Rapid changes have occurred in the way food is prepared and cooked, and in the places where it is consumed. Foodservice has become increasingly important in the composition of the food account among Malaysians. The objective of this study is to analyze consumers’ expenditure pattern on foodservice in Malaysia. Several functional forms and a Heckman two-step methodology, to account for censored-response bias, are employed in the analysis of the Household Expenditure Survey 2004-2005 data. Regardless of functional forms, the empirical estimates of income elasticity of demand for foodservice are significantly bigger than income elasticity of demand for food at home. This study shows positive prospect for foodservice industry in Malaysia, where an increase in income has the propensity to lead to an increase in expenditure (demand) on foodservice.

The affluence of Malaysian people is reflected by higher household expenditure on consumer goods over the years. Statistically, the Malaysian household average monthly expenditure on consumer goods (both food and non-food) is recorded in the Household Expenditure Survey of 1973, 1980-82, 1993-94, 1998-99, and 2004-05, individually.

The increase in household monthly expenditure on consumer goods started from Ringgit Malaysia (RM)412 in 1973 to RM732 in 1980-82. It, then, rose to RM1631 in 1993-94, followed by an average positive rate of 7% between 1993-94 and 1998-99. Even more rapid development in the Malaysian economy after the economic crisis in 1997, observed that the Malaysian average monthly household expenditure on consumer items surged even further from RM1,161 in 1998-99 to RM1,937 in 2004-2005.

Aggregate food expenditure share (both food at home and foodservice) decreased from 38.3% in 1973 to 31.2% in 2004-05. By probing in further, it is recorded that Food At Home (FAH) expenditure share declined steadily from 33.7% in 1973 to 20.4% in 2004-2005. Foodservice expenditure share increased from 4.6% in 1973 to 10.8% in 2004-05. Such statistics imply that rapid changes have occurred in the way food is prepared and cooked, and in the places where it is consumed, as foodservice has become increasingly important in the composition of the food account among Malaysians.

Agricultural Economics Journal, Consumer Goods, Economic Crisis, Food At Home, FAH, Agri-food Industry, Organizational Structure, Socio-Demographic Factors, Food Processors, Double-Hurdle Model, Expenditure Survey, Income Elasticity, Household Expenditures, Semi-Logarithmic, Double- Logarithmic, Quadratic forms.