Halal food sector moves to maturity

From the abattoir to the plate, consumer demand is spurring the growth of clearly labelled and regulated Shariah-compliant products across the value chain

Increasing demand for halal food is impelling the creation and maturity of an end-to-end ecosystem that begins with regulation and covers the entire supply chain all the way to the consumer’s plate. Such an ecosystem acquired a higher level of maturity in 2016 and industry participants expect this to continue in 2017 as the halal market sweeps into new geographies and embraces new population demographics.

Granular compliance standards at the domestic level are now guiding new entrants to the sector and consumers can now expect to taste halal ramen wheat noodles in Japan and sample halal bibimbap when in Korea.

As one of the fastest growing components of the global Islamic economy, the size of the market for halal-certified food was estimated at $415 billion in 2015 by the State of the Global Islamic Economy Report 2016/17 by Thomson Reuters and Dinar Standard. The report pegged Muslim consumer spending on food and beverage at $1.17 trillion in 2015—not all of which was spent on halal or halal-certified products—and forecast growth to $1.9 trillion by 2021, a compounded annual growth rate (CAGR) of 9 percent.

“Halal food will continue to see growth as a result of increasing religious awareness, a growing Muslim middle-class and government efforts to promote domestic halal food services and exports. Southeast Asian countries like Indonesia, Malaysia, Thailand and Singapore as well as Middle Eastern countries like Oman and the UAE are aggressively promoting halal food exports,” Leon Perera, CEO of Singapore-headquartered emerging markets-focused Spire Research and Consulting, told Salaam Gateway.

The UAE, for instance, will see Swiss food and beverage giant Nestlé open its second factory in the country in 2017. In 2014, the company said 85 of its 456 factories globally were halal-certified. “The factory in the UAE takes the number of factories with halal certification to at least 86. The new factory in Dubai South has also been certified by ESMA,” a Nestlé spokesperson told Salaam Gateway.

GEOGRAPHIC SPREAD

The sector has the advantage of having some of the biggest players in the food industry throwing their weight behind producing a diverse range of fully compliant products, adding to a rich range available to the consumer.

Some hotspots are seeing more action than others. In a report released in November 2016, Transparency Market Research (TMR) estimated the global size of the halal market, 50 percent of which comprises food products, at $2.7 trillion in 2015, expected to reach $10.51 trillion by 2024, a CAGR of 16.2 percent.

TMR estimates that the market for halal products in the Asia Pacific and the Middle East and Africa regions cumulatively accounted for more than 80 percent of the global market in 2015. Asia Pacific alone accounted for 47.74 percent and is also expected to witness the expansion of the halal products market at the most significant pace between 2016 and 2024.

Yusuff Ali M.A., Founder of Lulu Group International, said that promoting halal products and bringing food entrepreneurs up to speed on best practice is part of his company’s strategy. His special focus, he said, was to promote halal products.

“We’re focusing not only on GCC but also on Indonesia, Malaysia and India to help companies and entrepreneurs who produce halal products. If you make it more professional, more people will be interested,” he said at the Global Islamic Economy Summit 2016 in October.

Beirut-based chef and culinary consultant Joe Barza, who gained fame for co-hosting the Middle Eastern version of the TV programme Top Chef, told Salaam Gateway that wider consumer acceptance is responsible for fast growth. “Halal food eaters do not eat non-halal products, although non-halal food eaters eat both products,” he said, adding that the market is growing more diverse with the introduction of halal in energy drinks, vegan and vegetarian foods, meat and poultry, canned goods, and gourmet and fine foods.

SUPPLIERS COAST ON DEMAND

One of the reasons for the high growth in the sector is cross-border consumption, which is set to increase with new entrants eyeing the expanding market. Brazil, for instance, is the biggest exporter of halal meat and livestock to Organisation of Islamic Cooperation (OIC) countries.

“Countries with large Muslim populations will start to drive the halal food import trade, as Muslim consumers begin to hit that income tipping point beyond which they demand higher-quality imported food,” Perera said.

He cited economies with rapidly-growing middle income demographics, such as Indonesia, Nigeria, Bangladesh and Iran as the ones driving demand. “Iran is a special case which will see significant economic growth in 2017 due to the easing of Western sanctions and hence more demand for high-quality imported halal food from its middle-class,” he said.

Supplier countries are becoming increasingly attuned to the lifestyle demands of their target markets. “One segment that will see growth is the supply of goats for the annual ‘qurban’ ritual. For instance, Ireland has begun supplying such livestock to Singapore’s Muslim community. Countries that are able to export such livestock in a safe and humane manner will see strong demand from Muslim populations in countries like Singapore,” Perera said.

UNIFIED STANDARDS ON THE HORIZON

Recognising that an absence of common and unified standards globally is one of the major barriers to entry, Muslim-majority countries are now making their presence felt in the regulatory landscape by creating globally acceptable standards.

There are four specific market drivers for industry growth and the need for enhanced regulation: 1) Increasing spend and halal penetration among Muslims; 2) The high proportion of non-OIC countries exporting halal products; 3) Non-OIC countries seeking to enter the global halal market, and 4) The entrance of mainstream players and the growing participation of OIC countries in food export markets, according to a Salaam Gateway report on the global regulation of halal food.

As official codified halal standards are largely absent in the halal food industry, Malaysia and the UAE have gained a foothold with industry-leading standards, and Turkey-based Standards and Metrology Institute for the Islamic Countries (SMIIC) has established a framework for a global, unified halal food standards, said the report.

Nestlé, for instance, has been operating in the halal sector for more than three decades and has witnessed many regulatory developments. “In the Middle East when there were no local halal standards, we ensured international certifications. When the UAE introduced ESMA (Emirates Authority for Standardisation and Metrology) certification, we were the first food manufacturer to obtain the certification,” said a Nestlé spokesperson. 

In early 2015, ESMA launched the UAE Halal Mark for certifying the full halal supply chain, from the slaughter process to the additives and ingredients used.

Another potential significant facilitator towards more unified standards is the Indonesian government taking the country's halal certification under its authority and away from the long-standing independent LPPOM-MUI. The government hopes that its oversight of halal certification will better assure other countries of Indonesia's halal standards and processes. The new body, to be called the Halal Products Certification Agency, is scheduled to start operating next year, ahead of mandatory halal labeling in Indonesia by the end of 2019.

COMPLIANCE CHALLENGE

In May 2016, 10 accreditation centres – including from the GCC, Spain, USA, Pakistan, Saudi Arabia, Australia, New Zealand, UK and Egypt – signed a memorandum of understanding in Dubai to establish the International Halal Accreditation Forum (IHAF) to be based in the emirate.

The biggest challenges for the IHAF relate to compliance and conformity, Managing Director Mohammed Badri said at a panel discussion during GIES 2016. “We have identified more than 175 requirements for food to be labelled as halal. The problem is, there is no agreement between countries on whether we all accept these requirements,” he said.

Badri added that an ideal situation would be a single certification agency in each country, preferably operating in the government sector. “That way, countries can cooperate in importing and exporting halal products without the need to certify them as ‘halal’ multiple times. This saves time and money. We don’t want halal food to be like diamonds or gold. We need to make it as affordable and accessible as possible,” he said.

As more and more entrants eye this market, various bodies are working towards unified regulation. 2016 saw the Islamic Chamber of Commerce, Industry and Agriculture (ICCIA), an organ of the 57-member OIC, announce that Qatar would host the premises of the ICCIA halal accreditation centre.

A universally recognised certification would make it simpler for producers looking at wider markets. The Nestlé spokesperson said, “We follow the compliance standards of whichever country we operate in – if there are two standards to follow, we will follow the stricter of the two. Our Middle East region comprises 13 different countries – from the Levant to the GCC countries, Iran, Iraq and Yemen – each with its own regulatory requirement and processes. We comply with each country, and for us, the more aligned it is, the better it is for product distribution and registration. It would be ideal for our products for the region to have aligned unified certification process.”

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