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Last Updated: Sep 25th, 2006 - 11:36:04 |
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“Tesco is extremely pleased to be able to offer this support to the Malaysian government. The export of RM1 billion of Halal products to the UK will really help Malaysia to develop quickly into a global Halal hub.” James McCaan, chief executive officer of Tesco Malaysia. |
Even before the dust had settled on MIHAS 2006 and the inaugural World Halal Forum, Malaysia’s bid to become a leader within the global Halal industry was given yet another major boost when the local office of Tesco, the world’s third largest retail chain operator, announced its intention to export RM1 billion worth of Malaysian Halal products into their main market in the UK over the next five years.
Under a strategic move to support the Ninth Malaysia Plan and the Halal hub initiative, Tesco Malaysia will not only export local Halal products to the UK, they also announced plans to buy RM100 million worth of agriculture products from the Perak state government to complement their new RM50 million fresh distribution centre in Simpang Pulai, near Ipoh, Perak.
During the signing ceremony witnessed by the Prime Minister Dato’ Seri Abdullah Ahmad Badawi, James McCaan, chief executive officer of Tesco Malaysia said they have identified three opportunity areas to offer local Halal manufacturers, namely access to export markets, access to national domestic market as well as offering help in maintaining quality, consistency and price of local Malaysian produce.
“Tesco is extremely pleased to be able to offer this support to the Malaysian government. The export of RM1 billion of Halal products to the UK will really help Malaysia to develop quickly into a global Halal hub,” said McCaan.
Apart from that, Tesco Malaysia will also assist local suppliers to supply products under the Tesco brand name locally and internationally, and will work with the state governments and local chambers of commerce to maximise local sourcing opportunities.
Before one jumps on the phone to call Tesco’s office, there are a few basic rules with regards to retailing in the UK as explained by Azlam Shah Alias, director of corporate communications, Tesco Malaysia. First, there must be a demand for any given product, and in this case, it must be Halal certified. Second, all products must pass the strict British Retailers’ Consortium (BRC) standards. Third, manufacturers need to understand that the liability of the products sold in the UK is on the retailers, not the government, hence the strict safety requirements.
To start the ball rolling, manufacturers of Halal finished products are invited to contact the local Tesco headquarters in Damansara directly. A team called the Training, Legal and Technical Department (TLT) headed and comprised of food technologists will then take samples for the products and test them for food safety standards to make sure that it is in fact safe, hygienic and traceable.
They will then audit the manufacturing processes to make sure that it satisfies the requirements of Hazards Analysis and Critical Control Points and General Manufacturing Practices. The BRC also prefers all products to have Quality Management System in place. Part of the requirements is to make sure that all documentations are in order and there exist accountability and transparency. Once the BRC’s standards are satisfied, the product will have automatic passport to go anywhere in the world.
To supply to UK stores, Tesco’s local TLT team will also send samples of product to the TLT in UK to determine if the product is actually in demand and up to their standards. “We have our ethnic buyers in UK who will be able to tell whether the products are acceptable or not,” said Azlam. He added that even before sending to UK, their TLT in Malaysia will know exactly what the requirements are for the UK market. Once both offices are satisfied that the particular product meets their safety requirements, they will then start to look at the standards and later discuss its terms and conditions.
Azlam expects that the supply of local Halal finished products to UK will commence as early as 2007 when their RM50 million fresh distribution centre in Simpang Pulai is completed. Built on a 15-acre property, the centre will have 14,000 square metres of cold storage facility that will take in fresh produce from farmers around Cameron Highlands before re-distributing it back to all their 13 stores throughout Malaysia.
In fact, Tesco has penned its commitment with the Perak state government to buy RM100 million worth of agricultural products over the next five years. Fresh produce does not only mean fruits and vegetables, it would also include poultry, meats and seafood. “As we speak, we already have three contracts that are in the finalising stage with some of the Perak suppliers to supply fish, prawns and poultry. We are also negotiating for some other products from local farmers,” Azlam added.
According to him, Tesco currently does not own a fresh distribution centre in Malaysia except a temporary one in Balakong as it requires at least 12 – 15 stores to make it a cost effective exercise. Since they now have 13 stores, with their 14th store opening in Ampang by the end of July and another two sites pending for approval, Tesco is now ready to buy local agriculture produce on a huge scale.
“As it is right now, suppliers are delivering directly to our stores, so it is a bit difficult for them, especially for smaller players. Once we have our distribution centre, there will be more opportunities for small holders to supply directly to us. We are also working with the state government to identify other potential suppliers. They will grow whatever we want and we will teach them all the right methods in terms of making sure all of their products meet our standards,” he said.
He added that this is actually easier said than done. Local farmers, by their very nature, need plenty of training and Tesco uses a hands-on approach in educating these farmers. Tesco usually invites the farmers to come to their stores, observe the back-of-house activities, how the produce are being handled and cleaned. They are even asked to do the processes themselves, making sure they truly understand how it works, from unloading right up to the shelves.
“But it is a long educational process. It took four to five years in Thailand to come up with the level they are now where produce are on the shelves in less than 24 hours after harvesting. Customers are very demanding, they want freshness, and so do we. But some farmers do not understand, so we have to be transparent. We tell them the price and the volume for one year, and they must tell us whether they are able to deliver or not. At the end of the period, whoever is able to deliver will survive,” said Azlam.
As for the RM1 billion Halal exports to UK, the success of the program will also depend upon the new fresh distribution centre, since the centre will be responsible in ensuring that all finished products meet the required BRC standards. To address this concern, they will be working with the Small and Medium Industries Development Corporation (SMIDEC) to ensure that the suppliers meet their requirements.
“We are doing a three-pronged approach with SMIDEC. One is about awareness and training to increase level expertise of the suppliers. The second is to open up export market within Tesco where the suppliers are ready and have the products but don’t have the market to supply. For this, we will link them up with our international sourcing hub in Hong Kong. Aside from sourcing for viable companies, SMIDEC will also help us to build capacity and capability within the Halal industry,” he added.
One of the key steps that have been undertaken by Tesco Malaysia is to develop a Supplier Guidelines Communication Pack for potential suppliers, as well as organising seminars and workshops for local suppliers on supplying to hypermarkets like Tesco. The most recent was in early May when Terry Babbs, head of Tesco’s TLT UK came over and gave a talk about supplying there. He later spoke at the inaugural World Halal Forum about a supermarket’s perspective on Halal food.
Aside from the fresh distribution centre in Ipoh, Tesco Malaysia will also build an ambient distribution centre in the Klang Valley, which is expected to be ready by 2008. But they are not waiting for the new centre to start supplying Halal products to the UK. As it is, they will be pushing for some of their in-house labels that have met the BRC standard for exports to UK.
“At the same time, we are also looking at some of the more established names in Malaysia which we think can penetrate the UK market, which are mostly within the ready-to-cook meal segments, and also some of the spices, herbs and sauces. We are also talking to a few interested parties to supply, so it will just be a matter of time,” he said.
Expressing his confidence that Halal products are very much in demand in the UK and the Halal industry is actually thriving over there, Azlam pointed out that they have done a similar program in 2004 where they stocked their shelves with Halal and ethnic goods. Through the many market research and customer questionnaires, they found that customers in UK actually wanted more Halal-certified products than the ethnic foods.
“We first tested in one particular store in Slough where there were requests for Halal meat. So we opened a butcher shop selling Halal meat and that was an overwhelming success. Using that same concept, we extended our ethnic range by providing more ethnic foods and we also opened up a section on Halal food, and that too created a lot of interest and people started asking for more. Again, the success was overwhelming and that was when we realised there is this huge demand for Halal products. Now we are going ahead to sell in about 50 stores all over UK,” he said.
“And now we are trying to see if we can help the government to fast track the Halal hub initiative by sending more local Halal products overseas. But it all depends on the quality, price, availability, and of course demand. At the end of the day, if the product is not sellable, there is nothing much we can do, regardless of how much in-store promotions we carry out,” he added.
That should be the challenge for local Halal manufacturers – to manufacture quality and sellable Halal products.
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