Download PDF The Pre-Feasibility Study of Potato Chips Industry Investment in Malaysia

 

potato_chips_production11. Summary

Potato chips are an impulse in which an element of indulgence is required. With the development of people’s life, healthier potato chips are needed. The potato chips market of Malaysia is on the rise with the development of urbanization and the changing of eating habits. This paper mainly indicates the current potato chips market, the favorable investment of the potato chips industry, and the opportunities a new player can gain to enter the Malaysian potato chips market.

2. Introduction to Malaysia

Malaysia is regarded as an upper-middle-income group country. Gross Domestic Product growth is forecast at 4 percent for 2012, with expected to expand to 5.6 percent in 2013-2016.
producing_potato_chipsMalaysia is a politically and economically stable country and open to foreign trade. Transportation, communications, banking, and health services are modern and efficient. With a population of around 28 million, it is one of the most developed nations in Southeast Asia. About 61% of its population falls into the middle to the upper-income group of consumers, with a GDP per capita income of US$9,890.Its economy has a firm foundation that includes strong manufacturing, service, and agricultural sectors.
The Malaysian food and beverage market is very developed and sophisticated and is supplied by both local and imported products. Urban consumers are relatively brand conscious and prefer to shop in stores, which offer convenience and good product selections. Hypermarkets/large format stores are the dominant format in urban areas in Malaysia with about 45% to 60% of urban household shoppers using them as the main outlet for the majority of their packaged groceries.

3. Crucial Factors & Steps in Decision Making for Investment

3.1 SWOT Analysis

STRENGTH

  • The high automatic potato chips production line, effective production and packaging technology
  • High demand for potato chips domestically and for export
  • Good government support. There is strong government support for the industry stemming from the recent refocusing on the agricultural sector.
  • Premium quality products with less fat which meet the quality demand
  • Long shelf-life
  • Convenient transportation systems
  • Have a big market, well accepted by domestic and abroad, especially Singapore markets.

WEAKNESS

  • Lack of local material
  • No skilled workers, which may result in waste
  • Weak marketing linkages
  • Initial material waste

OPPORTUNITIES

  • Increase urbanization means the potato market is expanding.
  • People’s lifestyle tends more to on-the-go food which promotes the development of the snack food market.
  • Growing domestic and foreign market
  • Available technology generators to further modify the potato chips flavors

THREATS

  • Competition from already established companies
  • Less no fat modification of other savory snacks
  • Competition from import potato chips
  • People pay more attention to health issues.

3.2 Key Successful Factor

A.Marketing

  • Marketing and promotional activities, especially media advertising and demonstrations are effective in communicating the new brand and its nutrition and differences from other snacks food.

B. Products

  • Premium quality
  • Healthy to eat, low fat, low calorie, no transfat and acrylamide
  • Special taste that loved by adults and children

C. Logistics

  • Better equipment, proper food handling practices, adequate transportation, and storage will encourage higher output and minimize incidences of spoilage.

4. The Potato Market in Malaysia

import_potatoAs the fourth most important food crop after the cereal wheat, rice, and corn in global crop production, potatoes are the most important vegetable crop and the world’s recognized stable food consumed by many people. In 2011, the potatoes industry contributed approximately 61% to the total gross value of vegetable production. The processing of potatoes has grown at a rapid rate over these years. Consumption of potatoes and potato products is growing rapidly in Asia. As there is a lack of locally grown potatoes suitable for processing, processed potato products, such as potato chips, frozen French fries, potato crisps are mostly imported.
Malaysia does not produce significant quantities of potatoes and does not produce

chip-stock potatoes. As all suppliers of fresh chip-stock potatoes receive duty-free access in Malaysia, the price of fresh potatoes and potato products is stable. As Euromonitor predicts the country’s sweet and savory snacks market will grow and chips are expected to post strong sales growth as consumers resume steady snacking habits.

5. Malaysia Potato Chips Market

5.1 Snacks Food Industry

Including the manufacture of potato chips, corn chips, popcorns, pretzels, extruded snacks, seeds and nuts, and chocolates, the snack food industry is on the rise with the increasing of people’s income and the change of people’s lifestyle. With the rapid growth of Malaysia’s traditional snack industry, the sales figure of snacks food hits $ 66 million. As consumers have ample choice when comes to local snacks, crispy chips made of potatoes, sweet potatoes, tapioca, banana, and onion, are the favorite ones. According to the growth data for the country’s snack industry, the chips represent the biggest market share of the snack industry with their sales figure amounting to $ 34 million.
The snack industry has played an important role in improving the rural economy and increasing the rural people’s income, where many of the chip makers work in groups.
Chips market is on the rise with the development of urbanization. The demand for potato chips is increasing day by day.

5.2 Potato Chips Market Information

As there is an increase of working women who spend less time cooking, the snack food market will increase. The demand for snack food, especially potato chips is increasing. According to an American Snack Food Association survey done in 1996, potato chips are the most popular snack food, exported to Canada, Western Europe, the Asia Pacific Rim, and the Middle East. Consumers snack potato chips between meals at least once a day.
Recently, the expansion of the potato processing industry in most developing countries has created a demand for better varieties of chips, frozen French fries, including Malaysia. Malaysia potato chips producers not only target their target market domestically but also abroad.
As people pay more attention to health issues and safety, healthier potato chips are needed. A new brand with premium quality potato chips can enter this market through heavy promotion activities and advertisement.
Reasons for People Consumption Chips

For Time Pass
Taste
Hunger
55.83%
37.5%
4.17%

5.3 Target Customers

Population6In nowadays, Malaysia has a young population today with 28% aged 15 years and below and 67% in 15 years old to 64 year age range. As the research shows, about 97% of the working population are employed. Over 60% of the population are middle income to high income who have growing purchasing power. As Malaysia’s lifestyles become more sophisticated and modernized, people tend more to western snack food, especially potato chips. With the development of media and globalization, young people are attracted by the western lifestyle and tend to eat snack food day by day. Recently, more and more women get to work, therefore, they have less time to cook and potato chips with crispy, good taste and color are one of their choice between meals. Market research of the demand for potato chips and French fries shows that the consumption of potato products is significantly influenced by income, price, the rate of urbanization, and country-specific factors. Therefore, the potato chips target customers can be divided as follows:

  • Children and students —- Major target customers, as potato chips are the most favorite snack food. Research shows that potato chips are students’ first choice when taking lunch.
  • Middle income and High-income groups —- These people can afford potato chips. Middle-income groups are mostly working people, and they often purchase ready-to-eat food, therefore potato chips as tasty snack food are popular among them. For high-income people, pursue high-quality life and tend to the western lifestyle. Consumption of high-quality potato chips is one main snack in their life.
  • Tourists —- Malaysia tourist industry is increasing and bringing lots of tourists from all over the world and these are the target customers of potato chips.

6. Conclusion

Currently, the consumption of potatoes and potato products, such as potato chips, French fries, and potato crisps is on the rise in Malaysia with the increase of urbanization and people’s income and the boost of the tourist industry. Market researches show that the potato chips market in Malaysia is on the rise and there are lots of opportunities for a new player who can provide high-quality potato chips. As Malaysia is a developing country, the market is full of opportunities for expansion and to invest.

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