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UPM-FAMA Program 4: Project 1. Opportunities in Increasing the Export of Food Products Based on the Consumer Preferences in Europe 15 August 2008 Prof Dr Jinap Selamat Dr Roselina Karim Pr Dr Mad Nasir Shamsuddin Prof Madya Dr Jamil Bojei Dr Rosli Saleh Dr Tan Chin Ping. MAHA 2008.

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UPM-FAMA Program 4: Project 1

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

in Europe

15 August 2008

Prof Dr Jinap Selamat

Dr Roselina Karim

Pr Dr Mad Nasir Shamsuddin

Prof Madya Dr Jamil Bojei

Dr Rosli Saleh

Dr Tan Chin Ping

MAHA 2008


FAMA-UPM Program 4: Project 2


World GDP (PPP)

FAMA-UPM Program 4: Project 2


GDP (PPP)Definition

  • 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


19.7%

USD 14.4

Trillion

Agriculture Imports

GDP (PPP)


EU Requirement

EC No 178/ 2002

1 Jan, 2005

Article 5 of Regulation EC No 852/2004

All food businesses with the exception of primary producers & associated operations

1 January, 2005

HACCP

Traceability

FAMA-UPM Program 4: Project 2


  • The ingredient list, must specify

    • the percentage the ingredients

    • nutritional facts

    • serving size

    • customer service information

EU Labeling Requirement

FAMA-UPM Program 4: Project 2


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

EU Entry Requirements


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


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

EU Food Regulations


EU Food Regulations: no. 882/2004

  • 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:

  • 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


  • 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

B. EU Food Directives


  • 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

Market Requirements


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

  • Agents and distributors are viewed as partners to a manufacturer

Working with Export Partners in the EU


  • 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.

Agent vs Distributor


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

EU Tariff and Tax Basics


  • 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)

Sources for Duty/Tariff


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


  • 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


  • 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

SWOT Analysis - Weakness (cont..)


SWOT Analysis - Weakness (cont..)

  • 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 - Opportunities

  • 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%)

FAMA-UPM Program 4: Project 2


SWOT Analysis

- Opportunities (cont..)

  • 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)

FAMA-UPM Program 4: Project 2


SWOT Analysis - Threats

  • 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

FAMA-UPM Program 4: Project 2


Product Selection

28


EU

Snacks

Nani Fried Sesame

Kart Food Steamed Bun

Jalen Chilli

Bumi Hijau

Black Pepper

Muslim Salsa

Black Pepper Spicy

FAMA

Sauces

29


Beverages

Hobary Pink Guava

Perda Guava Juice

Cookies

DMG Butter Cookies

Noraini’s Ginger and Almond

FAMA-UPM Program 4: Project 2


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


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


Analysis of Acceptance


Demographic Profile


Demographic Profile


Demographic Profile


Demographic Profile


Characteristic

Overall Acceptability- Appearance- Aroma – Smell- Flavor – Sweetness- Texture – Body or viscosity- AftertasteOverall Packaging- Packaging Design- Color- Size of Pack- Overall

FAMA-UPM Program 4: Project 2


Consumer Acceptance - Snacks


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

*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 -Beverages


Consumer Acceptance -Sauces

*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 - Sauces


Consumer Acceptance - Sauces


Consumer Acceptance - Cookies

*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 -Cookies


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

FAMA-UPM Program 4: Project 2


Techno-Quality-Economic Matrix for

Export Ready and Product Potential by product


Way Forward

(General)


Way Forward

FAMA-UPM Program 4: Project 2


Way Forward


Way Forward

FAMA-UPM Program 4: Project 2


Way Forward


Way Forward


Way Forward


Way Forward


Way Forward


Way Forward

(Product based)

FAMA-UPM Program 4: Project 2


Situational Analysis – Black pepper Sauce

FAMA-UPM Program 4: Project 2


Action plan – Black Pepper Sauce

  • 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


Situational Analysis – Chili Sauce

2) Chili Sauce (Jalen)


Action plan – 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

FAMA-UPM Program 4: Project 2


Situational Analysis – Salsa Papaya Sauce

3) Salsa papaya sauce


Action plan – 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

FAMA-UPM Program 4: Project 2


Situational Analysis – Frozen Sesame Ball


Situational Analysis – Frozen Sesame Ball


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

70


Situational Analysis

– Frozen Steamed Bun


Situational Analysis

– Frozen Steamed Bun


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

73


Situational Analysis – Tapioca Chip


Situational Analysis – Tapioca Chip


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

76


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