The Growing EBN Industry by Thestar

TO ASIANS, consuming the nest of a certain species of birds is no strange thing.

In fact, the practice is growing in popularity and the producers of edible bird’s nests are sprouting all over the region as the industry is expected to grow rapidly. Malaysia alone is expected to see the swiftlet farming industry contributing RM4.5bil to gross national income by 2020.

And producers, like Swiftlet Eco Park Group, are riding the growing demand for edible bird’s nests.

Swiftlet Eco Park was established in 2004 as a developer of bird houses.

“People thought we were crazy because we were developing housing for birds when there was big demand for housing for people,” said managing director Loke Yeu Loong with a laugh, clearly amused by the thought himself.

Penetrating new markets: Loke says there is a need to educate consumers in its new markets on the benefits of edible bird’s nest.

But the project came about as a result of trying to find a solution to the many illegal bird houses in Sitiawan, Perak, which were a nuisance to people due to their location in town areas.

The locals were complaining that the bird houses were dirty, smelly and noisy.

Swiftlet Eco Park had obtained tracts of land from the Perak government to explore plans for a swiftlet park that quickly turned out to be a fortuitous move.

“It directed the swiftlets out of towns and the park started drawing tourists as well. And it worked so well that other state governments came to study what we had built and wanted to work with us on joint ventures to build similar projects,” Loke said.

Swiftlet Eco Park currently has 14 projects in seven states and plans to build some 600 units of bird houses, in line with the Government’s target of 100,000 bird houses by 2015. The group has so far completed 70 units.

Although the group started off as purely a property developer, the potential of the edible bird’s nest business soon prove to be too tempting to resist.

Loke said swiftlet ranching started in Malaysia about 30 years ago when the birds started migrating from Indonesia due to the haze from forest clearing activities there.

Swift dive: Prices of raw bird’s nest plunged from RM4,000 per kg in 2010 to below RM2,000 currently following China’s ban on imports of raw bird’s nests.

Indonesia has a 100-year history of producing edible bird’s nest and is the largest producer, meeting about 78% of global demand. Malaysia is the second-largest producer at about 10%, followed by Thailand with 9%.

The local industry is estimated to be valued at RM1.5bil now with total production of 375 tonnes of edible bird’s nest a year.

Swiftlet Eco Park did not want to pass on its chance to participate in the growth of the industry and decided to keep some 200 units of the 600 bird houses that it was planning to build.

According to Loke, the cost of building a bird house is about RM500,000, which would amount to RM100mil for 200 units.

“We obviously did not have that kind of capital. So we embarked on a programme to raise funds as well as to allow other investors an opportunity to be a part of this growth industry,” he said.

Swiftlet Eco Park launched Malaysia’s first edible bird’s nest swiftlet ranching share farming interest scheme in 2010 to raise RM240mil.

Nonetheless, things have been far from smooth for the industry over the past year.

Value-added products: Swiftlet Eco Park, via its subsidiary RBN, went downstream into producing high-value bird’s nest products (above) to mitigate the effects of China’s ban on raw bird’s nests from Malaysia.

After the launch of the investment scheme, China, which makes up about 60% of global demand for bird’s nests, slapped a ban on imports when samples of some bird’s nests were found to contain nitrite levels that did not meet China’s health standards.

Before the ban, China was the biggest importer of Malaysia’s bird’s nest products and the trade was worth RM1bil a year.

The ban saw local prices for grade A unprocessed bird’s nests plunging from RM4,000 per kg in 2010 to between RM1,200 and RM1,500 per kg in the local market this year.

Note that the cost of processing bird’s nests here is high, between RM1,000 and RM1,500 per kg, compared to about RM350 per kg in Indonesia, due to the higher cost of labour.

With the industry hit by low prices and rising stockpiles, Swiftlet Eco Park took the opportunity to go downstream.

“We were riding on the crisis. The low prices were a good opportunity for us to develop other products because that would mean cheaper raw material for us and it made it easier to carry out R&D,” said Loke.

He added that producing and exporting bird’s nest-related products such as its bird’s nest coffee and bird’s nest supplement pills was a way of mitigating the effects of the ban on exports of raw bird’s nests into China.

“Since we couldn’t export raw bird’s nests, we overcame the ban with value-added products,” he said, adding that the company has invested some RM300,000 in R&D alone.

In June, it was reported that China had lifted the freeze on bird’s nest imports from Malaysia, allowing nine Malaysian companies to resume exports to China.

However, Loke noted that prices of raw bird’s nest are still languishing due to the large stockpiles and traders continue to struggle.

Unlike other local bird’s nest traders, supplying its products to China alone is no longer the company’s main agenda.

These days, Swiftlet Eco Park is eyeing the vast opportunities that new markets such as the US, Europe, Middle East and India have to offer.

But Loke acknowledged that educating new markets about the benefits of bird’s nest will be a challenge.

“They think we are crazy for consuming bird’s saliva!” Loke laughed.

“But once they see proof of the benefits of consuming bird’s nest, they are amazed. Also, this is where value-added products come in because they can understand bird’s nest coffee more than raw bird’s nests,” he added.

To ensure a steady stream of demand for its products, marketed under the Royal Bird’s Nest brand, Swiftlet Eco Park also set up a multi-level marketing network and will be embarking on a franchise network with the opening of its flagship outlet in the Publika mall in KL next week.

Group chief executive officer Tan Chee Hongsaid the MLM segment is expected to generate revenue of RM6mil this year, growing to RM120mil by 2017.

The franchise network will mainly cater to health and beauty treatments using bird’s nest products.

Tan is aiming for 100 franchise outlets over the next three years.

“We are moving along the value chain. We are not just competing within the industry in terms of quantity, but also in the high-end, value-added segment. Our value-creation efforts exceed RM10bil for the whole group,” said Tan.

Both Tan and Loke reiterate that there are still plenty of untapped opportunities in the industry and the group is excited to unlock this potential.