ASIAN CASE RESEARCH JOURNAL, VOL.
17, issue 1, 73–96 (2013)
acrj
This case was prepared by
Rozhan Abu Dardak of
MARDI, Selangor, Malaysia
and Farzana Quoquab of Uni-
versiti Technologie Malaysia,
as a basis for class discussion
rather than to illustrate either
effective or ineffective handling
of an administrative or busi-
ness situation.
Please send all correspondence
to Farzana Quoquab, Uni-
versiti Technologie Malaysia,
54100 Kuala Lumpur,
Malaysia. E-mail: fqbhabib@
yahoo.com
© 2013 by World Scientific Publishing Co. DOI: 10.1142/S021892751350003X
S021892751350003X.indd 73
Musalmah Sauce: Opt for the Best
INTRODUCTION
The closing of the account for the Musalmah Food Industries
Sdn Berhad (MFI) was on 31 March 2009. Its general manager,
Mr. Mohammad Nasir presented the company’s finan-
cial statement to the Chief Executive Officer (CEO), Datuk
Ibrahim Mohammad on 1 April 2009. It was noted that the
domestic sales account for 2008 for the sauce products has
increased continuously but on a diminishing or downward
trend. The growth of the total sales of these products had
increased around 5.6% as compared to 9.4% in 2007, 24.5% in
2006 and 25.2% in 20051–3.
As a major shareholder and chairman of the company,
Datuk Ibrahim was anxious with the company’s down-
ward trend of the sale of the sauces. He immediately called
a meeting that involved Mr. Mohammad Nasir and Mr. Sta
Maria, the Business Development Managers, and other execu-
tives from the production, finance, corporate communication
and administration divisions. They had a long meeting and
the discussion focussed on how the company could improve
its domestic sales of the sauce products. In relation to this,
Datuk Ibrahim had asked them to look into other issues
related to the industry, sauce products, marketing channels
and competitors.
During the discussion, they realized that the compe-
tition within this industry was fiercer than it was five years
ago, especially when the number of new players entering the
industry had also increased every year. A report published by
the Ministry of Entrepreneur and Cooperative Development
showed that the numbers of registered enterprises in the food
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 74  ACRJ

industry were 6069 in 2008, of which 5925 were in the small

and medium sized enterprises (SME) category. This figure
did not include non-registered companies which had been
in operation as cottage industries or backyard companies.
Among these companies, it was estimated that more than
90 enterprises had been manufacturing sauce products. As
the number of products offered increased, the market share
decreased as the customers had more choices to opt for.
Datuk Ibrahim was optimistic that a large domestic
market could promise great opportunities. He quoted a
statement from the Ministry of Agriculture and Agro-based
Industry’s 2008 annual report which stated that the country’s
balance of trade for food products was on a negative trend,
in which the deficit of sauce products was around RM350,000.
This means that the country was importing a lot of these
products, especially from Thailand, Singapore and China.
Datuk Ibrahim had inquired from the executives about how
Musalmah could fill the gap and replace the imported sauces
with its own products.
Mr. Sta Maria proposed a preamble idea on how the
company could improve the domestic sales of sauce prod-
ucts. They need to expand the marketing channels not only to
the supermarket and hypermarket segments but also to small
outlet segments which would include the grocery outlets,
convenient shops and petrol stations. Datuk Ibrahim had
agreed in principle to the proposal but had said that the com-
pany’s products had been sold at grocery shops in the early
years of its establishment, but unfortunately this did not work
out well. He added that it could be worth to try it out again.
He wanted the complete business proposal to be ready by 30
April 2009. This date is very important as the Annual General
Meeting (AGM) of Musalmah Berhad (the parent company)
has been scheduled for 25 May 2009. He wanted to make sure
that the strategy options will convince the shareholders.

INDUSTRY SCENARIO

The processed food industry is one of the most important

industries in Malaysia. It has a great potential market as the

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 musalmah sauce: opt for the best  75

global retail sales in food products are worth around USD3.5

trillion and are expected to grow at annual rate of 4.8% to
USD6.4 trillion by 20204. The Malaysian food processing
sector accounts for about 10% of the domestic manufacturing
output and companies in this industry are predominantly
Malaysian-owned. Basically, this industry is dominated by
small and medium scale enterprise. Small enterprises are
those enterprises with sales turnover above RM250,000 and
less than RM10 million or employs 5–50 full time workers.
Medium enterprises are defined as those enterprises with full-
time employees not exceeding 150 or its annual sales turnover
not exceeding RM24 million (USD1 = RM3.10).
The companies manufacture and market a range of
products such as marine products, beef products, fruit and
vegetables, cocoa-based products, cereals products, conve-
nience foods and beverage, and sauces and condiments. The
total number of companies by size in Malaysia is as seen in
Table 1.

Table 1. Total establishment of companies by size (2008)

Size Number Percentage

Large 4,542 0.8%

Medium 12,694 2.3%
Small 100,561 18.25
Micro 435,052 78.7%
5
Source: Ministry of Entrepreneurship and Cooperative Movement (2009) .

Food processing companies are generally perceived as

agro-based industries which have a strong support from the
Ministry of Agriculture and Agro-based Industry. Small-scale
food processing enterprises are usually organized as family
business. However, as the enterprise expands, a partnership
normally evolves, leading eventually to the formation of a
limited company. The location of the enterprises is evenly dis-
tributed, but as the population is concentrated in urban areas,
such as in Klang Valley (areas within Kuala Lumpur and the

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state of Selangor), more than 40% of the factories are located

in this area. Even though Malaysia is rich in agriculture
produce, this industry is dependent on imported raw mate-
rials such as dried chili and spices. The sources of raw mate-
rials are mainly from Indonesia, India and China.
The Malaysian government is very concerned with the
processed food industry as it contributes significant growth
to Malaysia’s economy. For example, in 2008, this industry
contributes 32% to Malaysia’s GDP and 19% of total export.
The industry’s growth was 9.9% in the 9th Malaysia Plan
(2006–2010), and is expected to grow about 12% during the
10th Malaysia Plan (2011–2015)6. The Malaysian government
provides a lot of incentives such as direct tax (income tax)
and financial assistance and consultancies. These incentives
are available for all SMEs and they are specifically introduced
to help the companies and eventually increase the industry
competitiveness.
The food industry in Malaysia is regulated by many
food acts and regulations, and standards such as Hazard
Analysis and Critical Control Point (HACCP), good manu-
facturing practice (GMP), and Sanitation Standard Operating
Procedures, Halal certification, CE marking or EU standard
for European markets. The application for these certifications
or standards is on a voluntary basis. However, for those who
have the accreditation certificate or comply with the stan-
dards would add value to their products, especially if they
are marketed overseas.
The domestic retail for processed food shows an
upward trend, for the past five years. This trend indicates the
changes in lifestyle, especially for those people in urban areas.
The consumption of processed food in Malaysia has increased
along with the economy growth. Consumers have better
choice of products as their disposable income increases. They
prefer convenient products that can be consumed directly
or take minimum time for preparation. The consumption of
processed food has increased, and it is influenced by several
factors, such as increase in the numbers of middle-income
group who are committed to their career, increase in dispos-
able income, and less time for preparing the food. In general
the income per capita has increased from RM15,000 in 2000

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 musalmah sauce: opt for the best  77

to more than RM23,000 in 20087. The purchasing power of

Malaysian consumers is relatively high and increasing every
year.
The increase in demand and consumption of processed
food in Malaysia is reflected by the growth rate of the pro-
cessed food industry8. The value and average growth rate of
selected processed food sub-sectors are as shown in Table 2.

Table 2. Sales of sauces, dressings and condiments by subsector in 2002–2008

Subsector 2002 2004 2006 2008 AGR Changes

Million Million Million Million 2001– (%)
RM RM RM RM 2008 2001–
2008
Tomato pastes and puree 5.3 5.7 6.3 6.6 4.7 25.9
Stock cubes 9.4 9.8 10.3 10.7 2.6 13.8
Gravy granules 6.3 6.5 6.9 7.1 2.6 13.8
Bouillon/stock cubes 15.7 16.3 17.2 17.8 2.6 13.8
Herbs and spices 391.5 407.2 427.8 442.8 2.5 13.1
MSG 5.5 5.7 5.9 6 1.9 9.9
Chilli sauces 68 72.4 76.4 79.1 3.1 16.3
Oyster sauces 38.6 41.4 43.7 45.3 3.2 17.2
Other table sauces 19.1 20 21.1 22.3 3.2 17
Table sauce 125.7 133.8 141.2 146.7 3.1 16.7
Soy-based sauces 109.8 115.4 120.6 124.2 2.5 13.1
Pasta sauces 13.7 15.5 16.8 17.6 5.2 28.9
Wet/cooking sauces 103.2 109.4 116.7 121.3 3.3 17.6
Ketchup 45.2 47.7 50.4 52.1 2.9 15.3
Regular mayonnaise 3.7 4 4.2 4.3 3.3 17.5
Mayonnaise 3.7 4 4.2 4.3 3.3 17.5
Ready-to-eat sauces 5.9 6.3 6.8 7.2 4.2 22.7
Salad dressing 5.9 6.3 6.8 7.2 4.2 22.7
Pickled products 29.7 30.2 31.3 32.2 1.6 8.4
Other sauces, dressings 61.9 66.3 69.3 71.4 2.9 15.3
and condiments
Total 919.6 963.4 1,014.5 1,050.40 2.8 14.6
9
Source: Ministry of Agriculture and Agro-based Industry (2008) .

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Table 2 shows that the industry has grown about 15.0%

during 2002–2008. It is projected that this industry will grow
more than 20% in the next decade (2010–2020) due to higher
demand for domestic and international markets. In spite of
successful and increasing growth rate, the processed food
industry is also facing several constraints such as:
i) Insufficient supply of good quality raw materials
• Most of the raw materials are imported from neigh-
boring countries and the price is increasing every year.
ii) Low level of technology
• Some micro-scale food processing enterprises that are
operated from the backyard generally use traditional
methods of processing and it affects the quality of the
products. However, small-scale processing enterprises
normally use modern technology.
iii) Research and development
• No research activity is undertaken at factory level.
Most of the R&D in food processing technology is
undertaken by government research institutions.
iv) Competition
• Many small-scale food enterprises process the same
type of products, such as sauces, snacks, beverages
and bakery products. These are items which require
a low capital investment. The number of compa-
nies involved is increasing, and thus, the competition
becomes stiffer.
• However, some enterprises are able to expand their
enterprises because they are innovative and have an
aggressive marketing strategy.
v) Quality problems
• The product quality of some small-scale food enter-
prises is inconsistent due to lack of facilities for
quality control, lack of awareness of the need for
these, and due to poor manufacturing practices. This
is true especially for backyard industries that focus on
local area market (usually at rural areas).
vi) Food packaging
• Some enterprises still produce goods packed in
low-quality packaging material with unattractive
packaging design.

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 musalmah sauce: opt for the best  79

vii) Management
• Most small-scale food enterprises are managed by the
owners. In many cases, they do not follow modern
technique of management and do not maintain proper
records.
Quite recently, the Malaysian government is committed
to transform this industry through its Long Term Industrial
Master Plan (IMP). This IMP provides several strategies that
can overcome these challenges and at the same time increase
the performance of this industry. The Malaysian govern-
ment set many programmes and provides incentives that can
help this industry to move forward and become one of the
economy drivers. The specific objectives of the IMP are stated
below:
i) Develop a modern food processing industry to meet
Malaysia’s food needs in conformity with modern
hygienic standards,
ii) Establish export oriented as well as import substituting
products,
iii) Develop industries which utilize more local raw materials
and substitute the imported one.
In summary, the facts about the processed food industry in
Malaysia are as follows:
i) High food and beverage spending in Malaysia
a) The young population in Malaysia is around 55% of
its 27.5 million people. Malaysia is one of Southeast
Asia’s most developed nations with its income per
capita of RM23,000 a month. More than 61% of the
citizens belong to the middle-to-upper-income group.
b) Food and beverage expenditure accounts for 25% of
total consumer spending. The per capita food and
beverage consumption in Malaysia is forecasted to
reach a regionally impressive RM1500 a month in
2012.
ii) Imports as the major source of food supply
a) Although export performance of the food processing
sector in Malaysia has doubled over the last decade,
the country is highly dependent on the imported food

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products, especially the intermediate goods, due to

the limited domestic agricultural production and the
rising demand for many food products.
b) Malaysia imports more than RM35 billion of food
products in 2008.
iii) Resilient growth of food demand and imports
a) The food consumption by Malaysian has registered
incessant growth annually, since 2000.
b) According to the forecast by Business Monitor
International in 2009, the food consumption in
Malaysia will continue to grow by a hefty 22.7% by
2013 and soft drink sales to increase by 32.9% over the
same period.
c) In times of an economic recession, the food sector
stands as the safest bet due to its sustainable demand.
iv) Strong impetus from the food service industry
a) The sizeable and rapidly growing food service market
in Malaysia is propelled by local consumers as well as
foreign tourists.
b) According to a global survey conducted by Nielsen
Malaysia to uncover out-of-home dining habits of
consumers, 67% of Malaysians dine at restaurants at
least once a week. Furthermore, the tourism industry
is attracting more than 20 million tourist arrivals to
Malaysia yearly.
v) Well organized and expanding of retail food sector
a) Malaysia has a dynamic mass grocery retail sector
with international retailers like Carrefour, Dairy Farm
(Cold Storage and Giant), Jusco and Tesco.
b) Expansion plans have been confirmed by the retail
majors regardless of the impact of the downturn in
economic growth. Sales value of food and beverage
products through modern retail outlets are forecasted
to increase by 36.9% by 2013.
c) Around 53% of Malaysian consumers purchase their
grocery products from hypermarkets and supermar-
kets, 40% from grocery stores. Less than 10% purchase
from other outlets such as petrol kiosk, convenient
stores and street markets.

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 musalmah sauce: opt for the best  81

i) Import liberalization of food products

v
a) As a measure to mitigate the increase in prices of
essential consumer goods, the Malaysian government
announced the abolishment, reduction and exemption
of import duty on a wide range of food products in
year 2009.

POTENTIAL BUYERS OF MUSALMAH’S PRODUCTS

Musalmah was one of the household brands for Malaysian

travelers, especially the Malays who go abroad for vacations,
on business trips, further studies and going to Mecca for pil-
grimage. Musalmah is a ready-to-eat sauce with many vari-
eties of flavor. It is a convenient food that a consumer needs
just about 2 minutes to prepare. A customer needs to dip a
pack of Musalmah ready-to-eat sauce into a bowl of boiled
water and then, it is ready to be consumed. The Malay trav-
elers bring Musalmah as a source of Halal food because it
is usually very difficult to find Muslim restaurants in non-
Muslim countries. The domestic travelers, on the other hand,
were those who like to go camping and fishing. It was esti-
mated that around 46.2 million travelers including the
domestic travelers have the potential to be targeted by MFI.
The numbers of travelers that Musalmah can target to buy its
products are shown in Table 3.
Table 3 shows the numbers of Malaysian travellers
within and across the country in 2008. They are potential cus-
tomers that Musalmah can target at. Given the number of
Malay travellers to non-Muslim countries is unknown, it can
be estimated that around 0.01% or 46,000 has the potential to
be Musalmah’s customers. The main targets are the first-time
travellers to non-Muslim countries and students. These poten-
tial customers normally bring around 10 packs of ready-to-eat
food during their journey. These customers can also introduce
Musalmah to other potential customers, and thus, it is crucial
to ensure that they are satisfied with the products.

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Table 3. The numbers of Malaysian travelers in 2008

Travelers Numbers
On vacation, business, leisure (Malaysians crossing the border using 26.0 million
passport) (figure 2005)*
Students (first time)**
– Under Public Service Department 9,325
– MARA 2,477
– PETRONAS 138
– Others 397
Pilgrimage***
– Hajj 36,485
– Umrah 154,566
Domestic tourists**** 20,000,000
Total 46,203,389
* 10
Source: Parliament report during question and answer session (2008)
**
Ministry of Higher Education (2008)11
***
Lembaga Urusan dan Tabung Haji Annual Report (2006)12
****
Tourism Malaysia (2008)13

SAUCES, DRESSING AND CONDIMENTS

Domestic Market

Among these processed food, the sauces, dressings and condi-

ments had contributed quite a high value to the economy. As
a result of the urbanization trend and increasing westerniza-
tion, Malaysian consumer lifestyles have changed, seeing an
increasing demand for convenient sauces, dressings and con-
diments. More people, especially women, have entered the
workforce, and consequently have less time for cooking. As
a result, sauces, dressings and condiments offer convenience
in terms of packaging and preparation, such as ready-made
pasta sauces and wet/cooking sauces, have become more
attractive to these urban consumers.
In Malaysia, the demand for sauces, dressings and con-
diments is relatively high as Malaysian consumers connect
home cooking with family attachment. However, the majority
of Malaysian consumers do not emphasize brand loyalty
but rather price sensitivity. Nevertheless, this segment

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 musalmah sauce: opt for the best  83

within the food processing industry has significant expan-

sion potential as manufacturers are willing to venture into
new products to generate interest. This segment’s product
type is grouped into two categories: niche Western and
mass market Asian. The Western types are mustard, salad
dressing and pasta sauces while the Asian types are chilli
sauces, ketchup, dipping and cooking sauces. Asian sauces
are utilized to accompany a meal or to enhance the taste of
food via seasoning or marinate. In domestic market, the retail
sales of sauces, dressings and condiments has increased from
RM1.05 billion in 2006 to more than RM1.47 billion in 2008,
a sales increment of about 14.0% with an annual growth rate
of 2.8% for four years. Among these products, pasta sauces
posted strong growth with average growth rate of 5.2%, fol-
lowed by ketchup (average growth rate 4.8%), salad dressing
(4.6%) and cooking sauce (4.5%)14. The ready to eat sauce is
a relatively new product. However, in the past five years the
demand has continuously increase, especially in urban areas.
This product is considered convenience food as consumer
can directly consume it after dipping it in hot water for five
minutes or put in microwave oven for less than five minutes.
The average sales growth rate for this product is 3.9% during
2006–2009. The sales of sauces, dressing and condiments by
subsector are shown in Table 2.
In general, sustained demand for these sauces help to
maintain sales volume. Especially, soy-based sauces grew in
proportion with the population growth rate as these products
can be found in almost every household of different ethnic
groups. The total sales of sauces, dressings and condiments
had increased from RM916.6 million in 2001 to more than
RM1.05 billion in 2006 and RM1.47 billion in 2009 (see Table 2).
There are many companies involved directly in the
manufacturing and marketing of sauces. Most of them are
new players with less than 10 years of operation. These
new players manufacture and market their products mainly
for domestic markets. These companies also manufactured
almost similar product categories of sauces, including soy
sauces, ketchups, chili sauces, ready-to-eat and ready-to-cook
sauces, fruits mixed sauces, meat-based sauces, fish-based
sauces, vegetable-based sauces, BBQ sauces and black pepper

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sauces. This situation had led to an intense competition in

the domestic market. On the other hand, the major players of
processed food were the multinational companies which had
been in the market for more than 30 years.

Customers and Their Buying Behavior

Malaysia is a newly industrialised market economy. In 2009,

Malaysia is populated by more than 27.5 million people,
of which more than 64% are in the 15–64 age group15. The
median age is 26 years that indicates a dynamic working
group. More than 70% of the population live in urban areas
with a growth rate of 3% a year. In term of ethnicity, more
than 50.5% are Malays, 23.7% Chinese, 11% indigenous
people and 7% are Indians. Out of these, more than 60% are
Muslims, 19.2% Buddhists and 9.1% are Christians.
The consumers who buy processed food products are
the working groups who have limited time for preparing
food. These people look for convenience food that require
minimal preparation but of high quality. In recent years
one of the most rapidly grown sector is convenience food,
including ready-to-eat sauce.
Convenience food is commercially prepared food
designed for ease of consumption. Products designated as
convenience foods are often prepared foodstuffs that can be
sold as hot, ready-to-eat dishes; as room temperature, shelf-
stable products; or as refrigerated or frozen products that
require minimal preparation, typically just heating. These
products are often sold in portion controlled, single serve
packaging designed for portability for "on-the-go" or later
eating. Convenience food can include products such as candy;
beverages such as soft drinks, juices and milk; fast food; nuts,
fruits and vegetables in fresh or preserved states; processed
meats and cheeses; and canned products such as soups and
pasta dishes.
The majority of the Malaysian population is Muslim
and they are very concerned with Halal issue. This segment
of customers look for processed products, especially meat
food products with Halal logo or fully certified as Halal. Halal

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 musalmah sauce: opt for the best  85

is an Arabic word which mean lawful or permissible. At the

same time the non-Muslim are very important consumers for
processed food products. As working group consumers, they
look for hygienic and tasteful products and Halal products are
also associated with clean and hygienic food.

Export Market

The exports of processed food have escalated from RM2.8

billion in 1996 to RM7.8 billion in 2005, an average annual
growth rate of 11.3%. This increment is attributable to the
expansion of food processing activities and the increasing
acceptance of Malaysia’s processed foods in the interna-
tional market. Major processed foods exported are processed
seafood, cocoa and cocoa preparations, prepared cereal and
sauces.
Malaysia’s top export destinations in 2008 were
Singapore (RM1.16 billion) followed by the USA (RM597.6
million), Indonesia (RM586 million), Japan (RM364.1 million)
and the Netherlands (RM339.9 million). To expand the
market, Malaysia is focusing its exports to EU and the Middle
East countries. The export of Malaysia’s processed food to
the Middle East is shown in Table 5. Malaysia has the oppor-
tunity to market its products under the Halal branding. The
Muslim population in the Arab countries is estimated to be
around 200 million and it is a great potential market for pro-
cessed products including sauces. The Middle East consumers
have higher purchasing power and have strong demand for
oriental products. The Middle East consumers consist of 60%
youth (<35 years old) and they are willing to try new prod-
ucts. The average economic growth of Arab countries such as
Saudi Arabia is about 8% a year. At the same time the growth
rate of imported sauce by Arab countries is around 6% a year.
Malaysia’s position as one of the most developed countries
among Muslim nations and its roles as a former Chairman
of the Organization of Islamic Nation (OIC) helps it to posi-
tion its products in these Muslim countries. The export of
Malaysia’s processed food to the Middle East is as shown in
Table 4.

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Table 4. Export of Malaysia’s processed food to the Middle East

(USD `000)

Year Beverages Sauces and Spices Chocolate

Condiments
2002 335 3866 471 3598
2003 433 5902 493 5253
2004 628 6363 544 7834
2005 846 6246 645 8072
2006 1585 8105 835 8992
2007 1620 8620 876 9120
2008 1765 8716 878 9157
Source: Ministry of Entrepreneurship and Cooperative Movement (2009)16.

Table 5. The main manufacturer and producer of sauces in Malaysia

(2005) (Including retort pouch ready-to-eat sauce)

No Company Sale (RM million)

1. Nestlé (M) Berhad 97.6
2. Sing Long Foodstuff 91.8
3. Ajinomoto (M) Sdn Bhd 49.2
4. Lee Kum Kee Co. Ltd. 41.0
5. Clouet A & Co. (KL) Sdn Bhd 32.8
6. Kikkoman (S) Pte. Ltd 27.9
7. McCormick & Co. Inc 20.5
8. Tong Foong Sauce Sdn Bhd 20.5
9. Yeo Hiap Seng (M) Sdn Bhd 13.1
10. Sri Nona Food Industries Sdn Bhd 10.7
11. Chiro (M) Sdn Bhd 10.7
12. Campbell Cheong Chan (M) 8.2
13. Adabi Consumer Industries 6.6
… …… …
18. Musalmah Berhad 3.2
17
Source: Ministry of Agriculture and Agro-based Industry (2007) .

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 musalmah sauce: opt for the best  87

Competitors

Food processing is a very lucrative and competitive industry.

There were more than 90 companies involved in manufac-
turing sauces and ready-to-eat products in 2008. However,
in the retort pouch products category, there were not many
companies involved. There were few local companies manu-
factured and marketed the retort pouch sauce and ready-
to-eat products, while some products were imported from
Singapore, China and Hong Kong. The main producers of this
product category are as seen in Table 5.
Table 5 shows that the main manufacturers of the
sauce and ready-to-eat products are the multinational com-
panies. Among them, the local players are Tong Foong Food
Industries, Yeo Hiap Seng, Sri Nona Food Industry, Chiro,
Adabi Consumer Industry and MFI. Even though MFI is a
new player in this industry, it claims to be the first user of the
retort pouch packaging system in Malaysia.

MUSALMAH FOOD INDUSTRIES SENDIRIAN

BERHAD (MFI)

The Musalmah Food Industries (MFI) was incorporated in

1984 by Datuk Ibrahim Mohammad, a retired Major General
in the Malaysia Armed Forces. In the early years of its estab-
lishment, it was known as a supplier of ready-to-eat meals for
the Malaysian Armed Forces, Royal Brunei Armed Forces and
Sri Lanka Armed Forces. It had expanded its business and
ventured into the catering service and had become one of the
ready-to-eat meal suppliers for the national carrier Malaysia
Airline System (MAS). It is a caterer for local universities
under a central canteen system, a privatised food supply
programme under the Ministry of Higher Education. Datuk
Ibrahim started to manufacture Malay condiments, dressings
and sauces in 2004 when he obtains a contract for supply
sauces for the Malaysian Armed Forces and schools hostels in
Malaysia.
MFI had been classified as a medium size manufac-
turer. Companies under this classification were entitled to

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participate in the entrepreneurship development programs

organized by the Ministry of Entrepreneur and Cooperative
Development and the Ministry of Agriculture and Agro-based
Industry. The programs that had been organized by these
Ministries consisted of consultations, promotions and par-
ticipation in the Ministry’s overseas trade exhibitions. These
companies are also entitled to apply for soft loans for the
expansion of their business ventures.
The operation of MFI is divided into three divisions —
manufacturing, food processing and trading. These divisions
are headed by their respective managers who are respon-
sible to the General Manager, Mr. Mohammad Nasir. The
company’s structure is as shown in Exhibit 1.

Products

There are two types of products manufactured by MFI,

namely, (a) premium quality ready-to-eat food for the armed
forces and retail consumers, which are manufactured by its
Manufacturing Division, and (b) food services, through its
Food Processing Division. In the manufacturing product line,
it sells “Musalmah”, one of the Malaysian household brands
for convenience foods. It produces a range of Malay cooking
condiments and dressings which includes more than 20 prod-
ucts under four product categories: vegetable dishes, meat
dishes, sauces and curries. The company pioneered the use of
the ‘retort pouch’ food packaging and technique, a technology
developed by the U.S. and Japan. This was an advanced pack-
aging technique that could maintain food quality for a longer
period of time. The total sales of MFI’s product lines are as
shown in Table 6.
MFI’s sauce products are precooked sauces with
various flavours such as meat curry, rendang, sambal tumis,
sour and spicy (asam pedas) and Kurma. They are packed
in retort pouch. The preparation of the sauces requires the
consumers to dip the pouch into boiled water for about two
minutes and the sauce is then ready to be eaten. Consumers
can add fresh meat, chicken or seafood into the sauce and
cook it for about 8 minutes or until it is cooked. A list of
Musalmah’s sauces is given in Exhibit 2.

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 musalmah sauce: opt for the best  89

Table 6. Total sales and growth rates of Musalmah Food Industries (2002–2008)

2004 2005 2006 2007 2008

RM ‘000 % RM ‘000 % RM ‘000 % RM ‘000 % RM ‘000

Food catering for 802 18 946 21 1,163 24 1,442 27.5 1,839

MAS/airline services
and airport*

University feeding 246 58 388 72 667 56 1040 62 1,684

program*
Sauce products 1614.8** 25.2 2021.7 24.5 2517.1 9.4 2753.7 5.6 2907.2
(domestic segment)

Note: *actual figures, **×1.1 of the actual figure.

Source: Musalmah Food Industries Sdn Berhad Annual Reports (2004; 2005; 2006; 2007; 2008)18,19,20,21,22.

Specifically, the main competitors of MFI are the ready-

to-cook and ready-to-eat sauces produced by five companies:
Sing Long from Singapore, Madam Sal, Sri Murni, Lee Kum
Kee, a Chinese based company and Teen Gourmont. Among
these companies, Sri Murni is the main competitor because it
is a bumiputera company and produce Halal products. The
others companies are Chinese owned and do not have the
Halal logo on the packaging. The comparison between MFI
and other ready-to-eat sauces or ready-to-cook pastes is as
indicated in Table 7.
Amongst the competitors, Sing Long and Lee Kum Kee
are two international giant companies that produce similar
products, while others such as Madam Sal and Sri Murni
are considered small competitors and relatively new to this
industry. Their share of the market is relatively small.

Marketing Channels

In the beginning of its establishment, MFI’s products were

sold by its mobile salesmen from small grocery shops to the
customers. The products were sold on consignment basis.
However, this approach failed because some of the grocery
shops delayed their payments, closed their operations with

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Table 7. Comparison between Musalmah’s and other selected brands

Brand/Company Product Main Characteristics/ Weight Packaging Price

Types Special Features
Musalmah/MFI 24 – Ready-to-eat/ – 180 gram Retort RM3.20
cook sauce – 300 gram pouch RM5.79
– Precooked
– Halal Logo on
packaging
Sing Long/ 7 – Ready-to-cook sauce – 150 gram Plastic RM2.60
Sing Long – Singapore based based
– No Halal logo on pouch
packaging

Madam SAL/Sal 3 – Ready-to-eat sauce – 180 gram High quality RM3.59

Food Industries – Heat and serve retort pouch
– The meat is cooked (can be heated
together in microwave)
– No Halal logo on
packaging
Sri Murni/FMM 9 – Ready-to-cook paste – 120 gram Plastic based RM2.50
– Halal logo on pouch
packaging
Lee Kum Kee/ 5 – Ready-to-cook paste – 150 gram Plastic based RM3.20
Lee Kum Kee – China based pouch
– No Halal logo on
packaging
Teen’s gourmet/ 3 – Ready-to-cook paste – 200 gram Plastic based RM2.00
Sunfraco Sdn Bhd – No Halal logo on pouch
packaging
Source: The author inspected the supermarket Giant and Grand Union Seri Kembangan on 24 April 2009.

uncollected debts and in some cases, the salesmen went

missing with the collection of payments. Starting from 1994,
Musalmah was marketed by MFI Trading Sdn. Berhad, a
sister company of MFI. Its marketing channels were mainly
the supermarkets, hypermarkets and large grocery stores.
It was then very unlikely to find Musalmah’s sauce in small
outlets or in the remote areas.
This approach was considered more effective and prof-
itable as the products were sent only to the hypermarkets and

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 musalmah sauce: opt for the best  91

supermarkets. The supermarket distribution centre would dis-

tribute the products to its supermarket chains. For example,
MFI would send its products to the Tesco distribution centre
in the Glenmarie industrial park in Shah Alam and they
would in turn be distributed to the Tesco supermarket chains.
The sale of MFI had increased as the number of hyper-
markets and supermarkets had been increasing every year.
In other words, the market expansion was done in parallel
with the supermarket expansion in Malaysia. This approach
was very effective as consumers are looking for convenience
foods could easily find them in the supermarkets and hyper-
markets. They also have a wide range of products to choose
from.
According to the Statistics Department of Malaysia,
there was a big change in terms of the share of retail markets
and the number of marketing channels. The numbers of
grocery outlets were reduced from 55,869 in 1993 to 44,990
in 2003, a negative growth of 19.5%. On the other hand,
the number of supermarkets and hypermarkets showed
an increasing trend where the total number had increased
from 429 in 1995 to 793 in 2005. The number of retailers in
Malaysia is as shown in Table 8.

Table 8. The distribution of retailers in Malaysia

1995 2005
Numbers Numbers Changes % of
Contribution
Grocery shops 55869 44990 -19.5 90.1
Supermarkets 349 588 68.5 1.4
Supermarkets and hypermarkets 80 205 156.3 0.4
Convenience stores 116 219 88.8 0.4
Department stores 43 302 602.3 0.6
Mini markets 1535 3632 136.6 7.3
Total 57992 49936 -13.9 100.0
23
Source: Statistics Department of Malaysia (2006) .

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Price

The price of MFI products is relatively competitive as com-

pared to other products in the same category. There are two
different prices for two categories of products: RM3.20 for a
180 gram product and RM5.79 for a 300 gram one. Different
companies sell their products in different weights: 120
grams, 150 grams, 180 grams and 300 grams. As a compar-
ison, the price per unit of Musalmah is RM0.0178/gm, while
for other competitors: Sing Long (RM0.0173/gm), Madam
Sal (RM0.0199/gm), Sri Murni (RM0.020), Lee Kum Kee
(RM0.021/gm) and Teen Gourmet (RM0.010/gm).

Promotion

Most of MFI business is carried out through government

contract. It supplies ready-to-eat and ready-to-cook products
directly to its customers. MFI does not have much experience
in conducting its promotion activities for consumer prod-
ucts. It only produces product catalogues and brochures to be
distributed at the supermarkets and hypermarkets. It never
promotes its products using the mass media such as radio,
television and newspaper. MFI, however, advertises its prod-
ucts on the internet. It uses Ali-Baba.com, one of the famous
sources of products and contact suppliers on the internet’s
top B2B directory. Only quite recently did MFI advertise its
products on the billboards along the highways. This adver-
tisement cost MFI about RM20,000 for six month. However,
MFI cannot judge the effectiveness of this advertisement on
its sale.

The Performance of MFI

In general the performance of MFI’s product line can be sum-

marized as in Table 9.
At the end of its meeting, the management of
Musalmah still had doubts as to how they can sustain their
market share in the processed food industry, especially in the

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 musalmah sauce: opt for the best  93

Table 9. Product lines and performances of Musalmah (2007)

Musalmah Product Lines Contribution to Company’s Profit

Food catering for airlines and This service was operated by its sister company. It showed
airport continuous losses due to the high cost of operations and
would be restructured in the near future.

Food Service division (University Revenue increased from RM1.1 million (2004) to RM4.2
feeding program) million (2005). However, this program had been terminated,
except at UUM, due to continuous losses.

Manufacturing division (Sauce Net profit increased from RM0.6 (2004) to RM1.4 million
products) (2005). Sales had increased marginally from RM1.614 million
(2004) to RM12.02 million (2005), RM12.517 million (2006),
RM12.753 million (2007) and RM12.907 million (2008).

Source: Annual Report of Musalmah Holding Berhad (2008) 24; Musalmah’s internal report (2007)25.

ready-to-eat sauce product category. As the pioneer of man-

ufactured processed food using the retort pouch packaging
technique, Musalmah believes that the domestic market offers
a great opportunity for it to become a market leader in this
industry.

ACKNOWLEDGMENTS

The authors would like to thank Musalmah Food Industry’s

(1) general manager Mr. Mohd. Nasir Nasuha, (2) busi-
ness development manager, Mr. Moses Sta Maria, (3) human
resource manager, Ms. Marina Mohd. Yusoff, and (4) Dato’
Ibrahim Ahmad Badawi’s secretary, Ms. Latifah Ibrahim for
their considerable time and attention in providing detailed
first-hand information for this teaching case.

References

1. Musalmah Holding Berhad 2006. Annual Report, p. 7.

2. Musalmah Holding Berhad 2007. Annual Report, p. 6.
3. Musalmah Food Industry Sendirian Berhad 2007. Annual Report,
p. 12.

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 94  ACRJ

4. Fatimah Arshad and Mad Nasir Shamsuddin 2009. Retail market

in Malaysia: Issues and challenges. Economic and Technology
Management Review, 4: 32–45.
5. Ministry of Entrepreneurship and Cooperative Movement 2009.
Statistic of SME. http://www.kpdnkk.gov.my/web/statistics.
Accessed on November 9, 2010.
6. Malaysia 2007. 8th Malaysian Plan, p. 312
7. Ministry of Finance, Malaysia 2008. Economic Report 2007/2008,
pp. 63–77.
8. Ministry of Agriculture and Agro-based Industry 2008. Report
on Processed Food Industry, p. 18.
9. Ibid.
10 . The Star, 16th February 2008. Dewina holdings to supply halal
food overseas, p. 15.
11. Ministry of Higher Education 2008. Annual Report, p. 37.
12 . Lembaga Urusan dan Tabung Haji Annual 2006. Annual Report,
p. 84.
13. Tourism Malaysia 2008. Quarterly Bulletin (April–June): 12.
14 . Statistic Department Malaysia 2009. Annual Report on Food
Industry. http://www.statistics.gov.my/portal/index. Accessed
on March 3, 2010.
15 . Ibid.
16. Ministry of Entrepreneurship and Cooperative Movement 2009.
Malaysia Industry Master Plan, p. 36.
17 . Ministry of Agriculture and Agro-based Industry 2007. Processed
Food Industry Report, p. 21.
18 . Annual Report of Musalmah Holding Berhad 2004.
19 . Annual Report of Musalmah Holding Berhad 2005.
20 . Annual Report of Musalmah Holding Berhad 2006.
21. Annual Report of Musalmah Holding Berhad 2007.
22. Annual Report of Musalmah Holding Berhad 2008.
23. Statistics Department of Malaysia 2006. Retail market in Malaysia,
p. 128. Available at http://www.statistics.gov.my/portal/retail
market report. index.php
24. Annual Report of Musalmah Holding Berhad 2008.
25. Internal Report, Musalmah 2007.

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 musalmah sauce: opt for the best  95

Exhibit 1
Exhibit
Organizational Structure 1
of Musalmah Holding Berhad
Organizational Structure of Musalmah Holding Berhad

Chairman/CEO
(Datuk Ibrahim)

General Manager
(Mohammad Nasir)

Other
subsidiaries
Musalmah Food Musalmah Food
Industries (MFI) Trading (MFT)
(Mohammad Nasir) (Sta Maria)

Warehouse Production Quality Finance Human

Management Resource

Exhibit 2
The Sauces Manufactured and Marketed by Musalmah Food Industries

1. Musalmah's Malaysian Hoi Sin Sauce 300GM

2. Musalmah's Thai Masaman Curry Sauce 300GM
3. Musalmah's Thai Green Curry Sauce 300GM
4. Musalmah's Indonesia Rendang Sauce 300GM
5. Musalmah's Thai Kaffir Lime Leaf & Basil Sauce 300GM
6. Musalmah's Thai sweet & Sour Sauce 300 GM
7. Musalmah’s Malaysian Masak Merah Sauce 300GM
8. Musalmah’s Malaysia Nyonya Sauce 300GM
9. Musalmah's Kuah Kari Ikan 180G IS
10. Musalmah’s Kuah Kari Daging 180G IS
11 .Musalmah’s Kuah Kari Rendang 180G IS
12. Musalmah's Kuah Sambal Tumis 180G
13. Musalmah's Kuah Masak Merah 180G IS
14. Musalmah's Kuah Asam Pedas 180G
15. Musalmah's Kuah Kari Kurma 180G
16. Musalmah’s Lemak Cili Padi 180GM
17. Musalmah's Kuah Pajeri 180G
18. Musalmah's Kuah Satay 180G
19. Musalmah's Kuah Ayam Madu 180G
20. Musalmah's Kuah Kari Ayam 180G
21. Musalmah's Kuah Kari Rendang 180G IS
22. Musalmah's Kuah Sambal Pedas 180G
23. Musalmah's Kuah Masak Merah 180G IS
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Exhibit 2

The Sauces Manufactured and Marketed by Musalmah Food

Industries
1. Musalmah’s Malaysian Hoi Sin Sauce 300GM
2. Musalmah’s Thai Masaman Curry Sauce 300GM
3. Musalmah’s Thai Green Curry Sauce 300GM
4. Musalmah’s Indonesia Rendang Sauce 300GM
5. Musalmah’s Thai Kaffir Lime Leaf & Basil Sauce 300GM
6. Musalmah’s Thai sweet & Sour Sauce 300 GM
7. Musalmah’s Malaysian Masak Merah Sauce 300GM
8. Musalmah’s Malaysia Nyonya Sauce 300GM
9. Musalmah’s Kuah Kari Ikan 180G IS
10. Musalmah’s Kuah Kari Daging 180G IS
11. Musalmah’s Kuah Kari Rendang 180G IS
12. Musalmah’s Kuah Sambal Tumis 180G
13. Musalmah’s Kuah Masak Merah 180G IS
14. Musalmah’s Kuah Asam Pedas 180G
15. Musalmah’s Kuah Kari Kurma 180G
16. Musalmah’s Lemak Cili Padi 180GM
17. Musalmah’s Kuah Pajeri 180G
18. Musalmah’s Kuah Satay 180G
19. Musalmah’s Kuah Ayam Madu 180G
20. Musalmah’s Kuah Kari Ayam 180G
21. Musalmah’s Kuah Kari Rendang 180G IS
22. Musalmah’s Kuah Sambal Pedas 180G
23. Musalmah’s Kuah Masak Merah 180G IS
24. Musalmah’s Kuah Asam Pedas 180G

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