Chapter 5 INDUSTRY & MARKETPLACE

The Industry

Definition of the industry

Food and beverage industry has been growing rapidly and expanding in Malaysia nowadays. Due to the increasing population, the demand for food and beverage also increases as more people need food and beverage to survive and live a normal life. Familiar name such as Coca Cola, McDonald, KFC are examples of famous food and beverage industry in Malaysia. Ice cream can be defined as a frozen dessert and usually made from dairy products such as milk, cream, and the combination of fruits and other ingredients. There are different types of ice cream brands which we can find in Malaysia, such as Wall’s, Nestle, King’s and many more. Ice cream can be mass-produced and therefore it is available widely all around the world. In Malaysia, ice cream can be purchased at every supermarkets and grocery shops. Not only that, we can purchased ice cream even from petrol station, convenience shops, small carts and vans. Nowadays, eating ice cream can be considered as a trend for all of us in Malaysia. Ice cream industry in Malaysia has been growing by years as there are more new flavors and shapes available in the market today.

Shape of the industry 

Food and beverage industry continues to grow in Malaysia. Due to the increasing population, the demand for food and beverage also increases. During the past quarter-century, the number of plants manufacturing ice cream has declined by 62%, but average plant capacity has increased more than sixfold. In 1938 there were 5,003 wholesale ice cream plants averaging 54,000 gallons per year. Meanwhile, there were 1,904 plants averaging 342,600 gallons per year in 1961. Today, Malaysia’s own food and beverage industry is miniscule (on average 2.75% of the GDP for the last eight years), which is why Malaysia is highly dependent on imported food ingredients and consumer products, despite of its potentials. In 2008, the production for canned pineapple was 14,713 tonnes, a decrease of 15% from 2007. Productions for rice, wheat flour and sweetened condensed milk gained momentum, registering 7.63%, 3.03% and 1.41% y/y respectively, their fifth consecutive year of production growth since 2004. Other food productions items have not fared much better. Canned pineapple posted a 14.68% y/y plunge in production figures in 2008. Production for frozen shrimps, crude coconut oil, margarine, blended cooking oil and biscuits retreated after the cost of production drastically shot up in 2008.

The outlook for the food and beverage sector remains cloudy. Sales of food stables remained compressed due to consumer thrift. They are spending roughly 20% of their disposable income on food. According to BMI’s forecast, Malaysia’s food consumption is expected to grow 9.4% in 2012 in local currency terms and 12% in per capita terms driven by Malaysia’s vision to be a high income society and the country’ s continued economic development. Going forward, it is expected that the growth in consumer spending on food and beverages will rebound together with the synchronized global economy’s recovery in 2010.

Development of Industry 

In Malaysia, food processing is an important component within the agro-based industry. This sector accounts for 10% of the country's total manufacturing output with an annual trade of over RM17 billions and exports of over RM10 billions to more than 80 countries around the world. The increased demand for processed food and beverages has in turn escalated the needs for food processing and packaging equipment and technology, making it a major contributor to the Malaysian economy.

In 2008, the food processing industry contributed about 10% of Malaysia's manufacturing output and companies in this industry are predominantly Malaysian-owned. It is estimated that the present global retail sales in food products are worth around US$3.5 trillion, and are expected to grow at an annual rate of 4.8 per cent to US$6.4 trillion by 2020. Malaysia remains a net importer of food. In 2008, Malaysia's total amount of food exported is up to RM17.9 billion, while imports cost around RM28 billion. Malaysia exports food product to more than 200 countries. The main product were cocoa (RM3 billion), fisheries products (RM 2.5 billion), margarine and shortening (RM 2.4 billion) and animal feed (RM1.2 billion).

Meanwhile, the major import for Malaysia food imports in 2008 were cereal and cereal preparations, cocoa, vegetables and fruits, dairy products and animal feed. Raw materials such as cereals and dairy products will continue to be imported for further processing for human consumption as well as for the production of animal feed. Among the dairy products produced are milk powder, sweetened condensed milk, pasteurized or sterilized liquid milk, ice cream, yoghurt and other fermented milk. According to SNS News (2006), the size of the Malaysia ice cream market, which is growing at some 5% annually, is estimated at RM400mil to RM500mil at the consumer price level.

The Marketplace

Current Condition of the Marketplace

Wall’s market condition are very stable so far and their sales keep increasing by years. Wall’s ice cream can be found in every supermarkets, grocery shops, convenience shops as well as petrol stations. Wall’s magnum, with its elegant and unique design of the packaging, together with the cracking chocolate and smooth delicious ice cream, Magnum are able to compete against its competitor. Magnum ice cream and other Wall’s products are displayed at the frozen food department. There are other competitors for Wall’s ice cream products. These competitors are Nestle, King’s, Magnolia and Baskin Robbin. All this brand produce their own different types of ice creams. Therefore, Wall’s are facing a lot of competitors and have to come out with something new from time to time in order to stand out from its competitors and gain more sales and profits as well as consumers loyalty.

Changes in Marketplace

Positive:

Wall’s ice cream products normally having good sales especially when the weather is hot. During the hot weather, consumers will look for ice creams to eat in order to cool themselves. Besides that, during the afternoon when the sun rise above the head, this is also the timing where consumer will buy ice creams to relief themselves from the hot sun.

Besides that, Wall’s products sales also increases when there are promotions made to promote their products. Usually promotions are made when they release new products with new flavor and taste. Consumers would like to try something which are new to them and therefore they will purchase these new products.

Negative:

Wall’s ice cream will have their sales decreasing when it comes to monsoon season or raining days. Due to the cold weather, no people will like to eat ice creams which are already cold itself. Consumers would prefer to eat something which can warm themselves.

Besides that, consumers perception towards their health also causes the sales of Wall’s products to decrease. Consumers believe that eating too much ice cream, which is cold and sweet can bring bad health to them such as diabetes and obesity. This normally happen when there are campaigns organized to bring awareness about health issues.