Corporate Office: Block 2A , Level 25 Suite 25-1 Plaza Sentral,Jalan Stesen Sentral 5 50470 Kuala Lumpur Tel: 2089 3400 Fax: 2089 3500 www.mafc.com.my Distribution Center: No 3 Jalan Perindustrian Puchong Bandar Metro Puchong 47160 Puchong Selangor Malaysia Azizi Meor Ngah Chief Executive Officer A Journey Towards Building a Sustainable Agrifood Supply Chain Entity EAP Regional Agribusiness Trade & Investment Conference 2009, Singapore The ESCM Approach
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Corporate Office:Block 2A , Level 25 Suite 25-1Plaza Sentral,Jalan Stesen Sentral 550470 Kuala LumpurTel: 2089 3400 Fax: 2089 3500
www.mafc.com.my
Distribution Center:No 3 Jalan Perindustrian PuchongBandar Metro Puchong47160 Puchong SelangorMalaysia
Azizi Meor NgahChief Executive Officer
A Journey Towards Building a Sustainable Agrifood Supply Chain Entity
Our Business Approach and the Benefits to the FFV Sector
Introduction to MAFC
Flow of Presentation
3
• A commercial entity with specific Government agenda
• A new start up hybrid company established in June 2006 with catalytic role in stimulating and reshaping the horticultural industry
• Policy instrument to change, enhance and drive the sector to be competitive
• To adhere relevant global standards in food production and distribution for better consumer preferences
Getting to know MAFC…
4
• Improve productivity , yields and Income of producers/farmers through direct engagement with them
• Better Value Capture by managing the pre and post harvest losses
• Better Price Discovery through opening of markets or provide market access locally and globally
Objective 1: To Catalyse Production ………
5
• To ensure produce have access to both domestic and global markets by observing the global food safety standard
• Apply appropriate standards to grading, packaging and palletization
Objective 2: Firm emphasis on compliance to GAP, Food Safety Regime and Quality Assurance
6
Objective 3: Proof of Concept at the Upstream - Modelingof CEF to change the farming culture and to adhere to sustainable principles within its own 30% production policy
• Ecology, Economics and Ethics (3E)– compliance to EIA/EMP requirement set
by DOE– Attention to Workers welfare– A win-win formula with all transaction
partners• Contract farming with extension services• Agripreneur Programme to educate new
entries into modern farming
7
MAFC is focused in Temperature Controlled Distribution system as a way to stay ahead of competition
• Offering Seeds to shelves services to both producers and buyers to maximise returns
• Providing the use of hard infrastructure - CPPCs and DC; to ensure better distribution, crop recovery and extended product shelf life
• Leveraging on Cold Chain Integrity and Traceability
• Provide Extension Services/ Entrepreneur Programme for the Last Mile
Issues and Challenges in the
horticultural trade in Malaysia
8
Our Business Approach and the Benefits to the FFV Sector
Introduction to MAFC
9
The Challenges: Complexity in Malaysia’s FFV trade arising from inefficiency and inequity in the ecosystem – middlemen adding costs but not value and Government’s disconnect with the market realities…..
Source: MAFC Strategic Planning
Source: KNB team analysis
*Based on a study at Cameron Highlands, the price margin between1) Farmer & middleman: 100-200% 2) Middleman & wholesaler: 100-150%3) Retailer & consumer: 100-200% For example if the price of tomato was RM1.00 at farm gate, the retail price would be RM 5.00. Very often consumers pay double or triple the farm price.
Source: Consumer International
Inefficiency(Average Wastage is
about 30%)
Poor planning
Lack of capital for scale up
Poor branding initiatives
High Wastages Lack technology and product R & D
Small scale producers
Poor farming techniques
Government agencies Shortage of labour
Small & scattered farms
Inequity(65% agri-products
distributed thru’ wholesale)
Size
Exploitation*Capital inequality
Access to shelf space
Non-tariff barriers
Competition from strong producing countries
Competition from established brands
Debt/bondageInformation asymmetry
Cartel middlemen*
Small farmers
Powerful middlemen*
Non-tariff barriers
Aging farmers
Focus on BOT
Poor cold chain logistics
Poor and multiple handling
Risks from weather and diseases
Limited sorting, packaging, grading
Implementation shortcomings
Lack of coordination Migration to
towns
Duplicationof initiatives
Poor information flow throughout value-chain
Lack technology & management skills
Lack of training
Fragmented decisions
Perishable produce
Lack of SME
Issues and Challenges in the
horticultural trade in Malaysia
10
Our Business Approach and the Benefits to the FFV Sector
Introduction to MAFC
11
Customers: B2B
• Food service companies; McDonald, Burger Kings, etc
Mitigating the Complex Ecosystem: Slice, dice, analyze and prioritize the food value chain. So far One acquisition and the rest on organic growth in building a SC Company
1. Acquired Food Logistics company CCN in 2006 as an entry point into FFC trade
2. Rapidly built the CPPCs near er to farms
3. Engage the farmers directly through Contract Farming, Contract Sourcing and using Nucleus-Plasma Model
PHASE 2
PHASE 11. Develop products and
markets based on consumer surveys and market demand studies
2. Value chain analysis
PHASE 3
1. Build CEF as POC2. Introduce papaya as the
Iconic crop3. Engage d DOA on Cluster
farming
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CPPC 1
CPPC 2
CPPC 3 & 4
CCCC
CCCC
Highlands crops
MISC-LogisticsHub
MAS Cargo
Hypermarkets
Independent Buyers / Sellers
DC in KLCross Docking
Value Addition
Cold Storage
Packaging & Repackaging
Tomatoes, capsicum, lettuce
Tropical Fruits and vegetables
Export of Tropical Juices, concentrates Fruits & Vegetables & Import of Temperate fruits
Exports of flowers, fruits & vegetables
• Access to the global market -Packed fruits, vegetables, ready meals, Juices, Concentrates, temperate fruits and vegetables
• Imports of food products from oversea hypermarkets
• Packed vegetables & fruits, ready meals and concentrates, purees,,etc
• Imports through the trading arm
Corporate Farming/
Independent Producers
Trading
Import route
cc
Lowland Crops
Lowland Crops
Zone 1
Zone 2
Zone 3 & 4
C E
F
Corporate Farming/
Independent Producers
Midstream DownstreamUpstream
We found two areas of focus: Engage closer with farmers to improve farming standards and address the disconnect between the farms and the markets
Tropical Fruits and vegetables
MAFC grows 30% its own supply and source s the rest from farming partners
13
CPPC 1
CPPC 2
CPPC 3 & 4
CCCC
CCCC
Highlands crops
MISC-LogisticsHub
MAS Cargo
Hypermarkets
Independent Buyers / Sellers
DC in KLCross Docking
Value Addition
Cold Storage
Packaging & Repackaging
Tomatoes, capsicum, lettuce
Tropical Fruits and vegetables
Export of Tropical Juices, concentrates Fruits & Vegetables & Import of Temperate fruits
Exports of flowers, fruits & vegetables
• Access to the global market -Packed fruits, vegetables, ready meals, Juices, Concentrates, temperate fruits and vegetables
• Imports of food products from oversea hypermarkets
• Packed vegetables & fruits, ready meals and concentrates, purees,,etc
• Imports through the trading arm
Corporate Farming/
Independent Producers
Trading
Import route
cc
Lowland Crops
Lowland Crops
Zone 1
Zone 2
Zone 3 & 4
C E
F
Corporate Farming/
Independent Producers
Midstream DownstreamUpstream
We found two areas of focus: Engage closer with farmers to improve farming standards and address the disconnect between the farms and the markets
Tropical Fruits and vegetables
MAFC grows 30% its own supply and source s the rest from farming partners
Relationship Building is CRITICAL
14
MAFC evolves from a supplier role to solutions selling for most of the actors in the food chain
For Producers• MAFC’s insistence on GAP Certification
from contract farmers and suppliers
• Buys their produce outright based on long term pricing
• Provides Triple Compartment 40FT reefer trucks that can handle frozen, chill and ambient at one go – thus reducing logistics cost and turnaround time
• Reduces PH losses resulting in higher crop recovery
• Produce having longer shelf life by passing through pre-cooling and vacuum chilling processes at the packaging centers
For Customers
• Longer Shelf Life and deliver fresh products to the shelves
• Consumer Labeling and packaging with trace-back system on product origination
• Enabled clients to create house brand or promote individual own brand
• Door-to-door delivery service, stuffing and 3PL services
• Shares CSR programme with buyers through solutions selling from seeds to shelves
15
Our Shared Values : Environment, Ethics and Economic
Delivering Safe and Quality Food
• Fresh
• Nutritious
• Exciting
Recognizes social responsibility
• Safe working and living environment for workers
1
2Transparent Settlement System with farmers
• Fair Trade practices
3
Promote Social Inclusiveness
• Moving farmers produce up the value chain
• Creating new employment and improving earnings
• Anchor tenant – nucleus-plasma concept
1
Ensuring Sustainable Livelihood
• Technically efficient
• Economically viable
• Market accessible
Incorporates environment friendly methodologies
• Best management practices
• Sustainable agriculture – EIA/EMP
• Global GAP/GMP/HACCP certification
12
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MAFC Business Philosophy Desired OutcomeEcology, Economics & Ethics Sustainable Agriculture
• Improve the living standard of farming community for fair and equitable wealth distribution
• Ensure consistent food safety and quality management
• Adopt Environmental ManagementAn integrated eSCM Model with unbroken cold chain
Market Efficiency and Effectiveness• Focus ed Post Harvest discipline• Removing middlemen that do not add
value• Transparency in trading • End-to-end solutions to retailers
Branding and Packaging Better Value Capture and Price Discovery• Fulfill social and ethical demand
Certification: HACCP, ISO HALAL, Global GAP and Traceability
Global Market Access• Food safety, quality compliance and sector
competitiveness
In Summary: MAFC leverages on its knowledge, facilities and efficient logistics to catalyse production and maximiseevery opportunity in correcting market failures
17
Lesson Learnt So Far
1. Shared vision between private sector and government
2. You must persevere as progress is slow at the beginning
3. You must have deep pockets as a start up company
4. Many corrections need to be done along the value chain
5. High Learning Curve costs6. The critical need for Subject Matter