Singapore gears up to serve China’s halal market

Photo: Muslim women break fast on Laylat al-Qadr during the holy month of Ramadan at the historic Niujie Mosque in Beijing, China June 21, 2017. REUTERS/Thomas Peter

China lacks the standards and certification framework needed to serve its local halal demand, presenting opportunities for foreign exports and expertise to tap the nation’s $21 billion halal market, as estimated by Euromonitor International. Enter Singapore, whose stringent food safety standards, internationally recognized halal certification and close business links with China make it a good fit to serve the People’s Republic’s growing halal industry.

“Singapore has been China’s top foreign investor since 2013. Singaporean companies, including the food players, have always been interested in the Chinese market and are familiar with it,” Kenneth Teo, International Enterprise (IE) regional director of West China told Salaam Gateway. Government body IE facilitates the overseas growth of Singapore-based companies and promotes the city state’s international trade.

In 2013, Singapore became the largest foreign investor in China for the first time, pumping $7.23 billion into the People's Republic, according to IE data. Last year, Singapore remained China's top foreign investor, accounting for 5 percent of the $133.7 billion inflow, according to United Nations Conference on Trade and Development (UNCTAD). The two countries have forged strong ties especially in trade and finance. 

Singapore may be ready to help fulfill China’s increasing demand for halal, as there are mechanisms and facilities already in place. “Up to 70 percent of Singapore food manufacturers’ exported goods are halal-certified,” said Teo.

“According to the Islamic Religious Council of Singapore (MUIS), the number of halal-certified Singapore food manufacturers has increased from 524 in 2015 to 784 as of Q2 2017. This means many of our food manufacturers can tap this large consumer market readily,” he added.

Ronnie Faizal Tan, Chairman of Singapore-based halal supply chain platform MyOutlets agrees the republic ticks many of the right boxes in meeting China’s halal market needs.

MyOutlets opened Singapore’s biggest all halal-certified foods supermarket in late 2016 and has expanded into Japan with a store in Chiba. The company is currently working on opening its first supermarket in Malaysia, in the southern border town of Johor Bahru, and two in China – one in Beijing and another in Dongguan in the southern Guangdong province, the company told Salaam Gateway. MyOutlets also runs online halal marketplace Haladeen that will also be plugged into the China market.

As an indication of China’s halal market potential, Tan expects a sales revenue of $500 million from MyOutlets’ China businesses within the next three years, which will contribute almost 30 percent of the company’s total revenue. 

“MyOutlets is currently in the IPO financial roadmap and seeking external funding to grow our businesses. We are expecting to materialize the group holdings market capitalization of $4.5 billion by 2023,” said Tan.

Photo: Muslims prepare food before breaking fast on the first Friday of the holy fasting month of Ramadan at the historic Niujie Mosque in Beijing, China June 2, 2017. REUTERS/Damir Sagolj

ADVANTAGE SINGAPORE

Tan believes Singapore’s advantage serving China’s halal market stems from the smaller country’s skills in communications and marketing.

“Efficiency in responding and a service-oriented mindset is one important factor,” said Tan, acknowledging the similarities in culture between the two countries and a prevalence of Chinese speakers in Singapore. “Singapore also tends to go beyond just the services by providing additional value in the form of market intelligence and technology.”

However, Tan admitted that even though Singapore may be well-positioned to serve China’s halal market, it should consider working with Malaysia to best address the opportunity. He believes it would be beneficial for Malaysia’s Halal Industry Development Corporation (HDC) to provide training on export readiness to China for local manufacturers in both Singapore and Malaysia.

“Integration and collaboration are the only ways to survive in today’s world. Partners and companies must play their roles respectively to deliver the best results,” said Tan.

Malaysia has maintained a good position in terms of halal certification standards that would allow it to export to China, said Tan. However, he believes this is only the case for major corporations, often leaving out the smaller players.

SMEs SIDELINED

“Only a handful of ‘big boys’ such as Nestle and Old Town White Coffee are performing well in China, but there is a big pool of small- and medium-sized enterprises that are struggling to enter the market,” he said, adding that the main causes of this struggle are expensive listing and brand marketing fees.

According to Tan, SMEs also struggle to enter China’s halal market due to a lack of understanding of market demands, including certain nuances when making products for Chinese consumers.

“For example, most mainland Chinese do not like the traditional Southeast Asian food ‘rojak’, as they feel it pungent, or ‘sambal chilli’ as Southeast Asian chilli is sweet and they prefer theirs salty.”

Tan said halal-focused businesses from Singapore and Malaysia need to thoroughly understand their customers and target market before trying to enter China.

Photo: Stacks of meat skewers at a stall on Beiyuanmen Muslim Street, Muslim Quarters, Xi'an China. Oswald Visual/Shutterstock

FOOD STANDARDS

MyOutlets had tried to export halal products to China in the past but ran into trouble with the country’s Inspection and Quarantine Services over the nation’s strict import rules. Tan cites a lack of consistent import regulations in different Chinese provinces as the main challenge. However, he said there has been some progress in this regard. 

“The current China inspection and Quarantine practices are more transparent, as well as more efficient, especially with the pressure from many countries and associations,” said Tan.

He added that the government has received feedback from industry stakeholders and is looking to implement a single standard importation procedure.

China currently does not have consistent national halal food standards and enforcement and Teo believes it is vital for companies looking to do business in the country’s halal market to be aware of the different standards across provinces.

“It is important to spend time understanding the specific local market conditions and preferences, and develop more competitive and curated offerings,” he said, adding that Singapore's International Enterprise has been working with Singaporean companies to help them get their footing in China’s halal market.

“IE Singapore has been sharing such information with Singaporean companies through seminars and business missions, and will be leading a mission to West China this October,” he said. “We are also working with the Singapore Manufacturing Federation to raise awareness of our halal food offerings and seek partners at the Xi’an International Halal Food and Trade Expo in October 2017.”

IE Singapore’s Teo also points out trends that businesses should be aware of when dealing with China’s halal market, including regulation.

“Local provincial governments in China are stepping up efforts to regulate the halal food industry by introducing their own halal certifications and standards, such as the Ningxia Islamic Association Halal certificate and the Gansu Linxia Halal Food Certification Centre certificate,” he said.

Photo: A restaurant serving halal food in Niujie, Beijing, on April 14, 2017. Farris Noorzali/Shutterstock

CHINESE DEMAND AND SUPPLY

Halal food is becoming increasingly popular in China, according to Euromonitor, particularly in the west of the country where 90 percent of the nation’s Muslim population resides. Other popular cities for halal include Beijing, Guangzhou, and Xinjiang.

The halal market opportunity has caught the attention of China’s large food companies.

“Large Chinese food companies are beginning to target this growing segment, some through investments and acquisitions to boost their halal offerings,” said IE Singapore's Teo. “For example, to target the Muslim segment and increase its customer base, [popular tea supplier] Jia Duo Bao has also certified its herbal tea drink as halal.”

“There is an estimated Muslim population of 26 million in China, presenting a large consumer base,” said Teo. “At this point, we see China predominantly as a consumer market with opportunities for Singapore companies to offer more diversified halal food options.”

Halal-certified foods also appeals to the country’s non-Muslims who are now more aware of food safety. China’s food safety standards have been called into question numerous times especially after the discovery of baby formula tainted with melamine in 2008. Melamine is a plastic used for laminated coatings that includes formaldehyde as an ingredient. The Chinese government estimated 300,000 babies have consumed the toxic formula.

China recorded half a million illegal food safety violations in the first nine months of 2016, including the use of recycled “gutter oil” in restaurants, according to a Reuters news report. This also includes the fake food issue, in which counterfeit eggs and rice made with harmful chemicals hit the market on multiple occasions in the past.

Salaam Gateway reported last year that China’s food safety crisis has lifted the profile and credibility of halal-certified foods as the country’s non-Muslims believe halal is safer. IE Singapore’s Teo agrees.

“Halal food is gaining in popularity among non-Muslims [in China] due to its stringent requirements and inspection processes,” said Teo. “These are key considerations for today’s consumers regarding health, hygiene, and food safety.”

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