Hershey Doubles Down on Malaysia’s Growth Story with New Regional R&D Hub in Johor

Research and Development (R&D) plays a critical role in the long term success of companies which in turn, translates to the growth of their respective economies. At the same time, the rise of R&D investments and activities by foreign investors in the country led to the formulation of several key government policies.

In 2020, the National Policy on Science, Technology and Innovation (NPSTI) 2021-2030, was launched to promote the importance of connecting the available science, technology and innovation (STI) facilities and capacities to the overall economy in Malaysia.

A total of ten (10) Science, Technology, Innovation and Economy (STIE) leap programmes have been formulated under this plan with the aim to achieve the GERD (gross domestic expenditure on R&D) goal of 3.5% by 2030.

With the rise of Industry 4.0 technologies and smart manufacturing, even global brand names are finding new ways to win the R&D war. Industry players are prioritising innovation or R&D led-growth models to be resilient in the long term.

Customising R&D for regional tastes

Headquartered in Pennsylvania, USA, The Hershey Company (Hershey) is one of the world’s largest chocolate manufacturers with approximately 19,000 employees and 100 brand names across 80 countries around the globe.

The candy champion brings in more than USD8.9 billion (RM39 billion) in annual revenue, and markets iconic brand names as Hershey’s, Reese’s, and Ice Breakers. However, Hershey refuses to rest on its laurels and continues to invest in R&D to drive international growth through innovation.

On 11 May 2022, Hershey, which already operates a chocolate factory in Johor, opened its new R&D Centre in Senai, Johor. The facility serves as the multinational confectioner’s AEMEA (Asia Pacific including India and China, Europe, Middle East, and Africa) hub for innovation and technology.

The 10,400 square-foot facility houses R&D laboratories, a packaging development facility, and a sensory area, which will enable the company to partner with various innovation teams to taste, test and shortlist iconic products known and loved by consumers across the globe.

Malaysia was chosen as the regional hub in an effort to enable Hershey to quickly develop, test, and launch new products, customised based on the tastes of consumers across the region, and will become one of Hershey’s largest R&D facilities outside of The U.S.

Mr. Herjit Bhalla, Managing Director and Vice President – India and AEMEA said, “The facility will act as a central hub for the company’s operations across the AEMEA region within countries in the Asia Pacific including India and China, Europe, the Middle East, and Africa. Our new R&D Centre reflects our ongoing commitment to understanding the preferences of consumers across the markets”.

Capitalising on APAC demand

Asia’s continuously growing middle-class represents a USD10 trillion consumption growth opportunity over the next decade. McKinsey projects that by 2030, three billion people, or 70% of Asia’s total population, may be part of the consuming class.

Members of the consuming class are expected to attain higher income levels than ever before, and thus in the next decade, 80% of Asia’s consumption growth could come from higher-income consumers.

Retailers like Hershey are paying more attention to the continent and crafting products that better suit regional customers. This also calls for increased local expertise and R&D professionals who better understand the lay of the land.

This latest R&D investment is not Hershey’s first in Malaysia. In 2013 the company invested USD250 million to build a manufacturing plant in Johor, its biggest investment in Asia. The company chose Malaysia due to its strategic location providing Hershey easy distribution and access to more than 30 markets across Asia.

Malaysia also offers a well-educated workforce, a stable political environment, a strong supply chain infrastructure, and globally recognised Halal food manufacturing certification, an advantage for products sold in the region.

Malaysia’s burgeoning R&D ecosystem

As the leading investment promotion agency in Malaysia, MIDA brings together Malaysia’s various strengths and enhances it with incentives and policies that encourage investors to continuously embrace research, development, commercialisation and innovation (R&D&C&I).

MIDA’s efforts to nurture the R&D ecosystem in the country have made an impact as Malaysia has moved up two spots to rank 33 overall in the Global Innovation Index (GII) 2020 report, released by the World Intellectual Property Organisation.

Within Asia, Malaysia ranks 8th among 17 economies thanks to its world-class tertiary education system, sophisticated capital market and robust private sector, particularly excelling in high-technology exports and creative goods exports. Excitingly, Malaysia ranks second among upper middle-income innovation economies.

Malaysia continually supports companies in a wide spectrum of industries to achieve their R&D aspirations through various incentives and financial assistance, which covers the value chain of innovation, from ideation to commercialisation. The main R&D incentives include R&D Status, Contract R&D Company, R&D Company and In-House R&D.

Please contact respective Industry Divisions of MIDA to know more on the In-House R&D establishments or the Advanced Technology and Research & Development Division of MIDA for R&D Service establishments.