The Concept of HalalGAP as a Means of Gaining Unfair Competitive Advantage
Murray Hunter University Malaysia Perlis (UniMAP ) World Food Shortage Conference – Series II Kuala Lumpur, 9-10 th July 2009
<ul><li>The Importance of EurepGAP, GMP and HACCP </li></ul><ul><li>The Organic Food market </li></ul><ul><li>The Halal Market </li></ul><ul><li>Present Status of farming, processing and Supply chain </li></ul><ul><li>The search for competitive advantage for Malaysian agriculture sector </li></ul><ul><li>The principals of Halal GAP </li></ul><ul><li>Why it is necessary to create unfair competitive advantage for the Malaysian Agricultural Sector </li></ul>
EU is approximately 30% of the World Market for food It has great regulatory influence on the rest of the World
Good Manufacturing Practice (GMP) Good Manufacturing Practice (GMP) is a system for the management, quality control, testing of manufacturing facilities for food, pharmaceutical, medical devices, cosmetics and herbicide (in some cases) production. GMP is a total management approach to the operation of manufacturing facilities and laboratories which require documentation practices and procedures to maximize traceability, as a safeguard of the event of any future problems. GMP requires that all equipment be suitable for use according to specific specifications, operated according to certain procedures which would include pre-operational, operational and post-operational practices. Under a GMP system, raw materials utilized in the manufacturing process have set guidelines concerning sourcing, preparation, use and testing. Personnel deployment and standard of training is also defined in GMP, as is the documenting of each operational step in the facility.
Hazard Analysis and Critical Control Points (HACCP) HACCP is a preventative method of food and pharmaceutical safety assurance, taking a holistic or “soil to table” approach. HACCP analysis assesses the biological, chemical and physical hazards involved in production. Although primarily relating to the food industry, HACCP is also applied to the pharmaceutical industry in some jurisdictions and finding a role in the cosmetic industry, on a voluntary basis. The HACCP approach seeks to identify and evaluate potential hazards in the production and supply chain and develop solutions or protocols to deal with each potential hazard, in contrast to traditional quality assurance methods which rely upon post production inspection.
<ul><li>The basic process of the HACCP framework involves; </li></ul><ul><li>The conduction of a hazard analysis of biological, chemical and physical aspects along the production chain that may render food or products unsafe for human consumption and determine the preventative measures that can control these hazards. </li></ul><ul><li>Identify the critical control points in the production process where particular measures can be taken to prevent, eliminate or reduce any hazard to an acceptable level. </li></ul><ul><li>Establish a critical control points monitoring process with maximum and minimum tolerance limits at each control point and specify the monitoring procedure. </li></ul><ul><li>Establish the critical control point monitoring methods necessary to ensure the production process is under control. </li></ul><ul><li>Establish what corrective actions are required when monitoring a critical point detects a deviation from the accepted critical limits. </li></ul><ul><li>Establish the necessary record keeping procedures to maintain documentation of the monitoring of critical points, limits the process reach, and handling of process deviations, and </li></ul><ul><li>Establish a system to ensure that the HACCP system is working as intended. </li></ul><ul><li>The verification of the total system requires a plan to continually review hazards, critical points and preventative measures, so that the system will remain intact and work effectively. </li></ul>
ISO Number Name Purpose ISO 65 Fairtrade: Process and Compliance Used for certification of Fairtrade producers and traders. ISO 9001:2000 (2008) Quality management system Usually used by manufacturing and trading based companies. Focus on seven principals: Customer focus, leadership, involvement of people, process approach, systems approach, continual improvement, factual approach to decision making, and mutually beneficial supplier relationships. Some pharmaceutical manufacturers may certify under PS 9000 . ISO: 9235:1997 Aromatic Natural Raw Materials - Vocabulary Defines natural ISO 14001:2004 Environmental Management System A standard that provides a framework for environmental management covering development of environmental policy, implementation, monitoring and evaluation of policy effect and continual improvement of environmental performance. ISO/IEC 17025:2005 Testing and Calibration Laboratories The certification required for operating a laboratory. Covers the scope of the laboratory, normative references, terms and definitions, and both management and technical requirements. ISO 21149:2006 Cosmetics-Microbiology-Enumeration and detection of aerobic mesophilic bacteria Standard intended to reduce human infection from cosmetic products through a series of microbiological examination standards. HACCP/ISO 22000:2005 HACCP Food Safety Management System The ISO standard for HACCP certification. ISO 22715:2006 Cosmetics-Packaging and Labeling ISO 22716:2007 Good Manufacturing Practice (GMP) – Guidelines on Good Manufacturing Practice Sets out GMP requirements and specifications.
Good Agricultural Practice (GAP) Good Agricultural Practice (GAP) originated around a decade ago as consumers developed a concern for safety issues, environmental and labour standards along the supply chain, by European Retailers, and standards bodies. This led to the formation of EurepGAP, which is a private sector body comprising of retailers, farmers, and relevant people from the service side of agriculture, in what is espoused as a partnership of agricultural producers and retailers for the setting of voluntary standards for the certification of agricultural products.
<ul><li>GAP is basically a number of agreed principals set in agreed and certifiable terms applying to farm production processes that result in safe and healthy food and non-food agricultural products. These principals take into account economic, social and environmental sustainability, as well as social and community cultural practices, with the objective of developing natural resources. These principals set out a framework understanding production issues from a sustainability viewpoint, planning, reviewing, monitoring, and record keeping for each stage of the production process. This framework should provide farmers with the ability to identify problems and issues and modify practices, according to changes in conditions. </li></ul>
<ul><li>1. General Provisions </li></ul><ul><li>GAP guidelines apply both to conventional and organic agricultural practices, </li></ul><ul><li>All farm production should avoid harmful environmental disturbances, which involves good crop rotation, developing buffers and hedge zones, avoidance of damage to existing wildlife habitats, and within the framework of enhancing the biodiversity of the farm. </li></ul><ul><li>Required to follow the critical steps that are needed to comply with good quality, with good hygiene, </li></ul><ul><li>Reduce potential microbiological contamination to a minimum during the production process, </li></ul><ul><li>Documentation should be kept to allow traceability of the entire production process, and </li></ul><ul><li>Encourage their suppliers to comply with GAP guidelines. </li></ul>
<ul><li>2. Personnel and Facilities </li></ul><ul><li>Personnel should be fully trained and educated in what is required in the cultivation, harvesting, processing, drying and conservation processes, as a way to ensure the best quality. </li></ul><ul><li>The education process should be documented, </li></ul><ul><li>Personnel involved in the production process should have a high degree of personal hygiene, and understand their hygiene responsibilities. </li></ul><ul><li>People with infectious diseases or open wounds and cuts should not be involved in the production process (complying with EU-Guidelines on food hygiene and European Directive on Good Manufacturing Practice). </li></ul>
<ul><li>3. Seeds and Propagation Materials </li></ul><ul><li>Seed and other propagation materials must be identified botanically, indicating plant variety, cultivar, chemotype and origin. The material should be traceable. </li></ul><ul><li>Starting materials used in organic production should be certified as organic. </li></ul><ul><li>Starting materials should be pure and free of any pests and diseases and contaminating plants controlled during the cultivation, harvesting and packaging processes. </li></ul><ul><li>Seed and plant materials of or derived from genetically modified organisms (GMO) must be in accordance with National and European regulations. </li></ul>
<ul><li>4. Cultivation, Soil and Fertilization, Irrigation </li></ul><ul><li>Plants should not be grown in soils that are contaminated by sludge, heavy metals and residues of plant protection products and other synthetically derived chemicals. </li></ul><ul><li>Farms should aim for effective minimum input of chemicals, and comply with European Union minimum residue limits. </li></ul><ul><li>Manure should be free of human faeces and thoroughly composted before application </li></ul><ul><li>Irrigation should be minimized as much as possible, according to the needs of the plant. </li></ul><ul><li>Irrigation water should comply with quality standards and free of contaminants such as faeces, heavy metals, pesticides, herbicides and other toxicologically hazardous substances. </li></ul><ul><li>Tillage should be adapted to plant growth and requirements. </li></ul>
<ul><li>5. Harvest </li></ul><ul><li>Harvests should take place when plants are of the best quality and take place under the best conditions i.e., in terms of soil, field and weather conditions). </li></ul><ul><li>Harvest equipment should be in the best order and should be clean. </li></ul><ul><li>Care should be taken during harvest not to collect contaminating weeds. </li></ul><ul><li>Time between harvests, drying and/or processing should be very short and in accordance with the methods that will result in the best quality. </li></ul>
<ul><li>6. Primary Processing </li></ul><ul><li>All primary steps of processing whether for food or medicinal use should conform with the relevant National and European regulations. </li></ul><ul><li>Buildings used in the processing of harvested crops should be clean, thoroughly aerated, dedicated and protect the crop from birds, insects, rodents, and domestic animals, etc. </li></ul><ul><li>In the case where drying is required, the crop must be spread out in a thin layer to secure unlimited air circulation and all attempts made to prevent mould formation. Where heat is used, correct temperatures should be adhered to, according to the requirements of the specific plant. </li></ul>
<ul><li>7. Packaging </li></ul><ul><li>After control and elimination of low quality and contaminating materials, the product should be packaged in clean and dry conditions with the label fixed clearly and permanently. </li></ul><ul><li>Re-useable containers should be thoroughly cleaned and dry before reuse. </li></ul>
<ul><li>8. Storage and Transport </li></ul><ul><li>Stored materials and products should be stored in dry, clean locations where daily temperature does not fluctuate and good aeration is available. </li></ul><ul><li>Essential oil storage must conform to the appropriate chemical storage and transport standards concerning risks and labelling requirements with national regulations and EU Council Directive 94/55/EEC. </li></ul><ul><li>Storage area must be protected from pests, birds, rodents, domestic animals through windows and door openings. </li></ul><ul><li>Organic products must be stored with national organic regulations and EU Directive 209/91. </li></ul>
<ul><li>9. Equipment </li></ul><ul><li>Equipment used in plant cultivation should be easy to clean to assist in the elimination of contamination. </li></ul><ul><li>All equipment should be in continual good order and calibrated. </li></ul><ul><li>Preferably non-wooden equipment should be used unless traditional methods require this. </li></ul>
<ul><li>10. Documentation </li></ul><ul><li>Documentation required to enable traceability, includes; </li></ul><ul><li>field records </li></ul><ul><li>pesticide, herbicide, fertilizer usage </li></ul><ul><li>Special situations due to weather, etc. </li></ul><ul><li>Product batch numbering, and </li></ul><ul><li>Any processes that can affect the quality of the product. </li></ul>
11. Quality Assurance Active ingredient levels, optical and sensoric properties, limit values of germ numbers, chemical residues and heavy metals must be based on internationally recognized specifications.
<ul><li>12. Self Inspection </li></ul><ul><li>Should be conducted to monitor the implementation and compliance with Good Agricultural Practice principals and identify corrective measures required </li></ul><ul><li>Documents should be examined periodically to ensure adherence to quality assurance principals, and </li></ul><ul><li>Self inspections should be recorded. </li></ul>
There are a number of certification schemes in operation. The Food and Agricultural Organisation of the United Nations (FAO) adopted a set of GAP principals in 2002.Good Agricultural Practice (GAP) is growing in countries like Australia , New Zealand, Vietnam and especially in Thailand, where it is claimed some 60% of rice production is under GAP standards. In countries like Indonesia and Malaysia, GAP is still in its infancy of awareness by producers, although schemes exist .
Recent reports indicate that halal sales in the US are increasing around 80% per year, where a number of new retail outlets specializing in halal products are opening up. A&P, Loblaws, Food Basics and Wal Mart are allocating space for halal products in their stores
(Ranked by Muslim contribution to GDP at Purchasing Price Parity) Markets Where the Islamic Population is the Dominant Group Rank Country Total Population % Muslim Population Muslim Population Muslim GDP USD (PPP) GDP Per Capita USD (PPP) 1 Turkey 71,892,808 99% 71,173,879 879.12 B 12,900 2 Indonesia 237,512,352 88% 207,000,105 771.075B 3,725 3 Iran 65,875,224 98% 64,557,719 737.94 B 10,624 4 Saudi Arabia 28,146,656 100% 28,146,656 564.6 B 23,243 5 Pakistan 172,800,08 97% 167,616,046 397.7 B 2,600 6 Egypt 81,713,520 90% 73,542,168 363.6 B 5,500 7 Algeria 33,769,668 99% 33,431,871 222.5 B 6,500 8 Malaysia 25,274,132 60.4% 15,265,575 215.9 B 13,316 9 Bangladesh 153,546,896 90% 138,192,206 186 B 1,300 10 U.A.E. 4,621,399 96% 4,436,543 160.6 B 37,300 11 Nigeria 146,255,312 50% 73,127,656 146.3 B 2,-35 12 Morocco 34,343,220 99% 33,999,787 124 B 4,100 13 Kuwait 2,596,799 85% 2,207,279 110.5 B 39,305 14 Albania 19,747,586 70% 2,533,845 13.94 B 6,300 15 Iraq 28,383,577 97% 27,374,544 99.23 B 3,600 16 Kazakhstan 15,340,533 57% 8,744,103 95.5 B 11,100 17 Syria 19,383,577 90% 17,772,827 78.3 B 4,500 18 Tunisia 10,383,577 98% 10,175,905 75.4 B 7,500 19 Libya 6,173,579 97% 5,98,371 72.5 B 12,300 20 Azerbaijan 8,177,717 95% 7.768,831 62.6 B 7,700
Markets Where the Islamic Population is a Minority Group (Ranked by Muslim contribution to GDP at Purchasing Price Parity) Rank Country Total Population % Muslim Population Muslim Population Muslim GDP USD (PPP) GDP Per Capita USD (PPP) 1 USA 303,824,640 3.5% 10,633,862 487 B 45,800 2 India 1,147,995,904 13.4% 153,831,451 415.3 B 2,700 3 Russia 140,702,096 10.5% 14,633,017 215.1 B 14,700 4 China 1,330,044,544 3.0% 39,901,336 211.5 B 5,300 5 France 64,057,792 7.5% 4,804,334 159.5 B 33,200 6 Germany 82,369,552 3.7% 3,047,673 104.2 B 34,200 7 Thailand 58,851,357 14.0% 8,239,190 65 B 7,900 8 UK 60,943,912 2.7% 1,645,485 57.75 B 35,100 9 Japan 125,449,703 1.0% 1,254,497 42.1 B 33,600 10 Italy 57,460,274 2.4% 1,379,047 41.92 B 30,400 11 Philippines 74,480,848 14.0% 10,427,319 35.4 B 3,400 12 Netherlands 15,568,034 5.4% 840,674 32.4 B 38,500 13 Singapore 3,396,121 17.0% 577,477 28.7 B 49,700 14 Canada 33,212,696 1.9% 631,041 24.2 B 38,400 15 Israel 5,421,995 14.0% 759,079 19.58 B 25,800 16 Spain 40,491,052 1.5% 607,365 18.3 B 30,100 17 Angola 10,366,031 25% 2,591,508 14.5 B 5,600 18 Austria 8,205,533 4.5% 369,248 14.2 B 38,400 19 Kenya 28,176,686 29.5% 8,312,122 14.13 B 1,700 20 Belgium 10,258,762 3.6% 369,315 13 B 35,300
Global Economic Activity Shifts to the East Innovation Drives Global Competition Muslim World Demographic Changes Muslim Consumer Market Segment Grows
Present Status of farming, processing and Supply chain
The Muslim living as a minority in a non-Islamic society will have a number of problems identifying what items are halal and haram (forbidden in Islam), without product certification. For example, gelatine, lard and tallow can be either in a halal or non-halal, depending upon their source and method of processing. Cross contamination is a major problem in stores and particularly restaurants, where pork is also served.
“ He hath subjected to you all that there is in the heavens and all that there is in the earth: All is from Him. Verily, herein are signs for those who reflect.” Al-Jathiyah 45:12
<ul><li>From the Muslim consumer standpoint; </li></ul><ul><li>Products must be produced without any forbidden ingredients, </li></ul><ul><li>Products must be proved to be in the interests of the consumers’ health and wellbeing, </li></ul><ul><li>3. Products must be clean and hygienic, have supply chain integrity, </li></ul><ul><li>4. Products must benefit those who produced them, </li></ul><ul><li>5. Products must benefit the community they came from and </li></ul><ul><li>6. Products and the materials that make up these products must be traceable from the origin, to have total confidence. </li></ul><ul><li>The halal certification system must be widened to verify these issues </li></ul>
Although widely respected internationally The present Halal Certification is only related to ingredients and processing environment
The search for competitive advantage for Malaysian agriculture sector
Economies of scale – commodity crops Beautiful Infrastructure
New infrastructure is not enough to Move Malaysia to a new paradigm in Agribusiness Infrastructure is easily replicated
Toyyibaan & Halal <ul><li>This day are (all) things good and pure made lawful unto you. The food of the people of the Book is lawful unto you and yours is lawful unto them. … If anyone rejects Faith, fruitless is his work, and in the Hereafter he will be in the ranks of those who have lost (all spiritual good). </li></ul><ul><li>Al-Ma’idah5:5 </li></ul>
<ul><li>O you people! Eat of what is on earth, lawful and good; and do not follow the footsteps of the evil one, for he is to you an avowed enemy. </li></ul><ul><li>Al-Baqarah 2:168 </li></ul>
<ul><li>From the land that is clean and good, by the Will of its Cherisher, springs up produce, (rich) after its kind; but from the land that is bad, springs up nothing but that which is niggardly: thus do we explain the Signs by various (symbols) to those who are grateful. </li></ul><ul><li>Al-A’raf 7:58 </li></ul>
<ul><li>O ye who believe! Eat of the good things that We have provided for you, and be grateful to God, if it is Him ye worship. </li></ul><ul><li>Al-Baqarah 2:172 </li></ul>
<ul><li>O ye who believe! Eat of the good things that We have provided for you, and be grateful to God, if it is Him ye worship. </li></ul><ul><li>Al-Baqarah 2:172 </li></ul>
Halal means what is permitted under Islam and is important to a Muslim’s life and spiritualism, a concept that is much wider than just issues of food. The guiding laws of Islam are the Syar’iah . Central to the syar’iah are the concepts of halal and Toyyibaan , which govern all the economic activities of man in wealth production and consumption of wealth, where certain means of gaining a livelihood are declared unlawful
Toyyibaan would also mean that agriculture must be undertaken within sustainable practices, and in business, where things should be done with good intentions.
HalalGAP should mean “ Sustainable Production”
Faith in one God and a commitment in the teachings revealed by God and His Messengers . Iman affects our world view and daily practices. Knowledge. Three sources based on Iman , a) intellect (‘aql), experiences and revelations (wahy). Guided by Iman. Work and deeds, pious practice, orientated to Allah, turning away from all weakness and evil. Amal is based and guided by Iman and Ilmu . The path shown by Allah (SWT). The divine law. A holistic life where one looks after worldly comforts and also prepare for the hereafter. An individual’s obligation to perform one’s religious duties. A collective responsibility for both social and spiritual development
Mutual consent A business partnership;a) Shirkah: where two or more individuals pool financial resources and share profit and loss on an agreed ratio and held liable to the extent of their capital,b ) Syari’ah: each partner is able to operate other businesses, independent of the principal businessc) Mudarabah: Partnership where one manages the partnership and another supplies the financial resources. Worship. Relates man to Allah through spiritual acts. The manifestation of Amal salih (pious actions). Piety Recognition of the right and proper place and station, condition in life and to self discipline in positive and willing participation in enacting one’s role in accordance with that recognition and acknowledgement. Its occurrence in one and society as a whole reflects the condition of justice. Trust by God in man in the all encompassing concept of nature (tabi’ah) Inclination towards destruction The concept of Al-Falah requires Muslims to win and be successful in both this world and the hereafter. Islamic community
HalalGAP EurepGAP <ul><li>Integrity and audit trails for : </li></ul><ul><li>Pork and bi-products </li></ul><ul><li>Animals dead prior to slaughter </li></ul><ul><li>Blood and blood bi-products </li></ul><ul><li>Carnivorous animals </li></ul><ul><li>birds of prey </li></ul><ul><li>Land animals without external ears </li></ul><ul><li>Alcohol, and </li></ul><ul><li>Animals killed in the name of anything other than Allah. </li></ul>Company Ethics, i.e., follow principals of Tawhid Current Halal Certification Scope of Tawhid
Why it is necessary to create unfair competitive advantage for the Malaysian Agricultural Sector
There is more affinity to faith and spirituality in relation to the purchase of goods and services today Islamic Finance is growing at 15% and tipped to grow at 50% p.a, The Halal market is growing at 36% There is also some desire to change and adhere to Islamic management Practices
<ul><li>Be proactive as this will develop the ability to control one’s environment, </li></ul><ul><li>rather than be controlled by it, as is generally the case. </li></ul><ul><li>Begin tasks with the end result in mind, avoid distractions </li></ul><ul><li>and concentrate only on relevant activities, </li></ul><ul><li>which will make you much more productive, </li></ul><ul><li>Organise correctly and undertake the most </li></ul><ul><li>important tasks first in a step by step approach, </li></ul><ul><li>Look for win-win strategies so that all benefit, </li></ul><ul><li>Listen to people first and understand them before you </li></ul><ul><li>try to make them understand you, which will assist in </li></ul><ul><li>maintaining positive relationships with people, </li></ul><ul><li>Look to develop synergy between people which will </li></ul><ul><li>develop a better outcome, greater than what individuals </li></ul><ul><li>can achieve working by themselves, and </li></ul><ul><li>Continually seek self-renewal, spiritually, mentally, </li></ul><ul><li>emotionally, socially and physically. </li></ul>
Aveda The Body Shop Sureco Hain Celestial Group Est. Sales USD120million (1996) USD619mil (2006) USD1.5Billion (2006) USD40Mil  USD738Mil  (2006) Location Established 1978 1976 1999 1926 Products Personal Care Personal Care Herbs Organic food and cosmetics Basic Philosophy To sustain the environment and give back to communities Social humanitarianism activism on many issues Halal & Toyyibaan Free of artificial ingredients, Kosher foods Ethics Yes Green Yes Yes Natural Yes Yes Yes Organic Yes Yes Yes Community Yes Yes Cultural Religious/Spiritual Yes Yes Mode of Distribution Direct Marketing/Salon Retail and e-Commerce Direct Marketing General distribution Owner Estée Lauder Companies Inc. L’Oreal Private Ownership Listed company
Healthy food Arguably the fastest growing sector of the food market. Ethnic Foods Ethical & Environmental Safety Issues Mad Cow Disease and Avian Flu Halal food Assurance auditing to verify halal compliance from the farm to the plate Islam is a way of life based on modesty, justice and religious practices, which Creates a unique set of Product and service needs
How Quickly can a Turn into a red ocean strategy?
The opportunity exists for Malaysia to develop what Dr. Dan Herman Calls “ Unfair Competitive Advantage” Unfair Advantage means: 1 You have a wildly successful differentiation 2 Your customers adore you, and 3 Your competitors do not imitate you. Opportunties are created rather than found and Halal GAP can be seen as creative market segmentation
Malaysia must use it’s incumbency to develop itself as the premier producer of Halal products, taking the first mover advantage by pushing the boundaries of competition to new paradigms