CHAPTER 2 FOOD AND BEVERAGE SECTOR 2.0 Global Food and Beverage (F&B) Industry : An Overview 2.1 Food and Beverage Industry in Malaysia 2.2 Food and Beverage Industry in Sarawak 2.3 Potential Agro-Based Food of Sarawak 2.3.1 Crisps 2.3.2 Other Highly Potential Agro-Based Food 2.3.3 Types of Beverages 2.4 Issues and Challenges of Micro-Entrepreneurs in Agro-Based Food and Beverage Sector 2.4.1 Producer Issues 2.4.2 Product Issues 2.4.3 Marketing Issues 2.4.4 Consumer Issues 2.5 SWOT Analysis 2.6 Basic Strategy Tenants (Strategic Tracks) for the Food and Beverage Sector 2.7 The Supply Chains 2.8 Recommendations 2.8.1 Agro-Based Enterprises Sub-Sector 2.8.2 Gerai and Restaurant Sub-Sector 2.8.3 Processed Food and Beverage Sub-Sector 2.9 Food Sector Priority Action List 2.10 Food Sub-Sector Clusters 2.10.1 The Produce Food Cluster 2.10.2 The Gerai and Restaurant Cluster 2.10.3 The Processed Food Cluster 2.11 Summary 2.0 GLOBAL FOOD AND BEVERAGE (F&B) INDUSTRY: AN OVERVIEW As of March, 2012, the world’s population exceeds seven billion, with an annual growth rate of about 1.10 per cent.The global population is expected to reach between 7.5 and 10.5 billion by 2050 (Halal Research Council). Undoubtedly, with such a growing population, the global demand for food and beverages (F&B) will also increase. It is projected that by 2050, the global demand for F&B will be doubled. Factors like growing population, changes in lifestyle, rising health awareness, and increasing necessity for convenience food, are set to accelerate the growth of the F&B industry.These have also impacted the demand for healthy processed food for an improved diet. The growth of the F&B market has been the highest in developed countries. This market is dominated by a cluster of powerful multinational corporations (MNC) such as Kraft, Cadbury, Danone and Coca-Cola. These giant MNCs were able to generate revenues valued around $126 billion in the year 2008 and the value increases every year. Figure 2.0 lists the top producers, exporters and importers of F&B in the world. Figure 2.0 : Global Top Producers, Exporters and Importers of Food and Beverage Products Source : http://www.businessvibes.com The growing population of Muslims and the awareness of halal food have also significantly influenced the global food market. The world’s Muslim population was at 1.8 billion in 2011 constituting an estimated 25 per cent of the world’s population (Jones, 2011). The Muslim population is expected to account for 30 per cent of the world’s population by 2025. Majority of the Muslim population are found in 57 countries. In 2011, the global halal food market was more than US$800 billion (RM2.42 trillion) accounting for 17 per cent of the global food market. It is estimated that the global value for the trade of halal foods and non-food products is at US$2.1 trillion annually. The trade in halal food is enormous, lucrative and has huge opportunities and potentials. Ironically, about 80 per cent of the halal food industry is controlled by non-Muslim countries.The major current players in the halal market are Brazil, China, India, Thailand and Switzerland.The European halal food market alone was estimated at US$67 billion in 2010. 2.1 FOOD AND BEVERAGE INDUSTRY IN MALAYSIA Malaysia is endowed with rich natural resources, including sizable arable lands that can contribute to the development of the agriculture and agri-business sectors. Hence, food production in Malaysia is very much related to the agriculture sector. In view of that, the agri-food sector was given priority in the Ninth Malaysia Plan, which envisaged agri-food sector as the third engine of growth. Furthermore, the National Agri-food Policy (NAP) 2011-2020 that was launched in September 2011 gave more focus not only on the food sector but also on new industries with high growth potential. The policy also stressed the importance of large scale agriculture and encouraged the diversification of land use and farmers’ activities in order to develop rural economy. Simultaneously, the policy also aims at increasing the income of agro- entrepreneurs and rural folks towards reaching a higher income nation. This drives the agri-food industry into a mass scale profitable industry through the involvement of the manufacturing and food processing industries. Food processing has been identified as an important component within the agro-based industry, accounting for a significant amount of the country’s total manufacturing output. Singapore, US, Indonesia and China have been identified as the major importers of Malaysia’s processed food products. Fruit chips and snacks in the US market In the Third Industrial Master Plan (IMP) (2006 – 2020), the food processing industry is given priority to expand towards making Malaysia a food manufacturing and distribution hub, emphasising on halal food production. With this emphasis, the prospect for the halal food industry is promising. It was reported that the market value of halal products in Malaysia was estimated at US$30 billion (RM90.6 billion) in 2011 (Halal Research Council). Undoubtedly, the halal industry in Malaysia provides immense opportunities for Malaysian manufacturers. It is also an emerging market force that is attracting non-Muslims with its wholesome, hygienic and contamination-free principles of food production. Overall, for better quality production, the F&B industry in Malaysia must be able to benchmark and implement internationally accepted best practices. To reach out a bigger market and win a place at an international level, the F&B industry in Malaysia must comply with international requirements and standards, which will enable the growth and sustainability of the industry. Figure 2.1 : Exports of Selected Processed Food and Beverage Products (Percentage change 2010/2009) Source : “Market Watch 2012”, The Malaysian Food Industry In the year 2010, there were about 3,200 manufacturers involved in the food processing industry. The industry, which is predominantly Malaysian owned, contributed about 10 per cent of the country’s manufacturing output. Processed foods in that year were exported to 80 countries, with an export value of more than US$3.8 billion. As of the year 2011, Malaysia exported food products worth RM20.6 billion to more than 200 countries, of which RM13.5 billion were processed foods. Beverages, Spirits & Vinegar 13% Miscellaneous edible preparations 13% Preparations of vegetables, fruits, nuts, etc. 13% Cocoa & cocoa preparations 17% Sugar & sugar confectionery 32% Table 2.0 : Plantation Area and Fruit Production (2006-2010) State 2006 2007 2008 2009 2010 Peninsular 230,668 1,094,548 227,977 1,100,087 212,479 1,260,934 194,592 1,257,497 232,286 1,379,569 Sabah 15,904 132,700 17,001 141,683 17,412 148,904 17,447 142,322 20,829 164,600 Sarawak 34,403 200,316 34,695 191,452 34,663 186,184 37,690 200,878 44,996 220,827 W. Labuan 248 1589 248 1,589 259 2,064 266 1,970 318 2,804 TOTAL 281,223 1,429,154 279,920 1,434,812 264,814 1,598,085 249,994 1,602,667 298,429 1,767,800 Plantation area (HA) Plantation area (HA) Plantation area (HA) Plantation area (HA) Plantation area (HA) Production (Ton Metrics) Production (Ton Metrics) Production (Ton Metrics) Production (Ton Metrics) Production (Ton Metrics) 2.2 FOOD AND BEVERAGE INDUSTRY IN SARAWAK Sarawak’s reserves of natural resources are largely still untapped. Hence, there is much potential for investment in resource-based industries, especially in agro-based and food processing.The food sector in Sarawak has always been associated with “The Soul of Borneo” theme due to the uniqueness, great taste and potential for marketability of the food products. This is because Sarawak food is a fusion of both modern and traditional customs that rise from the State’s multi-ethnic cultures. This, therefore, brings about the distinctive tastes that cannot be found anywhere else but in the island of Borneo. With Sarawak’s vast agricultural land, the agro and food industries are currently based on oil palm, pepper, rubber and sago. Due to the gaining importance of the agriculture industry in the State, plans are already in place to develop other agricultural and food crops. This is also to expand the scope of downstream products under agro-based industry clusters. For example, the State Government, through the Land Custody and Development Authority (LCDA) and Department of Agriculture, have implemented several initiatives to encourage agro-based food production projects. The Federal Agriculture Marketing Authority (FAMA) in Sarawak has also set out to focus on implementing national level development programmes for about 10,000 agro-based industry entrepreneurs. The upcoming Tanjung Manis Halal Hub (TMHH) project also highlights agro-based products that will potentially mark Tanjung Manis as a marketing centre for these products. This indicates the focus and interest of the Government to develop and expand the food and industry globally. Source : Agriculture Department Information Book 2010 2.3 POTENTIAL AGRO-BASED FOOD AND BEVERAGES OF SARAWAK 2.3.1 Agro-based Food Crisps (Kerepek) Tapioca crisps or ‘kerepek ubi’ has been gaining popularity as a convenient snack among the local people. Tapioca crisps have much marketability potential since they come in many flavours, such as chilly prawns, cheese, pepper, sweet and spicy, and curry. This variety in flavours is appealing to a range of customers. Another famous Sarawak food product is the healthy and tasty banana crisps, also locally known as ‘kerepek pisang’.The demand for this snack shows a positive growth due to its distinguished taste and classification as a healthy snack. They come in two popular flavours, and they are either salty or sweet and spicy. In the 2012 Malaysia Agriculture, Horticulture and Agrotourism International Show (MAHA), Hajah Reni from Tajung Parang, Sarawak won the best banana crisp. This marked the acceptance and potential of Sarawak’s kerepek to be marketed in a wider market. BOX 2.0 explains more on Hajah Reni’s and her husband Haji Bujang’s crisps production, while BOX 2.1 narrates the success story of a crisps entrepreneur in Selangor Moreover, the lush lands in Sarawak have the potential to be cultivated for crop plantation purposes. These plantations can contribute significantly to the richness of raw materials and supplies that make up the food sector.Although the year 2007 noted a decline in plantation area and fruit production, the year 2008 until the year 2010 witnessed a rising trend (see Table 2.0). This development highlights the prospect of increasing the number of plantations where pineapple, banana, cassava, tapioca and yam can be planted to meet the rising demands of the food sector in Sarawak. Figure 2.2 : Zoning Areas of Agro-Based Plantation for Potential Food Production in Sarawak Source : Agriculture Department Information Book, 2010 Banana Crisp of Hhj. Reni from TanjungParang, Sarawak won the best kerepek at MAHA 2012 international exposition. With current technology developments, many local fruits can be turned into crisps such as pineapple, papaya, jackfruit and many more. Pineapple crisps have been introduced and are well accepted among the consumers. The demands for such products have been increasingly significant. Pineapple Chips Produced by Dailyfruits Sdn. Bhd. under the supervision of Pertubuhan Peladang Kawasan, Paya, Perlis. On the whole, crisp production in Sarawak shows massive potentials due to the vast agricultural lands that can be tilled to produce crisp raw materials. For example, Samarahan subdivision is identified to be a fertile land suitable for tapioca, banana, yam and pineapple plantations. (See Figure 2.2 for the zoning areas of agro-based plantations for potential food potential in the state of Sarawak). BOX 2.0 A Potential Crisp Entrepreneur in Sarawak In the year 2006, Hajjah Reni, a crisp entrepreneur from Tanjung Parang village, with her husband Haji Bujang, established Reni Enterprise. With luck on her side, her husband transformed the 15 hectares of land he owned into yam, cassava and banana plantations. In 2008, Hjh Reni received a grant worth RM13,000 from the Department of Agriculture of Sarawak to buy a slicing and toaster machine for her crisps. In 2010, she received fundings worth RM15,000 to build a small factory. In addition, she received assistance from SIRIM in the form of 4,500 stickers. In order to improve the quality of her product, Hjh Reni attended consultation sessions and trainings from Sarawak’s Department of Agriculture. Hjh Reni’s monthly revenue is about RM4,000 – RM5,000. Up to the present, she receives assistance from her children and neighbours to operate the factory. Her husband helps in selling the crisps at grocery shops, school canteens and restaurants. Presently, her products have been marketed around Kuching and Sibu only. Proudly, Hjh. Reni won the best kerepek in MAHA 2012 (Malaysia Agriculture, Horticulture and Agrotourism International Show).The MAHA exposition biennial series in Malaysia’s leading agricultural show hosted by the Ministry of Agriculture and Agro-Based Industries. The exposition is amongst the largest and most comprehensive of its kind in the region. BOX 2.1 Success Story of a Crisp Entrepreneur in Selangor En.Amat Termizi of Sepang, Selangor started his business with an initial capital of only RM50.00 when he purchased a basic frying equipment. Now, he specialises in producing various types of crisps made from tapioca/cassava, yam, banana and sweet potato. En.Amat Termizi is behind Jamirah Food Industries (M) Sdn. Bhd, now a renowned successful crisp production company in Malaysia, that he single-handedly established in 1996. Being a sole proprietor of the company,Amat now generates a monthly income of about RM150,000.00, which can reach RM500,000.00 during festive seasons. Amat’s company has gradually become the major supplier of raw materials to produce crisps in his area. The most successful period in his business was when he was invited by an international production company in the United Kingdom (UK) to export his crisps. Over the years, the demand for the production of his crisps has increased. This has proven that Jamirah Food Industries is not only recognised locally but also internationally. In sustaining and maintaining his business, he received support from the State Government, Malaysia Technology Development Corporation (MTDC), Malaysian Industrial Development Finance (MIDF) and the Department of Agriculture (DOA). The DOA provides him guidance and assistance on business knowledge and plantation processes. Although he has attained a certain level of success in his business, he had faced challenges along his path to success, including his dealing with the shortage of cooking oil and other raw materials. Tebaloi (Sago Snack) ‘Tebaloi’ is a snack that is synonymous with the Melanau people and is a traditionally consumed item in Sarawak. This snack is produced from sago flour, coconut, egg and sugar. It varies in colours and flavours.The available four flavours are chocolate, strawberry, pandan and original. Most often, this snack is sold in kiosks, souvenir shops, supermarkets and airports. Kuih Sepit Lemantak The special Kuih Sepit Lemantak is a unique version of Sarawak’s love letters. It is a unique blend of raw sago flour and palm sugar (gula apong). This snack is a favourite among the locals and is gaining popularity and demand even in overseas markets. It is usually served during festive seasons and community events. BOX 2.2: The Successful Woman Entrepreneur of Layered Cake: Rabiah Amit Rabiah Amit is a successful cake producer in Sarawak, through her layered cakes (kek lapis) which is one of the most popular icons of the State of Sarawak. Surprisingly, she attained only a primary education, and yet is able to be very successful. She initially inherited the business from her family and then later expanded the range of cakes on offer. She gained her trainings, supervision and guidance from Department of Agriculture of Sarawak. The success of her layered cake business is mainly attributed to her excellent public relations with her customers and her good emphasis on packaging. The key to her good quality layered cakes is that, she always takes time to solicit views and feedback from her customers. When she started out in the business, she received comments that her layered cake was too sweet. Therefore, she reduced the sugar content in her next batch of layered cake production. Then, she designed the patterns for her cakes and once again she asked her customers for feedback. A perfectionist in making packaging for her products, Rabiah Amit keeps fulfilling her customer requirements and satisfying their taste buds. She maintains a superior level of quality for her product. However, she had to face many challenges on her path to success, including insufficient financial resources. Nevertheless, the constraints she faced only made her stronger and gave her the enthusiasm to strive and apply for fundings in the form of loans. Adding to that, she was able to publish her own books entitled, ‘Kek Lapis Sarawak’ Volumes I, II and III. Layered Cake (Kek Lapis) The special value held by Sarawak’s layered cake or Kek Lapis is its different patterns, unique packaging and texture. This colourful cake is one of the versatile items that are always in demand during main festivals like Gawai Dayak and on other occasions such as engagement and marriage ceremonies. Due to their exclusiveness, they make perfect souvenirs. Sesar Unjur Sesar Unjur (smoked shrimp) is a traditional Sarawak delicacy made from special red shrimp found at the Belawai village. This village is famous for its Sesar Unjur that is widely used in selected dishes. Sesar Unjur has higher demands in Sarawak compared to West Malaysia because it enhances the taste of Sarawak’s unique cuisines.This product is much sought after and has been awarded the certification ‘Sarawak Best’, and this is an indication of its international marketability. 2.3.2 Agro-based Beverages The beverages of Sarawak have the potential to be commercialised both locally and globally. There are several types of beverages that have been identified with potentials and could be built upon for further expansion.These beverages are softdrinks, cordials, fruit juice and natural drinks. Soft Drinks The soft drink industry covers sparkling drinks, concentrates, juices, bottled water, smoothies, and functional drinks. Soft drinks do not usually contain alcohol, although they can have up to 0.5 per cent alcohol content. They are generally made on a still or carbonated water base with added flavours and sweeteners, and sometimes fruit juices or caffeine. Many carbonated soft drinks are optionally available in versions sweetened with sugars or with non-caloric sweeteners. Carbonated beverage is a fizzy drink that releases carbon dioxide under conditions of normal atmospheric pressure. Club soda is also artificially carbonated but it contains other additives such as sodium bicarbonate and sometimes light flavouring.Today, heavily sweetened, carbonated drinks, or sodas, are among the most popular beverages in the world. In the last two decades, the introduction of diet drinks containing artificial sweeteners has increased the sales of carbonated beverages. Cordial Cordial or sometimes called ‘squash’ is non-alcoholic concentrated syrup that is usually fruit-flavoured. It is generally made from the mixture of original or artificial fruit juice, water and sugar or a sugar substitute. Modern cordials may also contain food colouring and additional flavouring. Some traditional cordials contain herbal extracts; most notable are extracts from flowers and ginger. Cordials are prepared by mixing the extracts with a certain amount of water or club soda before drinking. Citrus fruits like orange, lime and lemon or a blend of fruits and berries are popular. New flavours are being introduced from time to time.The market is now rich with not only conventional choices but also new flavours like pineapple, mango, aloe vera, sugarcane, soursop, roselle, guava and many more. Cordial currently requires a large portion of real fruit juices for the soft drink market. Roselle Hibiscus Drink that has potential to be developed in Sarawak (in the picture is Roselle drinks from Melaka) Pineapple cordial produced by En. Shafiee Ginta (Rahimah Enterprise), one of the potential fruit juice enterpreneurs in Samarahan, Sarawak Fruit Juice The fruit juice market competes with other beverage markets such as ready-to-drink beverages, bottled water, herbal drinks, energy drinks and sports drinks. Juice consumption recorded strong sales in developed and developing markets. Demand for juices, and fruit juices in particular, continues to rise mainly due to increasing consumer awareness of the health benefits of a balanced diet.The consumption of fresh juice is wide in Sarawak, including in hotels, restaurants and stalls. Most fruit juices are made from easily available local fruits such as pineapple, mango, watermelon, lime, and guava. Natural Drinks The emergence of natural drinks with appealing health benefits like Bird’s Nest Drink is also gaining popularity both locally and internationally. Malaysia is the third largest producer of bird’s nest after Indonesia and Thailand. The swiftlet nest from this country is of high quality and is highly sought after in China and Arab countries with prices fetching up to RM10,000 per kilogram. The suitability of Sarawak farmlands for building bird’s nest houses and the high quality of bird’s nests produced is a potentially lucrative industry due to the increasing demands for bird’s nest products internationally. There are several existing bird’s nest products such as “Jus Sarang Burung Walit Gold” and “Jus Sarang Burung Walit Plus Aloe Vera”. The benefits of this drink are that it stabilises sugar content in blood, reduces alzheimer effects, increases metabolism, cures sinusitis and allergies, lowers high blood pressure, cures skin complications, reduces cholesterol levels and promotes reproduction and regeneration of human cells. In general, the local beverage industry in Sarawak has a lot of potentials to be developed and promoted in the national and international markets, mainly due to the vast range of herbs and fruits which can be exploited to fill in the natural beverage market demands. These natural beverages, made without preservatives or additives, are leading the healthy juice market-products currently valued by consumers. Furthermore, consumers prefer new flavours like pineapple, sugarcane, soursop, corn, barley and many more to the conventional choices of cordial or soft-drinks. Juice consumption recorded strong sales in developed and developing markets. Demand for juices, and fruit juices in particular, continues to rise mainly due to increasing consumer awareness of the health benefits of a balanced diet. BOX 2.3 A Success Story of Frutania Industry Owner: Saparu bin Walli Mohammed Address: Lot 1 & 2, KawasanIndustri Mara, Jejawi, Jalan Kangar-Arau, 01000, Kangar, Perlis Date of Establishment: 1995 Business Type: Beverage www.frutania.com.my Frutania Industry was established in 1995 with the cash capital of RM50,000 and is a 100 per cent Bumiputera-owned company. With the rapid expansion and growing demand for herbal-based products, Frutania Industry started its operation by focusing on herbal juices. Most of the raw materials (herbs) such as misai kucing, pegaga, inai, manjakani, kacip fatimah, tongkat ali and ginseng are purchased from external vendors either via contract farming or independent retailers from the state of Perlis. Frutania Industry also works closely with other agencies such as FAMA Perlis, MADA Perlis/Kedah and a number of direct sales companies. For its Mango Cordial and Mango Drink products, the raw materials (Harum Manis mango) is directly supplied by FAMA Perlis, already in the form of processed, unseeded and frozen mango flesh. Frutania Industry has expanded its range of products to health beverages for overseas markets especially in Thailand, Indonesia and Brunei. In addition, it has also produced its own energy drinks: VitaniaTongkat Ali and Vitania Ginseng Plus, which are similar to Red Bull and Livita. Frutania Industry’s growth is also certified by its successive wins in the One District One Industry (SDSI) product showcases organised by the Ministry of Entrepreneur and Cooperative Development in 2007, 2008, 2009 and 2010. In MAHA 2010, Frutania Industry won third place in two categories for herbal drinks and fruit-based drinks. Box 2.4 Case Study of HomeoLab, Jitra Kedah Company: Darul Aman Homeopathic Laboratories (M) Sdn. Bhd (HomeoLab) CEO: Prof. Dr. (H) Hamsiah Ismail Managing Director: Dr. (H) Jamaludin Mat Piah Address: Lot 59, 60 & 61, Taman Industri KEDA, Napoh, 06000 Jitra, Kedah DarulAman. Date of Establishment: 1980 Business Type: Homeopathic products manufacturer www.homeolab.com.my HomeoLab was first established as a small homeopathic clinic by the late Prof. Dr. Azizan Ismail in 1980 in Jitra, Kedah. The Homeolab is now run by the surviving family of deceased founder. Prior to the establishment of HomeoLab, Prof. Dr. Azizan Ismail spent ten years in the teaching profession at vocational and technical secondary schools and later, at a teachers’ training college after graduating with Diploma in Agriculture from the College of Agriculture Malaya (now known as Universiti Putra Malaysia). After contracting a disease which was incurable by allopathic medicines, he took on homeopathic treatment and was cured of his affliction. Realising the potential of homeopathy, he chose to fully dedicate himself to studying homeopathy. First, he completed a diploma in the School of Homeopathy Singapore and then, a doctorate in Brantridge Forest School, Sussex, United Kingdom. Later, under the Implementation and Coordination Unit, Prime Minister’s Department, he was trained in homeopathic medicine manufacturing in Germany. HomeoLab’s first product, EXAMO-CKM 500 (which is a special combination of Schuessler’sbiochemic tissue salts) was formulated in 1978.With increasing demands in homeopathic and other alternative medicinal products, HomeoLab produces various over-the-counter homeopathic and herbal products for health supplements. Today, HomeoLabhas has extended its range of products to health drinks such as TehTarikTudya (which is designed for patients with diabetes) and Tamara (made from Tamar seeds for anti-aging). Specialised products for the consumption of children and nursing mothers are included in their portfolio, such as Choco Latte powdered drink, Bio-Lac milk powder, Growell milk powder and Salindah tonic series. 2.4 ISSUES AND CHALLENGES The food and beverage industry is identified as a potential sector that contributes towards the growth and sustainability of Sarawak’s economy. This industry has been the backbone of Sarawak’s GDP growth, boosted by the agro-based industry. Sarawak is rich with natural resources that can be utilised to its fullest for development purposes. It is thus pertinent to understand issues and challenges faced by the producers in this sector so that proper strategies and actions can be put in place to improve and enhance the sector. Specifically, the strategies proposed must ensure that local producers/ entrepreneurs remain competitive and the products are sustainable in the global market. The following sections highlight some of the striking issues and challenges faced by the producers and some inputs gained from the consumer surveys carried out. Specifically, the issues and challenges are highlighted in the following order: producers, products, marketing and consumers. 2.4.1 Producer Issues Supply of Raw Materials Insufficient amount of raw material supply poses a potential obstacle to the growth of the food industry. Raw materials are often supplied by small scale farmers or from roadside stalls. This causes a setback to producers because the supply of raw materials does not meet the required amounts for production. Similarly, the beverage industry also requires a constant supply of raw materials such as fruits, sugar, clean water and so forth. It has been shown from the studies that most manufacturers bought their raw materials from plantations or through contractual plantations.Among the problems faced by producers are insufficient raw materials, high cost of raw materials, distance and also some discriminatory practices in the market. BOX 2.5 Methods of Collecting Data and Information To gain first hand information on the current issues and challenges, interviews and focus group discussion were organised on producers that are involved in this sector. A total of 44 agro-based snack food producers and 15 beverage producers were interviewed and a total of six food and beverage producers made themselves available for the focus group discussion. In addition, to benchmark with competing products produced by entrepreneurs outside Sarawak, visits and interviews were conducted with producers from Selangor, Perlis, Kedah and Thailand. With regard to understanding the consumer perception towards food-snacks from Sarawak, three approaches were used to collect information and data. The first approach was a sensory test where a team of taste test experts in food comprising of students from the Food Technology Division, School of Industrial Technology, Universiti Sains Malaysia were engaged to evaluate the quality of the products. The second approach was an in-depth interview involving 41 students. The third approach was a survey involving food consumers (178 respondents) and beverage consumers (101 repondents). Suitability and Availability of Plantation Land Although Sarawak has vast lands allocated for agricultural activities, some of the lands are not suitable for this use due to soil water retention character and infertility. In addition, some lands are of the low land and swampy category. Treating the soil will incur higher costs before the soil can be made fertile again for crop plantations. In addition, higher water level in the soil makes it unable to sustain the growth and productivity of the crops. Thus, crops are unfruitful and are likely to die off before they reach maturity. This narrows down the land availability for crop plantations to be carried out only in certain areas of Sarawak. Given these circumstances, some of the rural folks opt their land for higher revenue-gaining crops such as oil palm and rubber. The land conversion for other uses including oil palm plantation has reduced the supply of land for agro-based food production. For example, gula apong which is very popular among the Sarawakians especially for making traditional cakes and biscuits is derived from “nira nipah”. However, certain areas under nipah palms have been cleared to pave the way for development projects such as housing, roads, plantations, etc. Small Scale Plantation Some of the entrepreneurs interviewed have small plantations to partly support the supply of the raw materials.These small plantations are normally found at their backyard and are not properly cultivated. It is also found that these entrepreneurs / farmers do not till their plantations daily because of their commitment to their full-time jobs. Thus, they run the plantations as part-time activities or just to fulfil communal-based demands. Some farmers and landowners are also unwilling to work on larger scale plantations due to lack of skills, knowledge and confidence in operating bigger plantations as well as manpower to do hands-on farming. This confined mentality could become a barrier to increase production for a wider market. Entrepreneurs lack economies of scale that can maximise the utilisation of the land which in turn can lead to an increase in overall productivity of the plantation. Small Scale Production Entrepreneurs or producers sometimes do not fully operate their factories and production sites on a daily basis. This is because they are satisfied with their businesses done in a small or average scale. Production is mostly carried out based on occasional or seasonal demands. There are only a few enterprises that have been able to produce and meet the growing demand for their products to serve the local market. Small Scale Production of Crisps Business and Entrepreneurial Skills Business skills and foresight are vital for the purpose of business expansion and future of the enterprise. These skills can contribute to the development of a successful business model. On the other hand, lack of business skills among entrepreneurs could be a barrier towards their business progress and growth. Some entrepreneurs lack knowledge in marketing and management and need help in these areas. Skill to Handle Machines and Maintenance There is a concern regarding entrepreneurs’ inability to fully utilise the machines provided by the government, especially the bigger and more complicated ones. Some producers are still lacking in knowledge on how to use available technology and thus affecting their production capacity. They have insufficient expertise, knowledge and skills to handle machines. Some of the machines provided by the government agencies are also not fully utilised due to improper maintenance and lack of skilled workers to handle the machines. IADA Samarahan, fruit juice processing machines Transportation Sarawak has vast lands and the connectivity between two points is sometimes difficult.This, therefore, causes a delay in the transportation of raw materials or finished goods for producers and end consumers. There are many places in the hinterlands that are accessible only by boats. This condition limits transportation of both raw and finished products. For example, Kapit and Song produce agricultural crops but farmers cannot maximise production due to the limitations they are faced with in terms of transporting their products to a bigger market in order to augment their income. 2.4.2 Product Issues Packaging Attractive and good packaging add value to the F&B products and can easily attract consumers’ attention. Thus, good packaging should address the technical requirements of the product, for instance, protection against light, crushing, air and moisture. The selection of packaging materials that can catch attention is frequently a struggle amongst small producers and is a possible delay for products getting established in the market. In addition, the use of sustainable packaging to minimise waste is a matter of growing concern.Although sustainable packaging is not yet a primary motivator of purchases, it is increasingly expected by consumers. From interviews carried out with crisps/kerepek producers, it is revealed that packaging activities are mostly done manually. Majority of the producers in the F&B sector use plastic as packaging material. Specifically for beverage producers, glass bottles are very expensive to use for packaging due to their high cost. In addition, there is also a limited supply of glass bottles in Sarawak. As for beverage producers, they too rely heavily on the bottles supplied by Integrated Agricultural Development Area (IADA) based in Samarahan.Thus, the consistency and availability of the bottle supply somehow influence the level of beverage production in Sarawak. Technology To ensure the continuity and growth of the F&B industry, some form of technology assistance is required. This would enable the tasks involved to be easier and less time consuming. Many of the micro entrepreneurs, especially in kerepek production still use low technology machines in their production. Thus, the low technology machines limit their capacity to produce at bigger scale. However, it is noted that, some producers use machines that are designed by universities’ lecturers and students. Those machines, undoubtedly, have helped producers to improve the efficiency and capacity of their production. Beverage Packaging Samples A Renowned Sarawak Tea Creativities in Packaging for Kopi Sarawak and Borneo Coffee Slicing Machines Traditional Frying Equipment Hand sealing machine New Ideas and Innovation Some entrepreneurs are not able to foresee the potential of their products.They do not know how to remain in the market due to lack of new ideas and innovation. Although there is always a niche market for products, some entrepreneurs are unable to identify this niche to make a profit out of that possibility. Hence, many are confined and complacent with their existing scale of production. They produce just enough for local consumption only. Logistics for the Products The F&B industry produces Sarawak-originated products that are agro-based and therefore perishable in nature. If not managed and handled in the right and required manner, they are unable to sustain a longer period.There are also possibilities for losses and deterioration in quality to take place from farm to factory due to inappropriate or insufficient storage facilities and the lacking connectivity of roads. 2.4.3 Marketing Issues Branding Branding is a key notion in marketing circles, as it can drive a business forward, and give it a competitive edge. A well-defined and strong brand will create brand value, and most importantly, it can be the catalyst for business growth. For branding, many producers interviewed use their company’s name as a brand; therefore, there is no strong brand equity. This could be attributed to the lack of knowledge on marketing and branding. Moreover, most products do not have proper labeling that informs matters such as the contents, expiry date and the packaging design. The study shows that, branding such as labeling, product information, manufacturer/producer and trademark is done by most of the manufacturers. However, they do not have the Halal, HACCP and Sirim certificates as well as the logo and design. Table 2.1 displays the related agencies and their relevant certifications and recognition that guarantee the quality of the products. (Refer to Appendix A2.1 for information on manufacturing issues, regulated through Good Manufacturing Practice.) Table 2.1 : Agencies that issued the certificate of recognition Certification Issued by Hazard Analysis & Critical Central Points (HACCP) World Health Organization Good Manufacturing Practice (GMP) Standard and Industrial Research Institute of Malaysia (SIRIM) Good Agricultural Practice (GAP) Department of Agricultural Good Hygiene Practices (GHP) Ministry of Health Good Distribution Practices (GDP) Ministry of Health HALAL Jabatan Kemajuan Islam Malaysia (JAKIM), Department of Health MS ISO 1500:2010 International Organisation of Standardization Malaysian Organic Scheme (SOM) Ministry of Agriculture and Agro- based Industry Farm Accreditation Scheme of Malaysia (SALM) Ministry of Agriculture and Agro- based Industry Malaysian Aquaculture Farm Certification (SPLAM) Ministry of Agriculture and Agro- based Industry Livestock Certification (SALT) Ministry of Agriculture and Agro- based Industry Source: www.fao.gov.my Sarawak’s Sagu Snack Some Local Brands for Products of Sarawak Pricing Strategy From the in-depth interviews, it has been observed that majority of the producers set prices for their products based on costs. This is followed by a predetermined profit margin. Another basis for pricing is the packaging. The issue of pricing is predominantly the cost that producers have to pay for the raw materials.The constraint on the supply of raw materials has resulted in the increase in the cost of production, thus eroding the profit margin of the producers. Problems are related to the opportunity cost of planting banana, yam, cassava/tapioca and pineapples, versus leasing out of lands for planting oil palms. Promotions Promotions are carried out by the producers themselves, with only