majorfoodcommodities malaysia 2010

Food Consumption Trend:Turning Issues into OpportunitiesM Nasir Shamsudin Jinap Selamat Alias Radam Abdul Gh iff Ramin Abd l Ghariff R i Tay Yeong Sheng Ahmad Hanis Izani Abdul Hadi Presented at the Agribusiness Marketing Conference Organised by Federal Agricultural Marketing Authority 23 February 2010With Knowledge We Serve

Trends i F d C T d in Food Consumption tiTypical of developing economies Stages:Initial increase in traditional staple foods Increase in non-traditional staples Diversification in consumption habits Increase in higher value, processed & higher proteins

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With Knowledge We Serve

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Trend in per capita consumption of meat, vegetables, and fruits increases, but consumption of rice reduces.Consumption of Meat per capita, 1990-03 (kg/capita/year) 60 50 k g /c a p /y e a r 40 30 20 10 0 1990 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 1991 2001 4 8 .8 4 8 .8 4 9 .2 5 0 .1 5 1 .3

Consum ption of Vegetables per capita, 1982-01 (kg/capita/year) 50 40 kg/cap/year 30 20 10 0 1982 1985 1988 Year 1991 2000 2001 27.3 32.0 34.8 35.5 35 5 39.3

4 5 .6

4 5 .6

4 5 .0

4 3 .4

3 4 .6

3 6 .4

Year

4 1 .8

4 3 .9

4 4 .5

40.6

Consum ption of Fruits per capita, 1982-01 (kg/capita/year) 40 35 30 25 20 15 10 5 0

Consum ption of Rice per capita, 1970-2005 capita 1970 2005 (kg/capita/year)34.1

32.8 21.2 23.5 25.6 27.7

140 120 100 80 60 40 20 0

118.8

109.5

kg/ca ap/year

kg/cap/year

97.7

94.0

79.8

82.7

79.6

74.3

1982

1985

1988 Year

1991

2000

2001

1970

1975

1980

1985

1990

1995

2000

2005

Year

Sumber:FAOSTAT Source: www.agrolink.moa.my/jph/dvs

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As income increases, proportion spent on food to total expenditures declines..away from home increases1973* 1980* 1993/94 1998/99 2004/05

Total

45.1

35.4

35.6

35.1

33.6

At home

36.2

28.4

23.8

22.6

20.1

Away from home

8.9

7.1

11.8

12.5

13.5

* Peninsular Malaysia

Source: Department of Statistics Malaysia, HES, various issues

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Why changes in the trend of the food consumption patterns? Wh are the ? What h driving forces?

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The Driving ForcesIncome growth Urbanization Gender Employment Race Age

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Income growthEconomic growth led to income growth a growth, growth, dominant force, haspushed up middle-class consumers purchasing h d iddl l h i power generated rising demand for food, and t d ii d df f d d shifted food demand away from traditional staples and towards higher value foods. higher-value foods

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ASEAN: GDP per capitaASEAN:GDP per cap, 2003 (USD)

GDP per cap

0

5,000

10,000

15,000

20,000

25,000

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The ratio of food processing value added to agriculture value added rises with income

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Implications of Income ElasticityConsumption Patterns (from y )Indicates signs of convergence towards western diet Higher income elasticity (y) for wheat-based products than for rice products Decline in per capita consumption of staple food y for meat, fish, fruit & vegetable items are high Demand f red meats i D d for d t increases more th white than hit meat as shown by their y.

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Implications of Price ElasticityConsumption Patterns (from ii) p ( Wheat-based, meat, fish, fruits are more price sensitive than vegetables & rice => staples are not price sensitive compared to non-staples

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Consumption Trend monthly per capita food consumption yp p f p

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Income growth Income growth h also caused I h has l d changes in the demand for food attributes & its willingness to pay

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There have been changes in the demand for food attributes, e.g. Leafy Vegetables

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Consumers are willing to p y higher prices for food g pay g p f f attributes, e.g. Leafy Vegetables

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Effect of Demographic Factors on Food Consumption Patterns

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Effect of Demographic Factors on Food Consumption Patterns

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Changing patterns of food consumption as income rises0 - 1000 1 - 5000 5 - 10000 10 - 15000 15 - 20000 + 20000 Loose unbranded cereals

Basic packaged food

Per capita income

Basic frozen products

Types of foodHealth, variety, pre-prepared

Fresh and health

Malaysia, Thailand Basic packaged food and frozen products: Malaysia, Thailand, Philippines Unbranded products, and basic packaged products with some frozen p products: Indonesia, Philippines, Vietnam , pp , Unbranded products, and some basic packaged foods: Cambodia, Laos, Myanmar MNS 2009

Chart: SG Heilbron, Source: The Economist, December 4, 1993 Sophisticated p p processed and fresh, ,

health p products: Singapore, Brunei, g p , ,


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Summing up: Changes in food consumption patternsIncrease in higher value and higher proteinsConsumption of meats, fish, dairy products, wheat, fruits and vegetables increased Consumption of rice decreased Emerging patterns on the demand for attributes

Driving forcesIncrease in income Structural transformation and urbanization Changes in tastes and lifestyles Market development MNS 2009


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Summing up: What consumers wantin food attributestaste p price qualityIncome growth has caused changes i f d consumption h in food ti patterns & trend. So, what are the responses of the agri-food system to such changes in order to take the opportunities?

convenience health safety MNS 2009


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Could it be translated into business opportunities?Agribusiness System

Planning Control

ManagementImplementation

Analysis

Changes in the food consumption patterns mean more business opportunities for all supply chain participantsConsumer Satisfaction

Input & Services Sector

Production System

Post P t Harvest

Processing

Marketing & Sales

Logistics Information

When there are issues, opportunities are at our door!

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The relative shares of agriculture and agribusiness in GDP change as incomes rise. Thus, we need to consider the whole supply chain in policy formulation.

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Strategies to realize the opportunities: the Way Forward

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Turning issues into opportunitiesResponding to consumers p g Decline in generic products p y Trend towards product diversity /differentiation p g pp y Adopting supply or value chain approachWhy?

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Why moving into value chain? y g

High Specificity of Customer End-User DemandsAligned Supply Chain

Open Market O M k t Coordination

Low Low MNS 2009

Differentiation of Products

High25


Why moving into value chain? y g

High Specificity of Customer End-User DemandsAligned Supply Chain

Open Market O M k t Coordination

Low Low MNS 2009

Complexity of Production/

High26

Potential of Mistakes With Knowledge We Serve

Drivers of supply chains formation.take the opportunityChanges in consumer demand and consumption Advances in technology in food production and distribution system d ti d di t ib ti t Changes in the role of government Shift of resources essential to compete in global markets g MNS 2009


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But.core competencies are needed to realize th opportunity in value chain li the t it i l h i formationAre we ready?Increased focus on product & process development Emphasis on market flexibility to meet changing consumer demands Improved ability t respond and customize I d bilit to d d t i products to end-user needs Continued focus on cost control & efficiency Focus on holistic systems that integrate the entire supply chain pp y MNS 2009


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But.core competencies are needed to realize th opportunity in value chain li the t it i l h i formationAre we ready? (continued)Increased emphasis on quality and quality assurance along the chain Emphasis on information and information sharing Optimization of the logistics and distribution p g system Increased skill in negotiation and joint decisionmaking Development of collaborative attitudes and perspective Capacity to trust and to be trust-worthy MNS 2009


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And.what are the barriers to change formation?Mutual trust b chain participants M l by h i i i Communication and information flow across chain participants h i ti i t Commitment and willingness to invest in chain infrastructure Awareness of benefits and costs of more tightly aligned supply chain An acceptable governance system with equitable sharing of power and control MNS 2009


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And.what are the barriers to change formation? ((continued) ti d)Equitable sharing of the risk and rewards in a supply chain Capacity of the chain to be flexible and adaptable Policy environment that does not limit chain formation An organisational structure that allows implementation of chain approaches Willingness to adopt a collaborative versus competitive business approach

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Strategies to realize the business opportunitiesChoosing the value Market Se election/ Foc cus Value Pos sitioning Providing the value Communicating the value Sales pro omotion Sales Force F Distrib buting Advert tising 32

Cust tomer Segme entation

Prod duct Develop pment

Serv vice Develop pment

Sourc cing Advert tising

Strategic Marketing

Tactical Marketing

Value Creation and delivery sequences MNS 2009


Servicing

Prici ing

Mak king

Strategies to realize the business opportunities..Choosing the value Value positioning Market segmentation

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Strategies to realize the business opportunities..Providing the value Product development Relevant R&D in agrifood technology & marketing Input Procurement system I tP t t Service development Distribution h Di ib i channels l Strategic alliance with LEs MNS 2009


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Strategies to realize the business opportunities..Communicating the value Promotion Advertisement Strategic alliance with LEs

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ConclusionIn the past, commodity production. Today, development of differentiated products. p p Moving from open to value chain negotiatedcoordinated markets. Messages concerning product attributes are clear, but some are noise. Value capture before value decay. The ability to respond quickly to changes in economic climate is critical to maintaining profit margins. MNS 2009


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Terima Kasih T i K ih

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Supply or value chainTo explicitly specify the value creating activities i the production-distribution i i i in h d i di ib i process, and to provide an explicit structure for the linkages among these t t f th li k th activities or processes. The chain involves input suppliers, producers, processors, marketers, retail outlets.

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Value CreationThe basic principle is to produce or provide a product or service that h id d i h has sufficient value for customers or endusers th t th will pay f th t product or that they ill for that d t service.

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PERCAPITA CONSUMPTION OF MAJOR FOOD COMMODITIES, 1985 2010 (kg/year) g yRice, Vegetables, Fruits120102

100 80 Value

89.9

86.9

85.7

82.8

80.4 65.1

58.9

6039.7

49.9 44.3 45.5 48.5

53.5 63.6 57.5 52

40 20 0

Rice Vegetables Fruits

42.4 42 4

1985

1990

1995

2000

2005

2010

YearSource: Ministry of Agriculture

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PERCAPITA CONSUMPTION OF MAJOR FOOD COMMODITIES, 1985 2010 (kg/year) g yBeef, Mutton, Pork, Eggs20 18 16 14 12 10 8 6 4 2 017.3 17.3

15.7

16.4

16.8

13.2 11.4 10.1 9.2 8.1 8.4 6.7 5.3 4.3 2.4 3.2 0.4 0.4 0.6 0.6 0.7 0.7 9.2 12

Beef B f Mutton Pork Eggs

Value

1985

1990

1995 Year

2000

2005

2010

Source: Ministry of Agriculture

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PERCAPITA CONSUMPTION OF MAJOR FOOD COMMODITIES, 1985 2010 (kg/year) g y

Fish and Milk70 60 50 Value 40 30 20 10 0 1985 1990 1995 YearSource: Ministry of Agriculture37.2 37.7 39.1 33.4 34.8 49 51.5 53 56 56 60.6 60.6

f

Food Fish Milk

2000

2005

2010

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majorfoodcommodities malaysia 2010

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