Risks and Rewards: the Halal Market

| 02/07/2008 | Reply

Written by Alex Hawkes

According to the Islam faith, Muslims are commanded by Allah in the
Qur’an to eat only pure, wholesome and permissible food that is fit for
human consumption. By labelling a food product Halal, which translated
literally means permissible, a commitment has been made to adhere to
such dietary laws.

Although many are quite basic in their
nature, for instance pork, alcohol and blood are forbidden; others
follow stringent religious procedures, for example an animal must be
slaughtered using a certain technique and in the name of Allah.

In predominantly Muslim countries, the Halal
food sector has the experience and support to confront all the
requirements of the consumer.

“As of yet no standardised global Halal guidelines have emerged from the sector and areas of uncertainty remain.”

Countries such as Indonesia, Singapore and in particular Malaysia are
well positioned to capitalise on the potentially lucrative Halal market
with government bodies helping to promote the industry through defined
guidelines.

However, as of yet no standardised global Halal
guidelines have emerged from the sector and areas of uncertainty
remain. No more so, than for food processors based outside of the
traditional Halal food-producing territories, where food products are
certified only by small Islamic societies or non-governmental
organisations.

CORPORATE CONCERNS

Imarat Consultants are Halal market
specialists and their managing director and senior analyst Abdalhamid
Evans, says he believes certification is holding the overall Halal
market back, particularly in the Western world.

“From a
manufacturer’s point of view, the market is still full of grey areas. A
company must know what line they are taking and why they are entering
the market before doing so,” says Evans.

“There are certain political areas one must tread carefully around, but the rewards far outweigh the risks,” he adds.

“The Muslim market is waking up to the fact it has consumer power.”

However,
Evans identifies larger players in the industry already starting to
make serious headway where few other have. “Big corporations such as
Nestle, McDonalds and Tescos are now becoming heavily involved in the
Halal sector. They are playing a large role in the progression of the
industry and are setting an example for other companies to follow,” he
says.

Of such examples, Nestle has in particular emerged as a
global pioneer of Halal standards. Around ten years ago its Malaysian
division developed corporate level guidelines that have since made the
company a prominent player in the Halal market.

Examining every
part of its supply chain in acute detail, Nestle carried out a
stringent internal audit that exemplifies the level of detail required
to approach the market. The consequences of doing otherwise are
sometimes disastrous.

“There are a lot of halal consumer
organisations full of rumour and speculation which can organise
campaigns capable of undermining sales,” says Evans.

UNDERSTANDING THE CUSTOMER

The
evolving Muslim consumer demographic is an area Imarat Consultants has
placed a strong focus upon. With Halal product reviews starting to
appear online through social networking sites, there is a growing drive
from the consumers themselves to push forward the standard of Halal
products currently on the market.

“In
the US and UK, 20% of the growth in the kosher food market is due to
Muslim consumers compensating for the lack of Halal products.”

“The
Muslim market is waking up to the fact it has consumer power,” says
Evans “In the US for example, over eight million Muslims have
disposable income which equates to billions of dollars. Likewise there
is a huge demand in the Middle East and growing demand in Turkey and
Europe. As the consumers become more aware of how valuable their demand
is, they will become more vocal.”

Recognising this fact, the
global food industry information exchange provider TraceTracker has
recently signed a joint venture with CIMB Private Equity to launch an
online global portal for the traceability of Halal products.

Known
as Alfitrahnet, the system will work closely with the Halal Development
Corporation and various Halal certification bodies in order to target
all members of the Halal food supply chain.

MEETING MARKET DEMAND

Knut Jørstad, chairman of
TraceTracker says he believes the service can help ensure demand for
Halal products is met on a global basis. “Food processors and retailers
in Europe and US have often neglected Halal products,” he says. “In the
US and UK, 20% of the growth in the kosher food market is due to Muslim
consumers compensating for the lack of Halal products.”

There are
a great deal of similarity between the laws of Halal and kosher – foods
that conform to Jewish dietary laws – which have sparked ongoing
internal debates between Muslim authorities. However, in areas where
there is a shortage or absence of Halal products, Muslims often resort
to kosher products.

The statistics speak for themselves. The
total global Halal market is worth $580bn, with US Muslims estimated to
be spending $16bn a year on kosher products because Halal ones are not
available.

“The total global Halal market is worth $580bn, with US Muslims estimated to be spending $16bn a year on kosher products.”

Migration
has played a strong role in the rift between demand and supply of Halal
products in the Western world, with many second generation Muslims no
longer content with small corner shops specialising in Halal products.

“I
think it is possible for Halal food producers to fight for upmarket
opportunities and be able to support the demand,” says Jørstad.
“Furthermore, the products have crossover appeal to non-Muslims as the
quality of the products is often less processed and more natural than
western food.”

“Alfitrahnet will help support the development of
the market by preventing counterfeiting through its ability to trace
the supply chain. The additional applications of the network can
display a temperature log and offer vital information on the life
expectancy of a product, also helping to ensure the quality of the
food.”

RISING TO THE CHALLENGE

Despite all these efforts,
there is still hesitation from many food processors in Europe and the
US to enter the Halal market. The challenge of obtaining recognisable
certification and ensuring all components of the operation are
consistently Halal compliant appears a dominant deterrent.

However,
as always there are exceptions to the rule. US-based Crescent Foods
began producing and distributing Halal produce in late 1996 for the
Minnesota area and has since gone national, growing from one employee
to around 40. During this period, its founder and president Ahmad Adam
has had to overcome a number of challenges in order to offer customers
a quality Halal product.

“For the first nine years Crescent had
no named Halal certification – we operated through a transparent policy
and open visitation to the facility,” he explains. “Customers,
community leaders and scholars visited the slaughtering facility and
endorsed the procedures. Integrity was transmitted nationally through
the communities by word of mouth.”

“Crescent
Foods sells whole chickens, chicken parts and chicken patties, and
estimates it has provided products to 10 million Muslims in the US.”

“In
2005, a group of customers suggested it was time to have Crescent
certified by a third party certifier. We responded and became certified
by the Shariah Board of North America, which conduct random visits and
audit procedures then issue an annual certificate that we post on our
website.”

Crescent Foods sells whole chickens, chicken parts and
chicken patties, and estimates it has provided products to 10 million
Muslims in the US. Its packages are purposely designed to have
crossover appeal to the non-Muslim population, so that its business is
sustainable through generating additional sales. “Never design a Halal
business only for Muslims in areas where Muslims are a minority,” says
Adam.

In order to ensure Crescent provides a Halal-compliant
supply chain, the company implements its own delivery trucks in the
Chicago area. Although stringent procedures are in place, Crescent
admits that delivering the final products on a national level has
proven a distinct challenge.

Likewise, Crescent’s business setup
conjures a number of challenging processes. “On a daily basis, Crescent
functions just like any other food processing business,” Adam adds.
“However, at the slaughtering level, ensuring the availability and
quantity of qualified slaughter men can be a real challenge.

“This
is a sensitive issue that can affect the overall integrity of the
operation – because if that fails, everything else thereafter fails.
There is also the issue of ingredients and additives, where food
scientists are required more than religious advisors such as Imams or
Shariah scholars.”

PAVING THE WAY FORWARD

However, with a consistent
annual corporate growth rate of 15% since its inception, Crescent
proves that the rewards of overcoming such challenges can be high.

“Never design a Halal business only for Muslims in areas where Muslims are a minority.”

With
the global Halal market still in a stage of relative infancy and the
industry yet to overcome certification and supply-chain uncertainties,
particularly in Europe and the US, examples such as Crescent could
encourage other food processors.

“Crescent has changed the face of the Halal business,” says Adam.

“It
has raised the bar for higher expectation and set a model for those who
would like to ride the wave of success by utilising the energy of the
emerging Halal industry from local to global markets.”

“Many are still thinking about pursuing the Crescent Halal business
methodology due to the commitments needed, the challenges involved and
the vision required.”

Category: Europe, Halal Integrity, The Americas

Leave a Reply