how i started - sarawak development institute sessions/plenary 2/selina gan.pdfhow i started • no...

HOW I STARTED

• No customer

• Don’t know how to do organic business – no precedent.

• The market for organics was still in its infancy 10 years’ ago.

• My friends and my family thought I was mad to sell local organic vegetables at US2.80 per kilo. Who will buy my organic vegetables which is 3 times higher than the price of conventional vegetables?

• Low level of awareness - Now in Malaysia when you talk about organics: 7 out of 10 people now knows the term organic.

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HISTORY OF RETAILING IN MALAYSIA

LATE 1990’s• Sickness Industry• Customer Profile: 98% ethnic Chinese who are : -

a) cancer patientsb) degenerative diseasesc) Vegetarians and/or Buddhists

1999 - 2003• Emergence of “Mom and Pop” shops in Klang Valley and major towns in Malaysia • Real growth in the number of shops started from 2003 onwards.

2005 – 2008• Major Supermarket chains like Jusco, and Hypermarket like Carrefour started to create

organic corners.• Herd mentality – ‘me-too’• No growth in “Mom and Pop” shops since 2006



PRESENT CUSTOMER PROFILE• Amongst consumers in the ASEAN countries, the Malaysians are more

sophisticated and knowledgeable about organic and health food in this region.

• 80% of the organic consumers are ethnic Chinese. Psychographic profiles of the Malaysian Chinese community are divided into G1 and G2.

• G1 Group (80%) – Chinese educated Mandarin speaking

• G2 Group (20%) - English educated, English speaking, some Mandarin

• The present consumer profiles have changed and are attracting more health conscious people in their early forties and those with young families

• Mothers will always give the best to their babies and kids.

• Aging baby boomers (late forties to sixties), who refused to age. Higher disposable income compared to their fathers time.



SUPERMARKETS AND HYPERMARKETS

In Malaysia• Jusco (Store within a Store concept)• Carrefour (Store within a Store concept) • Cold Storage / selected Giant stores• Other niche Supermarkets – Isetan, Sogo, Village Grocers

In Singapore (only dry goods)• NTUC – 2 Outlets (Finest Stores)• Cold Storage – 12 Outlets• Shop & Save – 10 Outlets• Carrefour – 2 Outlets



• Supermarkets and hypermarkets are paying more attention to organic products and most of them carry some organic products.

• Carrefour and Jusco have set up organic corners measuring from 800 to 1,000 sq ft in prominent corners adjacent to the Vegetables Section.

• Jusco was the very first supermarket that experimented with organic vegetables 6 years ago.

• Carrefour started one year ago with dedicated organic corners. Country Farms is the exclusive operator.

• Cold Storage also have Country Farm on their shelves in dedicated stores.

• The smaller supermarts carry a few selected organic items

TRENDS IN SUPERMARKETS AND HYPERMARKETS



COUNTRY FARMS INSIDE CARREFOUR HYPERMARKET

800 - 1000 sq ft “Store Within A Store” – Selected Organic Partner with Country Farms

• Carrefour, WANGSA MAJU, KL• Carrefour, MID-VALLEY, KL• Carrefour, SUBANG, PJ • Carrefour, MALACCA • Carrefour, AMPANG• Carrefour, KLANG

• Carrefour, PENANG • Carrefour, JOHOR BAHRU• Carrefour, Tropicana City (opening Nov ’08)• Carrefour, PLAZA SINGAPURA• Carrefour , SUNTEC CITY, Singapore



COUNTRY FARMS INSIDE JUSCO Supermarket

800 - 1000 sq ft “Store within a Store” – Selected Organic Partner with Country Farms

• Jusco, MIDVALLEY, KL• Jusco, SUNWAY PYRAMID II, PJ• Jusco, BUKIT TINGGI, KLANG • Jusco, TEBRAU CITY, JB• Jusco, PERMAS JAYA, JB

• Jusco, QUEENSBAY MALL, PG• Jusco, PERDA, BUKIT MERTAJAM• Jusco, AMPANG, KL (opening in Nov. ‘08)• Jusco, JOHOR (opening in Dec. ’08))



COUNTRY FARMS INSIDECOLD STORAGE Supermarket

• Cold Storage Supermarket, BANGSAR • Cold Storage Supermarket, MIDVALLEY• Cold Storage Supermarket, GE MALL• Cold Storage Supermarket, KLCC• Cold Storage Supermarket, TS• Cold Storage Supermarket, THE MALL• Cold Storage Supermarket, SUMMIT • Cold Storage Supermarket, PUTRAJAYA

• Cold Storage Supermarket, MD• Cold Storage Supermarket, SUBANG PARADE• Cold Storage Supermarket, GURNEY PLAZA,• Cold Storage Supermarket, ISLAND PLAZA, PG• Cold Storage Supermarket, PELANGI MALL, JB• Cold Storage Supermarket, KUANTAN• Cold Storage Supermarket, IPOH• Cold Storage Supermarket, SOLARIS



COUNTRY FARMS RETAIL OUTLET CUM RESTAURANT



CFO RESTAURANT SERVING TASTY ORGANIC AND WHOLESOME FUSION FOOD

Tom Yam Spaghetti 8 – Booster Rojak

Organic Nasi Lemak with Rendang Chicken

Organic Soy Smoothies Fortified with Organic Flaxseed Oil

CF Organic Salad

Organic Fresh Juice – Green Apple with Wheat Grass



“MOM AND POP” SHOPS

Typical Health Food Stores in Malaysia- Approximately 100 stores nationwide run by owner operators

- No growth in volume from these shops

- Consumers preferring to shop in Supermarket now



• The ‘mom and pop’ no longer carry lots of organic food products. They now carry more natural products from Taiwan mostly: Beverage powder in tin cans, Asian sauces, fruit enzymes, vinegars, and cookies.

• No longer can these shops be called organic shops – they are just health food store. The mom and pop shops are declining. They cannot compete with the supermarkets and the bigger organic retailers.



Natural Products from

Taiwan

NATURAL PROCESSED PRODUCTS FROM TAIWAN

Multi-grain Rice Asian Sauces

Powdered Beverages in Tin Cans Cookies and Instant Beverages



AWARENESS THROUGH EDUCATION

• Quarterly Newsletters / Brochures / Website• Organic fair / talks / food demonstration • Guest speaker for event & media• CFO spent approx. USD 120,000 per year on newsletters and communication

materials

• 20,000 copies printed every Quarter

• Mailed out 12,000 Free to members



BUSINESS ORIENTATION

• Most health food stores tend to orientate towards:(a) Macrobiotic(b) Vegan or Vegetarian (shops refuse to sell meat products)(c) Buddhism

• Country Farms – APOLITICAL- We serve consumers from all walks of life- Halal (Pork Free)



CHALLENGES



PRICE WAR

• Not uncommon – price war do exist amongst the distributors.

• Private label and contract packing are quite common as players differentiate themselves.

• Similar products in many different labels• China organic product – negative image – some re-

packers have resorted to purposely omit the country of origin on purpose (which is against the Malaysian labeling law).



ORGANIC WHOLESALE & RETAIL IN MALAYSIA

Problems faced by retailers in Malaysia and Singapore• Shortage of locally grown organic perishables• Limited Assortments of local and imported organic products• Price Premium• Not many certified Organic farmers

SupplyDemandLocal fruits, vegetables & Poultry

MORE THAN



SUPPLY CHAIN• 85% of organic products in Malaysia and Singapore are imported all over

the world.

• Made in Malaysia organic products:

• 2008 : Asian Noodles – one manufacturerBy 2009 : two to three processors - Rice Vermicelli, Condiments,

Asian Sauces, Soy Sauce

• Some cottage industry players processing soy sauce, miso, taufu & cookies.• Non certified organic processors without any GMP, HACCP or ISO

certifications.



SUPPLY AND DEMAND MISMATCH

• In the last 2 years, the DEMAND for organic vegetables in Malaysia has increased but SUPPLY has not

• Big shortage of organically grown vegetables during rainy season in Nov / Dec / Jan – supply drops by 50%.

• Supermarkets such as Carrefour and Jusco are now demanding for CERTIFIED ORGANIC fruits and vegetables, chicken, and seafood products



COUNTRY FARM’S IMPORTCountry of Origin

USA BrazilChina Inner MongoliaFinland ThailandSweden India Italy IndonesiaFrance PhilippinesGermany PakistanAustralia TurkeyNorway PeruNew Zealand



PRICE POINT• The price differential between conventional and organic in the USA and EU is

narrow - between 25% to 30%.

• Wide price differentials in Malaysia: ranging from 100% and 300% (depending

on the type of organic products)

Imported Fresh Produce from California, USA



• Malaysians love temperate climate organic vegetables

• Heavy reliance on imported produce for assortments – USA, Australia, New Zealand

Imported - USA Imported - Australia

TEMPERATE CLIMATE VEGETABLES



• The Four Hills of West Malaysia1. Cameron Highlands2. Lojing Heights3. Bukit Tinggi4. Gunung Jerai

• Lack of suitable land in Cameron Highlands. Moratorium on hill cultivation

• Other highland areas - not cold enough to produce temperate climate vegetables such as:1. carrots2. broccoli3. cauliflower 4. celery5. potato

CONSTRAINS IN FARMING



LIMITED ASSORTMENTS OF LOWLAND VEGETABLES

Asian Leafy Vegetables Asian Leafy Vegetables

Tropical Fruits Tropical Fruits



LOCAL FARMERS• 70% of organic farmers are highly educated with tertiary education.• Small Acreage (2 - 10acreas) – No economies of scale.• Most farmers practiced some form of organic farming• Certified farmers by NASAA & SOM

• Titi-Eco• Zenxin• Loh Organic

• Certified by SOM• Titi Eco• Kahang Organic• Natural Red (Ishak)• GK Organics• Ponak Plantation



MALAYSIAN ORGANIC CERTIFICATION UNDER THE DEPARTMENT OF

AGRICULTURE

SOM ( SKIM ORGANIK MALAYSIA )

• launched in 2005• certified ten (10) farm operators to date



MALAYSIAN PIONEERS IN ORGANIC FARMING

Mr & Mrs GK Gan ( GK Farms )

Ms Tan Siew Luang ( Cetdam )

Mr Lim (Titi-Eco Farm )

Mr Ho ( Ho Organic )

Mr Lee Ong Sing ( Cameron Organic )

Mr Ho San Cheh (Vision Eco Organic Farm)



COMMON COMPLAINTS BY FARMERS

• Lack of Suitable Land• Poor Top Soil• Labour Problem – Malaysia has almost 2.1 million foreign workers (legal

and illegal) in various industries. Population of Malaysia is 28 million • Not many passionate and knowledgeable organic farmers. • Many young Malaysians prefer white collar jobs• Insufficient capital for expansion or to build rain shelters• Climate - Too much rain or too dry• Low Yield • Constant Insect Attacks



Poor Top Soil “Kangkong” & Local Spinach – easy to grow

Wet climate – susceptible to fungus attack

Lots of soil conditioning



ORGANIC CERTIFICATIONS

• Organic certification is the most important factor in the organic industry. Malaysian government has not enforced rules on organic labeling yet.

• Liberal use of the word “Organic” and Organic logos

• Customers do not question the authenticity of the products. It’s all based on trust.



ACT ( Export ) ICEA

SOM ( Farm Production ) OAM ( Service Provider )

SERVICE PROVIDER / ORGANIC CERTIFICATION IN MALAYSIA



HOW TO GROW THE ORGANIC MARKET IN MALAYSIA

§ Create A Wider Market: The Middle to Upper Class Segment§ Catch 22

Situation§ Make Organic

Food even more affordable§ Volume Purchase

Small Market



• Work with Supermarkets as partners.

• Work in partnership with big FMCG organizations to contract pack organic products to further expand to more mainstream consumers. Example: Contract packing of oats, sugar and etc

• The growth will be from the Supermarkets – not from the “mom & pop” shops.

• Commoditized popular organic products and bring them to the mainstream market through the supermarket channels.

Organic Oats Organic Raw Cane Sugar

Organic Rice OrganicSoy Sauce

Organic Bihun Natural Himalayan Rock

Salt



• Grow the Organic market to create a wider market. • Achieve economies of scale to make organic food more affordable to the

public. Organic will never be cheap, there is a premium tied to organic.• Trade with regional countries• Reduce Carbon Footprint• Price Point - Magic Rule - “20% to 30%” for Vegetables & Groceries• (Organic products are priced at 20%-30% more than the conventional

price.) • Organic Sea Food – 30% more than conventional• Natural Sea Food (Chemical Free) – 15% to 20% more than

conventional seafood• Malaysia has high middle class population. Our aim is to pursue the middle

class segment in urban sectors.• Promote the local manufacturing and processing of organic food products

e.g. noodles, tomato ketchup, jams, etc,.

COUNTRY FARM’SLONG TERM PLAN



RICE VERMICELLI• Mainly for Export• Made in Malaysia product – Rice Vermicelli (Non Organic –

certification in mid 2009) • Not from white flour with emphasis on high fibre

Vermicelli – Brown Rice, Tomato & Beetroot



ORGANIC ASIAN NOODLES• Mainly for Export• Made in Malaysia product –

Asian Noodles • Value Added by

manufacturing in Malaysia ( M’sia does not produce any flour)

• MATRADE encourages Malaysian companies to export manufactured food products extensively



T

H

A

N

K

Y

O

U



ECOWASH• Consumers care more for themselves than caring for the

environment• Although price is quite compatible, consumers still prefer detergent

with lots all foam (example: maids)• Mainly Caucasians are aware and buys Ecowash • Ecowash’s range: Dishwashing Liquid, Floor Cleaner, Colour Wash

and Washing Powder with Bleach



BIOKINDER• Recent Melamine Scare – Panic and damage control• Certification via Ministry of Health to allay their fears• Country Farms Infant Formula, Toddler and Goat Milk originates

from the US and Germany

Product of USA Product of Germany



ORGANIC SEASONINGS• To be certified in 2009• Processed in Malaysia exclusively for Country Farms• Gluten Free Soya Sauce

Organic Light Soy Sauce and Soy Sauce Organic Chunky and Creamy Miso



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