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

EAP Regional Agribusiness Trade & Investment Conference 2009, Singapore

The ESCM Approach

Issues and Challenges in the

horticultural trade in Malaysia

2

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

• Hypermarkets – TESCO, JUSCO, STORE, GIANT & Mydin

• Exporters

• Institutional Markets

• Food manufacturers

Vegetable &

Fruit Clusters

•Tomatoes

•Capsicum

• lettuce

•Zucchini

•Papaya

•Pineapple

•Chilly

•Banana

Central Distribution

Center

CPPC

CPPC

CPPC

CPPC

4 Regional Office & Sourcing Centers

• MAFC Farms (CEF)

• Individual & Group Private farms

• Corporate Contract Farms

• Institutional Cluster Farms (TKPM)

Source; Azizi MAFC (2008)

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

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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

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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

Expertise

THANK YOU

Value Packed Freshness

Award

Certifications

ISO 9001:2000

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