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GCC Food Industry | February 22, 2017
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GCC Food Industry | February 22, 2017
Alpen Capital was awarded the Best Research House at the Banker Middle East
Industry Awards 2011, 2013, and 2014
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GCC Food Industry | February 22, 2017
Table of Contents
1. EXECUTIVE SUMMARY ..................................................................................................... 7
1.1 Scope of the Report ................................................................................................................. 7
1.2 Industry Outlook ....................................................................................................................... 7
1.3 Key Growth Drivers .................................................................................................................. 7
1.4 Key Challenges ........................................................................................................................ 8
1.5 Key Trends .............................................................................................................................. 8
2. THE GCC FOOD INDUSTRY OVERVIEW .......................................................................... 9
2.1 Country-wise Market Overview ............................................................................................... 15
2.2 Demand and Supply of Major Food Categories ....................................................................... 21
2.3 Food Security Initiatives ......................................................................................................... 27
3. THE GCC FOOD INDUSTRY OUTLOOK ......................................................................... 34
3.1 Forecasting Methodology ....................................................................................................... 34
3.2 The GCC Food Consumption Forecast ................................................................................... 34
3.3 Country-wise Market Size Forecast ........................................................................................ 36
4. GROWTH DRIVERS ......................................................................................................... 41
5. CHALLENGES ................................................................................................................. 46
6. TRENDS ........................................................................................................................... 49
7. MERGER AND ACQUISITION (M&A) ACTIVITIES .......................................................... 55
8. FINANCIAL AND VALUATION ANALYSIS ...................................................................... 57
8.1 Financial Performance ........................................................................................................... 57
8.2 Valuation Analysis .................................................................................................................. 63
COUNTRY PROFILES...................................................................................................................... 66
COMPANY PROFILES ..................................................................................................................... 73
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GCC Food Industry | February 22, 2017
Overall consumption will continue to rise, given population growth and demographics. Trends
that are expected to emerge include healthy and organic, but the scale of those categories is
still small. Whilst theres a lot of concern regarding diabetes and sugar consumption, numbers
show that categories such as confectionary, bakery and sweets continue to see robust growth.
We saw Saudi Arabia impose a tax to fizzy drinks in the budget. Convenience and value will be
the big drivers of category selection in the medium term especially in urban centres.
However, the biggest challenge is probably embedded in the supply chain on the FMCG side,
with large costs associated with distribution and no reliable independent provider of scale. The
best networks are captive today. The dependence on imports further augments this challenge
and limits the ability to expand price offering. Easier regulatory pathways to set up local
manufacturing bases, access to third party logistics that is reliable and especially labour
regulation, can help support local manufacturers. Easier and more importantly reliable custom
procedures and timelines would support importers.
Looking at avenues to boost local production up the value chain within the climate restrictions,
is going to be important in the long term. There is a focus on cost management emanating from
the general slowdown and rising costs in places like Saudi Arabia. Although we do not have a
"search for growth" like the developed market players, we are witnessing deceleration and to
compensate companies are looking at costs, new categories and even consolidation. Having
said that, we are also seeing a lot of focus on food, from investors.
Huda Al Lawati
Chief Investment Officer
Savola Group Co. SJSC, Saudi Arabia
The GCC food market will likely see continued growth despite the recent slowdown in the
overall economy. The changing demographics in the region, driven by a youthful population and
a growing middle class, have resulted in a preference for quick and easy meal options, giving
an impetus to the packaged foods market. On the other hand, we have noticed that the demand
for healthy and international foods is rising due to high health awareness and a developing taste
for a westernized diet. However, the challenge of heavy reliance on imports to meet the growing
demand for food continues to remain a matter of concern. With regional governments efforts on
ensuring food security through various means, this challenge can be alleviated in the long term.
The favourable demographics with a higher urbanization rate, upcoming global events in the
GCC like the EXPO 2020 and FIFA 2022, government measures, hypermarkets and
supermarkets gaining popularity, and introduction of newer distribution channels, are some of
the factors that will drive the growth of this industry in the coming years.
Suresh Subberwal
Chairman
Al Kabeer Group of Companies, UAE
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GCC Food Industry | February 22, 2017
Despite weaker commodity prices, the food and beverage sector in the Gulf has remained
robust and we expect this to continue notwithstanding continued regional and global economic
challenges. Population growth paired with upward economic mobility is already changing the
face of the food sector in the region, with a greater number of consumers seeking organic,
locally grown and produced, healthy and nutritious products.
As one the pioneers of food manufacturing and importers in the Gulf, Al Islami Foods has built
its brand of providing halal food based on the core pillars of quality and trust. Today this now
applies for the diverse people that now reside in the Gulf and call this region their home.
Whilst we remain confident in the dynamics and growth of the regional markets, as a local brand
the global halal food industry provides outstanding opportunities to companies such as ours -
not only the first trusted providers of halal food, but only providing halal food is part of our DNA.
We therefore see the tables turning somewhat. It is now for the regional producers and
manufacturers to show the world our expertise and quality. A challenge that us all in the Gulf
should be proud to embrace.
Brent Pearson
Chief Financial Officer
Al Islami Foods, UAE
The market conditions last year have been challenging and are likely to remain so in the next
couple of years. This has been further dampened by increasing commodity costs, regional
governments measures such as reduction in public wages, removal of subsidies on food
commodities, and subsidies on water and electricity. Having said that there are certain pockets
of opportunities like growth in every day consumables, non-discretionary food products and agri
products that are produced in the region as consumers shift their behavior to reflect the new
reality.
The biggest factor impacting the sector is population, the growth of which has slowed down
considerably in last few years. Not just that, the population mix has changed considerably
affecting the consumption of certain commodities, particularly premium products. The regional
legislation changes like KSA introducing an increase in visa fees for dependents thereby
impacting the family size, reducing public sector salaries, etc. will impact the overall
consumption. With daily expenses growing, the consumers have become cost conscious and
are always looking for better deals. We also see a fall in the trend of spontaneous shopping.
The tourist arrival numbers have also softened a bit due to the slowdown in the economy in
Europe and Russia. All these factors coupled with reduction in government spending will make
the coming years challenging for the industry. However, those with strong balance sheets and
well managed working capital and cash flows, will sustain and eventually grow. Those with
expensive distribution channels will start looking for alternatives.
