Required Report - public distribution

**Date:** 5/17/2005

**GAIN Report Number:** MY5022

MY5022

**Malaysia**

**HRI Food Service Sector**

**Food Service Malaysia**

**2005**

**Approved by:**

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

U.S. Embassy, Kuala Lumpur

**Prepared by:**

Spire Research Consulting

**Report Highlights:**

From 1999 to 2003, total consumer spending in the food service sector
increased by 39% from \$3.1 billion to \$4.3 billion. Imports of food
(primarily for consumer consumption) increased by 11.9% from \$1.6
billion in 1999 to \$1.8 billion in 2003. Nearly two-thirds of the
imports are for processed foods. Hotel and resorts, restaurants, and the
institutional sub-sectors represent the best potential for U.S.
exporters. The restaurant accounted for 67.3% of the total food service
sales in 2003. This is followed by the hotels and resorts (7.6%) and
catering services to institutions (4.3%).

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 Expenditure On Food Service
6](#malaysias-expenditure-on-food-service)

[2.2 Food Service Sub-Sectors 6](#food-service-sub-sectors)

[2.3 Drivers of Growth and Consumer Trends
7](#drivers-of-growth-and-consumer-trends)

[2.4 Advantages and Challenges for US Food Exporters
8](#advantages-and-challenges-for-us-food-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 12](#market-structure)

[3.3 Regulations on Importing Foods 13](#regulations-on-importing-foods)

[3.4 Sector Profile 14](#sector-profile)

[3.4.1 Hotel and Resorts Sub-Sector 14](#hotel-and-resorts-sub-sector)

[3.4.2 Restaurant Sub-Sector 16](#restaurant-sub-sector)

[3.4.3 Institutional Food Service Sub-Sector
19](#institutional-food-service-sub-sector)

[4. Competition 21](#competition)

[5. Best Product Prospects 24](#best-product-prospects)

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

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

[5.3 Products Facing Significant Barriers
27](#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 Expenditure On Food Service

Malaysians frequently eat away from home at various low to high-end food
service establishments across the country. It is common for families to
treat themselves at least once a week eating away from home. From 1999
to 2003, total consumer spending in the food service sector increased by
39.0% from US\$3.09 billion to US\$4.3 billion.

  --------------- ----------- ----------- ----------- ----------- --------------
  **Food Service                                                  
  Sales(US\$                                                      
  Mil)**                                                          

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

  3,093           3,458       3,698       3,964       4,298       8.6%

  *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 and the remaining
one-third for primary foods.

+---------------------------+------+------+------+------+------+----+---+
| > **Imports of Foods      |      |      |      |      |      |    |   |
| > Primarily for the       |      |      |      |      |      |    |   |
| > Consumer Consumption    |      |      |      |      |      |    |   |
| > (US\$ Mil)**            |      |      |      |      |      |    |   |
+---------------------------+------+------+------+------+------+----+---+
| **Food Category**         | **\  | **\  | **\  | **\  | **\  | ** |   |
|                           | \    | \    | \    | \    | \    | Av |   |
|                           | 19   | 20   | 20   | 20   | 20   | g. |   |
|                           | 99** | 00** | 01** | 02** | 03** | An |   |
|                           |      |      |      |      |      | nu |   |
|                           |      |      |      |      |      | al |   |
|                           |      |      |      |      |      | Gr |   |
|                           |      |      |      |      |      | ow |   |
|                           |      |      |      |      |      | th |   |
|                           |      |      |      |      |      | ** |   |
+---------------------------+------+------+------+------+------+----+---+
| Primary foods             | 536  | 551  | 597  | 657  | 661  | 5. |   |
|                           |      |      |      |      |      | 5% |   |
+---------------------------+------+------+------+------+------+----+---+
| Processed foods           | 1    | 1    | 1    | 1    | 1    | 1. |   |
|                           | ,058 | ,150 | ,282 | ,231 | ,123 | 9% |   |
+---------------------------+------+------+------+------+------+----+---+
| Total imports             | 1    | 1    | 1    | 1    | 1    | 3. |   |
|                           | ,594 | ,701 | ,879 | ,888 | ,784 | 0% |   |
+---------------------------+------+------+------+------+------+----+---+
| *Source: MITI Report      |      |      |      |      |      |    |   |
| 1999- 2003.*              |      |      |      |      |      |    |   |
+---------------------------+------+------+------+------+------+----+---+

## 2.2 Food Service Sub-Sectors

Hotels and resorts, restaurants, and the institutional sub-sectors
represent the best potential for US exporters. The restaurant sub-sector
accounted for 67.3% of the total food service sales in 2003. This is
followed by the hotels and resorts (7.6%) and catering services to
institutions (4.3%). Other sub-sectors include food stalls but are not a
potential market for US exporters since they mainly serve relatively
cheap local dishes.

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

  Hotels and Resorts          327            13.1%           1,800

  Restaurants                 2,893          8.9%            15,600

  Institutional               185            4.2%            N/A

  Others                      893            7.2%            \-

  Total                       4,298          8.6%            

  *Source: Euromonitor,                                      
  Malaysia Tourism, trade                                    
  sources, and Spire                                         
  analysis.*                                                 
  -----------------------------------------------------------------------------

***Hotels and Resorts.*** The hotels and resorts sub-sector encompasses
cafés/bars and full-service restaurants in 3 to 5 star establishments.
Many 3 to 5 star hotels and resorts are located in or nearby Kuala
Lumpur, Penang, Johor Bahru, Langkawi Island and Kuantan in Peninsular
Malaysia and Kuching and Kota Kinabalu in East Malaysia. 4-5 star
establishments generally serve a wider range of imported foods compared
to 3 star establishments. Best potential for US exporters are the food
and beverage outlets in the 4-5 star hotels and resorts.

***Restaurants.*** The restaurant sub-sector includes full service
restaurants, café/bars, and fast food restaurants. Low-end full service
restaurants and café/bars generally serve local dishes while mid to
high-end establishments serve local, other Asian, and western dishes.
Fast food restaurants cater to the mid-end segment and are increasingly
popular generally serving western meals. These include US franchise
operations such as KFC, McDonald's, Burger King, and Domino's Pizza.
Most fast food restaurants and mid to high-end restaurants and café/bars
are located in the cities and major urban areas where there is a
significant population of middle to high-income customers. Best
potential for US exporters are in the mid to high-end establishments.

***Institutional Contract.*** The institutional contract sub-sector
involves food-catering services to institutions where there are a
certain number of confirmed customers. These include schools, hospitals,
police, military, and airline catering. This sub-sector is serviced by
small family-owned companies serving local dishes purchasing food items
based on the lowest possible price. The exception is airline catering
services by MAS Catering, which services not only Malaysia's national
airline but also 20 other international airlines. Best potential for US
exporters are with airline catering services.

## 2.3 Drivers of Growth and Consumer Trends

Increasing employment opportunities in the urban areas, urbanization,
and rising personal income has led towards changes in lifestyle and
increasing consumerism. Eating away from home has become frequent
affairs for many Malaysians:

-   Urbanization has caused greater time pressure on the working
    population creating demand for instant or convenience foods
    especially among younger people and singles that prefer to eat away
    from home.

-   Nearly 45% of the women in Malaysia are employed and this proportion
    is expected to increase in the future. Traditionally women have
    prepared family meals but as more women enter the workforce they
    have less time to do so and increasingly rely on food services for
    their family meals.

-   Eating out is a typical event among families and friends, especially
    during weekends. For special occasions, eating out at high-end
    establishments serving "exotic" imported foods such as seafood (e.g.
    US codfish, Australian pomfret, and Norwegian salmon) are considered
    a treat for the occasion.

Business lunches and dinners are increasingly popular among businesses.
Lunches and dinners at higher-end hotels and restaurants are popular
choices for such occasions and "exotic" imported foods are seen as
adding prestige to the occasion. Businesses and government often conduct
meetings, training programs, and special functions at high-end hotels
and resorts and buffet serving various local and western dishes are
common.

Wedding receptions conducted at high-end hotels and resorts are common
among affluent Malaysians. Such occasions generally cost between
US\$13,000 and US\$30,000 and as many as 200-400 guests are invited.
Conducting wedding receptions at mid to high-end Chinese restaurants is
also common among the Chinese population. Various local and imported
food items are served during these occasions

Muslims account for 56% of Malaysia's population who consume only foods
that are permitted by their religion known as *halal.* Thus Muslims do
not consume pork or their products but consume beef, lamb, and poultry
that have been slaughtered according to Islamic traditions. Thus all
fast food restaurant chains and many mid to high-end restaurants and
cafés (including those in hotels and resorts) serve only *halal* foods.

Most of the food and beverage chains operating in Malaysia are US
franchises and are found in nearly every city and major town in
Malaysia. Many Malaysians study abroad to the US, Britain, Australia,
and New Zealand and return to Malaysia. Malaysia's economy is dependent
on international trade and many Malaysians travel abroad on business.
Furthermore, many Malaysians in the middle and high-income group have
traveled abroad at least once in their lifetime. Thus Malaysians are
increasingly open to trying new foods and recipes especially Western
menus.

Malaysia's tourism industry has also led towards the growth of the food
service industry in Malaysia. The number of tourist arrivals to Malaysia
nearly doubled from 7.9 million in 1999 to 13.2 million in 2002 but
declined to 10.6 million in 2003 due to the outbreak SARS in region.
However, tourist arrivals to Malaysia are expected to reverse to 15.5
million in 2004 with being SARS abated in the region. Aside from
neighboring Singapore, Thailand, and Indonesia, most of the arrivals are
from countries of Northeast Asia, North America, Western Europe, and
Australia. Common destinations are Kuala Lumpur, Penang, Johor Bahru,
Langkawi Island, Kuantan, Kuching and Kota Kinabalu where there are many
4-5 star hotels and resorts.

## 2.4 Advantages and Challenges for US Food Exporters

Malaysians frequently eat away from home either to save time in
preparing meals at home, for family treats, or socializing with friends.
Thus there are advantages for US exporters to supply to Malaysia's food
service sector. However, US exporters also face challenges from local
producers and imports from other countries.

+----------------------------------+-----------------------------------+
| **Advantages and Challenges for  |                                   |
| US Exporters**                   |                                   |
+==================================+===================================+
| **Advantages**                   | **Challenges**                    |
+----------------------------------+-----------------------------------+
| The Malaysian government adopts  | An import duty and sales tax is   |
| an "open door" policy towards    | imposed on imported processed     |
| imports of fresh and processed   | foods if a local industry         |
| foods without any import quotas  | producing such foods exists in    |
| as long as regulatory            | Malaysia to protect the local     |
| requirements on imported foods   | industry. However, exporters of   |
| are met.                         | processed foods from the ASEAN    |
|                                  | countries enjoy lower import      |
|                                  | duties than exporters from other  |
|                                  | countries such as the US.         |
+----------------------------------+-----------------------------------+
| Malaysia's growing economy,      | Many importers, distributors, and |
| rising personal income,          | mid to high-end food service      |
| urbanization, and increasing     | establishments are less familiar  |
| number of women joining the      | with US imports compared to foods |
| workforce has created a more     | from Australia, New Zealand, and  |
| hectic lifestyle and increasing  | China.                            |
| consumerism.                     |                                   |
|                                  | For example, many are familiar    |
| Thus Malaysians frequently eat   | with beef, lamb, coldwater        |
| away from home since rising      | seafood, dairy products, and      |
| personal income has made eating  | temperate fruits and vegetables   |
| out especially at mid-end food   | from Australia and New Zealand.   |
| service establishments more      | Many are also familiar with fresh |
| affordable.                      | temperate fruits and vegetables   |
|                                  | from China, pasta from Italy, and |
|                                  | salmon from Norway.               |
+----------------------------------+-----------------------------------+
| Malaysians are becoming more     | Importers and distributors        |
| familiar with western foods from | supplying mid to high-end         |
| their trips abroad as students,  | establishments will purchase at   |
| on business, or holiday. The US, | the lowest price from any         |
| Britain, Australia, and New      | exporter or country food items    |
| Zealand are major destinations   | that are perceived as             |
| for many Malaysians.             | substitutable or commodities.     |
|                                  |                                   |
| Nearly all F&B outlets in 4-5    | For example, importers consider   |
| star hotels and resorts serve    | broccoli from China and the US as |
| western menus and there are many | substitutable and will source     |
| mid to high-end restaurants      | imports offered at the lowest     |
| across Malaysia serving such     | price. Beef and lamb from         |
| menus. US food service franchise | Australia, New Zealand, and the   |
| operations dominate the          | US are known for their quality    |
| Malaysian market and include     | and considered not substitutable  |
| fast food restaurants and cafés  | with lower price imports. (US     |
| and are located across Malaysia. | beef is temporarily banned in     |
|                                  | Malaysia because of the discovery |
|                                  | of a single case of bovine        |
|                                  | spongiform encephalopathy in the  |
|                                  | US).                              |
+----------------------------------+-----------------------------------+
| Malaysia does not produce or     | 56% of Malaysia's population is   |
| produces in insufficient         | Muslims. Thus only *halal* meats  |
| quantities certain food items    | (beef, lamb, and poultry) are     |
| and therefore such food items    | allowed to be imported into       |
| have to be imported. These       | Malaysia from a plant approved by |
| include beef, lamb, cheese,      | the Malaysian Islamic Development |
| butter, pasta, and temperate     | Council and certified by a        |
| fruits and vegetables.           | recognized Islamic institution in |
|                                  | the country of export.            |
+----------------------------------+-----------------------------------+
| There are many 4-5 star hotels   | China is in the same growing      |
| and resorts in and around Kuala  | season as the US and able to      |
| Lumpur, Penang, Johor Bahru,     | supply temperate fresh fruits and |
| Langakawi Island, Kuantan,       | vegetables at lower prices than   |
| Kuching and Kota Kinabalu        | the US. However, Australia and    |
| catering to foreign visitors to  | New Zealand is in the opposite    |
| Malaysia. F&B outlets in these   | growing season than the US and    |
| establishments serve high price  | does directly compete with the US |
| local and western menus using    | or China for temperate fresh      |
| imported food items such as      | fruits and vegetables.            |
| beef, lamb, seafood, dairies,    |                                   |
| fruits, and vegetables.          |                                   |
+----------------------------------+-----------------------------------+
| There is a demand for high       | Imports from countries that are   |
| priced "exotic" imported foods   | closer to Malaysia than the US    |
| such as seafood (e.g. coldwater  | such as China, Thailand,          |
| fishes from New Zealand,         | Australia, and New Zealand have a |
| Australian pomfret, and Sri      | faster delivery time.             |
| Lankan crab). These "exotic"     | Furthermore, their due to their   |
| foods are perceived as adding    | closeness to Malaysia, freight    |
| prestige to the occasion,        | costs from these countries to     |
| especially when dining in        | Malaysia are lower than from the  |
| Chinese restaurants.             | US.                               |
+----------------------------------+-----------------------------------+
|                                  |                                   |
+----------------------------------+-----------------------------------+

# 3. Road Map For Market Entry

## 3.1 Entry Strategy For US Food Exporters

The food service sector comprises of low to high-end establishments.
Various foods are served in different types of establishments ranging
from local (Chinese, Malay, and Indian), western, to other Asian menus.
US exporters face competition from local producers and exporters from
other countries who have already established themselves in the food
service sector. Thus it is important for the US exporter to understand
the Malaysian market for their products when establishing a market entry
strategy.

+---------------------+------------------------------------------------+
| **Key Entry         |                                                |
| Strategies for US   |                                                |
| Exporters**         |                                                |
+=====================+================================================+
| **Strategy**        | **Reasons**                                    |
+---------------------+------------------------------------------------+
| Conduct promotional | Local food importers and food service          |
| activities to       | establishments are generally less aware of US  |
| create awareness    | food products compared to food products from   |
| among importers and | Australia, New Zealand, Thailand, and China.   |
| the food service    | Examples to create awareness of US food        |
| establishments.     | products include:                              |
|                     |                                                |
|                     | -   Participate in exhibitions such as Food    |
|                     |     and Hotel Malaysia (FHM) and KL Food       |
|                     |     Festival since hoteliers and restaurateurs |
|                     |     often attend to these events to learn and  |
|                     |     scout for new products and ingredients;    |
|                     |                                                |
|                     | -   Conduct food festivals at leading hotels   |
|                     |     since they are often attended by           |
|                     |     importers, other hoteliers, and            |
|                     |     restaurants from mid to high-end           |
|                     |     establishments;                            |
|                     |                                                |
|                     | -   Samples if possible or pictures of the     |
|                     |     food item and its price together with a    |
|                     |     brief description of the food item to      |
|                     |     generate interest; and                     |
|                     |                                                |
|                     | -   Advertise in local food service magazines  |
|                     |     such as Food & Beverage.                   |
+---------------------+------------------------------------------------+
| Appoint local       | Local importers specialized in food services   |
| importers           | have an established network with local food    |
| specialized in the  | service establishments to promote and market   |
| food service        | the exporter's food items. These specialized   |
| industry to import  | importers understand the needs of the          |
| and market the      | individual establishments and potential        |
| exporter's food     | markets for the exporter's food items.         |
| products to the     |                                                |
| food service        | It is also important to maintain a good        |
| establishments.     | business relationship with the importers. In   |
|                     | Malaysia, as in other parts of Asia,           |
|                     | successful business ventures involves          |
|                     | maintaining a cordial business relationship    |
|                     | between the parties.                           |
+---------------------+------------------------------------------------+
| Target the mid to   | F&B outlets in 4-5 star hotels and resorts and |
| high-end food       | mid to high-end establishments in the          |
| service             | restaurant sub-sector represent the best       |
| establishments.     | potential for US exporters. Another is the     |
|                     | airline catering services in the institutional |
|                     | food service sub-sector.                       |
|                     |                                                |
|                     | These establishments are willing to purchase   |
|                     | higher price quality food items than similar   |
|                     | food items that are lower in price and         |
|                     | quality. Furthermore, some mid-end and many    |
|                     | more high-end full-service restaurants,        |
|                     | especially Chinese restaurants, including      |
|                     | those in the hotels and resorts serve high     |
|                     | priced "exotic" imported foods such as         |
|                     | seafood.                                       |
+---------------------+------------------------------------------------+
| Acquire *halal*     | Many mid to high-end food establishments       |
| certification from  | including fast food restaurants do not serve   |
| recognized Islamic  | pork but only *halal* menus to cater to their  |
| institutions in the | Muslim diners. Furthermore, Malaysia only      |
| US.                 | allows import of *halal* beef, lamb, and       |
|                     | poultry into the country.                      |
+---------------------+------------------------------------------------+
| Maintain a product  | Some food items are perceived as commodities   |
| positioning         | if importers are in the opinion that similar   |
| strategy for the    | food items are available from other exporters. |
| exporter's food     | Price is then the deciding factor to purchase. |
| items.              | Thus US exporters would have to compete on the |
|                     | price of their product. By positioning and     |
|                     | differentiating an exporter's product from the |
|                     | competitors establishes a niche market and     |
|                     | provides better opportunities for US exporter  |
|                     | to compete other than on price.                |
|                     |                                                |
|                     | For example, lower priced local and imported   |
|                     | fish are available from Thailand, Indonesia,   |
|                     | and China. Though New Zealand is not a major   |
|                     | exporter of fish to Malaysia, it has           |
|                     | established itself a niche market for          |
|                     | coldwater seafood and is a major exporter.     |
+---------------------+------------------------------------------------+
|                     |                                                |
+---------------------+------------------------------------------------+

## 3.2 Market Structure

![](media/image2.wmf){width="5.998611111111111in" height="2.78125in"}

Generally in the food service industry:

-   Sales of imported and locally produced foods to 4-5 star hotels and
    resorts are usually on a contract or tender basis. Various importers
    submit their tenders and the hotel or resort's management committee
    decides on the award taking into consideration feedbacks and
    comments from their F&B department.

-   Some major food producers in Malaysia (e.g. Nestle) have their own
    marketing department selling directly to the various food service
    establishments.

-   Wholesalers generally sell to smaller full-service restaurants
    including those in 3 star hotels and institutional food service
    contractors except airline catering.

Where food service establishments are far away from the importer's
business operation, distributors and wholesalers in these far away
locations are used to distribute the food items to the establishments.

## 3.3 Regulations on Importing Foods

Malaysia's Food Act 1983 and the Food Regulations 1985 govern various
aspects of food quality control in Malaysia including imported foods.
Import formalities are relatively straightforward at the port of entry
and clearance is usually within 1-2 days. Custom documents required
include a custom entry form, bill of lading, certificate of origin,
commercial or pro-forma invoice, and may require a certificate of
analysis. The local food importer usually arranges these formalities for
clearance at the port of entry

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 are
no government quotas on import of foods into Malaysia except rice.
Import of genetically modified (GM) foods is permitted but 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,        |
| r           |     ingredients according to proportion including      |
| equirements |     additives, alcohol, and animal content. Expiry     |
| for         |     dates are required on foods with a short shelf     |
| processed   |     life.                                              |
| food        |                                                        |
| products    | -   All imported processed food products must show the |
|             |     name of the manufacturer and importer or importing |
|             |     agent.                                             |
|             |                                                        |
|             | -   If the above are not mentioned on the packaging,   |
|             |     details printed on labels affixed onto the         |
|             |     packaging are acceptable.                          |
+-------------+--------------------------------------------------------+
| Meat        | -   Only certified *halal* meat products are to be     |
| products    |     imported into Malaysia. Imported *halal* meat and  |
| (excluding  |     meat products must be from a plant approved by the |
| pork)       |     Malaysian Islamic Development Council and          |
|             |     certified by a recognized Islamic institution      |
|             |     based in the country of export.                    |
|             |                                                        |
|             | -   Meat and meat products require an import license   |
|             |     and the meat product must be free from anthrax and |
|             |     bovine spongiform encephalopathy (mad cow          |
|             |     disease).                                          |
+-------------+--------------------------------------------------------+
| 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.               |
+-------------+--------------------------------------------------------+
|             |                                                        |
+-------------+--------------------------------------------------------+

## 3.4 Sector Profile

There are four major sub-sectors under food services in Malaysia. These
four sub-sectors are the:

-   Hotels and resorts, which includes full-service restaurants and
    cafés/bars found mainly in 3-5 star establishments;

-   Restaurants, which also includes full-service restaurants,
    cafés/bars, and fast food restaurants;

-   Institutional food services, which includes catering services to
    government institutions, factory cafeterias, and airlines.

-   Stall foods sold on the streets or in food courts generally selling
    relatively cheap local dishes.

F&B outlets in 4-5 star hotels and resorts; mid to high-end full-service
restaurants, cafés/bars, and fast food restaurants; and airline catering
(institutional food services) represents the best potential for US
exporters. However, 3 star hotels and resorts represent moderate
potential for US exporters compared to 4-5 star hotels. These
establishments regularly purchase imported foods whereby the quality and
uniqueness of the food are important purchasing criteria.

### 3.4.1 Hotel and Resorts Sub-Sector

Most of the full-service restaurants and cafés/bars in 4-5 star hotels
and resorts are located in or around Kuala Lumpur, Johor Bahru, Penang,
Langkawi Island, Kuantan, Kuching and Kota Kinabalu. However, major
concentrations are in and around Kuala Lumpur and Penang. There were
1,800 F&B outlets in 3-5 star hotels and resorts in 2003 and food
service sales in this sub-sector grew by 63.5% from US\$200 million in
1999 to US\$327 million in 2003. Sales of foods and beverages account
for 20%-30% of the total revenue of many 4-5 star hotels and resorts.

  ----------------------- --------- --------- --------- --------- ---------
  **Hotels and Resorts                                            
  Food Service Sales                                              
  (US\$ Mil)**                                                    

  **Type of F&B           **\       **\       **\       **\       **\
  Establishment**         1999**    2000**    2001**    2002**    2003**

  Café/Bars               107       136       160       184       214

  Full-service            93        101       104       108       113
  restaurants                                                     

  Total                   **200**   **237**   **264**   **292**   **327**

  *Source: Euromonitor,                                           
  Malaysia Tourism, trade                                         
  sources, and Spire                                              
  analysis.*                                                      
  ----------------------- --------- --------- --------- --------- ---------

Food quality and overall service levels are generally high leading to
higher prices charged for foods and beverages in 4-5 star hotels and
resorts. Local menus (Malay, Chinese and Indian) alongside western and
other Asian menus are generally served. Besides dining by guests:

-   Families, friends, and even businesses often celebrate festivities
    (e.g. Chinese New Year, Christmas, and New Year) at these
    establishments

-   Many hotels during the Muslim fasting month of Ramadan have month
    long buffet promotions for Muslims to break the fast.

-   Food sales are also from events and functions such as weddings and
    seminar packages.

Imported beef, lamb, cheese, butter, and jam from Australia and New
Zealand are generally served. Chicken is sourced mainly from local
produce but turkey is imported from the US. Seafood (fish, mollusks, and
crustaceans) is a commonly served and diners at Chinese restaurants are
willing to pay exorbitant prices for "exotic" seafood since they add
prestige to the occasion. Seafood from the coldwater is imported mainly
from New Zealand and salmon from Norway. Imported temperate fruits and
vegetables are also served and imported mainly from China, Australia,
New Zealand, and the US.

  ------------------------------------------------------------------------------
  **Selected                                                      
  Major 5 Star                                                    
  Hotels in                                                       
  Kuala Lumpur                                                    
  (Sales in                                                       
  US\$ Mil)**                                                     
  ------------- --------------------------- ----------- --------- --------------
  **Hotels in   **\                         **\         **\       **\
  Kuala         \                           No. of      Food      Banqueting
  Lumpur**      Type of F&B Outlet**        Outlets**   Sales**   Services**

  Pan Pacific   Bars                        1           3         Ballroom can
                                                                  cater up to
                                                                  550 people for
                                                                  weddings and
                                                                  other
                                                                  functions.

                Cafes                       1                     

                Full service restaurants    2                     
                (Chinese, Japanese)                               

  Renaissance   Bars                        4           5         Convention
                                                                  center
                                                                  available for
                                                                  banquets and
                                                                  conferences.

                Cafes                       2                     

                Full service restaurants    3                     
                (Chinese, Japanese,                               
                Mediterranean)                                    

  Equatorial    Bars                        2           3         Ballroom can
                                                                  cater up to
                                                                  500 people for
                                                                  weddings and
                                                                  other
                                                                  functions.

                Cafes                       2                     

                Restaurants (Chinese,       2                     
                Japanese)                                         

  Mandarin      Bars                        1           3         Facilities
  Oriental                                                        available for
                                                                  large dinners,
                                                                  banquets and
                                                                  themed events.

                Cafes                       2                     

                Restaurants (Chinese,       3                     
                Western, Italian)                                 

  Shangri-La    Bars                        2           5         Ballroom can
                                                                  cater 800
                                                                  people for
                                                                  weddings and
                                                                  other
                                                                  functions.

                Cafes                       4                     

                Restaurants (Chinese,       3                     
                Japanese, French)                                 

  *Source:                                                        
  Published                                                       
  company                                                         
  sources                                                         
  including                                                       
  website and                                                     
  sales                                                           
  estimates                                                       
  based on                                                        
  trade                                                           
  sources.*                                                       
  ------------------------------------------------------------------------------

### 3.4.2 Restaurant Sub-Sector

The restaurant sub-sector includes the full-service restaurants, cafés
and bars, and fast food restaurants. Most of the mid to high-end
establishments are concentrated in the cities and major towns where
there is a significant population of middle and high-income customers.
There were 15,600 establishments in 2003 and food service sales
increased by 40.4% from US\$2.06 billion in 1999 to US\$2.89 billion in
2003. Full-service restaurants accounted for 54.6% of the total sales in
this sub-sector followed by the cafés and bars (28.7%), and fast food
restaurants (16.7%).

-   The fastest growing segment is the cafés and bars and sales grew by
    98.3% from US\$418 million in 1999 to US\$829 million in 2003.

The second fastest growing segment is the fast food restaurants and
sales grew by 48.5% from US\$326 million in 1999 to US\$484 million in
2003.

  ----------------------- --------- --------- --------- --------- ---------
  **Restaurant Sub-Sector                                         
  Food Service Sales                                              
  (US\$ Mil)**                                                    

  **Type of F&B           **\       **\       **\       **\       **\
  Establishment**         1999**    2000**    2001**    2002**    2003**

  Full-Service Restaurant 1,316     1,422     1,458     1,514     1,580

  Cafes/Bars              418       532       625       716       829

  Fast Food               326       372       398       429       484

  Total                   2,060     2,327     2,482     2,659     2,893

  *Source: Euromonitor,                                           
  trade sources, and                                              
  Spire analysis.*                                                
  ----------------------- --------- --------- --------- --------- ---------

***Full-Service Restaurants.*** Full-service restaurants in this
sub-sector include restaurants serving Chinese, Malay, Indian, Japanese,
and western menus. They import similar food products as full-service
restaurants in the hotels and resorts sub-sector. Most Chinese
restaurants do not serve *halal* foods and dishes serving pork is common
in the menus. Ordering seafood (fish, mollusks, and crustaceans) is
popular among diners in Chinese restaurants and high priced "exotic"
seafood is prized by diners. However, most western, Japanese, Malay, and
Indian full-service restaurants serve *halal* foods. Many full-service
restaurants franchise chains in Malaysia are US or Malaysian franchise
operations. Pizza is a popular menu and dominated by Pizza Hut and
Shakey's Pizza.

  ----------------------------------------------------------------------------------
  **Major                                                          
  Full-Service                                                     
  Restaurants                                                      
  Chains (Sales in                                                 
  US\$ Mil)**                                                      
  ----------------- ---------- ------------- ----------- --------- -----------------
  **\               **\        **\           **\         **Sales   **\
  Name of           Type of    \             No. of      in 2003** Major Locations
  Establishment**   Menu**     Franchise**   Outlets**             of Outlets**

  Pizza Hut         Pizza and  US            102         57        Kuala Lumpur and
                    other                                          major towns in
                    western                                        Malaysia

  Four Seasons      Chinese    Malaysian     15          18        Kuala Lumpur

  Chakri Palace     Indian     Malaysian     5           25        Kuala Lumpur and
                                                                   nearby towns

  Tai Thong         Chinese    Malaysian     10          14        Kuala Lumpur and
                                                                   nearby towns and
                                                                   Perak

  Shakey's          Pizza and  US            23          13        Kuala Lumpur and
                    other                                          major towns in
                    western                                        Malaysia

  Chili's           Western    US            4           12        Kuala Lumpur

  Dave's Deli       Western    Malaysian     23          9         Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  TGI Friday's      Western    US            5           6         Kuala Lumpur and
                                                                   nearby towns and
                                                                   Johor

  Sushi King        Japanese   Malaysian     32          4         Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  *Source:                                                         
  Published company                                                
  sources, trade                                                   
  sources, and                                                     
  Spire analysis*                                                  
  ----------------------------------------------------------------------------------

***Cafés and Bars.*** This food service segment comprises mainly of
specialist coffee houses. Others include gourmet coffee houses, tapas,
wine bars, and tea houses. These establishments are found in cities and
major towns across Malaysia but most are concentrated in Kuala Lumpur.
They are often found in exclusive locations catering to a more affluent
segment of Malaysia's population. Business and social meetings are often
conducted in these establishments and are viewed as trendy. Major café
chains are US franchise operations and main menus served are western
dishes.

  ---------------------------------------------------------------------------------
  **Major Café                                                     
  Chains (US\$                                                     
  Mil)**                                                           
  ----------------- --------- ------------- ------------ --------- ----------------
  **\               **\       **\           **\          **Sales   **\
  Name of           Type of   \             No. of       in 2003** Major Locations
  Establishment**   Menu**    Franchise**   Outlets**              of Outlets**

  Starbucks         Western   US            40           38        Kuala Lumpur,
                                                                   Penang, Pahang,
                                                                   Johor

  Coffee Bean       Western   US            37           32        Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  Dome              Western   US            10           16        Kuala Lumpur and
                                                                   nearby towns and
                                                                   Penang

  Gloria Jean's     Western   US            11           15        Kuala Lumpur,
                                                                   Penang, and
                                                                   Malacca

  San Francisco     Western   US            14           9         Kuala Lumpur and
  Coffee                                                           nearby towns

  Austin Chase      Western   US            5            1         Kuala Lumpur and
                                                                   nearby towns

  *Source:                                                         
  Published company                                                
  sources, trade                                                   
  sources, and                                                     
  Spire analysis*                                                  
  ---------------------------------------------------------------------------------

***Fast Food Restaurants.*** Fast food restaurants are becoming
increasingly popular for family outings, meeting friends, and quick
meals. Western menus are generally served but catered to local tastes.
For example, chili sauce is offered, besides ketchup, in nearly all fast
food restaurants. Fast food restaurants in Malaysia are dominated by US
followed by Malaysian franchise operations. Major US fast food
restaurants include KFC, McDonald's, Burger King, Domino Pizza, and A&W
and are located in cities and major towns across Malaysia. Menus serving
beef and chicken are popular and chicken is sourced from local poultry
farms while beef imported from Australia.

  ---------------------------------------------------------------------------------
  **Major Fast Food                                                
  Chains (US\$                                                     
  Mil)**                                                           
  ----------------- --------- ------------- ------------ --------- ----------------
  **\               **\       **\           **\          **Sales   **\
  Name of           Type of   \             No. of       in 2003** Major Locations
  Establishment**   Menu**    Franchise**   Outlets**              of Outlets**

  KFC               Western   US            334          216       Kuala Lumpur,
                                                                   major towns, and
                                                                   smaller towns in
                                                                   Malaysia

  McDonald's        Western   US            148          75        Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  Delifrance        Western   French        40           37        Kuala Lumpur,
                                                                   Penang, Johor
                                                                   Bahru

  Marrybrown        Western   Malaysian     89           26        Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  A&W               Western   US            21           21        Kuala Lumpur and
                                                                   major towns in
                                                                   Malaysia

  *Source:                                                         
  Published company                                                
  sources, trade                                                   
  sources, and                                                     
  Spire analysis*                                                  
  ---------------------------------------------------------------------------------

### 3.4.3 Institutional Food Service Sub-Sector

The institutional sub-sector includes food services to government
institutions (e.g. schools, police, military, and hospitals) and airline
catering. The value of this sub-sector is estimated at US\$185 million
in 2003 accounting for 4.3% of the total food service sales. Food
services to government institutions are not a potential for US exporters
since it is dominated by many small family-owned operations serving low
cost local menus.

Airline catering represents the best potential for US exporters in this
sub-sector. Airline catering is dominated by MAS Catering, which
services Malaysia's national carrier Malaysian Airlines and 20 other
airlines landing in Malaysia. Nearly 35,000 meals are prepared daily
serving imported quality foods in its international first and
business-class menus including beef, veal, mushrooms, cherries, caviar,
and seafood. Sales declined from US\$56 million in 2002 to US\$52
million in 2003 due to the outbreak of SARS.

  ----------------------- --------- --------- --------- --------- ---------
  **Institutional Food                                            
  Service Sales (US\$                                             
  Mil)**                                                          

  **Type of F&B           **\       **\       **\       **\       **\
  Establishment**         1999**    2000**    2001**    2002**    2003**

  MAS Catering            51        52        52        56        52

  Others                  106       108       113       117       133

  Total                   157       160       165       173       185

  *Source: Published                                              
  company sources, trade                                          
  sources, and Spire                                              
  analysis*                                                       
  ----------------------- --------- --------- --------- --------- ---------

# 4. Competition

Major competitors for US exporters are exporters from Australia, New
Zealand, China, India, Thailand, and Indonesia besides local producers.
While China, India, Thailand, and Indonesia compete on the price of
their food products, Australia and New Zealand rely more on aggressive
marketing and promotion through their importers.

Local importers often use "food catalogs" containing pictures, details,
and prices of the imported food items to promote to the food service
establishments. For example, US black codfish and Chilean sea bass
received increasing acceptance through such "food catalogs". The
bi-annual Food and Hotel Malaysia (FHM) and KL Food Festival is an
important venue for many exporters, importers, local producers, and
buyers from food service establishments. Exporters sometime conduct
promotions in leading hotels such as "New Zealand Wine", "Saba Saikyo
Yaki Delicacy" from Japan, and "Wholesome Hunan Specialties" from China.

+---------------+------------------+-----------------+----------------+
| **Major       |                  |                 |                |
| Imports in    |                  |                 |                |
| 2003**        |                  |                 |                |
+===============+==================+=================+================+
| **\           | **\              | **Strengths of  | **Advantages   |
| Product       | Major Supply     | Supplying       | and            |
| Category**    | Countries\***    | Countries**     | Disadvantages  |
|               |                  |                 | of Local       |
|               |                  |                 | Suppliers**    |
+---------------+------------------+-----------------+----------------+
| Fruits (fresh | 1.  China -- 35% | Low price       | Fruits         |
| or chilled)   |                  | imports of      | cultivated in  |
|               | 2.  Thailand --  | temperate       | Malaysia are   |
| Import:\      |     12%          | fruits from     | tropical       |
| 325,817 tons\ |                  | China. Tropical | fruits and     |
| (US\$118.4    | 3.  Australia -- | fruits from     | therefore      |
| mil)          |     10%          | Thailand are    | Malaysia is    |
|               |                  | 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 limited to  |
| fruits        | 2.  Thailand --  | to Asian fruit  | pineapples and |
| (including    |     18%          | products while  | Malaysian      |
| tomato & jam) |                  | Turkey is well  | tropical       |
|               | 3.  Turkey -- 7% | known for its   | fruits.        |
| Import:\      |                  | tomato paste.   |                |
| 55,179 tons\  | 4.  US -- 3%     |                 |                |
| (US\$57.1     |                  |                 |                |
| mil)          |                  |                 |                |
+---------------+------------------+-----------------+----------------+
| Vegetables    | 1.  China -- 38% | Low price       | Local          |
| (fresh or     |                  | imports of      | cultivation is |
| chilled)      | 2.  India -- 15% | temperate       | unable to meet |
|               |                  | vegetables from | demand for     |
| Import:\      | 3.  Australia -- | China, India is | various        |
| 666,903 tons\ |     13%          | a major         | vegetables     |
| (US\$210.0    |                  | supplier of     | especially     |
| mil)          | 4.  US -- 4%     | onions, while   | temperate      |
|               |                  | Australia is in | vegetables.    |
|               |                  | opposite        |                |
|               |                  | growing season  |                |
|               |                  | from the US.    |                |
+---------------+------------------+-----------------+----------------+
| Beef and lamb | 1.  India -- 40% | Indian beef is  | Local industry |
| including     |                  | cheaper than    | is small and   |
| processed     | 2.  N. Zealand   | local beef      | fragmented and |
|               |     -- 16%       | while quality   | therefore      |
| Import:\      |                  | meat from       | unable to meet |
| 113,684 tons\ | 3.  Australia -- | Australia, New  | demand from    |
| (US\$210.3    |     15%          | Zealand, and    | the food       |
| mil)          |                  | the US are      | service        |
|               | 4.  US - 2%      | well-known in   | industry.      |
|               |                  | the food        |                |
|               |                  | service sector. |                |
|               |                  | (Beef from the  |                |
|               |                  | US is           |                |
|               |                  | temporarily     |                |
|               |                  | banned in       |                |
|               |                  | Malaysia        |                |
|               |                  | because of the  |                |
|               |                  | discovery of a  |                |
|               |                  | single case of  |                |
|               |                  | bovine          |                |
|               |                  | spongiform      |                |
|               |                  | encephalopathy  |                |
|               |                  | in the US).     |                |
+---------------+------------------+-----------------+----------------+
| Poultry       | 1.  Thailand --  | Thailand's      | Established    |
|               |     35%          | closeness to    | poultry        |
| Import:\      |                  | Malaysia        | industry       |
| 38,858 tons\  | 2.  Denmark --   | shortens        | dominated by   |
| (US\$49.1     |     28%          | delivery time   | large poultry  |
| mil)          |                  | while Denmark   | companies.     |
|               | 3.  Netherlands  | and Holland has |                |
|               |     -- 12%       | been a          |                |
|               |                  | traditional     |                |
|               | 4.  US -- 5%     | supplier of     |                |
|               |                  | imported frozen |                |
|               |                  | poultry.        |                |
+---------------+------------------+-----------------+----------------+
| Fish (fresh,  | 1.  Thailand --  | Low price       | Established    |
| chilled, or   |     31%          | imports from    | fishing        |
| frozen        |                  | Thailand,       | industry but   |
|               | 2.  Indonesia -- | Indonesia, and  | unable to meet |
| Import:\      |     20%          | China and short | local demand.  |
| 269,588 tons\ |                  | delivery time   | Coldwater fish |
| (US\$185.0    | 3.  China -- 6%  | due to          | popular in     |
| mil)          |                  | closeness to    | restaurants is |
|               | 4.  US -- 1%     | Malaysia.       | unavailable    |
|               |                  |                 | from           |
|               |                  |                 | Malaysia's     |
|               |                  |                 | tropical seas  |
|               |                  |                 | and therefore  |
|               |                  |                 | imported       |
|               |                  |                 | mainly from    |
|               |                  |                 | New Zealand.   |
+---------------+------------------+-----------------+----------------+
| Shellfish &   | 1.  China -- 27% | Low price       | Established    |
| crustaceans   |                  | imports from    | local industry |
| (fresh,       | 2.  Indonesia -- | China,          | for breeding   |
| chilled, or   |     20%          | Indonesia, and  | and harvesting |
| frozen)       |                  | Thailand and    | shellfish from |
|               | 3.  Thailand --  | closeness to    | the coastal    |
| Import:\      |     17%          | Malaysia        | waters.        |
| 45,772 tons\  |                  | shortens        |                |
| (US\$101.5    | 4.  US - \<1%    | delivery time   |                |
| mil)          |                  | and costs.      |                |
+---------------+------------------+-----------------+----------------+
| Dairies       | 1.  Australia -- | Products from   | Established    |
| (milk, cream, |     50%          | New Zealand and | dairy food     |
| butter,       |                  | Australia are   | processing     |
| yoghurt, &    | 2.  N. Zealand   | well            | industry but   |
| cheese)\      |     -- 38%       | established and | dependent on   |
| Imports:\     |                  | known for their | imports of raw |
| 20,911 tons\  | 3.  France -- 3% | quality due to  | dairy food     |
| (US\$38.8     |                  | strong          | materials due  |
| mil)          | 4.  US -- 1%     | promotional     | to limited     |
|               |                  | activities.     | supplies of    |
|               |                  |                 | locally        |
|               |                  |                 | produced milk. |
+---------------+------------------+-----------------+----------------+
| Fruit juice   | 1.  Netherlands  | A variety of    | Established    |
| including     |     -- 13%       | quality juices  | distribution   |
| vegetable     |                  | originating     | channel but    |
| juice\        | 2.  US -- 10%    | from temperate  | limited range  |
| Imports:\     |                  | fruits from the | of juices      |
| 20.2 mil      | 3.  Australia -- | Netherlands,    | originating    |
| liters        |     9%           | US, and         | from temperate |
| (US\$24.7     |                  | Australia.      | fruits.        |
| mil)          |                  |                 |                |
+---------------+------------------+-----------------+----------------+
| *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

+----------+-------+--------+-----------+-------------+--------------+
| **\      | **\   | **\    | **\       | **Key       | **Market     |
| Product  | 2003  | \      | \         | Constraints | At           |
| C        | M     | 2003   | Import    | Over Market | tractiveness |
| ategory\ | arket | Imp    | Tariff    | Dev         | for US       |
| (HS      | S     | orts** | Rate**    | elopments** | Exporters**  |
| Code)**  | ize** |        |           |             |              |
+----------+-------+--------+-----------+-------------+--------------+
| Poultry  | 1.4   | 38,858 | None for  | Large       | Market for   |
|          | mil   | tons   | fresh,    | poultry     | turkey (US   |
| (HS      | tons  |        | chilled,  | companies   | is a major   |
| 0207)    |       |        | or        | dominate    | supplier)    |
|          |       |        | frozen.   | and quality | during       |
|          |       |        |           | frozen      | Christmas.   |
|          |       |        | 5% sales  | *halal*     | Turkey is    |
|          |       |        | tax for   | imports     | used to      |
|          |       |        | p         | from        | produce      |
|          |       |        | rocessed. | Denmark and | turkey ham   |
|          |       |        |           | the         | as an        |
|          |       |        |           | N           | alternative  |
|          |       |        |           | etherlands. | to pork to   |
|          |       |        |           |             | cater to     |
|          |       |        |           |             | Muslim       |
|          |       |        |           |             | diners.      |
+----------+-------+--------+-----------+-------------+--------------+
| Beef and | 15    | 1      | None for  | Low price   | Demand for   |
| lamb     | 5,000 | 13,684 | fresh,    | beef from   | high quality |
| i        | tons  | tons   | chilled,  | India and   | meat for     |
| ncluding |       |        | or        | aggressive  | fine-dining  |
| p        |       |        | frozen.   | marketing   | and fast     |
| rocessed |       |        |           | by          | food         |
|          |       |        | 5% sales  | Australian  | restaurants  |
| (HS      |       |        | tax for   | and New     | (for burgers |
| 1601,    |       |        | veal.     | Zealand     | and          |
| 1602,    |       |        |           | exporters   | hotdogs).    |
| and      |       |        | 0-20%     | for high    | Furthermore, |
| 0202)    |       |        | import    | quality     | local        |
|          |       |        | duty and  | meat.       | produce is   |
|          |       |        | 5% sales  |             | unable to    |
|          |       |        | tax for   |             | meet demand  |
|          |       |        | p         |             | from the     |
|          |       |        | rocessed. |             | food service |
|          |       |        |           |             | industry.    |
+----------+-------+--------+-----------+-------------+--------------+
| Fish     | 1.4   | 2      | None      | Established | Market for   |
| (fresh,  | mil   | 69,588 |           | local       | cold-water   |
| chilled, | tons  | tons   |           | industry    | fish such as |
| or       |       |        |           | c           | salmon, cod, |
| frozen)  |       |        |           | omplemented | and trout    |
|          |       |        |           | by low      | for fine     |
| (HS      |       |        |           | price       | dining at    |
| 0304)    |       |        |           | imports     | western and  |
|          |       |        |           | from        | Chinese      |
|          |       |        |           | Thailand,   | restaurants. |
|          |       |        |           | Indonesia,  |              |
|          |       |        |           | and China.  |              |
|          |       |        |           | Also, food  |              |
|          |       |        |           | service     |              |
|          |       |        |           | industry is |              |
|          |       |        |           | not         |              |
|          |       |        |           | familiar    |              |
|          |       |        |           | with US     |              |
|          |       |        |           | fish.       |              |
+----------+-------+--------+-----------+-------------+--------------+
| S        | 37    | 45,772 | 0-20%     | Established | Market from  |
| hellfish | 0,000 | tons   | import    | local       | high-end     |
| &        | tons  |        | duty for  | industry    | Chinese      |
| cru      |       |        | and for   | involved in | restaurants  |
| staceans |       |        | some 5%   | marine      | for unique   |
| (fresh,  |       |        | sales     | culture and | coldwater    |
| chilled, |       |        | tax.      | low price   | shellfish    |
| or       |       |        |           | imports     | and          |
| frozen)  |       |        |           | from China, | crustaceans  |
|          |       |        |           | Indonesia,  | such as      |
| (HS 0306 |       |        |           | and         | crabs,       |
| and      |       |        |           | Thailand.   | oysters,     |
| 0307)    |       |        |           |             | crawfish,    |
|          |       |        |           |             | and          |
|          |       |        |           |             | lobsters.    |
+----------+-------+--------+-----------+-------------+--------------+
| Fresh    | 1.4   | 6      | No import | Competition | Demand for   |
| ve       | mil   | 66,903 | duty or   | from local  | temperate    |
| getables | tons  | tons   | sales     | cultivation | fresh        |
|          |       |        | tax.      | and low     | vegetables   |
| (HS 0701 |       |        |           | price       | which        |
| to 0709) |       |        |           | imports     | Malaysia has |
|          |       |        |           | from        | to import    |
|          |       |        |           | neighboring | since its    |
|          |       |        |           | countries   | cultivation  |
|          |       |        |           | coupled     | is limited   |
|          |       |        |           | with        | to the       |
|          |       |        |           | aggressive  | highlands.   |
|          |       |        |           | marketing   |              |
|          |       |        |           | from        |              |
|          |       |        |           | Australia.  |              |
+----------+-------+--------+-----------+-------------+--------------+
| Fresh    | 2.3   | 3      | 5% import | Competition | Demand for   |
| fruits   | mil   | 25,817 | duty and  | from        | temperate    |
|          | tons  | tons   | for most  | Malaysian   | fruits but   |
| (HS 0803 |       |        | 5% sales  | tropical    | Malaysia is  |
| to 0810) |       |        | tax.      | fruits, low | dependent on |
|          |       |        |           | price       | imports      |
|          |       |        |           | imports     | since local  |
|          |       |        |           | from China, | cultivation  |
|          |       |        |           | and imports | is mainly on |
|          |       |        |           | from        | tropical     |
|          |       |        |           | Australia   | fruits.      |
|          |       |        |           | are         |              |
|          |       |        |           | marketed as |              |
|          |       |        |           | quality     |              |
|          |       |        |           | produce.    |              |
+----------+-------+--------+-----------+-------------+--------------+
| Soft     | 159.1 | 20.2   | 0-30%     | Local       | Demand for   |
| drinks   | mil   | mil    | import    | production  | n            |
| i        | l     | liters | duty and  | dominating  | on-alcoholic |
| ncluding | iters |        | for most  | market for  | wine and     |
| juices   |       |        | 5% sales  | non         | "purer"      |
|          |       |        | tax.      | -carbonated | fruit juices |
| (HS      |       |        |           | drinks      | than those   |
| 2009)    |       |        |           | including   | available    |
|          |       |        |           | juices.     | from local   |
|          |       |        |           |             | produce.     |
+----------+-------+--------+-----------+-------------+--------------+
| Sauces   | 6     | 7,330  | 0-20%     | Demand more | Increasing   |
| and      | 5,600 | tons   | import    | for sauces  | acceptance   |
| co       | tons  |        | duty and  | suited for  | of western   |
| ndiments |       |        | for some  | local food  | foods and    |
|          |       |        | 5% sales  | p           | the US is a  |
| (HS      |       |        | tax.      | reparations | major        |
| 2103)    |       |        |           | and dining  | exporter of  |
|          |       |        |           | supplied    | such sauces  |
|          |       |        |           | mainly by   | to           |
|          |       |        |           | local food  | complement   |
|          |       |        |           | man         | western      |
|          |       |        |           | ufacturers. | foods.       |
+----------+-------+--------+-----------+-------------+--------------+
| P        | 8     | 21,998 | 0-10%     | Dominated   | Western      |
| rocessed | 3,800 | tons   | import    | by canned   | restaurants  |
| fruits   | tons  |        | duty and  | tropical    | serve canned |
| (mostly  |       |        | for some  | fruits from | temperate    |
| canned)  |       |        | 5% sales  | local       | fruits used  |
|          |       |        | tax.      | production  | in desserts  |
| (HS      |       |        |           | and         | and          |
| 2008)    |       |        |           | imports.    | bakeries.    |
+----------+-------+--------+-----------+-------------+--------------+
| *Source: |       |        |           |             |              |
| M        |       |        |           |             |              |
| alaysian |       |        |           |             |              |
| St       |       |        |           |             |              |
| atistics |       |        |           |             |              |
| Dep      |       |        |           |             |              |
| artment, |       |        |           |             |              |
| Euro     |       |        |           |             |              |
| monitor, |       |        |           |             |              |
| trade    |       |        |           |             |              |
| sources, |       |        |           |             |              |
| Spire    |       |        |           |             |              |
| a        |       |        |           |             |              |
| nalysis, |       |        |           |             |              |
| and      |       |        |           |             |              |
| M        |       |        |           |             |              |
| alaysian |       |        |           |             |              |
| Customs  |       |        |           |             |              |
| Tariff   |       |        |           |             |              |
| on       |       |        |           |             |              |
| Import/  |       |        |           |             |              |
| Export.* |       |        |           |             |              |
+----------+-------+--------+-----------+-------------+--------------+

## 5.2 Potential Products Not Present In Significant Quantities

+----------+--------+-------+----------+------------+---------------+
| **\      | **\    | **\   | **\      | **Key      | **Market      |
| \        | 2003   | \     | \        | C          | A             |
| Product  | Market | 2003  | Import   | onstraints | ttractiveness |
| Ca       | Size** | Impo  | Tariff   | Over       | for US        |
| tegory** |        | rts** | Rate**   | Market     | Exporters**   |
|          |        |       |          | Deve       |               |
|          |        |       |          | lopments** |               |
+----------+--------+-------+----------+------------+---------------+
| Cereals  | 10,340 | 5,300 | 2-7%     | Local      | Foreign       |
|          | tons   | tons  | import   | diners     | diners from   |
| (HS      |        |       | duty and | prefer     | western       |
| 1904)    |        |       | 5-10%    | local      | countries     |
|          |        |       | sales    | menus      | prefer        |
|          |        |       | tax.     | served in  | cereals as    |
|          |        |       |          | r          | part of their |
|          |        |       |          | estaurants | breakfast     |
|          |        |       |          | for their  | menu.         |
|          |        |       |          | breakfast  |               |
|          |        |       |          | than       |               |
|          |        |       |          | cereals.   |               |
+----------+--------+-------+----------+------------+---------------+
| Butter   | 8,614  | 8,614 | 2%       | Butter     | No local      |
|          | tons   | tons  | import   | from       | production    |
| (HS      |        |       | duty and | Australia  | and preferred |
| 0405)    |        |       | 5% sales | and New    | over          |
|          |        |       | tax.     | Zealand is | margarine by  |
|          |        |       |          | well known | food services |
|          |        |       |          | and has a  | es            |
|          |        |       |          | captive    | tablishments. |
|          |        |       |          | market in  |               |
|          |        |       |          | the food   |               |
|          |        |       |          | service    |               |
|          |        |       |          | sector.    |               |
+----------+--------+-------+----------+------------+---------------+
| Jam, nut | 7,900  | 3,074 | No       | C          | Imported jams |
| based,   | tons   | tons  | import   | ompetition | are preferred |
| and      |        |       | duty but | from local | by mid and    |
| c        |        |       | for some | production | high-end      |
| hocolate |        |       | 5% sales | and        | western       |
| spreads  |        |       | tax.     | com        | restaurants   |
|          |        |       |          | petitively | due to higher |
| (HS      |        |       |          | price      | fruit         |
| 2007)    |        |       |          | imports    | content.      |
|          |        |       |          | from       |               |
|          |        |       |          | Australia. |               |
+----------+--------+-------+----------+------------+---------------+
| Cheese   | 5,651  | 5,651 | 5-10%    | Cheeses    | No local      |
| and curd | tons   | tons  | import   | from       | production    |
|          |        |       | duty and | Australia, | and commonly  |
| (HS      |        |       | 5% sales | New        | serve by mid  |
| 0406)    |        |       | tax.     | Zealand,   | and high-end  |
|          |        |       |          | and        | restaurants   |
|          |        |       |          | Denmark    | serving       |
|          |        |       |          | are        | western       |
|          |        |       |          | t          | foods.        |
|          |        |       |          | raditional |               |
|          |        |       |          | suppliers  |               |
|          |        |       |          | to the     |               |
|          |        |       |          | food       |               |
|          |        |       |          | service    |               |
|          |        |       |          | sector.    |               |
+----------+--------+-------+----------+------------+---------------+
| Pasta    | 2,357  | 2,357 | 5-8%     | Asian      | No local      |
|          | tons   | tons  | sales    | r          | production    |
| (HS      |        |       | tax and  | estaurants | and pasta     |
| 1902)    |        |       | for some | prefer to  | dishes are    |
|          |        |       | 5% sales | use        | popular menus |
|          |        |       | tax.     | noodles    | in            |
|          |        |       |          | rather     | restaurants   |
|          |        |       |          | than       | serving       |
|          |        |       |          | pasta.     | western       |
|          |        |       |          |            | foods.        |
+----------+--------+-------+----------+------------+---------------+
| *Source: |        |       |          |            |               |
| M        |        |       |          |            |               |
| alaysian |        |       |          |            |               |
| St       |        |       |          |            |               |
| atistics |        |       |          |            |               |
| Dep      |        |       |          |            |               |
| artment, |        |       |          |            |               |
| Euro     |        |       |          |            |               |
| monitor, |        |       |          |            |               |
| trade    |        |       |          |            |               |
| sources, |        |       |          |            |               |
| Spire    |        |       |          |            |               |
| a        |        |       |          |            |               |
| nalysis, |        |       |          |            |               |
| and      |        |       |          |            |               |
| M        |        |       |          |            |               |
| alaysian |        |       |          |            |               |
| 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 | Medium to    |
|         | tons    | tons     | import  | monopolized | high-end     |
| (HS     |         |          | duty or | and         | food service |
| 1006)   |         |          | sales   | controlled  | outlets      |
|         |         |          | tax     | by Bernas   | often serve  |
|         |         |          |         | (a          | imported     |
|         |         |          |         | government  | premium rice |
|         |         |          |         | c           | to their     |
|         |         |          |         | orporation) | customers.   |
|         |         |          |         | importing   |              |
|         |         |          |         | mainly from |              |
|         |         |          |         | Myanmar,    |              |
|         |         |          |         | Vietnam and |              |
|         |         |          |         | Thailand.   |              |
+---------+---------+----------+---------+-------------+--------------+
| *       |         |          |         |             |              |
| 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