Overview-The $10 bln U.S. halal food market

Photo: NEW YORK CITY, USA - OCT 9 2009: Worker in halal fast food stand in Manhattan, New York / ChameleonsEye / Shutterstock.com

The U.S. halal market was worth an estimated $10 billion in 2014 and growth is expected to exceed 2 percent per annum through 2020. What are the opportunities for companies to enter the market?

The U.S.’s 5.8 million Muslims spent around $12.7 billion on food and beverages in 2014, out of the $741 billion that Americans spent on F&B in the same year, according to DinarStandard analysis.

The country’s halal market was estimated to be $10 billion in 2014, excluding spend by non-Muslim consumers on halal. 90 percent of this $10 billion is attributed to domestic Muslim spend on halal F&B and the remaining $1 billion to halal meat exports to OIC countries. 

The market is poised for growth. Muslim consumer spend on total F&B is expected to grow at a CAGR of 2 percent per year between 2014 and 2020, according to DinarStandard analysis.

This is underlined by a 2014 survey undertaken by the American Muslim Consumer Consortium and DinarStandard on the American Muslim Consumer that showed a vast majority of respondents (93 percent) purchased halal food products to eat at home, and with over half of those respondents indicating they purchased strict zabiha (hand-slaughtered) halal meat.

Further, non-Muslims represent an increasingly important customer segment, attracted to halal meat based on quality, most notably as seen in the success of Saffron Road.

KEY PLAYERS

There are no clear market leaders and hence there is significant scope for expansion within the country for emerging halal food brands.  

In a survey undertaken in the AMCC 2014 study referenced above, Al Safa stood out as the most regularly consumed brand (55 percent said they purchase it ‘regularly’ or ‘sometimes’), followed by Crescent Halal, and Midamar, with notable recognition of Saffron Road as a commonly purchased brand.

Al Safa is one of the most established halal food brands in the U.S. It opened in 1999 with operations in Canada and was acquired by Pakistan-based Engro Foods in 2011, which reported consolidated revenues of close to $400 million in 2014 revenues.

Saffron Road is one of the fastest growing halal food brands in the U.S., achieving over $40 million in retail sales across 50 frozen entrée food products within five years, the company told DinarStandard.

Crescent Halal and is one of the largest manufacturers of processed chicken in the U.S, with plans to expand into beef and other meat products, according to their website.

Midamar was established in 1974 and manufactures over 200 halal meat products. Its products are sold through various distributors and are also available online throughout the U.S. and Canada, according to the company’s website.

RETAIL MARKET

Halal food is available through over 2,500 grocery outlets across 37 market chains and through over 600 restaurant outlets across 62 restaurant chains, according to data available on Zabiha.com as of January 2016. Some notable players include:

Halal Guys, which began as a cart-based fast food service in New York City over 25 years ago, is now expanding into a franchise, with agreements to develop 200 locations across the U.S. and worldwide, including Canada and Malaysia, according to its website.

Elevation Burger is a fast-growing organic fast food restaurant which began in the U.S., with close to 30 locations in major cities and over 10 locations internationally.

However, mainstream players are also increasingly accommodating halal food, including fast food chain KFC, for which halal is available across 27 restaurant outlets in the U.S., and Leading Discount Chain, for which halal products is available across 380 U.S. outlets.

EXPORT-FOCUSSED SUPPLIERS

The abattoir industry is fragmented in the U.S. Over 1,000 suppliers of halal meat were identified in a search of the private company database and Cargill and American Foods Group are identified as key players in the market.

Cargill is one of the largest meat manufacturers globally and a key exporter of halal meat to OIC countries. Overall, the firm’s estimated revenue in 2014 was $120 billion.

American Foods Group is another key exporter of halal meat to OIC countries and the fifth largest beef processer in the country. It exports to 38 countries, with 4,000 employees in the U.S, according to its website.

KEY CONSIDERATIONS

Organic market - There is a significant opportunity for halal food producers to target the organic market, which was a $247 billion sector in 2014 and expected to grow by around 15 percent per year until 2020.

Saffron Road’s tremendous growth since its founding in 2011 has largely been driven by its core focus on organic food products, with a majority of its customers being non-Muslim. In an interview with Just Food in 2015, CEO of American Halal Company, which owns the Saffron Brand, said that over 70 to 80 percent of the company’s consumers are not Muslim but who are attracted to values around halal.

Creating cost-efficient, scaleable chains - The halal food supply chain in North America is fragmented with significant scope for consolidation. As identified in Salaam Gateway’s Halal food M&A report, there is a significant degree of fragmentation, in particular among suppliers, with opportunities for private equity firms and conventional players to acquire smaller players and build scale.

Upholding integrity - Halal scandals globally have occurred that have adversely affected consumer confidence in products advertised as halal and the U.S. has been no exception.

In 2014, Midamar was charged with fraudulently shipping beef to Malaysia and Indonesia that did not meet the countries’ import requirements. Key executives were convicted by a U.S. Federal Court in 2015.

In 2011, Super King Market reached a settlement penalty of $525,000 with the Orange County District Attorney for falsely labelling and selling meat as halal at its outlet in Anaheim, California.

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