Required Report - public distribution

**Date:** 5/17/2005

**GAIN Report Number:** MY5023

MY5023

**Malaysia**

**Retail Food Sector**

**Retail Food Malaysia**

**2005**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

U.S. Embassy, Kuala Lumpur

**Prepared by:**

Spire Research Consulting

**Report Highlights:**

Malaysia\'s GDP grew by 7.0% in 2004 and is forecast to grow by 5 to 6
percent in 2005 and 2006. Retail food sales from the supermarket and
hypermarket increased from \$2 billion in 1999 to \$3.16 biliion in
2003. Malaysia has a large and increasingly sophisticated food and
beverage market that is supplied by both local and imported products.
Increasing personal income and urbanization of Malaysia\'s population
has created changes in the consumer lifestyle. Best product prospects
include frozen turkey, snacks (potato and cereal based), frozen
vegetables, fresh temperate fruits, dried fruits, canned fruits, edible
nuts, fruit juices, wine and pet food.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Kuala Lumpur \[MY1\]

\[MY\]

Table of Contents

[1. Country Summary 3](#country-summary)

[2. Market Summary 6](#market-summary)

[2.1 Malaysia's Retail Food Sector 6](#malaysias-retail-food-sector)

[2.2 Consumer Trends 8](#consumer-trends)

[2.3 Advantages and Challenges For US Exporters
8](#advantages-and-challenges-for-us-exporters)

[3. Road Map For Market Entry 11](#road-map-for-market-entry)

[3.1 Entry Strategy For US Food Exporters
11](#entry-strategy-for-us-food-exporters)

[3.2 Market Structure 13](#market-structure)

[3.3 Regulations on Imported Foods 14](#regulations-on-imported-foods)

[3.4 Sector Profile 15](#sector-profile)

[4. Competition 18](#competition)

[4.1 Competition Facing US Food Exporters
18](#competition-facing-us-food-exporters)

[4.2 Major Products Categories and Competitor's Market Share
19](#major-products-categories-and-competitors-market-share)

[5. Best Product Prospects 22](#best-product-prospects)

[5.1 Products Having Good Sales Potential
22](#products-having-good-sales-potential)

[5.2 Potential Products Not Present in Significant Quantities
25](#potential-products-not-present-in-significant-quantities)

[5.3 Products Facing Significant Barriers
26](#products-facing-significant-barriers)

# 1. Country Summary

  -------------------------- --------------------------------------------
  **Overview of Malaysia**   

  **Location of Malaysia**   South East Asia

  **Malaysia's land area**   329,735 square km (127, 311 square mile)

  **Form of government**     Parliamentary government under
                             constitutional monarchy

  **Capital**                Kuala Lumpur

  **Population in 2003**     25.05 million

  **Composition of           Bumiputera (61.3%), Chinese (24.5%), and
  population**               Indians (7.2%), other Malaysians (1.2%), and
                             non-Malaysians (5.9%)

  **Religious composition**  Islam (56%), Buddhism/Confucianism/Taoism
                             (29%), Hinduism (7%), Christianity (6%), and
                             others (2%)

  **Major languages**        Malay, English, Chinese (including various
                             dialects), and Tamil

  **Major festivals**        Eidil Fitri (Islam), Chinese New Year,
                             Deepavali (Hindu), Christmas, and Harvest
                             Festival (East Malaysia only)

                             
  -------------------------- --------------------------------------------

Malaysia is located in South East Asia and slightly larger than New
Mexico. The country comprises of Peninsular Malaysia (located between
Thailand's southern border and Singapore) and East Malaysia (occupying
nearly one-third of northern Borneo Island). The country has a hot and
humid climate with seasonal monsoons rains.

Malaysia's population in 2003 stood at 25.05 million and nearly 80% of
the population resides in Peninsular Malaysia while the remaining 20%
reside in East Malaysia. Malaysia's population consists of various
ethnic groups. The indigenous group known as *Bumiputera* accounts for
61% of the population and comprises of ethnic groups such as the Malays,
Ibans, Dayaks, Melanaus, Kadazans-Dusuns, Bajaus, and Dayaks. Chinese
account for 24% of the population followed by Indians at 7%. Islam is
Malaysia's official religion and nearly 56% of the population professes
to the Islamic faith. Other major faiths practiced in Malaysia include
Buddhism, Taoism, Hinduism, and Christianity. Thus various religious and
ethnic festivities are celebrated and are public holidays in Malaysia.

The proportion of Malaysia's population living in the urban area
increased from 50.7% in 1991 to 62.0% in 2000 while the proportion
living in rural areas declined from 49.3% to 38.0%. The proportion of
Malaysia's urban population is expected to increase further in the
coming years due to greater job opportunities coupled with higher pay
compared to the rural areas. Thus the average income of the working
population living in the urban areas is 1.8 times greater than those in
the rural areas.

  ------------------------------------------------------------------------
  **Major Urban Areas                                       
  and Their Population                                      
  (2003)**                                                  
  ---------------------- ------------------- -------------- --------------
  **\                    **\                 **Population   **% of Total
  City/Town**            State**             (Million)**    Population**

  Kuala Lumpur           Federal Capital     1.40           5.6%

  Penang (state)         Penang              1.30           5.2%

  Johor Bahru            Johor               0.68           2.7%

  Klang                  Selangor            0.68           2.7%

  Ipoh                   Perak               0.58           2.3%

  Ampang                 Selangor            0.50           2.0%

  Petaling Jaya          Selangor            0.45           1.8%

  Kuching                Sarawak             0.45           1.8%

  Shah Alam              Selangor            0.33           1.3%

  Kota Kinabalu          Sabah               0.33           1.3%

  Seremban               Negri Sembilan      0.30           1.2%

  Kuantan                Pahang              0.30           1.2%

  Total                                      7.59           29.1%

  Malaysia's Total                           25.05          100.0%
  Population in 2003                                        

  *Source: Malaysian                                        
  Statistics                                                
  Department.*                                              
  ------------------------------------------------------------------------

Malaysia has enjoyed moderate to strong economic growth since the 1990s
except in 1998 during the Asian Economic Crisis and 2001 during the
global economic slowdown. Malaysia's GDP per capita is among the highest
in South East Asia after Singapore and Brunei. Inflation and
unemployment in Malaysia remains relatively low and the country has
nearly 1 million foreign workers mainly employed in unskilled and
semi-skilled work. Malaysia's currency has been pegged to the US dollar
since 1998 and currencies, such as the Euro and Japanese Yen, have
appreciated against the US dollar and Malaysian Ringgit since 2000.

  -------------------------- ---------- ---------- ---------- ---------- ----------- -----------
  **Malaysian Economy in                                                             
  Brief**                                                                            

                             **2000**   **2001**   **2002**   **2003**   **2004e**   **2005f**

  GDP (US\$ billion)         90.3       88.0       94.9       103.7      111.0       117.2

  GDP per capita (US\$)      3,844      3,665      3,880      4,131      4,319       4,455

  Income per capita (US\$)   3,529      3,386      3,516      3,710      4,036       4,197

  Exchange rate - RM to      3.8        3.8        3.8        3.8        3.8         3.8
  US\$1                                                                              

  Overall CPI                1.5%       1.4%       1.8%       1.1%       1.5%        1.7%

  Population (million)       23.5       24.0       24.5       25.1       25.6        26.1

  Unemployment rate          3.1%       3.6%       3.5%       3.6%       3.8%        3.8%

  *Source: Malaysian                                                                 
  Statistics Department,                                                             
  Ministry of Finance, and                                                           
  Asian Development Bank.*                                                           
  -------------------------- ---------- ---------- ---------- ---------- ----------- -----------

Malaysia's GDP is expected to grow by 7.0% from US\$103.7 billion in
2003 to US\$111.0 billion in 2004. The Asian Development Bank forecasts
Malaysia's GDP to continue to grow but at a slower pace of 5.6% in 2005
to reach US\$117.2 billion. Inflation and unemployment will continue to
remain low and per capita income to grow in 2004 and 2005 in line with
Malaysia's economic growth trends.

# 2. Market Summary

## 2.1 Malaysia's Retail Food Sector

Malaysian households spend an average 24% of their household income on
retail purchase of foods. Purchase of foods from the retail outlets
increased by 23.6% from US\$7.55 billion in 1999 to US\$9.33 billion in
2003. This average to nearly US\$370 spent annually by each individual
on retail purchase of foods in 2003.

  --------------- ----------- ----------- ----------- ----------- --------------
  **Retail Sales                                                  
  of Foods (US\$                                                  
  Mil)**                                                          

  **\             **\         **\         **\         **\         **Avg. Annual
  1999**          2000**      2001**      2002**      2003**      Growth**

  7,547           8,442       8,424       8,921       9,330       5.5%

  *Source:                                                        
  Euromonitor.*                                                   
  --------------- ----------- ----------- ----------- ----------- --------------

Imports of foods (primarily for consumer consumption) increased by 11.9%
from US\$1.59 billion in 1999 to US\$1.78 billion in 2003. Nearly
two-thirds of the imports are for processed foods (e.g. dairy products,
processed meat, canned foods, confectionary, and sauces) and a third are
for primary foods (e.g. fresh fruits and vegetables).

  ---------------------------- -------- -------- -------- -------- -------- ---------- --
  **Imports of Foods Primarily                                                         
  for the Consumer Consumption                                                         
  (US\$ Mil)**                                                                         

  **Food Category**            **\      **\      **\      **\      **\      **Avg.     
                               \        \        \        \        \        Annual     
                               1999**   2000**   2001**   2002**   2003**   Growth**   

  Primary foods                536      551      597      657      661      5.5%       

  Processed foods              1,058    1,150    1,282    1,231    1,123    1.9%       

  Total imports                1,594    1,701    1,879    1,888    1,784    3.0%       

  *Source: MITI Report 1999-                                                           
  2003.*                                                                               
  ---------------------------- -------- -------- -------- -------- -------- ---------- --

The retail food sector includes the supermarkets and hypermarkets,
convenience stores, and traditional markets. The traditional markets
include the independent grocery stores ("mom and pop" stores) and wet
markets. Traditional markets account for 54.0% of the total retail food
sales in 2003. This is followed by the supermarkets and hypermarkets
(33.9%) and convenience stores (2.4%).

  ---------------------------------------------------------------------------
  **Retail Food Sales and                                    
  Outlets**                                                  
  ---------------------------- ------------- --------------- ----------------
  **\                          **\           **Avg. Annual   **Number of
  \                            Sales in      Growth\         Establishments
  Retail Sector**              2003\         (1999-2003)**   in 2003**
                               (US\$ Mil)**                  

  Independent grocery stores   4,385         2.9%            28,000

  Supermarkets and             3,163         12.3%           438
  hypermarkets                                               

  Wet market operators         653           4.7%            29,000

  Convenience stores           228           21.9%           870

  Others                       901           \-              \-

  Total retail sales           9,330         5.5%            

  *Source: Euromonitor,                                      
  ACNielsen, trade sources,                                  
  and Spire Analysis.*                                       
  ---------------------------------------------------------------------------

***Supermarkets and Hypermarkets.*** Supermarkets (often established as
supermarket cum department stores) and hypermarkets are found in major
urban areas where there is a large population of middle to high-income
consumers. Smaller size supermarkets are also found in the smaller towns
where there is a significant population of middle income consumers. Both
supermarkets and hypermarkets sell a wide range of imported and locally
produced fresh and processed foods besides non-food items.

***Convenience Stores.*** Convenience stores include those operating
solely as convenience stores and those operated by gas stations (gas
marts). Convenience stores generally operate long hours and some round
the clock. Convenience stores including gas marts are generally located
in the residential areas with a significant population of middle to
high-income consumers and in the business areas. Gas marts are also
found along Malaysia's expressway stretching from northern to southern
Peninsular Malaysia. Convenience stores sell a limited range of food
items and are generally snack foods, beverages, confectionaries, ice
cream, and bakeries often purchased in small quantities.

***Traditional Markets.*** Independent grocery stores and wet markets
are found in the residential areas of both urban and rural towns across
Malaysia:

-   Most of the food items sold by grocery stores are canned foods,
    dried foods, snack foods, ice cream, and soft drinks. Fresh produces
    such as fruits and vegetables are seldom sold and usually do not
    sell frozen or chilled foods other than ice cream. However, grocery
    stores known as mini-markets, which are larger and more modern than
    the traditional grocery stores, would sell these food items.
    However, they are relatively fewer in numbers compared to the
    traditional grocery stores.

Wet markets include daily wet markets operating in permanent buildings
and weekly morning and night markets operating in non-permanent
locations. Food items sold are generally fresh fruits, vegetable, meat
and fish. Imports are usually apples, oranges, grapes, carrots,
potatoes, onions, cabbages, and broccoli.

## 2.2 Consumer Trends

Increasing personal income and urbanization of Malaysia's population has
created changes in the consumer lifestyle. Consumers are also demanding
more variety and quality in the foods they consumed and are increasingly
exposed to western foods. Consumers are also experiencing a busier pace
of life and creating demand for more processed foods that are convenient
to prepare than traditional cooking. Consumers are generally price
sensitive towards purchases of foods but those from the middle to
high-income group are willing to pay more for quality foods.

Shopping at the supermarkets and hypermarkets is becoming increasingly
popular at the expense of the traditional grocery stores. Supermarkets
and hypermarkets offer shopping convenience by selling a wide range of
food and non-food items in a comfortable shopping environment. Shopping
at the traditional grocery stores will continue to remain but their
numbers are expected to gradually decline. Wet markets will remain
popular among consumers since they offer a wide variety of fresh
produces. Though retail food sales from the convenience stores are
relatively small (compared to the other retail sub-sectors), they are
increasingly popular since they provide consumer convenience by
operating long hours.

Various cultural and religious festivals are celebrated since Malaysia's
population is multi-cultural and multi-religious. These celebrations
include Eidil Fitri (Islam), Eidil Adha (Islam), Chinese New Year,
Christmas, Deepavali (Hindu), and the Harvest Festival (East Malaysia).
High quantities of foods and beverages are consumed during these
festivities. For example:

-   Beef, chicken, pastries, and soft drinks are consumed during the
    Muslim festival of Eidil Fitri; and

-   Mandarin oranges or tangerines, seafood, chicken, ducks, pastries,
    soft drinks, and beer are consumed during Chinese New Year.

Sales of various food items increase prior to the festivities since they
often last for days. During the festivities, friends and relatives are
often invited to visit each others' homes whereby foods and drinks are
served generously.

56% of the population is Muslims who do not consumer pork but only meat
(beef, lamb, and poultry) and meat products that have been slaughtered
according Islamic practices known as *halal*. *Halal* foods also include
processed foods containing any ingredients of animal origin such as
gelatin and animal protein extracts including beef and chicken stocks.
Thus Muslim consumers often seek food products that are *halal*
identified by a *halal* logo on the packaging.

## 2.3 Advantages and Challenges For US Exporters

US exporters face both advantages and challenges in Malaysia's retail
food sector. The market is open to exporters and the government does not
place any restrictions on import of foods (except rice) provided import
regulations on foods are complied. US exporters face competition not
only from local producers but also exports from countries close to
Malaysia.

+----------------------------------+-----------------------------------+
| **Advantages and Challenges for  |                                   |
| US Exporters**                   |                                   |
+==================================+===================================+
| **Advantages**                   | **Challenges**                    |
+----------------------------------+-----------------------------------+
| Malaysia's economy will continue | Though consumers are demanding    |
| to grow resulting in an          | greater variety and quality in    |
| increasing number of consumers   | the foods consumed, they are      |
| in the middle income group       | generally price sensitive towards |
| demanding greater variety and    | purchases. Thus retailers often   |
| quality of foods consumed.       | purchase food items that are more |
|                                  | affordable to the majority of the |
|                                  | consumers.                        |
+----------------------------------+-----------------------------------+
| Increasing consumer health       | Though food items containing      |
| consciousness has resulted in    | genetically modified (GM) foods   |
| demand for healthier foods       | are permitted, proposed           |
| providing opportunities for food | regulations on labeling of foods  |
| manufacturers to develop,        | containing more than 3% GM food   |
| produce, and market such foods.  | material may discourage consumer  |
|                                  | purchase.                         |
+----------------------------------+-----------------------------------+
| The government has an open door  | The government imposes an import  |
| policy towards import of foods   | duty and sales tax on many        |
| into Malaysia and there are no   | processed foods that are          |
| quotas on any food items         | primarily for the consumer        |
| imported from any country except | market. However, lower import     |
| rice.                            | duties are imposed on processed   |
|                                  | foods produced in the ASEAN       |
|                                  | countries.                        |
+----------------------------------+-----------------------------------+
| Shopping for foods at            | Countries that are close to       |
| supermarkets and hypermarkets is | Malaysia have a faster delivery   |
| becoming increasingly popular.   | time and lower freight cost to    |
| Furthermore, new supermarkets    | Malaysia compared to US exports.  |
| and hypermarkets are being       | Other countries are able to       |
| established throughout Malaysia  | supply foods at lower pries than  |
| where there is a significant     | imports from the US.              |
| population of middle to          |                                   |
| high-income consumers.           | For example, imports from China,  |
|                                  | Thailand, Indonesia, and India    |
| Thus supermarkets and            | are known for their relatively    |
| hypermarkets are providing       | low prices. Australia and New     |
| greater market access for        | Zealand are known for their       |
| imported foods including chilled | *halal* beef and lamb and their   |
| and frozen foods since these     | dairy products. European          |
| retail outlets have cold storage | exporters have established their  |
| facilities.                      | own market for jam,               |
|                                  | confectionary, pasta, and juices. |
+----------------------------------+-----------------------------------+
| Consumers are increasingly       | Though consumers are increasingly |
| exposed and accustomed to eating | exposed to western foods through  |
| western and other Asian foods    | eating at western restaurants and |
| and willing to try new foods.    | fast food establishments, many    |
| Consumers are also increasingly  | are unfamiliar on preparing and   |
| eating more processed foods,     | cooking these foods. For example, |
| fresh fruits, and vegetables     | many consumers are unfamiliar     |
| from the temperate climate.      | with preparing and cooking        |
|                                  | seafood from the cold waters and  |
|                                  | pasta dishes.                     |
+----------------------------------+-----------------------------------+
| Foreign including US brands are  | 56% of the consumers are Muslims  |
| available especially in the      | who consume *halal* beef, lamb,   |
| supermarkets and hypermarkets.   | and poultry and their products.   |
| US brands such as Campbell Soup, | Furthermore, only *halal* meats   |
| Kellogg's, Kraft, Prego,         | are allowed to be imported into   |
| Coca-Cola, Pepsi-Cola, Heinz,    | Malaysia.                         |
| Washington Apple, and Wise are   |                                   |
| well known brands.               | Australia and New Zealand have an |
|                                  | established *halal* food industry |
|                                  | for their beef and lamb exports   |
|                                  | to Malaysia while Denmark and the |
|                                  | Netherlands for frozen *halal*    |
|                                  | poultry.                          |
+----------------------------------+-----------------------------------+
| The US is a major supplier of    | US exporters face competition     |
| many food items to Malaysia.     | from Malaysian food               |
| Major imports from the US        | manufacturers, who produce not    |
| include apples, oranges and      | only local food items but also    |
| frozen turkey. Other imports     | western foods such as sausages,   |
| from the US include sauces,      | fruit juices, dairy products,     |
| ketchup, food seasonings, cake   | confectionary, and savory snacks. |
| mixes, dried prunes, fruit       |                                   |
| juices, and raisins.             | US exporters also face            |
|                                  | competition from multinational    |
|                                  | food manufacturers (e.g. Nestle)  |
|                                  | operating in Malaysia and         |
|                                  | Southeast Asia with an already    |
|                                  | established distribution network  |
|                                  | in the country.                   |
+----------------------------------+-----------------------------------+
| *Source: Trade sources.*         |                                   |
+----------------------------------+-----------------------------------+

# 3. Road Map For Market Entry

## 3.1 Entry Strategy For US Food Exporters

US exporters should understand their major competitors, local consumer
trends, the distribution channels available, and key developments in the
retail sub-sectors before adopting a market entry strategy. Such an
understanding ensures the most effective strategies are adopted to
distribute and market the exporter's products.

+---------------------+------------------------------------------------+
| **Key Entry         |                                                |
| Strategies for US   |                                                |
| Exporters**         |                                                |
+=====================+================================================+
| **Strategy**        | **Reasons**                                    |
+---------------------+------------------------------------------------+
| Acquire *halal*     | Muslim consumers account for 56% of Malaysia's |
| certification from  | population. Muslims are forbidden to eat pork  |
| recognized Islamic  | and consume beef, lamb, and chicken that are   |
| institution in the  | *halal*. Furthermore, the government allows    |
| US.                 | only imports of beef, lamb, and poultry that   |
|                     | are *halal.* Ensuring the meat is *halal*      |
|                     | establishes a market for US meat exporters in  |
|                     | Malaysia.                                      |
+---------------------+------------------------------------------------+
| Market, distribute, | Most of the supermarkets and hypermarkets      |
| and promote through | (e.g. Carrefour, Jaya Jusco, The Store, Tesco, |
| the supermarkets    | and Giant) are chain operations located        |
| and hypermarkets.   | throughout Malaysia with newer outlets being   |
|                     | established. Shopping at these outlets is      |
|                     | increasingly popular among consumers because   |
|                     | of the wide variety of food and non-food items |
|                     | sold. Furthermore, these outlets have cold     |
|                     | storage facilities to store and display        |
|                     | chilled and frozen foods.                      |
+---------------------+------------------------------------------------+
| Promote food        | The market is competitive and a wide range of  |
| products to create  | foods from local producers and imports are     |
| consumer awareness  | available in Malaysia. Promotional activities  |
| and loyalty.        | have an impact in creating consumer awareness  |
|                     | and loyalty. Consumers are familiar with       |
|                     | phrases such as "Premium Australian *Halal*    |
|                     | Beef", "Norwegian Salmon", "New Zealand Lamb", |
|                     | "Washington Apples", and "California Raisins"  |
|                     | due to promotional activities.                 |
|                     |                                                |
|                     | Consumer health consciousness has created      |
|                     | opportunities for marketing healthier foods.   |
|                     | Some foods are promoted as being healthier     |
|                     | using phrases such as "high in calcium", "low  |
|                     | fat", "no cholesterol", "high in fiber", "no   |
|                     | sugar added", and "high in vitamin C". Thus US |
|                     | exporters should take opportunities to promote |
|                     | their foods as healthier foods.                |
|                     |                                                |
|                     | Examples of promotional activities include     |
|                     | radio and television talk shows, press         |
|                     | releases, media advertising, product           |
|                     | brochures, contests, food festivals at         |
|                     | supermarkets and hypermarkets, and on the      |
|                     | packaging itself.                              |
+---------------------+------------------------------------------------+
| Processed foods     | Local consumers are becoming accustomed to     |
| should be           | western and other Asian foods. Thus US         |
| acceptable to local | exporters should determine whether the         |
| tastes and have     | processed food intended for export are         |
| appropriate         | acceptable to local tastes. Simple food taste  |
| packaging.          | trials conducted on a few local consumers are  |
|                     | recommended.                                   |
|                     |                                                |
|                     | Local consumers may not consume some foods in  |
|                     | large quantities or on a regular basis. Some   |
|                     | foods in large packaging maybe considered to   |
|                     | costly for many consumers to purchase. Thus    |
|                     | smaller packaging should be considered.        |
|                     |                                                |
|                     | Malaysia is a multi-lingual country and        |
|                     | labeling on packaged and canned foods sold in  |
|                     | Malaysia are usually in two or at most three   |
|                     | languages. English, Malay, and Chinese are the |
|                     | most common languages used.                    |
+---------------------+------------------------------------------------+
| Appoint importers   | Local food importers and agents have a network |
| or agents that best | of distributors and retailers. Furthermore,    |
| meets the needs of  | they are familiar with regulatory              |
| the exporter.       | requirements, clearance at the port of entry,  |
|                     | and logistics to transport the imported foods. |
|                     |                                                |
|                     | Each importer or agent have their own          |
|                     | peculiarity in their import and distribution   |
|                     | channel. For example, some focus distribution  |
|                     | on specific geographical markets. There are    |
|                     | those who would import if appointed as a sole  |
|                     | importer and those who would import similar    |
|                     | foods from other exporters.                    |
|                     |                                                |
|                     | An importer usually handles a specific food    |
|                     | category such as dealing in fresh fruits and   |
|                     | vegetables, chilled or frozen foods, or dried  |
|                     | foods.                                         |
|                     |                                                |
|                     | Thus it is important for the exporter to       |
|                     | appoint an importer or agent that meets the    |
|                     | exporter's requirements. The US exporter       |
|                     | should also decide whether to appoint a sole   |
|                     | or multiple importers or agents.               |
|                     |                                                |
|                     | Like most businesses in Asia establishing a    |
|                     | good business relationship improves the        |
|                     | prospects of conducting business in Malaysia.  |
|                     | A cordial business relationship improves       |
|                     | business confidence and communications between |
|                     | the partners and also market access.           |
|                     | Malaysia's population is multi-ethnic and      |
|                     | multi-religious and therefore advisable to     |
|                     | appreciate simple local customs when           |
|                     | conducting business in Malaysia.               |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+

## 3.2 Market Structure

Importers and indent agents generally handle imports of foods. Importers
purchase and import directly from the exporters while agents earn
commissions by collecting orders from distributors or retailers before
placing orders to the exporters. Importers and agents often market
directly to supermarket, hypermarket, and convenience store chains and
also to independent grocery stores that purchase in large quantities.
However, they generally distribute through distributors to grocery
stores that purchase in smaller quantities and those located too far
away from their business operations. Another distribution channel for
the importers and agents is through the wholesalers and are generally
for fresh fruits and vegetables. With the emergence of foreign retail
players, some hypermarkets such as Dairy Farm (Giant) and Carrefour are
sourcing their products (e.g. dry goods and fresh produces) directly
from the exporters.

![](media/image2.wmf){width="5.995833333333334in"
height="2.7715277777777776in"}

## 3.3 Regulations on Imported Foods

There are no government quotas on import of any foods into Malaysia from
any country except rice. Customs formalities are straightforward and
cleared rather quickly at the port of entry. However, agriculture or
health officials conduct random checks and testing on food consignments
at the point of entry. Imported foods that that do not meet regulatory
health requirements are rejected or destroyed.

There is no government regulation banning or restricting imports of
genetically modified (GM) foods at this moment. However, the Food Safety
and Quality Control Division under the Ministry of Health is proposing
mandatory labeling on foods containing more than three percent GM
material.

+-------------+--------------------------------------------------------+
| **Import    |                                                        |
| Re          |                                                        |
| gulations** |                                                        |
+=============+========================================================+
| **Issues**  | **Requirements**                                       |
+-------------+--------------------------------------------------------+
| Labeling    | -   To indicate the products' weight or volume,        |
| for         |     ingredients according to proportion including      |
| processed   |     additives, alcohol, and animal content. Expiry     |
| foods       |     dates are required on foods with a short           |
|             |     shelf-life.                                        |
|             |                                                        |
|             | -   Nutritional claims on the labels for certain       |
|             |     product categories must adhere to food             |
|             |     regulations.                                       |
|             |                                                        |
|             | -   Nutritional information is required on foods for   |
|             |     babies and children, breakfast cereals, and foods  |
|             |     for dietary purposes.                              |
|             |                                                        |
|             | -   All imported processed foods must show the name of |
|             |     the manufacturer and importer or importing agent.  |
|             |                                                        |
|             | -   If the above are not mentioned on the packaging,   |
|             |     the details printed on labels affixed onto the     |
|             |     packaging are acceptable.                          |
+-------------+--------------------------------------------------------+
| Meat        | -   Imported *halal* meat and meat products (excluding |
| products    |     pork) must be from a plant approved by the         |
| (beef,      |     Malaysian Islamic Development Council and          |
| lamb, and   |     certified by a recognized Islamic institution      |
| poultry     |     based in the country of export.                    |
| except      |                                                        |
| pork)       | -   Meat and meat products require an import license   |
|             |     and the meat product must be free from anthrax and |
|             |     bovine spongiform encephalopathy. Import licenses  |
|             |     for chicken meat is sometimes limited to control   |
|             |     supplies.                                          |
+-------------+--------------------------------------------------------+
| Use of food | -   Regulations on maximum permissible level of        |
| additives   |     specified additives have to be followed including  |
|             |     preservatives, dyes, flavoring substances,         |
|             |     antioxidants, and food conditioners.               |
+-------------+--------------------------------------------------------+
| *Source:    |                                                        |
| Ministry of |                                                        |
| Health.*    |                                                        |
+-------------+--------------------------------------------------------+

## 3.4 Sector Profile

***Supermarkets and Hypermarkets.*** Supermarkets and hypermarkets are
located throughout major urban areas of Malaysia where there is a
significant population of middle to high-income consumers. The number of
supermarkets and hypermarkets increased from 387 in 1999 to 438 in 2003
and their numbers are expected to increase further in the next five
years. This sub-sector sells a wide range of imported foods such as
fresh fruits and vegetables and chilled, frozen, canned, and dried
foods.

Major reasons for the popularity of shopping at these establishments
among consumers are:

-   The wide selection of food and non-food items under various brands;

-   Comparatively low prices of goods sold especially among
    hypermarkets; and

-   Comfortable shopping atmosphere and clean environment

This sector is also gaining popularity among consumers in the
lower-income group. Smaller size supermarkets cum department store
chains are also found in the less urban towns where there is a
significant population of consumers in the middle-income group.

Retail food sales from this sub-sector increased from US\$2.00 billion
in 1999 to US\$3.16 billion in 2003. This was an increase from 26.5% in
1999 to 33.9% in 2003 of the total retail food sales. Sales from this
sub-sector are expected to increase further to US\$4.37 billion in 2006
to account for 39.9% of the total retail food sales. Foreign
supermarkets and hypermarkets operating in Malaysia are joint
investments between foreign and Malaysian businesses.

+----------------+-----------+---------+--------------+---------------+
| **Major        |           |         |              |               |
| Supermarkets   |           |         |              |               |
| and            |           |         |              |               |
| Hypermarkets** |           |         |              |               |
+================+===========+=========+==============+===============+
| **\            | **Parent  | **Sales | **\          | **Major       |
| Company\       | Company\  | in      | No. of       | Locations of  |
| (Outlet        | Owne      | 2003\   | Esta         | Est           |
| Type)**        | rship\*** | (US\$   | blishments** | ablishments** |
|                |           | Mil)**  |              |               |
+----------------+-----------+---------+--------------+---------------+
| Dairy Farm     | British   | 408     | 56           | Kuala Lumpur  |
| (Giant and     |           |         |              | and major     |
| Cold Storage)  |           |         |              | towns in      |
|                |           |         |              | Malaysia      |
| (Supermarkets  |           |         |              |               |
| and            |           |         |              |               |
| hypermarkets)  |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+
| Jaya Jusco     | Japanese  | 332     | 10           | Kuala Lumpur  |
|                |           |         |              | and nearby    |
| (Supermarkets  |           |         |              | towns         |
| cum department |           |         |              |               |
| stores)        |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+
| The Store      | Malaysian | 297     | 38           | Smaller towns |
|                |           |         |              | in western    |
| (Supermarket   |           |         |              | Peninsular    |
| cum department |           |         |              | Malaysia      |
| stores and     |           |         |              |               |
| hypermarkets)  |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+
| Carrefour      | French    | 234     | 7            | Towns near    |
|                |           |         |              | Kuala Lumpur  |
| (Hypermarkets) |           |         |              | and major     |
|                |           |         |              | towns in      |
|                |           |         |              | western       |
|                |           |         |              | Peninsular    |
|                |           |         |              | Malaysia      |
+----------------+-----------+---------+--------------+---------------+
| Tesco          | British   | 226     | 5            | Towns near    |
|                |           |         |              | Kuala Lumpur  |
| (Hypermarkets) |           |         |              | and in        |
|                |           |         |              | northern      |
|                |           |         |              | Peninsula     |
|                |           |         |              | Malaysia      |
+----------------+-----------+---------+--------------+---------------+
| Makro          | Dutch     | 205     | 8            | Towns near    |
|                |           |         |              | Kuala Lumpur  |
| (Warehouse     |           |         |              | and in        |
| club)          |           |         |              | northern      |
|                |           |         |              | Peninsula     |
|                |           |         |              | Malaysia      |
+----------------+-----------+---------+--------------+---------------+
| Parkson        | Malaysian | 75      | 6            | Towns near    |
|                |           |         |              | Kuala Lumpur  |
| (Supermarkets  |           |         |              | and in        |
| and            |           |         |              | western       |
| hypermarkets)  |           |         |              | Peninsular    |
|                |           |         |              | Malaysia      |
+----------------+-----------+---------+--------------+---------------+
| Billion        | Malaysian | 34      | 22           | Smaller towns |
| Shopping       |           |         |              | in Peninsular |
| Centre         |           |         |              | Malaysia      |
|                |           |         |              |               |
| (Supermarkets) |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+
| Pasaraya Hiong | Malaysian | 34      | 21           | Smaller towns |
| Kong           |           |         |              | in Peninsular |
|                |           |         |              | Malaysia      |
| (Supermarkets) |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+
| *Source:       |           |         |              |               |
| Published      |           |         |              |               |
| company        |           |         |              |               |
| information    |           |         |              |               |
| including      |           |         |              |               |
| websites,      |           |         |              |               |
| trade sources, |           |         |              |               |
| and The Star   |           |         |              |               |
| newspaper.     |           |         |              |               |
| Note:\*Foreign |           |         |              |               |
| companies      |           |         |              |               |
| operating in   |           |         |              |               |
| Malaysia have  |           |         |              |               |
| Malaysian      |           |         |              |               |
| investments.*  |           |         |              |               |
+----------------+-----------+---------+--------------+---------------+

***Convenience Stores.*** Convenience stores including gas marts are
generally found in the residential areas with a significant population
of middle to high-income consumers and in the business areas. Gas marts
are also found along Malaysia's expressway stretching from northern to
southern Peninsular Malaysia. Those operating solely as convenience
stores usually operate 24 hours per day and those operating as gas mart
usually operate 16 hours per day. The number of convenience stores
increased from 400 in 1999 to an estimated 870 in 2003. A third of these
operate solely as convenience stores and two-thirds are operated by gas
stations.

Convenience stores sell a limited range of food and non-food items often
purchased in small quantities. Prices of the food items sold are
generally higher than the supermarkets and hypermarkets. Common food
items sold include snack foods, beverages, confectionaries, ice creams,
and bakeries. Convenience stores are increasingly popular since they
offer consumer shopping convenience by operating long hours. Convenience
stores compete by offering other services such as automatic teller
banking services, mini café's, take-away light meals, courier, and fax
services.

Food sales from this sector doubled from US\$105 million in 1999 to
US\$228 million 2003 increasing from 1.4% to 2.4% of the total retail
food sales during the period. Food sales are expected to increase
further to US\$413 million by 2006 as the number of convenience stores
increases. Marketing through the convenience stores should not be
considered as a major distribution channel for US exporters but as
supplementary since sales of any particular food item is generally
small. Furthermore, food items sold are generally snack foods,
beverages, confectionaries, ice creams, and bakeries.

+---------------+-----------+---------+-------------+----------------+
| **Major       |           |         |             |                |
| Convenience   |           |         |             |                |
| Store         |           |         |             |                |
| Chains**      |           |         |             |                |
+===============+===========+=========+=============+================+
| **\           | **Parent  | **Sales | **\         | **\            |
| \             | Company\  | in      | No. of      | Major          |
| Company**     | Owne      | 2003\   | Estab       | Locations of   |
|               | rship\*** | (US\$   | lishments** | Es             |
|               |           | Mil)**  |             | tablishments** |
+---------------+-----------+---------+-------------+----------------+
| 7-Eleven      | US        | 55      | 217         | Major urban    |
|               |           |         |             | towns and      |
| (Sole         |           |         |             | cities across  |
| convenience   |           |         |             | Malaysia       |
| store)        |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| Shell         | An        | 59      | 260         | Across         |
|               | glo-Dutch |         |             | Malaysia       |
| (Gas mart)    |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| Petronas      | Malaysian | 42      | 190         | Across         |
|               |           |         |             | Malaysia       |
| (Gas mart)    |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| ExxonMobil    | US        | 34      | 170         | Across         |
|               |           |         |             | Malaysia       |
| (Gas mart)    |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| Caltex        | US        | 17      | 105         | Across         |
|               |           |         |             | Malaysia       |
| (Gas mart)    |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| BP            | British   | 11      | 80          | Across         |
|               |           |         |             | Malaysia       |
| (Gas mart)    |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+
| ProJeT        | US        | 8       | 33          | Major urban    |
|               |           |         |             | towns and      |
| (Gas mart)    |           |         |             | cities across  |
|               |           |         |             | Malaysia       |
+---------------+-----------+---------+-------------+----------------+
| *Source:      |           |         |             |                |
| Published     |           |         |             |                |
| company       |           |         |             |                |
| information   |           |         |             |                |
| including     |           |         |             |                |
| websites,     |           |         |             |                |
| trade         |           |         |             |                |
| sources, and  |           |         |             |                |
| The Star      |           |         |             |                |
| newspaper.    |           |         |             |                |
| Note:         |           |         |             |                |
| \*Foreign     |           |         |             |                |
| companies     |           |         |             |                |
| operating in  |           |         |             |                |
| Malaysia have |           |         |             |                |
| Malaysian     |           |         |             |                |
| investments.* |           |         |             |                |
+---------------+-----------+---------+-------------+----------------+

***Traditional Markets.*** Traditional markets include the independent
"mom and pop" grocery stores and the wet markets. They are located in
residential areas in both urban and rural towns across Malaysia.

The number of independent grocery stores declined to nearly 28,000 in
2003, as consumers prefer shopping at supermarkets and hypermarkets.
Common food items sold are canned foods, dried foods, snack foods, ice
cream, and soft drinks but generally do not sell fresh produces and
chilled and frozen foods except ice cream. Some grocery stores located
in the urban areas have evolved into mini-markets and are slightly
larger and sell a wider range of foods including fresh, chilled, and
frozen foods. There are an estimated 1,000 mini-markets located across
Malaysia. Food sales from the independent grocery stores were US\$4.39
billion in 2003 accounting for 47.0% of the total retail food sales.

Shopping at wet markets is still popular among consumers and there were
an estimated 29,000 small businesses classified as wet markets in 2003.
Wet markets in Malaysia either operate on a daily basis in permanent
buildings or on a weekly basis in open locations. Food items sold at the
wet markets are mainly fresh fruits and vegetable, local beef and
chicken, and locally caught fish or imported from Thailand. Imported
food items sold at the wet markets are usually apples, oranges, grapes,
carrots, potatoes, onions, and broccoli. Food sales from the wet markets
were US\$653 million 2003 accounting for 7.0% of the total retail food
sales.

# 4. Competition

## 4.1 Competition Facing US Food Exporters

The three major food exporting countries to Malaysia are China,
Australia, and Thailand. This is followed by Indonesia, New Zealand,
India, and the US.

-   China's key strengths are low prices of its foods and closeness to
    Malaysia. Imports from China were once perceived as of low quality
    but has since improved especially its fresh produces. China competes
    directly with the US for temperate fresh fruits and vegetables since
    both countries are in the same growing season.

-   Australian exporters target Malaysia as one of the potential markets
    for their food exports. Australian food products are perceived by
    consumers as reasonably priced and of high quality. Australia is in
    the opposite growing season than China and the US and therefore does
    not compete directly with these two countries for export of fresh
    temperate fruits and vegetables to Malaysia.

-   Thailand's key strengths are low prices of its foods and neighbors
    Malaysia by a land border. Thus trucks transport daily tropical
    fresh fruits, vegetables and fish from southern Thailand to various
    locations in Peninsular Malaysia and as far as Singapore.

  --------------------------------------- -------------------------------
  **Major Food Exporting Countries to     
  Malaysia by Value of Imports**          

  **Country**                             **Market Share in 2003**

  China                                   17.3%

  Australia                               16.4%

  Thailand                                13.0%

  Indonesia                               8.2%

  New Zealand                             6.4%

  India                                   6.1%

  United States                           5.5%

  Others                                  27.1%

  Total                                   100.0%

  *Source: Malaysian Statistics           
  Department*                             
  --------------------------------------- -------------------------------

Closeness of Indonesia and India to Malaysia and low prices of their
imports is their key strengths. Overall consumer perception towards
imports from New Zealand is similar to Australia i.e. reasonably priced
high quality foods. Consumer perception towards the quality of US food
products is similar to Australian and New Zealand imports but US imports
are generally higher priced.

## 4.2 Major Products Categories and Competitor's Market Share

+---------------+------------------+-----------------+----------------+
| **Major       |                  |                 |                |
| Imports in    |                  |                 |                |
| 2003**        |                  |                 |                |
+===============+==================+=================+================+
| **\           | **\              | **Strengths of  | **Advantages   |
| Product       | Major Supply     | Supplying       | and            |
| Category**    | Countries\***    | Countries**     | Disadvantages  |
|               |                  |                 | of Local       |
|               |                  |                 | Suppliers**    |
+---------------+------------------+-----------------+----------------+
| Dairies       | 1.  Thailand --  | Products from   | Established    |
| (milk, cream, |     39%          | New Zealand and | food           |
| powder,       |                  | Australia are   | processing     |
| butter,       | 2.  Australia -- | well            | industry for   |
| yoghurt, &    |     19%          | established due | diaries but    |
| cheese)       |                  | to aggressive   | dependent on   |
|               | 3.  N. Zealand   | promotion and   | imports of raw |
| Import:\      |     -- 19%       | diaries from    | dairy food     |
| 219,653 tons\ |                  | Thailand are    | materials due  |
| (US\$289.0    | 4.  US -- 1%     | marketed by     | to Malaysia's  |
| mil)          |                  | multinational   | limited milk   |
|               |                  | companies.      | production.    |
+---------------+------------------+-----------------+----------------+
| Fruits (fresh | 1.  China -- 35% | Low price       | Local          |
| or chilled)   |                  | imports of      | cultivation of |
|               | 2.  Thailand --  | temperate       | tropical       |
| Import:\      |     12%          | fruits from     | fruits is      |
| 325,817 tons\ |                  | China. Tropical | adequate to    |
| (US\$118.4    | 3.  Australia -- | fruits from     | meet local     |
| mil)          |     10%          | Thailand are    | demand but     |
|               |                  | transported     | dependent on   |
|               | 4.  US -- 9%     | through land    | imports for    |
|               |                  | border with     | temperate      |
|               |                  | Malaysia while  | fruits.        |
|               |                  | Australia is in |                |
|               |                  | opposite        |                |
|               |                  | growing season  |                |
|               |                  | from the US.    |                |
+---------------+------------------+-----------------+----------------+
| Can           | 1.  China -- 52% | China and       | Local industry |
| ned/preserved |                  | Thailand cater  | is mainly on   |
| fruits        | 2.  Thailand --  | to Asian fruit  | pineapple      |
| (including    |     18%          | products while  | products       |
| tomato & jam) |                  | Turkey is well  | followed by    |
|               | 3.  Turkey -- 7% | known for its   | other local    |
| Import:\      |                  | tomato paste.   | fruits but not |
| 55,179 tons\  | 4.  US -- 3%     |                 | temperate      |
| (US\$57.1     |                  |                 | fruits.        |
| mil)          |                  |                 |                |
+---------------+------------------+-----------------+----------------+
| Vegetables    | 1.  China -- 38% | Low price       | Local          |
| (fresh or     |                  | imports of      | cultivation is |
| chilled)      | 2.  India -- 15% | temperate       | insufficient   |
|               |                  | vegetables from | to meet local  |
| Import:\      | 3.  Australia -- | China, while    | demand and     |
| 666,903 tons\ |     13%          | India is a      | dependent on   |
| (US\$210.0    |                  | major exporter  | imports for    |
| mil)          | 4.  US -- 4%     | of onions and   | temperate      |
|               |                  | Australia is in | vegetables.    |
|               |                  | opposite        |                |
|               |                  | growing season  |                |
|               |                  | from the US.    |                |
+---------------+------------------+-----------------+----------------+
| Beef and lamb | 1.  India -- 40% | Indian beef is  | Local industry |
| including     |                  | lower in price  | is small and   |
| processed     | 2.  N. Zealand   | than local beef | fragmented to  |
|               |     -- 16%       | while           | meet total     |
| Import:\      |                  | Australian and  | demand for     |
| 113,684 tons\ | 3.  Australia -- | New Zealand     | meat products. |
| (US\$210.3    |     15%          | meat are        |                |
| mil)          |                  | aggressively    |                |
|               | 4.  US - 2%      | promoted as     |                |
|               |                  | *halal.*        |                |
+---------------+------------------+-----------------+----------------+
| Poultry       | 1.  Thailand --  | Thailand's      | Well           |
|               |     35%          | closeness to    | established    |
| Import:\      |                  | Malaysia        | and organized  |
| 38,858 tons\  | 2.  Denmark --   | shortens        | poultry        |
| (US\$49.1     |     28%          | delivery time   | industry but   |
| mil)          |                  | while Denmark   | dependent on   |
|               | 3.  Netherlands  | and Holland is  | imported       |
|               |     -- 12%       | a traditional   | animal feed.   |
|               |                  | supplier of     |                |
|               | 4.  US -- 5%     | imported frozen |                |
|               |                  | *halal*         |                |
|               |                  | poultry.        |                |
+---------------+------------------+-----------------+----------------+
| Fish (fresh,  | 1.  Thailand --  | Low price       | Established    |
| chilled, or   |     31%          | imports from    | fishing        |
| frozen)       |                  | these countries | industry but   |
|               | 2.  Indonesia -- | and short       | dependent on   |
| Import:\      |     20%          | delivery time   | imports since  |
| 269,588 tons\ |                  | due to          | seasonal       |
| (US\$185.0    | 3.  China -- 6%  | closeness to    | monsoons       |
| mil)          |                  | Malaysia.       | hinders        |
|               | 4.  US -- 1%     |                 | fishing.       |
+---------------+------------------+-----------------+----------------+
| Canned and    | 1.  Thailand --  | Thailand well   | Cheaper        |
| preserved     |     55%          | known for it's  | imports of     |
| seafood       |                  | competitively   | processed fish |
|               | 2.  China -- 26% | price canned    | products from  |
| Import:\      |                  | tuna fish and   | Thailand and   |
| 28,323 tons\  | 3.  Chile -- 9%  | sardines while  | China limits   |
| (US\$36.8     |                  | China for       | expansion of   |
| mil)          | 4.  US -- 1%     | various seafood | the local      |
|               |                  | products.       | industry.      |
+---------------+------------------+-----------------+----------------+
| Shellfish &   | 1.  China -- 27% | Low price       | Well           |
| crustaceans   |                  | imports from    | established    |
| fresh,        | 2.  Indonesia -- | China,          | local industry |
| chilled, or   |     20%          | Indonesia, and  | with breeding  |
| frozen)       |                  | Thailand and    | facilities and |
|               | 3.  Thailand --  | short delivery  | one of the     |
| Import:\      |     17%          | time due to     | world's major  |
| 45,772 tons\  |                  | closeness to    | exporters of   |
| (US\$101.5    | 4.  US - \<1%    | Malaysia.       | prawns.        |
| mil)          |                  |                 |                |
+---------------+------------------+-----------------+----------------+
| Fruit juice   | 1.  Netherlands  | Netherlands,    | Local industry |
| including     |     -- 13%       | US, and         | is dominated   |
| vegetable     |                  | Australia are   | by local and   |
| juice         | 2.  US -- 10%    | known for a     | multinational  |
|               |                  | variety of      | companies but  |
| Import:\      | 3.  Australia -- | juices          | juices         |
| 20.2 mil      |     9%           | originating     | considered     |
| liters        |                  | from temperate  | less "pure"    |
| (US\$24.7     |                  | fruits and      | than imports.  |
| mil)          |                  | noted for their |                |
|               |                  | high quality.   |                |
+---------------+------------------+-----------------+----------------+
| Baked goods   | 1.  China -- 67% | China produces  | Local          |
|               |                  | mainly Chinese  | manufacturers  |
| Import:\      | 2.  Indonesia -- | or Asian baked  | produce a wide |
| 25,862 tons\  |     8%           | goods for       | range of baked |
| (US\$18.2     |                  | export while    | goods but      |
| mil)          | 3.  Thailand --  | many Indonesian | mostly         |
|               |     8%           | and Thai        | targeted at    |
|               |                  | companies       | the low to     |
|               |                  | produce western | mid-end        |
|               |                  | bakeries for    | market.        |
|               |                  | export.         |                |
+---------------+------------------+-----------------+----------------+
| Confectionary | 4.  China -- 28% | China produces  | International  |
|               |                  | Asian style     | brands         |
| Import:\      | 5.  Indonesia -- | confectionary   | produced by    |
| 14,977 tons   |     23%          | while imports   | multinational  |
| (US\$20.6     |                  | from Indonesia  | companies or   |
| mil)          | 6.  Philippines  | and the         | local          |
|               |     -- 16%       | Philippines are | companies      |
|               |                  | mostly from     | (under         |
|               | 7.  US -- 1%     | multinational   | license) are   |
|               |                  | companies.      | widely         |
|               |                  |                 | available.     |
+---------------+------------------+-----------------+----------------+
| *Source:      |                  |                 |                |
| Malaysian     |                  |                 |                |
| Statistics    |                  |                 |                |
| Department    |                  |                 |                |
| and trade     |                  |                 |                |
| sources.      |                  |                 |                |
| Note: \*US    |                  |                 |                |
| included if   |                  |                 |                |
| not among the |                  |                 |                |
| top three     |                  |                 |                |
| major         |                  |                 |                |
| suppliers.*   |                  |                 |                |
+---------------+------------------+-----------------+----------------+

# 5. Best Product Prospects

The best product prospects are developed from a broad base study of the
Malaysian market and should not be construed as detailed market studies
of each segment. US exporters who are interested to develop viable
markets should consider conducting a detailed market study for the
products they represent.

## 5.1 Products Having Good Sales Potential

+-----------+--------+--------+---------+--------------+--------------+
| **\       | **2003 | **\    | **\     | **Key        | **Market     |
| Product   | Market | \      | Import  | Constraints  | At           |
| Category\ | Size   | 2003   | Tariff  | Over Market  | tractiveness |
| (HS       | Esti   | Imp    | Rate**  | De           | for US       |
| Code)**   | mate** | orts** |         | velopments** | Exporters**  |
+-----------+--------+--------+---------+--------------+--------------+
| Poultry   | 1.4    | 38,858 | None    | Large        | Niche market |
|           | mil    | tons   | for     | poultry      | for turkey   |
| (HS 0207) | tons   |        | fresh,  | companies    | (US is a     |
|           |        |        | c       | dominate the | major        |
|           |        |        | hilled, | local        | supplier)    |
|           |        |        | or      | industry     | especially   |
|           |        |        | frozen. | with Thai    | during       |
|           |        |        |         | imports      | Christmas.   |
|           |        |        | 5%      | supplying    | No           |
|           |        |        | sales   | northern     | commercial   |
|           |        |        | tax for | peninsular   | rearing of   |
|           |        |        | pro     | and *halal*  | turkey in    |
|           |        |        | cessed. | imports from | Malaysia.    |
|           |        |        |         | Denmark and  | Market for   |
|           |        |        |         | the          | processed    |
|           |        |        |         | Netherlands. | poultry such |
|           |        |        |         |              | as hot dogs  |
|           |        |        |         |              | and salami.  |
+-----------+--------+--------+---------+--------------+--------------+
| Beef and  | 1      | 1      | None    | Low price    | Rising       |
| lamb      | 55,000 | 13,684 | for     | beef from    | consumer     |
| including | tons   | tons   | fresh,  | India and    | income has   |
| processed |        |        | c       | aggressive   | created      |
|           |        |        | hilled, | promotion at | demand       |
| (HS 1601, |        |        | or      | retail       | especially   |
| 1602, and |        |        | frozen. | outlets by   | for high     |
| 0202)     |        |        |         | Australian   | quality meat |
|           |        |        | 5%      | and New      | but Malaysia |
|           |        |        | sales   | Zealand      | is unable to |
|           |        |        | tax for | exporters as | supply       |
|           |        |        | veal.   | *halal*      | sufficiently |
|           |        |        |         | meat.        | to meet      |
|           |        |        | 0-20%   |              | demand.      |
|           |        |        | import  |              |              |
|           |        |        | duty    |              |              |
|           |        |        | and 5%  |              |              |
|           |        |        | sales   |              |              |
|           |        |        | tax for |              |              |
|           |        |        | pro     |              |              |
|           |        |        | cessed. |              |              |
+-----------+--------+--------+---------+--------------+--------------+
| Fish      | 1.4    | 2      | None    | Established  | Niche market |
| (fresh,   | mil    | 69,588 |         | local        | for          |
| chilled,  | tons   | tons   |         | industry     | cold-water   |
| or        |        |        |         | complemented | fish, such   |
| frozen)   |        |        |         | by low price | as salmon    |
|           |        |        |         | imports from | and cod, for |
| (HS 0304) |        |        |         | Thailand,    | use in       |
|           |        |        |         | Indonesia,   | western      |
|           |        |        |         | and China.   | cooking      |
|           |        |        |         | Most         | among middle |
|           |        |        |         | consumers    | to high      |
|           |        |        |         | are          | income       |
|           |        |        |         | unfamiliar   | consumers.   |
|           |        |        |         | in cooking   |              |
|           |        |        |         | coldwater    |              |
|           |        |        |         | fishes.      |              |
+-----------+--------+--------+---------+--------------+--------------+
| Shellfish | 3      | 45,772 | 0-20%   | Development  | Market for   |
| &         | 70,000 | tons   | import  | of the local | more         |
| cr        | tons   |        | duty    | industry and | "exotic"     |
| ustaceans |        |        | for and | marine farms | seafood.     |
| (fresh,   |        |        | for     | are          | Cold storage |
| chilled,  |        |        | some 5% | supported by | facilities   |
| or        |        |        | sales   | the          | in           |
| frozen)   |        |        | tax.    | government.  | supermarkets |
|           |        |        |         |              | and          |
| (HS 0306  |        |        |         |              | hypermarkets |
| to 0307)  |        |        |         |              | widen market |
|           |        |        |         |              | for frozen   |
|           |        |        |         |              | seafood.     |
+-----------+--------+--------+---------+--------------+--------------+
| Canned    | 52,000 | 28,323 | 0-20%   | Overall      | Ready to eat |
| seafood   | tons   | tons   | import  | consumer     | canned tuna  |
|           |        |        | duty    | preference   | and mackerel |
| (HS 1604) |        |        | and for | for fresh or | are popular. |
|           |        |        | some 5% | chilled      |              |
|           |        |        | sales   | seafood for  |              |
|           |        |        | tax.    | cooking.     |              |
+-----------+--------+--------+---------+--------------+--------------+
| Fresh     | 1.4    | 6      | No      | Competition  | Demand for   |
| v         | mil    | 66,903 | import  | from locally | vegetables   |
| egetables | tons   | tons   | duty or | grown        | from the     |
|           |        |        | sales   | "tropical"   | temperate    |
| (HS 0701  |        |        | tax.    | vegetables.  | climate but  |
| to 0709)  |        |        |         | US imports   | cultivation  |
|           |        |        |         | competes     | is limited   |
|           |        |        |         | with fresh   | to the       |
|           |        |        |         | produces     | highlands    |
|           |        |        |         | from China   | and          |
|           |        |        |         | since both   | therefore    |
|           |        |        |         | are in the   | dependent on |
|           |        |        |         | same growing | imports.     |
|           |        |        |         | season.      |              |
+-----------+--------+--------+---------+--------------+--------------+
| Fresh     | 2.3    | 3      | 5%      | Competition  | Demand for   |
| fruits    | mil    | 25,817 | import  | from         | temperate    |
|           | tons   | tons   | duty    | tropical     | fruits,      |
| (HS 0803  |        |        | and for | fruits grown | which        |
| to 0810)  |        |        | most 5% | abundantly   | Malaysia has |
|           |        |        | sales   | in Malaysia. | to import.   |
|           |        |        | tax.    |              |              |
+-----------+--------+--------+---------+--------------+--------------+
| Processed | 83,800 | 21,998 | 0-10%   | Consumer     | Canned       |
| fruits    | tons   | tons   | import  | preference   | peaches and  |
| (mostly   |        |        | duty    | for fresh    | pears and    |
| canned    |        |        | and for | fruits than  | preserved    |
| and       |        |        | some 5% | canned or    | fruit snacks |
| dried)    |        |        | sales   | dried.       | have a niche |
|           |        |        | tax.    |              | market.      |
| (HS 2008) |        |        |         |              |              |
+-----------+--------+--------+---------+--------------+--------------+
| Soft      | 159.1  | 20.2   | 0-30%   | Competition  | The US is a  |
| drinks    | mil    | mil    | import  | from locally | major        |
| including | liters | liters | duty    | produced     | supplier of  |
| juices    |        |        | and for | carbonated   | fruit juices |
|           |        |        | most 5% | drinks,      | and there is |
| (HS 2009) |        |        | sales   | juices, and  | no import    |
|           |        |        | tax.    | Asian        | duty and     |
|           |        |        |         | specialty    | sales tax    |
|           |        |        |         | drinks.      | for infant   |
|           |        |        |         |              | fruit juice  |
|           |        |        |         |              | and          |
|           |        |        |         |              | grapefruit.  |
+-----------+--------+--------+---------+--------------+--------------+
| Sauces    | 65,600 | 7,330  | 0-20%   | Consumer     | Increasing   |
| and       | tons   | tons   | import  | preference   | acceptance   |
| c         |        |        | duty    | for locally  | of western   |
| ondiments |        |        | and for | produced     | foods and    |
|           |        |        | some 5% | sauces used  | the US is a  |
| (HS 2103) |        |        | sales   | for local    | major        |
|           |        |        | tax.    | cooking and  | exporter of  |
|           |        |        |         | dishes.      | sauces for   |
|           |        |        |         |              | such foods.  |
+-----------+--------+--------+---------+--------------+--------------+
| Bakeries  | 1      | 25,862 | 0-20%   | A wide       | Consumer     |
|           | 30,000 | tons   | import  | variety of   | health       |
| (HS 1905) | tons   |        | duty    | locally      | trends have  |
|           |        |        | and 5%  | produced     | created      |
|           |        |        | sales   | bakeries     | demand for   |
|           |        |        | tax.    | including    | healthier    |
|           |        |        |         | i            | bakeries     |
|           |        |        |         | nternational | such as high |
|           |        |        |         | brands at    | fiber, low   |
|           |        |        |         | competitive  | fat, or high |
|           |        |        |         | prices.      | calcium      |
|           |        |        |         |              | bakeries.    |
+-----------+--------+--------+---------+--------------+--------------+
| Conf      | 26,000 | 14,997 | 15%     | Consumption  | Promotion of |
| ectionary | tons   | tons   | import  | of           | quality      |
|           |        |        | duty    | c            | chocolate    |
| (HS 1704  |        |        | and 10% | onfectionary | c            |
| and 1806) |        |        | sales   | is mostly    | onfectionary |
|           |        |        | tax.    | confined to  | in small     |
|           |        |        |         | younger age  | packaging is |
|           |        |        |         | consumers.   | creating     |
|           |        |        |         |              | demand from  |
|           |        |        |         |              | middle       |
|           |        |        |         |              | income       |
|           |        |        |         |              | consumers.   |
+-----------+--------+--------+---------+--------------+--------------+
| *Source:  |        |        |         |              |              |
| Malaysian |        |        |         |              |              |
| S         |        |        |         |              |              |
| tatistics |        |        |         |              |              |
| De        |        |        |         |              |              |
| partment, |        |        |         |              |              |
| Eur       |        |        |         |              |              |
| omonitor, |        |        |         |              |              |
| trade     |        |        |         |              |              |
| sources,  |        |        |         |              |              |
| Spire     |        |        |         |              |              |
| analysis, |        |        |         |              |              |
| and       |        |        |         |              |              |
| Malaysian |        |        |         |              |              |
| Customs   |        |        |         |              |              |
| Tariff on |        |        |         |              |              |
| Import    |        |        |         |              |              |
| /Export.* |        |        |         |              |              |
+-----------+--------+--------+---------+--------------+--------------+

## 5.2 Potential Products Not Present in Significant Quantities

+-----------+--------+--------+--------+----------------+-------------+
| **\       | **2003 | **\    | **\    | **\            | **Market    |
| Product   | Market | \      | Import | Key            | Att         |
| Category\ | Size   | 2003   | Tariff | Constraints    | ractiveness |
| (HS       | Esti   | Imp    | Rate** | Over Market    | for US      |
| Code)**   | mate** | orts** |        | Developments** | Exporters** |
+-----------+--------+--------+--------+----------------+-------------+
| Breakfast | 10,300 | 5,300  | 2-7%   | Consumer       | Promotion   |
| cereals   | tons   | tons   | import | preference     | of cereals  |
|           |        |        | duty   | towards local  | targeted at |
| (HS 1904) |        |        | and    | dishes and     | young       |
|           |        |        | 5-10%  | bread as a     | children,   |
|           |        |        | sales  | breakfast      | as a health |
|           |        |        | tax.   | menu.          | food, and   |
|           |        |        |        |                | as an       |
|           |        |        |        |                | ingredient  |
|           |        |        |        |                | for         |
|           |        |        |        |                | homemade    |
|           |        |        |        |                | cookies     |
|           |        |        |        |                | creating    |
|           |        |        |        |                | demand.     |
+-----------+--------+--------+--------+----------------+-------------+
| Butter    | 8,614  | 8,614  | 2%     | Competition    | Malaysia    |
|           | tons   | tons   | import | from margarine | does not    |
| (HS 0405) |        |        | duty   | as a healthier | produce     |
|           |        |        | and 5% | substitute for | butter and  |
|           |        |        | sales  | butter.        | therefore   |
|           |        |        | tax.   |                | depends on  |
|           |        |        |        |                | imports.    |
+-----------+--------+--------+--------+----------------+-------------+
| Jam, nut  | 7,900  | 3,074  | No     | Competition    | Demand for  |
| based,    | tons   | tons   | import | from low price | higher      |
| and       |        |        | duty   | local jams     | price       |
| chocolate |        |        | but    | with lower     | quality     |
| spreads   |        |        | for    | fruit contents | jams and    |
|           |        |        | some   | and            | spread with |
| (HS 2007) |        |        | 5%     | competitively  | high fruit, |
|           |        |        | sales  | priced quality | nut, or     |
|           |        |        | tax.   | imports from   | chocolate   |
|           |        |        |        | Australia and  | content.    |
|           |        |        |        | Europe.        |             |
+-----------+--------+--------+--------+----------------+-------------+
| Cheese    | 5,651  | 5,651  | 5-10%  | Malaysia is a  | Malaysia    |
| and curd  | tons   | tons   | import | traditional    | does not    |
|           |        |        | duty   | market for     | produce     |
| (HS 0406) |        |        | and 5% | cheeses from   | cheese and  |
|           |        |        | sales  | Australia and  | therefore   |
|           |        |        | tax.   | New Zealand    | depends on  |
|           |        |        |        | and therefore  | imports.    |
|           |        |        |        | popular among  |             |
|           |        |        |        | consumers.     |             |
+-----------+--------+--------+--------+----------------+-------------+
| Pasta     | 2,357  | 2,357  | 5-8%   | Most consumers | I           |
|           | tons   | tons   | import | are accustomed | ntroduction |
| (HS 1902) |        |        | duty   | to local       | of          |
|           |        |        | and    | noodles and    | pre-cooked  |
|           |        |        | for    | unfamiliar     | can         |
|           |        |        | some   | with cooking   | ned/bottled |
|           |        |        | 5%     | pasta based    | spaghetti   |
|           |        |        | sales  | dishes.        | sauce has   |
|           |        |        | tax.   |                | created     |
|           |        |        |        |                | demand for  |
|           |        |        |        |                | pasta.      |
+-----------+--------+--------+--------+----------------+-------------+
| *Source:  |        |        |        |                |             |
| Malaysian |        |        |        |                |             |
| S         |        |        |        |                |             |
| tatistics |        |        |        |                |             |
| De        |        |        |        |                |             |
| partment, |        |        |        |                |             |
| Eur       |        |        |        |                |             |
| omonitor, |        |        |        |                |             |
| trade     |        |        |        |                |             |
| sources,  |        |        |        |                |             |
| Spire     |        |        |        |                |             |
| analysis, |        |        |        |                |             |
| and       |        |        |        |                |             |
| Malaysian |        |        |        |                |             |
| Customs   |        |        |        |                |             |
| Tariff on |        |        |        |                |             |
| Import    |        |        |        |                |             |
| /Export.* |        |        |        |                |             |
+-----------+--------+--------+--------+----------------+-------------+

## 5.3 Products Facing Significant Barriers 

+---------+---------+----------+---------+-------------+--------------+---+
| **P     |         |          |         |             |              |   |
| roducts |         |          |         |             |              |   |
| Facing  |         |          |         |             |              |   |
| Sign    |         |          |         |             |              |   |
| ificant |         |          |         |             |              |   |
| Bar     |         |          |         |             |              |   |
| riers** |         |          |         |             |              |   |
+=========+=========+==========+=========+=============+==============+===+
| **\     | **\     | **\      | **\     | **Key       | **Market     |   |
| \       | 2003    | \        | Import  | Constraints | At           |   |
| Product | Market  | 2003     | Tariff  | Over Market | tractiveness |   |
| Cat     | Size**  | Import** | Rate**  | Dev         | for US       |   |
| egory** |         |          |         | elopments** | Exporters**  |   |
+---------+---------+----------+---------+-------------+--------------+---+
| Rice    | 2.4 mil | 840,000  | No      | Imports are | Rice remains | [ |
|         | tons    | tons     | import  | monopolized | Malaysia's   | ] |
| (HS     |         |          | duty or | and         | staple food  | { |
| 1006)   |         |          | sales   | controlled  | and there is | . |
|         |         |          | tax     | by Bernas   | a demand for | m |
|         |         |          |         | (a          | premium      | a |
|         |         |          |         | government  | grade rice   | r |
|         |         |          |         | c           | from         | k |
|         |         |          |         | orporation) | Malaysia's   | } |
|         |         |          |         | importing   | middle to    |   |
|         |         |          |         | mainly from | high-income  |   |
|         |         |          |         | Myanmar,    | urban        |   |
|         |         |          |         | Vietnam and | population.  |   |
|         |         |          |         | Thailand.   |              |   |
|         |         |          |         | F           |              |   |
|         |         |          |         | urthermore, |              |   |
|         |         |          |         | per capita  |              |   |
|         |         |          |         | rice        |              |   |
|         |         |          |         | consumption |              |   |
|         |         |          |         | is          |              |   |
|         |         |          |         | gradually   |              |   |
|         |         |          |         | declining   |              |   |
|         |         |          |         | in favor of |              |   |
|         |         |          |         | bread.      |              |   |
+---------+---------+----------+---------+-------------+--------------+---+
| *       |         |          |         |             |              |   |
| Source: |         |          |         |             |              |   |
| Ma      |         |          |         |             |              |   |
| laysian |         |          |         |             |              |   |
| Sta     |         |          |         |             |              |   |
| tistics |         |          |         |             |              |   |
| Depa    |         |          |         |             |              |   |
| rtment, |         |          |         |             |              |   |
| trade   |         |          |         |             |              |   |
| s       |         |          |         |             |              |   |
| ources, |         |          |         |             |              |   |
| Spire   |         |          |         |             |              |   |
| an      |         |          |         |             |              |   |
| alysis, |         |          |         |             |              |   |
| and     |         |          |         |             |              |   |
| Ma      |         |          |         |             |              |   |
| laysian |         |          |         |             |              |   |
| Customs |         |          |         |             |              |   |
| Tariff  |         |          |         |             |              |   |
| on      |         |          |         |             |              |   |
| I       |         |          |         |             |              |   |
| mport/E |         |          |         |             |              |   |
| xport.* |         |          |         |             |              |   |
+---------+---------+----------+---------+-------------+--------------+---+

END OF REPORT