Malaysian halal products are going global
The word halal is increasingly heard around the world these days. It literally means something that is permissible under the teachings of Islam. Food manufacturers are more and more interested in halal foods as they target Muslim markets across Asia and the Middle East.
In the Malaysian capital of Kuala Lumpur, a woman wearing a hijab – a head scarf worn by some Muslim women – peruses products in a convenience store. She chooses an instant food package of the popular dish, nasi goreng. Having confirmed its halal certification on the packaging, she happily heads to the register. This particular product is produced by the Malaysian unit of Thailand's Charoen Pokphand Group. The company is one of a handful of Chinese-owned conglomerates in Thailand.
It is not a Muslim enterprise.
Yet, it has acquired halal certification from a government organisation and entered the Muslim market. Islam is the state religion of Malaysia, with adherents accounting for 60 per cent of the nation's population. Nearly 4,000 companies have obtained a halal certification from government organisations, with around 70 per cent of those being non-Muslim. Most are thought to be Chinese companies. Strict standards must be satisfied in order to obtain halal certification. No pork or alcohol can be used in the manufacture of food and precise regulations govern the processing of cattle.
"They are strict standards, but they're not a burden at all," said Charoen Pokphand Malaysia's President and CEO Pratan Jongpun. The company's plan is to export halal food produced in Malaysia to neighbouring Muslim countries. There are around 1.6 billion Muslims in the world. "If you're thinking about winning in the world, halal is unavoidable", said Pratan. One often hears Japanese food producers say that halal standards are too exacting and hinder expansion. Companies such as Kewpie have managed to obtain halal certification, but many companies hesitate to enter the market, citing halal as an obstacle. There are two main reasons that Malaysia introduced a halal certification system. One was the change in the retail market that accompanied urbanization.
Certification of Halal Products spurs Market Potential
"In the old days, we only shopped at stores managed by Muslims," said a man in his fifties living in Kuala Lumpur. Confirming which products displayed on store shelves are halal and which are not has become more difficult as the number of large supermarkets and other retailers has increased. Consequently, a system with clear stand-
ards was created, one that also enables non-Muslim companies to be recognized as halal. This certification has also made it easier for non- Muslim companies to enter the market.
The other reason was cultivation of the food industry. The Malaysian government is implementing a plan to make the country an export base for halal foods. It is provi-
ding special privileges such as tax benefits to international companies entering the market. A good example is European food producer Nestlé, which exports products to some 50 countries from its base in Malaysia. When the circumstances surrounding the birth of the halal certification are examined, one fact becomes apparent.
The purpose was to include non-Muslims and open the market through the establishment of clear rules. At a halal food exhibition held in Kuala Lumpur, companies from China, South Korea and Belgium, among others, set up booths while those from Japan were not noticeable. Food producers from around the world, such as US choco-
late maker Hershey, are making serious moves into the Muslim market. Japanese companies threaten to miss the boat.
However, the halal market is not limited to food and beverages. Cosmetics companies like Taiyen Biotech of Taiwan present their products. Although Taiwan is home to only a small number of Muslims, the skin care and cosmetics companies decided to get more than 100 of its products certified as halal three years ago. The company, which markets the Lumiel brand, has high hopes for expansion in Southeast Asia and the Middle East. The numbers for the showcase reflect the growth of the halal busi-
Malaysian companies are well-positioned for the global halal market
While companies outside the Muslim world are increasingly keen to meet global halal demand, home-grown businesses in Malaysia are also tapping into it. Malaysia's government introduced halal-compliance standards and certification in the late 1970s, mainly for the food industry. The country, with a Muslim population of 18 million (60 per cent), last year exported 10 billion US Dollar worth of halal products. 40 per cent of those products came from the food and beverage sector.
Munchy Food Industries, the largest biscuit maker in Malaysia, is a regular exhibitor at the trade fair because it wants to promote itself abroad. The company was found-
ed in 1991 in a village in the southern state of Johor. With limited equipment, the founder made cookies and peddled them in nearby towns. Today the ethnic Chinese-
owned company sells cookies worth 7-8 million Malaysian Ringgit per month in more than 60 countries. All its products get the halal stamp from Jakim, the Malaysian government agency in charge of certifications. Overseas sales currently account for 30 per cent of Munchy's total. Asked how much the company intends to raise that ratio, LK Tan, vice chairman and son of the founder, said "we will grow our revenue to a proportion of 40-to-60 in two years' time."
To expand in nearby emerging markets, such as Indonesia, Munchy plans to reduce package sizes in order to bring down prices. "Our premium products are selling well in Middle East countries and Japan, but to grow in developing countries, we need to re-strategize."
Prime Tourist Destination for Muslims
Exports are not the only benefit of Malaysia's image as halal centre. The ready availability of such products in the country makes it a prime tourist destination for Muslims from other parts of the world. Last year Malaysia topped a ranking of holiday spots among Muslims, according to a survey released in February by Singapore-based travel company Cresentrating. Tourists from Muslim-majority nations made up about 17 per cent of Malaysia's total of 26 million arrivals in 2013, up 7 per cent from a year ago. "It's very important to have halal food," said Amos Alfris, a 29-year-old tourist from Oman visiting Kuala Lumpur with his wife. "If not, we can't come."
Procedures of halal certification: on the way to a global halal standard?
Malaysia's halal certificates are recognized worldwide. Jakim is advised by religious scholars appointed by the government. The agency's officials go through rigorous training before they are allowed to audit food processing procedures. Not all certificates are created equal, though. In some countries with Muslim minorities, religious associations handle halal-related matters. The credentials they issue carry less weight among the faith's closest adherents. Many say it is time for a true universally ac-
Malaysia is trying to address this issue within the Organization of Islamic Cooperation, a multinational association. "Malaysia is partnering with Turkey to tackle the differences in halal certification and to come up with new standardized criteria that will be applied in all OCI countries", Jamil Bidin, CEO of Halal Industry Development, said at a press briefing. As consumer incomes rise and markets become ever more connected, a global halal standard could help businesses make the most of demand growth.