food and beverage manufacturing opportunities in the ... manufacturi… · prepared by ernst and...

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Food and Beverage Manufacturing Opportunities in The

Kingdom of Bahrain: A Sector Study

PREPARED BY ERNST AND YOUNG AND DINARSTANDARD

DRAFT DATED 17th AUGUST 2017

PLEASE NOTE: WHILE SUBSTANTIALLY FINALIZED, THIS REPORT IS STILL A DRAFT AND IS SUBJECT TO FURTHER CHANGE

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Table of Contents

1 Executive Summary ........................................................................................................ 3

2 Report Purpose and Methodology .................................................................................. 5 2.1 Report Purpose ............................................................................................................................. 5 2.2 Methodology ................................................................................................................................. 5

3 Market Demand ............................................................................................................. 7 3.1 Introduction .................................................................................................................................. 7 3.2 The economic contribution of Bahrain’s Food and Beverage Industry ........................................ 7 3.3 Consumer demand in Bahrain’s Food and Beverage Industry ...................................................... 8 3.4 Drivers of domestic Bahrain Food and Beverage growth ........................................................... 11 3.5 GCC and OIC Food industry opportunity ..................................................................................... 18 3.6 The export opportunity for Bahrain’s Food and Beverage industry ........................................... 24 3.7 Demand study conclusion ........................................................................................................... 27

4 Supply landscape .......................................................................................................... 28 4.1 Introduction ................................................................................................................................ 28 4.2 Bahrain’s Food and Beverage Industry value chain overview .................................................... 28 4.3 Import dependency in Bahrain’s Food and Beverage Industry .................................................. 30 4.4 Primary inputs used in Bahrain’s Food & Beverage industry...................................................... 32 4.5 Food and Beverage ingredients market ...................................................................................... 37 4.6 Food processing .......................................................................................................................... 41 4.7 Key players in Bahrain’s Domestic Food and Beverage Industry ................................................ 45 4.8 Supply landscape study conclusion ............................................................................................. 49

5 Strategic options for Bahrain’s Food and Beverage Industry .......................................... 50 5.1 Introduction ................................................................................................................................ 50 5.2 Economic objectives and potential of Bahrain’s Food and Beverage Industry .......................... 50 5.3 The ecosystem of Bahrain’s Food and Beverage Industry .......................................................... 52 5.4 Evaluating Bahrain’s current ecosystem for Food processing .................................................... 56 5.5 Conclusion: Strategic Roadmap for enhancing Bahrain’s Food and Beverage industry ............. 59

6 Select opportunities for Food and Beverage Manufacturing Projects in Bahrain ............ 60 6.1 Introduction ................................................................................................................................ 60 6.2 The criteria for selecting sector opportunities ........................................................................... 60 6.3 Identifying the most opportune sectors ..................................................................................... 62 6.4 Identifying the most opportune sectors ..................................................................................... 65 6.5 Conclusion: Select opportunities for pre-feasibility study .......................................................... 67

7 Acknowledgements ...................................................................................................... 68

8 Appendix ...................................................................................................................... 71

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1 Executive Summary

There is substantial room for The Kingdom of Bahrain to expand its advanced Food and Beverage processing industry, feasibly adding up to $115 million in incremental economic activity by 2020, with four broad learning points from the study:

(1) Domestically, demand for food and beverage is substantially addressed through imports

Bahrain’s Domestic demand, estimated at $2.4 billion in 2015, is showing robust growth, at 7% per annum by 2020. Bahrain’s Food and Beverage Industry is set to reach $3.5 billion by 2021, growing from $2.36 billion in 2015, with volume growth a core driver, expected to increase by 5.5% CAGR between 2015 and 2020, underpinned by 1.1% CAGR population growth, 2.6% CAGR increase in GDP per capita between 2015 and 2020, and 4.2% CAGR decrease in inbound tourism between 2010 and 2014

Food imports account for 69% of 2015 consumption, elevating the role of local distributors in the value chain. The level of imports has increased by 6.5% CAGR between 2011 and 2015, with meat and live animals accounting for 19.7% of imports in 2015, with distributors players a key role in distributing food products to end retailers

The manufacturing industry representing only 0.4% of GDP per annum but plays a key role in the economy, employing close to 6,000 people. Manufacturing projects in Food and Beverage have attracted $507 million investment across 191 companies operating in Bahrain. While the focus is concentrated across 43 sub-sectors, there are opportunities in particular in ingredients, to address the substantial import demand, totaling $13.4 billion across the OIC region.

(2) To meet food demand, expanding advanced processing activity is a more accessible option

than expanding the country’s agricultural footprint

The agriculture sector in Bahrain contributed 0.4% of GDP in 2015. Arable land has remained at 11.2% of total land between 2011 and 2015. There have been substantial efforts to enhance food supply in Bahrain with the set-up of a $265 million agriculture Fund, and substantial government support to boost aquaculture, with plans to increase output to by more than 11,000 tons per year, however, the ability to substantially enhance agricultural capacity is limited

Bahrain’s Food and Beverage Industry could generate up to $115 million in incremental economic activity by 2020, with the growth in production capacity critical to addressing the country’s economic diversification objectives and boosting Food Security.

(3) For advanced processing to become feasible, an export-driven proposition is needed

Bahrain is currently under-addressing the OIC-wide Food and Beverage Export Opportunity

While Bahrain’s Food and Beverage Industry is a minor fraction of total GCC demand, estimated at $71.7 billion in 2015, Bahrain can play a key role in exporting to the GCC

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region, and broader OIC region, where total OIC consumption of Food and Beverage Products totaled $1,184 billion in 2015

Halal products and health-oriented products, such as organic and gluten free, represent robust local opportunities, but also combined address a $888.1 billion global market opportunity.

(4) This report has identified five specific opportunities that can advance Bahrain’s Food and Beverage industry and provide it with a competitive production advantage in the GCC

The top five opportunities identified for pre-feasibility are Halal Baby Food, Halal meat snacks, Food flavors, High end chocolates, and Edible Oils. The selection of these opportunities, out of 20 identified, reflect key stakeholder feedback on financial viability, taking into account the ability to reach or exceed a $25 million revenue opportunity within five years and to provide Bahrain with a competitive advantage in the GCC and globally

The product-level opportunities were identified as a result of a rigorous, four-stage process that incorporated vast quantitative data and Bahrain stakeholder feedback via interviews. The initial suitability screen and quantitative ranking helped prioritize attractive sectors, with qualitative feedback providing essential stakeholder perspectives on competitive advantage, which helped prioritize 17 specific sectors. The twenty specific opportunities represented the most opportune product-level segments within the sectors.

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2 Report Purpose and Methodology

2.1 Report Purpose

Objectives

The Kingdom of Bahrain’s Economic Vision 2030 underpins the country’s commitment to economic diversification, with the Agriculture and Food and Beverage Processing Industry playing a small but important role in the country’s Economy. Given the country’s high reliance on Food and Beverage imports, there is substantial room for growth in particular in the processing industry. This report examines in detail the Food and Beverage Sector Size and Growth drivers, Export Opportunities and the value chain, before providing a strategic assessment of key priorities for Food processing and identifying twenty specific opportunities for Food Processing Projects to be located in the Kingdom of Bahrain. The report further suggests five specific opportunities, for which pre-feasibility studies will be prepared for further consideration among investors, government stakeholders and leading multinational Food and Beverage Companies. Key stakeholders The report has been commissioned by the Gulf Organization of Industrial Consulting, but among the key stakeholders are the Ministry of Industry and Commerce, the Economic Development Board, as well as potential investors, including Mumtalakat, and international Food and Beverage companies that could be directly involved as operating partners in the opportunities identified.

2.2 Methodology

This report has been developed based on robust secondary and primary research, substantiated by both Ernst and Young and DinarStandard analysis and expertise. A few important caveats regarding the preparation of this report:

Where applicable, secondary data was supplemented by reasonable estimation where only partial datasets were publicly available

2015 was used as a reference throughout the report – at the time of writing, not all essential publicly available datasets were reliably available for 2016, and so for consistency, 2015 was used throughout

The reference currency used for this report was US Dollars ($), again, in accordance with the availability of data, and to aid consistency throughout the report.

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Secondary research Several secondary sources were used to support the preparation of this report and the associated

financial model, including but not limited to, Alpen Capital, Business Monitor International (“BMI”),

Globaldata, Bahrain’s Economic Development Board, Euromonitor, Food and Agriculture Organization

(“FAO”) of the United Nations, IBIS World, KPMG, Nielsen, Salaam Gateway, World Bank.

Interviews 20 interviews were held with stakeholders that are either actively participating in Bahrain’s Food and Beverage Industry, or have evaluated potential involvement, whether through investment or distribution.

Stakeholder type Entity name (listed alphabetically) Job titles (listed alphabetically)

Manufacturing entities 7 interviews

Al Jazeera Sweets

Awal Dairy

Bin Mahmood

Delmon Poultry

MakFood

Mondelez Kraft

Shell Fisheries

Chief Financial Officer

General Manager

Plant Manager

Production manager

Distributors and retailers 5 interviews

DM Cafe

Fine Foods

Food Link

Riz Global Foods (international)

Trafco

Chief Executive Officer

General Manager

Investment firms 4 interviews

Arcapita

Ibdar Bank

Mizuho Gulf

Mumtalakat

Associate

Chief Investment Officer

Executive Director

Head of Industrials

Government and other stakeholders 4 interviews

Bahrain International Investment Park (“BIIP”)

Economic Development Board of Bahrain (“EDB”)

Business Development Manager

Chief Economist

Marketing Manager

Projects Director

Survey Two surveys were carried out as part of this study:

Opportunity identification: A survey was carried out to help prioritize opportunities identified

for pre-feasibility, assessing relative attractiveness of each opportunity, with six credible

respondents

Pre-feasibility studies: A survey was completed in detail by nine credible respondents, providing

relevant estimates on set up costs, production capacity, and labor requirements, used as a

benchmark for financial estimates prepared as part of this study.

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3 Market Demand

3.1 Introduction

Bahrain’s Food and Beverage Industry represents a sizeable share of the country’s GDP, and is set to experience substantial growth through to 2021. This section looks in detail at the segmentation and growth trajectory of Bahrain’s Food and Beverage Industry, underlying core drivers of demand in total and by core category, key export opportunities, and identifies the most attractive sectors based on demand parameters.

3.2 The economic contribution of Bahrain’s Food and Beverage Industry

There are opportunities for growth and export in select categories, considering that the domestic food consumption is set to grow by 10% per annum to 2021 and the overall GCC and the broader OIC region presents a $190 billion industry opportunity.

Food Manufacturing represents less than 1% of GDP, however, the Food and Beverage industry consumption represented 8% of GDP, with imports addressing the significant disparity. Figure: Bahrain’s Manufacturing and Non-oil share of GDP between 2013 and 2015

Bahrain has succeeded in diversifying its economy, reducing its reliance on oil between 2013 and 2015, underpinned by its National Development Strategy, as part of the Broader Economic Vision 2030. Manufacturing comprises a key component of Bahrain’s Economy, representing a 14.6% share of real GDP in 2013, and growing broadly in line with real GDP.1

1 “Bahrain Economic Quarterly”, Bahrain Economic Development Board, March 2016.

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The Food industry comprises a relative small share of manufacturing activity, contributing 0.4%2 of Bahrain’s GDP, which pales in comparison to Bahrain’s consumption of Food and Beverage, totaling $2.5 billion in 2015, and representing 8.0% of total GDP3. The substantial difference between demand and local value added is the high degree of reliance on imports, both of finished products and raw materials.4

3.3 Consumer demand in Bahrain’s Food and Beverage Industry

Bahrain’s Food and Beverage Industry is set to experience 7.4% CAGR growth, largely driven by volumes, with poultry, bread and fresh fruits key consumption categories

Bahrain’s Food and Beverage industry is set to grow at a CAGR of 7.4%, from $2.36 billion in 2015 to $3.4 billion in 2020. This compares to population growth of 1.1% per annum between 2015 and 20205, and GDP per capita growth of 2.6% per annum between 2015 and 20206, but is lower than GCC Food and Beverage Sector growth, projected at 7.9% CAGR between 2015 and 2020. Figure: Bahrain’s Food and Non-alcoholic drinks Sales from 2013 to 2020 ($, billions)7.

Segmentation by product Meat and poultry was the largest category among food consumption, representing 15% of spend, and also accounted for the fastest growing category. The following key observations can be made:

2 “Bahrain’s Food Manufacturing Industry”, B3 Globe, 2015

3 “Bahrain Food and Drink Report”, Business Monitor International (“BMI”), Q1 2017

4 http://www.trademap.org/, accessed on 1

st June 2017

5 World Bank Demographic Data For 2015

6 World Bank

7 BMI (Bahrain Food & Drink Report – Q1 2017), National Sources and DinarStandard Estimates

$1.92 $2.02 $2.15 $2.31 $2.48

$2.66 $2.86

$3.07

$0.19 $0.20 $0.21 $0.23 $0.25 $0.27 $0.29 $0.31

$2.11 $2.22 $2.36 $2.54

$2.73 $2.93

$3.14 $3.38

$-

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

2013 2014 2015 2016 2017 2018 2019 2020

Bahrain’s Food and Non-alcoholic drinks Sales from 2013 to 2020 ($, billions)

Food, sales Non-alcoholic drinks, sales Total

http://www.trademap.org/

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Key categories: Meat and poultry represent the most significant product categories in Bahrain (14.7% of the total spend), followed by bread, rice, cereals (11.9%) and fresh and preserved fruits (11.6%)

o Within meat and poultry, poultry accounted for $158 million in 2015 expenditure, followed by pork and related products ($66 million)

o Within bread, rice and cereals, rice accounted for $142 million, followed by bread ($78 million)

Highest growth: Meat and poultry represented the fastest growing projected category (7.7% CAGR to 2021), followed by coffee and hot drinks (7.4%), and fresh vegetables (7%)

o Within meat and poultry, however, prepared meals and meat based snacks are the fastest growing sub-categories, showing 17% CAGR (and $25 million in 2015 spend), followed by organic meat and prepared meals, showing 15% CAGR (and $13 million in 2015 spend)

o Preserved fruit and rice represent the third and fourth fastest-growing sub-categories, growing at 9% and 8.5% CAGR respectively between 2015 and 20218

Figure: Bahrain’s Food and Beverage market size and annual CAGR (2015-21) per segment 9.

8 BMI (Bahrain Food & Drink Report – Q1 2017), Euromonitor International, National Sources and DinarStandard

Estimates 9 BMI (Bahrain Food & Drink Report – Q1 2017) and DS Estimates

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Segmentation by price and volume Across Food and Beverage categories, the average price was $4.9 per kilogram, and set to grow at a

more moderate pace than inflation, while volume is the main driver of value growth, at 5.5% CAGR to

2020. The following key observations can be made:

Price trends: Overall food and beverage prices are set to grow below inflation, which is

projected to reach 2.9% by 202010, with price increases across most major categories offset by

lower increases in the other food and beverage category, primarily due to expected lower

increases in dairy products and prices

o Prices are lower, however, than historical trends, due in large part to the increased

competition seen among value players in the retail segment, as well as the impact

already realized of the removal of meat subsidies

Volume trends: Volume is the main driver of increased value, increasing at 5.5% CAGR, higher

than that historically observed, and notably high for meat and poultry products, as well as other

food and beverage items

o The general increase reflects a range of factors impacting overall demand, including

population, GDP per capita and tourism, examined further in this section.

Table: Segmentation of major food and beverage categories by price and volume, 201511

Category Meats and packaged meals

Cereal products

Sugar and sugar products

Other food and drink products

Total food and beverage

Value, $ millions 611.9 486.5 94.9 1,170.0 2,363.3

Volume, Kilograms in millions 107.4 121.6 10.3 270.3 482.3

Price, $ per kilogram 5.7 4.0 9.2 4.9 4.9

Figure: Volume CAGR, 2013-2020

Figure: Price CAGR, 2013-2020

10

https://tradingeconomics.com/bahrain/inflation-cpi, accessed on 1st

July 2017 11

Based on DinarStandard synthesis and analysis - Volume data for key categories derived from Global Data by category, Value data derived from BMI, and Total volume data derived from Alpen Capital

https://tradingeconomics.com/bahrain/inflation-cpi

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3.4 Drivers of domestic Bahrain Food and Beverage growth

The growth of Bahrain’s Food and Beverage Industry is underpinned by robust growth in population, tourism and income levels, with notable channel shifts towards mass retail and ecommerce, and increasing preference for Halal and healthy products among the local population

Population, GDP per capita and tourism are the key market drivers affecting Bahrain’s consistent

growth during the last decade.

Overview of key market trends

At the high level, we have identified 10 key trends affecting demand in Bahrain which are based on the

country’s population, its economic prosperity and the rise of tourism.

The table below summarizes these market drivers and other factors influencing the composition of the

market in detail.

Table: Bahrain’s Food and Beverage Industry market drivers12

Overall market demand drivers

Drivers affecting market composition

Channel mix shift Product mix shift

Population Mass market retail Halal

GDP per capita Ecommerce Healthy eating

Tourism Restaurants Regulatory changes

Overall market demand drivers

(1) The population is set to grow by 1.1% CAGR between 2015 and 202013

Population growth is a modest contributor to increased Food and Beverage Consumption in Bahrain, set to grow by 1.1% CAGR between 2015 and 2025, significantly lower than historical growth of 4.8% CAGR between 2005 and 2015

Immigration has been the main driver of historical growth, with the size of the non-Bahraini population increasing by 8.8% CAGR14 to 702 million or 51% of the total population by 201515

Projected growth inherently assumes a much lower migration rate to Bahrain, with a modest 1.2% CAGR increase in Urbanization and a moderate 0.2% CAGR decline in the youth growth rate

12

DinarStandard synthesis and analysis 13

World Bank Demographic Data For 2015 (http://data.worldbank.org/indicator/SP.POP.GROW?locations=BH) 14

“Demography, Migration, and the Labor Market in Bahrain”, GLMM, 2015 15

http://data.un.org/CountryProfile.aspx?crName=BAHRAIN, accessed on 15th

June 2015

http://data.un.org/CountryProfile.aspx?crName=BAHRAIN

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Figure: Bahrain Population growth, 1990 - 2025

(2) GDP per capita is set to grow by 2.6% CAGR between 2015 and 2020

Bahrain’s GDP per capita is set to grow by 2.6% between 2015 and 202016, at a moderately higher rate than historic growth, with the following notable observations:

There is a robust Middle class that is set to grow: Although Bahrain’s GDP per capita is lower than the GCC average (at $41.850 in 2015), compared to GCC counterparts, Bahrain has a sizeable Middle Class, with over half the population earning more than $50,000 per annum17, and with the government aiming to expand the Middle class to 65% of the population18.

The ultra-rich are set to get richer: Private Wealth is set to increase from $0.2 trillion to $0.3 trillion between 2015 and 2020, with wealth held by the Ultra High Net Worth Households (those with wealth exceeding more than $100 million) expected to grow by 16% by 202019

Figure: Bahrain’s GDP per Capita between 2010-2020, in dollars thousands

16

World Bank statistics. 17

“Bahrain Consumer and Retail SWOT”, BMI, Q3 2017 18

Bahrain Government Portal 19

http://www.arabianbusiness.com/bahrain-private-wealth-set-grow--300bn-by-2020-636940.html, accessed on 16

th June 2017

http://www.arabianbusiness.com/bahrain-private-wealth-set-grow--300bn-by-2020-636940.html

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(3) The number of tourist visitors is expected to grow by 4.2% CAGR between 2015 and

202420

Bahrain’s tourism industry is expected to experience robust growth of 4.2% CAGR, driven by a number

of government initiatives to enhance capacity, and market Bahrain as an attractive tourist and events

destination21:

Attracting visitors: Bahrain’s Tourism and Exhibition Authority has actively engaged public

authorities and private sector organizations, and was named “Capital of Gulf Tourism” by the

GCC ministers of tourism, with initiatives such as the Bahrain Gaming Experience 2016, and the

Bahrain International Air Show22

Expanding capacity: Inbound investment into Bahrain’s tourism infrastructure is expected to

increase substantially from BHD 105.3 million in 2015 to BHD 217.9 million in 2025, with a $1.1

billion Airport Modernization program set to double airport capacity to 14,000 visitors by 2020,

and an increase of hotel rooms by 4,187 rooms or 33% of current availability.23

Figure: International tourism arrivals in Bahrain, 2004 – 2024 projected

Channel mix shift

Bahrain’s Food and Beverage spend is experiencing a shift towards Mass retail, the main channel for

purchasing food and beverage, with ecommerce set to also experience substantial share gain, at the

expense of small and local retailers.

20

DinarStandard Synthesis of World Bank Statistics 21

“GCC Food Industry”, Alpen Capital, 2015 22

“Bahrain Economic Quarterly”, Economic Development Board, 2016 23

http://news.wtm.com/bahrain-tourism-industry-to-reach-us1-billion-by-2020/, accesed on 15th

June 2016

http://news.wtm.com/bahrain-tourism-industry-to-reach-us1-billion-by-2020/

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Figure: Channel breakdown of Bahrain consumer spend on Food and Beverage in 201524

Three key trends are shaping the distribution of channels through which consumers purchase food and

beverage:

(1) Mass-retailer are gaining substantial share at the expense of small and traditional retail

Mass retailers account for the largest share of consumer spend, representing ~45% of total consumer

spend on Food and Beverage in 2015, and is set to experience continued growth, at the expense of

smaller, traditional retailers, with the following observations:

Large, regional retailers are investing in the country: Following the first hypermarket opened in

the country in 2005 by Geant, numerous regional players have entered the market, including

The UAE Lulu Group, recognized aa the leading grocery retailer in Bahrain, which now has six

locations, and Carrefour, which has a location in Manama25

The focus is primarily on the Middle class: High end retailers are few in number, with UK-based

Waitrose existing a local venture after three years, leaving Alosra as the main player. The main

hypermarkets are focused on serving the needs primarily of a growing and sizeable Middle class

in Bahrain, with the ability to entice low income households through deep discounts26

Prepared meals are set to benefit as a category: Hypermarkets and supermarkets are the main

channels catering to prepared meals, globally accounting for 68% market share of distribution,

24

Based on interview feedback, reflecting the synthesis of ten different interview responses, and triangulated with PwC estimates on restaurant industry spend, as well as emarket estimates on the ecommerce industry 25

“BMI Bahrain Food and Drink Report”, BMI, Q1 2017 26

“BMI Bahrain Food and Drink Report”, BMI, Q1 2017

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and a key category set to grow as households have increasingly busier lives and less time to cook

from scratch.27

(2) E-commerce has captured a small but rapidly growing share of consumer Food and

Beverage spend

Ecommerce has captured a ~2.5% share of total 2015 consumer spend on Food and Beverage in Bahrain,

but this share is set to grow substantially, and in line with broader MENA region digital food and drink

grocery sales, projected at 15.4% between 2015 and 202028, driven by:

Very high mobile penetration: 92% of population are mobile subscribers, the highest in the

MENA region, and 75% have mobile internet plans29

Increasing overall spend via mobile and internet: Bahrain total ecommerce sales are set to

increase from $159 million to $396 million between 2015 and 2020, representing a growth of

20% CAGR.30

Technology solutions are increasingly addressing digital demand, with a clear increase in food e-

commerce and delivery apps in Bahrain, including:

Restaurant delivery apps Tauseel eat, Talabat, as well as broader regional apps such as Carriage,

and global apps such as Delivery Hero

Grocery delivery apps such as Baqala, online retailer Card, and solutions offered by local

retailers, such as Alosra online.

(3) Restaurant revenue growth is in line with total Food and Beverage spend growth

The restaurant sector accounts for ~15% of total 2015 consumer spend on Food and Beverage in

Bahrain, with spend expected to grow by 6.8% CAGR, broadly maintaining share of total spend by 202031

The growing popularity of restaurants largely mirrors the expected growth in GDP per capita, as

well as the influx of tourists.

Product mix shift

(1) Halal importance among Muslim consumers

The Muslim population in Bahrain accounted for 81.2% of the total population in 2010, a proportion

which is expected to remain the same in 2030, with Halal a critical component of the Muslim diet, and

with the following trends set to see significant growth in Halal product demand:

27

“Prepared meals market to reach nearly $100 billion by 2020”, Global Data via PR Newswire, 2017 28

Emarketer 29

“The Mobile Economy – Middle East and North Africa 2016”, GSMA, 2016 30

Emarketer 31

“A Taste of Growth: The GCC Food Service Sector”, PwC

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Robust demand from consumers broadening scope: Halal represents an important part of the

consumer diet, with 48% of MENA respondents to a 2015 survey indicating Halal was an

important dietary restriction32

o Halal consumers are becoming more sophisticated: As consumers become more aware

of the complexity of the food chain, and the widespread use of non-Halal ingredients in

food products, there is a substantial opportunity for Halal-certified food products to

experience tremendous growth, including Halal baby food, and Halal ingredients across

a range of categories, including gelatin and food coloring.33

Increasing stringency: Halal certification is becoming more stringent in the MENA region,

following efforts led by the UAE to create a Halal accreditation forum to oversee the regulation

of Halal certification bodies with increasing global scope

o These measures will ensure that all food products, including ingredients, meet Halal

requirements for the Muslim-majority population

Figure: Bahrain Muslim population breakdown between 2010 and 2030 projected

Source: (World Bank (2010 total population figure), UN population statistics (2025 total

population figure) and Pew Research (Muslim share %)

(2) Healthy products

There is a shift towards healthy food consumption in the GCC, driven more broadly by the rise of non-communicable diseases (NCDs) in Bahrain.

32

The Nielsen Global Health and Ingredient-Sentiment Survey in 2016 is based on 30,000 respondents in 63 countries. “What’s In Our Food And Our Mind, Ingredient and Dining-Out Trends Around The World”, Nielsen, August 2016. 33

“Addressing the Halal Ingredients Opportunity: Industry Developments”, Salaam Gateway, May 2016.

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NCDs as leading cause of death: Cardiovascular diseases (26%), Diabetes (13%), Cancers (13%), Chronic respiratory diseases, and other NCDs (20%) accounted for 78 percent of total deaths in 2014 according to the World Health Organization34

70 percent of adults in Bahrain are either overweight or obese, according to the National Health Ministry, which is directly linked to the NCDs and major causes of death.35

To prevent obesity rates from rising, the Bahrain Health Ministry is emphasizing the importance to adopt a healthier diet and exercise. As a result, the demand for healthy, organic, and dietary foods is growing in Bahrain.

GCC organic food market: The organic food market in the Gulf is estimated to grow by nearly 20 percent CAGR from $300 million in 2009 to $1.5 billion in 2018, according to Alpen Capital36

Organic meat and prepared meals in Bahrain are projected to grow by 15.1% CAGR (2015-2022) from $13 million in 2015 to reach $26.2 billion in 202037

Gluten-free bread products and baked goods are expected to grow by 5.9% CAGR (2015-2022) from $0.5 million 2015 to $0.7 million in 2020. 38

(3) Government-led price reforms impacting volumes

Important changes have already occurred reflecting efforts to minimize government budget deficits,

following the substantial decline in oil prices

The impact of subsidy cuts has largely been realized after the removal of subsidies on meat and

poultry in October 2015, with prices for the products almost doubling, although there were

efforts to compensate Bahraini citizens for the increase.39

There are a number of important regulatory changes that will occur40:

Introduction of VAT: The GCC has planned 5% VAT to be introduced in 2018. Although the exact

amount and exempted categories needs to be finalized on a country-by-country basis, it will be

applicable to both local citizens and expats, with average price increases of 5% expected

o The price increases are less severe than the subsidy cuts seen in 2016, and with over

75% of households earning above $25,000 per annum in Bahrain, any negative impact is

expected to be mostly short-term

34

World Health Organization - Bahrain Noncommunicable Diseases (NCD) Country Profiles, 2014, http://www.who.int/nmh/countries/bhr_en.pdf, accessed on 28 June 2017. 35

“70pc adults in Bahrain ‘overweight or obese’”, Trade Arabia, 29 April 2015. 36


BMI (Bahrain Food & Drink Report – Q1 2017), Euromonitor International, National Sources and DinarStandard Estimates 38

BMI (Bahrain Food & Drink Report – Q1 2017), Euromonitor International, National Sources and DinarStandard Estimates 39

“Bahrain lifts meat prices as cheap oil hits state finances”, Reuter, Oct 2015 40

“Bahrain: Minister of Finance signs the GCC Unified VAT and Excise Tax Treaties”, PwC, Feb 2017

http://www.who.int/nmh/countries/bhr_en.pdf

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Soft drinks tax: Bahrain’s Ministry of Finance has signed a decree to levy an excise tax on soft

drinks at 50% of the retail price and energy drinks at 100% of the retail price, favoring

consumption towards healthier, low sugar substitutes.

3.5 GCC and OIC Food industry opportunity

Outside of Bahrain, the GCC and broader Organization of Islamic Countries (“OIC”) region represents a broader addressable market opportunity for producers in Bahrain, with Halal and health-related products attractive global propositions.

OIC demand Representing 23.5% of the global population, the OIC region represents a $1,184 billion Food and Beverage market opportunity. The 57 Organization of Islamic Co-operation (“OIC”) countries, spent in aggregate $1,184 billion on Food and Beverage in 2015, and this spend is projected to growth to $1,988 billion by 2021, providing a broader accessible market opportunity for Food Manufacturers in Bahrain. Of the OIC, MENASA countries represented 48% or $569 billion, with growth projected at 10.3% CAGR between 2015 and 2021.41 GCC demand Meat and poultry products represent the largest category of consumption in the GCC, representing 26% of total GCC Spend. Oils and fats represent the fastest growing category projected between 2015 and 2022 by 8.6% CAGR.

Largest 2015 expenditure categories: Meat and poultry represent the most significant product category in GCC countries (26.3% of total spend), followed by bread and cereals (12.1%), and dairy (11.5%).

Within meat and poultry, poultry accounted for the $7.8 billion of 2015 expenditure, followed by pork related products ($3.3 billion).

Within bread, rice, and cereals, rice alone accounted for $4 billion of 2015 expenditure, followed by cereals ($2.2 billion).

Highest growth categories: Oil and fats represent the fastest growing category projected between 2015 and 2022, by 8.6% CAGR, followed by meat and poultry (7.4%) and bread, rice, and cereals (7.4%)

Within meat and poultry, the fastest growing subcategories are prepared meat-based meals and meat snacks (15.9% growth and $1.2 billion 2015 expenditure) and organic meat and prepared meals (14.5% growth and $639 million 2015 expenditure).

41

Regional spend on food and beverage analysis is based on ICP 2011 projections by country and extrapolation of growth to 2015 based on a synthesis of national estimates and a regression of historical food industry growth on nominal GDP.

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Within bread, rice, and cereals, rice is the fastest growing subcategory with 9.4% growth and $4 billion of 2015 expenditure.

Figure: GCC Spend in Food and Beverage Categories in 2015 (in million dollars) 42

42

BMI (Bahrain Food & Drink Report – Q1 2017)

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Figure: GCC Growth Rate (CAGR) for Food and Beverage Categories in 2015 - 202143

Drivers of OIC demand 9% Growth in OIC spend on Food and Beverage is underpinned by robust economic and demographic drivers The growth dynamics for the OIC are highly favorable, with several key drivers shaping overall spend:

(1) The population in Muslim-majority countries is expected growth rapidly

OIC population growth is set to grow from 1.76 billion to 2.22 billion between 2015 and 2030, at 1.68% CAGR, which compares to global population growth of 0.97% CAGR over the period

Top 10 OIC countries by population growth (2015-2030)

Rank Country CAGR (2015-2030)

1 Niger 4.02%

2 Uganda 3.13%

3 Chad 3.02%

4 Gambia 3.01%

5 Mali 2.99%

6 Syrian Arab Republic 2.96%

7 Somalia 2.87%

8 Senegal 2.77%

9 Burkina Faso 2.76%

10 Iraq 2.67%

OIC Total (All countries) 1.68%

Global 0.97%

43

BMI (Bahrain Food & Drink Report – Q1 2017)

- 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Pasta productsSugar and sugar products

Baked goodsOther food products

Fruit and vegetable juicesFresh vegetables

DairyCoffee, teas and other hot drinks

Soft drinksMineral or spring waters

Fresh and preserved fruitMeat and Poultry

Bread, rice and cerealsCarbonated drinks

Oils and FatsFish and fish products

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(2) GDP is set to show above average growth

The OIC had a GDP (PPP based) in 2015 of $17 trillion, accounting for 15 percent of the total

global GDP (PPP based), which was $113 trillion in 2015.

In a climate of slow global economic growth, these economies are growing at a faster rate than

the global economy, with average growth of the OIC markets between 2015-21 expected at 4.2

percent compared to the rest of the world’s GDP growth, averaging 3.6 percent during that

same period

21 of the OIC countries are projected to have a higher growth rate than IMF’s “emerging market

and developing economies.”

Table: OIC growth economies

Avg. % GDP Growth (2015-2021)

Mozambique 11.57

Côte d'Ivoire 7.70

Senegal 6.87

Bangladesh 6.73

Djibouti 6.57

Niger 6.17

Uzbekistan 6.07

Uganda 5.81

Burkina Faso 5.53

Libya 5.53

Turkmenistan 5.50

Indonesia 5.47

Benin 5.34

Togo 5.33

Brunei Darussalam 5.31

Guinea-Bissau 4.94

Mali 4.94

Pakistan 4.94

Cameroon 4.90

Guinea 4.90

Malaysia 4.84

Benchmarks

Emerging market and developing economies 4.67

Global Average 3.6

OIC overall 4.19

Source: IMF Outlook, April 2016

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(3) Tourism arrivals are set to grow rapidly

OIC countries represent 10.3% of global international tourism receipts, which was estimated at $129.7 billion in 2015, according to UNWTO statistics available between 2013 and 2015.44 OIC inbound tourism arrivals were also estimated to reach 171 million in 2015, according to UNWTO statistics aggregated between 2013 and 2015.45 Inbound arrivals accounted for 14% of global inbound arrivals 1.19 billion, with global arrivals set to grow by 3% CAGR to 2021. Assuming tourism receipts by OIC countries grow in line with global arrivals, total tourism receipts could reach $154.9 billion by 2021.

Halal market opportunity Bahrain is well-positioned to play a key role in addressing the $415 billion Halal Certified Food and Beverage market, which is set for robust growth. The global Halal Certified Food and Beverage market opportunity is estimated at $415 billion in 2015, with broader Muslim spend on Food and Beverage set to grow from $1,173 billion in 2015 to $1,914 billion in 2021, at a CAGR of 8.5%46. The OIC region accounts for 84% of global Muslim spend on Food and Beverage in 2015. The Halal market is set for robust growth, underpinned by robust population growth, and increasing adherence to Halal.

Population growth drivers: The global Muslim population is expected to rise from 1.7 billion in

201447 to 2.2 billion by 2030 (26.4 percent), according to Pew Research Center’s Forum on Religion

& Public Life,48 growing at about twice the rate of the non-Muslim population over the next two

decades – with an average annual growth rate of 1.5 percent for Muslims, compared with 0.7

percent for non-Muslims

Halal Adherence increasing: Increasing adherence is noted as a key trend in the State of the Global

Islamic Economy Report, evidenced by a rapid growth in the number of startups and mainstream

companies addressing the Halal opportunity.

o Underpinning this trend is survey data, with a 2015 Pew Global Attitudes survey of select 42

countries, 83 percent of respondents from Islamic countries considered “religion as very

important in their lives”

44 According to the UNWTO statistics available for the period between 2013 and 2015 for inbound tourism expenditure for 41 OIC countries and assuming inbound tourism expenditure for the latest year available is constant between 2013 and 2015. Inbound tourism expenditure for each of the 41 OIC countries was aggregated based on the statistics available between 2013 and 2015. 45 IBID 46

“State of the global Islamic Economy 2016/17”, Thomson Reuters and DinarStandard, 2016 47

Derived from 2010 baseline and 1.5 percent growth estimated by The Future of the Global Muslim Population, Pew Research Forum, 2011. 48

http://www.pewforum.org/2011/01/27/the-future-of-the-global-muslim-population/, accessed on 8 August 2016.

http://www.pewforum.org/2011/01/27/the-future-of-the-global-muslim-population/

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o An earlier comprehensive study from 2012 by the Pew Forum found that 87 percent of

Muslims globally considered religion ‘very important’ and 93 percent fast in the month of

Ramadan.

Other health-driven industry opportunities There is a broader opportunity to address a global shift in consumer preference towards healthier

foods, with five notable emerging sectors, totaling $888.1 billion in 2015.

The largest and fastest growing sector is Non-GMO, estimated at $608 billion in 2015 and growing by 18

percent CAGR through to 2020. Non-GMO food and beverages refer to foods that do not contain

ingredients with genetically modified organisms from genetically modified crops or animals fed with

genetically modified feed.

Organic is the second largest, a $105 billion industry, expected to grow by 16 percent CAGR through to

2020. Organic food and ingredients are produced without using pesticides, fertilizers, synthetic

ingredients, antibiotics or growth hormones.

In the backdrop of a global food and beverage industry, where consumers spent an estimated $7 trillion

in 2015, and projected to grow by 6 percent CAGR (2015-2020) to reach $9.8 trillion by 2020, the

industries highlighted represent a substantial growth opportunity for established and emerging

companies in the food industry.

Market opportunities created

Segments Market size, 2015 ($, billions)

Market size, 2020 ($, billions)

CAGR

Non-GMO49 (non-genetically modified organisms)

$608 $1,407.4 18.3%

Healthy Snacks50 (Breakfast/cereal/ granola/snack bars; Snack nuts and seeds; Dried fruit snacks; Trail mix or sweet/salty snacks)

$163.6 $215.951 5.7%

Organic52

$105.0 $220.5 16%

Plant-based Protein53 (examples include Legumes, Rice, and Quinoa)

$7.7 $10.1 5.7%

Meat Substitutes54 (examples include Tofu & Tofu Ingredients)

$3.8 $5.2 6.6%

Total $888.1 $1,859.1 13.1%

49

http://www.foodnavigator-usa.com/Markets/Global-non-GMO-market-could-reach-800bn-by-2017-demand-not-unanimous 50

http://www.packagedfacts.com/Healthy-Ingredient-Snacks-10121548/ 51

Calculated using the US healthy snack market cumulative annual growth to 2020 at 5.7 percent. 52

https://www.techsciresearch.com/news/462-global-organic-food-market-to-grow-at-over-16-by-2020.html 53

http://www.foodbev.com/news/new-report-into-plant-protein-market-forecasts-30-growth-by-2020/ 54

http://www.marketsandmarkets.com/Market-Reports/meat-substitutes-market-979.html

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3.6 The export opportunity for Bahrain’s Food and Beverage industry

The GCC and broader OIC region represents a substantial export opportunity for Bahrain’s Food and Beverage Industry, but Bahrain’s penetration of the addressable export market is currently low

Bahrain’s exports Bahrain exported a total of $314.8 million worth of Food and Beverage Products in 2015, with 48% of exports accounted for by confectionary, dairy and animal products, and with Saudi Arabia and Iraq accounting for 52% of exports.55

Trend: Bahrain’s exports of Food and Beverage declined by 5.1% CAGR between 2011 and 2015, with a 5.7% CAGR growth in meat and fish exports from $24 million to $34 million, offset by a $80 million decline in non-meat exports to $284 million. In the non-meat category, while confectionary input exports increased by $103 million to $106 million, this was more than offset by a decline in dairy and animal by products of $132 million, and a further decline of $48 million in other food processing inputs.

Major categories: Confectionary inputs accounts for 34% of exports, followed by dairy and animal by products (14%) Iraq represents the top export market for confectionary inputs ($49.7 million), as well as for dairy and other animal by products ($19.4 million)

55

Data extracted from International Trade Center

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Major end markets: Saudi Arabia accounted for 31% of Bahrain’s exports, followed by Iraq (21%) The top products imported by Saudi Arabia were confectionery inputs ($34.5 million), and veg or seed derived products ($12.2 million). GCC countries in total accounts for 26% of Bahrain imports ($450.4 million), and OIC countries in total accounted for 39% ($680.4 million).

Bahrain’s addressable export opportunity The GCC imported a total of $49.6 billion of food and beverage products in 2015, with the broader OIC region accounting for $190 billion. Bahrain’s exports, at $314 million, represents a fractional share of total OIC imports

GCC: The GCC imported $49.6 billion overall in 2015, accounting for 51% of total consumption, with Bahrain representing only 0.4% of the GCC’s total imports. Products: The top product categories imported by the GCC were veg or seed derived products (39%) of total imports, meat (19% of total imports), and animal by products (11% of total imports) Source markets: The top source markets were India (10.5% of total imports), Brazil (7.4% of total imports), and the United Arab Emirates (6.6% of total imports).

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OIC: The OIC imported $190 billion overall in 2015, accounting for 16% of total consumption. Products: The top product categories imported by the OIC were veg or seed derived products (49%) of total imports, meat (12% of total imports), and dairy and animal byproducts (8% of total imports) Top importing countries: The top importing countries were Saudi Arabia (11.3% of total imports), Malaysia (7.9% of total imports), and the United Arab Emirates (7.8% of total imports) Source markets: The top source markets were Brazil (8.4%) of total imports, India (6.8% of total imports), and the United States (6.4% of total imports)

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3.7 Demand study conclusion

Bahrain’s Food and Beverage industry is set to grow by almost 7% per annum to 2021, with fresh fruit the top product category, and mass retailers the leading channel for purchasing Food and Beverage

Bahrain’s Food and Beverage Industry is set to reach $3.5 billion by 2021, growing from $2.36 billion in 2015, with volume growth a core driver, expected to increase by 5.5% CAGR between 2015 and 2020, underpinned by 1.1% CAGR population growth, 2.6% CAGR increase in GDP per capita between 2015 and 2020, and 4.2% CAGR decrease in inbound tourism between 2010 and 2014

Mass grocery represents 45% of total consumer spend, and top three product categories represented by fresh fruit (12% of total spend), fresh vegetables (9% of total spend), and poultry meat (7% of total spend).

Bahrain is currently under-addressing the OIC-wide Food and Beverage Export Opportunity

While Bahrain’s Food and Beverage Industry is a minor fraction of total GCC demand, estimated at $71.7 billion in 2015, Bahrain can play a key role in exporting to the GCC region, and broader OIC region, where total OIC consumption of Food and Beverage Products totaled $1,184 billion in 2015.

Halal products and health-oriented products, such as organic and gluten free, represent robust local opportunities, but also combined appeal to a $888.1 billion global market opportunity

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4 Supply landscape

4.1 Introduction

Bahrain’s Food and Beverage Industry demand is set to grow substantially, however, the country relies heavily on imported products to meet this demand, with distributors playing a key role in the import of internationally manufactured products into Bahrain. This section looks in detail at the value chain for Food and Beverage Production in Bahrain, and for critical segments of the value chain, seeks to ascertain key developments and trends, as well as key players across the value chain in Bahrain’s Food and Beverage Industry.

4.2 Bahrain’s Food and Beverage Industry value chain overview

Grocery retail are a key end segment for Food and Beverage product manufacturers seeking to sell their products in Bahrain, with distributors representing a key market access point.

Sub-segmentation of Bahrain’s Food and Beverage Industry Bahrain’s $2.3 billion Food and Beverage industry comprises four key vertical segments across the value chain

Figure - Breaking down Bahrain’s 2015 Food and Beverage Industry Value chain

Referring to the above diagram, the following observations can be made:

Core retail channels: The consumer purchases ~80% of its products through grocery retailers, with the balance through food service and ecommerce channels

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Key role of distributors: Distributors have captured a significant portion of products sold in Bahrain, primarily due to majority of products being imported

o Distributors have the infrastructure and connectivity to transport, store and sell on a large scale to end retailers across all consumer-facing channels

o End retailers are also compelled to acquire products through distributors due to

exclusivity arrangements that the distributors have multinational food and beverage brands, examples of which include leading distributor Al Jazira Group exclusively distributing Heinz and McVities products56

56

http://www.aljaziragroup.com.bh/profile.html, accessed on 9th

June 2017

http://www.aljaziragroup.com.bh/profile.html

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4.3 Import dependency in Bahrain’s Food and Beverage Industry

Bahrain is heavily dependent upon imports to meet local demand for Food and Beverage products

Bahrain’s imports Bahrain imported a total of $1.72 billion worth of Food and Beverage Products in 2015, accounting for 72.9% of domestic consumption, with Saudi Arabia representing the largest trading partner, and dairy produce the largest food category imported.

Trend: Bahrain’s imports of Food and Beverage increased by 6.5% CAGR between 2011 and 2015, with a 7.6% CAGR growth in non-meat imports, growing from $1.34 billion to $1.72 billion, and a 2.6% CAGR growth in meat and fish exports from $307 million to $340 million. In the non-meat category, vegetable and seed-derived showed the largest increase, by $124 million to $507 million in 2015, followed by confectionary inputs, increasing by $85 million to $175 million. In meat and live animals, a $33 million and $24 million increase bovine and poultry produce, respectively, was partially offset by a $42 million decline in goat and lamb products.

Domestic F&B consumption

$1,699 million $2,363 million

% consumption

78.8% 72.9%

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Major categories: Meat and live animals account for the largest share or 19.7% of Bahrain imports, followed by dairy and animal byproducts (15.6%) and fruits and nuts (8.8%). Australia represents the top source market for meat and live animals ($111.3 million) and Saudi Arabia represents the top source market for dairy and animal byproducts ($120.8 million).

Major source markets: Saudi Arabia accounted for 17.1% of Bahrain’s imports, followed by Australia (9.5%), and India (8.5%). The top products imported by Saudi Arabia were animal byproducts ($120.8 million), and vegetable or seed derived products ($89 million). GCC countries in total accounts for 26.1% of Bahrain imports ($450.4 billion), and OIC countries in total accounted for 39.4% ($680.4 billion).

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4.4 Primary inputs used in Bahrain’s Food & Beverage industry

Bahrain’s Agriculture Industry represents less than 0.5 percent of GDP, but substantial efforts have been undertaken by the government to boost domestic food production and enhance food security in light of substantial raw material price fluctuations

Bahrain’s Agriculture industry The value added by Bahrain’s agriculture industry represented a minimal 0.32% of GDP in 2015, limited in large part by the availability of agricultural land, which accounted for 11.2% of total land mass in Bahrain in 2015.

Figure: Agriculture value added as a share of total nominal GDP57

Figure: Agricultural land development in Bahrain – total area and share of total land available58

Domestic production of primary Food and Beverage inputs Bahrain’s agriculture industry was able to meet only 12.4% of total consumption needs in 2014, a decline of 2.4 percentage points from 2012 to 2014, as the country’s agriculture industry has struggled to keep pace with rising domestic consumption, increasing Bahrain’s reliance on imports for essential supply of food and beverage inputs, with the following notable observations:

Core consumption categories: Meat and cereals represent a significant 46% of total Food and Beverage consumption in Bahrain in 2015, followed by Fruit, Dairy produce and vegetables (together accounting for a 33% of consumption)59

Production: Meat represents the strongest sector for Bahrain, meeting 25% of its consumption needs, however, there has been a significant drop in production share across categories, with

57

http://www.theglobaleconomy.com/Bahrain/ 58


“Bahrain Food and Drink Report”, BMI, 2017, supplemented by DinarStandard analysis, grouping food sub-sectors into core agricultural categories for 2015

33 | P a g e

fruit production halving its share of consumption to 13.9%, and with Bahrain fully dependent on imports for cereals.60

Figure: Breakdown of food consumption by core agricultural produce, 2015

Figure: Breakdown of food consumption by core agricultural product, 201561

Figure: Food and Beverage Self-sufficiency Ratio, 2012 and 201462

Raw materials pricing trends

Bahrain’s high import reliance left the country vulnerable to food price fluctuations, amounting to a

36% around the average monthly food input price index between 2012 and 2017

Volatility by category: Dairy and sugar showed the highest price volatility, with prices

increasing almost by 100% from lowest to highest price over the 5-year period, while meat

prices were on average the most stable, with the peak price remaining within 35% of the lowest

price

o Although volatility is evident in the year-on-year chart, average prices peaked in 2011,

most dramatically for cereals (reaching 3.5 times the 2002-04 price reference point),

o There was a subsequent decline in price across categories from 2011 to 2015, mirroring

the drastic decline in oil prices in particular between 2014 and 2016, followed by a

reversal thereafter

Select subsidies acting as a buffer: The cost of meat, wheat and poultry has historically been

mitigated by government subsidies, increasing substantially to reach 67 million BHD ($176

million) in 2014, however, meat and poultry subsidies were removed in 2016.63

60

“GCC Food Industry”, Alpen Capital, Feb 2017 61

“Bahrain Food and Drink Report”, BMI, 2017, supplemented by DinarStandard analysis, grouping food sub-sectors into core agricultural categories for 2015 62

http://www.theglobaleconomy.com/Bahrain/

34 | P a g e

Figure: Annual food price index analysis per category, June 2012 – May 201764 (2002-04 = 100)

Figure65: High-Low price analysis per category, June 2012 – May 201766 (2002-04 = 100)

Table: Price index volatility per category, June 2012 – May 201767 (2002-04 = 100)

Food price index

Meat price index

Dairy price index

Cereals Price index

Oils price index

Sugar price index

Absolute volatility 68.46 66.75 147.95 114.51 99.15 161.14 Average price 187.0 176.3 194.1 185.9 176.9 244.0 Volatility % of average 36.6% 37.9% 76.2% 61.6% 56.0% 66.0%

Figure: Cost of Food subsidies, 2004 – 2013 68

63

“Bahrain on the Food Security Index 2013 – White Paper”, EDB, 2014 64

http://www.fao.org/worldfoodsituation/foodpricesindex/en/, accessed on 20th

June 2017 65

Note: Line indicates highest lowest points during the period; dark bars indicate opening and closing positions in the period where prices declined, and white bars indicate opening and closing positions where prices increased 66

http://www.fao.org/worldfoodsituation/foodpricesindex/en/, accessed on 20th

June 2017 67

IBID. 68

“Bahrain on the Food Security Index 2013 – White Paper”, EDB, 2014

http://www.fao.org/worldfoodsituation/foodpricesindex/en/

http://www.fao.org/worldfoodsituation/foodpricesindex/en/

35 | P a g e

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Poultry 241,614

250,315

256,141

268,129

1,429,372

1,789,450

1,900,000

2,600,000

2,800,000

2,800,000

Flour 2,603,109

2,360,839

2,917,685

6,477,732

13,462,301

9,353,888

8,100,000

11,600,000

13,600,000

13,600,000

Meat 6,408,780

6,381,548

7,845,910

9,675,601

19,197,556

22,550,603

32,880,000

41,440,000

50,600,000

50,600,000

Source: Ministry of Finance

Enhancing agricultural capacity: Opportunities and limitations

While there is opportunity to enhance primary input production, natural water and land capacity

constraints limit Bahrain’s scope.

The challenges to expanding agricultural output are significant:

Limited water supply: Bahrain has one of the lowest renewable freshwater resources per capita in the world, at 3 cubic meters, compared to Saudi Arabia which has 78 cubic meters69. Bahrain’s consumption of water is leading to over-extraction, with fifty-five percent of demand accounted for by municipal water, industry and commerce sectors, limiting the availability of water for agriculture70

Limited land: Land available for cultivation has declined primarily due to rising urbanization, soil salinization and water-logging.71

69

http://data.worldbank.org/indicator/ER.H2O.INTR.PC?year_high_desc=false, accessed on 20th

June 2017 70

“Strategic analysis paper: Bahrain Food and Water Security”, Future Directions International, August 2015 71

“GCC Food Industry”, Alpen Capital, Feb 2017

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total cost of food subsidies

Poultry Flour Meat

http://data.worldbank.org/indicator/ER.H2O.INTR.PC?year_high_desc=false

36 | P a g e

However, the government has undertaken several initiatives to enhance food security, the most promising of which is developing the countries aquaculture industry

Agriculture industry financial support: The government has sought to improve domestic productivity through:

o Providing loans and subsidies to farmers, with subsidies covering 84% of the cost of

machinery services, 50% of the cost of pesticides, and 40% on modern irrigation equipment72

o The establishment of a $265 million fund, by the National Bank of Bahrain and the

Future Generation Reserve, to enhance Food Security in Bahrain, supporting technological advancement and agricultural investments73

Boosting investment in aquaculture: Bahrain has substantial potential to develop a wide range of aquatic species, in order to meet growing domestic consumption, as well as international demand, and through initiatives

o Juvenile fish has been a core focus on Bahrain’s efforts, with the National Pisciculture Centre looking to encourage more fish farming, enhancing technology, and adding new breeds of local fish, with the ultimate goal of producing 10,000 tons a year74

o The Ministry of Municipalities and Urban Planning, has signed two agreements, one with Asmak Bahrain Company to produce 1,500 tons of fish by using floating cages in Gumais, producing seabream and sobaity bream, and the other with the Aquatic company, which aims to produce 250 to 300 tons of different fish species a year75.

Securing stable food supplies externally: The Khairat Al-Bahrain agricultural project covers 42,000 hectares of land for agricultural use, animal breeding, and the production of fodder, an agreement between Sudan and Bahrain. Bahrain has also entered similar arrangements with Egypt to support agriculture and aquaculture76.

72

“GCC Food Industry”, Alpen Capital, Feb 2017 73


“Bahrain Food and Drink Report”, BMI, 2017 75

http://www.fao.org/fishery/countrysector/naso_bahrain/en, accessed on 20th

June 2017 76

“GCC Food Industry”, Alpen Capital, Feb 2017

http://www.fao.org/fishery/countrysector/naso_bahrain/en

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4.5 Food and Beverage ingredients market

Processed Food and Beverage Ingredients, which in include flavors, emulsifiers and sauces, represent a critical component of the supply chain, with a substantial opportunity for potential Bahrain-based manufacturers to address GCC-wide and broader OIC demand, in particular for Halal ingredients

Food and Beverage ingredients market overview – Bahrain Bahrain’s Food Ingredients industry accounted for $57.9 million in 2015, representing 2.5% of total consumer spend on Food and Beverage in 2015.77 Table: Food ingredients market subcategories – Bahrain (2015-2020, $ millions) 78

Segment 2015 size

2020 size (projected)

CAGR % (2015-2020)

Description

Sauces and marinades79

$16.9 $20.7 4.2 Sauces and marinades are essentials for cooking and food preparation. Condiments and sauces are used to enhance flavor and improve food and serving appearance.

Thickening agents $13.6 $17.9 5,7 Thickening agents are used across a variety of sectors, including food, to create thicker liquid products from their less dense liquid forms.

Sugar substitutes80

$11.3 $14.3 4.7 Sugar substitutes replace sugar with other substances, which is helpful for health-conscious consumers whom require low-calorie products.

Flavors81 $10.7 $13.2 4.3 Flavors are used to enhance taste in processed, organic, and healthy food products.

Other $5.4 $7.9 8.0

Total $57.9 $74.0 5.0

Export opportunity for Bahrain’s Food and Beverage Ingredient’s Industry

77

DinarStandard Synthesis and analysis; “Addressing the Halal Ingredients Opportunity: Industry Developments”, Thomson Reuters and DinarStandard, June 2016. 78

IBID. 79

“Global Sauces, Condiments and Dressings Market 2015: Trends, Analysis and Forecasts to 2021 for the $24 Billion Industry,” Research and Markets, 2015. 80

“Sugar Substitutes Market Worth 16.52 Billion USD by 2020,” MarketsandMarkets, 2015. 81

“Flavors Market to Reach $15.2 Billion, Globally, by 2020—Allied Market Research,” Allied Market Research, 2015.

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The OIC imported ~$13.4 billion in food ingredients in 2015, with the GCC representing 15% of OIC total imports and with Bahrain capturing only 0.4% in 2015.82

OIC import demand of ingredients in 2015 The top three categories of ingredient imports in 2015 by OIC countries include animal, vegetable fats and oils (92%), yeasts and prepared baking powders (3.6%) and lac, gums, resins (3.3%). Gelatin ingredient imports only accounted for 0.9% of total OIC food ingredient imports in 2015. Bahrain’s top ingredient categories for imports in 2015 included animal, vegetable fats and oils (92%), and lac, gums, resins (5.2%) and yeasts and prepared baking powders (2.8%).

Top Ingredient Categories for OIC Imports, 2015 ($, millions)83

Top Ingredient Categories for Bahrain Imports, 2015 ($, millions)84

82

ITC Trademap statistics, http://www.trademap.org/Index.aspx?AspxAutoDetectCookieSupport=1, accessed on 10 August 2017. 83

IBID. 84

IBID.

$13,367.89

$12,249.45

$482.29

$441.65

$120.32

$46.19

$28.01

$- $4,000.00 $8,000.00 $12,000.00 $16,000.00

Total

Animal,vegetable fats and oils, cleavageproducts, etc

Yeasts, prepared baking powders

Lacs, gums, resins etc

Gelatin and gelatin derivates

Sugars

Products of animal origin

$53.9

$49.5

$2.8

$1.5

$0.1

$0.0

$0.0

$- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0

Total

Animal,vegetable fats and oils, cleavage…

Lacs, gums, resins etc

Yeasts, prepared baking powders

Gelatin and gelatin derivates

Sugars

Products of animal origin

http://www.trademap.org/Index.aspx?AspxAutoDetectCookieSupport=1

39 | P a g e

Top importing countries The top three countries importing ingredients are Turkey ($1.96 billion), Malaysia ($1.9 billion), and Saudi Arabia ($0.94 billion). The GCC represents $2.1 billion or 15% of total OIC imports in 2015.

Top OIC Importers of food ingredients, 2015 ($, billions)

Top exporting countries of food ingredients to the OIC The top exporting countries of food ingredients in 2015 include Indonesia ($6 billion), Malaysia ($2.6 billion), Russia ($1.6 billion) and the Argentina ($1.3 billion).

Top Source Markets for OIC Imports, 2015 ($, billions)

$1.96 $1.90 $0.94 $0.81 $0.72 $0.65 $0.62 $0.61 $0.58 $0.42

$2.10

$4.15

$13.36

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$6.04

$2.63

$1.63 $1.29

$0.96 $0.81 $0.57 $0.47 $0.39 $0.38

$-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

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Specific areas of opportunity

With the rising importance of the integrity of Halal products among Muslim populations, Bahrain can

serve as a conduit for Halal ingredients.

Given the high Muslim population in Bahrain and the broader GCC, accounting for 38.2 million in 2015,

or 87% of the total population, there are a number of problematic ingredients that are often imported

without full Halal certification.85

Gelatin: The global gelatin industry was valued at $2.7 billion in 2015. About 45 percent of

gelatin is sourced from pig and more than 50 per cent from cows.86 The very small proportion

that would be acceptable for Muslims is either from halal-slaughtered animals or from fish.

Gelatin is a problematic ingredient and its used is widespread, which is not suitable for Muslim

consumers. Gelatin sourced from pigs or not slaughtered in accordance with Shariah law is not

permissable for consumption by Muslims. Gelatin is used as a foaming agent, stabilizer,

emuslifier, gelling agent and processing aid often found in yogurt, confectionaries, snacks,

cakes, ice cream, bakery products and marshmallows.

Carmine [Colorants]: Carmine, sourced from insects, are widely used as a colorant across

multiple food products. Carmine is classified as haram as insects are considered unclean and

their consumption in any form is forbidden.87

Alcohol: Alcohol is found in a variety of ingredients and products including wine, beer, sake,

mirin, and makgeolli and is sourced from grapes, grains, and rice. Alcoholic beverages are used

for direct consumption, as flavor enhancers and ingredients. However, consuming alcohol is

forbidden for Muslims, regardless of its application.88

85

CIA World Factbook Population Statistics, https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html, accessed on 28 June 2017. 86

“Addressing the Demand for Halal Gelatin in Food Products,” Salaam Gateway, http://food.salaamgateway.com/en/food/story/SALAAM10042016082408/, accessed on 25 May 2016. 87

"Guide to Understanding Halal Foods," Toronto Public Health, 2004. 88

"Fiqah and Science," Muslim Consumer Group, 2016.

https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html

https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html

http://food.salaamgateway.com/en/food/story/SALAAM10042016082408/

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4.6 Food processing

Food processing industry overview

The Food processing industry in Bahrain plays a small but important role in the country’s economy, employing close to 6,000 people

Overview

Bahrain’s Food and Beverage Processing industries in aggregate with 191 operational companies

accounting for 5,700 people, accounting for $507 million in investment89

Core segments: Top sectors by employment are processed snacks/ condiments (37.3% of

employment), followed by beverage and bottling (21.9% of employment), while beverage and

bottling is the largest sector by number of companies (~30% of total companies). Across 43

segments identified in the Food and Beverage Industry, 21 are being addressed by local

companies.

Key investments: Confectionery products constitute a significant share of total investment

(30.2%) and total sum of 58,916,770 BHD.

Figure: Number of companies, by segment, 2015

Figure: Investment, by segment, 2015

89

Gulf Organization for Industrial Consulting (GOIC) - Company Profile & Production Details by Sector (2017): 127 food processing companies employ 5757 employees and have a combined investment of 194,992,094 BHD in Bahrain.

6

8

19

19

23

29

0 10 20 30 40

Meat, Poultry andFish Processing

Dairy

Cereals/Grains

ProcessedSnacks/Condimen…

Confectionary

Beverages &Bottling

Number of companies by segment, 2015

0 100000000

Beverages &Bottling

Dairy

Meat, Poultryand Fish…

Cereals/Grains

ProcessedSnacks/Cond…

Confectionary

Investment companies in each sector (BHD, 2015)

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Figure: Employment by sector

Geographic distribution

Bahrain’s food processing companies are concentrated around major population centers with 61.4%

of the firms located in the capital of Manama

Manama is followed by three other major locations including Muharraq (13.4%), Sitra (3.9%)

and Hidd (3.2%), with the four major locations constitute 81.8% of the companies dedicated to

food processing across country

While Manama dominates other cities across all segments of food processing, Muharraq shows

relative strength in terms of number of confectionery players with HIDD also having a major

presence.

Figure: Distribution of Food and Beverage processing companies in Bahrain, 2015

154

437

581

765

1047

1779

0 200 400 600 800 1000 1200 1400 1600 1800 2000

Meat, Poultry and Fish Processing

Dairy

Confectionary

Cereals/Grains

Beverages & Bottling

Processed Snacks/Condiments

Number of employees in each segment

43 | P a g e

Figure: Geographic mapping of Bahrain’s Food and Beverage companies

Figure: Distribution of Food processing companies by location and sector

Location success factors

Domestic market connectivity, transport proximity and raw materials access are three core factors

contributing the current configuration of where Bahrain’s Food processing companies are location.

Reviewing each of these factors:

(1) Access to Internal Markets is critical

Manama is the capital and largest city of Bahrain, with an approximate population of 157,000 people. Long an important trading center in the Persian Gulf, Manama is home to a very diverse population including large number of expats.

Muharraq is Bahrain's third largest city and served as its capital until 1932 when it was replaced by Manama. The population of Muharraq in 2012 was 176,583 which constitutes a significant internal market.

The northern section of Sitra island has been turned into an industrial area. Bapco oil storage reservoirs are located in the south. Sitra is also the terminus of the 42-km Dhahran-Sitra natural

25

17

14

6

4

12

3

1

6

2

1

4

1

1

1

2

2

1

1

0 10 20 30 40

Beverages & Bottling

Cereals/Grains

Confectionary

Dairy

Meat, Poultry and FishProcessing

ProcessedSnacks/Condiments

Number of companies in each sector in Bahrain's major cities

Manama Muharraq SITRA HIDD

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gas pipeline, which connects it to Dhahran in Saudi Arabia. As a result, there is an internal demand in the area.

(2) Proximity to Transportation routes is key to accessing export markets

Manama is the main hub of the country's road network. Due to the fact that it is the capital and the main city in the country, where most of the government and the commercial offices and facilities are established, the city also has the largest fleet of vehicles for the purpose of road transportation.

Bahrain International Airport is located on the nearby Muharraq Island. It is a premier hub airport in the Middle East, strategically located in the Northern Persian Gulf between the major markets of Saudi Arabia and Iran. The airport also has one of the widest range and highest frequency of regional services with connections to major international destinations in Europe, Asia, Africa, and North America.

The Sitra Causeway connects the north of the island to Nabih Saleh and to Umm al Hussam (Manama) on Bahrain Island.

All four locations are in close proximity to Port Salman which is a major hub of food and raw material transportation.

(3) Proximity to local Raw Materials in another factor, in particular critical to accessing fish

inventory

Before the discovery of oil in Bahrain, the inhabitants of Hidd were largely involved in the fishing or pearl diving industries which continues to leave a trace to this day. Due to proximity to fish and related raw materials, although there are only 4 companies operating in the food and beverage sector, the town is home to a major fish processing company which employs 49 people and its total investment of 20 million BHD makes it the largest investment in the fishing segment in the nation.

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4.7 Key players in Bahrain’s Domestic Food and Beverage Industry

Across the value chain, a handful of key players in Bahrain’s Food and Beverage Industry have captured a sizeable share of the local market

Landscape of Bahrain’s Domestic Food and Beverage Industry players

Bahrain’s Domestic Food and Beverage industry comprises ~350 companies across the value chain,

excluding raw input suppliers and imported products

Fragmentation: There is significant fragmentation across all segments of the value chain, with

the largest number of players addressing food Manufacturing, which spans primary input

processing and advanced food preparations

Top five share: The largest five players have captured the most significant share in the retail

segment, at ~30% of total sales, followed by food processing and distribution

Chart: Mapping of domestic players in the Food and Beverage Industry)

DRAFT SUBJECT TO FINALIZATION

46 | P a g e

Key value-added players

While there are ~350 companies in Bahrain’s Food and Beverage industry, across three vertical

segments, 15 companies have established important scale. These companies are examined in further

detail across each of the three segments.

(1) Food Processing/ Manufacturing entities

Figure: Key Bahrain-based Food Manufacturing entities

Company Employment (% share of total in food and beverage processing)90

Description91

Mondelez (Cadbury Schweppes and Kraft Foods)

1,578 (27%) Bahrain location and market focus: Manama; Multinational leveraging Bahrain as a core production regional hub with one biscuit plant and one cheese/powdered beverage plant92

Core products produced: Biscuits (Oreo, Ritz and Cadbury chocolate), cheese (Kraft), and powdered beverage (Tang)

Awal Dairy 254 (4%) Bahrain location: Manama; Core market focus and leading food and drink manufacturer in Bahrain

Core products produced: Established market leader in the fresh milk segment with multi-category products including fruit juices, cream milk, natural yogurt and ice cream93

Beverage Division of Ahmadi Industries W.L.L.

236 (4%) Bahrain location: Zing; Local distributor with Bahrain as a core market

Core products produced: AI is the sole bottler and franchisee of PepsiCo in Bahrain; distributes to over 5,000 outlets in Bahrain94

Coca Cola Bottling Company – Bahrain

219 (4%) Bahrain location: Aali, Manama; Multinational leveraging Bahrain as a local production and distribution hub

Core products produced: Bottling of carbonated soft drinks, energy drinks, juice, and water.95

Delmon Poultry Company

188 (3%) Bahrain location: Hamla; Core market focus the wider Gulf region

Core products produced: Market leader in Bahrain’s poultry sector and only authorized chicken meat distributor in Bahrain96

90

Gulf Organization for Industrial Consulting (GOIC) - Company Profile & Production Details by Sector (2017): 127 food processing companies employ 5757 employees and have a combined investment of 194,992,094 BHD in Bahrain. 91

BMI Research; BMI Bahrain Food and Drink Report 2017; Company websites; DinarStandard synthesis and analysis 92

http://alaujan.com.bh/mondelez/, company website accessed on 10th

August 2017. 93

http://awaldairy.com/about-us/, company website accessed on 10th

August 2017. 94

http://ahmadiindustries.com/, company website accessed on 10th

August 2017. 95

http://www.zawya.com/mena/en/company/The_CocaCola_Bottling_Company_of_Bahrain_WLL-1001238/, Zawya company database, accessed on 10

th August 2017.

96 http://www.dawajen.bh/en/content/about-us, company website accessed on 10

th August 2017.

http://alaujan.com.bh/mondelez/

http://awaldairy.com/about-us/

http://ahmadiindustries.com/

http://www.zawya.com/mena/en/company/The_CocaCola_Bottling_Company_of_Bahrain_WLL-1001238/

http://www.dawajen.bh/en/content/about-us

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(2) Key retail entities

Figure: Key Retail entities

Company Description

EMKE Group (LuLu)

Bahrain locations: Six

Core target customers: Regional grocery retailer with the largest mass grocery retail operation in Bahrain

Product types: Fresh food, frozen food, grocery food, health and beauty etc.

Notable developments: Opened 2 new stores in 2016, with 2 additional planned for 201797

Carrefour MAF Bahrain locations: One

Core target customers: Mass grocery retailer based in the United Arab Emirates; Strong presence in the Middle East98

Product types: Fresh food, frozen food, health and beauty etc.

Notable developments: Plans to pursue expansions in Bahrain with smaller Express stores

Jawad Bahrain locations: Two supermarkets and 21 convenience stores

Core target customers: Mass retailer with Bahrain as its core market focus

Product types: Fresh food, frozen food, health and beauty, home appliances etc.

Notable developments: Jawad operates a chain of 20+ 24 hour markets99

Al Jazira Bahrain locations: Seven

Core target customers: Mass grocery retailer with Bahrain as its core market focus

Product types: Fresh food, frozen food, health and beauty etc.

Notable developments: Al Jazira operates a logistics facility for distribution with capacity of dry, frozen, and chilled products100

(3) Key distribution entities

97

BMI Research Bahrain Food and Drink Report Q1 2017 98

BMI Research Bahrain Food and Drink Report Q1 2017 99

http://www.jawad.com/our-brands/24-hours-market, Jawad company website, accessed on 10th

August 2017. 100

http://www.aljaziragroup.com.bh/, Al Jazira company website, accessed on 10th

August 2017.

http://www.jawad.com/our-brands/24-hours-market

http://www.aljaziragroup.com.bh/

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Figure: Key Distribution entities

Company Description

Intercol Focus: A leading consumer products distributor in Bahrain

Key relationships: Exclusive distributor for Nestle through Nestle Trading Bahrain Co. W.L.L.

Core products: Dry, chilled and frozen products including food and health or beauty

Notable developments: Intercol operates a 50,000 sq meter warehouse with capacity to store 7,050 pallets of dry goods and 4,200 pallets for chilled and frozen food101

Trafco Group

Focus: Trafco Group Imports and distributes food and non-food products to over 60 countries; Largest FMCG conglomerate in Bahrain

Key relationships: Distributor for multiple foreign brands including Sadia, Rainbow, Noor, Daawat, OKI, Pride, Tata and Tetley

Core products: Canned, frozen and dry food and nonfood products, general commodities, fresh fruits and vegetables, chilldren and frozen meat.

Notable developments: Trafco Group is a public share holding company and operates six subsidiaries including Bahrain Water Bottling and Beverage Company, Bahrain Fresh Fruits Company, Awal Dairy etc.102

Fine Foods (HHM Group)

Focus: Leading foodservice supplier to airlines, hotels, restaurants, schools, and ships in Bahrain; Division of HHM Group

Key relationships: Distributor for foregin brands including Perdue, Opies, Caffe Musetti

Core products: Distributes over 6,000 products including dry, chilled, fresh, and frozen foods103

Notable developments: The company is an accredited supplier to Navy Forces, Air Forces, and Army garrisons to GCC countries

BMMI Group

Focus: BMMI is a distributor/wholesaler of food and household goods in Bahrain and Qatar

Key relationships: BMMI offers notable household brands in Bahrain, including MARS, Red Bull, American Garden, Storck, and Colgate

Core products: Confectionery, packaged and canned food, toiletries, fragrances, cosmetics, tobacco and other fast-moving consumer goods

Notable developments: BMMI has established an integrated logistics facility with a 28,000 sq meter warehouse and capacity for 10,000 pallets104

Abdul Latif Al Aujan Food Stuff Est.

Focus: Leading distributor of food products in Bahrain

Key relationships: Distributor for products including Kraft, Oreo, Cadbury, and Horlicks

Core products: Rice, beverages and other commodities Notable developments: The company operates a 23,000 sq meter of warehouse capacity to store over 20,000 pallets of products.105

101

http://www.intercol.com/consumer-products.html, company website accessed on 10th

August 2017. 102

https://www.trafco.com/profile.php, company website accessed on 10th

August 2017. 103

http://www.hhm-group.com/hhm_finefoods_ffc.asp, company website accessed on 10th

August 2017. 104

http://www.bmmigroup.com/divisions/bahrain-logistics-services/, company website accessed on 10th

August 2017. 105

http://alaujan.com.bh/, company website accessed on 10th

August 2017.

http://www.intercol.com/consumer-products.html

https://www.trafco.com/profile.php

http://www.hhm-group.com/hhm_finefoods_ffc.asp

http://www.bmmigroup.com/divisions/bahrain-logistics-services/

http://alaujan.com.bh/

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4.8 Supply landscape study conclusion

The role of distributors in Bahrain’s Food and Beverage Industry is integral to the supply chain, with 80% of products sold to end consumers going through distributors. Distributors enable market access for international Food and Beverage Producers, and imports represent a staggering $1.72 billion or 69% of 2015 consumption. The level of imports has increased by 6.5% CAGR between 2011 and 2015, with meat and live animals accounting for 19.7% of imports in 2015. The agriculture sector in Bahrain contributed 0.4% of GDP in 2015. Arable land has remained at 11.2% between 2011 and 2015. There have been substantial efforts to enhance food supply in Bahrain with the set-up of a $265 million agriculture Fund, and substantial government support to boost aquaculture, with plans to increase output to by more than 11,000 tons per year The manufacturing industry, although representing only 0.4% of GDP per annum, plays a key role in the economy, employing close to 6,000 people. Manufacturing projects in Food and Beverage have attracted $507 million investment across 191 companies operating in Bahrain. While the focus is concentrated across 43 sub-sectors, there are opportunities in particular in ingredients, to address the substantial import demand, totaling $13.4 billion across the OIC region. Key players have captured a substantial share of the market across the value chain. The report identified 15 key players across retail, distribution and manufacturing, that have captured a commanding share of their respective markets.

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5 Strategic options for Bahrain’s Food and Beverage Industry

5.1 Introduction

Bahrain’s Food and Beverage Industry represented less than 1% of GDP in 2015106, however, it represents a strategically significant area of focus for the government given the high growth in demand for Food and Beverage, with a critical need to enhance the availability of local inputs suppliers and advanced processing capabilities. This chapter examines the potential of the Food and Beverage industry in context of national economic priorities, evaluates the ecosystem supporting Food and Beverage companies, and outlines key strategic steps needed to further strengthen the country’s Food and Beverage Industry.

5.2 Economic objectives and potential of Bahrain’s Food and Beverage Industry

Critical economic priorities for Bahrain Economic diversification, further reducing the country’s reliance on oil exported, and enhanced Food security, are critical economic objectives for Bahrain, and sets the key context for how the Food and Beverage Industry must develop. There are three core objectives that set the context for how the Food and Beverage industry needs to develop in the next 13 years:

Boosting non-oil GDP: Bahrain’s Economic Vision 2030 cites the need to double household income in Bahrain, in real terms, between 2008, when the vision was established, and 2030107

o Manufacturing share of GDP has increased from 14.5% to 20.5% of GDP between 2010 and 2015108

o Linked to GDP growth is the need to provided jobs to local employees, with 7-8,000 employees expected to join the workforce by 2030109

Attracting Foreign Direct Investment: Foreign Direct Investment is critical in sectors beyond the Financial Sector according to the Economic Vision 2030, with a specific need in high potential sectors such as manufacturing, business services and logistics and with particular emphasis on export-oriented activities

o Bahrain Net Foreign Direct Investment has fluctuated year-on-year due to outward investment, but reached a high of $1.54 billion in 2012 and totaled $281.9 million in 2016110

106


Economic Vision 2030 Document 108

http://bahrainedb.com/business-opportunities/key-sectors/manufacturing/ 109

Economic Vision 2030 Document 110

https://www.ceicdata.com/indicator/bahrain/foreign-direct-investment

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o As at the end of 2015, $507 million had been invested in the Food and Beverage Industry111

o Mondelez alone invested $165 million in country and serves as a key case study for attracting multinationals to Bahrain, and leveraging the country as a key production and export hub112

Improving Food Security: Although Bahrain is considered a good environment for Food Security, ranked 33 globally in the 2016 EIU Food Security Index, Bahrain is heavily reliance on Food imports, and has set the challenging goal of increasing self-sufficiency to 60 per cent of demand by 2020

o A number of critical steps have been taken to boost security, with the establishment of a $265 million Fund113, and key investments made by sovereign Wealth Fund Mumtalakat in local suppliers supporting the Flour, Poultry and Aquaculture Industries114

The economic potential of Bahrain’s Food and Beverage Processing Industry Bahrain could increase its food processing share of GDP by up to 0.3 percentage points, amounting to up to ~$114.6 million per annum by 2020 The value added by Bahrain’s Food and Beverage industry is similar to the value-added by its agriculture to industry, both totaling 0.8% of GDP in 2015115

Potential ratio: Based on a regional benchmarking exercise carried out by the Food and Agriculture Organization of the United Nations, Bahrain could increase the ratio of Food processing to 1.6 times Agriculture, in line with other developed nations

Potential economic impact: a 0.3 percentage point increase in GDP would result in $95 million in incremental economy activity, based on 2016 GDP116, or $114.6 million, based on projected 2020 GDP117

o This assumes that the agriculture sector’s share of GDP remains broadly the same, and not taking into account the upside from initiatives to enhance aquaculture and agricultural output

111

BMI Research Bahrain Food and Drink Industry Report Q2 2017 112

http://alaujan.com.bh/mondelez/ 113


http://www.bmhc.bh/portfolio/sector#2, accessed on 17th

July 2017 115

http://www.theglobaleconomy.com/Bahrain/ and http://b3globe.com/sites/default/files/Bahrain%20-%20B3G%20Food%20Industry%20Report%202016.pdf, accessed on 17

th July 2017

116 GDP assumed to be 31,859 million dollars in 2015, according to

http://databank.worldbank.org/data/download/GDP.pdf, accessed on 13th

July 2017 117

https://tradingeconomics.com/bahrain/gdp, Trading Economics, accessed on 17th

July 2017.

http://www.bmhc.bh/portfolio/sector#2

http://www.theglobaleconomy.com/Bahrain/

http://b3globe.com/sites/default/files/Bahrain%20-%20B3G%20Food%20Industry%20Report%202016.pdf

http://b3globe.com/sites/default/files/Bahrain%20-%20B3G%20Food%20Industry%20Report%202016.pdf

http://databank.worldbank.org/data/download/GDP.pdf

https://tradingeconomics.com/bahrain/gdp

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Figure: Food-Processing-to-Agriculture Value Added Ratio by Country Grouping (2010-12)

Source: Food and Agriculture Organization of the United Nations118

5.3 The ecosystem of Bahrain’s Food and Beverage Industry

Bahrain’s Food and Beverage Industry is supported by a broader ecosystem of ten key government or government-backed entities addressing five core objectives. Figure: Key objectives of entities supporting Bahrain’s Food and Beverage Industry Ecosystem

Core Entity Logo Core role

118

http://www.fao.org/economic/ess/ess-economic/gdpagriculture/en/, accessed on 13th

July 2017

http://www.fao.org/economic/ess/ess-economic/gdpagriculture/en/

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objective

Regulation and approval: Providing regulatory oversight to safeguard consumer needs

Ministry of Health119

Government department responsible for approving premises located in Bahrain and setting health regulations, policy making, promoting health and ensuring resources are used effectively for high standard evidence based care.

Supreme Council for Environment120

A government entity responsible for assisting the Kingdom of Bahrain’s government in preserving and managing its environment, including its natural and marine resources, its wildlife, and its biodiversity.

New business set up: Supporting the establishment of new facilities in Bahrain

Economic Development Board121

Government-agency responsible for attracting investment into Bahrain and supporting initiatives to ensure the investment climate is attractive. EDB Bahrain serves as a one-stop shop for foreign entities seeking to invest in Bahrain. The EDB focuses on the following sectors: Financial services, manufacturing, ICT, tourism, logistics and transportation.

Business Investor Center122

The BIC was established by the Ministry of Industry and Commerce to support entrepreneurs and business start-ups to facilitate the business start-up process and help founders or startups to commence business operations. Private sector partners at the BIC provide vital services to investors, such as consultancy, finance, banking, and telecommunications

Bahrain International Investment Park123

Government-funded industrial park with 118 total projects across 247-hectare amount of space developed by the Ministry of Industry, Commerce and Tourism. Key entity supporting Food and Beverage companies, having attracted 17 approved food projects The BIIP is focused on attracting export oriented

119

https://www.moh.gov.bh/ 120

http://www.sce.gov.bh/en/ 121

http://bahrainedb.com/ 122

http://www.moic.gov.bh/En/MoIC%20Centers/BahrainInvestorsCenter/Pages/index.aspx 123

http://www.biip.com.bh/

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companies, in manufacturing and internationally traded services, with high value projects that will contribute to creating local employment in Bahrain.

Business Investment Wharf124

BIW is a privately owned industrial park in Bahrain that has an area over 1.7 million square meters in which it operates an industrial, logistics and warehousing park, a business and commercial park, and residential housing for the local workforce. The park targets light industries including warehousing, and logistics for electronics, pharmaceuticals, textiles, paper products, plastics etc.

Khalifa Bin Salman Port Salman (APM Terminals)125

[LOGO NOT AVAILABLE] Khalifa Bin Salman Port (KBSP) is a privately-owned transshipment hub operated by APM Terminals and now the main sea port within the Kingdom of Bahrain. It has a total of 110 hectares of reclaimed land and can handle container vessels as well as general cargo and passenger facilities.

Ongoing support: Providing ongoing strategic and operational support for existing businesses

Bahrain Chamber of Commerce and Industry126

The Bahrain Chamber of Commerce and Industry is a representative committee of private sector companies across segments and activities. The Chamber is responsible for defending private sectors rights and protecting its wellbeing as a vital part and a major contributor to the overall economy through discussing issues, suggesting and pursuing solutions, seeking partnerships with concerned stakeholders, supporting private sector throughout crisis and dilemmas and minimizing negative repercussions, and increasing its effectiveness and contribution to the economic and social development in the Kingdom of Bahrain.

Ministry of Industry, Commerce and Tourism127

Government department that plays an active role in developing the national economy by encouraging and promoting inward investment and business development. Other services include providing high quality facilities and services to investors.

124

https://www.bahiw.com/ 125

http://www.apmterminals.com/operations/africa-middle-east/bahrain 126

https://www.bcci.bh/en 127

http://www.moic.gov.bh/En/Main/News/Pages/Minister-of-Industry-Commerce-and-Tourism-received-CEO-of-Bahrain-Development-Bank.aspx

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Business expansion: Providing capital for expansion

Bahrain Mumtalakat Holding Company128

Mumtalakat is a sovereign wealth fund for the Kingdom of Bahrain that has invested locally in strategically significant industries. Within Food, the fund has inherited investments in the General Poultry Company, Delmon Poultry Company, Bahrain Flour Mills Company, and has also made investments in Asmak to support the country’s aquaculture industry. The independent holding company was established to actively manage and grow a diverse portfolio of commercial assets locally, regionally, and internationally. Mumtalakat is a key potential investment partner for incoming Food and Beverage companies

Local worker protection: Advancing the needs of local workers

Tamkeen129

Tamkeen is a semi-governmental organization in Bahrain, established to make the private sector the key driver of economic development. Tamkeen’s mandate revolves around developing talent in Bahrain to enhance competition in the labor market, drive increased efficiency among businesses, and help generate value-added job opportunities. Tamkeen has launched over 200 initiatives focused on areas such as funding and financing, skill and career progression, customized employment schemes, and entrepreneurship exposure.

Labor Market Regulatory Authority130

The Labour Market Regulatory Authority (LMRA) is a government body responsible for regulating and controlling work permits for expatriate employees and self-employed, in addition to issuing licenses for manpower and recruitment agencies, introducing labor market reforms and tackling all issues related to this sector by drafting a strategy and policy of employment of nationals and expatriate employees.

128

http://www.bmhc.bh/ 129

https://www.tamkeen.bh/ 130

http://lmra.bh/portal/en/home

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5.4 Evaluating Bahrain’s current ecosystem for Food processing

Bahrain is regarded as business-friendly, and the success of Mondelez clearly shows Bahrain’s ability to attract multinational companies, which can leverage Bahrain as a global production hub. As the country seeks to further develop its food processing capabilities, there are six key success factors for Bahrain to develop, with substantial progress made across all of them to date. Figure: A framework to evaluate how Bahrain currently supports its Food Processing Industry

Business objective

Key success factors

Strengths and developments Limitations and areas for development

Setting up business

Robust set up support

Friendly foreign ownership and local market access: Bahrain received recognition globally for its investor-friendly environment and was ranked ahead of other GCC countries in the “Global Best to Invest Awards” in 2016

131,

allowing 100% foreign ownership, is flexible on capital requirements for new projects, as well as allowing 100% repatriation of capital

132

Effective government representation to attract FDI: Bahrain’s ability to attract FDI substantially enhanced by the EDB, supported by the BIIP, provide accessibility to key stakeholders in the country, and serving as a “one stop shop”

133 for Foreign investors

134

No local Halal certification body: While the Ministry of Health ensures incoming products are Halal-certified, the lack of a local Halal certification body limits the country’s ability to capitalize on global Halal export opportunity. Setting up a Halal certification body will help Bahrain develop into a value-added export Hub for Halal products

Regulatory requirements: In some instances,

key players noted areas where certain regulations could be relaxed, with a view to supporting increased GCC-wide competitiveness for Food products, in particular labelling requirements

135

o A detailed benchmarking study against U.S. and GCC labelling and packaging

131

http://bahrainedb.com/the-kingdom-of-bahrain-wins-the-global-best-to-invest-award/, accessed on 17th

July 2017 132

http://www.biip.com.bh/default.asp?action=article&id=26, accessed on 17th

July 2017 133

https://www.state.gov/e/eb/rls/othr/ics/2015/241473.htm, accessed on 17th

July 2017 134

Based on review of EDB website and discussions with key personnel from the EDB on 10th

July 2017

http://bahrainedb.com/the-kingdom-of-bahrain-wins-the-global-best-to-invest-award/

http://www.biip.com.bh/default.asp?action=article&id=26

https://www.state.gov/e/eb/rls/othr/ics/2015/241473.htm

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Business-friendly regulation

Favorable customs and tax regulations: Bahrain was ranked 63

rd globally for Ease

of Doing Business globally, ahead of Saudi Arabia (Ranked 94

th), Kuwait (Ranked

103rd

), as well as Oman and Qatar. Bahrain has robust incentives for Businesses, with zero percent corporation tax, provided with a 10-year guarantee, and allowing the full repatriation of capital

136.

requirements would help identify further specific areas of improvement

Generating profits

Cost-efficient quality labor and overheads

Low cost of doing business relative to GCC counterparts: Bahrain exhibits the lowest values for a majority of the cost components in manufacturing with costs of operation in the GCC lowest in Bahrain (BIIP), being 21% lower than the most expensive location, RAKFTZ in UAE.

137

Improved access to high quality local labor: The Tamkeen Program has seen $440 million invested in local training programs, with 4,000 Bahrainis trained

138,

supported by robust internationally-leading training offered by Mondelez, boosting the quality of local labor

Higher cost quotes from, and limited availability of, local suppliers: Based on feedback from key players

139:

o Local suppliers have been noted to be much more expensive than imported materials across a range of products – including crab, and dairy inputs

Accordingly, a program that substantially incentivizes local food manufacturers to buy from local suppliers could work well, supported by efforts to improve operating efficiencies for local manufacturers

o Furthermore, a lack of local suppliers for key food ingredients, including edible fats and flavors, has been noted as a major gap in the Food Processing ecosystem

Investment support to enhance the Food manufacturing ecosystem will generate new economic activity as well as support existing Food processing companies in their growth

Cost-efficient supply chain access

Improving local access to key raw material inputs: Bahrain provides access to key local input suppliers, including flour, sugar, poultry and dairy products

140,

with enhancements to packaging.141

Growing business

Securing export market access

GCC market access: Companies in Bahrain have duty-free access to the GCC and are not required locate within in a freezone, providing a key advantage over other GCC countries, and avoiding the typical

High border transit time: The transit time across the King Fahad Causeway has been highlighted as a significant issue, especially among Perishable Food items, although with significant reductions made

135

Based on discussions with Awal Dairy 136


July 2017 137

“Cost of Doing Business in Bahrain”, KPMG, February 2016 138

http://bahrainedb.com/investing-advantages/empowered-workforce/ 139

Based on discussions with Awal Dairy, BIIP, EDB and Shell Fisheries on 10th

and 11th

July 2017 140

Refer to Module 2 for key players 141

Based on discussions with Mondelez and BIIP on 10th

July 2017


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surcharge faced by freezone companies when they export

142, which could be 5%

of the value of products143

Broader global market access: Free trade

agreements with the U.S., as well as double-tax treaty with close to thirty countries, including the UK, Turkey and India, provide advantageous access to key export markets

144

o Empowering the Bahrain Logistics Board to help cross the causeway within a few hours is a critical step that will enhance the competitiveness of Bahrain-based Food processing companies

145

Ease of growing production capacity

Successful expansion noted with key players in the industry: Mondelez has sought to expand to a second location, investing $90 million, and Shell Fisheries, which has expanded into value-added products, with plans to open a new second facility by end of 2017

146

Credit access: Bahrain also a respectable ranking for “Ease of Getting Credit”, at 101 globally, ahead of Kuwait, Oman and Qatar, and scoring significantly higher than the MENA regional average with notable improvements made in the access to credit information

147. Tamkeen

has also played a key role providing expansion support to local companies

148.

142

“Bahrain Shows the Gulf How to go beyond Freezones”, Inc Arabia, 5th

April 2017 143


July 2017 144

https://www.state.gov/e/eb/rls/othr/ics/2015/241473.htm, accessed on 17th

July 2017 145

Based on discussions with Mondelez, Awal Dairy and Trafco on 10th

and 11th

July 2017 146

Based on discussion with Delmon Poultry on 10th

July 2017 147

http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/bhr.pdf, accessed on 17

th July 2017

148 “Tamkeen Annual Report 2015”


https://www.state.gov/e/eb/rls/othr/ics/2015/241473.htm

http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/bhr.pdf

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5.5 Conclusion: Strategic Roadmap for enhancing Bahrain’s Food and Beverage industry

Bahrain’s Food and Beverage Industry could generate up to $115 million in incremental economic activity by 2020, with the growth in production capacity critical to addressing the country’s economic diversification objectives and boosting Food Security. There are three key success factors that will support the success of existing and new ventures in Food and Beverage processing in the Kingdom of Bahrain:

(1) Addressing critical gaps and weaknesses in the domestic supply chain

Feedback from key Food and Beverage Manufacturers in Bahrain highlighted a number of gaps in the local ecosystem, most notably flavors and edible oils processing. Opportunities in those areas, if executed with high competency, would serve an immediate market demand in Bahrain, but could also venture into the broader GCC region, with Bahrain as a hub

The price competitiveness of local suppliers could be further enhanced via a review of incentives offered for purchasing local products throughout the supply chain

(2) Meeting global demand for key sectors

Feasible processing opportunities must be export-oriented, firstly to get access to attractive locations at the Bahrain International Investment Park, but also to gain viable scale and secure an attractive return on investment

Addressing the global Halal opportunity is a key priority for the industry, and must be underpinned by the set-up of a local Halal certification body that is aligned with leaders in the Halal Industry globally, notable the Department of Standards of Malaysia and The Emirates Authority for Standardization and Metrology

(3) Ensuring physical access to key export markets

Mondelez in particular highlighted the tremendous progress Bahrain has made in enhancing the Food supply ecosystem, enabling the company to turn Bahrain into a global production hub for its operations in key products

The next step in Bahrain’s progress is to support Logistics initiatives to significantly reduce the time to cross the causeway into Saudi Arabia

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6 Select opportunities for Food and Beverage Manufacturing Projects in Bahrain

6.1 Introduction

Bahrain’s Food and Beverage Industry retail spend on Food and Beverage, together with Food Ingredients (used typically as an intermediate input in Food and Beverage production), totaling $2.4 billion and $75.5 billion for Bahrain and the GCC respectively in 2015.149 This chapter segments the Food and Beverage Industry into 48 sub-sectors and examines in detail the methodology, based on quantitative and qualitative parameters, to determine the top five opportunities for further pre-feasibility review, which comprise Halal Baby Food, Halal meat snacks, Food flavoring, High end chocolates, and Edible Oils.

6.2 The criteria for selecting sector opportunities

The top twenty opportunities were identified following a rigorous three-tier screening process of individual segments of the Food and Beverage Industry in Bahrain and the broader GCC. Bahrain’s Food and Beverage Industry has been segmented into 48 sub-sectors, with three broad screens applied to identify twenty specific manufacturing opportunities for Bahrain to consider:

The initial screen eliminated sectors not suited to advanced processing or the local ecosystem

The quantitative screen accounted for domestic demand and supply parameters and GCC demand, based on detailed secondary data, to identify the most attractive sectors

An additional qualitative screen was applied to capture the most opportune, addressable segments at the product category level, where Bahrain could have a competitive advantage relative to other GCC countries, based largely on feedback from interviews and limited surveys with industry participants

Diagram – The process for identifying opportune sectors for Food and Beverage Manufacturing in Bahrain

Source: DinarStandard analysis

149

BMI Research Food and Drink Statistics 2016, accessed on 15 July 2017; DinarStandard synthesis and analysis

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Table: Explaining the initial screen and quantitative rankings in more detail

Screening process

Explanation

Initial suitability screen

An initial screen was applied excluding sectors that were either not suitable for a Halal ecosystem (for instance Pork and related products), or that do not require substantial advanced processing (inclusive of fresh vegetables, bovine meat, poultry meat and other meat)

Quantitative measures and ranking

Type Weights Measure Explanation of metrics Maximum possible score (post-weighting)

Bahrain Demand

25% Bahrain Sector Spend, 2015 $ in millions

Bahrain Spend and Growth for each individual sector was evaluated, with each sector given a relative score ranging from zero to one for both Spend and Growth.

0.5

Bahrain Sector CAGR, 2015-2020

GCC Demand

50% GCC Sector Spend, 2015, $ in millions

GCC Spend and Grow, overlaid with broader MENASA spend, was evaluated for each sector, with each sector given a relative score ranging from zero to one for both Spend and Growth.

1.0

GCC Sector CAGR, 2015-2020

MENASA Sector Spend, 2015, $ in millions

Bahrain Supply

25% Bahrain imports, 2015, $ in billions

The value of imports was evaluated by sector and used to identify sectors where there was high dependency on imports, whereby sectors with the highest import values provided a score of one, and the lowest a score of zero The level of employment was used as a proxy for competition in each sector, with sectors having no employment, and hence limited competition earning the highest score, with scores ranging from one to zero

0.5

Existing employment per sector, in thousands

Total scoring

100% Summary of all sectors

The score of the three areas have been added after applying the weightings. A higher weighting was given to GCC demand parameters, due to the criticality of an export-driven proposition to ensure a proposition can scale sufficiently and become financially viable

2.0

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6.3 Identifying the most opportune sectors

Summary of qualitative and quantitative sector results

Applying both qualitative and quantitative screening, meat-based and processed fish preparations

were identified as the most opportune segments for Bahrain, followed by Food ingredients. Six of the

top ten sectors in the quantitative ranking were validated by stakeholder feedback, but with eleven

sectors further prioritized based on ecosystem fit and areas of competitive advantage.

Figure: Comparing quantitative and qualitative screen results


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Quantitative approach – results150

Prepared meat-based meals and snacks represent the most attractive opportunities, following by

dairy products and organic meat-based preparations. The quantitative ranking was applied to 33

sectors, excluding those that did not meet the initial screen.

Table: Top ten sectors identified in quantitative screening

Rank Sector Bahrain market size, $ millions

2015-20 CAGR %

GCC market size, $ millions

2015-20 CAGR %

Existing employment in Bahrain, thousands

2015 Imports, $ in thousands

Total relative score (max of 2)

1 Prepared meat-based meals and snacks

24.7 16.5 1,213.7 15.9 10.0 23.2 1.0

2 Other dairy products

93.2 7.2 2,665.3 8.5 0.0 94.6 0.9

3 Organic meat and prepared meals

13.0 15.1 639.3 14.5 0.0 12.2 0.9

4 Oils and Fats 63.3 6.3 2,180.4 8.6 0.0 65.2 0.8

5 Processed fish preparations and meals

184.5 5.4 3,839.9 5.6 282.0 23.6 0.8

6 Pasta-based meals and preparations

39.6 7.1 1,294.7 4.6 0.0 95.3 0.7

7 Other soft drinks

33.0 6.3 1,799.7 7.1 0.0 20.8 0.7

8 Bread 77.9 5.0 2,180.0 5.5 115.0 31.5 0.7

9 Preserved fruit and other products

7.9 9.0 203.9 9.6 15.0 3.6 0.6

10 Energy drinks 8.3 8.0 454.4 9.0 0.0 5.3 0.6

Source: BMI, Euromonitor, Nielsen, ITC Trademap, IMI, and DinarStandard analysis,

150

Please refer to the Appendix for sources pertaining to each sector. Market spend and growth estimates were primarily based on BMI, GlobalData and Nielsen, while ITC Trademap was used for import data, and IMI was used for Employment.

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Qualitative approach – final ranking results

Applying a lens of rationality and feasibility, seventeen specific sectors were identified and ranked.

The prioritized sectors formed the basis for identifying twenty product-level opportunities, based on the

number of mentions in interviews with key stakeholders, with prepared meat-based meals and meat

snacks the most opportune sector based on both screening approaches.

Table: Top ten sectors identified in quantitative screening151

Sector Total quantitative

score (out of max

2)

Number of interview

mentions

Prepared meat-based meals and meat snacks 1.0 4.0

Processed fish preparations and meals 0.8 4.0

Ingredients - Thickening agents 0.5 3.0

Ingredients – Flavors 0.5 3.0

Bread 0.7 2.0

Baby food 0.6 2.0

Other dairy products (Butter, curd, creams) 0.9 1.0

Oils and Fats 0.8 1.0

Preserved fruit and other products 0.6 1.0

Cocoa-based products (Chocolate syrup and chocolate

confections)

0.6 1.0

Cheese 0.6 1.0

Ingredients - Other food ingredients 0.6 1.0

Syrups and spreads 0.6 1.0

Condiments, seasonings and spices 0.5 1.0

Soups 0.5 1.0

Gluten free bread products 0.5 1.0

Other confectionary products 0.4 1.0


151

Based on interview feedback, obtained as part of the primary research as explained in the methodology section earlier in this report

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6.4 Identifying the most opportune sectors

Overview The most opportune product categories for Bahrain-based manufacturing projects comprise Halal Baby Food, Halal meat snacks, Food flavoring, High end chocolates and Edible Oils manufacturing. The opportunities were identified through discussion with stakeholders and validated by select key stakeholders in Bahrain’s Food and Beverage Industry. Identifying the top 20 opportunities The top twenty product-level opportunities were derived from discussions with industry stakeholders as part of the interview campaign. The opportunities comprised a further segmentation of the seventeen top sectors prioritized via the qualitative ranking, with an identification of specific opportunities that could give Bahrain a competitive manufacturing advantage, both domestically and in exporting to the GCC.

Figure: Identifying the top 20 opportunities


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Prioritizing the 20 opportunities The prioritization of Halal Baby Food, Halal meat snacks, Food flavoring, High end chocolates and Edible Oils was based on survey feedback on revenue potential and export competitiveness.

Validation: Six industry participants were surveyed, including two GCC-based investment firms, an international distributor to the GCC, a government representative and two Bahrain-based manufacturing entities, with further validation gained from potential operating partners with proven manufacturing capabilities in each area

Specific parameters and results: $25 million in revenue was used as a benchmark for sufficient scale, with Halal baby food giving a unanimous top score across scale-ability and competitive advantage in the GCC and internationally, followed by Halal meat snacks and Food flavoring. High end chocolates and edible oils, while scoring less across scalability and global propositions, still represented viable options for manufacturing, and hence were selected for pre-feasibility.

Prioritizing the 20 opportunities

Rank Sector Very high or moderate change of exceeding $25 million in revenue

GCC competitiveness: Unique proposition or substantial room for new entrants

Very strong or moderate global export proposition

1 Halal baby food 100% 100% 100%

2 Halal meat snacks 83% 67% 67%

3 Food flavoring 83% 67% 67%

4 High end chocolates 67% 67% 67%

5 Edible oils 50% 50% 50%

6 Frozen breaded fish 50% 50% 50%

7 Soups and broths 50% 33% 33%

8 Organic meat-based meals 50% 33% 33%

9 Halal sweets 50% 33% 33%

10 Food colorants 50% 33% 33%

11 Halal gelatin 50% 17% 33%

12 Low GI rice 33% 17% 33%

13 Frozen fish-based meals 33% 17% 33%

14 Frozen meat-based meals 33% 17% 17%

15 Halal cheese 33% 17% 17%

16 Specialty gluten free bread 17% 0% 17%

17 Camel’s milk 17% 0% 17%

18 Cake rusks 17% 0% 17%

19 Packaged naan bread 17% 0% 17%

20 Fruit chips 17% 0% 17%


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6.5 Conclusion: Select opportunities for pre-feasibility study

The top five opportunities identified for pre-feasibility were Halal Baby Food, Halal meat snacks, Food flavors, High end chocolates, and Edible Oils. The selection of these opportunities, out of 20 identified, reflect key stakeholder feedback on financial viability, taking into account the ability to reach or exceed a $25 million revenue opportunity within five years and to provide Bahrain with a competitive advantage in the GCC and globally. The product-level opportunities were identified as a result of a rigorous, four-stage process that incorporated vast quantitative data and Bahrain stakeholder feedback via interviews. The initial suitability screen and quantitative ranking helped prioritize attractive sectors, with qualitative feedback providing essential stakeholder perspectives on competitive advantage, which helped prioritize 17 specific sectors. The twenty specific opportunities represented the most opportune product-level segments within the sectors. The pre-feasibility of each project will be based on a detailed examination of the market demand and competitive landscape, investment requirements, financial feasibility and associated returns. The investment requirements will vary by product category, as well as the revenue and cost profile. Taking into account market size and growth for each segment, the study will determine feasible market share, associated investments and costs, and whether the returns from such a venture are sufficiently attractive after a five-year period.

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7 Acknowledgements

Supported by:

The Gulf Organization for Industrial Consulting (GOIC)

The Gulf Organization for Industrial Consulting (GOIC) was founded in 1976 by the Gulf Cooperation Council

(GCC) member states: The United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait, and in

2009, Yemen joined the Organization.

Article I of the Establishment Agreement states that GOIC is a regional organization known as “The Gulf

Organization for Industrial Consulting” hereinafter referred to as “The Organization” and enjoys an

international legal personality.

According to Article III of the Establishment Agreement, the Organization was founded to achieve industrial

cooperation and coordination between member states. In order to do so, it collects and disseminates

information about industrial development projects and policies. GOIC also offers specific suggestions aiming

at establishing joint industrial projects between member states and delivers recommendations to reconcile

industrial development projects. It coordinates and develops technical and economic cooperation between

existing industrial institutions and others that are yet to be established. In addition to that, GOIC offers

technical assistance in preparing and assessing industrial projects and puts together industrial sector-related

data and studies.

GOIC organizational chart includes the Board and the General Secretariat. The Board is formed by member

state representatives appointed by their governments.

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Produced by:

EY

In collaboration with:

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality

services we deliver help build trust and confidence in the capital markets and in economies the world

over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders.

In so doing, we play a critical role in building a better working world for our people, for our clients and

for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst &

Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK

company limited by guarantee, does not provide services to clients. For more information about our

organization, please visit ey.com.

The MENA practice of EY has been operating in the region since 1923. For over 90 years, we have

grown to over 5,000 people united across 20 offices and 15 countries, sharing the same values and an

unwavering commitment to quality. As an organization, we continue to develop outstanding leaders

who deliver exceptional services to our clients and who contribute to our communities. We are proud

of our accomplishments over the years, reaffirming our position as the largest and most established

professional services organization in the region.

70 | P a g e

DINARSTANDARD™

Report Team

Report Coordinators

Abdulla Sayyar, Financial Analyst, The Gulf Organization for Industrial Consulting (GOIC)

Adnan Fareed, Senior Financial Analyst, The Gulf Organization for Industrial Consulting (GOIC)

Report Advisors

Ashar Nazim, Partner, EY

Rafi-uddin Shikoh, Managing Director, DinarStandard

Report Authors and Lead Analysts:

Haroon Latif, Director, Strategic Insights, DinarStandard

Shiraz Mohyuddin, Senior Manager, EY

Research Analysts

Yaser Al Mohsen, Senior Analyst, EY

Yasir Malik, Senior Analyst, DinarStandard

DinarStandard™ is a growth strategy research and advisory firm empowering organizations for

profitable and responsible global impact. DinarStandard specializes in the Halal/Tayyab food,

Islamic/Ethical Finance, Halal Travel, Islamic NGOs and OIC member country sectors. Since 2008,

DinarStandard has been advising organizations globally on market expansion, business/investment

strategy, and innovative marketing strategies. Its clients include global multi-nationals, Islamic financial

institutions, halal market startups and NGOs.

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8 Appendix

Market study - Sources breakdown Category Source:

Bahrain/ GCC Spend (2015) and CAGR growth (2015-20)

Sub-category Source for Bahrain spend (2015) and growth (2015-20)

Source: GCC

Fresh vegetables

BMI Fresh vegetables

BMI Household spend on vegetables

BMI Household spend on vegetables for all GCC countries

Meat and Poultry

BMI Poultry meat BMI Household spend on meat BMI Household spend on meat for all GCC countries; Middle East Natural and Organic Products Expo 2017

Fresh bovine meat

BMI Household spend on meat BMI Household spend on meat for all GCC countries; Middle East Natural and Organic Products Expo 2017

Pork and related products

BMI Household spend on meat BMI Household spend on meat for all GCC countries

Organic meat and prepared meals

Middle East Natural and Organic Products Expo 2017

Middle East Natural and Organic Products Expo 2017

Prepared meat-based meals and meat snacks

Global Data Remaining categories based on GCC size and growth for Meat and Poultry

Other meat BMI Household spend on meat

Fresh and preserved fruit

BMI Fresh fruit BMI GCC estimates by sub-sector inferred based on BMI spend and growth for fresh and preserved fruit for GCC relative to Bahrain

Preserved fruit and other products

Euromonitor

Fish and fish products

BMI Unprocessed fish and seafood

Global Data GCC estimates by sub-sector inferred based on BMI spend and growth for fish and fish products for GCC relative to

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Processed fish preparations and meals

BMI Bahrain

Bread, rice and cereals

BMI Bread Euromonitor/ Board Bia GCC estimates by sub-sector inferred based on BMI spend and growth for bread, rice and cereals for GCC relative to Bahrain

Gluten free bread products

Euromonitor

Rice Global Data

Other cereals BMI

Pasta products BMI Dry pasta and noodles

Global Data GCC estimates by sub-sector inferred based on BMI spend and growth for pasta products for GCC relative to Bahrain

Pasta-based meals and preparations

BMI

Baked goods Cakes/ pastries

Euromonitor/ Board Bia (based on UAE figures)

GCC estimates by sub-sector inferred based on BMI spend and growth for baked goods for GCC relative to Bahrain Sweet

biscuits Euromonitor (based on UAE figures)

Gluten free baked goods

Euromonitor (based on UAE and MENA figures)

Other baked goods

BMI (Implied)

Dairy BMI Cheese Euromonitor (based on UAE figures)

GCC estimates by sub-sector inferred based on BMI spend and growth for dairy products for GCC relative to Bahrain

Milk Euromonitor (based on UAE figures)

Yogurt and sour milk

Euromonitor (based on UAE figures)

Other dairy products (Butter, curd, creams)

BMI (Implied)

Oils and Fats BMI Oils and Fats BMI BMI

Sugar and sugar products

BMI Cocoa-based products (Chocolate syrup and chocolate confections)

AC Nielsen/ TechSci (based on UAE figures)

GCC estimates by sub-sector inferred based on BMI spend and growth for sugar and sugar products for GCC relative to Bahrain

Ice-cream Global Data

Syrups and spreads

Global Data

Other confectionary products

BMI (Implied)

Other food products

BMI Condiments, seasonings and spices

Global Data GCC estimates by sub-sector inferred based on BMI spend and growth for other food products for GCC relative to Bahrain Soups Global Data

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Baby food Euromonitor

Other food products not categorized

BMI

Coffee, teas and other hot drinks

BMI Coffee Euromonitor GCC estimates by sub-sector inferred based on BMI spend and growth for each beverage category for GCC relative to Bahrain

Tea BMI

Soft drinks BMI Carbonated drinks (soda, lemonade, cola)

Global Data

Energy drinks Global Data

Other soft drinks

Global Data (triangulated with BMI)

Fruit and vegetable juices

BMI Nectar juice and fruit powder


Other fruit and vegetable juice


Mineral or spring waters

BMI Mineral water


Carbonated water


Ingredients Calculation based on summing sub-sectors

Sauces and marinades

ITC Trademap for Bahrain and GCC, based on imports minus exports of food ingredients Breakdown based on global market size estimates for Food ingredients contained in Halal ingredients report, but each core area

Thickening agents

Sugar substitutes

Flavors

Other food ingredients

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