The next big market

THE MUSLIM population continues to grow and with it, the Halal food and lifestyle products sectors as various local and international companies are keen to tap this lucrative market.The growth strategy research and advisory firm, DinarStandard, provides organisations with fact-based solutions to help ensure profitable and responsible global impact. Its market focus is on OIC economies, Halal/ethical food & lifestyle sectors, Islamic finance, impact investment, and NGO’s/non-profit organisations. In this interview with FMJE, managing director Rafi-uddin Shikoh, shares his insights on the current status of the regional and global Halal food sector.

Please explain the factors driving the Halal market.

We have identified eight main drivers to this trend, four of which are internal Islamic market-based drivers and four are global environment-based drivers that are shaping the growth and prominence of the global Halal food market.

Islamic-market drivers begin with, first, the global Muslim demographic that is large, young, and fast growing. Muslim population globally is estimated at 1.6 billion growing faster than the rest of the world’s population growth (1.5% annually compared to 0.7% for the rest). Second, economically Muslims belong to many global emerging markets from Indonesia, Saudi Arabia, UAE to Turkey. The 57 mostly Muslim-majority member countries of the OIC (Organisation of Islamic Cooperation) are expected to average 6.3% growth annually compared to global GDP growth averaging 5.3% (2013-18, based on IMF projections). Also many of these major OIC markets are net food importers ($191 billion in 2012 by all OIC markets representing 10.5% of global imports).

Tying these two drivers of demographic and economics that is shaping the Halal food demand is, third, the role of Islamic ethos/ values that are increasingly driving lifestyle and business practices.The numbers of Muslims identifying and adhering to Islam is quite high. According to a 2012 study by The Pew Forum, globally 87% of Muslims consider religion ‘very important’ and 93% fast in the month of Ramadan. Comparatively, in Europe less than 30% rated religion as very important and in US 56% rate religion as ‘very important’ in their lives. The final Islamic-market driver is, fourth, the growing Intra-OIC trade. In 2005, the OIC had set a target of 20% Intra-OIC trade by 2015.

Global environment based drivers is being led by fifth, participation of global multi-nationals in the Islamic economy.Global companies such as Nestlé and Carrefour’s Halal food initiatives are not only participating but leading in the Halal food sector development given their large scale and stature. The sixth driver is developed economies seeking growth markets. Asia in particular has been a focus for growth with many of the OIC (which are already mostly in Asia and Africa) as target markets. The global driver that connects with Islamic economy’s ethical base is the growing global focus on wholesome and healthy eating and social responsibility. The final major driver that is facilitating Halal food sectors is the global communication technology revolution.These social media, mobile and broadband technologies are revolutionising every aspect of food retail, review and distribution business. [The] Halal food sector has been able to gain wide global reach and exposure due to these developments.

Given these factors, what is the Halal food market worth in the GCC?

Based on DinarStandard estimates, the GCC Halal food and beverage market is worth $85 billion (2012) and expected to reach $119 billion by 2018. These data represent the consumer expenditure in GCC on food and beverage. This in essence is the universe of the GCC Halal food & beverage market. The specific breakdown is as follows: Saudi Arabia, $44.4 billion; UAE, $19.9 billion; Kuwait, $8.4 billion; Qatar, $5.9 billion; Oman, $4 billion; Bahrain, $2 billion.

Demand is also growing amongst non-Muslim consumers.

The global driver mentioned earlier, that on the growing global focus on wholesome and healthy eating and social responsibility is one of the reasons Halal has a wider appeal. However this appeal currently is limited given very few Halal brands are transcending from the strict Halal rulings to a more“tayyab”or wholesome food industry value chain.

Can Dubai make it as the next primary global trading hub for Halal?

We believe that many nations, given their various competencies and geographic reach, will play a significant role in this industry. Dubai is certainly a major one. Malaysia has been a pioneer in championing the Halal food space, for example, Nestlé’s Halal initiatives were first piloted in Malaysia before being rolled out globally and Malaysia has led the setting of Halal food standards and Jakim (its certification agency) is a well-respected body globally. We do see Dubai taking a lead in this next phase of Halal food economy development, given its announcement of initiatives and strong leadership will to establish Dubai as a ‘Capital of the Islamic Economy’ and its leadership in SMIIC (OICbacked Halal standards setting body.) The question is how can it make a business case for major food producers- regional and multinationals to set up operations in Dubai? How can it support the ecosystem and the supply chain to support such initiatives? The announcement of the [Halal] hubs is a start.

What challenges are makers facing in this industry?

The Halal food industry is going to be limited by its own inability to realize the potential future. So while most in the industry are focused on the integrity of the certification, accountability and traceability process – which is a very important aspect too – it really has to see connectivity with the “Blue Ocean” of leading the global wholesome/healthy eating and organic movement. It’s mirroring the fate of the evolution the Islamic finance industry is going through to make itself relevant in the global ethical finance/ impact investing space.

How important are accountability and traceability for Muslim consumers?

Muslims globally come in different shades of awareness and interest in Halal accountability and traceability. First, big segmentation is population concentration based – Muslim significant majority (e.g. GCC countries), Muslim majority or significant minority (e.g. Malaysia, Nigeria,) Muslim minority (India, USA, Europe). In the significant majority cases governments drive accountability and traceability and consumers assume it is taken care of. In other markets consumers are more concerned.Other dimension is Muslim consumers’ religious affinity and care which differ in different countries. For example Muslims in Lebanon or Kazakhstan are less concerned than Muslims in Malaysia.

How socially conscious are Muslim consumers of today?

By virtue of inbuilt religious practices such as Zakat and Sadaqah, Muslims are very socially conscious. However broader awareness and interest in responsibility toward the environment, fair trade, healthy diet, non-GMO/organic is something that is still not a mass movement in most major Muslim communities.