The Malaysian Reserve

Global halal food demand jumps as new growth engines take off

Asia is home to around one billion, or more than 60% of the world’s Muslim population. Pic by Afif Abd Halim/TMR)

By BLOOMBERG/ Pic BY TMR

The global halal food industry, worth more than US$1 trillion (RM3.9 trillion) a year, will likely see sales soaring much faster than the overall food market over the next decade, with emerging categories such as baby food and snacks, and traditional ones such as meat to likely propel industry sales higher, according to Bloomberg Intelligence (BI).

Income and population gains should fuel stronger consumption in Indonesia, Bangladesh and Pakistan. Foodmakers in Australia and Brazil are also obtaining halal certification to capitalise on rising imported-food demand in the Gulf Cooperation Council countries, the report said.

Here are some of the salient points in the BI report.

Muslim middle class, favourable demographics stoke halal demand: Nestlé SA, Mondelez International Inc, Meiji Holdings Co Ltd, Morinaga & Co Ltd and other multinational food companies will likely add more halal-certified products over the next three to five years to capitalise on the relatively fast population expansion and burgeoning middle class in Muslim majority countries, particularly as growth prospects in their home markets remain challenging.

Halal product demand takes flight in Asia: Asian shoppers trading up to more premium-priced dairy, snack and ready meals should propel halal food sales higher in the coming years, particularly as incomes jump in Muslim-majority nations such as Indonesia and Malaysia.

Asia is home to around one billion, or more than 60% of the world’s Muslim population. That’s three times as large by number as second-placed Middle East-North Africa. Sub-Saharan Africa ranks third at 15%, according to Pew Research Centre data.

Halal food spending should also be propelled by population growth over the next one or two decades, aided by the younger demographics and higher birthrate for Muslims compared to the world overall.

The median age of Muslims in 2015 was 24 years, versus a median age of 32 for non-Muslims.

Indonesia, Pakistan spark halal opportunity: Indonesia, India, Pakistan and Bangladesh will likely be the key growth engine for Asia’s halal product demand over the next one or two decades. These four nations account for about 70% of the region’s one billion Muslims, according to Pew Research Centre data.

Rising wages and younger, expanding populations in these countries should deliver food sale gains that surpass the global growth rate. Shoppers in more affluent nations such as Malaysia should also increasingly trade up to higher margin, premium-priced offerings.

Largest Market

Indonesia’s halal market feeds appetite for growth: Indonesia’s booming US$190 billion (RM741 billion) halal food market could jump-start growth for European, North American and Japanese firms facing weak consumption in their home markets.

Baby food, dairy, snacks, soft drinks and other non-traditional categories will likely propel future expansion of the country’s halal market.

To capitalise on this trend, Calbee Inc, Morinaga and Universal Robina Corp are developing halal-certified snacks to win over Asia’s growing number of affluent Muslim consumers.

Nestlé and other multinational firms will likely use Indonesia as a hub to make halal products for other Muslim-majority countries in the region, including Bangladesh, Malaysia and Pakistan. The need to obtain halal certification in each country could present a hurdle to growth.

Saudi, Algeria baby food demand getting ready to grow up: Baby food sales in Saudi Arabia could soar 9% a year through 2022, as government initiatives aimed at encouraging more women to enter the workforce leads them to breastfeed less frequently.

A rising number of dual-income households will provide more families with the financial flexibility to trade up

to higher margin premium offerings such as organic and all-natural formula. The sales bounce in Algeria should mimic Saudi Arabia’s as it undergoes similar social changes, underpinning demand in Algiers, Constantine and Oran. Population growth and higher wages will likely help amplify growing demand for baby formula in these markets.

Food spending pinches Pakistani, Indonesian household budgets: Consumers in Pakistan and Indonesia will likely be more inclined to trade down to less expensive regional brands and private label products during periods of high inflation than their peers in more affluent Muslim-majority countries.

Shoppers’ budgets in these nations are extremely stretched, with food making up about 40% of household spending in Pakistan and a third in Indonesia, which limits their disposable income.

Inflation in Pakistan could accelerate in 2018, according to economists’ forecasts. Shoppers in Malaysia may be able to better cope with elevated inflation, with food spending accounting for only about 20% of household expenditures.

Halal tourism market growth fuelled by expanding middle class: Halal-friendly tourism could surge to US$220 billion in 2020 from just US$155 billion in 2016, according to MasterCard-CrescentRating, with about 156 million Muslims projected to travel annually by 2020.

Middle-class travellers from Indonesia, Malaysia, Saudi Arabia, Turkey and the United Arab Emirates should help fuel rapid expansion.

Hotels such as Fairmont in Singapore, Shangri-La in Manila and Park Hyatt in Tokyo operate halal kitchens that serve pork-and alcohol-free meals.

Hotels are adding rooms with Qibla compasses and Qurans as prayer aids. Travel sites such as crescentrating.com, halaltrip.com and islamictravels.com are also making it easier for consumers to book halal-friendly hotels, restaurants and tour packages. — Bloomberg