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Halal market sweeps into new geographies
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Wednesday, 30 August, 2017, 08 : 00 AM [IST]
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Dr Faridah HJ Hassan
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An estimated 23% of the global population or about 1.8 billion consumers are Muslims with an average growth rate of 3% per annum (Hussein Elasrag, 2016). This market provides huge potential for companies, organisations and others, from the West and from Muslim countries, and is on a steep growth path. The expected growth of the global Muslim population is about 35 per cent over the next 13 years, rising to 2.2 billion by 2030, or 26.4 per cent of the world’s total projected population of 8.3 billion. The Muslim population could grow to 2.6 billion and represent nearly 30 per cent by 2050 of the global projected population (Faridah Hj Hassan, 2013).
In Islamic majority and minority countries throughout Asia, the Middle-East, Africa, and Europe, business activity is escalating, with Islamic trade currently estimated in trillions of dollars. Companies are coming to understand the great opportunity that the Muslim consumer represents. But addressing this market is not as straightforward as dealing with other billion population consumer markets such as India and China. For a start, the Muslim community is not a single homogeneous group. Muslims live in every country in the world, represent every race and come from every social and economic stratum. And although they share the common thread of their beliefs, they have their own cultural, regional or local nuances, preferences and practices (Munich Personal RePEc Archive, 2016).
Muslim diverse consumer can prove to be a challenge to those who view markets as geographies and for whom the concept of an Islamic consciousness operating across market frontiers is alien. Neither can the Muslim economy be as easily defined as other cross border markets such as the “green economy” or the “pink dollar.” Economist Ben Simpfendorfer suggests that the strong cultural and historical links between the Muslim and non-Muslim worlds are starting to come to the fore for example China as a country that is addressing the Muslim opportunity (Fleishman Hillard, 2011).
Consumer demand is spurring the growth of clearly labelled and regulated Shariah-compliant products across the value chain from the abattoir to the plate. Increasing demand for Halal food is impelling the creation and maturity of an end-to-end ecosystem. It begins with regulation and covers the entire supply chain all the way to the consumer’s plate. Such an ecosystem acquired a higher level of maturity in 2016 and industry participants expect this to continue in 2017 as the Halal market sweeps into new geographies and embraces new population demographics (Shalini Seth, 2016).
The size of the market for Halal-certified food was estimated at $415 billion as one of the fastest growing components of the global Islamic economy in 2015 by the State of the Global Islamic Economy Report 2016/17 (Thomson Reuters and Dinar Standard). The report pegged Muslim consumer spending on food and beverage at $1.17 trillion in 2015—not all of which was spent on Halal or Halal-certified products—and forecast growth to $1.9 trillion by 2021, a compounded annual growth rate (CAGR) of 9 per cent (Global Islamic Economy Gateway, 2016).
According to Leon Perera, CEO, Spire Research and Consulting, Singapore, Halal food will continue to see growth as a result of increasing religious awareness, a growing Muslim middle-class and government efforts to promote domestic Halal food services and exports. Indonesia, Malaysia, Thailand and Singapore in Southeast Asia as well as Oman and the UAE in the Middle-East are aggressively promoting Halal food exports. Nestlé reported that the UAE, for instance, will see the Swiss food and beverage giant open its second factory in the country in 2017. In 2014, the company said 85 of its 456 factories globally were Halal-certified. The factory in the UAE takes the number of factories with Halal certification to at least 86. The new factory in Dubai South has also been certified by ESMA.
Food Business
The food sector has the advantage of having some of the biggest players in the Halal industry throwing their weight behind producing a diverse range of fully compliant products, adding to a rich range available to the consumer. Some hotspots are seeing more action than others. In a report released in November 2016, Transparency Market Research (TMR) estimated the global size of the Halal market, 50 per cent of which comprises food products, at $2.7 trillion in 2015, expected to reach $10.51 trillion by 2024, a CAGR of 16.2 per cent.
It was estimated by TMR in 2015 that the market for Halal products in the Asia-Pacific and the Middle-East and Africa regions cumulatively accounted for more than 80 per cent of the global market. Asia-Pacific alone accounted for 47.74 per cent and is also expected to witness the expansion of the Halal products market at the most significant pace between 2016 and 2024.
Yusuff Ali M A, founder, Lulu Group International, said that the Global Islamic Economy Summit 2016 in October for promoting Halal products and bringing food entrepreneurs up to speed on best practice was part of his company’s strategy. Lulu focusses not only on GCC but also on Indonesia, Malaysia and India to help companies and entrepreneurs who produce Halal products to make it more professional where more people will be interested.
Beirut-based chef and culinary consultant Joe Barza, who gained fame for co-hosting the Middle-Eastern version of the TV programme Top Chef reported that wider consumer acceptance is responsible for fast growth. Halal food eaters do not eat non-Halal products, although non-Halal food eaters eat both products. The market is growing more diverse with the introduction of Halal in energy drinks, vegan and vegetarian foods, meat and poultry, canned goods, and gourmet and fine foods.
One of the reasons for the high growth in the sector is cross-border consumption, which is set to increase with new entrants eyeing the expanding market. Brazil, for instance, is the biggest exporter of Halal meat and livestock to Organisation of Islamic Cooperation (OIC) countries.
According to Perera of Spire, countries with large Muslim populations especially in Asia will start to drive the Halal food import trade, as Muslim consumers begin to hit that income tipping point beyond which they demand higher-quality imported food. Economies with rapidly-growing middle income demographics, such as Indonesia, Nigeria, Bangladesh and Iran are the ones driving demand. Iran is a special case which will see significant economic growth in 2017 due to the easing of Western sanctions and hence more demand for quality imported Halal food from its middle-class.
Countries that supply meat are becoming increasingly attuned to the lifestyle demands of their target markets. One segment that will see growth is the supply of goats for the annual ‘qurban’ ritual. For instance, Ireland has begun supplying such livestock to Singapore’s Muslim community. Countries that are able to export such livestock in a safe and humane manner will see strong demand from Muslim populations in countries like Singapore and Europe.
Regulations
Muslim-majority countries are now making their presence felt in the regulatory landscape by creating globally acceptable standards after recognising that an absence of common and unified standards globally is one of the major barriers to entry. According to a Salaam Gateway report on the global regulation of Halal food, there are four specific market drivers for industry growth and the need for enhanced regulation: 1) Increasing spend and Halal penetration among Muslims; 2) The high proportion of non-OIC countries exporting Halal products; 3) Non-OIC countries seeking to enter the global Halal market; and 4) The entrance of mainstream players and the growing participation of OIC countries in food export markets.
As official codified Halal standards are largely absent in the Halal food industry, Malaysia and the UAE have gained a foothold with industry-leading standards, and Turkey-based Standards and Metrology Institute for the Islamic Countries (SMIIC) has established a framework for a global, unified Halal food standards, according to the report.
A Nestlé salesperson reported for more than three decades Nestlé, has been operating in the Halal sector for more than three decades and has witnessed many regulatory developments. In the Middle-East when there were no local Halal standards, Nestlé ensured international certifications. When the UAE introduced ESMA (Emirates Authority for Standardisation and Metrology) certification, Nestlé was the first food manufacturer to obtain the certification. In early 2015, ESMA launched the UAE Halal Mark for certifying the full Halal supply chain, from the slaughter process to the additives and ingredients used.
Another potential significant facilitator towards more unified standards is the Indonesian government taking the country's Halal certification under its authority and away from the long-standing independent LPPOM-MUI. The government hopes that its oversight of Halal certification will better assure other countries of Indonesia's Halal standards and processes. The new body, to be called the Halal Products Certification Agency, is scheduled to start operating in 2017, ahead of mandatory Halal labelling in Indonesia by the end of 2019.
Unification
In May 2016, 10 accreditation centres including from the GCC, Spain, USA, Pakistan, Saudi Arabia, Australia, New Zealand, the UK and Egypt signed a memorandum of understanding in Dubai to establish the International Halal Accreditation Forum (IHAF) to be based in the Emirate. Managing director Mohammed Badri, a panellist during GIES 2016, felt that the biggest challenges for IHAF relate to compliance and conformity. They have identified more than 175 requirements for food to be labelled as Halal. The problem is, there is no agreement between countries on whether to accept these requirements. An ideal situation would be a single certification agency in each country, preferably operating in the government sector like in Malaysia. Thus, countries can cooperate in importing and exporting Halal products without the need to certify them as ‘Halal’ multiple times. It saves time and money, not exclusive but as affordable and accessible as possible.
There are various bodies working towards unified regulation as more and more entrants eye this market. The Islamic Chamber of Commerce, Industry and Agriculture (ICCIA), an organisation of the 57-member OIC, in 2016 announced that Qatar would host the premises of the ICCIA Halal accreditation centre. A universally recognised certification would make it simpler for producers looking at wider markets. Nestlé follows the compliance standards of whichever country it operates in. If there are two standards to follow, Nestlé will follow the stricter of the two. Nestlé deals with the Middle-East region comprising 13 countries each with its own regulatory requirement and processes from the Levant to the GCC countries, Iran, Iraq and Yemen. Nestlé complies with each country, and for Nestlé, the more aligned it is, the better it is for product distribution and registration. However, It would be ideal for Nestlé products for the region to have aligned unified certification process.
(The author is director, iHalal Management and Science (iHALALMAS), professor in marketing and strategic management, faculty of business management, Universiti Teknologi MARA, Malaysia. She can be contacted at faridah387@salam.uitm.edu.my)
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