Their Production Costs Are High: Ghanim

| 04/10/2009 | Reply

hala

High Cost Noel Shield, Interim Chief Executive Of Ghanim
International Food Corporation, Says Its Difficult To Get High-Cost SME
Products Into Major Retailers’ Shelves abroad.

Bandar Seri Begawan – Bruneian companies production cost has
affected their chances of being immediately considered for inclusion in
the list of food makers whose products would be marketed under the
Brunei Halal brand.

At the moment, Ghanim International Food Corporation Sdn Bhd is not
looking at local food producers due to the high operation and
production costs, Noel Shield, interim chief executive officer at
Ghanim, said in an interview with The Brunei Times.

“We are not concentrating on local production and nearly all of the
companies we are working with now are all international companies,
about 90 per cent,” said Shield.

“(This) for the simple reason that they’ve got fairly big production
scales now,” he explained. “I’ve kept local companies on a separate
list because I started to look at the local SMEs (small and medium
enterprises) and went to visit them at their factories. I haven’t fully
got into pricing structure, but what I’ve done is see how it is done
and see where we can rake cost out of their current business.”

Once the brand’s marketing strategies get on stream though, it should be easier for high-cost SMEs to get on board.

Joseph Sequeira, technical director of Hamidjojo Development who has
been researching markets for over 20 years, said companies with
operations in Brunei do have to deal with higher costs in shipping
their goods overseas.

“From my experience, average operation costs have to be broken down
and compared to other countries before deciding how we fare in the
market,” said Sequera. ‘The most important categories to compare are
power, labour, transportation and raw material costs.

“In terms of power costs, Brunei is definitely lower and is one of
the lowest in the region, but with labour, we are lower than Singapore
but higher than Indonesia and Thailand,” he said.

One aspect of production that adds to fairly high operation cost is the Sultanate is raw materials and shipping.

“Almost everything is imported and with food and beverages as well,
I believe. We do not really produce a lot of mw materials in Brunei and
shipping adds to the cost of raw materials,” he said.

There is no direct shipping route to Brunei from common sources of
raw materials. “So raw materials that come in from … Japan, China or
Europe would have to stop at Singapore and then take another ship to
Brunei, and this makes costs go up,” said Sequeira.

Shield said Ghanim’s strategy will be to build the brand so that it
will be easier to introduce (later) local food under the brand.

Manufacturers that will be licensed to use the Brunei Halal brand are expected to easily penetrate growing Muslim markets.

Ghanim at the moment is working on accrediting mostly snack items due to their high visibility and volume sales.

“Niche products won’t do that for you,” said Shield, “but that’s
part of the whole umbrella. So you’ve got niche products, snack
products, fast moving products, impulse products and some local SME
products,” he said.

“Niche products will be looked at in the next stage … because
being a niche product, your sales aren’t going to be extremely high,”
he said.

Shield added that by working with a good global retailer and by
introducing a big range of products, it becomes easier to bring some of
the local high-cost SMEs into the whole process.

“You’re never going to get a high-cost local SME into a major
retailer without already having some strength. That’s why (local SMEs)
are going to find it difficult, but I do think that there is somewhere
to go and we have the potential to do this,” he said.

“We are still targeting the high disposable income market, that
hasn’t changed in our strategy, such as Europe or the United Kingdom
for the first stage,” he said. He added that the idea is “to get as
global as possible”, but should other countries come online quicker,
then their business model is flexible enough to consider those markets.
“For example, we’ve had approaches from South Africa, where there is a
big Muslim community, and it may be easier to establish the brand in
South Africa than, maybe, Germany,” he said. — Courtesy of The Brunei Times

Category: Asia, Food Manufacturing

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