Expanding the Malaysian Herbal Industry by Developing the Farmer-Government-University Nexus

1. Murray Hunter
University Malaysia Perlis
The 7th Malaysian Agro-Bio International Business Conference with the 12th
Malaysian International Food & Beverage Trade Fair (MIFB 2011) 13-15th
July 2011.

2. Raw Herbs Traditional Herbal Medicines
Fresh
Dried Consumption Fermented
Medicinal Medicinal
Powders Beverages
Extracts
Standardised Extracts Fractions & Isolates
Phytopharmaceutical Bioactive
Products Compounds
Prescription & OTC
Enzymes Essential Oils & Drugs
Other Volatiles
Agricultural Personal Care Flavour & Aromatherapy
Application & Cosmetics
Fragrance
Figure 1: The Family Tree of Herb Derivatives

3. Types of herbal products
Type Definition
Nutritional Supplement Vitamins which are defined as complex chemical substances
that are needed for the functioning of the body, but that
generally cannot be produced by the body and must therefore
be obtained from food or nutraceuticals
Nutraceutical Is a product isolated or purified from foods and generally sold
in medicinal forms not usually associated with food for the
purpose of physiological benefits or to provide protection
against illness
Dietary Supplement Includes preparations of vitamins, minerals, amino acids and
mixtures of these ingredients as well as herbs and other
botanicals
Herbal Medicines Includes herbs and traditional medicine, which means any
product employed in the practice of indigenous medicine,
whereby the drugs used consist of one or more naturally
occurring substances of a plant, animal, or mineral or part
thereof, or in extracted form or non-extracted form, or any
homeopathic medicine.
Indigenous Medicine Is a system of treatment and prevention of diseases involving
the traditional use of naturally occurring substances.
Homeopathic Medicine Any drug in a pharmaceutical dosage form that is used in the
homeopathic therapeutic system in which diseases are treated
by the use of minute amounts of such substances which is
capable of producing in healthy persons symptoms similar to
those of the disease being treated.

4. The Issues

6. Obtaining Finance

7. Technology

8. The Necessary Skills

9. Finding New Business Models

10. Farmers

11. The Major Blocks to Development
• The current “psych” of farmers
• Growing rural unemployment
• Unbalanced affluence (town-rural)
The Probable Causes

12. Lack of Ideas
Lack of education and skills
Narrow mindset
Feeling of powerlessness – lack of
access to markets
Lack of resources
Lack of will

14. The Essential Oil Value Chain (Flavour & Fragrance Industry)
Flavour &
Consumer
Essential Trading Fragrance End
Oil Compoundi Product Wholesal Retailer
Production ng Manufactur er
e
1.0 1.6 2-3.0 (6-9) 2-2.5 (18-24) 1.1-1.2 (19.8- 1.2-1.4
28.8) (23.76-
Relative and (Absolute) Value Added Through Chain 40.32)

15. Essential oils exported to
international customers
Regional or Country Based
Wholesaler/Exporter
Domestic sales
Local Collectors and
Wholesalers
Subsistence
Farmers

16. Customers
Cooperative company with central distillery
(harvest equipment) and carrying out marketing
role.
Determines production levels
Controls quality
Negotiates R&D with research institutions
Offers advisory services
Run by farmer representatives
Harvested
foliage
sent to Some growers
central elect to sell
distillery own oil
Farmers who are members of a cooperative let the
cooperative distill and sell the oil on their behalf

17. Venture Focus Along Different Parts of the Supply Chain
Manufacture of end
products. Focus on
Consumers formulation and end Consumer
product Trends
development Important
Wholesalers & retailers
Vertical Integration Along the Supply Chain
Essential oil as
an ingredient in
a product.
Focus on uses
and applications Technical Branding
research Trends Theme
Manufacturers Important Consumer
Marketing
Essential oil as Reaching
Application
primary Product. Mass or
Focus
Flavour & Fragrance Focus on market
Technology
selected
Markets
Houses demand & supply
Focus
and meeting New Product
standard IP Focus (?)
Development
Specific
Demand & Customer
Traders & Brokers Supply, Buying
Criteria Important
Technical
Primary Producer Focus
General or
Niche
Customers
Agro Industrial Consumer
Orientation Orientation Orientation

18. Universities & Research Institutes

19. Information
seeking and Begin with an
Planning Planning entrepreneurial
Research and management style, then
Phase orientation
collaborative move to marketing
orientation orientated style and
eventually corporate
R&D management style
Phase
Seeking of
information,
looking for ideas,
screening for
opportunities, Commercial Phase
setting of a vision
and planning out Start-up Growth Maturity
the project Start-up
Develop
company,
production and
Test hypothesis, review early customer
market, confirm viability, base, usually Maturity
develop applications, very personal & Corporate orientation
increase knowledge, hands on. with well defined
learn how to operate depts. Formalised
commercial operation. marketing & production
Growth roles in organization,
Collaborate with Develop value-added products, take strategic outlook
customer & R&D new market, customers, expand for business.
Institutions production, move to more formal
management

21. • Fundamental research
• Applied research
• Assist in technology scale up
• Coordinate research through national
committee
• Graduates into industry
• Product marketing and entrepreneurial skill
development

22. Government

23. • Not as a direct player
• Take on a support role
• Organize the industry
• Develop extension
• Partly fund research
• Act as a general promoter
• Set up Herbal Finance Corporation
• Set up national research committee

26. Kunzea ambigua
Mentha Piperita

27. Blue Gum Eucalyptus
(Eucalyptus globulus)
Lavandula angustifolia

28. Tasmannia lanceolata
BlackcurrentRibes nigrum

29. Boronia Megastema

30. Opium poppy Papaver somniferum
pyrethrum

31. wasabi
Fresh Asian Vegetables

32. Wine
Native Spices Herbal teas Native herbs
New Activities to
Tasmania Asian vegetables
New and existing essential
oils
Wasabi
Herbal Tourism
Aromatherapy pyrethrum
Opium

33. The Tasmanian Essential Oil Industry Structure
Industry
Growers Associations Research
Advisory
Committee
Field Processing
Government
Development
Corporations
(RIRDC/HAL)
Processing and
Marketing Company
(Essential Oils of
Tasmania Pty. Ltd.) Research Provider
(University of
Tasmania/TIAR)
Agents The World Market

35. What Can Be Done?

36. Marketing
Farmers Companies
Manufacturers Researchers
Regulators Government

37. • Coordinated Research
• Creating farmers’ organizations
• Producer and marketer association
• Industry association
• Industry levy for research
• Participatory action research
• New approach to finance (Herbal finance
Corp.)

38. Social
Systems Agriculture Participatory Action
Agricultural professional Research
stance that emphasizes Emphasis on co-learning
farming as a social practice through farmer and
Discipline Orientation
that uses technology community participatory
research and empowerment
programs Shift from
theoretical and
technical to
community
collaboration and
Traditional Academic Farming Systems problem specific
Based Research Research research
Based on developing On-farm technical problem
technology and principals, diagnosis and adaptive
models and possible research
practices
Technical
General Domain Focus Local

45. Conclusion

46. The set of opportunities for an essential oil producer
General Trading Other Aromatic Aromatic Chemical Agro-Tourism Agricultural
(marketing) Essential Oil Extract (bio-route) By-Products
Region’s production
Specialised single oil
marketing
General multi-oil
marketing
Mulches
Aromatic Chemical
(physical route)
Bio-fuel
Commodity Oil Single Crop Portfolio of Crops
Business through select supply chains
Specialty Oil Flavour & Cattle feeds
Fragrance
Builds brand image and support.
Aroma Chemical Complements other activities.
Aromatherapy & Paper
Cosmetic
Production &
marketing of Pharmaceutical Other diversification
products Production of herbs
and spices
Agro-chemical
Higher differentiation and value adding Diversification of activities Utilisation of wastes

47. Sustainability
of the
venture for
long-term R&D Underlying
survival Knowledge
Govt./institutional
support
Access to
capital
JV,
partnerships,
strategic
alliances, etc
Unexploited
Opportunity
or idle
Cost and resources
performance
benefits of
product
Economies of scale or
Impact on competitive advantage
and from through differentiation
local
community
Access to
market/network
Market driven
selection of
crops and
product Customer
driven
management

48. • Creates wealth Economic growth & •Commitment to business (state
• Develops human capital diversity enterprises don’t work)
•Makes Malaysia internationally • Private enterprise most
competitive effective
•Follow Islamic economic • Need to nurture multiple
principles Farmer Market
Groups Groups businesses
•Diversifies agriculture • Role in regional development
Entrepreneurship as a national
development strategy
Coordinated Industry
Body
Universities &
Government Research Institutions
•Part source of funding for R&D •Undertake fundamental research
• Regulator •Undertake applied research
• Organizer •Undertake participatory action
• International representative bodies research
• Standards • Quality assurance role
•Infrastructure •Provide trained human capital

49. Thank You