Chapter 5 - Industry and Marketplace

Chapter Five: Industry and Marketplace

5.1   The Industry

5.1.1   Definition of the Industry

The food and beverage industry is widely expanding its sector year after year. Its focus is in the making and delivering of foods as well as the concept behind every production. In assuring consumers satisfaction and quality guaranteed production, companies are bending hastily to keep up with the speed of change according to consumer demands. They are further subdivided into groups that comprises of meat, fish, fruit and vegetables, fats, dairy products, grain mill, starch products and prepared animal feeds. One of the largest divisions of the food and beverageoperations is the cafes, bars and restaurants.     

Internationally, the food and beverage sector is one of the many important industries in the world economy and is rated approximately at 4.22 billion and 4.4 million people are employed under it. In addition to that, some small group of multinational companies are leading the industry and running globally. However, a great deal of small and medium-sized firms are manufacturing for the local markets.

In Malaysia, its food and beverage industry is rather small as compared to the other countries which are at 2.75% on average. With this in mind, Malaysia is more reliant on imported food and consumer products regardless of their potential. Consumers spend about 20% of their income on food. Malaysia’s food consumption is estimated to increase 9.4% in 2012 in relation to Malaysia’s vision of becoming a high income society and economic growth.

5.1.2. Shape of the Industry

The food and beverage industry contributes to one of the major economic growth. Its development growth has been consistent annually. They are also expected to increase at 3.5% by 2014. Europe currently has the largest share in the global food and beverage industry along followed by US. China and India is presently the major contributor or raw materials to the food and beverage industry.

The main difficulty faced by this industry is the rising of food prices, transportation cost for oil consumption causing a decline in consumer expenditure. Even so, the food and beverage industry are less impinged on as compared to other industries since food product is vital to consumers. With this in mind, the food retail industry is expected to rise from $3.9 of 4.8% between 2008 and 2013 to $5 billion.

Malaysia’s food industry is as diverse as the multi-cultures of Malaysia, with a wide range of processed food with Asian tastes. The food processing industry is 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 2010, Malaysia’s food exports amounted to RM18.2 billion, while imports totalled RM30.3 billion. Malaysia exported food products to more than 200 countries and the main products exported were cocoa (RM3.8 billion), fisheries products (RM2.6 billion), margarine and shortening (RM1 billion) and animal feed (RM1.1 billion). (MIDA, 2012)

5.1.3. Development of the Industry

The food and beverage industry is expected to continue its growth, primarily focused by developing countries and their large populations and rising income. However, due to rising of fuel prices, the food and beverage industry may expect a downturn.

At present, around 58% of produced food is consumed by developing countries. It is also expected to rise up to 72% by 2050. A rise in cereal demand is predicted to increase from 2.1 billion tons to more than 3 billion. The buying shape in low cost countries is developing from small grocery stores to bigger hypermarkets and supermarkets like Tesco, Carrefour and Wal Mart.

Besides that, recent studies have said there is a shift in demographics of consumer hence the demand and choice of products they want to buy has grown towards improved health and dietary lifestyle. According to 2007 International Food Information Council survey, 75% good that are healthy and nutritious is a factor in maintaining health. Asia is said to have had the similar changes. With that in mind, the food and beverage industry has to go along with the changes to meet consumer’s demand.

5.2   The Marketplace

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5.1.2. Current Condition of the Marketplace

The market place of ice cream products are classified into the frozen dessert market. They fall under one of the subdivisions of the food and beverage industry. Frozen desserts by definition are desserts that are made by freezing liquid, semi-solid and at times even solid. Besides that, frozen desserts also have flavored water based on fruit flavors which includes sorbets, sherbets and gelatos and not forgetting the conventional milk and cream which includes most ice creams and premium ice creams.

The ice cream and frozen dessert comprises of a variety of products such as low/non/fat, regular, premium and super premium ice cream, soft serve ice cream, hard and soft frozen yogurt,sorbets, gelato and frozen ices. With that in mind, frozen dessert falls under the second level from the top of the food guide pyramid which has four levels. This would also mean they should be consumed occasionally only.Globally, the frozen dessert market is expected to reach $47.3 billion by the year 2015 in Europe. Asia-Pacific on the other hand has the fastest growing frozen dessert market worldwide.

5.2.2. Changes in Marketplace

The frozen dessert market is growing progressively in Malaysia. Mainly the ice cream businesses as they are gaining fast popularity such as Häagen-Dazs that are aiming for more wealthy and urban consumers. Ice cream cafes have become a trend nowadays with the high demand of healthy ice creams as to the current overwhelming weather consumers try to endure. At the same time, manufacturers of frozen desserts are aiming on the average income consumers to purchase bulk ice cream and multipack ice cream by companies such as Nestle and Walls.

In 2009, Unilever Holdings took over Nestlé’s position of holding the leading ice cream company due to Walls and Cornetto’s varieties of ice creams offered. In addition to that, their marketing and promotion activities have led them to achieve this stance. Malaysian consumers have now target more toward the western-style food service outlets allowing restaurants and more café’s to meet their expectation. Ice cream parlors such as Häagen-Dazs currently have a growth value of 12% as they are constantly gaining fame in Malaysia.

The sales of frozen desserts are constantly changing which are mainly influenced by the shifts in the economy. However, many companies are developing better enhanced products and improving existing ones in the market by counting in features according to consumer demands.Now many companies are focusing on producing fat-free and low-fat classes of frozen desserts as compared to the full-fat category on the account of consumers who are not very particular about their fat intake as to keep a healthy eating lifestyle.