THE STATE OF HALAL FOOD INDUSTRY IN THE OIC …. Savas Alpay... · 12/27/2013 1 the halal food industry in oic member countries opportunities and threats statistical, economic and

12/27/2013

1

THE HALAL FOOD INDUSTRY IN OIC MEMBER COUNTRIES

Opportunities and Threats

STATISTICAL, ECONOMIC AND SOCIAL RESEARCH AND TRAINING CENTRE FOR ISLAMIC COUNTRIES

OR GA NI Z A T I ON OF I S L A M I C COOP E R A T I ON

Halal Congress Middle East-2013

Agenda

Growing Interest in Halal

Key Markets, Key Facts

Kosher Experience

Enhancing Cooperation in Halal Food among OIC Countries

Halal Food Standards and Certification

Halal Food Authentication

The Potential of Islamic Finance for Halal Industry

Challenges and opportunities

Recommendations and Outlook

12/27/2013

2

0

10

20

30

40

50

60

70

80

90

100

SESRIC | Halal Congress Middle East-2013

Background: Interest in Halal

The total number of the searches through web for the term “halal” has more than tripled from January 2004 to August 2011

Web Search Interest: Halal

Index

Source: Google Insights for Search

0

10

20

30

40

50

60

70

80

90

100

The storm started brewing in

South East Asia Non-Muslim countries with an

established minor Muslim population, such as United Kingdom, France and Australia, are emerging as new markets for halal products.

3

Key halal food

Markets Muslim population, million

Source: Pew Report, 2009

Muslim pop.

Muslim pop.

(%)

Muslim pop.

(% of OIC)

Muslim pop.

(% of World)

Muslim pop.

Muslim pop. (%)

Muslim pop. (% of World)

Indonesia 203 88.2 15.9 12.9 India 161 13.4 10.3 Pakistan 174 96.3 13.6 11.1 Ethiopia 28 33.9 1.8 Bangladesh 145 89.6 11.4 9.3 China 22 1.6 1.4 Egypt 79 94.6 6.2 5.0 Russia 16 11.7 1.0 Nigeria 78 50.4 6.1 5.0 Tanzania 13 30.2 0.8 Iran 74 99.4 5.8 4.7 Philippines 4.7 5.1 0.3 Turkey 74 98.0 5.8 4.7 Germany 4.0 4.0 0.3 Algeria 34 98.0 2.7 2.2 Thailand 3.9 5.8 0.3 Morocco 32 99.0 2.5 2.0 Ghana 3.8 15.9 0.2 Iraq 30 99.0 2.4 2.0 France 3.6 6.0 0.2 Sudan 30 71.3 2.4 1.9 Kenya 2.8 7.0 0.2 Afghanistan 28 99.7 2.2 1.8 United States 2.5 0.8 0.2 Uzbekistan 26 96.3 2.1 1.7 Saudi Arabia 25 97.0 2.0 2.0 Yemen 23 99.1 1.8 1.5

Syria 20 92.2 1.6 1.3 Malaysia 17 60.4 1.3 1.1 Niger 15 98.6 1.2 1.0

OIC Countries 1275 81.8 100.0 81.2 Non-OIC Countries 295 5.7 18.8

Key Markets, Key Facts

90-100 %

75-90%

50-75%

25-50%

5-25%

1-5%

0-1%

Estimated world Muslim population:

1.6 billion (Pew Research, 2009)

OIC countries with a total Muslim

population of 1.3 billion account

for the 81.2 per cent of the world total Muslim population


The Muslim population is approaching 2 billion and is expected to account for 30% of the world's population by 2025

4

12/27/2013

3

4.3% 4.5% 3.5% 4.1% 3.7%

33.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

100

200

300

400

500

600

700

World Asia Africa Europe America Australia/Oceania

2004 2005 2009 2010 Change from 2009 to 2010

Global Halal Food

Expenditure USD billion

Source: WHF Secretariat

Key Markets, Key Facts (cont.)

Halal food makes up over 60% of the global market for halal products (Halal Industry Development Corporation) and 16-17% of the US$ 3,992-billion entire global food industry (Agriculture and Agri-Food Canada, 2011)

The market for halal food products is US$ 662 billion annually in 2010, 4.3 per cent above from its 2009 level (WHF Secretariat, 2011). The projected demand for halal foods is US$ 2.1 trillion for 2015 (Shield, 2009)

Nestlé estimates that Halal food could easily account for 20% of world trade in food products in the future.


5

America and Europe have a small share in halal food expenditure with respect to their share in food expenditure

Halal food market in Asia has grown by 4.5 per cent to US$ 418 billion in 2010

Oceania 1.40%

America 26.80%

Europe 29.70%

Africa 7.10%

Asia 35.00%

Oceania 0.2%

America 2.5%

Europe 10.2%

Africa 23.8%

Asia 63.3%

Share in Total

Food (left) vs.

Halal Food (right)

Expenditure by

Continent, 2009 Percent



The growth in Asia has been driven by changing lifestyles that allow for higher incomes. The GCC countries have higher incomes and consequently higher per capita rates on consumption. The growth in the halal food industry is unlikely to be curbed in the near future.

Countries in North Africa region are not only import-dependent for food, but consumers are predominantly Muslim with rising per capita incomes. With Muslims making up 30.1% of the population, the halal food industry in Sub-Saharan Africa is expected to see continuous growth in the upcoming years

With a total share of 57 per cent in total food consumption vis-à-vis only 13 per cent in halal food Europe and Americas are presenting huge demand for high quality, healthy and safe products.


6

12/27/2013

4

Top Countries by

Volume of Halal

Food Consumer

Market USD billion



2004 2005 2009 2010f

Indonesia 72.9 73.9 77.6 78.5

GCC Countries 38.4 39.5 43.8 44.7

India 21.8 22.1 23.6 24.0

Russia 20.7 20.8 21.7 21.9

China 18.5 18.9 20.8 21.2

France 16.4 16.5 17.4 17.6

USA 12.3 12.5 12.9 13.1

Malaysia 6.6 6.9 8.2 8.4

United Kingdom 3.4 3.5 4.1 4.2

Canada 1.4 1.5 1.8 1.9


7

Kosher Food

1275 BC –The Torah, given from God to Moses on Mount Sinai, imposes dietary restrictions that form the basis for kosher food requirements.

1654 – The story of kosher food in America begins when twenty-three Sephardic Jews arrived in New Amsterdam

1739 – New York kosher beef was being exported to Jamaica and Curacao

Piety at hard times

1898 – Orthodox Union (OU) was founded as a means of bringing cohesion to the fragmented immigrant Jewish populations offers Rabbinic supervision for foods

1924 – OU introduced official kashrut supervision and certification program

1935 – Organized Kashrut Laboratories (OK) was established and quickly became one of the largest kosher certification agencies

1946 – Tens of thousands of migrant Jews brought along their strict kosher standards to U.S. With diverse kosher skills, they open manufacturing plants, retail establishments, or go into food service

1956 – Star-K started offering supervision services

1965 – Kosher started to take on a special meaning for the mass market - cleaner, more carefully prepared foods

1969 – Kof-K supervisory agency was founded


Elements of success:

Awareness (devout Jews), early establishment of supervisory bodies, correct brand positioning.

8

12/27/2013

5

Search volume index

0 100

0 20 40 60 80 100

Israel

United States

South Africa

United Kingdom

Canada

Australia

India

Italy

Germany

France

Web search interest in Kosher Food

US Market for Kosher foods and beverages • 40% of the world’s Jewish population (i.e.

an estimated 5.2 million ethnic consumers) 12.3 million total consumers

• US$ 12.5 billion market value in 2008 (An estimated US$ 13 billion by 2013)

• Average annual growth rate of 15% during 2005-2008 and 10% during 2008-2010

• 16,000 companies selling kosher products • Total 110,000-130,000 kosher certified

products, with approx. 2,500 new products added each year

• 5,389 new launches in 2008

28

21 21

13

0

5

10

15

20

25

30

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2003 2005 2006 2007 2008

Per

cen

t

Nu

mb

er o

f p

rod

uct

s

New Kosher Products Percentage of Purchasers

Lessons from the Kosher Food Success

Kosher has gone far beyond its religious base in that many of its products have a much broader market consisting also of non-Jewish consumers. Many original kosher products are moving into mainstream aisles with a far greater potential than ever imagined


9

Lessons from the Kosher Food Success

Jewish Consumers Non-Jewish Consumers Who Buy for Religious

Reasons

Consumer with Dietary Restrictions and

Preferences

Consumers with Health/Wellness and

Safety Concern

Who buys kosher

2009 Mintel

consumer

survey

62%

51%

34%

14%

Food quality General healthfulness

Food safety Religious rules


Kosher was in first place in the U.S. market with 5,389 new launches in 2008 in a top ten list of claims for new food and beverage products Mintel’s Global New Products Database (GNDP)

The majority of today’s kosher consumers are classified within the following categories

Kosher-food customers are marked by two key factors:

• Higher than average spending power

• Willingness to spend more for products that they deem superior in quality and intrinsic value.

10

12/27/2013

6

Halal Food in OIC Countries: Key Issues


Unification of Standards and Certification

Halal Food Authentication

Unveiling the Potential of Islamic Finance

ORGANIZATION OF ISLAMIC COOPERATION

ISLAMIC CHAMBER OF COMMERCE &INDUSTRY

Role: Principal representative of OIC on halal

COMCEC

Role: ● Secretariat for OIC standards

development ● Participates in SEG

INTERNATIONAL HALAL INTEGRITY ALLIANCE

Role: ● Appointed as global halal standards authority● Not a

halal certification body ● Harmonization of standards and

alignment of Halal certification practices

OIC halal authorities

There is not yet a global authority for halal food standards. No standard certification for halal food products.

Over 300 halal certification bodies exist worldwide, however, very little mutual recognition exists between them (Hashim, 2011). Certification requirements vary by importing country.


May 2006 IHI Alliance was formed at the World Halal Forum

March 2008 ICCI was recognized as the principal representative of the private sector in OIC member states in halal

May 2008 ICCI formalized its partnership with IHI Alliance

…

April 2009 OIC-SEG finalized three non-binding guideline documents for halal food, halal certification and accreditation bodies

November 2007 SEG was mandated to develop halal food standard and procedures


STANDARDS AND CERTIFICATION

12

12/27/2013

7

MUTUAL RECOGNITION

No need to be accredited more

than one accreditation bodies HALAL ACCREDITATION BODY

● Become party to mutual

recognition arrangements within

OIC

● Assess competence of halal

certification body

HALAL CERTIFICATION BODY

● Assess conformity to OIC Halal

Standards and Guidelines

STANDARDS AUTHORITY

(IHI ALLIANCE)

● Act as global halal standards authority

and a credible reference centre

● Uphold the integrity of global halal market

OIC

(ICCI)

● Assess conformity to

OIC Guidelines for Halal

Accreditation Bodies

(REGULAR) PEER

(RE-)EVALUATION(S)

● Halal product, services, management systems

● Certified halal organizations (suppliers)

● Consumers

● Customers

● Clients

● Purchasers

DEMAND

Proposed structure for

halal certification

Based on OIC Guidelines for the Halal

Accreditation Bodies



STANDARDS AND CERTIFICATION

13

Thus,

It is imperative to develop robust scientific methods for traceability in halal compliance of ingredients and products. Proper authentication will help to guarantee and sustain authenticity, combat fraudulent practices and control adulteration and substitution

Consolidation of analytical techniques will assist integrity and result in a more rapid growth of halal food industry

However,

OIC countries are lagging in the number of laboratories that are able to develop state‐of‐the‐art analytical and measurement techniques to determine the provenance of halal foods


Halalan Toyyiban requirement

Throughout the industry, halal requirements must be complied with at all stages of the production and supply chain, including procurement of raw materials and ingredients, logistics and transportation, packaging and labelling ()


AUTHENTICATION

14

12/27/2013

8

Equity or profit sharing

partnerships with halal food

companies

Financial certificates

issued by halal companies

(leases., debt, asset, etc.)

Financing facility to halal food SMEs for

start-up and/or growth

Financing facility to halal

food consumers

● Mudarabah

● Musharakah

● Sukuk (Ijarah,…) ● Announce a

competition for

financing innovative

ideas and established

products for

development of the

Halal industry

● Murabahah, Ijara,

Hybrid, etc.

Investable Halal Food Index Islamic finance value proposition for

halal food industry


Build a bridge from halal industry to Muslim investors

Position halal food industry as an investable asset class

Performance benchmark and monitoring mechanism


UNVEILING THE POTENTIAL OF ISLAMIC FINANCE

Halal food industry should better explain the inter-relatedness of these two industries , business model and risks, how Islamic banks can benefit by diversifying their lending base and increase their lending options

However, inevitable convergence of common interests is likely to lead to a new collaboration between Islamic finance and halal food industries.

15

On-going Challenges


Rising demand and trade in the halal food products, in the face of lack of global integrity

in the certification process, has already led to the abuse and misuse of halal food certification. In many instances, halal certificates can be granted very easily;

Most of the current importing countries still rely on non-tradable food products that are largely supplied domestically;

In the case of high tradable products, such as in the GCC countries, being halal is necessary, but not a sufficient condition as the halal products are already becoming mainstream and competitive products;

Halal markets in OIC and non-OIC countries are fragmented market by ethnicity, location, income, awareness and a few other determinants. Therefore, a one-size-fits-all strategy simply cannot work.

Halal finance is one of the essential ingredients of halal food. Interaction between Islamic finance and halal food industries have been very limited so far.

Most halal products in the export markets fail due to poor product adaptability and lack of branding exercise. Brand awareness and loyalty are not at the desired level;

In many OIC countries, underdeveloped transport and logistics negatively impact the intra-OIC halal food trade. Exporting halal food products to some of member countries can only be achieved through multi-modal transport due to the unavailability of seaports, which inevitably adds costs;

Scientific techniques as independent means of verifying the halal status of food products are not in place. Traceability for halal certification relies almost solely on paper trail;

16

12/27/2013

9

The halal food market presents vast business opportunities to food manufacturers in the OIC countries:

Product variety is currently low and the market is relatively unsaturated,

Demand is huge for new and innovative products, as well as mainstream halal foods,

The halal-seeking consumer market can grow very rapidly and will potentially include a variety of consumer types other than Muslims,

Halal products can be positioned as higher quality, safer products, targeting consumers who wish to spend more on food products than average consumers,

Many Muslims, who would otherwise prefer halal food, are currently substituting kosher products for halal foods, spending billions annually.

Opportunities


17

OIC, the member countries and the global halal food stakeholders should agree on the development of the global halal standards and a mutually recognized halal certification structure to prevent further abuse and misuse of halal certification;

Monitoring of the implementation of OIC standards on halal food and guidelines for both certification and accreditation bodies is core to the success of the industry. In this regard, the scientific and technological infrastructure for halal authentication should be established;

The future growth of halal food industry lies in the assurance and sustenance of food quality, rather than pure religious matters. Europe and Americas, with a total share of 57 per cent in total food consumption vis-à-vis only 13 per cent in halal food, are presenting huge demand for higher quality, healthier and safer products;

The inevitable convergence of the halal food and Islamic finance sectors is one of the key developments that is likely to shape the Halal food sector over the coming years. The areas of collaboration for unraveling the potential of Islamic finance for supporting halal food industry should be sought;

OIC member countries with relatively underdeveloped multi-modal transport infrastructure should develop their transportation networks to facilitate the intra-OIC trade of halal food; Integration of production and logistics into an efficient supply chain network has to be considered;

Capacity building programmes for halal food activities: Training of halal inspectors, halal food auditors and laboratory analysts;

The role of conventional, digital and social media in shaping consumer perceptions as well as providing access to 1.7 billion potential customers should be examined;

Recommendations and Outlook


18

12/27/2013

10

T H A N K YO U

For enquiries:

[email protected]

Documents

THE STATE OF HALAL FOOD INDUSTRY IN THE OIC …. Savas Alpay... · 12/27/2013 1 the halal food industry in oic member countries opportunities and threats statistical, economic and