According to a report, it has been stated that the Muslim consumer expenditure globally on food and lifestyle sectors, estimated at $1.62 trillion in 2012, are expected to reach $2.47 trillion by 2018.
The state of the global Islamic economy 2013 report has stated that it forms a potential core market for halal food and lifestyle sectors. The report, commissioned by ‘Dubai Capital of the Islamic Economy’ and produced by Thomson Reuters in collaboration with Dinar Standard, was released as part of the Global Islamic Economy Summit 2013.
Islamic financial assets are currently estimated to be $1.35 trillion in total disclosed assets (2012) and growing at 15-20 per cent a year in most core markets. The report also estimates that the potential universe of Islamic finance assets in its core market (assuming optimal scenario) to be $4.1 trillion.
While these Islamic economy sectors are potentially large in size, the opportunities for growth and investments are larger and could even be a necessity in true realization of their individual visions.
The Key Drivers
According to the report, it has been identified that four major Islamic market-based drivers and four major global environment-based drivers that are shaping the growth and prominence of the Islamic economy.
Islamic-market drivers begin with its attractive demographic that is large, young, and fast growing. Muslim population globally is estimated at 1.6 billion and growing faster than the rest of the world’s population growth. (1.5 per cent annually compared to 0.7 per cent for rest)
Economically, Muslims belong to many global emerging markets – Indonesia, Saudi Arabia, UAE and Turkey. The 57 mostly Muslim-majority member countries of the OIC (Organization of Islamic Cooperation) are expected to average of 6.3 per cent growth annually compared to global GDP growth averaging 5.3 per cent (2013-18, based on IMF projections)
Tying these two drivers of demographic and economics that is shaping the Islamic Economy sectors is the role of Islamic ethos/ values that are increasingly driving lifestyle and business practices. According to a 2012 study by The Pew Forum, globally 87 per cent of Muslims consider religion ‘very important’ and 93 per cent fast in the month of Ramadan. Comparatively, in Europe less than 30 per cent rated religion as very important and in US 56 per cent rate religion as ‘very important’ in their lives. The final Islamic-market driver is the growing Intra-OIC trade. In 2005, the OIC had set a target of 20 per cent Intra-OIC trade by 2015.
The global environment based drivers are generally led by the participation of global multi-nationals in the Islamic economy. Global banks (Deutche Bank, HSBC, Citi and others in Islamic Finance) and major global companies (Nestle, Carrefour’s Halal food efforts) are not only participating but leading in the Islamic economy development given their large scale and stature.
Asia in particular has been a focus for growth with many of the OIC (which are already mostly in Asia and Africa) as target markets. The global driver that connects with Islamic economy’s ethical base is the growing global focus on business ethics and social responsibility.
The final major driver that is facilitating Islamic economy sectors (especially lifestyle sectors) is the global communication technology revolution. These social media, mobile and broadband technologies are revolutionizing every aspect of world business, social services, political activism, education, health, recreation/ entertainment, and every other possible area of our lives. Islamic economy lifestyle sectors have been able to gain wide global reach and exposure due to these developments.
The Halal Food Sector
From the world’s largest food manufacturer, Nestle’s 150 Halal certified factories worldwide to the popular Halal food carts on the streets of Manhattan, Halal food is a large segment serving the global Muslim population while also gaining attention of a wider global audience.
Around $1088 billion for food has been spent by the Muslim consumers. This is the data that has been derived in the year of 2012. This expenditure is 16.6 percent of the total global expenditure. This expenditure is expected to grow to $1,626 billion market by 2018. This represents the Halal food potential market world-wide within its core Muslim consumer market.
Top countries with Muslim consumer food consumption are Indonesia ($197bn), Turkey ($100bn), Pakistan ($93bn) and Egypt ($88bn) based on 2012 data. Collective global Muslim F&B market is larger than the largest food consuming national market of China.
The Halal food industry faces many challenges that include industry scale and in-efficiency, lack of halal authority leadership, raw material / supply chain challenges, human capital deficiency, low consumer confidence, and global perception challenges.
The Key Opportunities
Investment: Example area is the ‘meat and live animals’ sector where 91pc of meat and live animals imports into OIC countries were from Non-OIC countries. With 100’s of fragmented suppliers in this value chain, and major investors and food and agriculture players from the OIC countries, halal food value chain should be a prime area of focus.
With a trillion dollar consumer market, it is surprising that no focused global food product or food retail concept that is completely halal-certified exists today.
OIC companies: Many of the large food conglomerates in the OIC countries stand to benefit from the large ($72 billion) food trade deficit within OIC countries given halal food synergies.
Other areas of opportunities highlighted in the report: Regulatory compliance facilitation, R&D, halal center of excellence, halal ingredients and processing, consumer media platforms.