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Gulf Countries Prefer "U.S.-Made"
by Edwin Porter, Hovaguim Kizirian and Mohamed Taha
In this Middle East region where 60
percent of the total agricultural imports are consumer-ready
foods, U.S. suppliers are finding the Gulf Cooperation Council
(GCC-5) countries that include Bahrain, Kuwait, Oman, Qatar and
the United Arab Emirates (U.A.E.) a ready marketplace for their
consumer-ready foods.
In 1996, per capita incomes for the region ranged from a high of $16,200 in Qatar to a low of $6,900 in Oman. Since there are no income taxes or other deductions, these figures reflect the net income of the population.
With their economies heavily dependent on oil revenues, the GCC-5 countries can experience erratic income. Because of the expected downward pricing trend of oil in 1997, the overall gross domestic product (GDP) is likely to decrease.
This trend, however, is not expected to effect sales of the booming consumer-ready products market. High per capita incomes, growing populations, liberal trade policies and limited local agricultural production will continue to provide an annual 5- to 10-percent market growth rate, with the U.S. share expected to grow 10 percent yearly.
Retail Food Sector Evolving
Emerging consumer cooperative societies in the U.A.E. and Kuwait, with member ownership and government subsidies, are having a profound effect on the Gulf's retail food trade. They have stimulated intense competition with other retailers, forcing upgrades with state-of-the-art supermarkets and expansion to other Gulf and neighboring countries.
The U.A.E., which buys 65 percent of U.S. consumer-ready food exports to the GCC-5, will continue to offer the best market opportunities in the region for U.S. food products. Of the five countries, count on the U.A.E. as a best customer with its large population, free-trade zone and excellent transportation and seaport facilities that ensure its status as the Gulf's transshipment hub (re-exporting 60-70 percent).
Best bets for U.S. suppliers in the expanding Gulf market: convenience foods, juices, snack foods, beef and poultry, honey, condiments, sauces, ice cream, processed cheese, almonds, fresh apples and pears, frozen and processed fruits and vegetables and confectionery products.
Also, expansion of the local food processing industry will continue to provide good market opportunities for sweeteners and beverage bases, edible oils, ingredients and pulses.
Trade Restrictions Minimal
Import duties, if any, range from 4 to 5 percent. Kuwait and the U.A.E. have no import duties on food products. There are plans to standardize import duties throughout the GCC (GCC-5 plus Saudi Arabia), after Oman and Saudi Arabia join the other GCC countries in accession to the World Trade Organization (WTO).
Short shelf-life restrictions and Arabic labeling requirements are perhaps the greatest non-tariff barriers to U.S. food exports. In an effort to harmonize import regulations, the GCC reduced the shelf-life duration for several food products. Particularly hard-hit from the U.S. perspective were table eggs, cookies and baby food.
But the harmonization of GCC food regulations should eventually benefit U.S. suppliers. Customs clearance in one country would suffice for other GCC countries, including Saudi Arabia, which is already a $550-million export market for U.S. agricultural products.
Import Regulations
GCC-5 standards require that labels on all prepackaged food products be printed in Arabic. Each GCC-5 country has a variation of this requirement. For example, the U.A.E. does not require Arabic labeling. Other GCC-5 countries permit Arabic stickers in lieu of Arabic labels, except for Bahrain. Dual language labels such as Arabic/English are permitted and actually recommended, as many local consumers speak English.
But products packed in wholesale containers and those used in further processing or sale to institutional end users are exempt from the Arabic language requirement.
Each label must contain the product name, brand name, country of origin, manufacturer/packer, exporter, importer or distributor (depending on importing country), net weight, ingredients and additives, if any. All measurements must be in metric units. Labels may not contain pictures or recipes including pork or alcohol.
Production and expiry dates must be engraved, embossed, printed or stamped directly onto the original label or primary packaging at the time of production, using indelible ink.
The GCC-5 allow food additives, colorings and preservatives approved by the Codex Alimentarius. (The Codex Alimentarius is a United Nations organization that establishes international food standards to protect consumer health and facilitate fair trade practices.) Fats and oils must be identified by source. Imported meat (beef and poultry) and meat products must be accompanied by a health certificate from the country of origin and a Halal (Islamic slaughter) certificate issued by an approved Islamic center in the country of origin. Some certificates require further official action.
No irradiated products can be imported into most of the GCC-5 countries. Pork and pork products and alcoholic beverages face restrictions in the region.
U.S. exporters are encouraged to work with their importer to take advantage of pre-export clearance. This can ensure in advance that labels and ingredients meet all local requirements.
Consumer Demographics
Wealthy nationals and expatriates make up most of the market for U.S. food products. Of the 7.7 million people living in the region, about 45 percent are nationals. About 5 percent of the remaining population are expatriates from Western countries.
About 60 percent of the national population is less than 20 years old. The increasing numbers of youth, working women and single people drive the rapidly expanding market for convenience and health foods, particularly for prepared meals, desserts and frozen pastries.
Restaurants and Fast-Food Outlets
Trade contacts estimate that non-traditional fast-food sales will increase as much as 25 percent over the next several years. This is good news for U.S. franchises that now command a 90-percent market share of the casual and fast-food dining establishments in the GCC-5.
Also benefiting from the increased dining out: U.S. suppliers of poultry, beef, processed cheese and other dairy products, Tex-Mex foods and condiments.
More than 20 five-star hotels are in the planning stages in the Gulf region; they'll add to an already impressive number of upscale restaurants. Most of the new construction will be in Dubai.
Each of these hotels will have several restaurants that serve U.S. foods because of their high quality and safety. In greatest demand: Chilled/frozen beef, ice cream, fresh produce, breakfast cereals, bakery ingredients, frozen vegetables (particularly french fries and corn-on-the-cob) and condiments. Also, a niche market for fresh U.S. lobster and crab has developed.
Retail Sector
A few large companies tend to dominate trade in each country. They are wholesalers and distributors, operating their own warehouses, refrigerated storage facilities and truck fleets.
The larger retail food companies directly import many of their products and also distribute to competing retail companies.
The local retail sector consists of modern supermarket chains, member-owned consumer cooperatives and small neighborhood grocery stores called cold stores.
Between 15 and 20 major supermarket chains account for between 40 and 50 percent of the total retail food sales with a wide variety of Western foods. Many have their own delicatessens and bakeries and offer additional services such as dry cleaning, video rentals, cash machines and even fast-food takeout.
Neighborhood cold stores abound; they account for about 35 percent of total retail food sales and stock according to neighborhood demands. Many carry a surprising array of U.S. food products, sometimes at prices below those of major supermarkets.
Who Is the Competition?
The United States has about a 6-percent market share of total GCC-5 agricultural imports and a 7-percent share of consumer-ready imports. U.S. competitors for:
The only locally produced foods that might provide competition would be fruit juices, retail-packed edible oils, carbonated beverages, processed meats, cookies and crackers.
Many competitor countries maintain trade offices in the Gulf, mostly in Dubai. The U.S. Agricultural Trade Office (ATO) in Dubai provides marketing support such as reporting, trade servicing and visitor assistance and participates in promotional activities such as the biannual Gulf Food Show, which will be held in Dubai on January 31- February 3, 1999.
Tips for Exporters
Gulf importers are genuinely interested in exploring trade opportunities with U.S. suppliers. Some suggestions for preparation:
Porter is director and Kizirian and Taha are agricultural specialists at the FAS Dubai Agricultural Trade Office. Tel.: (011-971-4)314-063; Fax: (011-971-4)314-998. E-mail: atodubai@emirates.net.ae
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