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Halal meat market in the Gulf region and compliance
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Thursday, 01 February, 2018, 08 : 00 AM [IST]
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Saurabh Sharma
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The Gulf Cooperation Council (GCC)1 with its six-member country states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) is home to 52.7 million people2. GCC is among the world’s richest areas in terms of per capita income3. Being home to a large percentage of Muslims of the world, the Gulf region has tremendous potential to occupy a large share of the global Halal food market, estimated to reach US$1.9 trillion by 20214.
Uncharted territory
In spite of catering to at least 1.8 billion consumers5 in the world in 2017, the Halal food market has, for many years, largely been an uncharted territory. In recent years, driven by increased consumer awareness and an entrepreneurial streak, the Halal market has received global attention. Halal, being a farm-to-fork process, is a broad category; led by food and beverages products, and now expanding into pharmaceutical, cosmetics as well as personal care6.
Among global food product categories, Halal industry expansion has been driven primarily by three factors: Growing consumer awareness and decision to eat healthier; Broad definition of ‘Halal’; now an umbrella term for manufacturing processes compliant with the Shariah Law; An entrepreneurial eye towards new emerging markets.
With new standards being laid down, Halal compliance is now essential for the entirety of the supply chain – slaughtering, warehousing, transportation and logistics and hence plays an important role in maintaining the Halal tag.
Apart from Muslim-majority countries, Halal products are also gathering significant momentum in Muslim-minority countries as it has now become a defining element of their religious identity. Halal F&B market stood at US$1.17 trillion in 2015 which is 17 per cent of the global F&B market with revenues touching US$415 billion in 20157.
A report ranked Halal products consumer countries in terms of various consumer and governance metrics8. This market – though fragmented geographically – is one that cannot be overlooked.
The table lists the top consumers of Halal products for the year 2016. With the exception of Kuwait, 5 out of 6 GCC countries figures are listed above (in grey highlights), led by the UAE as the top consumer country of Halal products worldwide.
Domestic market scenario
The domestic Halal meat is broadly divided into 3 categories: Bovine animals (cattle) and products; lamb, sheep, goats and their products; and poultry products. The domestic Halal meat consumption in all three categories grew at a Compound Annual Growth Rate (CAGR) of 6.75 per cent 1.
Lamb, sheep and goats remain dominant forms of consumption over the years, accounting for 75 per cent of the total meat consumed in the GCC region.
Kuwait is the biggest consumer of bovine Halal in the GCC region with over 11.5 kg per capita, while the UAE is the biggest consumer of lamb, sheep and goats at 10.1 kg per capita2.
The increase in population, tourism and expatriates
have actively contributed to a rise in consumption and hence, the sale of Halal meat over the years.
Role of imports to meet domestic consumption demands3
The GCC, due to several geographical and ecological disadvantages, owing to water shortage and arid land is forced to import a major share of its food demand4. In 2015, the total combined import bill of meat and meat products for the combined GCC countries was US$5 billion.
The graph depicts the rise of meat imports by member countries since 2011. Saudi Arabia accounts for 48 per cent of the total imports in the Gulf countries, followed by the UAE at 27 per cent. Qatar and the UAE showed impressive annual growth rates of imports at 10 per cent and 8 per cent respectively, owing primarily to increasing tourist arrivals and a young Muslim populace.
There are several suppliers active in today’s highly competitive market. Some 57 per cent 7 of the meat imports to the GCC countries were sourced from Brazil in 2016 whereas Australia, India, France and the United States are the other top suppliers.
GCC’s poultry market is a prominent destination for the world poultry meat exports, accounting for nearly 13 per cent of the total exports. Low domestic production (unfeasible livestock farming on large scale) and re-exports (post- food processing) are the primary drivers for this trend in the GCC poultry market.
Halal food market opportunities
The driving forces in the Halal food market are
as follows:
Growing awareness and demand1
Consumer awareness for Halal food has had a major impact on its evolution as a global market, especially in the Gulf region. Shopping, cooking and dietary habits have been altered, owing to the widespread lifestyle changes in the region. The emergence of convenience food and convenience food outlets coupled with increasing urbanisation and urban lifestyles present an opportunity for the growing Halal meat market.
Rise in protein-based rich diet2
Availability of Halal food products at every stage has led to the local population shifting its consumption patterns from a carbohydrate-based diet to a more protein-based diet. This is expected to further boost the demand and give rise to new sub-sectors of food market in Halal industry.
Advanced food technology
Latest technology has significantly narrowed the gap between the manufacturer and the consumer’s preferences. This trend shall inevitably continue with the advent of social media as manufacturers and exporters, realise the importance of Muslim consumers of the Gulf region and set up niche markets.
New economic paradigms
The Halal food market does not exist in isolation, rather, with Islamic finance gaining momentum, it emerges as a key part of a new economic paradigm that coincides with the widespread quest for new commercial growth markets. Convergence between these sub-markets, food and travel for example, can strengthen the growth of Halal food market.
Halal tourism
The Gulf region is also among the world’s top tourist destinations. According to a report3, the UAE has emerged among the top 10 tourist destinations of the world, while being the most popular in the Arab world, attracting over 14 million tourists in 20164.
Islamic digital economy
The emergence of the Halal market also coincides with the rise of the digital economy. New online marketplaces for Halal food provide the much needed access to global markets. The natural ecological texture of the Gulf region which inhibits widespread agriculture and livestock farming is a major driver for Halal meat exporters wanting to tap the regional market.
Challenges ahead
The global Halal food industry seems to present many viable business opportunities. These are the road blocks investors should keep in mind:
Varying interpretations
The Halal market, while still expanding, remains complex and fragmented. Cultural assumptions, varying habits and preferences, different interpretations of Shariah law and the very nature of global food and food product supply chains are some of the variables affecting this evolving market.
Logistics
One of the important element in the integrity of the Halal supply chain is logistics. Dedicated storage, handling and transportation facilities invite high costs of investments in the absence of clear standards and regulatory framework.
Global Halal standard
The lack of a regulatory framework, consistent with international standards to assure integrity of Halal, remains a pressing issue for manufacturers and exporters trying to tap into the Gulf market.
Fighting corruption
Government officials and bureaucrats involved in the Halal food processing chain have seen an increase in their discretionary powers thereby leading to corruption, largely owing to the absence of a standardised certification process and regulatory framework. Changing definitions, varying interpretations, multiple audits and certificates and corruption are rampant in these markets.
What lies ahead?
The governments across the Gulf region have taken numerous steps to improve food security and reduce reliability on imports in accordance with the fall in global crude prices. These steps include preparing and implementing long-term strategic plans to enhance domestic livestock farming along with optimally utilising available resources.
The thriving tourism sector has also led to a notable improvement in cold chain infrastructure for storage and trade of perishable goods, including meat. The combined factors of increasing population and booming tourism industry has reinforced the demand of meat and meat products and will also add to the local domestic capability, inhibiting imports in the long term.
Nevertheless, Halal products are gaining wider recognition, not just in predominantly Muslim countries like the Gulf region, but also in Europe and elsewhere which houses a sizeable proportion of Muslims. High income levels have complemented higher consumption rates and thereby more opportunities for Halal food producers and exporters.
While several challenges still stand in the way of Halal becoming a global standardised market, the opportunity for expansion are aplenty, especially in niche markets like those of the Gulf.
References
1. https://www.salaamgateway.com /en/story/gulf_countries_import_78_of_their_food-SALAAM01032017102644/
2. https://data.worldbank.org/ indicator/SP.POP.TOTL
3. https://www.thebalance.com/gulf-cooperation-council-3306357
4. https://ceif.iba.edu.pk/pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf
5. https://www.thoughtco.com /worlds-muslim-population-2004480
6. https://www.prnewswire.com /news-releases/halal-products-market---global-industry-analysis-size-share-growth-trends-and-forecast-2016---2024-300422951.html
7. https://ceif.iba.edu.pk/pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf
8. https://ceif.iba.edu.pk/pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf
9. https://www.trademap.org /Index.aspx
10. http://www.agr.gc.ca /eng/industry-markets-and-trade/international-agri-food-market-intelligence/middle-east-and-africa/market-intelligence/sector-trend-analysis-livestock-and-meat-trends-in-the-gulf-cooperation-council/?id=1490119143313
11. https://comtrade.un.org/data
12. https://ceif.iba.edu.pk /pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf
13. http://gulfnews.com/business /economy/islamic-economy-on-growth-path-as-consumer-demand-rises-1.2131341
14. https://www.menaherald.com /en/business/retail-entertainment/gcc-meat-poultry-demand-rise-origin-organic-moving-agenda
15. https://www.e-unwto.org/doi/book/ 10.18111/9789284419029
16. https://www.visitdubai.com /en/tourism-performance-report-old
17. https://financialtribune.com/articles/travel/79468/iranian-hotels-cafes-to-get-halal-certification
(The author is country director (India), Spire Research and Consulting)
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