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Techno Economical Aspects of the Halal Industry and its Services
Dr. Irfan Sungkar M.EcSenior Economist & Halal Industry Consultant
Director, PT. Green Research Indonesia
The First Gulf Conference on Halal Industry and its Services
24-26 January 2011Salmiyah, State of Kuwait-Holiday Inn Hotel, Al
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الجوانب التقنية ا�قتصادية
لصناعة الح�ل وخدماته
سونغرعرفان . د
اندونيسيا أول اقتصادي لصناعة الحل، مستشار
مؤتمر الخليج ا�ول لصناعة الحل وخدماته2011يناير 24-26
دولة الكويت–السالمية –فندق ھوليدي إن
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• There exists many examples of market failurescommitted abroad by international marketers.
• Mistakes relating to international marketselection occur through inadequate orinappropriate evaluation of market potentials;
• The outcomes are almost always moreexpensive than the costs associated withsystematic evaluation that would haveprevented their occurrence;
• Understanding the nature of the industry,characteristics, consumers behavior and maingrowth factors are critical success factors
MARKET ASSESMENT OF HALAL INDUSTRY:
WHY IT IS IMPERATIVE
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• Halal Industry is unique in the sense it is an industry where Islamicvalues, ideals and beliefs are implemented and adhered within thewhole chain of the production process of such respective Halalindustry.
• Given that certain aspects of the Halal procedure cannot be fullyverified ex-post through random sampling and testing, very closeand continuous supervision is necessary, especially for Halal servicesector.
• The more stringent (note: This is an arbitrary sentence!) the Halalstandard (e.g. no stunning, no mechanical slaughter), the higher willbe the supervision/transaction costs and the more likely is thetendency towards internalizing the process in a vertically integratedchain. Also, the greater there is the advantage of scale economiesthat allow the spreading of the said transaction/supervision costover a larger output volume. Brazil is able to internalized this cost(WHY?).
HALAL INDUSTRY:
A PROCESS AND PRODUCT ORIENTED
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HALAL INDUSTRY:
DETERMINANTS OF POTENTIALS & TRENDS
Trade Situation &Import Regime(Tariffs & NTBs)
Market Adaptation (Tastes,
Preferences, etc)
Current & Future Demand
Internal Competition &Industry’s Structure
4% 1%
Cheapest proteins
Price is the key factor –Low brand awareness
Higher purchasing powerRefrigerator
High Value Added & Convenience Food Products
Primary Products Semi-Processed Products
Value added Products
Modern Retail Outlets
BUSINESS STRATEGY DEPENDS ON THE STAGE OF
INDUSTRIAL DEVELOPMENT (Ex: Poultry sector)
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REGIONAL COMPARATIVE
Country
• China
• India
• Brazil
• Russia
• Middle-East
Population
(Million)
• 1,330
• 1190
• 195
• 145
• 360
Economic
Growth (%)
• 8.0-9.0%
• 7.0-7.5%
• 4.5-5.5%
• 5.0-6.0%
• 6.0-7.0%
GDP
(Billion US$)
• 4,410
• 1,220
• 1,580
• 1,690
• 2,300
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DEMOGRAPHIC: SIGNIFICANT FOREIGN WORKERS
0
10
20
30
40
50
60
70
80
90
Avg GCC Saudi
Arabia
Oman Bahrain Kuwait Qatar UAE
Locals Foreigners
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EST. SIZE OF HALAL FOOD MARKET (MILL US$, 2010)
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
EGYPT SAUDI ARABIA UAE YEMEN KUWAIT JORDAN OMAN QATAR BAHRAIN
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SIGNIFICANT IMPORTS OF HALAL PRODUCTS
(EX: HALAL MEAT IMPORTS TO GCC COUNTRIES, 2009)
Bahrain
3,0% Kuwait
12.4%
Oman
5,8%
Qatar
6,3%
Saudi Arabia
49,5%
United Arab
Emirates
23,0%
Total Halal Meat Imports: US$ 2.48 billion
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IMPORTS ARE RISING FAST, BUT NOT EVENLY
(EX: HALAL MEAT IMPORTS TO GCC COUNTRIES, 2000)
Bahrain
4,4%Kuwait
10,2% Oman
4,8%
Qatar
4,6%
Saudi Arabia
59,6%
United Arab
Emirates
16,4%
Total Halal Meat Imports: US$ 0.98 billion
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WITH LARGE PRICE VARIATIONS (EX: FROZEN CHICKEN)
9.13
7.64 7.80 7.52 7.40
6.235.68 5.43 5.36
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
CoopIslami
Al Salwa Al Watania(S. Arabia)
Khazan(Kuwait)
Sadia (Brazil )
Struer(Denmark)
Al Wadi(France)
Doux(France)
Seara(Brazil)
Local Brand
Foreign Brand
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GCC IS NOT A SINGLE MARKET: DIFFERENT FAVORITE
PRODUCTS IN EACH COUNTRY (EX: KUWAIT)
68.9 67.8
56.750 47.8 44.4 42.2
32.2 3022.2
16.7 13.3 11.1 10 8.9 6.7 3.3
01020304050607080
Nug
gets
Sau
sage
s
Sha
war
ma
Sou
ps
Min
ced
Mea
t
Sto
ck /
Bro
th
Bur
ger
Sam
osa
Sal
ami /
Kaa
lbaa
s
Mea
t bal
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Spr
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Rol
ls
Mea
t Fla
vour
Kab
ab
Oth
ers
Kof
ta
Gra
vies
Esse
nce
and
Gra
nule
s
%
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GCC IS NOT A SINGLE MARKET: DIFFERENT FAVORITE
PRODUCTS IN EACH COUNTRY (EX: UAE)
55.80
49.50 49.00
38.10 36.40 33.9028.80
18.90 17.50 16.40 15.40 12.80 11.60 11.608.40 7.80
2.1
0.00
10.00
20.00
30.00
40.00
50.00
60.00N
ugge
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Bur
ger
San
dwic
h/S
haw
arm
a
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s
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ps
Tikk
a
Sto
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roth
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Min
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Mea
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t bal
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Esse
nce
and
Gra
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Kof
ta/S
hish
Kof
ta
Oth
ers
%
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TYPICAL RETAIL DISTRIBUTION CHANNEL IN GCC
FOREIGN SUPPLIERS
CONSUMER (RETAIL) MARKET
Importers
Wholesalers and Semi-wholesalers
Hypermarket, Big/Large
Supermarkets
Smaller Supermarket,
Grocery Shops, Etc.“Baqalas”
Other Outlets
Cooperative Shops
40% 15-20%20-25% 5% 25%
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PRICE DIFFERENTIALS: LOCAL – IMPORTS - FOREIGN(EX: CHICKEN NUGGET PRICE/KG IN THE UAE & MALAYSIA)
Local Brand Foreign Brand Malaysia Brand
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ANALYSIS OF PRICE & PRODUCTS COMPETITIVENESS(EX: EX- JEBEL ALI PRICE OF MALAYSIAN CHICKEN NUGGET)
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MAJOR FOOD COMPANIES IN GCC COUNTRIES
� Americana Group – Head Quarter in Kuwait
� Processing Plants in Kuwait, Jeddah and Cairo –
Among the Largest in GCC & Middle East;
◦ Available in all GCC Countries.
◦ This is a good case study to show how Kuwaiti
company and products can attain success in
highly competitive foodservice market in the
region.
◦ Principal suppliers to foodservice outlets in
Middle-East
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MAJOR FOOD COMPANIES IN GCC COUNTRIES
� Al-Islami – Dubai Cooperative Society
(UAE)
◦ Available in All GCC countries. Has one of the
highest market share in UAE;
� Al Kabeer – Cascade Marine Foods Llc
(UAE)
◦ Not available in all GCC countries. One of the
highest market share in UAE and Saudi Arabia
� IFFCO Group – Major consumer goods in GCC;
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MAJOR FOOD COMPANIES IN GCC COUNTRIES (ii)
(The list is NOT extensive: for purpose example only)
� Universal Islamic Meat (UAE)
◦ Mostly available only in UAE. Presence in Saudi Arabia and Kuwait is
limited.
� GCC Food Company (UAE)
◦ Based in Dubai with large range of products. Took over Canned beef
products from Americana in 2003
� Al Watania Poultry (Saudi Arabia)
◦ Available widely in Saudi Arabia. The largest dessert-based poultry
farms in the world (near Riyadh)
� Radwa Food Production and Sunbullah Co. (Saudi Arabia)
◦ Radwa introduced ‘Satay’ (Ex. of business flexibility)
◦ Both has higher market share in Saudi Arabia
� Khazan Meat Factory (Kuwait)◦ Has the second highest market share in Kuwait.
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HOW TO BE COMPETITIVE WHEN PRODUCTION
FACTORS ARE EXPENSIVE or RARE?
� Fact: Local raw materials are limited and expensive. Thus, Has liberal import regime◦ Major Kuwaiti & GCC company imports almost all the main raw materials
and ingredients from the most competitive sources in the world;
� Fact: Labor shortage. Thus, Labor intensive production facility is not encouraged◦ Whenever possible, capital intensive production facilities are being used.
There is a free movement of labor forces in the designated large area production facilities;
◦ The result: GCC country has a free market. So, company has to be competitive or ceased operation
◦ Business flexibility & innovative: Targeted segment & niche products (Good example: Americana Group)
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DOWNSIDE: HALAL COMPLIANCE IN QUESTION
� How many Kuwaiti company, or any GCC-based companycan ensure all their raw materials and ingredients boughtfrom many sources/countries are Halal?
◦ Need to buy raw materials/ingredients from Halal certified sources (Is there any Halal assurance system?)
◦ Do you need Halal certificate for imported pastries to produce sambosa? (L-cysteine could be used)
◦ Do you need Halal MSGs as a taste enhancer? (The case of Ajinomoto in Indonesia during 2000’s: Consumers’ revolt knowing porcine-based enzyme was used as catalyst agent in the production process)
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CONSUMER BEHAVIOR & PURCHASE PATTERNS:
FRAGMENTED BY ETHNIC, INCOME & CULTURE
Local Citizen ‘Western’ Arab Asian
• Comparatively affluent in GCC countries
• Shopping/fast food increasingly a form of entertainment
• The family unit remains important
• High levels of spending and debt. But price conscious for food purchases
• High income levels
• High standard of living
• Some tendency to save
• Seek foods they are familiar & with high levels of confidence
•Below average income levels
• Save rather than spend
• Basic food consumption patterns
• Seek value for money
•Relatively lowly paid
• Save rather than spend
• Basic food consumption patterns reflecting national cuisines
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CONSUMERS MAY HAVE LIMITED KNOWLEDGE(WHETHER ISLAMIC SYMBOLS PERSONIFIES HALAL?)
0%
20%
40%
60%
80%
100%
Malays Chinese Indians Others
40,3%
10,7%
18,2%22,2%
59,7%
89,3%81,8%
77,8%
Yes
No
Meat & meat-
based
Processed food PharmaceuticalsCosmetics &
personal-care
100% 0%
98.0% 68.0% 28.0%32.0%
Source: Consumer Survey in Southeast Asia and GCC Countries, 2008
VARIED AWARENESS LEVEL ON ‘HALAL’(POLARIZATION ON THE CONCEPT OF HALAL)
CONSUMERS ARE ABLE TO MAKE INFORMED
CHOICE ABOUT HALAL CERTIFICATIONS?
TO REGULATE HALAL CERTIFICATION OR LET THE MARKET DECIDE?
MORE COMPLEX AS THE HALAL MARKET GROWSIS IT TRUE THAT SOME ARE RENT SEEKERS?
WHO SHOULD PROVIDE DATA & INFO? WHOM IS THE REPRESENTATIVE OF OIC?
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• Brand has the power to
differentiate the product and
‘communicate’ values to the
consumers;
• An effective branding and market
positioning strategy gives
additional values for the
products to be able to be sold at
‘premium’ prices;
• It avoid the products from
commoditization.
REACHING THE CONSUMERS: IMPORTANCE OF
BRAND AND MARKET POSITIONING STRATEGY
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• Consumers/buyers perceives unique added
values which match their needs more closely;
• Consumer’s values, beliefs, lifestyles and taste
perception are related to food consumption
and purchasing behavior. Actual choice of
food products depend on consumer value
orientations;
• Need to aware of attitude/perception bias
and purchasing realities when doing research
FACTORS BEYOND BRANDING: CONSUMERS’
VALUE ORIENTATIONS AND BELIEFS
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THANK YOU – Q & A
IRFAN SUNGKAR
ECONOMIST & HALAL INDUSTRY CONSULTANT
DIRECTOR - PT. GREEN RESEARCH INDONESIAEMAIL: [email protected]; [email protected]
Mobile (KL): +60.17- 250 8190