You might think of Nestlé as the least likely company to venture into such a ticklish market as religious food. The Swiss multinational has, after all, attracted more than its share of protesters with other product lines (namely, infant formula and chocolate). But far from shying away from the halal market–food that passes muster with Islamic authorities–Nestlé has jumped in with both feet.
For centuries the men who decided whether food was halal were bearded and worked in mosques. But Othman Mohamad Yusoff–not a mullah but a clean-shaven Nestlé executive–has forged a career as a halal expert. He’s in charge of Nestlé Malaysia’s halal lines, making sure they’re free of alcohol, pork or any product from an animal not slaughtered according to Islamic guidelines. This covers everything right down to KitKat bars that are free of flavorings that have traces of alcohol.
Othman, 45, was a food engineer in Groupe Nestlé’s R&D headquarters in Switzerland more than a decade ago when he was asked to help hammer out a strategy on supply chains, including how to keep them halal. It proved to be a good career break. Nestlé has become the biggest food manufacturer in the halal sector, with more than $3 billion in annual sales in Islamic countries and with 75 of its 481 factories worldwide producing halal food. “Nestlé’s set the pace on halal for multinationals,” says Abdulhamid Evans of KasehDia, a Kuala Lumpur consulting company.
Nestlé is tapping into a vast market. With 1.6 billion Muslims worldwide and Islam the fastest-growing religion, halal food sales are now worth $580 billion annually, according to Malaysia’s Halal Industry Development Corp. “Food companies are not going to be global unless they’re halal,” says Joe Regenstein, a professor of food science at Cornell University. And an increasingly affluent and savvy base of Muslim consumers means that the halal industry is growing in sophistication as well as size. Well beyond being just about meat, it now embraces products from lipstick to vaccines to savings accounts. In 1990 the Islamic Food & Nutrition Council of America had only 23 clients paying for its halal certification services. Last year it certified products for 2,000 companies worldwide.
Nestlé, which had $81 billion in sales last year and ranks number 51 on forbes asia’s Global 2000 list, caught the wave when the halal industry was pretty much a matter of uncle-and-auntie butchers and the neighborhood bazaar. In the 1980s Nestlé Malaysia started a halal committee–a group of 11 executives who oversaw halal standards from farm to fork. In the early 1990s this division decided to make all of its imports and exports halal “to reassure customers that we were taking the business of halal very seriously,” says Nestlé Malaysia’s managing director, Sullivan O’Carroll. That has resulted in its food scientists occasionally engaging in angels-on-a-pinhead debates. “Alcohol is not allowed,” he says. “But if a product has natural alcohol in it, for example, from fruit, it is allowed. So there can be a debate as to whether the alcohol is there naturally or has been put in.” Nestlé Malaysia has pioneered halal standards for Nestlé worldwide, with Othman and his staff flying off to consult with executives from India to West Africa.
The lengths to which Nestlé must go to meet these standards can be seen at the Maggi noodle factory outside of Kuala Lumpur. It looks ordinary enough, with its bright lights, conveyor belts and white-coated workers bent over noodle vats. But for one thing, if animal bristles are used in the factory’s machine brushes, they’ve been checked to make sure they don’t come from pigs or animals not slaughtered in accordance with Islam. And petroleum grease, rather than animal-derived grease, lubricates the equipment.
Like the rest of Nestlé’s hundred halal lines, the noodles have been subjected to an intensive screening process, starting with the R&D. A halal checklist runs around 30 pages for each product and includes such questions as “Does product contain pork or parts thereof, e.g. enzymes, bacon … ?” Then the Muslim scholars at Jakim, Malaysia’s Department of Islamic Development, must approve the checklist.
Producing halal products takes time and money, but Othman sees it simply as “the cost of doing business.” Scale–and building halal factories from scratch, rather than modifying old ones–have kept costs down, notes O’Carroll. “When we compare our factories in Malaysia with other Nestlé factories around the world, we are at least as cost-effective,” he says.
Increasingly, the halal industry no longer stops at production. The latest buzzword is “logistics,” with shipping and storage companies from Dubai to Rotterdam positioning themselves as protectors of halal purity. “It’s fashionable nowadays to talk about ‘halal logistics,'” says O’Carroll. For Nestlé, the logistics are pretty simple, he notes. A box of Maggi soup “has an outer box. Then it’s in shrink wrap and then in a container. So if we send it to [British supermarket chain] Tesco, we don’t feel that needs ‘halal logistics.'”
Nestlé might not, but many Muslim customers do. Last autumn Malaysia’s national shipping company, MISC, launched the weekly Halal Express Service, a liner to carry Australian and New Zealand halal beef from the Straits of Malacca to the Middle East and beyond. It’s also building a halal logistics hub at Port Klang, west of Kuala Lumpur, which will have cold-storage facilities, sterilization units and a lab to test products to ensure they’re halal.
The Halal Express is just one of many projects designed to make Malaysia a global halal leader. Eager to capitalize on its strengths in manufacturing and halal-production know-how, Malaysia is making a bid to beat out Thailand and Singapore as the region’s “halal hub.” Malaysian firms export such sophisticated products as Vigor Power Ice, a bright blue halal energy drink, and halal gelatin capsules for pharmaceuticals and vitamins. Last May in Kuala Lumpur, the Malaysian government hosted the first World Halal Forum, which brought together Islamic scholars, small businesses and multinationals such as Nestlé, Tesco and McDonald’s (nyse: MCD – news - people ). Last year the government budgeted $26 million for its halal drive, including support for halal industrial parks and entrepreneurs developing halal products. And there’s a big publicity drive that has included a slick halal-industry magazine and a TV series beamed across Southeast Asia, covering halal issues from banking to cooking.
Earlier campaigns by Kuala Lumpur to build industry hubs–such as recent plans for a high-tech hub–have sputtered out, warn longtime Malaysia industry watchers. But Darhim Hashim, a former venture capitalist who’s a director at the halal development outfit, argues that this bid is different because Malaysia already has strong government-enforced halal standards and an established Islamic financing industry. Thailand–also trying to build its halal industry–and Singapore, with its peerless infrastructure, simply don’t have Malaysia’s Islamic credentials, says KasehDia’s Abdulhamid, whose firm works with the government to promote Malaysia’s halal industry. “Malaysia has credibility in the Muslim world and represents the crossover between the Muslim world and the non-Muslim market,” he says.
Malaysia’s hope–and Nestlé’s–is that halal will reach an audience beyond Muslims. But how do you sell halal to an infidel? Talk about health, purity and ethics. That image would dovetail with Nestlé’s new push as a health-and-wellness company–and with Malaysia’s own ambition to be seen as a moderate, industrialized multicultural nation. “We see halal as something that can develop along the lines of organic food,” says Abdulhamid. Opening the halal forum last year, Malaysian Prime Minister Abdullah Badawi invoked halal as “that which is good, healthy, safe and high quality in all aspects of life. [It] represents values that are held in high regard by all peoples, cultures and religions.”
There could be a nice side effect from pushing the halal market beyond its traditional customer base. Halal’s association with purity and animal welfare could help overcome Islamophobia. “Halal could be an extremely good platform for changing perceptions,” notes Abdulhamid.
Still, selling foods internationally is harder than selling a commodity such as petroleum. Country-to-country differences in halal methods and standards have created headaches for manufacturers for decades. Middle Eastern import companies used to send halal slaughterers to South America to kill the chickens themselves. A couple of years ago, when Muslim scholars in Australia decided that stunning was an Islamically permissible way to kill animals, Australian beef–20% of Malaysia’s beef imports–suddenly fell afoul of Malaysia’s halal standards. The government banned Australian beef, and Nestlé Malaysia, which was importing all its beef fat from Australia, had to look for alternative sources overnight. The company scrambled to import from South America, but making the change took months. As long as different countries interpret forms of killing in slightly different ways, “it makes trade challenging,” says O’Carroll.
Devising global standards is a key goal of the second World Halal Forum in Kuala Lumpur, to be held in May. But getting Islamic scholars from Dacca to Detroit to agree will be tricky. Darhim, of the halal development unit, argues that not just Islamic scholars but trade experts and food scientists must be involved in setting the standards. “We need to apply science to the discussion,” he says. “There has been a tendency in Islam to make issues out of things that aren’t issues.” Nestlé’s Othman says the industry needs to be demystified. “Halal is not that difficult,” he says. “A lot of things are halal. Not so many things are not.” And as the industry grows, that’s likely to be truer with every passing year.
Source : forbes.com