GCC Markets: Five Big Opportunities for Australian Food Exporters
It’s not widely-known, but the Gulf Cooperation Council (GCC) states - Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Oman and Qatar - are increasingly important and attractive markets for Australian food exporters. That’s because there are great synergies between the world-famous capabilities of Australian food producers and the urgent need for the GCC countries to ensure sustainable food security.
Although they are rich in natural resources and boast some of the highest per capita incomes in the world, the GCC states are fighting an uphill battle to increase their agricultural production. That’s because they are located in one of the driest, most arid regions on earth, where water and arable are scarce, and growing large volumes of crops and animals is difficult.
GCC populations are also booming, the middle classes are expanding rapidly and domestic production cannot keep pace with the ever-increasing demand for high-quality food. With the GCC’s population forecast to reach over 50 million by 2020 (a 30% increase since 2000) and the region’s GDP expected to reach US$1.8 trillion by 2017, food will continue to represent the largest consumer household expenditure across the region.
By 2020, the GCC countries are expected to be importing an astonishing 90% of their food requirements, creating plenty of opportunities for entrepreneurial food exporters to meet rising demand for premium food.
In this post, I want to briefly highlight five areas in which I believe Australian companies have a particular advantage.
Premium quality meats
With global meat production projected to increase from 218 million tonnes in 1997-1999 to 376 million tonnes by 2030, the GCC is poised for some of the fastest growth in meat consumption. The driving force behind this enormous surge is a combination of population growth, rising incomes and urbanisation. Despite relatively small populations (with the exception of Saudi Arabia and the UAE), the GCC is a strong contender for Australian meat export market growth.
Australia has been exporting meat to the MENA region for about 45 years and has built an excellent reputation in this time. In particular, Australian companies are seen as ‘clean and green’ premium producers of food. Strong demand, higher international market prices for quality produce and the potential for increased farm gate returns are strong incentives for Australian meat producers to access the GCC markets.
Grains and cereals
Cereals are the most consumed food group in the GCC, and are forecast to reach 46.5% of the GCC’s total food consumption by 2019. Cereal consumption levels are set to grow at 3% between 2014 and 2019, which is lower than the projected increase for the consumption of meat (4.4%) and fruit (3.8%). Despite the growth in other food sectors, wheat will remain an ever-popular staple food in the region, for use in Middle Eastern bread and rice dishes.
The demand for grain stemming from the Middle East is becoming increasingly important to the Australian grain industry, in supplementing revenue from traditional export markets such as the USA, UK, Japan and China. Australian wheat types suitable for the Middle Eastern market include Australian Premium White, with greater than 10% protein, and Australian Hard White, which is grown in Australia’s southern crop belt region.
Dairy production in the GCC includes milk and dairy by-products such as cheese, cream, spreadable fats and yoghurt, but volumes have not increased in tandem with the growth in local demand. In 2013, 57% of the GCC’s total dairy consumption was met through imports.
New Zealand is a major exporter of dairy products to the GCC and Fonterra’s wholly owned Saudi New Zealand Milk Products group has a mega-factory in Dammam, Saudi Arabia. Its, five processing lines, produces a range of natural processed and re-combined cheeses, supplying over 30 countries.
Nonetheless, Victorian companies are also taking identifying and filling fruitful gaps in the dairy market. Exports of Victorian dairy produce to the MENA region increased by some 18% from 2009 to 2010, with a value of AUD$272 million. Bega Cheese announced in 2012 it would invest AUD$7.8 million into expanding its facility to increase production for cream cheese exports to the MENA, lifting its capacity from 15,000 tonnes to 22,000 tonnes per annum, to meet surging MENA market demands.
Processed, packaged and convenience foods
Fast growing populations, increased urbanisation and a burgeoning workforce have led to busier, urbanised lifestyles throughout the GCC. As a result, consumers are increasingly opting for the convenience of ready-to-eat, pre-packaged food instead. In addition, a greater number of organised retail offerings through the emergence of hypermarkets, discount stores, local groceries and other retail outlets have significantly contributed to the growing demand for processed food.
Australia’s exports of processed food products to the region grew at an annual average of 23%between 2009 and 2013. The United Arab Emirates lead the way in increased processed food exports, which rose from AUD$34 million to AUD$101 million during this time, at an annual average growth rate of 32%.
These figures demonstrate that there are numerous opportunities for Australian food processors and providers of high value, convenience foods including chilled products and bakery goods to export to the GCC markets. Australian companies such as Sara Lee, The Byron Bay Cookie Company, The Old Colonial Cookie Company and Paradise Foods (Green’s Food Holdings), amongst others, are already doing so successfully.
Organic and health food
A growing awareness about healthier foods and lifestyle diseases like diabetes and hypertension and an expanding expatriate population are gradually lifting demand for organic food products in the GCC. Consumers are increasingly placing more value on products that are good for their health and the environment. Despite expatriate workers consuming most of the organic product demand, retail executives in the UAE have forecast sales of organic products to grow by 5% to 10% from 2014 to 2017.
In the coming years, GCC consumer demand for all things healthy, organic, additive-free and natural will follow the Western world’s increasingly health-conscious food market. In recent years, there has been a shift in food habits towards supplementing traditional meals with Western-style foods. Within this market slice is an emerging market gap for healthier, organic and ‘wholefood’ products.
Australian products that are organically certified are likely to perform well in this niche market, if they are high in quality, taste and nutrition, and are carefully marketed through the right partner on the ground. Consumers of packaged organic food from this region prefer to buy products and brands that they are familiar with, especially those produced outside of Asia and the Middle East, because they are generally sceptical about the quality of organic products and the trustworthiness of the organic certification mechanisms in these regions.
This blog post has provided the briefest of outlines on opportunities for Australian food producers to tap booming GCC markets, but if you’d like more information, grab a copy of Dearin & Associates report, Opportunities for Australian Food and Agribusiness in the GCC.