Malaysia F&B

Since the COVID-19 pandemic struck our nation in 2020, local businesses continue to be greatly impacted on many fronts. According to the SME Association of Malaysia, at least 100,000 SMEs have ceased operations since the first MCO.

Not only that, Datuk William Ng, Central Chairman of Small and Medium Enterprises Association (Samenta), said many businesses that survived were either in the right industry or kept afloat by digging into savings to pay salaries and suppliers.

For many of these businesses, especially those within the food and beverage (F&B) sector, the core focus has shifted from profitability to survivability, with the need to adopt new business strategies to remain operational.

In a few months from the first lockdown, the disruption has led to over 2,000 eateries shutting down permanently. The ongoing restrictions could further affect 60 per cent of F&B operations, eventually leading to more closures.

While the outlook of the F&B industry remains uncertain, many businesses have shown resilience and adapted to the new normal – such as exploring new opportunities to source quality ingredients at reasonable prices or additional revenue streams by expanding their customer base through digital means to ensure their business survival and potentially, growth.

Also Read: How COVID-19 accelerated digitalisation in the F&B industry in Malaysia

Food disruption and cost inflation: A key disruptor to the Sector

Challenges faced by the F&B industry had happened since the first nationwide lockdown when the food supply chain encountered disruptions due to travel restrictions, market opening hours and closing of local open markets.

The supply of produce from farms have been affected by bottlenecks to meet demand, coupled with movement restrictions and dependency of the season, which has led to a decrease in food supplies.

The cost of food supplies undoubtedly plays a significant role in strategising their expenditure. Datuk Jawahar Ali Taib Khan, President of Malaysian Muslim Restaurant Owners Association (Presma), said that the price of raw materials had more than doubled since the second lockdown.

Supply cost is a key determining factor to the price of end products for consumers and how long a business can sustain through this arrangement. According to the United Nations Development Programme (UNDP), suppliers must find a flexible and resilient supply chain by mapping their stakeholders in a system, mitigating potential business impact due to supply disruptions and price inflation.

Given the current circumstances, going digital has been instrumental for businesses to regain a sense of normalcy. Having digital access provides businesses with an alternative to reach out to customers and suppliers alike.

Transforming by digital means

However, the initiative to push businesses to digitalise is not new in Malaysia. There have been many government initiatives in the past to spur digital transformation. Still, adoption thus far has been slower than expected, especially among SMEs, with only a third of Malaysian enterprises going digital. In contrast, less than a quarter has a digital team, according to the World Bank June 2021 report.

Also Read: 25 notable startups in Malaysia that have taken off in 2021

The emergence of COVID-19 has accelerated businesses’ ability to adapt to new and innovative strategies to remain resilient in times of crisis.

Digitalisation is crucial today as many businesses have recognised the benefits reaped during the MCO, with 40 per cent increasing their focus on online sales and 70 per cent of companies expecting their revenue to grow in 2021, according to a survey by CPA Australia.

Driving digitalisation has also been central in the Twelfth Malaysia Plan, where accelerating technology adoption and innovation constitutes one of the catalytic policy enablers that will direct the nation towards resettling the economy and achieving a high technology-based economy.

This will accelerate Malaysia’s adoption and application of digital and advanced technology to unlock new opportunities.

How this translates for the local F&B sector is that embracing digital transformation in the form of digital tools and platforms will be critical towards improving business sustainability and operational efficiency.

Businesses can reduce costs and increase their profit margins when using advanced digital technologies such as data management solutions, increasing productivity by 60 per cent, according to research by Huawei Technologies.

Bringing two digital tools together to elevate F&B businesses

Recently, F&B solutions provider Saladplate and Food Market Hub collaborated to offer a comprehensive digital platform for the local F&B sector, designed to simplify the product sourcing journey and manage business expenditure intelligently.

Platforms such as this don’t just offer businesses a digital marketplace to gather and conduct business. The proprietary AI-Powered, Cloud-Based procurement solution within the platform enables business owners to be cost-efficient and assist them in making purchase smarter decisions, which is vital during this challenging period.

This echoed the Malaysian government when it announced the Budget 2022 plan to encourage technological transformation. The allocation of MYR30 million to implement an IR 4.0 innovation hub and MYR20 million for Cradle to oversee the startup ecosystem points to the goal of centralising technology and innovation as a means of local businesses, enabling them to remain competitive during this post-pandemic Malaysia.

Also Read: How cloud kitchen startup COOKHOUSE, started amidst COVID-19, managed to win 35 F&B clients in Malaysia within a year

According to Jimmy Lai, president of CPA Australia’s Malaysia Division, 42 per cent of Malaysian businesses saw positive returns from their digital investments in 2020, and the focus on digital will likely see businesses recover quickly from the pandemic.

Din Tai Fung, an upscale Taiwanese restaurant chain, is an example of a business in Malaysia that have successfully adopted the digital platform and saw a 31 per cent increase in their year-on-year growth results in 2020.

Available digital platforms such as the one by Saladplate and Food Market Hub, amongst others, will play a significant role in driving business growth or its sustainability journey.

It is a pre-requisite in this digital age that F&B business owners should factor digital transformation in their business plan, utilising digital tools to provide them with the needed competitive edge during this period of economic recovery or thereon.

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Image credit: oksix

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