Overview-Kazakhstan’s $3 bln halal food market

Kazakhstan’s halal food market is set to grow rapidly, with 11 million Muslim consumers spending an estimated $3 billion on halal food in 2014 and with a substantial push from the government to develop the country into a leading exporter of meat in Central Asia and Eastern Europe. What opportunities exist for food suppliers and manufacturers to enter the Kazakh halal food industry?

Consumers in Kazakhstan spent an estimated $22 billion on food and beverage in 2014. The country's 11 million Muslims accounted for approximately $12.4 billion of this F&B expenditure. This is similar in size to U.S. Muslim spend on F&B as estimated by the State of the Global Islamic Economy 2015/16 report.

In the halal sector, the market grew rapidly between 2002 and 2014 and indicatively, was worth $3 billion in 2014. This 2014 estimate is derived from the value of the agriculture sector, estimated at $21 billion in 2014, based on official economic statistics.

Meat accounted for 45 percent of the agricultural industrial output in 2013, reported AgriCIS Trade and 30 percent of the country’s meat market is halal, according to Kazakhstan’s Halal Industry Association (AHIK).

HALAL MARKET DEVELOPMENTS

The development of the halal industry in Kazakhstan follows the government’s efforts to foster a greater connection with the country’s Islamic heritage.

Kazakhstan registered as a member of the Organisation of Islamic Cooperation (OIC) in 1995, soon after independence from the Soviet Union. The country then established its own Islamic religious authority and in 2006 set up a national halal certification body, the Kazakhstan Halal Industry Association.

To underpin the development of the halal market, AHIK uses Mayalsia’s halal standards in its certification process and the organisation actively cooperates with Malaysia’s certifiers, including the use of the halal logo, with re-certification required on an annual basis.

As a consequence, the number of halal food enterprises in Kazakhstan has grown exponentially, from only eight businesses in 2005 to over 600 in 2014, and with over 100 abattoirs conforming to halal standards.

While the domestic halal market has enjoyed a boom, there still remains a substantial opportunity for external players to enter the Kazakh market.

Kazakhstan -  Muslim food and beverage spend vs. halal food spend, 2014 in USD billions

Source: SGIE 2015/16 report; Kazakhstan National estimates, DinarStandard analysis

RENEWED FOCUS ON AGRIBUSINESS

Kazakhstan was a major exporter of meat during the Soviet era but exports declined rapidly, due in large part to a plunge in the volume and quality of livestock. Most notably, there was more than a 100 percent dip in cattle heads from 1990 through to 2014.

The country is currently a net importer of meat and meat products, with $252 million imported in 2014 versus $27 million exported to other markets, according to UN Comtrade data.

In 2014, agriculture only accounted for 10 percent of GDP despite more than 70 percent of land being used for crops and animal husbandry.

There is now a renewed focus on agribusiness and under the Kazakhstan government’s Agribusiness 2020 program (announced in 2013 as an eight-year program) the agriculture industry will be supported by the development of a Customs Union with Belarus and Russia and WTO accession negotiations.

In addition, the government is planning to provide approximately $20 billion in financial support for businesses.

The agribusiness program has started to bear fruit, with a substantial six-fold increase in beef exports and a 42 percent decrease in beef imports between 2013 and 2014. In particular, the meat exports to the five-nation Eurasian Customs Union more than trebled from $1.4 million in 2012 to $9 million in 2014.

Further, significant efforts have been made to improve the quality of beef cattle stock with the completion of a program to import 10,000 Aberdeen, Angus, and Hereford cattle from the UK, Europe, and the U.S. over the past year.

HALAL EXPORT OPPORTUNITY

There is substantial opportunity for Kazakhstan to increase its export of halal meat to OIC countries.

Of the country’s $92 billion total exports in 2014, only 8 percent, or $ 7 billion, was to OIC countries. $4.6 billion of this was to Turkey and Uzbekistan, with exports to MENA at less than $300 million.Kazakhstan has already sought to address external demand for halal meat, leveraging its close relationship with Malaysia.

Under the National Agribusiness plan, one of the largest players in the domestic halal food industry, Aktepa Company, opened a major meat processing plant in the Aktobe region in December 2015. The plant is halal certified and can process 7,200 tonnes of beef annually, with $6.5 million in estimated costs and with an extra $450,000 for infrastructure allocated by the government, according to Global Meat News.

Berdybeck Sapabayev, Governor of the Aktobe region, told Global Meat News in December 2015 that the new plant will result in an increase in the number of livestock and expand the export potential of the region.

The facility will be fully focused on the supply of beef to the Russian Market within the Commons Customers Space of the Eurasian Economic Union. 60 percent of products will be exported to Russian cities, said Nurlan Sagnalin, head of Aktepa.

CHALLENGES

However, challenges remain in Kazakshtan which can limit its ability to export to OIC markets, with concerns around the credibility of halal. 

The consumer rights protection agency in the country recently highlighted a lack of regulation and legislation governing the appropriate use of halal certification. The agency also found traces of pork in sausages that were marked as halal when undertaking laboratory tests on various products, which further highlights the scale of the problem.

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