Malaysia’s economy took a tremendous hit during the COVID-19 pandemic, seeing a 5.6% GDP drop in its first year, experiencing as much as a 17.1% contraction in Q2 2020. The F&B industry Malaysia had before the pandemic was secure and growing, but the global health crisis saw many SMEs and local businesses finding themselves forced to cease operations entirely. However, with the government pushing for digitalisation and instigating plans to resettle and grow the economy, the future looks more promising for the sector.
We take a look at the F&B industry throughout COVID-19.
COVID-19 and its impact on the F&B industry
Malaysia went into a strict lockdown or Movement Control Order (MCO) on March 18th 2020, for six weeks until May 4th. They then relaxed some restrictions for the sake of the economy, as according to the Prime Minister, Muhyiddin Yassin, the economy was losing $556 million USD per day, totalling $14.6 billion USD.
The MCO had several iterations depending on infection levels, with only half of Malaysia’s 14 states fully opening up and the rest stating they are not yet ready. Unfortunately, many of these states were part of the supply chain in the national food and beverage industry, meaning that continued lockdowns are crippling the seven open states’ ability to produce at full capacity or service the sector’s needs.
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The impact of these shortfalls increased further when people were required to work from home. This move to remote working skyrocketed the demand for instant foods, frozen foods and other ready to eat items, putting even more strain on an already stretched system.
The imbalance and uncertainty in the sector put Malaysia in a very precarious economic position, with approximately 12% of SMEs ceasing operation from 2020 to 2021.
The twelfth Malaysia plan
In September of 2021, Malaysia’s new Prime Minister Datuk Seri Ismail Sabri Yaakob recognised that something more needed to be done and announced the 12th Malaysia Plan. It consists of a series of reforms they aim to complete by 2025. Its three main tenets are resetting the economy, strengthening security, well-being and inclusivity, and advancing sustainability.
The idea behind the plan is to focus on four different areas that can become the foundation, enabling Malaysia to advance its program and bring about a greener, more economically stable future. These four foundational blocks involve developing future talent, improving public transport infrastructure, focusing on utilising and developing cutting-edge technology, and strengthening their public services to enhance the wellbeing of all Malaysian people. These forward-thinking policies hinge on increased digitalisation as the country tries to future proof its economy and continue developing as one of the stars of Southeast Asia.
A change in the way F&B businesses operate
As the F&B sector works to shore up its position in the economy, innovative ideas such as cloud kitchens are fast becoming part of the landscape. This type of shared space is ideal for takeout restaurants built around delivery or caterers, providing the perfect space for many F&B businesses to get back on their feet after the pandemic.
One such cloud kitchen, Cookhouse, is a huge success story. Founded in 2019 by Huen Su San, the business really took off as the government ended its lockdown in May, growing from one location to seven. With the demand for ready-made food and deliveries on the rise, businesses like Cookhouse have created an environment for F&B startups to launch themselves with reduced risk.
One clear advantage of using a cloud kitchen is that it significantly reduces costs. The cost of renting the shared space is substantially lower than purchasing or leasing a solo kitchen and equipping it fully. Many smaller businesses can focus on returning to or expanding their services by sharing the costs and equipment, which will fill the demand for takeaway and delivery, creating more economic growth in the F&B sector.
Why digitisation is important
To survive and thrive in this new era of digital consumerism, F&B companies must grow their online presence. Access to internet food ordering was particularly vital when people could not leave their homes due to the MCO resulting in a 61% increase in food deliveries.
However, it is not just the eCommerce element of digitalisation that will help this sector grow. Automation of procurement, use of fintech products and data management systems will all reduce costs and speed up processes, allowing businesses to focus on increasing their profits.
After surviving the ordeal of COVID-19, SMEs must digitise as soon as possible to grow their brands, reduce costs, and streamline operations as they help move the economy to a more stable footing. The F&B industry Malaysia hopes to develop will need to rely more heavily than before on digitalisation if it is to find its way back from the almost catastrophic impact of the pandemic.