Risks and Rewards: the Halal Market

According to the Islam faith, Muslims are commanded by Allah in the Qur'an to eat only pure, wholesome and permissible food that is fit for human consumption. By labelling a food product Halal, which translated literally means permissible, a commitment has been made to adhere to such dietary laws.

Although many are quite basic in their nature, for instance pork, alcohol and blood are forbidden; others follow stringent religious procedures, for example an animal must be slaughtered using a certain technique and in the name of Allah.

In predominantly Muslim countries, the Halal food sector has the experience and support to confront all the requirements of the consumer.

Countries such as Indonesia, Singapore and in particular Malaysia are well positioned to capitalise on the potentially lucrative Halal market with government bodies helping to promote the industry through defined guidelines.

However, as of yet no standardised global Halal guidelines have emerged from the sector and areas of uncertainty remain. No more so, than for food processors based outside of the traditional Halal food-producing territories, where food products are certified only by small Islamic societies or non-governmental organisations.

CORPORATE CONCERNS

Imarat Consultants are Halal market specialists and their managing director and senior analyst Abdalhamid Evans, says he believes certification is holding the overall Halal market back, particularly in the Western world.

"From a manufacturer's point of view, the market is still full of grey areas. A company must know what line they are taking and why they are entering the market before doing so," says Evans.

"There are certain political areas one must tread carefully around, but the rewards far outweigh the risks," he adds.

However, Evans identifies larger players in the industry already starting to make serious headway where few other have. "Big corporations such as Nestle, McDonalds and Tescos are now becoming heavily involved in the Halal sector. They are playing a large role in the progression of the industry and are setting an example for other companies to follow," he says.

Of such examples, Nestle has in particular emerged as a global pioneer of Halal standards. Around ten years ago its Malaysian division developed corporate level guidelines that have since made the company a prominent player in the Halal market.

Examining every part of its supply chain in acute detail, Nestle carried out a stringent internal audit that exemplifies the level of detail required to approach the market. The consequences of doing otherwise are sometimes disastrous.

"There are a lot of halal consumer organisations full of rumour and speculation which can organise campaigns capable of undermining sales," says Evans.

UNDERSTANDING THE CUSTOMER

The evolving Muslim consumer demographic is an area Imarat Consultants has placed a strong focus upon. With Halal product reviews starting to appear online through social networking sites, there is a growing drive from the consumers themselves to push forward the standard of Halal products currently on the market.

"The Muslim market is waking up to the fact it has consumer power," says Evans "In the US for example, over eight million Muslims have disposable income which equates to billions of dollars. Likewise there is a huge demand in the Middle East and growing demand in Turkey and Europe. As the consumers become more aware of how valuable their demand is, they will become more vocal."

Recognising this fact, the global food industry information exchange provider TraceTracker has recently signed a joint venture with CIMB Private Equity to launch an online global portal for the traceability of Halal products.

Known as Alfitrahnet, the system will work closely with the Halal Development Corporation and various Halal certification bodies in order to target all members of the Halal food supply chain.

MEETING MARKET DEMAND

Knut Jørstad, chairman of TraceTracker says he believes the service can help ensure demand for Halal products is met on a global basis. "Food processors and retailers in Europe and US have often neglected Halal products," he says. "In the US and UK, 20% of the growth in the kosher food market is due to Muslim consumers compensating for the lack of Halal products."

There are a great deal of similarity between the laws of Halal and kosher – foods that conform to Jewish dietary laws – which have sparked ongoing internal debates between Muslim authorities. However, in areas where there is a shortage or absence of Halal products, Muslims often resort to kosher products.

The statistics speak for themselves. The total global Halal market is worth $580bn, with US Muslims estimated to be spending $16bn a year on kosher products because Halal ones are not available.

Migration has played a strong role in the rift between demand and supply of Halal products in the Western world, with many second generation Muslims no longer content with small corner shops specialising in Halal products.

"I think it is possible for Halal food producers to fight for upmarket opportunities and be able to support the demand," says Jørstad. "Furthermore, the products have crossover appeal to non-Muslims as the quality of the products is often less processed and more natural than western food."

"Alfitrahnet will help support the development of the market by preventing counterfeiting through its ability to trace the supply chain. The additional applications of the network can display a temperature log and offer vital information on the life expectancy of a product, also helping to ensure the quality of the food."

RISING TO THE CHALLENGE

Despite all these efforts, there is still hesitation from many food processors in Europe and the US to enter the Halal market. The challenge of obtaining recognisable certification and ensuring all components of the operation are consistently Halal compliant appears a dominant deterrent.

However, as always there are exceptions to the rule. US-based Crescent Foods began producing and distributing Halal produce in late 1996 for the Minnesota area and has since gone national, growing from one employee to around 40. During this period, its founder and president Ahmad Adam has had to overcome a number of challenges in order to offer customers a quality Halal product.

"For the first nine years Crescent had no named Halal certification – we operated through a transparent policy and open visitation to the facility," he explains. "Customers, community leaders and scholars visited the slaughtering facility and endorsed the procedures. Integrity was transmitted nationally through the communities by word of mouth."

"In 2005, a group of customers suggested it was time to have Crescent certified by a third party certifier. We responded and became certified by the Shariah Board of North America, which conduct random visits and audit procedures then issue an annual certificate that we post on our website."

Crescent Foods sells whole chickens, chicken parts and chicken patties, and estimates it has provided products to 10 million Muslims in the US. Its packages are purposely designed to have crossover appeal to the non-Muslim population, so that its business is sustainable through generating additional sales. "Never design a Halal business only for Muslims in areas where Muslims are a minority," says Adam.

In order to ensure Crescent provides a Halal-compliant supply chain, the company implements its own delivery trucks in the Chicago area. Although stringent procedures are in place, Crescent admits that delivering the final products on a national level has proven a distinct challenge.

Likewise, Crescent's business setup conjures a number of challenging processes. "On a daily basis, Crescent functions just like any other food processing business," Adam adds. "However, at the slaughtering level, ensuring the availability and quantity of qualified slaughter men can be a real challenge.

"This is a sensitive issue that can affect the overall integrity of the operation – because if that fails, everything else thereafter fails. There is also the issue of ingredients and additives, where food scientists are required more than religious advisors such as Imams or Shariah scholars."

PAVING THE WAY FORWARD

However, with a consistent annual corporate growth rate of 15% since its inception, Crescent proves that the rewards of overcoming such challenges can be high.

With the global Halal market still in a stage of relative infancy and the industry yet to overcome certification and supply-chain uncertainties, particularly in Europe and the US, examples such as Crescent could encourage other food processors.

"Crescent has changed the face of the Halal business," says Adam.

"It has raised the bar for higher expectation and set a model for those who would like to ride the wave of success by utilising the energy of the emerging Halal industry from local to global markets."

"Many are still thinking about pursuing the Crescent Halal business methodology due to the commitments needed, the challenges involved and the vision required."