The halal food market may have once been considered a niche segment, but this is no more. According to a 2013 report by Thomson Reuters and Dinarstandards titled ‘State of the Global Islamic Economy’, the global halal food market was worth approximately US$1.09 trillion in 2012. One of its main drivers is the rapid growth of the Muslim population, which, according to a report in the Pew Forum on Religion and Public Life, is expected to grow by about 35 percent in the next 20 years, from 1.6 billion in 2010 to 2.2 billion by 2030.
The same report also states that the Muslim population is expected to grow at an average annual rate of 1.5 percent — twice the growth rate of non-Muslims. Should this continue, Muslims will account for more than one-fifth of the project population by 2030 at 26.4 percent. This is a phenomenon that is seen in both Islamic and non-Islamic nations, but with the former accounting for the lion’s share of growth.
As a result, one of the main opportunities that companies can tap on is to “tailor their strategic growth around the consumer needs of emergent economies in Asia, Africa and the Middle Eastern countries,” said Dr Muhammad Munir Chaudry, president of the Islamic Food and Nutrition Council of America (IFANCA). “Based on 2012 data analysed by Thomson Reuters, the top Muslim-majority countries’ food consumption is US$197 billion for Indonesia, US$100 billion for Turkey, US$93 billion for Pakistan, and US$88 billion for Egypt,” he said.
The Modern Muslim
Amru, Shah Alam, Malaysia
However, size is not the only influencing factor behind a greater adherence to halal requirements. Like the rest of the world, the Muslim population is registering demographic changes brought about by urbanisation and globalisation. Young, savvy, and educated, today’s Muslim consumer has demands similar to those of non-Muslims. They seek the same things — convenience, variety, and quality — but in a version that is aligned with their religious beliefs.
“Experts highlight the Muslim market’s ‘youth bulge’ as another driver for halal goods demand. 60 percent of the Muslim market is under 30 years old and 87 percent of Muslims describe the religious aspects of their lifestyle as ‘very important’. From these facts, we can believe that the demand for halal certified consumer products is only going to increase as this Muslim population grows and ages,” said Dr Chaudry.
Increasing consumer awareness of the manufacturing process and growing knowledge of how a product may become haram (impermissible in Islamic law) has contributed to the importance of certification—a mark of quality that consumers look for to indicate that the product is fit for consumption.
In places like US and Europe however, a gap still remains between the demand and availability of halal-certified foods. Muslim minorities in those places often have to settle for kosher products instead. This is a huge opportunity cost as halal consumers in these areas have above average incomes and a greater purchasing power.
“For example, an Ogilvy Noor marketing study showed the American Muslim consumer market was worth US$170 billion for a population of eight million in 2010. The Thomson Reuters 2013 report shows that the top Muslim-minority countries’ food expenditures is US$13 billion for the US, US$11 billion for China, US$11 billion for France, US$9 billion for Germany, and US$2 billion for Australia,” said Dr Chaudry.
These changes will also affect consumer behaviour, thereby opening a host of possibilities for players looking to enter the market.
Dissecting The Opportunities
Growing affluence among the community has essentially created a market for premium halal offerings, which include a greater taste for meat, a palate for international cuisine, as well as modern and safe options.
The demand for meat is increasing globally as emerging nations such as the Gulf Cooperation Council countries, Egypt, Turkey and Indonesia experience greater mobility. Economic development and urbanisation has changed lifestyle habits, where meat—once a treat for special occasions—is now affordable to the masses.
Demand for halal eady-to-eat (RTE) products is also on the rise as the younger generation of Muslim consumers seek fast and convenient options to fit their hectic lifestyles. This particular group of consumers belong to an era influenced by snacking and fast food, and duly seeks out offerings that provide the same instant gratification, which presents opportunities in the confectionery, frozen meals and processed food segments.
In addition, internationalisation and a greater exposure to other cultures have resulted in Muslim consumers desiring foods that imbue multi-ethnicity. In the French halal market for instance, arguably the largest in Europe, multinational companies are catering to this desire by introducing halal foie gras, spring rolls, lasagne and frozen meals.
As attitudes change, there are more Muslim travellers and a niche for meeting the needs of this particular group. The ability to provide halal options is vital for boosting tourism. Understanding this, flight carrier ANA is working with a partner on halal Japanese cuisine for in-flight catering in Japan. Japan-based Feed Innovation has also partnered with Hosana Kikaku to supply halal rice to inns, hotels, as well as Japanese airports that have international routes. It ultimately aims to supply the halal rice to Southeast Asian nations, where Japanese cuisine is highly popular.
According to the Halal Japan Business Association, an increasing number of companies are jumping onto the halal bandwagon by getting their products certified. For these firms, the halal market serves as a lifebuoy in the wake of a slumping domestic market caused by an ageing population.
Nonetheless, getting certified is also a boon that extends beyond the halal market. “Another interesting trend to note is food brands gaining simultaneous success with both halal and non-halal consumers. Take the example of halal certified Saffron Road Food, a US-based halal food brand, which produces frozen foods, packaged broths, and dry goods. They target halal, organic, and non-GMO consumers and garnered US$18 million in retail sales in 2013,” said Dr Chaudry.
Halal certification often goes hand in hand with food safety, and is perceived to be of a certain quality due to the stringent standards and testing involved. In a time where scandals involving authenticity and contamination are rife, food safety has become a top concern.
Beyond the retail and food service level, suppliers stand to gain from these developments as well. Substitutes for haram ingredients like pork gelatin and alcohol are sought after as manufacturers look to modify products that typically contain these items, so that they can reach out to the halal market.
For a product to be halal, all ingredients as well as the production line has to be certified. For manufacturers, this translates into a great deal of work as they have to juggle between catering to the latest trends and ensuring that the ingredients and secondary supplies involved are not haram.
According to Dr Chaudry, some of the difficulties that manufacturers face include limited supplies of halal gelatin, limited availability of halal proteins, as well as weak logistics systems, with the latter being important for ensuring that halal integrity is maintained across the entire supply chain from source to final location. “Gelatin is widely used in all sorts of products from yogurt to nutritional supplements. Right now 11 companies supply bovine level-2 halal internationally but it is a limited quantity, which uses up all the easily available raw material,” he explained.
On the logistics side, the globalised supply chain means that ingredients are moved all over the world and may be handled several times before reaching their final destination. “This could pose a challenge for maintaining the halal certified integrity of a product or ingredient. Ports of Zeebrugge and Rotterdam have been halal certified; most ports are not,” he added.
U.S. Department of Agriculture
For the food industry to be truly successful in the halal market, it is important for both suppliers and manufacturers to possess the right credentials. Not only will it simplify the supply chain and encourage participation in this upcoming sector, it also allows food producers to reformulate their recipes by increasing the availability of halal ingredients.
“Since the 1990s, flavour, ingredient, and processing aid companies increasingly embraced halal certification. From IFANCA’s own experience working with new companies, we can safely say that these segments are still growing robustly. On the other hand, we do see growth from entirely new categories such as lubricants, sanitation chemicals, and packaging materials that are related to food manufacturing.”
In line with the greater focus on food safety, consumers are vesting a deeper interest in what goes on throughout the entire process. Traceability has become a basic expectation, and dealing with certified suppliers and operators will make the delivery of this component much easier.
Certification undoubtedly plays a monumental role for entering the halal market. Companies work with halal certification organisations to remove doubt about their products, but what happens when doubt exists in the certification process itself?
One of the perennial challenges that manufacturers of halal products face is finding the right certification body. It is a nuanced affair as countries worldwide each have their own standards and certifying bodies. Some nations even have multiple bodies. Unsurprisingly, this causes confusion among manufacturers and may lead to costly mistakes. The lack of harmonisation also affects compatibility, product development and time to market. To circumvent this, Dr Chaudry has suggested that companies could set up production to meet the most stringent requirements so that they would be acceptable to all regulations by default, or to build plants in the targeted region or country so that exact protocols are met.
More importantly, he adds that it is imperative for companies to address the needs of halal consumers right from the beginning. “Companies face more challenges when they consider halal certification after buyer requests, as opposed to considering it during product R&D. There is a better chance of increasing sales when companies consciously position the product for the halal market and do their homework in advance,” he said. Despite the confusion involved in halal certification, it is something that every aspiring entrant to the halal market needs to adopt and eventually master. At the rate that the segment is growing, companies had best start optimising their processes.
“There is little doubt that halal is a mainstream market. Given that more than one-fifth of the global population needs halal, and (this demand) is widespread over many regions, companies must judiciously develop products that address the needs of halal consumers,” said Dr Chaudry. “With that approach, the product will be acceptable to a large portion of global consumers, right from the start. Halal certification is the way to ensure this strategy.”