Interview: Jens Michel
Where are the core areas of growth within the hotel, restaurant and catering sector?
JENS MICHEL: The sector is already sizeable in Myanmar, and one in which growth hinges heavily on tourism and the development of the middle class. Before entering Myanmar we conducted a thorough market study and found the hotel, restaurant and catering market in Yangon to be worth about $1bn. Since only a small number of businesses currently provide wholesale services, we envision considerable room to grow and innovate as a business-to-business wholesaler. In 2009 there was no noticeable or quantifiable middle class. This has now changed. There is a middle class that is willing and able to spend on entertainment and quality. This demand is driven by education and increased affordability.
Moreover, there is a recovery on the way for the tourism sector. The demographics of inbound tourists have shifted away from European visitors, whose numbers have decreased, and towards those from China and South-east Asia – a change which brings an expansion of fusion food offerings. Areas of growth in the country include not only Yangon and Mandalay, but also Naypyidaw, and tourism destinations such as Ngapoli Beach and Ngwe Saung.
What has been your experience of sourcing products locally, and how can consistency be ensured?
MICHEL: We have quickly identified strong local sourcing opportunities that are competitive in price and able to enact stringent certification programmes in order to play a productive role in supply chains. Within eight months of operations we had sourced 26% of products locally, and there is no reason to believe that we will not meet our target of 75%. There are challenges on this path, the most prominent of which is achieving a consistently high quality. The quality of meat has been a key issue in Myanmar, and firms will work hard to find red meat of compliant quality. These challenges are not insurmountable. To overcome them it is imperative to nurture strong relationships right down the supply chain. Regarding farmer development, for instance, a close relationship involves training and good agricultural practices certification, alongside improved market access. Such measures have proven effective in standardising supply. Turning to local competition, and the ability to compete in a market characterised by relationship trading, I believe that well-planned and efficient practices are indeed enough to create business. We see that prevailing price norms are high in key product segments. Companies with the ability to leverage a global supply chain network can be highly competitive. In the food service delivery segment we have very quickly established affordable pricing standards – notably in meat, rice and oils.
How will the liberalisation of the retail and wholesale sectors affect food distribution services?
MICHEL: Liberalisation of the retail and wholesale sectors is a fantastic development that has unleashed much opportunity in an underserved market. That said, thus far very few firms have entered under the new regulations. We believe that global companies are monitoring the political situation very closely, taking heed of the upcoming elections and testing domestic market sensitivity. European firms are particularly conscious of this and appear to be applying a wait-and-see approach to investment. Regional firms tend to be more fast moving. Therefore, as the elections close in November 2020, we expect liberalisation to move the sector. Looking forward, it is important to note the capital requirements for foreign firms, which are pegged high and present a significant hurdle for mid-sized companies looking to enter and take advantage of the opportunities the market has to offer. Generally, this is a step in the right direction. This trend of liberalisation has seen consistent momentum across the economy and is a promising signal to businesses that the public sphere is strongly committed to private sector growth.
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