Global food safety concerns offer potential for both Muslim and non-Muslim markets

Taking advantage of Brunei Darussalam’s core competencies, including its international reputation and an observant Islamic culture with strict adherence to halal standards, the country is looking to serve the growing global demand for sharia-compliant products by expanding its own stable of halal offerings. Derived from the Arabic word meaning permissible, halal is a term widely used to designate food and other consumer products that are deemed suitable according to Islamic law.

In addition, a growing number of non-Muslims are consuming more of these products due to the perception that halal-certified goods undergo more stringent safety inspections, and quality and hygiene controls. In this manner, halal products also hold appeal for a much broader market due to their compliance with universal values such as ethical, hygienic and eco-friendly processing standards, as well as higher workplace safety practices and nutritional value.

Tan Too Liang, managing director of BMC Food Industries, told OBG, “Food quality and processes are very strictly monitored by the relevant authorities in Brunei Darussalam, representing a marked advantage for the industry here in comparison with the standards present in other South-east Asian nations.”

Lucrative Market

The global halal market was estimated at $2.3trn annually in 2012 by the Halal Industry Development Corporation, divided among the globe’s roughly 2bn Muslims. The lion’s share of this value is accounted for by the fast-moving consumer goods (FMCG) sector, which accounted for 67% of all halal goods. The largest contributor of halal products in the FMCG sector is the processed food and beverage sub-sector, representing 35% of FMCGs. Pharmaceuticals composed another 23%, followed by bakery products (12%), primary meat (10%), cosmetics and personal care (9%), nutraceuticals (6%) and confectionary goods (5%). In addition to strict halal standards that must be adhered to during each stage of the supply chain, each step must comply with halal logistics practices and Islamic financing principals to maintain full integrity.

The early success of halal-centric businesses in Brunei Darussalam and throughout the region has already proven the viability of this business model, and projected worldwide demographic trends point to continued demand growth in the coming decades. The global Muslim population of 2.1bn (2012 estimates) is forecast to grow at twice the average worldwide growth rate, leading to Muslims representing an estimated 26.4% of the global population by 2030, according to a Pew Research Centre study. Not only is the Muslim target market expanding, but its purchasing power is also on the rise, with UN and IMF data indicating that the average GDP per capita for Muslims worldwide grew at a compound annual growth rate of 6.8% from 1990 to 2010, compared to a global average rate of 5%. Lastly, the uptake of halal products in primarily non-Muslim countries is also increasing, particularly in the huge markets of China and India. Ongoing concerns over lax foods safety standards, in China in particular, are driving growth for products perceived as safer, leading to an 10% annual rise in the Chinese halal market, according to the Islamic Association of China.

Brunei Halal

National halal certification is carried out by the Brunei Islamic Religious Council, which is under the Ministry of Religious Affairs (MoRA) and acts independently of any commercial entity. Working with the accreditation programme is the commercial arm of the industry led by Brunei Wafirah, which owns the rights to the Brunei Halal brand. A wholly owned state firm, Brunei Wafirah was established in 2009 to develop the Brunei Halal brand internationally. Due to the costs of production and logistics, the scarcity of raw materials and other international certification requirements, nearly all manufacturing of Brunei Halal products is carried out overseas at processing facilities located in China, Spain, Malaysia and India.

The Malaysian market was introduced to Brunei Halal in April 2014, when the marketing and distribution arm of Brunei Wafirah, Ghanim International Food Corporation, announced the launch of its Dishes of India products. The entrance was facilitated by a joint agreement made by the religious affairs ministries in Brunei Darussalam, Indonesia, Malaysia and Singapore under which accredited halal products from each nation may be sold in participating countries without having to obtain permission from each individual nation. The brand has also established itself in the lucrative Singapore retail market. Looking further afield, Brunei Wafirah has been making inroads in the UK as well. The firm announced in late 2013 an agreement with wholesaler and distributor Costcutter to distribute its products across the firm’s network of around 1600 retailers across the UK. Initial offerings will consist primarily of ready meals, frozen products and soft drinks with a target of achieving £200m in sales in the second or third year of operations, according Brunei Wafirah.

Branching Out

After initially developing only food products, the Brunei Halal brand is also now branching out into other products such as pharmaceuticals and cosmetics which will also be sold internationally. Halal guidelines in the Sultanate were developed for pharmaceuticals in 2010, and the Ministry of Industry and Primary Resources (MIPR) was developing regulations for manufacturing and handling halal cosmetic products, as well as logistics standards, as of early 2014. With these rules in place, the MoRA also mandated that all restaurant and food retailers serving Muslim customers would require halal certification by 2014, although a grace period of one year has been given.

Complementing the Sultanate’s stringent regulations is the creation of the Brunei Darussalam Halal Science Centre, which will carry out tasks including halal authentication, detection, innovation, and research and development (R&D). The centre will be fitted with the most advanced analytical equipment and machines to be utilised for both domestic needs and to further the Sultanate’s efforts to establish itself as the global reference centre for halal analysis, science and innovation. The MIPR is working closely with the MoRA, the Ministry of Health and Universiti Brunei Darussalam in developing the project, and has signed a memorandum of understanding in 2013 with three international institutions (Florida State University in the US, the Graduate School of Engineering in Osaka and Japan Food Research Laboratories) and one international company (Corporation South Korea) to cooperate on technical training and academic research. The facility is being constructed in a renovated building and was originally scheduled for completion by July 2014, although the project was not yet open as of late August 2014.

Production Base

In spite of the challenges associated with producing domestically, a number of successful halal manufacturing operations have proven that these ventures can in fact thrive in the Sultanate. One such company is the Al Hana Japan Incorporation (AHJI) joint venture between local dairy firm Al Hana Enterprise and Tokyo-based food firm Soy and World International, which produces soy milk and cakes for the Bruneian market. Originally created to bring halal products to the 127m-strong Japanese market, AHJI is targeting an ambitious 40% of Japan’s halal demand and more recently announced a plan in early 2014 to grow orchids in Brunei Darussalam for export to Japan as well. In order to supply both the domestic and regional markets, the company also began operations in early 2014 at its new soy bean processing plant situated within the Serambangun Industrial Complex in Tutong. The new facility will provide ingredients for traditional food products, as well as a new line of cosmetics developed from high-end, soya-bean-based products.

The development of one the world’s first halal pharmaceutical guidelines in 2010 gave Brunei Darussalam a leg up in the pharmaceuticals export subsector, an advantage the country will need when considering the similar aspirations of regional competitors Malaysia and Indonesia, both of which boast large, Muslim-majority populations. The strategy has already yielded some early results in the form of the establishment of Simpor Pharma, which acquired full halal certification at the end of 2013 and began producing sharia-compliant capsules in early 2014. A partnership between Canada-based Viva Pharmaceutical, private equity fund Aureos (Brunei) Capital and a group of local investors, the $26m facility was established as a production plant in Lambak Kanan (East) Industrial Site with a planned output of a variety of halal-certified health supplements, herbal products, nutraceuticals, cosmetics and other prescription drugs for export to Asia Pacific, the Middle East, Western Europe and the US.

Looking to the future, companies are also hoping to combine R&D projects with established halal standards. Japan’s Mitsubishi Corporation, for instance, announced a $2m commitment at the R&D stage for a microalgae cultivation project in June 2013, which will require further investment of $15m-20m upon commercialisation. The project aims to cultivate haematococcus pluvialis for the purpose of extracting Astaxanthin, employing halal-compliant methods. Astaxanthin is a highly valuable anti-oxidant utilised in many cosmetics and nutraceutical products, which could then be used as an input for further domestic manufacturing or export.