Foodservice profile – Malaysia

Consumer behaviour

Despite the global economic slowdown and the rising domestic cost of living (Tan, 2019), Malaysia's consumer confidence ranked sixth in the Asia-Pacific region in the fourth quarter of 2019, after India, the Philippines, Viet Nam, Indonesia and China (The Conference Board, 2020). According to the latest survey, conducted in 2016, household expenditure on restaurants and hotels increased to 13.4% in 2016 from 12.7% in 2014.This counted as being the fourth biggest component of total household expenditure after housing/ water/electricity/gas and other fuels (24.0%), food and non-alcoholic beverages (18.0%) and transportation (13.4%) (Department of Statistics Malaysia, 2017).

In Malaysia, Asian cuisine is the most popular cuisine in the full-service restaurant market. Chinese cuisine recorded the highest sales in 2018, reaching US$946.0 million in 2018; sales are expected to reach US$1.1 billion in 2023 at a CAGR of 3.9%. Italian cuisine recorded the highest growth in 2018 with a CAGR of 5.0%, and it is expected to lead in 2023 with a CAGR of 4.4%. In the quick-service restaurant market, burger sales led the pack in 2018 at US$788.2 million 2018, and they are expected to reach US$955.0 million in 2023 at a CAGR of 3.8%. Sandwich-based quick-service restaurants recorded the highest growth in 2018 at a CAGR of 5.0%, and are expected to lead in 2023 with a CAGR of 3.9%.

The overall foodservice market

Malaysia, with a population of approximately 32.6 million (Statistics Malaysia, 2019), is the second-largest foodservice market among four selected Southeast Asian nations (ASEAN). Malaysia's growing purchasing power and evolving urbanized lifestyles are stimulating demand for convenience, consistent quality, added value and diverse tastes in its foodservice industry. The country's foodservice sector grew at a CAGR of 4.9% from 2014 to 2018, reaching US$20.1 billion in sales in 2018, which is US$5 billion higher than the sales recorded in the Philippines' foodservice sector. The Malaysian foodservice sector is forecast to reach US$24.8 billion by 2023, growing at a CAGR of 4.3% from 2019 to 2023.

Restaurants are Malaysia's largest foodservice subsector, with sales of US$12.6 billion in 2018 and a CAGR of 5.5% from 2014 to 2018. This subsector is expected to reach US$16.0 billion by 2023 with a CAGR of 4.7%. The accommodation subsector ranked second in terms of value sales (US$2.0 billion) in 2018, followed by pubs, clubs and bars (US$1.8 billion); mobile operators (US$1.3 billion); and leisure outlets (US$833.5 million). All subsectors experienced healthy growth from 2014 to 2018, and the prospects are promising for 2019 to 2023.

Within the restaurant subsector, full-service restaurants recorded the highest sales at US$7,160.0 million in 2018, followed by quick-service food restaurants (US$4,325.1 million). These top two outlets accounted for 91.1% of total sales within the restaurant subsector (US$12.6 billion). Both outlets posted strong growth, with a CAGR of 5.8% and 5.4%, respectively, from 2014 to 2018, and are forecast to grow at a CAGR of 4.9% and 4.6%, respectively, from 2019 to 2023. Coffee and tea shops performed well at a CAGR of 4.2% from 2014 to 2018, reaching sales of US$856.4 million in 2018.

Within the accommodation subsector, hotels and motels recorded the highest sales (US$1.7 billion) in 2018, followed by holiday park outlets (US$146.3 million) and guest house outlets (US$62.8 million). These three outlets grew at a CAGR of 4.3%, 3.1% and 3.6%, respectively, from 2014 to 2018, and are forecast to grow at a CAGR of 4.4%, 3.5 and 2.9%, respectively, from 2019 to 2023.

Within the pub, club and bar subsector, pubs and bars recorded the highest sales of US$1.5 billion in 2018, followed by nightclubs (US$307.8 million). These top two outlets accounted for 98.0% of total sales within the pub, club and bar subsector (US$1.8 billion). Both outlets grew moderately well at a CAGR of 3.9% and 3.8%, respectively, from 2014 to 2018 and are forecast to grow at a CAGR of 3.4% and 3.1%, respectively, from 2019 to 2023.

Foodservice: chain franchises versus independent operators

Although independent operators account for a large market share in each channel, chain franchises are forecast to record higher CAGRs than the independent chains (4.8% vs 4.2%) by 2023. Despite the faster growth of the chain franchises, within the restaurant subsector, independent restaurant sales accounted for 75.5% of total sales, while chain restaurants accounted for 24.5% in 2018. Within the accommodation subsector, independent sales accounted for 93.7% of total sales, while chain franchise sales accounted for 6.3%. Among pub, club and bar outlets, independent sales accounted for 95.1% of total sales, while chain franchise sales accounted for 4.9%.

In the Malaysian foodservice sector, the highest value per transaction in 2018 occurred in independent nightclubs and chain nightclubs (US$25.8), followed by independent pubs and bars (US$22.4). Bed and breakfasts (independent) are expected to grow the fastest at a CAGR of 4.3% from 2019 to 2023.

Market trends

Association of Southeast Asian Nations economies

The Association of Southeast Asian Nations (ASEAN) economies, as a group, would be the world's fourth-largest economy in 2050 and Canada's sixth-biggest trading partner in 2018 (US-ASEAN Business Council, 2019; Global Affairs Canada, 2019). Canadian agri-food and seafood exports to the ASEAN markets combined were valued at US$1.6 billion in 2019, accounting for 3.2% of Canada's total exports to the world (US$50.5 billion). Canada's exports to the region were relatively small, with export values from Canada increasing by a CAGR of 1.7% from 2015 to 2019. However, Canada's agri-food and seafood exports to Malaysia declined at a CAGR of 1.1% from 2015 to 2019, with a value of US$151.1 million in 2019.

In 2019, Canada imported US$1.6 billion in agri-food and seafood imports from ASEAN countries. Canada's agri-food and seafood imports from Malaysia increased at a CAGR of 0.8% from 2015 to 2019 with a value of US$177.1 million in 2019.

Halal food products launch in Malaysia

The growing Muslim population is projected to account for 27% of the world population by 2030 (MIFB, 2019). Globally, Muslims' expenditure on food was valued at $1.4 trillion in 2018 and is forecast to reach $2.0 trillion by 2024 (DinarStandard, 2019). Between January 2015 and January 2020, 17.7% of food and beverage products (including pet food) launched in the Asia-Pacific regions had a halal claim (Mintel, 2020). As one of the Muslim-majority countries in the ASEAN region, Malaysia is seeking to lead the global halal industry and plans to become the international halal centre (Abdullah and Azam, 2020).

In Malaysia, 6,199 halal food products were launched from 2015 to 2019. In the same period, the top 10 food companies in Malaysia launched 1,520 products, growing by a CAGR of 8.2%. The company in Malaysia with the highest number of launches of halal food was Nestlé, with 347 product launches. The two categories with the highest number of launches of halal food were bakeries and snacks.

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• 2015: 1,173
• 2016: 1,350
• 2017: 1,151
• 2018: 1,302
• 2019: 1,223

Source: Mintel, 2020

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Company	Number of launches
Nestlé	347
Mondelez	159
Dairy farm	153
Petra foods	135
Delfi marketing	135
Delfi foods	135
GCH retail	134
Mondelez	119
Tong garden	102
Unilever	101

Source: Mintel, 2020

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Category	Number of launches
Sugar and gum confectionery	212
Baby food	246
Desserts and ice cream	267
Processed fish, meat and egg products	339
Chocolate confectionery	374
Meals and meal centers	528
Dairy	767
Sauces and seasonings	850
Snacks	889
Bakery	1,161

Source: Mintel, 2020

Global market

Malaysia is a net agri-food and seafood exporter to Canada with a net sales valued at US$26 million. Canada imported US$177.1 million in agri-food and seafood products from Malaysia, while Canada's exports were valued at US$151.1 million in 2019.

Malaysia's total agri-food and seafood imports from the world were valued at US$16.3 billion in 2019, of which US$148.9 million was from Canada, representing 0.9% of Malaysia's total agricultural imports. The gap between Malaysia's imports from the world and Canada was US$16.1 billion in 2019.

Malaysia's top imported products from the world in 2019 were cocoa beans (US$0.8 billion), food preparations (US$0.7 billion), raw cane sugar (US$0.6 billion) and oilcake (US$0.5 billion). Imports of cocoa beans grew the fastest at a CAGR of 4.7% from 2015 to 2019, followed by imports of food preparations at a CAGR of 3.7%.

Malaysia's agri-food and seafood imports from Canada declined at a CAGR of −5.6% from 2015 to 2019, to reach US$148.9 million in 2019. Malaysia's top imported products from Canada in 2019 were wheat and meslin (US$45.1 million), followed by low erucic acid rape or colza oil (US$22.3 million) and soybeans (US$19.9 million). Canada's canola oil accounted for 65.1% of Malaysia's total imports of that product from the world. Canadian canola seeds accounted for 25.9% of Malaysia's total imports from the world. Solid milk and cream had the most substantial import growth with a CAGR of 212.8% from 2015 to 2019, while soybean seed for sowing was in decline with a CAGR of −19.1% over the same period.

Top 10 foodservice companies in Malaysia

Yum! Brands was the top foodservice company with value sales of US$853.4 million in 2017, accounting for a 4.5% share of the foodservice market in Malaysia. It was followed by McDonald's (US$330.8 million), Doctor's Associates (US$142.0 million), Starbucks (US$127.6 million) and Domino's Pizza (US$101.2 million).

Competition and opportunities

Prospects for Canadian agri-food and seafood products in the Malaysian foodservice sector are promising for food preparations and solid milk and cream. Frozen pork and raw furskins are the fastest-growing Malaysian imports, growing at a rate of 2,058.1% and 267.1%, respectively, from 2018 to 2019. Canadian canola seeds exported to Malaysia increased by 59.7% with a market share of 25.9% in 2019. Canada also has the potential to increase exports of frozen pork and cranberries to Malaysia. The market share of these two products in Malaysia was under 5.5% in 2019.

Exporters are strongly recommended to work with the local import agent, distributor and end-user to make sure the products are in compliance with Malaysian regulations and all proper documentation has been completed. For more information, please consult Exporting food out of Canada (Canadian Food Inspection Agency), Step-by-Step Guide to Exporting - Step 6 - Opening the door: entering your target market (The Canadian Trade Commissioner Service) and customs regulations and compliance (Royal Malaysian Customs Department).

It is worth noting that CanExport provides funding to SMEs to reach export markets and execute strategic marketing projects such as participation in trade shows. Interested Canadian SMEs are encouraged to apply for CanExport for businesses (SMEs). If you have questions about exporting your agriculture or food products, or are looking for support, please contact the Market Access Secretariat, Agri-Food and Agriculture Canada, at aafc.mas-sam.aac@canada.ca .

According to the 2019 national trade estimate report published by the office of the United States Trade Representative (USTR) in 2019, "Malaysian halal standards require slaughter plants to maintain dedicated halal production facilities and ensure segregated storage and transportation facilities for halal and non-halal products. In contrast, Codex Alimentarius Commission allows for halal food to be prepared, processed, transported, or stored using facilities that have been previously used for non-halal foods, provided that Islamic cleaning procedures have been observed. All domestic and foreign meat (except pork) must be certified as halal by the Malaysian authorities or a Foreign Halal Certification Body (FHCB)."

Meat producers and exporters in Alberta do not have any packaged food products or beef/lamb going into the Malaysian market (Government of Alberta, 2020). Malaysian halal requirements are some of the strictest in the world. The Department of Islamic Development Malaysia (JAKIM) is the regulatory body issuing halal certification in Malaysia. In Canada, JAKIM has recognized two organizations (PDF version) to inspect and halal certify food and beverage products for Canadian exports to Malaysia: the Halal Montreal Certification Authority and the Halal Monitoring Authority (HMA).

Halal Montreal Certification Authority
1510 Chemin Chambly
Suite 270
Longueuil QC  J4J 3X5
Canada

Taibi Baaja
Phone: 514-296-7360
Fax: 450-332-7072
Email: info@halalmontreal.com / taibi@halalmontreal.com

Halal Monitoring Authority (HMA)
1825 Markham Road, #211
Scarborough ON  M1B 4Z9
Canada

Hafiz Faizan Ul-Haq (Chairman)
Phone: 416-731-2247
Fax: 416-981-3247
Email: info@hmacanada.org
Website: Halal Monitoring Authority Canada

Source: JAKIM - The Recognized Foreign Halal Certification Bodies & Authorities, as of February 13, 2019

Conclusion

Malaysia is a growing market for convenience, quality and healthy food products. Canada's low market share of Malaysia's imported food represents room for expansion and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will help improve Canada's competitiveness within the Malaysian market. On March 8, 2018, Canada signed the CPTPP with 10 countries: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Viet Nam. The CPTPP represents a significant step toward closer trade and investment between Canada and Malaysia.

The CPTPP gives Canadian agriculture and agri-food products preferential market access to key export markets, including Malaysia. Under the agreement, tariffs should be eliminated or reduced on a wide range of Canadian exports for the agricultural sector, including meat, grains, pulses, maple syrup, wines and spirits, seafood and other agri-food products. Read the Global Affairs Canada overview of the CPTPP and Canada's agriculture and agri-food sector for more information.

Significant gains are possible for Canadian producers, who could grow market share in economies such as Malaysia. The CPTPP ensures that Canadian agricultural products can compete on a level playing field with key competitors, specifically in countries where Canada formerly faced high tariffs and did not have preferential market access through existing free trade agreements. To obtain more information on the CPTPP regarding trade opportunities under this agreement see CPTPP for Agri-Food Exporters. To understand how the CPTPP helps Canada-Malaysia trade and investment in the agricultural sector see CPTPP partner: Malaysia.

For more information

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

• Overview of Trade Commissioner Services in the Malaysia
• Find a Trade Commissioner

For additional intelligence on this and other markets, the complete library of Global Analysis reports can be accessed through the International agri-food market intelligence page.

For additional information on Food & Hotel Asia 2020, please contact:

Ben Berry, Deputy Director
Trade Show Strategy and Delivery
Agriculture and agri-food Canada
ben.berry@canada.ca

Foodservice profile – Malaysia
Global Analysis Report

Prepared by: Zhiduo Wang, Market Analyst

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