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Iran’s F&B shows potential to grow
Source：Food Bev Asia
Date Published：6/12/2017 11:06:06 AM
IRAN continues to upgrade its food and beverage industry, with recent figures showing the country’s imports of the latest technology amounted to USD 236 million in 2016. Meanwhile the local food market had a turnover of in excess of USD 20 billion in 2015, according to Frost and Sullivan.
Rightly so. With a diverse climate, Iran has the potential to cultivate and harvest a variety of agricultural products as feedstock for the food and beverage industry. Currently, its production of agri-products is 120 million tonnes annually. The government is targeting the production of 300 million tonnes of agricultural products in the next 10 years, and the neighbouring region is a huge consumption market. Russia is also one of the biggest market for agricultural products importing USD 40 billion worth. It can create extra capacity for this industry in Iran.
But agricultural landscape is facing problems
Iran’s agribusiness environment is faced with major challenges, said Ali Mirmohammad, Senior Consultant - MENASA, Frost & Sullivan.
“Lack of appropriate logistics facilities, frequent droughts and sudden climate changes, lack of liquidity, non-competitive cost of products, poor packaging, branding and marketing, etc. are a few to name,” Mirmohammad commented.
“The shortage of warehouses and cold storage rooms as well as improper and worn-out transportation infrastructure has caused huge losses for the Iranian agribusinesses industry. Inappropriate logistics facilities result in the wastage of over 30% of agricultural products. The country needs an annual investment of over USD 3 billion for renovation of agri-business facilities and equipment for cultivation and harvesting as well as for renovation of F&B technologies. Add to that, recent droughts and shortage of water resources as well as sudden climate changes have impacted both quality and quantity of agricultural production. Such problems have led to deficits in feedstock for Iran’s food processing plants. Additionally, poor and insufficient irrigation systems are other key challenges for development of agribusiness in Iran.”
Mirmohammad added that although the quality of packaging in the Iran’s F&B industry has developed significantly over the past 10 years, more investments are required to ensure that quality reaches and matches internationally accepted standards. Implementation of international standards of agricultural products could also be the best way for increasing product quality, he added.
“Apart from the abovementioned challenges, Iran’s food industry is a high margin sector and has immense potential to increase in future. Within the next five years, Iran aims to increase food and beverage exports from USD 1.5 billion to over USD 5 billion. To do this, massive improvements through investment and joint ventures with well-known brands are required,” Mirmohammad added.
The halal market
The Islamic Chamber of Research and Information Centre suggested that nearly 1,500 companies have obtained halal brand license in Iran, but despite such growth, executives at the Federation of Iranian Food Industry Associations said that Iran’s share of the global halal market is quite small, currently standing at USD 250 to 300 million annually.
The global halal market is worth around USD 2 trillion dollars, according to Pew Research Centre. The Muslim population will grow to 2.8 billion by 2050, constituting 30% of the global population. Initially, halal produce was consumed only by Muslims due to religious considerations but given its association with safety and hygiene, it is now being favored by people of all most religions and backgrounds.
However, Iran may not be tapping into the trillion-dollar market well as it has historically shipped its products to traditional markets of Iraq and Afghanistan. Domestic food manufacturers have not been able to beef up its quality and standards with peers in developed countries to gain a big share of the growing market base.
Currently, three organizations can grant halal food licenses in Iran: a division of Iran Chamber of Commerce, Industries, Mines and Agriculture; Halal World Institute; and Iranian National Standards Organization.
Many factors contribute to the growth in Iran's consumption of dairy products
Dairy products set to soar
Dairy products in Iran are forecast to grow at a compound annual growth rate of around 22% during 2016 to 2021, suggested by US-based market research firm TechSci Research.
Increasing urbanization, rising health concerns among residents, altering lifestyles, demand for packaged products and ease of economic sanctions have all contributed significantly. Add to that, the spike in number of malnutrition cases have also led to growing awareness of the significance of milk and other dairy products. Also, the continuous bid of the Iranian government to diversify its oil and gas dependence is ensuring that the farming and agricultural verticals are well fuelled.
The years between 2011 and 2014 witnessed a huge demand for value-added daily products such as butter, margarine, yogurt, cheese, and ice cream. A lot of domestic and global dairy product providers’ encashed the opportunity by fulfilling the domestic demand. In April 2016, Ireland’s state agency Bord Bia visited Iran on a trade mission to explore its local market potential.
Nuts lead the way
The Fourth International Exhibition of Nuts, Dried Fruits and Related Industries was held in Tehran in January this year. The event attended by dignitaries suggested that Iran supplies more than 50% of the world’s pistachios, as its exports amounted to USD 1.2 billion during March 2015-16 while the global market is worth over USD 2 billion. Iran produces numerous types of pistachios that can be eaten as nuts or used as ingredients by the food industry. Pistachio, along with raisins and dates are the top three nuts exported and contribute significantly to the nation’s non-oil exports. Iran’s premier competitor in pistachio production is California.
According to a member of the Iran’s Pistachio Association (IPA), in the year till March 2017, Iran would export over 136,000 tonnes of pistachios. China is its main importer while others include India, Commonwealth of Independent States (CIS), European Union and a few Arab States.
Pistachios are among Iran's leading exports
Red meat and poultry
The Iranian poultry market has managed to increase production of table poultry and red meat by 20% over the last few years. As the government tries to maintain its growth in the poultry and red meat industry, officials say that it would require considerable amount of investment in doing so.
The poultry industry has grown leaps and bounds but still continues to face challenges. The Food and Agriculture Organization (FAO) in its report ‘Capacity Building for Food Loss Reduction in the Near East’ suggested that Iran could suffice itself in red meat without production increase, since the nation loses up to 100,000 across the supply chain.
A press release by FAO representation in Iran said that nearly one-third of the edible parts of food produced for human use gets lost or wasted worldwide, amounting to 1.3 billion tonnes annually.
Statistics released by the Ministry of Jihad – e- Agriculture states that Iran produces 950,000 of red meat and 1.75 million tonnes of poultry meat annually, while importing 100,000 tonnes of red and poultry meat annually. The total amount of meat in the country amounts to 2.8 million tonnes and while losses in Iran are low, it still loses nearly 300,000 tonnes in the form of waste.
Wheat production contributes to overall growth
Iran’s government purchased in excess of 11 million tonnes of wheat for the current fiscal year, achieving self-sufficiency and it is looking to export its excess three million tonnes of wheat in flour form to Iraq and Afghanistan. Iran requires more than 13 million tonnes of wheat annually, inclusive of the amount it keeps as a strategic reserve. 7.5 million tonnes are consumed by bakeries while 2.5 million tonnes are required by the nation’s food industry.
Fostering sustainable marine culture
Iran and FAO are partnering to develop the marine cage culture in the country as mariculture can play a significant role in the overall aquaculture sector. Iran holds potential to grow its freshwater and marine production due to good environmental conditions and it would also help to grow its export revenues and generate employment. The country has over 50 years of expertise in aquaculture, hosting a variety of freshwater species such as Chinese carps and rainbow trout.
Opportunities beckon ahead
“Development of greenhouses around the country, especially in North West of the country, can create a huge potential in the F&B industry. While the local technology for greenhouses is developed in a way, which can create joint ventures with foreign technology; several companies offer greenhouse erection, which can be optimised by new technologies. Most greenhouses can produce 10 months of the year and 90 percent of the production can be exported,” Mirmohammad, Frost & Sullivan noted.
He added that erection of packing houses and hubs in North and North West of the country is imperative; there are several packing houses which have been equipped but stopped working, due to the lack of export knowledge. Meanwhile, refrigerator trucks could be a great opportunity for investment, as well as establishment of trading houses for export of products, that can complete the value chain of agricultural products.
“There are several producers for fish and shrimp in Iran, which need collaboration in packing and implementation of international standards for export. Several packing houses and hubs are available in government companies, which can be leased for operation,” Mirmohammad concluded.