Market Overview – Malaysia

Country profile

Income and expenditure

Malaysia is an upper middle-income economy^{Footnote 1}, one of two in Southeast Asia alongside Thailand. In 2022, Malaysia's average gross income for individuals aged 15+ finally exceeded pre-pandemic levels. Measured in constant 2022 US dollars, income per working-age individual stood at US$9,028 in 2019, fell to US$8,483 in 2020, and stood at US$9,895 in 2022. Income is projected at US$10,209 per working-age person for 2023. This represents 28.9% total growth since 2017. Average gross income is predicted to grow to US$12.784 by 2027, an increase of 25.2% from 2023.

Median disposable income per household stood at US$20,280 in 2022, up from US$16,546 in 2017 and US$17,468 in 2020. There is a disparity between rural and urban households: per household rural disposable income was 57.1% of per household urban disposable income in 2017, 60.9% of per household urban disposable income in 2022, and is projected to be 66.7% of per household urban disposable income in 2027.

Gender income inequality is slowly declining in Malaysia. Per capita disposable income for women was 61.1% of per capita disposable income for men in 2017. This ratio increased to 64.4% in 2022, and is projected at 66.9% in 2027. There is a wider disparity between per capita rural and urban income than for households,but this is due to rural households being larger than urban ones^{Footnote 2}.

Demographics

Malaysia's population is growing. In 2017, Malaysia had a population of 31.4 million people. This increased to 32.7 million in 2022, and is projected at 34.6 million in 2027. By 2040, the population is projected at 37.6 million, which will make Malaysia the 14th largest country in Asia. This population growth is largely driven by increasing life spans, with a smaller contribution from positive net migration. Population growth will eventually reverse: the birth rate in Malaysia will fall to 1.6 children per women over the 2021-2040 period. The average age of Malaysians will be 40.7 in 2040, up from 31.8 in 2021.

Life expectancy in Malaysia will increase by four years from 2021 to 2024, to reach 79.2 years. Malaysia's life expectancy is higher than in other parts of Southeast Asia, owing to high quality healthcare and elderly care. On the flipside, diabetes and obesity are becoming increasingly prevalent due to sedentary lifestyles and unhealthy diets. Circulatory diseases and cancer are the leading causes of death in Malaysia^{Footnote 2}.

The number of foreign citizens in Malaysia is increasing. In 2017, just under 3 million foreign citizens lived in Malaysia (9.5% of the total population). This number increased to over 3.3 million in 2022 (10.2% of the total), and is forecasted to over 3.7 million foreign citizens by 2027 (10.8% of the total). Net migration was positive from 2017 to 2019, but was negative during the COVID-19 pandemic, with negative net migration of 76.2 thousand people in 2020 and 89.8 thousand people in 2021. In 2022, net migration was 169.9 thousand people, and projected net migration for 2023 is 265.1 thousand people. It is therefore likely that many of the people who left Malaysia during the pandemic are returning to their homes in Malaysia.

Of the 3.3 million foreign citizens in Malaysia, 2.2 million are foreign workers. Most are from other parts of Asia, notably Indonesia, Nepal, Bangladesh and Myanmar. Malaysia relies on foreign workers for its economy, especially in manufacturing, agriculture, hospitality, security and domestic service^{Footnote 2}.

Malaysia is one of the most urbanized countries in Asia, and urbanization is increasing. In 2017, 76.1% of the population was urbanized. This increased to 79.0% in 2022, and is projected to reach 81.4% in 2027.

Malaysia is a diverse country. Bahasa Malaysia (Malay) is the official and most spoken language, at 52.9% of the population in 2023. English is the second language, spoken as a primary language by 20.3% of the population in 2023. Mandarin Chinese and Tamil are the third and fourth most common languages, at 13.9% and 9.2% of the population in 2023, and 3.8% of the population has another language as its first language.

Consumers

As incomes increase in Malaysia, consumer demand for healthier food alternatives is also increasing. The COVID-19 pandemic has made consumers more conscious of preventative health measures, including healthy diet, exercise, vitamins and dietary supplements. Domestic producers have responded by increasing local investments in health product manufacturing, which in turn has led to consumers switching from imported to domestic products.

Obesity and diabetes are becoming ever more prevalent in Malaysia, and this has also driven increased spending on health and wellness products. Fortified and whole grain bakery products are gaining in popularity, as are low sugar, low fat and low cholesterol products. Nutritional supplement and meal replacement drinks are seeing increased sales and product launches, many of which feature natural ingredients. Certain retailers and direct sellers are adopting localized marketing campaigns, such as products that promote balanced nutrition before and during Ramadan to Malaysia's majority-Muslim population.

The spending power of Malaysian consumers has been impacted by higher staple food prices and a weaker ringgit. The ongoing war in Ukraine continues to disrupt the global supply chain, both due to lower grain production and due to shipping rerouting. Furthermore, hot and dry weather in the Asia-Pacific region has reduced rice production in the region. As a result, India temporarily reduced its rice exports to Malaysia, dropping restrictions in October 2023. Energy price and wage increases also increased domestic food production costs in Malaysia.

Plant-based meat and seafood substitutes are marginal in Malaysia, but they are increasing in popularity. These products are marketed to vegan, vegetarian and flexitarian consumers. As consumers become more aware of the health risks linked to meat overconsumption, meat substitutes provide an appealing alternative.

Despite the increase in food prices, staple food sales in Malaysia have increased, especially for ready-made meals. Foodservice volumes increased even more, due to a return to the office and the resumption of tourism. Foodservice volumes remain below pre-pandemic levels, however, and are not expected to reach these levels until 2027.

Production

Palm oil production dominates the Malaysian agriculture sector, representing 93.5% of all crop tonnage in 2021. Malaysia accounted for 27% of palm oil production in 2018, with neighbouring Malaysia accounting for 57% of the world total^{Footnote 3}. Palm oil production is a leading cause of deforestation in Malaysia, especially on the island of Borneo. Often, oil palms will be planted on land that had been recently logged, preventing reforestation after a timber or pulpwood harvest. Palm oil production has been steadily declining in Malaysia, with CAGR of −2.1% from 2017 to 2021.

Rice is the most important staple food in Malaysia, and represented 2.5% of crop tonnage in 2021. Malaysia is reliant on rice imports, with domestic production meeting 70% of its needs^{Footnote 4}. The Malaysian government maintains a strategic reserve of rice to prevent shortages as a result of supply chain disruptions; the government aimed for a target stockpile of 290,000 metric tonnes by the end of 2023.

Fresh and chilled chicken meat were Malaysia's largest meat product in 2021, representing 55.5% of total meat and animal product tonnage. Chicken meat production has been stable, with only −0.5% CAGR from 2017 to 2022. Raw cow milk experienced the strongest growth over this period, at 3.6% CAGR.

Trade

As of January 2024, Malaysian trade data is available through the end of November 2023. The value of year-to-date (January through November) exports decreased by −18.9% from 2022 to 2023, while the volume of exports increased 1.2% ove the same period. Year-over-year, the value of exports decreased by −2.9% relative to November 2022, and the volume of exports increased by 10.3%.

Over the same period, the value of year-to-date imports decreased by −9.0% and the volume of year-to-date imports decreased by −1.3%. For November 2023, the value of year-over-year imports decreased by −3.2% and the volume of year-over-year imports increased by 7.8%.

Malaysia has a positive balance of trade for agri-food and seafood products, both by value and volume. The Pandemic did not have a discernable effect on the overall agri-food and seafood balance of trade: the value of the trade surplus increased, but the volume of the trade surplus decreased.

Malaysia's leading export products are palm oil products. Palm oil (refined and unrefined), crude palm oil and palm oilcake were the three leading export products by volume from January to November 2023. Maize, cane sugar and wheat were the three leading import products by volume over the same time frame.

By value, palm oil and crude palm oil are the two leading export products, with hydrogenated vegetable oil being the third most important export products through November 2023. By value, the three leading import products through November 2023 were cocoa beans, raw cane sugar, and miscellaneous food preparations.

From 2018 to 2022, Malaysia's top five export partners by volume were India, China, Japan, Singapore and the Netherlands. By value the top five export partners were India, China, Singapore, the Netherlands and the Philippines.

From 2018 to 2022, Malaysia's top five import partners by volume and value were Argentina, Indonesia, Thailand, India and China. Argentina led by volume and Indonesia led by value. The top import products from Argentina by weight were maize and its products, soy oilcake, and wheat and meslin. The top import products from Indonesia by value were palm oil, other oils, and miscellaneous food preparations.

The value of Malaysia's agri-food and seafood imports increased by 9.0% CAGR from 2018 to 2022. Imports from Canada fell by −1.6% CAGR over the same period. Canada was Malaysia's 21st most important import partner from 2018 to 2022. Among major (top 10) import partners, growth was highest from India, Indonesia, Argentina and Australia. Brazil had the weakest growth, at 3.0% CAGR from 2018 to 2022. None of Malaysia's top 10 import partners saw their exports to Malaysia decline over this period.

Malaysia's top imports from Canada in 2022 were wheat and meslin (US$92.1 million, 189.2 thousand tonnes), soya beans (US$22.9 million, 28.2 thousand tonnes), soya seed (US$22.0 million, 27.7 thousand tonnes), potatoes (US$11.4 million, 7.1 thousand tonnes), and solid milk (US$10.9 million, 3.4 thousand tonnes).

Malaysia's processed food and beverage imports were valued at US$16.7 billion in 2022, with Canada as the 36th largest supplier, accounting for US$48.1 million with a market share of 0.3%. Processed food and beverage imports have increased by 10.7% CAGR since 2018. Malaysia's top processed food and beverage imports by value in 2022 were palm oil (US$1.3 billion, 7.6%), miscellaneous food preparations (US$1.1 billion, 6.3%), cane sugar (US$802.5 million, 4.8%), soy oilcakes (US$780.1 million, 4.7%) and frozen, boneless beef (US$650.5 million, 3.9%). Malaysia's top import partners for processed food and beverages in 2022 were Indonesia (17.3%), Thailand (10.9%), India (8.8%), China (8.3%) and Argentina (5.2%).

In 2022, Malaysia imported US$24.1 billion in agri-food and seafood products from the world. Malaysia's top three import partners in 2022 were Indonesia, China and Thailand. Canada was not a source of many of Malaysia's top ten imports, contributing only 0.3% of total miscellaneous food preparation imports, and no shares of the other top nine products. Palm oil is the most important import product, and the vast majority (98.9%) of palm oil imported by Malaysia is from across the border in Indonesia. In many cases, Malaysia has one primary import partner for given commodities. For example, Malaysia imports a large majority of its maize and maize seed from Argentina, and slightly more than half of its cane sugar from Brazil.

In 2022, Malaysia exported US34.1 billion of agri-food and seafood products to global markets. Palm oil in its various forms, including palm kernel oil, accounted for slightly more than half of the value of Malaysian exports in 2022. India, China and Singapore were Malaysia's top export markets. Malaysia's palm oil exports are greater than its palm oil imports by a factor of ten. Two thirds of crude palm oil production is exported to India, while a slightly less than a quarter of palm kernel oil is exported to China. Canada's leading import from Malaysia is palm oil, and it represents 0.2% of total Malaysian exports to the world. The second-place import from Malaysia is cocoa butter, fat and oil, and Canada accounts for 7.4% of Malaysia's total exports of this product.

Canada's performance

Canada reported US$168.4 million in agri-food and seafood products to Malaysia in 2022. All provinces exported to Malaysia except for Newfoundland and Labrador. The leading exporters were Ontario (US$47.3 million, 28.1% market share), Saskatchewan (US$38.0 million, 22.5% market share) and Alberta (US$33.8 million, 20.1% market share).

Ontario's leading exports to Malaysia in 2022 were soya beans (US$33.2 million), wheat and meslin (US$11,1 million), and dog and cat food (US$952 thousand). Saskatchewan's top export to Malaysia in 2022 was wheat and meslin (US$34.8 million), with wheat or meslin flour (US$793 thousand) and soya beans (US$776 thousand) being the 2nd and 3rd most important export commodities. Like Saskatchewan, Alberta's most important export product to Malaysia was wheat and Meslin (US$32.3 million), with potatoes (US$539 thousand) and farm animal fodder (US$251 thousand) being the 2nd and 3rd most important export commodities.

Retail sales – fresh food

Retail sales of fresh food in Malaysia stood at US$13.1 billion in 2023, up from US$10.1 billion in 2018. The only subcategory to see decreased sales were sugars and sweeteners. Packaged food sales were not negatively impacted by the pandemic, but fresh food sales fell from 2020 to 2021, recovering to pre-pandemic levels by the end of 2022. Fresh food retail sales are forecasted at US$15.3 billion by 2028.

Fish and seafood, meat and fruits are the three most important fresh food categories, with nuts and vegetables being the fourth and fifth most important categories. Sugar and sweeteners are the only fresh food category experiencing a decline, and they are a marginal part of the market. Overall, fresh food retail sales in Malaysia increased by 5.3% CAGR from 2018 to 2023, and a further increase of 3.2% is expected through the end of 2028.

Growth was particularly strong for both meat and fish and seafood. Meat grew at 9.4% CAGR from 2018 to 2023, while fish and seafood grew at 6.0% CAGR over the same period. Meat consumption is starting to fall, however: the fresh meat retail market is expected to to decrease slightly, with −0.3% forecasted CAGR from 2023 to 2028. Fish and seafood will continue to grow, with 3.2% forecasted CAGR through 2028. Nuts and vegetables will also experience strong growth over this period, at 5.2% and 4.4% forecasted CAGR, respectively.

Retail sales – packaged food

In 2023, the packaged food market in Malaysia was valued at US$8.6 billion, up from US$6.9 billion in 2018. This represents growth of 5.1% CAGR over this period. CAGR through 2028 is forecasted at 5.4%, which will result in packaged food retail sales of US$11.2 billion in 2028. All categories and sub-categories of packaged food have maintained steady growth since 2018, and continued growth is forecasted through 2028.

Staple foods are the top packaged food category in Malaysia. Rice, pasta and noodles are the leading sub-category of packaged foods, and they also experienced the strongest growth among packaged food sub-categories from 2018 to 2023, with 5.9% CAGR over this period. Staple foods have the highest projected growth from 2023 to 2028, at 5.8%, led by baked goods, breakfast cereals and rice, pasta and noodles, which are projected to grow at 6.2%, 6.1% and 6.0% respectively over this period.

Cooking ingredients and meals experienced the fastest growth from 2018 to 2023, at 6.8% CAGR. This made them a billion dollar category: their total value was US$902.3 million in 2018, and increased to US$1.3 billion by 2023. Growth is expected to slow through 2028, with 4.7% projected CAGR. The fastest growing sub-category was edible oils, with 8.9% CAGR from 2018 to 2023. This was also the fastest growing sub-category across all packaged food categories over this period.

Health and wellness

Market data on health and wellness retail sales for food products is limited to shares of claims. Retail sales data is available for consumer health supplements, however. These have gained a great deal of popularity in Malaysia over the past five years, and growth is expected to continue.

Vitamins and dietary supplements experienced remarkable growth, becoming a billion dollar industry by 2021. The pandemic led to increased consumer health product sales. Vitamins in particular were positively affected by a desire on the part of consumers to bolster their immune systems^{Footnote 2}.

Strong growth is forecast in the sector, at 10.0% overall CAGR through 2028. Weight management products will show strong growth as a response to increased obesity in Malaysia. This will be driven by increased sales of meal replacement products and weight loss supplements^{Footnote 2}.

In terms of packaged food, market share data is available for select health and wellness positioning claims. These claims represent the share of total products which feature given claims. Overlap is possible: for example, a snack featuring a lactose-free label may also be labeled as organic. Select positioning data is below.

In 2022, 4.6% of cooking ingredients and meals sold in Malaysia were labeled as natural, making it the most common claim on health and wellness products. Organic products are marginal, representing 0.2% of the market, but they are growing, and expected to reach 0.4% of the market in 2026.

The most popular dairy product claims represent intrinsic features. Low-fat products represent 5.3% of the market, but this would include products such as skim milk which can only exist in a low-fat form. Dairy products will be good sources of minerals because they contain calcium, and calcium will imply that the product is good for bone and joint health. As such, health and wellness positioning claims are more a matter of the manufacturer choosing to highlight benefits than a matter of products being manufactured specifically for these benefits.

High fibre is the only baked goods positioning claim of any significance. Some baked good mixes are marketed as natural, but this is insignificant in terms of total baked goods sales data.

Health and wellness positioning claims are very important for cereals. Nearly a fifth (18.7%) of breakfast cereals sold in Malaysia in 2022 were marketed as good sources of vitamins. High mineral, high fibre and high protein claims are also very common. Organic claims are growing, from 0.6% in 2019 to 1.6% in 2022.

Claims are somewhat uncommon on processed fruit and vegetable products. It is notable that organic processed fruits and vegetables have an insignificant market share in Malaysia.

The only notable claims for processed meat, seafood and alternatives products are high protein and natural claims. As is the case for processed fruits and vegetables, organic products are a negligible part of the market.

Rice, pasta and noodles do not tend to advertise health and wellness claims. Better for You and dietary or free from claims are not commonly advertised. Most pasta will be vegetarian, but this is unlikely to be advertised. Organic pasta is extremely marginal.

Fortified and functional or natural snack claims are relatively common, at 5.3% and 4.1% market share in 2022. Organic snacks are not particularly popular.

According to Mintel's Global New Products Database, at least 5,500 new and relaunched products with healthy claims were introduced on the Malaysian market from 2019 to 2023^{Footnote 5}. The top five categories were dairy, snacks, saubrakces and seasonings, bakery products and health supplements.

Most of the health and wellness packaged food products launched in Malaysia over the past five years were moderately priced: a majority of newly released products cost less than US$4.06, and very few cost more than US$8.07. Generally speaking, the most common claims were "free from" claims: products that are advertised as having no additives or preservatives at all, no artificial additives or preservatives, and no added or artificial colourings or flavourings.Most products sold on the market were domestic. Dairy and snacks were the two biggest categories for new releases over the five year period.

Foodservice

Consumer foodservice peaked at US$10.5 billion in Malaysia in 2019, and was significantly negatively affected by the COVID-19 pandemic, decreasing to US$8.2 billion in 2020. Foodservice sales have since recovered, driven primarily by chained consumer foodservice and limited-service restaurants, which posted a 7.5% and 9.7% CAGR, respectively, from 2017 to 2022. Recovery was delayed: a resurgence of COVID-19 in 2021 prompted additional pandemic restrictions. Many consumers remain cautious about in-person dining.

Home delivery grew during the pandemic: eat-in's share of consumer foodservice shrank from 70.0% in 2017 to 43.3% in 2020, increasing to 51.3% in 2022. Takeaway declined after the end of pandemic restrictions: its share was 25.9% in 2017, increased to 32.7% in 2020, but cratered to 12.7% in 2022. In 2017, home delivery represented only 3.1% of foodservice sales. This share increased to 35.0% in 2022, with most of the jump occurring during the pandemic.

Home delivery is forecast to maintain a consistent share of foodservice purchases through 2027, indicating that the pandemic permanently changed the habits of Malaysian consumers. New food e-commerce platforms such as Foodpanda, GrabFood and ShopeeFood are delivering food from both local and chained outlets. Malaysian foodservice providers had to adapt quickly to the pandemic, and chained foodservice providers adapted better than independent outlets^{Footnote 2}. For one thing, they were better equipped to work with delivery apps, and their parent companies also had sufficient cash reserves to weather temporary losses. As a result, independent foodservice saw the value of its retail sales fall by −3.1% CAGR from 2017 to 2022, and many businesses closed. Nonetheless, independent foodservice remained the largest foodservice category in 2022.

All foodservice categories are expected to recover through 2027. Cafés and bars, which were the category most affected by the pandemic, are forecast to grow at 12.1% CAGR from 2022 to 2027. Independent foodservice should grow 8.0% CAGR over this period as well. It will be surpassed by chained foodservice, which has a forecast CAGR of 10.6% and is expected to be the largest category. Limited service restaurants will maintain their steady growth, at 11.0% CAGR through 2027.

The majority of foodservice sales in Malaysia occur through standalone outlets, and these maintained positive growth over the 2017-2022 period. Leisure i.e. sporting and cultural events), travel and lodging all decreased significantly. They are all expected to recover through 2027, with each having a forecast CAGR of 11.5%.

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Resources

• Euromonitor International, Consumer Foodservice in Malaysia February 2023.
• Euromonitor International, Consumer Health in Malaysia – Analysis. October 2023.
• Euromonitor International, Weight Management and Wellbeing in Malaysia – Analysis. October 2023.
• Euromonitor International, Commodities: Malaysia. October 2023.
• Euromonitor International, Malaysia in 2040: the Future Demographic. November 2023.
• Euromonitor International, Staple Foods in Malaysia – Analysis. December 2023.
• Euromonitor International, Passport Statistics, 2024.
• Mintel Global New Product Database, 2024.
• Global Trade Tracker, 2024.
• Hamadeh, Nada, Catherine van Rompaey, Eric Metreau and Shwetha Grace Eapen. New World Bank country classifications by income level: 2022-2023. July 2022.
• Malay Mail. Agriculture Ministry assures Malaysia's rice supply stable, enough to meet local demand. July 2022.
• Ritchie, Hannah. Palm Oil. Our World in Data. February 2021.

Market Overview – Malaysia
Global Analysis Report

Prepared by: Alexandre Holm Perrault, Market Analyst

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