Halal – Missing the Boat? (Part I & II)

| 16/06/2009 | Reply

Missing the boat (Part I)

By Nathalie Bontems 

“Can you afford not to?” With this question, consulting firm AT Kearney opened its report, Addressing the Muslim Market,
published last May. The question was pitched at global manufacturers
and suppliers on the still-unrealised potential of halal products. But
it might just as well have been reserved for Arab companies, most of
which are surprisingly indifferent to the money that can be made from
Shari’ah-compliant commodities.

The figures speak for themselves: the $2.1 trillion halal industry
(says AT Kearney) could cater to over 1.8 billion consumers worldwide,
Islam being the world’s fastest-growing religion. While Islamic finance
is expected to be worth $1 trillion by 2010, according to Kuwait
Finance House-Bahrain, the global halal food business is already worth
more than half as much: some $580 billion annually. According to the
Canadian government’s Agri Food Trade Service, halal could account for
20 per cent of world food trade by 2025.

Demand is strong and growing, particularly in countries with an
important Muslim minority: according to a benchmark study by
advertising agency JWT last year, Muslim-Americans have a disposable
income of about $170 billion, but 44 percent feel that the available
food products don’t meet their needs, so they buy kosher goods instead,
spending $16 billion a year, which accounts for 20 percent of the
growth of this ethnic niche. The American halal certification agency,
Islamic Services of America, estimates that halal foods will continue
to grow at a rate of 25-30 percent over the next five-seven years in
the US.

“We envision the aisles in the supermarket dedicated to halal foods,
in much the same way as kosher and other ethnic foods do today,” said
Ann Mack, director of JWT’s trend-spotting unit.

Similarly, the halal market in Europe is worth $16 billion, with
France (where halal foie gras is now available) alone representing $4

Bridging the markets. Halal is a potentially
lucrative business, and it has long ago branched far beyond foods;
eco-tourism, logistics, pharmaceuticals, software development and
personal care products are among the many sectors that are being
explored, and with good reason.

The Halal Journal estimates at $560 million the global
halal cosmetics market. UK-based Saaf Pure Skincare was initially set
up “as an educational website making consumers aware of cosmetic
marketing ploys and cons”, says founder Mahvash Hussain-Gambles. “Then
I started creating skincare products for my family members, people with
sensitive skins and those who were allergic to even ‘natural’ products.
There were no halal-certified skincare products on the market at the
time, and this was one of the motivations, as well as making the rest
of the world aware of green business models and products.”

Since its product-oriented launch in February 2008, Saaf has
established a presence via appointed distributors and/or retailers in a
number of markets, including Dubai, Saudi Arabia, Germany, Sweden, the
US, Canada, Greece and Cyprus.

No wonder, then, that large multinationals want in: Nestlé, which
entered the market a decade ago, is now one of the most prominent halal
suppliers, with annual sales of $3 billion, 75 of its 480 factories
worldwide adhering to halal food requirements and a range of over 300
products. McDonald’s, KFC and Burger King have been selling halal
burgers and chicken nuggets for some years. Colgate-Palmolive has
launched halal toothpaste, while Australian firm Almaas has started
marketing halal makeup. Supermarket chains such as Wal-Mart, Carrefour,
Casino and Tesco are developing in-house halal ranges.

Such companies are aware that halal products have a strong crossover
appeal to non-Muslims, because animal testing must be pain-free, some
aspects of halal ritual slaughter are more ethical – animals may not be
slaughtered in the presence of other animals, for example – and the
meat is perceived as safer, more natural and environmentally friendly:
on the whole, the animals are better treated, and have been spared
disease outbreaks such as BSE and bird flu.

“With halal, we can target Muslims and non-Muslim countries, our
marketing is focused on organic, vegetarian and cruelty free,” says
Hussain-Gambles, who adds: “The majority of our clients are non-Muslims
and from Europe, and they are quite keen to find out more about halal
and intrigued, as halal is synonymous with animal killing, but our
products are certified vegetarian or vegan. It’s important to promote
halal as a symbol of purity and integrity in non-Muslim countries,
rather than as a religious brand. This will dispel any stereotypes
associated with halal and Muslims.

“My focus is to promote halal as the new eco-ethical certification,
which takes into consideration the highest standards of purity and
integrity. Let’s face it: halal principles are no different from
Western principles of eco-ethical. In halal, perhaps we can find global
integration irrespective of creed or religion.”

Arab apathy?

What is not in dispute, however, is that halal is a growing market and Arab companies seem to have missed the boat.

The Arab world is a premier market for halal products due to its
dense concentration of Muslim consumers, but it is not where most halal
products are made. On the contrary, Arab countries rely overwhelmingly
on imports. According to Brunei’s Department of Development Studies, 50
out of 57 member countries of the Organization of the Islamic
Conference (OIC) are dependent on imported halal meat products.

UAE’s halal industry may export $30 million-$50 million worth of
merchandise every year, according to the International Halal Integrity
Alliance (IHI Alliance), but Imarat Consultants (a consulting firm
specialising in halal) notes that the Emirates also imports about $150
million of similar goods each year, 80 percent of which is imported
from such non-Islamic countries as Brazil and Australia. “350,000 tons
of chicken [were] imported from Brazil to Saudi Arabia in 2006,” says
Abdalhamid Evans, senior consultant at Imarat. “That’s huge. And it
shows positions have been taken. Arab producers are now playing
catch-up and are facing challenges even to fill the slot in their own

A case in point: Malaysia’s Mihas, the halal showcase, recently held
its sixth expo; Abu Dhabi’s Halal World Expo was cancelled after a
brief two-year run.

“The exhibition didn’t get enough buyers last year, and when that
happens, exhibitors don’t come back the following year,” says Evans.
“Besides, it was competing with Gulfood [the food and drink expo held
in Dubai in February], whereas halal doesn’t get identified as a
separate concept in the UAE. They [the UAE government] need to rethink

Indeed, Arab authorities must shoulder part of the blame. Even in
Muslim emerging countries, governments strongly support halal
commercial development – for example, the Malaysian External Trade
Development Corporation is in charge of promoting Malaysian halal
exports overseas, with the enticing prospect of having the industry add
5.8 percent of GDP to the country’s coffers by 2020 – yet Arab
countries draw a blank.

“Governments in Southeast Asia, primarily, really saw halal as a way
to boost their exports,” says Evans. “Similarly, in Canada, the
government is looking at halal as a way to get back into exports after
the mad cow [disease] outbreak. In Arab Muslim countries, nobody saw
what the fuss was about. By and large, Arab governments were concerned
about building the tallest building and becoming a tourist destination.
Not much has been done to develop their own food industry. As the
recent downturn has shown, you don’t want to be depending on the rest
of the world to get your food.”

There is a curious paradox at the heart of this, because any product
coming from the Muslim heartland should have a marketable cachet.

Missing the boat, Part II

By Nathalie Bontems 

Thinking outside the box. One of the few halal
stalwarts inside the Arab world is Al Islami Foods. Established in
1981, its products have grown to include fresh and frozen chicken,
meat, seafood, vegetables, and dairy products, on top of which it
recently launched new dry and canned food lines. In 2007, the UAE-based
company launched a five-year diversification and expansion plan dubbed
“Big 5?, a major element of which is its franchise scheme, Al Islami

“In the UAE, Al Islami signed MoUs with the state-owned Mohammed Bin
Rashid Establishment for Young Business Leaders and Alf Yad Venture
Capital Fund to launch Al Islami Cart throughout the region,” says CEO
Saleh Abdullah Lootah. “The concept has now been introduced in the
lower Gulf, Egypt, Malaysia and, soon, in China.”

For Southeast Asian markets, Al Islami signed an MoU with Malaysian
government-owned Halal Industry Development Corporation. In Egypt, the
company inked a franchise agreement with Mo’men, and has forged a joint
venture in Iran for processing and distributing its products. Beyond
the regional arena, Al Islami Europe is in the final stage of
introducing its portfolio in Britain “to tap the UK’s $4 billion halal
food market,” adds Lootah.

“At a later stage, Al Islami Europe will cater to continental Europe
in a bid to create Al Islami’s ‘Real Halal’ benchmark [there],” he says.

The catering and hospitality sectors beckon: in early 2007, Al
Islami acquired regional chicken fast food chain Al Farooj Fresh.
“There are 17 outlets and the plan is to expand regionally to 40
outlets by franchising,” says Lootah.

And halal is a tourism draw card: international hotels such as Al
Jawhara or Almulla Hospitality have invested $2 billion to improve
their halal-compliant branding. Last winter, Rotana Hotel announced the
launch of Shari’ah-compliant brand Rayhaan Hotels and Resorts. With
Muslim travellers making up 10 percent – and growing – of the world
tourism market, according to the World Tourism Organization, it makes

Shaking the tree. “Arab are cash-rich, so they
could buy their way into the [international] halal industry,” suggests
Evans. “They don’t have to produce everything by turning the desert
green. They could actually control the industry.” According to the
Philippines Department of Agriculture last February, a group of Saudi
investors is looking into investing more than $240 million in the local
farm and fisheries sectors in order to produce goods – including about
$50 million in halal products – intended for export to the Middle East.

In line with diversification away from oil, and the growing
prominence of green solutions, Arab companies would do well to better
explore the global opportunities offered by intelligently marketed
halal products. “With growing focus in the West on greener sources of
energy, the ‘black gold’ from the Middle East may not hold as much
value in the future,” says Hussain-Gambles. “The key to surviving the
global recession is to think outside the box and invest in future
businesses. Making your investments in green companies is also halal.”

Evans adds that the first thing Arab companies need to realise is
“that their immediate competitors are international companies and that
it’s not good enough to supply domestically. They need to be very clear
about who their consumers are and who they’re marketing to, to make
sure that their product, packaging [and] manufacturing process are up
to standard. They need to raise their game.”

Not that the path is easy. “For Saaf, we had no problems getting in
Western markets, but it’s taking longer to get into the Middle East,”
says Hussain-Gambles. “Similarly, I would be lying if I said that there
are no negative perceptions of doing business with the Middle East. I
guess the solution lies with investing in a local partner rather than
starting from scratch. Find a local business with potential, and invest
and support them to grow.”

Certification woes. However, one unresolved issue
continues to dog the industry: a harmonising global standard that will
unify a fragmented industry and give consumers peace of mind. “There’s
a considerable [volume] of imports to the GCC that’s not halal,” says
Evans. “One can always find ways to get certificates, the most famous
example being the import of pork with the halal symbol on it.”

Meanwhile, as an increasing number of importers and exporters urge
governmental and religious bodies to formulate a global standard, each
affected country continues to go its own way: Turkey imports some $200
million in halal products each year but doesn’t have an official halal
certification system, while some Islamic exporting countries such as
Indonesia, Brunei and Malaysia, and even non-Islamic exporters such as
Australia, observe halal codes strictly. Oddly, the UAE does not
require businesses to specifically label halal products. In short,
chaos prevails.

Since the launch last year of the GCC Common Market, the industry
has petitioned local authorities to develop a gold standard so that
local markets can compete internationally, says Lootah, who expresses
concern about consumer confusion over “real halal”, hygiene and safety
problems, and “the total absence of market data on the size of the
halal food business and demand in the GCC region”, among other worries.

However, a solution may be near: in 2008, during the third World
Halal Forum (WHF) held in Malaysia, delegates agreed to develop the
International Halal Standard. The IHI Alliance has since been working
on a draft, which was presented to the OIC Standards Committee in
Jeddah last March. The draft will be endorsed by the 700 members of the
Islamic Chamber of Commerce and Industry (ICCI) and the results will be
made public this month at the fourth WHF.

“A huge market is getting its wheels to spin,” says Evans. “So now
is a huge opportunity for Muslims to present what they have in a
different light: something fantastic to offer to the world.”

It’s a pity the Arab world could well miss out.

First seen in Gulf Marketing Review magazine.

Category: Asia, Middle East & Africa, Research

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