Malaysia’s booming coconut products industry

Due to rising health consciousness, an increasing number of people are

aware of the health benefits of consuming coconut-related products,
especially as a substitute for dairy products. From 2011 to 2015, the
market value of the coconut and related products production industry in
Malaysia grew at a CAGR of 13.6%, from an estimated RM259.9 million
in 2011 to RM432.7 million in 2015. The growth was attributable to the
increasing popularity of coconut and related products in the global
market.
According to research and analysis from Ipsos Business Consulting, the
chart below sets forth the market value of the coconut and related
products production industry in Malaysia from 2011 to 2015 and forecast
from 2016 to 2020:

1. Coconut and Related Products ProductionIndustry In Malaysia

Major products produced by companies in the coconut and related

products production industry in Malaysia include coconut cream powder,
coconut milk/cream, desiccated coconut, coconut water and other
related products such as toastedcoconut paste (kerisik).
The diagram below presents the value chain of the coconut and related
products production industry in Malaysia:

Coconut and related products manufacturers produce coconut and

related products after obtaining raw materials from raw material
 suppliers. Manufacturers may engage with five types of customers,
including:
 OEM customers: Coconut and related products manufacturers sell products to OEM customers
who purchase coconut and related products produced according to the specifications and under
the brand name of the OEM customers.

 Distributors: Distributors purchase coconut and related products from manufacturers and sell to
their wholesale,industrial, and retail customers within their designated territories.

 Wholesalers/ trading companies: Wholesalers/trading companies purchase coconut and

related products and sell to their customers, for example, other retailers and industrial customers.

 Industrial customers: Industrial customers are customers who purchase coconut and related
products in bulk. These customers include food manufacturers, bakeries, restaurants, hotels,
cafés and other food service companies. For example, a bakery may procure coconut and related
products for making bread or cakes.

 Retailers: Retailers include supermarkets, hypermarkets or grocery stores where individual

consumers purchase coconut and related products. The role of retailers may include sales
andmarketing activities.

2. Major players In Malaysia

There are less than 10 major companies in the coconut and

relatedproducts production industry in Malaysia. The top five companies
accounted for a market share of approximately 73.6%, with the
remainder of the market consisting of approximately 26.4%.
3. Market Drivers
 Growing awareness of health and nutrition

Mainstream consumers, not only the typically health-conscious segment,

are increasingly seeking healthier products. Coconut and relatedproducts
are perceived as a functional food providing nutrients and other health
benefits. With the healthand nutritional benefits attributed to coconut,
the demand for coconut andrelated products increased.
 Versatilityin producing coconut based products

Coconut offers a high level of versatility, with both the flesh and
waterable to be consumed or further processed into other products.
Manufacturers are therefore able to fully utilize their raw material and
consumers are provided with arange of products.
 Demand for convenience foods

In the past, many consumers in countries such as Malaysia purchased

coconuts and extracted the milk themselves, or purchased fresh coconut
milk from local markets. However, more recently, urbanization and
growing affluence have resulted in consumers increasingly purchasing
ready-to-use coconut products, such as packaged coconut milk or
coconut cream powder.
 Malaysia as an Export Hub

Malaysia’s Third Industrial Master Plan 2006-2020 aims to establish

Malaysia as a leading supplier of HALAL products and services. The Halal
Industry Development Corporation was established in 2006 to spearhead
and coordinate the overall growth of the HALAL industry. Muslims
generally only consume products which arecertified Halal. Given that
Malaysia is an Islamic country and the government supports the
development of the Halal food production industry, Malaysian made
products are suitable to be sold in Islamic countries. Such government
policy initiatives are expected to continue to expand the export market
for Malaysian coconut and related products manufacturers, especially to
the Middle East and other countries with Islamic populations. In general,
countries with predominately Islamic populations tend to have local
cuisines which commonly use coconut and related products.

For example, coconut cream powder is mainly consumed in South-East

Asia, Central America and the Middle East. Some MiddleEastern and
Central American countries do not produce coconut cream powder
locally and the product is therefore imported from countries including
Malaysia, Thailand and Sri Lanka. In importing countries, it is common
for major coconut cream powdermanufacturers to appoint exclusive
distributors, however, not all brands engage distributorson an exclusive
basis.

According to Ipsos Business Consulting research and analysis, the sales

value of coconut cream powder in Malaysia increased from US$25.1
million in 2011 to US$26.0 million in 2015, at a CAGR of 0.9%. In
Jamaica, the sales value of coconutcream powder increased from
US$10.7 million in 2011 to US$13.4 million in 2015, at a CAGR of 5.8%
increase. The sales value of coconut cream powder in Saudi Arabia
increased from US$4.3 million in 2011 to US$8.3 million in 2015, at a
CAGR of 17.9%. The sales value of coconut cream powder in the UAE
expanded fromUS$6.0 million in 2011 to US$6.7 million in 2015, at a
CAGR of 3.0%. In the forecast period, the sales value of coconut cream
powder is expected to continue growing from US$7.1 million in 2016 to
US$9.0 million in 2020, at a more rapid CAGR of 6.0%.

The chart below sets forth the sales value of coconut cream powder in
Malaysia, Jamaica, Saudi Arabia and UAE from 2011 to 2015 and
forecast from 2016 to 2020:
4. Future Trends
Diversification of products manufactured

Given the recent growth of the industry, manufacturers may have the
financial capacity to invest in new product development and add to their
product portfolio in response to changing consumer demands. Other
related products such as virgin coconut oil, coconut ice-cream, coconut
puddings,coconut chips, coconut sugar, coconut flour and coconut
butter/ spreads arebeing developed by coconut and related products
manufacturers. The increase in the number of related products produced
is likely to increase the revenue stream of manufacturers and encourage
further industry growth.