Retail Sector

According to Euromonitor, retail sales in the packaged food market in Malaysia had been estimated to reach nearly US$7.7 billion in 2020.  That represents a growth rate of 24.7% or US$1.5 billion since 2016.  The forecast for growth in this market is also promising.  By the year 2025, the retail sales in the packaged food market in Malaysia is expected to reach US$9.5 billion, a growth rate of 18.7%, or another US$1.5 billion.  High growth categories in the forecast include:

• Pet Food
• Cheese
• Sweet Biscuits, Snack Bars & Fruit Snacks
• Dairy (Ex. Cheese)
• Ice Cream & Frozen Desserts
• Sauces, Dressings & Condiments
• Rice Pasta And Noodles
• Savory Snacks

Post reports that the Malaysia food retail sector continues to rapidly develop, and premium grocery stores and convenience outlets are increasingly popular.  The country’s food retailers reached US$26 billion USD in sales in 2019.  Industry analysts report the sector is dominated by five key players: Dairy Farm Group, Mydin Mohamed Holdings, Trendcell, Village Grocer Holdings, and AEON Group.

The Dairy Farm Group is Malaysia's largest food retailer (supermarkets and hypermarkets). Their retail format includes Giant, Cold Storage, Mercato, Jason's Place and G Ekspres supermarkets/hypermarkets. They procure from consolidators, distributors, local importers, and direct from exporters. Mydin Mohamed Holdings is a top retail chain in Malaysia (supermarkets). Their retail format includes Mydin supermarkets. They procure from consolidators, distributors, local importers, and direct from exporters.

Trendcell Sdn Bhd is the fastest growing premium food retailer in Malaysia. Their retail format includes Jaya Grocer supermarkets. They procure from consolidators, distributors, local importers, and direct from exporters.  Village Grocer Holdings is a top retail chain in Malaysia (supermarkets). Their retail Format includes Village Grocer and Ben's Independent Grocer supermarkets. They procure from consolidators, distributors, and local importers, and direct from exporters.   AEON Group is a top retail chain in Malaysia (supermarkets). Their retail format includes AEON, AEON Big, and AEON MaxValu supermarkets/hypermarkets. Procures from distributors, local importers, and direct from exporters

According to industry analysts, Malaysian consumers are starting to shift preference to smaller convenience stores as opposed to large supermarkets and hypermarkets in order to reduce time spent on grocery shopping. Health and wellness trends will continue to be prevalent in 2020. A growing e-commerce marketplace has resulted in major supermarkets offering online services as a convenience to their customers.  Mobile phone payment utilization in the food retail sector is growing. Many Malaysian supermarkets are now offering in-store dining facilities where customers have the option to purchase products from the store and have them prepared and served on-site. Secondary cities in Malaysia have seen growth in demand for imported food & beverage products.

Euromonitor reports that during 2020, the onset of COVID-19 and government measures to halt the spread of the virus led to a significant slowdown in the convenience stores category.  Growth dropped from steady double digits to single digits as consumers reduced the frequency of their visits to stores or shopped online.  Moreover, due to restrictions on operating hours, convenience stores were no longer allowed to operate 24/7.  As such, brands including KK, Family Mart and 7-Eleven lost significant sales and witnessed a considerable reduction in footfall. They are forecast to recover as post pandemic normalization takes effect.

Best Prospects:

Best product prospects for U.S. suppliers include those in the market with good sales potential. They are dairy, processed and fresh fruit, seafood, wine and beer, pork and products and beef and products.

Food Service Sector

Post reports that prior to the COVID-19 pandemic, Malaysia’s hotel, restaurant and institutional (HRI) industry was one of the fastest growing sectors in the country’s economy.  However, because of the pandemic and the ensuing movement control orders, the HRI sector has experienced a major drop in business with national hotel occupancy rates in a range of 12%-20% as of July 2020.  Despite these headwinds, Malaysian demand for foreign consumer-oriented food and beverage products continues to be robust with imports of these products through July 2020 up 5% (compared to the same time the previous year) at US$4.1 billion USD.

Although the overall industry is struggling, some components of the HRI sector have recovered quickly.  For example, 5-star hotel restaurants in Kuala Lumpur are reportedly now enjoying robust business.  According to Euromonitor, due to the government-imposed COVID-19 safe-distancing precautionary measures, third-party food delivery services have dramatically increased in use in urban areas.  Malaysia’s food service industry is one of the most diverse in the world with a broad range of Asian and Western cuisine widely available in dining formats ranging from food stalls to full service restaurants. 

A rapidly growing and highly urbanized population is demanding fast and convenient food choices.  Additionally, healthy and organic products are becoming very popular. Malaysia’s relatively young and educated population traditionally enjoys eating out.  To attract local and international Muslim tourism, the majority of hotels in the country (including international chains) maintain halal certification (please see the Halal Certification section below).  American chain restaurants dominate Western cuisine options in Malaysia with at least 18 U.S. franchises in operation.  Rapid expansion of the HRI industry throughout the country is expected to support steady growth in demand for imported high quality food and beverage products for the next several years.

Post advises that restaurants, bakeries, caterers, and airline food service providers are the main end-users in this sector, and a select number of importers specialize in providing raw materials and foods to these end-users.  As the end-users often prefer to source most of their supplies, ingredients, and food from a small number of importers, U.S. exporters wishing to serve the HRI market should focus on these importers.  Equally important, U.S. exporters should ensure that their products are halal certified. The end users’ premises are themselves halal certified, so they will only handle products that are likewise halal certified.

Best Product Prospects:

Post advises that Malaysia has a dynamic hotel and restaurant industry, and changing lifestyles and growing middle class underpins demand.  Key U.S. prospects for the HRI sector include dairy products, frozen potatoes, powdered milk, whey, sauce, citrus Fruit, almonds, cheese, chocolates, frozen chicken cuts, bread pastry and cakes and apple juices. Halal certification is essential.  Halal and other technical barriers hinder meat and poultry export opportunities.

Food-Processing Sector

Post reports that although Malaysia’s multibillion-dollar food processing industry has been significantly disrupted in the short-term by the COVID-19 pandemic, the sector is fairly robust and has been identified by the Malaysian Government as a crucial component of future national economic growth.  The Malaysian food processing industry includes several multinational corporation facilities and the main products produced are beverages, canned seafood, canned fruits, canned vegetables, confectionery, dairy products, noodles and bakery products. According to the Malaysian Investment Development Authority (MIDA), there are more than 8,000 establishments within the local food processing industry, ranging from small and medium-sized enterprises to major multinational corporation facilities.

The Malaysian food processing industry represents 12% of the country’s manufacturing output and is growing at a pace of roughly 3% per year.  Several multi-nationals have regional production facilities in and around Kuala Lumpur and the Government of Malaysia have identified the food processing industry as a critical sector for future economic growth.  Although the country’s halal requirements complicate trade for certain products, Malaysia’s trade and regulatory policies are relatively open and provide opportunities for a broad range of ingredient products. Malaysia’s total agricultural product imports in 2019 reached nearly US$18.3 billion, roughly 7% of which was sourced from the United States.

Both Malaysian and multinational companies are active in the sector. Multinational companies are often joint investments between foreign and Malaysian investments. Some foreign brands of food products are produced under license by Malaysian companies with the rights to market within specific geographical markets.

For some key food processing ingredients (wheat, soybeans, potatoes, dairy products, dried fruit, nuts), U.S. exporters face minimal competition from local producers as there is no local production.  However, U.S. exporters face strong competition from Thailand, China, Australia, and New Zealand.  Their products are competitively priced, and their proximity to Malaysia compared to the United States gives these countries an advantage in terms of delivery time and freight costs.  Furthermore, Australia and New Zealand have an established halal food industry geared towards exports to Muslim markets.

Best Product Prospects:

Top prospective U.S. food processing ingredient products for the Malaysian market include dairy, frozen potatoes, tree nuts and processed fruits. Other key imported materials for the food processing sector include basic commodities such as processed fish and fish products, chocolate products and sugar confectionery, protein concentrates, yeast, sugar derivatives and syrup as well as sugar.