MAHA 2008 Opportunities in Increasing the Export of Food Products Based on the Consumer Preferences in Europe 15 August 2008 Prof Dr Jinap Selamat Dr Roselina

MAHA 2008Opportunities in Increasing the Export of Food Products Based on the Consumer Preferences

in Europe

15 August 2008

Prof Dr Jinap SelamatDr Roselina Karim

Pr Dr Mad Nasir ShamsuddinProf Madya Dr Jamil Bojei

Dr Rosli SalehDr Tan Chin Ping

UPM-FAMA Program 4: Project 1

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FAMA-UPM Program 4: Project 2 2


World GDP (PPP)

GDP (PPP)Definition

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Gross Domestic Product (GDP) •GDP of a country is one of the ways to measure the size of its economy• the value of all final goods and services produced within a nation in a given year

Purchasing Powder Parity (PPP)•PPP theory uses the long-term equilibrium exchange rate of two currencies to equalize their purchasing powder

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GDP (PPP)

Agriculture Imports

USD 14.4Trillion


Article 5 of Regulation EC No 852/2004All food businesses with the exception of primary producers & associated operations 1 January, 2005

HACCPTraceability

EU Requirement

EU Labeling Requirement

The ingredient list, must specify the percentage the ingredientsnutritional factsserving sizecustomer service information


EU Entry Requirements

1. Legislation• Regulations: direct applicability in all

EU Member States

• Directives: binding objective for all Member States, but national authorities decide how to implement

• Decisions: measures binding on particular individual, firm or Member State

• National laws

2. Market Requirements • Set of requirements producers or exporters

adhere to on a voluntary basis in response to consumer demands pertaining to quality, and environmental and social accountability.

3. Standards • Documented, voluntary agreements, which

establish important criteria for products, services, and processes and help assuring that products are fit for their purpose and are comparable and compatible.

Sources of EU Entry Requirements

EU Food Regulations

European Regulation (EC) No 178/2002 – The EU Food Law– General principles and requirements of

EU food and feed safety– Creation of EU Food Safety Authority– Procedures in relation to food and feed

safety– Based on traceability during production,

processing and distribution

– Effective 2006– Complements 178/2002– Defines how official controls of EU

produced and imported food and feed will be performed

– Describes enforcement systems; their application by Competent Authorities.

EU Food Regulations: no. 882/2004

• Food Hygiene Regulations 852/2004 – pertaining to hygiene of foodstuffs- HACCP requirement

• Food Hygiene Regulation 853/ 2004 – pertaining to food of animal origin

• EU Regulation No 2092/91 – requirements for agricultural products and foodstuffs including organic production methods

EU Food Regulations:

B. EU Food Directives

• Directive 91/493/EEC and Directive 91/492/EEC pertain to requirements for production and export of fishery products. HACCP requirement.

• Directive 2000/29/EC deals with legislation regarding maximum levels of pesticide residues, heavy metals, microbiological and radiological contamination and phyto sanitary inspections

Market Requirements

• Voluntary by nature• Specific to participating countries and firms• Source of national and EU legislation• Not compulsory for trade with the EU

Market Requirements

• Organically Produced Food products – covered by EU inspection scheme[Krav (Sweden); NATURLAND (Germany); EKO (Netherlands)]

• Good Agricultural Practices (GAP)– Euro-Retailer Producer Group (Eurep-

Gap)– British Retail Consortium (BRC)

• Social Accountability– Fair Trade

Working with Export Partners in the EU

• Europeans spend more time building rapport and trust prior to entering partnerships.

• Agents and distributors are viewed as partners to a manufacturer

Agent vs Distributor

• Despite greater entitlement to termination payments, an agent isn't necessarily better than a distributor for the US exporter in Europe. A distributor has control of pricing, whereas using an agent provides a manufacturer with:

1) Control over pricing, and 2) More say in how the product is presented.

Agent vs Distributor

• Distributors - recommended for companies who are new in a market or seeking to grow

• Agents - for a manufacturer's more mature /developed markets.

PS: In Germany - a company to set up a direct sales office, due to that market's large size and the competition from European-made products.

EU Tariff and Tax Basics

• Value Added Tax: Imports into the EU will also be subject to a value added tax (VAT) Vat is calculated on the CIF + duty. Go to http://www.trade.gov/td/tic/tariff/eu_vat.ht

m for EU country specific VAT (Value Added Tax) rates.

Sources for Duty/Tariff

• EU Tariff Rates - based on the CIF value (Cost of goods, Insurance, Freight

• Tariff rates can be found in PDF format by BITD company or by using the EU Customs Union Online Database (http://europa.eu.int/comm/taxation_customs/dds/en/tarhome.htm)

http://europa.eu.int/comm/taxation_customs/dds/en/tarhome.htm

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Market Size and Growth of The Malaysian Processed Food Exports to European Union, 2001 – 2005

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Strength•Good Packaging – at par with mainstream supermarkets (e.g. TESCO)

Weakness•Packaging color and design not attractive•Packaging does not guarantee long shelf-life•High production cost - Thailand below the Malaysian. In general, the Malaysian products about 20% more expensive.

SWOT ANALYSIS

SWOT Analysis - Weakness (cont..)

• Too many brands. Lack of unique brand for the Malaysian food products.

• No strategic alliances (importers, distributors). No private agents to market the products.

• SMI entrepreneurs lack legal/social/cultural environment in the importing countries

• Entrepreneurs do not have enough capital to effectively export their products

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Need to identify consumer’s taste and preferences.

Some product branding not accepted globally

Weak in PR networking Service Centre (distributor) not available Weak R&D that match SME

requirements

SWOT Analysis - Weakness (cont..)

• Strong government supports for SME development in food processing

• Known for halal products• Strong government support in halal products and halal-

hub centre • Demand for oriental products (Thailand and Indonesia

have a large market share). • Positive growth rate in exports (2001 - 2005): Snacks

(6.5%); Beverages (36.2%); Sauce (6%); Cookies (30.5%); Spices (-5%)


SWOT Analysis - Opportunities


• Products at Mainstream Supermarkets categorized into: mainstream, ethnic , halal food products. Malaysia can take the opportunity to market under halal branding

• EU consumers are responsive to new product branding such as health food

• Main stream supermarket, like Tesco, can have potential to market Malaysian products in the area where there are many Asian ethnic (e.g. in Slough)

SWOT Analysis- Opportunities (cont..)

• Competitor production cost - mainly products from Thailand and Indonesia, are low in price. For certain products, the prices, converted to MR, are below Malaysian production costs


SWOT Analysis - Threats

Product Selection

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Cookies

Beverages Sauce&seasoning

Snacks

Spices

1.00

2.33

3.66

4.99

1.002.333.664.99

Business Strength

GENERAL ELECTRIC MODEL

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EU

Bumi Hijau Black Pepper

Jalen Chilli

Muslim Salsa

Black Pepper Spicy FAMA

Nani Fried Sesame Kart Food Steamed Bun

Snacks

Sauces


Perda Guava Juice Hobary Pink Guava

Beverages

DMG Butter Cookies

Cookies

Noraini’s Ginger and Almond

Ranking based on overall acceptability of products by respondents in the EU

No Product Name Category Overall AcceptabilityWillingness to

Buy

1 Frozen Sesame Ball Snack 4.09 4.26

2 Ginger and Almond Cookies Cookies 3.91 4.03

3 Chilli Sauce Sauce 3.91 3.96

4 Frozen Steamed Bun Snack 3.80 3.86

5 Black Pepper Chips Snack 3.76 3.76

6 Salsa Papaya Sauce Sauce 3.73 3.69

7 Black Pepper Sauce Sauce 3.72 3.85

8 White Guava Juice Beverage 3.70 3.83

9 Butter Cookies Cookies 3.60 3.72

10 Pink Guava Juice Beverage 3.48 3.43

11 Spicy Chips Snack 3.46 3.59

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Ranking based on overall acceptability of products by respondents in the EU

Analysis of Acceptance

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Demographic Profile

Demographic Profile

Demographic Profile

Demographic Profile

OVERALL ACCEPTABILITY- APPEARANCE- AROMA – SMELL- FLAVOR – SWEETNESS- TEXTURE – BODY OR VISCOSITY- AFTERTASTE

OVERALL PACKAGING- PACKAGING DESIGN- COLOR- SIZE OF PACK- OVERALL

Characteristic


Consumer Acceptance - Snacks

0%

20%

40%

60%

80%

100%

Colour Aroma-Oily smell

Saltiness Flavour Intensity

Crispiness

87.175.4 68.1 74.3 80.6

0.0 20.322.2 18.6 12.5

12.9 4.4 9.7 7.2 6.9

Black pepper Flavoured Tapioca Chip

Too High

Too Low

Just right

Consumer Acceptance -Snacks

Consumer Acceptance - Frozen Snacks

*Overall Acceptabilit.y(5= Like Extremely, 4= Like moderately; 3= Neither like or Dislike) ** Overall Packaging (5=acceptable and 1=not acceptable)***Willingness to Buy (5= Definitely would Buy, 4= Probably would buy; 3= Not Sure)

Consumer Acceptance -Snacks

Consumer Acceptance - Beverages


Consumer Acceptance -Beverages

Consumer Acceptance -Sauces


Consumer Acceptance - Sauces

0%

20%

40%

60%

80%

100%

Colour Sweetness Sourness Saltiness Spiciness Viscosity

96.473.3 71.9

90.0

53.1

89.3

3.6

16.7 12.5

6.7

34.4

7.10.0

10.0 15.63.3

12.53.6

Chilli Sauce

Too High

Too Low

Just right

Consumer Acceptance - Sauces

Consumer Acceptance - Cookies


Consumer Acceptance -Cookies


Techno-Quality-Economic Matrix for Export Ready and Product Potential by product category

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Techno-Quality-Economic Matrix for Export Ready and Product Potential by product

Way Forward

(General)


Identify relevant market segments Immediate: Target SMEs food products at Oriental/ Asian

consumers at oriental outlets Medium term: Expand into mainstream market

Identify critical success SME visit to successful exporting companies to identify and

study their success factors, or Invite successful exporting companies to a workshop to have

them present their success factors to the SMEs Provide incentives for lead / anchor companies to market

other products of the same category

Way Forward

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Develop structured human resource - functionality

Restructure to have competent staff e.g. export manager- for export activities, quality control personnel - ensure consistent product quality

Develop a systematic raw materials procurement system

Establish contract farming for raw materials supply Train SMEs entrepreneurs in price forecasting awareness Engage consultant to develop accounting module for SMEs Offshore investment of food products (lead by GLC) to acquire

cheap labour cost, raw materials and transportations in the importing countries. Example, Indonesian Indomee manufactured in Abu Dhabi

Way Forward


Improve the quality and taste of the productsFood to be tested by foreigners of the destination

country Use suitable packaging materials according to the

countryTraining of quality, safety and improvement of the

product to SMEs (processing, development of quality system such as HACCP, GMP and products safety.

Way Forward

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Intensify R&D that are relevant to SMEs Conduct R&D in packaging that ensure adequate shelf-

life Enhance cooperation between SMEs and IPTA in R&D

and technology transfer/ extension. Provide financial source for research

Promote incentives in food exports Training in business plan and marketing strategy for

SMEs to be able to formulate viable business proposals for acquiring loans from relevant institutions

Way Forward

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Develop entrepreneurship development program for SMEs food industry Conduct training in business communication & ethics, labeling

requirement, legal-social-cultural environment in EU Coordinate training module of various agencies/ departments Develop database relevant for food products export that can

be utilized by SME’s

Intensifying technology transfer and adoption

Conduct training in food processing technology and packaging that is coordinated by MECD

Provide incentive package for technology adoption for new enterprises in a short term basis.

Way Forward

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Formulate strategic alliance with the supply chain intermediaries SMEs as a consortium to identify and collaborate

with a partner/agent to market their products to ensure active promotion being done in destination countries

Visit to relevant supply chain intermediaries to seek for possible cooperation with them

MATRADE to establish database on the potential partners/agents in food products

MATRADE to develop criteria for reliable partners/agents

Way Forward

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Develop branding for SMEs food products

Identify a global brand for SMEs food products (e.g. Ole Malaysia’s Best ) with strict quality control

Position SMEs food products as premium products Enhanced joint promotional effort by manufacturers

and distributors to support product positioning Government intervention for promotion and

advertising as in tourism industry

Way Forward

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Establishment international logistics and marketing networkEstablish a private PR agency to promote

Malaysian products and develop distribution channel in the targeted country

- Examples of private agent are Teega Consortium, New Trade International and CYMAD in Singapore.

Way Forward

Way Forward(Product based)



Situational Analysis – Black pepper Sauce

Strength (S)Sensory attributes highly accepted. Can be used for various dishes (eg. seasoning for stir-fried dishes, marinates and dip)Raw materials readily available Processing and packaging technology readily available

Weakness (W)Shelf lifeLimited product variant in terms of level of spicinessLimited variety of product

OpportunitiesProduct is highly accepted (in term overall acceptability and sensory attributes).Needs to have different levels of spiciness.

ThreatsCompete with almost similar product in the market (eg BBQ steak sauce)Low product awareness due to unfamiliar with product usage and preparation method

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• Product Improvement:• various spiciness level (low, moderate, high)• different purpose (ready-to-use sauce for stir

fried, marinate, dip cooking)• create product differentiation (new formulation

containing ingredients such as garlic, onion, etc)• Conduct shelf life study• Educate consumers on the product usage, e.g: • In-store promotion• infomercial promotion • professional chef cooking TV series or website

Action plan – Black Pepper Sauce

2) Chili Sauce (Jalen)

Strength (S) Overall acceptability of product

is high High sensory parameters, just

right: color (96.4%), Sweetness (73.3%),

Processing and packaging technology is readily available

Weakness (W)Unknown shelf lifePoor pourabilityLimited product variant in terms of level of spiciness

OpportunitiesGrowing market size due to increasing Asian/Oriental population in EUThe product is highly accepted

ThreatsCompete with similar product from SEA and Asia

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Situational Analysis – Chili Sauce


Promote as a premium product - develop marketing plan to promote, include product attributes and packaging design

Product improvement - various level of spiciness (low, moderate, high)

Development of new product to create product differentiation (new formulation containing higher percentage of chilies)

Conduct shelf life study Product improvement in terms of pourability -

develop product with optimum viscosity

Action plan – Chili Sauce

3) Salsa papaya sauce

Strength (S)Unique-exotic taste acceptable by consumers (6.5 of 9) Processing & packaging technology readily available

Weakness (W)Unknown shelf lifeUnsuitable brand nameUnsuitable picture on package

OpportunitiesConsumers perceive the product as unique

ThreatsOther types of sauce are available in the marketNot yet considered as a mainstream product

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Situational Analysis – Salsa Papaya Sauce


Development of new product to create product differentiation (new formulation containing ingredients such as garlic, onion, etc.)

Conduct shelf life study Educate consumers on the product usage – a) in store promotion, b) infomercial promotion,

c) professional chef cooking tv series or website Packaging improvement

- package picture- provide information on how to use the product

Action plan – Salsa papaya sauce

Strength (S)A type of new productSensory - highly acceptedProcessing & packaging technology readily availableProduct can be expanded to contain variety of filling such as peanuts, red beans, etc OpportunitiesProduct is highly accepted (in term overall acceptability and sensory attributes)Frozen snack have good potential in the market as shown by the high score on willingness to buy

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Situational Analysis – Frozen Sesame Ball

Weakness (W)Some sesame seeds separated from the ball during frying and the dough burst during fryingSome indicated texture too chewyThreatsLow product awareness due to unfamiliar with product usage and preparation methodCompete with other existing frozen snacks such as samosa, steamed bun from other Asian countries Cold chain during storage and transportation – change sensory qualities; safety issue

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Situational Analysis – Frozen Sesame Ball

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Action plan – Frozen Sesame Ball

Product Improvement develop new dough formulation to overcome

textural problem Widen selection for the frozen snack in terms of

filling Educate consumers on the product usage Upgrade product safety (GMP, HACCP) Upgrade knowledge among staff on cold chain

management - training

Strength (S)Sensory attribute of product is highly acceptedProcessing & packaging technology readily available

OpportunitiesProduct is highly accepted (in term overall acceptability and sensory attributes)Frozen snack have good potential due to lack of similar Halal products in their marketAvailability of other existing variety of savoury and sweet fillings

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Situational Analysis – Frozen Steamed Bun

Weakness (W)Ambiguous labeling design (picture on the label does not reflect colour of final product, preparation instruction include frying does not reflect the name of the product (steamed)\

ThreatsChanges of sensory qualities due to improper cold chain management during storage and transportationCompete with many similar products available in the market (SEA and Asia)Safety issue due to fluctuation of temperature during storage and transportationNeed HACCP Certification for meat-based fillings

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Situational Analysis – Frozen Steamed Bun

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Action plan – Frozen Steamed Bun

Dough Improvement - develop new dough formulation to overcome textural problem

Widen the selection for the frozen snack in terms of filling (product variety)

Educate consumers on the product Product safety (GMP, ISO 2200, HACCP) Upgrade knowledge among staff dealing with

cold chain management - training

Strength (S)Sensory attributes of black pepper flavoured tapioca chips is quite acceptable Products with varieties of flavors

OpportunitiesHigh market potential Willingness to buy moderate

Situational Analysis – Tapioca Chip

Weakness (W) Poor physical quality (eg. broken into pieces) Lack of uniformity and consistency - colour and shape. Shorter shelf life – rancidity, loss of crispiness Lack of processing and packaging technology Low quality of the lid opener (opener easily broken and

metal lid easily torn apart).Colour on package inappropriate & not appealing to the EU consumers (bright red, yellow and green).ThreatsCompete with established snacks: potato chips; extruded productsCan be obtained at cheaper prices (bulk in plastic packages

Situational Analysis – Tapioca Chip

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Action plan – Tapioca Chip

Develop promotional program to introduce product Product improvement - reconstituted technology- adopt and adapt ala Pringles technology, in terms of

product design) Upgrade packaging technology - Adopt nitrogen-filled packaging technology (e.g.

flexible packaging)- Upgrade packaging materials of lid Upgrade processing technology - Promote automated processing machinery among

SMEs

Terima Kasih

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Documents

MAHA 2008 Opportunities in Increasing the Export of Food Products Based on the Consumer Preferences in Europe 15 August 2008 Prof Dr Jinap Selamat Dr Roselina