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Powdered milk in Malaysia

  •   29 Apr 2019
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Summary

Powdered skim milk imports from Canada represent 3.2% of total powdered skim milk imports to Malaysia. Between 2013 and 2017, imports from Canada increased by 150.0% annually. New Zealand is the largest powdered skim milk supplier to Malaysia with 44.1% of total imports, followed by the European Union (EU), the United States (U.S.), and Australia. Malaysia relies on imported milk for 95% of its dairy requirements. Fluid and powder milk do not require halal certification.

Between 2013 and 2017, there has been a 2.9% annual decrease in the retail sales of powdered skim milk in Malaysia. Foreign brands dominate the powdered milk market in Malaysia with brands owned by Nestlé, Friesland Campina, and Fonterra, owning a 93.9% market share. Given the larger population and stronger economy, West Malaysia, which includes the capital Kuala Lumpur, is Malaysia's largest consumer market.

Traditional grocers make up the largest distribution channel for milk products, at 70.3% of grocery retailers. These stores usually operate as specialist stores that carry only halal products targeted at the Muslim community as well as local traditional and Asian products that target the Chinese or Indian communities.

Malaysia is the third most affluent country in South East Asia and has one of the most well developed transportation infrastructures in the region. Peninsular Malaysia's network of well maintained highways link major growth centers to seaports and airports throughout the peninsula and provide an efficient means of transportation for goods.

Contents

Malaysia is the fourth largest economy and third most affluent country in South East Asia, after Singapore and Brunei, with an income per capita of US$10,620. Out of 32.1 million people, Malaysia's middle class consists of 3.5 million and is expected to remain the country's fastest growing social class. Wages in Malaysia have risen to the point where the country is on track to reaching the World Bank's threshold of US$12,475 to become a high income economy, similar to Costa Rica and Croatia, and no longer competitive in terms of labour costs with its regional neighbours.

The average annual disposable income per Malaysian urban household is US$27,152. In comparison, the average disposable income for urban Canadian households is US$67,382. Given the larger population and stronger economy, Penisular Malaysia, which includes the capital Kuala Lumpur, is Malaysia's largest consumer market. East Malaysia, which consists of Sabah and Sarawak on the Island of Borneo, is smaller by population and less developed economically.

Malaysia has a young population with 17% in the 15-24 year and 41% in the 25-54 year age range. Malaysia's multi-racial population consists of mostly ethnic Malays (67.4%), Chinese (24.6%), and Indians (7.3%).

Companies and brands

Foreign brands dominate the powdered milk market in Malaysia with brands owned by Nestlé, Friesland Campina, and Fonterra, owning a 93.9% market share.

Leading national brands by market share (%)

Brand Name20132014201520162017
Bear Brand (Nestlé SA)36.035.939.843.243.1
Alaska (Royal FrieslandCampina NV)27.527.527.026.726.3
Nido (Nestlé SA)8.38.59.410.010.2
Anchor (Fonterra Co-operative Group Ltd)7.57.47.47.57.6
Anlene (Fonterra Co-operative Group Ltd)6.36.46.46.66.7
Source: Euromonitor International 2017


Retail sales and distribution

Powdered milk represents 24.4% of retail sales of drinking milk products in Malaysia. Retail sales of powdered milk fell by a compound annual growth rate of 2.9% between 2013 and 2017 and is expected to grow by 7.5% between 2018 and 2022, partly due to the abolishment of the country's goods and services tax on June 1st, 2018.

Despite having the lowest energy costs in the Association of Southeast Asian Nations (ASEAN) region, largely due to government subsidies, fresh milk retail sales only represent 20.5% of total retail sales. Consumers who live in central and southern peninsular Malaysia prefer fresh milk, while consumers who live in northern and east coast areas prefer dairy only flavoured milk drinks and shelf stable milk, which have longer shelf lives.

Historic sales of drinking milk products (US$ millions)

Product20132014201520162017CAGR* % 2013-2017
Flavoured milk drinks149.6153.2137.6139.8144.8−0.8
Powder milk129.8129.9114.9114.1115.4−2.9
Milk alternatives127.5128.9114.3113.7115.4−2.5
Milk98.3101.291.393.397.3−0.3
Total505.3513.2458.2460.9472.9−1.6

Source: Euromonitor International 2017

*CAGR: Compound annual growth rate

Forecast sales of drinking milk products (US$ millions)

Product20182019202020212022CAGR* % 2018-2022
Flavoured milk drinks162.9180.6199.9221.2245.910.8
Milk alternatives127.3138.0149.7162.4177.08.6
Milk110.3123.0137.2153.2171.711.7
Powder milk125.8135.2145.3156.1168.37.5
Total526.2576.9632.2692.9762.89.7

Source: Euromonitor International 2017

*CAGR: Compound annual growth rate

Most Malaysians shop at traditional grocers, which are located throughout urban and rural areas and make up the largest distribution channel for milk products at 70.3% of grocery retailers. Traditional grocers are commonly family run, non-air conditioned, open-fronted stores in shop houses or markets, which offer products demanded by local households that are priced competitively and within short distances. These stores usually operate as specialist stores that carry only halal products targeted at the Muslim community (60% of the population). These stores also carry only local traditional and Asian products that target the Chinese (24.6%) or Indian (7.3%) communities, as well as westerners with a small number of more popular imported western food and beverage products. Traditional grocers typically source their products through local level importers, wholesalers, distributors, or sub-distributors that are accustomed to responding to demands for small and irregular volumes of products.

Drinking milk products, including powdered milk, are also widely distributed across modern (super/hyper markets, convenience stores) grocery retailers, which represent 28.5% of grocery retail sales. Modern grocery retailers have grown in popularity, especially amongst young consumers, for their selection of food that require controlled temperature, such as fresh milk. Online shopping represents 0.1% of drinking milk retail sales, despite 81% of Malaysians being internet users.

Distribution channels of drinking milk products by market share (%)

Distribution channel20132014201520162017
Traditional grocery retailers71.471.371.170.970.3
Hypermarkets20.320.420.520.621.2
Supermarkets5.65.65.75.86.0
Convenience stores2.02.02.02.01.9
Internet retailing0.10.10.10.10.1
Total99.499.499.499.499.5
Source: Euromonitor International 2018


Powdered milk imports

Malaysia imports around 95% of its dairy requirements, with local production of fluid milk covering only about 5% of domestic needs. Most fluid milk available at retail is reconstituted from imported powdered milk. All non-fat and whole milk powder, as well as whey and casein, are also imported for the processing sector.
Fluid and powder milk do not require halal certification, however, all imported value added dairy products (for example, whey, cheese, ice cream, etc.), including ingredients for the food processing industry, must be certified Halal by the Malaysian Department of Veterinary Services (DVS) and the Malaysian Islamic authority (JAKIM). Exporters must complete DVS and JAKIM application forms to receive a halal certificate, before exporting to Malaysia.

With 44.1% market share, New Zealand is the largest supplier of powdered skim milk, followed by the EU, and the U.S. Dairy products are charged a 5% import tariff. Imports from New Zealand and Australia have duty free access for dairy products through ASEAN agreements. Since 2013, imports from Canada have increased 150% annually and represent 3.2% of total imports. Fluctuation in exchange rates is an important driver that makes some countries temporarily more attractive for imports. Imports of dairy commodities and products for industrial use are dominated by Anglo-Saxon countries, whereas premium products are mainly from the EU.

Top five exporters of powdered skim milk to Malaysia (Harmonized system code 040210), Can$

Country20132014201520162017CAGR* % 2013-2017
New Zealand186,309,403301,692,463266,598,410202,151,141164,774,594−3.0
EU2856,738,086100,099,95580,178,57443,050,69278,433,8478.4
United States108,619,742134,241,88279,260,66067,801,32970,323,709−10.3
Australia48,443,80564,202,24050,770,18750,233,47842,131,900−3.4
Canada311,240613,30868,307012,203,621150.2
Rest of world11,433,15941,826,61011,283,76912,984,5285,720,827−15.9
Total411,855,435642,676,458488,159,907376,331,168373,588,498−2.4

Source: Global Trade Tracker, 2018

*CAGR: Compound annual growth rate


Transport, shipping channels

Malaysia has one of the most well developed transportation infrastructures in South East Asia. Peninsular Malaysia's network of well-maintained highways link major growth centers to seaports and airports throughout the peninsula and provide an efficient means of transportation for goods.

Over 90% of Malaysia's cargo volume throughput is by sea. Malaysia has seven international ports - Penang Port, Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port in Peninsular Malaysia and Bintulu Port in Sarawak. Port Klang and the Port of Tanjung Pelepas(PTP), are ranked among the top 20 container ports in the world.

The small percentage of Malaysia's cargo volume not handled by sea is transported by rail, air and land. Most rail cargo comes from southern Thailand and is exported through Port Klang and Penang Port, via Padang Besar Terminal. A key project under development is the Kuala Lumpur-Bangkok-Kuala Lumpur containerised service known as the Asean Rail Express (ARX). Malaysia is one of the key posts for China's belt and road trade and infrastructure plan. Under this initiative, the ARX is expected to become the Trans-Asia Rail Link that will include Singapore, Vietnam, Cambodia, Laos and Myanmar before ending up in Kunming, China.

For air cargo, Kuala Lumpur International Airport handles 77% of volume, while Penang Airport transported 12%. In terms of land transport, 65% of goods vehicles on the road are small commercial vehicles carrying less than five tonnes.

As part of the government's five-year development strategy for the period 2016-20, Malaysia aims to strengthen connectivity in rural and rural-urban areas by improving bus, rail and air transportations. This involves enhancing connectivity across transport modes and expanding port capacity, access and operations.

Resources

Prepared by: Kris Clipsham, International Market Analyst, Global Analysis

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2019).

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