03 Market Overview of Iran's Agricultural Food Sector

Market Overview of Iran’s Agricultural Food SectorJanuary 25, 2016

Confidential

Competitive LandscapeValue Chain, Roles and Responsibilities of key players, Profiles of select companies

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Overview of Iran’s Agricultural Food SectorIndustry Classification

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Market Overview of Iran’s Agricultural Food SectorSize, Break-up by Segment and Sub-Product, Production – Consumption Deficits, Pasta Insights, Trends, Drivers, Challenges, and Regulations

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Forecast for Iran’s Agricultural Food SectorTotal and Segment-Wise Market Forecast

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Attractive OpportunitiesInvestment Opportunities, Future Challenges and Investments

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Glossary37

TABLE OF CONTENTS

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3

01 Overview and Value Chain of Iran’s Agricultural Food Sector

Overview

Cereals Wheat

Corn

Barley

Rice

Oats

Pulses / Legumes Peas

Beans

Soybeans

Peanuts

Lentils, etc.

Oilseeds

Iran’s agriculture sector broadly categorised into five product segments

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Overview of Iran’s Agricultural Sector

Source: Food and Agriculture Organization (FAO) of the United Nations, Canadean Report

Agriculture

Grains Pasta OthersDairy Meat

Butter & Spreadable FatsCheese Natural Cheese

Processed CheeseMilk Liquid Milk

Powdered Milk

Yogurt

Frozen Yogurt

Set Yogurt

Yogurt DrinksCreamPuddings/Desserts

Beef/Veal

Poultry meat

Sheep and Goat meat

Sea Food

Other type of meat products

Elbow Macaroni Rigatoni Form

Shell Form

Mostaccioli (Penne) Form

Rotini Form (Twists)

Ziti Form

Spaghetti

Vermicelli

Lasagna

Fettuccine

Linguine and other types of Pasta

Vegetables, fruits and nuts

Sugar

Cotton

Cocoa

Coffee

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02 Market Overview of Iran’s Agricultural Food Sector

Market Size: Total & Segments

Market Segmentation by Sub-product

Regulatory Overview

Trends & Developments

Key Drivers & Challenges

Production – Consumption Deficit

Pasta Insights

Iran’s agricultural food sector valued at USD47.7 billion in 2015; grain segment largest contributor

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Size of Iran’s Agricultural Food Sector – Total and Segments

Source: BMI,IMF, News Articles

The sector primarily depends on rain rather than irrigation, making it susceptible to fluctuating weather conditions, thus affecting production

The agricultural food sector is segmented into:

• Grains: Wheat, corn, barley, rice and others

• Dairy: Liquid milk, cheese, milk powder etc.

• Meat: Beef, poultry, sea food etc.

• Pasta: Elbow macaroni, spaghetti, vermicelli, and other types

• Others: Sugar, cotton, cocoa, coffee, etc.

The sector recorded a decline in revenue at a CARC of 2.5% to USD47.7 billion in 2015 from USD50.2 billion in 2013. This could be attributed to the decrease in consumer price inflation (CPI) to 17% in 2015 from 35% in 2013, which resulted in decreased market prices of agricultural food products

The sector is import-oriented as the demand for agricultural products is greater than production. However, international sanctions imposed on Iran by the USA and the European Union (EU) (because of its nuclear programme) have affected imports

The government has introduced several regulations to encourage domestic production, consumption as well as import/export of agricultural products

2013–15 | Figures in USD Billion

50.2 47.2 47.7

CAGR2013–15

(2.5%)

(1.7%)

1.5%

0.3%

(6.3%)

Note: Horticulture and pisciculture have not been included in the agricultural food sector

(0.3%)

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Grain segment dominated by wheat production with a 70% share in volume terms

7

Iran’s Agricultural Food Sector Production by Major Sub-Products

Source: BMI, News Articles

2012–15 | Figures in Million Tonnes

WHEAT BARLEY CORN

RICE

GRAINS GRAINS GRAINS

GRAINS The grain segment in Iran’s agriculture food sector is dominated by wheat, barley, corn and rice

Total grain production in Iran was almost constant during 2012 – 15, attributed to the dependence on rainfall (rather than irrigation) as well as the lack of mechanisation

Wheat accounted for 70% of the grain production in 2014, followed by barley, corn and rice

With the rice cultivation area in the country stagnant at 580,000 hectares (ha) since 1995, production has also remained at 4.2 tonne/hectares

CAGR (2012–15): ~2.1% CAGR (2012–15): ~5.5% CAGR (2012–15): ~(5.2%)

CAGR (2012–15): ~2.0%

Higher consumption of grains vis-à-vis total production has led to imports

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Iran’s Agricultural Food Sector Consumption by Major Sub-Products2012–15 | Figures in Million Tonnes

WHEAT BARLEY CORN

RICE


GRAINS Iran’s growing population has led to an increase in demand for grains, which outpaces the country’s production. This results in making the country a net importer of grains

Production-consumption deficits in 2014 stood at:

o Wheat – 1.6 million tonnes

o Barley – 0.9 million tonnes

o Corn – 3.6 million tonnes

The production-consumption deficit in rice was 1.7 million tonnes in 2014, making the country largely dependent upon rice imports from India

CAGR (2012–15): ~3.4% CAGR (2012–15): ~2.4% CAGR (2012–15): ~1.1%

CAGR (2012–15): ~1.0%


Meat and milk production affected by inflated feed prices; low sugar production due to inadequate investment

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Iran’s Agricultural Food Sector Production by Major Sub-Products2012–15 | Figures in Million Tonnes

BEEF & VEAL POULTRYBEEF/MEAT BEEF/MEAT DAIRY

SUGAROTHERS Livestock in Iran primarily comprises beef/veal and poultry. International sanctions and inflated feed grain

prices affected meat production in the country over the past few years

The low sugar production in the country is attributed to the lack of adequate investment and public-private support as also the bankruptcy of government-owned sugar plantations

LIQUID MILKCAGR (2012–15): ~1%

CAGR (2012–15): ~2.6%

CAGR (2012–15): ~1.2% CAGR (2012–15): ~1.8%


Among all grain food products, consumption for sugar has increased the most in last four years

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Iran’s Agricultural Food Sector Consumption by Major Sub-Products2012–15 | Figures in Million Tonnes


SUGAROTHERS Increase in per capita income along with the growing population has boosted meat and milk consumption

in Iran. Furthermore, the government’s subsidy on milk has boosted local demand

Sugar production cannot keep pace with the demand, which is twice as high, making the country dependent upon imports. Meanwhile, the consumption of conventional sugar confectionery outpaces that of packaged items

LIQUID MILKCAGR (2012–15): ~1.6% CAGR (2012–15): ~1.2% CAGR (2012–15): ~2.6%

CAGR (2012–15): ~4.4%


Iran imports all key grain products such as wheat, barley, corn and rice, to support the imbalance between production and consumption

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Iran’s Agricultural Food Sector Production – Consumption Deficits2015 | Figures in Million Tonnes

Imbalance

Wheat Iran imports wheat from India,

China and Turkey to cover inadequate domestic production

The country ’ s investment in modern agricultural machinery and irrigation systems is expected to reduce the gap by increasing production efficiency

Barley Insufficient barley production in

Iran has increased the country’s reliance on imports

Key import partners include Russia, the European Union and Ukraine

Rice The production-consumption

deficit in rice was estimated to be 1.7 million tonnes in 2015, making the country largely dependent upon imports

Key import partners include India, UAE, Pakistan and Austria

Corn Iran imports corn in huge

quantities to support its low domestic production

Brazil and Argentina are primary suppliers of corn to Iran


Insufficient production makes Iran a net importer of beef and sugar; however, excess milk produced is exported to various countries

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2015 | Figures in Million Tonnes

Beef & Veal The Iranian government has been

trying to achieve self-sufficiency in beef production and has allocated funds (USD735 million for livestock) for this purpose

Meanwhile, to meet consumption demand, Iran imports beef and veal from Pakistan and India

Poultry Iranian government is offering its

'halal' poultry to a number of countries

It aims to triple its poultry meat exports to Oman in 2016, which were around 5000 tonnes in 2015

Iran aims to become net poultry exporter in MENA in next 5 to 7 years, targeting 1 million tonnes of poultry export in future

Sugar The deficit in sugar production-

consumption can be attributed to insufficient investment and the government ’ s inability to control imports

Iran imports sugar from India and Brazil to support its inadequate domestic production

Liquid Milk Iran – being self-sufficient in

milk production – exports liquid milk and milk products to 24 countries

Key importers of Iranian milk include Afghanistan, Canada, Iraq, Pakistan and Singapore

Imbalance

Iran’s Agricultural Food Sector Production – Consumption Deficits


Iran is one of the key consumers of Pasta globally; Pasta is also exported to neighboring countries

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Pasta Market in Iran

Source: International Pasta Organisation 2014, Euromonitor

Iran ranks among the top 10 countries worldwide in pasta consumption

The country is a major consumer of pasta, with a production output of around 560,000 tonnes in 2013. Total Consumption during that year was 360,000 tonnes and annual per capita consumption stood at 8.5 kg per capita

Per capita consumption of pasta is increasing rapidly in Iran due to its ease of use and wide availability across all retail outlets in Iran. Wheat pastas are also looked upon as a nutritional food product by consumers

Iran mainly exports pasta to neighbouring countries like Afghanistan, Iraq and Turkmenistan, whereas it imports pasta from countries like Turkey, Singapore and Italy

Pasta is one packaged food that has benefited the most from the sudden rise in the prices charged for staples such as bread, fresh meat and rice in Iran in recent years, especially after the launch of subsidies for pasta under the government’s 2010 reform programme

Tak Makaron Co. and Zar Macaron Co. are the key manufacturers of pasta in Iran, accounting for around 45% of total pasta retail value sales in the country in 2014

• Taking advantage of its strong position in pasta category, Tak Makaron plans to boost sales of other categories such as breakfast cereals and edible oils among consumers. The company is also focussing on marketing and branding initiatives for the same

2015 – 2025 | Figures in Thousand TonnesTrade Volume

Iran is a net exporter of pasta. Import and export volumes are:

CAGR: ~61.2%

CARC: ~ -65.4%

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Iran focuses on increasing agricultural output by investing more on agriculture infrastructure

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Increased Government Focus on Agriculture

Source: BMI, Euromonitor, FAO, News Articles

Iran has allocated USD10 billion to the development of its agriculture sector

The government plans to abolish its subsidies on food, thereby freeing more money for infrastructure improvements, which will help increase agricultural productivity and also bring down the cost of food

The country, in its sixth Five-Year Development Plan (2016–2021), aims to increase total agricultural, and fruits & vegetable production during 2015–2025 :

Key Trends (1/2) Description Impact

Production is set to rise with increased government focus and potential investment in the sector

CAGR: ~ 6.6%

2015 – 2025 | Figures in Million TonnesProduction Volume

CAGR: ~ 6.5%

Iran’s Production - Consumption deficit may be reduced with increasing imports and entry of foreign players

15Source: BMI, Euromonitor, FAO, News Articles

Key Trends (2/2) Description Impact

It is forecasted that Iran's deficit in grains (mainly wheat) would grow in the coming years. Therefore, the country might see an increasing reliance on imports

Countries like India, Latin America and the Black Sea region will most likely benefit from a rise in import demand from Iran

• India was one of the few countries to operate a barter system and other payment mechanisms with Iran. Iran has thus been increasingly relying on Indian rice exporters since 2011

Increasing Reliance On Imports

Iran may re-diversify its import sources after the lifting of sanctions

It would again seek traditional exporters like Thailand and Pakistan for rice. For sugar, Iran is expected to step-up imports from Brazil

Entry of Foreign Players (Investments)

With the lifting of sanctions and more government initiatives for the agricultural sector, many foreign companies are interested in Iran’s agriculture industry

• The Nardi Group, an Italian agricultural equipment producer, is investing in the production of agriculture machinery in the Moghan region, a major hub of food production in Iran and also home to some of the country’s biggest dairy, beef, sugar, cotton, and food-processing operations

As Iran ’ s consumption of agricultural produce is more than its production, early foreign entrants in the market will benefit greatly if they serve the bulk of demand

Easing of sanctions, foreign investments and increasing population are factors driving the sector’s growth and demand for products

16Source: BMI, Euromonitor, News Articles

The US and the UN Security Council have now lifted their economic sanctions on Iran. This would lead to a rise in imports of modern agricultural machinery, technology, fertilisers and quality seeds

Iran is one of the world’s biggest markets for grain; with the normalisation of its relations with the outside world, newer markets are likely to open up for grain exporters

The removal of sanctions would have a rapid and more direct impact on agricultural consumption, as food price inflation is expected to ease significantly from the current elevated levels

According to national statistics, there has been a gradual increase of 1.3% in Iran ’s population in 2014, from the previous year. Also, almost 70% of the population is aged between 15 and 64

Iran recently signed key Memorandums of Understanding (MOU) with several countries. These MOUs focus on boosting cooperation among the partners and increasing production for Iran

• Iran and France signed six MOUs for transfer of technological know-how in fisheries, production of organic foods, animal husbandry, farming, modern irrigation methods and harvesting techniques• Serbia and Iran signed bilateral agreements for production, joint investment and technology transfer on seed production, livestock and agricultural machinery• Iran signed an agreement to increase agricultural-product exports to Russia

Removal of Sanctions

International Investments

Growth in Population

Key Market Drivers Description Impact

Better-quality machinery, technology and fertilisers would ultimately result in improved crop production

Foreign investments will boost Iran’s agricultural sector

Increase in population has contributed to a growing demand for agricultural products

Water scarcity, food wastage remain key challenges for the sector

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Iran is vulnerable to unfavourable weather conditions as crops here rely almost entirely on natural irrigation, which is further hit by depleting water resources

About 84.5% of the land (165 million hectares) in Iran has arid and semi-arid climates, as a result of which 72% of the water received from rainfall evaporates

As per the Ministry of Energy, per capita water resources (renewable) fell substantially over 1921-2014

Source: BMI, Euromonitor, News Articles

Every year, 35% of Iran’s agricultural produce – a quantity that would feed 15 million people – is wasted due to lack of proper production technologies and inefficient logistics

Fruits face more wastage as compared to crops and meat food products

Water Scarcity Challenges Production Activities

Wastage of Agricultural Produce

Description Impact

If water reserves continue to deplete at the current rate, agricultural activities are expected to severely decline in future

Wastage of food also depletes scarce natural resources. For instance, food wastage results in an annual loss of 15 trillion litres of water

1921–2015 | Figures in Million LitresPer Capita Water Resources

Key Market Challenges

Beef deficit, low efficiency and anticipated increase in agricultural-commodity imports to hinder sector growth

18Source: BMI, Euromonitor, News Articles

Imports of Agricultural Commodities

In addition to lifting of sanctions, the Iranian government’s measures to boost imports – by reducing import duty on wheat and lifting the ban on rice – are likely to succeed, thereby reducing the need to spend on improving domestic agricultural infrastructure

Various livestock companies in Iran currently operate at a mere 20–30% of their production capacity. Also, the animals delivered to slaughterhouses are often underweight and do not meet the accepted quality standards

Description Impact

Imports of agricultural commodities may shift the industry’s focus away from domestic production

If the trend continues, Iran would be unable to meet its self-sufficiency target

Beef Deficit to Increase

Agricultural efficiency in Iran is less than 40% due to inappropriate soil utilisation, lack of crop diversity and obsolete traditional technology and equipment used in cultivation as well as harvesting

Low Efficiency Iran’s inefficient use of water and

soil results in poor agricultural productivity

2013-14–2018-19 | Figures in Thousand TonnesProduction Deficit

Key Market Challenges

Apart from having a regulatory framework to support agriculture, the Iranian government has taken positive steps as well

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Regulatory Framework

Ministry of Agriculture Jihad (MOAJ)

Primary regulatory body for the agriculture sector in Iran

Agricultural Research, Education, & Extension Organization (AREEO)

Responsible for formulation and implementation of policies and strategies and conducting training programmes

Minimum Price

The government imposes a price control on the milk-processing industry by setting a minimum price (IRR14,400 in 2015) to purchase raw milk from milk farmers, aimed at supporting them

However, the regulation has impacted milk suppliers as they have to purchase milk at a price that cannot be passed on to customers due to government price controls. This has led to slackened profit margins for suppliers

Water Efficiency

The government aims to boost water efficiency in Iran’s agriculture sector to 70% from 36% by investing in modern irrigation technology

It intends to review its agriculture policies to achieve this objective

Investments in the Sector

Iran allocated USD10 billion to the development of its agriculture sector. The amount will be paid out of the country's National Development Fund

It was also noted that, based on an order from the president, the 22% interest rate charged on loans to the agriculture sector would be revised

Source: News Articles, FAO, Agriculture Bank of Iran

Government Initiatives

Investment Supporting Entities in Iran’s Agriculture Sector

Agricultural Products Insurance Fund (APIF)

Established to support farmers and livestock producers incurring loses and damages in their products due to unexpected natural disasters

Investment Guarantee Fund

A financial and legal entity established to solve problems (such as lack of adequate collateral, credit guarantee) at the time of investment in the field

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04 Forecast for Iran’s Agricultural Food Sector

Market Size: Total & Segments

Agricultural food sector to grow to USD56.8 billion by 2019; production and consumption to improve with the removal of international sanctions

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Forecast for Iran’s Agricultural Food Sector – Total and Segments


The clinching of the nuclear agreement in 2015, followed by the lifting of international sanctions in 2016, is likely to boost Iran’s economy and thereby encourage greater agricultural food yield

With international sanctions being lifted, Iran may get easy access to inexpensive agricultural inputs (agrochemicals, equipment), increase foreign investments as well as reduce food price inflation

Feed prices would reduce and hence spur meat and dairy production.

Consumption of packaged foods would increase due to international investments and campaigns by makers of packaged products

Furthermore, urbanisation, lifestyle changes as well as the popularity of western products in Iran would encourage the production and consumption of processed and packaged meat and dairy products

However, as agriculture in Iran mostly depends upon rain (than irrigation), yields might be undermined. Hence, investments would be needed in modernisation, irrigation and mechanisation to improve agribusiness

Removal of international sanctions on Iran, would encourage imports of agricultural food products from several countries, instead of the previously limited number of suppliers


48 51 53 55

CAGR2015 - 19

4.5%

5.2%

3.5%

4.6%

4.8%

57

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Grain production to improve with easy access to agricultural inputs

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Forecast for Iran’s Agricultural Food Sector Production by Major Sub-Products


2016–19 | Figures in Million Tonnes

WHEAT BARLEY CORN

RICE


GRAINS After the lifting of international sanctions in 2016, Iran will have improved access to agricultural inputs at

reduced prices, thus improving grain yields. However, the north-western regions of the country suffer from sparse irrigation and mechanisation, which might hinder the anticipated increase in production

The government plans to achieve self-sufficiency in rice by encouraging domestic production and monitoring imports

CAGR (2016–19): ~2.8% CAGR (2016–19): ~2.8% CAGR (2016–19): ~2.7%

CAGR (2016–19): ~1.9%

Lifting of international sanctions likely to boost grain consumption and thereby imports

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Forecast for Iran’s Agricultural Food Sector Consumption by Major Sub-Products2016–19 | Figures in Million Tonnes

WHEAT BARLEY CORN

RICE


GRAINS Food price inflation is expected to decline after the lifting of international sanctions in 2016. This is likely

to boost the consumption of grains

As grain consumption is forecast to outpace production, imports are likely to rise further

Easing of international sanctions would also encourage imports of rice from Pakistan and Thailand, than just India

CAGR (2016–19): ~5.1% CAGR (2016–19): ~3.6% CAGR (2016–19): ~4.4%

CAGR (2016–19): ~1.9%


Reduction in feed prices to encourage meat and milk production; sugar production to grow with domestic and international investments

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Forecast for Iran’s Agricultural Food Sector Production by Major Sub-Products2016–19 | Figures in Million Tonnes


SUGAROTHERS Decrease in price of imported feed after the easing of international sanctions, would fuel meat and milk

production. International players are expected to tap the dairy market in Iran and popularise packaged dairy products

Sugar production is set to expand with the establishment of sugar mills in Oshnaveih in 2013, with capacities of 500,000 tonnes. The lifting of international sanctions is likely to attract foreign investment in packaged sugar confectionery

LIQUID MILKCAGR (2016–19): ~1.3% CAGR (2016–19): ~3.0% CAGR (2016–19): ~3.2%

CAGR (2016–19): ~2.3%


Consumption of packaged agricultural food products likely to increase

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Forecast for Iran’s Agricultural Food Sector Consumption by Major Sub-Products2016–19 | Figures in Million Tonnes


SUGAROTHERS Meat consumption in Iran is set to improve with the normalisation and reduction in food inflation

Diary consumption is projected to focus more on packaged as well as value-added products

Foreign investment in packaged sugar confectionery as well as marketing campaigns by international firms are likely to boost the consumption of packaged sugar products in Iran. The country is also likely to increase sugar imports from Brazil to meet the growing domestic demand

LIQUID MILKCAGR (2016–19): ~4.3%

CAGR (2016–19): ~4.9%

CAGR (2016–19): ~3.6% CAGR (2016–19): ~3.5%


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05 Competitive Landscape

Value Chain

Roles and responsibilities of channel entities

Profiles of select companies

Distributors/Wholesalers are a key entity in the Iranian agriculture sector that control not only the domestic distribution, but also Imports and Exports

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Value Chain of Iran’s Agriculture Sector

Distributor/Wholesaler

Exporters

Food Processing

Industry

Importers

Meat and Beef Processing

Dairy

Fruits, Vegetables & Crops

ButcheringBreeding

Milk ProductionBreeding

HarvestingPlanting

Independent Stores

Hypermarkets

Company Warehouse

Industry shows presence of vertically integrated players; modern retail channel remains under-penetrated

Entity Description Select Companies

Production

Producers Agricultural production is mainly carried out by independent small scale farmers. In addition, integrated food processing companies also engage in production

Sabah industries group

Kalleh Dairy

Ario Fruit

Amol Meat Products

Pegan DairySuppliers Suppliers play a key role by sourcing the produce from several farmers and

supplying to retailers, distributors, wholesalers and food processing companies

Distribution

Distributors Distribution of agricultural produce is largely done through agents or wholesale distributors. Distributors supply to modern and traditional retail outlets

Alin Meats

Solico Food Industries

Dasht Morghab Group

Tavakoli Fresh Fruit Company

Saranuts

Saradipour

Wholesalers Wholesalers supply large quantities of commodities to retailers, mainly in rural areas as well as to food service industry (restaurants)

Importers/Exporters

Exporters present in Iran, purchase goods from distributors and distribute it to other countries. Several food products such as milk, dried fruits etc. are exported. Importers purchase goods from foreign countries such as India, Brazil and Russia and supply to distributors. Key food products imported include meat and wheat

Retail

Independent Stores Agricultural commodities are majorly sold through traditional retail channels such as independent family-owned grocery stores and bazaars

Refah Supermarkets

Majid Al Futtaim Hypermarkets

Shahrvand SupermarketsModern Retail

Modern retail formats such as super markets and hyper markets, although underdeveloped at present, is rapidly growing sales channel for agricultural produce

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Role, responsibilities of key value chain entities

Source: Euromonitor

Solico Food Industries leads in dairy and meat products category with its diverse product range; strong marketing and distribution network are its key strengths

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Key Dairy and Meat Company

Key Metrics

Solico Food Industries’ leadership position in Iran’s dairy and meat sectors can be attributed to steady advertising campaigns, a wide product portfolio and expansion in its distribution network

Some of its key brands are Kalleh, Solico, Castle, Shams, Pemina and Fruzz

Year of Establishment 1973

Ownership Type Private

CEO G.A. Soleimani

Headquarters Tehran, Iran

Key Business Segments

Dairy, meat and cheese

Number of Employees 15,000

Revenue (2014) USD1 billion

Websitewww.solico-group.com

Solico Food Industries is one of the largest food processing companies in Iran, offering diverse products including milk,

yoghurt, ice cream, sour milk, snacks and meat. It manufactures over 1,800 products at 12 production facilities countrywide

The company operates more than 30 subsidiaries, including Kalleh Dairy Company and Kalleh Amol Meat Company

• Kalleh Dairy Company, established in 1991, is the market leader in several dairy products including cheese,

yoghurt and sour milk

• Kalleh Amol Meat Company, established in 1983, is the top player in processed meat and seafood categories

Solico Food Industries has a global presence, with 30 offices across England, Germany, Iraq, Russia and the USA

It fulfils over 1 million orders a month through a distribution network of 70 centres and a fleet of 2,000 trucks

COMPANY OVERVIEW

Solico Food Industries

Source: Company Website

Dasht Morghab Group leads Iran’s processed fruits and vegetables market supported by its strong brand image and high-quality manufacturing processes

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Key Fruits and Vegetables Company

Key Metrics

Dasht Morghab Group’s success can be attributed to its long history, strong brand image, wide product range and extensive distribution network


Ownership Type Public



Canned food products

Number of Employees 400

Website 1and1group.com/en

Dasht Morghab Group

Dasht Morghab Group, owner of the brand 1&1, is the leading player in Iran’s processed fruits and vegetables sector; it

accounted for 28% of the total market value in 2015

The group’s business is divided into four entities: Dasht-e-Morghab Company, product development, commercial activities

and distribution

The group was listed on the Tehran Stock Exchange in 1995

Dasht Morghab Group also exports products; some of its markets are Australia, Belgium, Canada, India, Germany, Sweden,

Kuwait and UAE

The group owns 13 warehouses, which help it in the distribution of products across Iran

Dasht Morghab Group holds several quality and environmental management certifications such as ISO 9001, ISO 22000

and ISO 14001

COMPANY OVERVIEW

Source: Company Website, Zawya, Euromonitor Note*: Latest available revenue figure has been used.

Huge production capacity and broad export markets make Tak Makaron the dominant player in Iran’s pasta sector

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Key Pasta and Corn Flakes Product Company

Key Metrics

Tak Makaron increases its global presence by participating in trade fairs worldwide. The company has participated in the Gulfood International Trade Fair – 2013 and 2014, Malaysia Food International Trade Fair – 2011 and Turkey Food Festival Trade Fair – 2009





Pasta, lasagna and corn flakes

Number of Employees 100

Revenue USD164.3 million

Websitewww.takmakaron.com

Tak Makaron

Tak Makaron is the biggest player in Iran’s pasta market; it has several product categories including pasta, flour, spaghetti,

corn flakes, lasagna and cake mix. The company accounted for a 23% share of total pasta sales in the country in 2014

It is also one of the leading players in Iran’s overall packaged food industry

Apart from supplying the domestic market, Tak Makaron exports products to Afghanistan, Bahrain, Saudi Arabia, Nigeria,

Canada and Ukraine

The company operates a 120,000-square-metre production facility with the capacity to produce 450 tonnes of pasta. The

automated plant houses six production lines and modern machinery, and is capable of producing 40 varieties of pasta

Tak Makaron also owns a warehouse with storage capacity of 7,000 tonnes of goods

COMPANY OVERVIEW

Source: Company Website, Capital IQ, Euromonitor

Golestan Company dominates Iran’s packaged rice industry by offering broad product categories

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Key Rice Supplier

Key Metrics

Golestan Company was the first packaged rice supplier in Iran. Its products are available across different income groups CSR initiative: The company helps the disabled by supporting charitable organisations such as Hazrat Fatemeh

Charitable Institute



Headquarter Tehran, Iran


Rice , saffron and tea

Number of Employees 2,000

Website www.golestan.com

Golestan Company

Golestan Company, a part of the Great Iranian Business Group (GBG Group), offers over 300 types of products such as

rice, tea, saffron and pistachio

It is the largest player in Iran’s packaged rice market. The company accounted for 41% of packaged rice sales in 2015

Some of its prominent rice brands are Golestan and Pardis. While Golestan is a type of high-quality, domestically produced

rice, Pardis is rice of lower quality imported from India

The company places its products with more than 100,000 retailers through a sales team of over 1,000 personnel

In 2007, Golestan Company acquired the licence to sell the global tea brand, Twinings, in Iran

COMPANY OVERVIEW

Source: Company Website, Euromonitor

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06 Attractive Opportunities

Major Agricultural Sectors And Their Future Potential

Future Challenges And Investments

Incentives And Benefits Of Foreign Investment

All major agricultural sectors are witnessing a positive outlook during the next five year, mainly due to government and foreign investment

34

Iran’s Major Agricultural Sectors and their future potential

Grains The Iranian government invests

heavily to modernise irrigation and drainage in key areas countrywide

It has also started programs to mend the country ’ s cropping patterns to increase domestic grain production

BayWa, a German company, plans to ship 250,000 metric tonnes of grains and oilseeds to Iran in early 2016

Hakan Agro DMCC, which already supplies dairy products to Iran, now plans to expand its business into supplying grains in the country

Dairy A strong, rising demand for

packaged cheese is forecasted in the next few years in Iran

A higher consumption of yogurt and sour milk is expected in Iran, mainly due to the people ’s preference for these over fresh/pasteurised milk as well as the overall high consumption of doogh, a beverage commonly served with Iranian meals

Fonterra, a New Zealand dairy giant, hopes to capitalise on Iran's dairy opportunity by entering the fat and butter products

Others Iran ’ s sugar consumption is set to

grow 27.6% to 3 million tonnes by 2019, after the removal of sanctions, mainly driven by a growing population and improved macroeconomic conditions

Poland plans to import fresh and dried fruits as well as pistachios from Iran, after the lifting of sanctions. Collaboration between the two countries is likely because the types of crops cultivated in their different climatic conditions do not compete with each other

Meat With the Iranian government ’s

push, a number of Omani companies have expressed interest in investing in new livestock production facilities

With the removal of sanctions, fisheries exports could hit USD1 billion and trade balance would reach USD800 million


CAGR: 4.8%CAGR: 4.6%

CAGR: 3.5% CAGR: 5.2%


High inflation, high domestic competition and issues of imitation of the product are key challenges that foreign companies can face in Iran

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Future Challenges for foreign companies entering Iran

Source: News Articles

Future Investments

Establishing a foothold in Iran after the lifting of sanctions will not be a straightforward task, even for companies that once had businesses there

First, inflation is still high. Many middle-income shoppers opt for essentials over indulgencesHigh Inflation

A further challenge is competition with domestic firms, as the country ’ s agricultural market is mainly dominated by domestic players. Locally produced goods are cheaper

Also, Iranian companies have an edge over international rivals because of their knowledge of Iranian consumers and their habitsCompetition

Scattered Retail Network

Iran’s retail network is highly scattered and relies on independent small grocers Therefore partnerships with local players may be one of the ways to try and establish a presence in the country

Imitation Issues A significant number of international branded products are available on the market, but are unlicensed and have no ties to the company's balance sheet

The government plans to build mega-scale water-management structures and to equip water wells with measurement devices to curb water consumption

Iran and France have agreed to establish a fish farm on Qeshm (Iran), for about USD2.2 million. The farm would be capable of producing around 10 million species of sea fish yearly and will help replace the farming of freshwater fish with saltwater types

Water Management

Fish Farm

Iranian government aims for self-sufficiency in beef production by 2016 by increasing its meat production capacity and allocating IRR900 billion (USD735 million), with investments also marked for animal facilities

Increasing beef production

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Government’s focus on agriculture via subsidies and tax exemptions provides various incentives for investments in Iran’s Agricultural Sector

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Incentives and Benefits of Foreign Investment in Iran’s Agricultural Sector

Source: News Articles

Financing and low-interest loans for investment in agriculture and agro-industrial projects Provision of agricultural machinery and equipment with emphasis on local production, by mandating technology transfers in

foreign contracts Allocation of government loans and financing for agro-industrial projects

Government’s Current Focus

The agricultural sector is heavily subsidised by the Iranian government. Each year, the government guarantees the purchase of wheat from farmers at a special price, to protect them from seasonality in market prices

Even though the prices of fuel, water and electricity have increased significantly in Iran, the government has kept prices low for agricultural consumption in vis-à-vis household and industrial consumption

High Subsidies and Low Prices

Exemptions Tax Exemption: The income derived from all agriculture and horticulture activities, animal-rearing, fish-farming, bee-keeping,

poultry husbandry, hunting and fishing, sericulture, and the revival of pastures and forests is exempt from taxes Export Exemption: 100% of the income derived from exports of agricultural products (including farming, horticulture, husbandry,

poultry, fishery, forest and pasture products) and its complementary industries is exempt from taxes

Quick approval of the foreign investment application Granting protection coverage to all foreign investment schemes Huge energy resources and low costs of production and public services Iran’s Foreign Investment Promotion and Protection Act and its executive bylaws allow foreigners to own 100% of the investments

they make. • Foreign investors can secure 100% land ownership for production purposes in Iran and will also have government’s support

Benefits to Foreign Investors

Incentives and Benefits of Foreign Investment in Iran’s Agricultural Sector

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Glossary

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Glossary of Terms

USD : US Dollar

IRR : Iranian Rial

CAGR : Compounded Annual Growth Rate

CARC : Compounded Annual Rate of Change

Mn : Million

Bn : Billion

CPI : Consumer Price Index

2015e : 2015 Estimate

2016f : 2016 Forecast

ITALIAN TRADE AGENCY

Via Liszt, 21 - 00144 Rome

Tel. 0039 06 59921 Fax 0039 06 59647382

www.ice.gov.it

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Documents

03 Market Overview of Iran's Agricultural Food Sector