Positive growth and outlook for the GCC food sector

Overall food consumption too will grow at a faster pace than it did over the last three years, owing to the rising incomes as well as fast growing population in the region. It is expected to expand at a CAGR of 4.6% over 2011–15 to 51.5 million metric tonnes in 2015 (as against an estimated CAGR of 4.1% over 2007-10).

The GCC Food Industry Outlook also expects the consumption of high-value and protein-rich products (meat), fruits, vegetables and other food products (sugar, oil, fish/eggs) to grow at a higher rate compared to that of staples such as cereals. This development is in line with global trends. While per capita cereal consumption is expected to decrease progressively across all countries; cereals will remain the leading segment, by volume. The consumption of milk is also likely to increase considering that the per capita consumption is low in the region compared to that in developed countries.

Key growth drivers

Strong GDP growth and increasing per capita income are expected to drive food consumption in the GCC countries. The region’s GDP is expected to reach USD1.8 trillion in 2015 from USD1.1 trillion in 2010. The per capita income is likely to increase to USD38,100 from USD26,700 during this period. The GCC population is also expected to expand from 40.6 million in 2010 to 45.6 million in 2015, contributing to the growth in food consumption. Per capita consumption in the region is low compared to that in developed economies and is to increase at relatively higher rate.

Industry trends and opportunities

In line with the global trend, the GCC region is also going to see a changing consumption pattern - a shift to a protein-rich diet that includes meat and dairy products from a carbohydrate-based one that consists of staple food items such as cereals. Increasing urbanization, hectic lifestyles, growing popularity of large food retail formats and presence of multinational food companies in the GCC region are expected to increase the popularity of high-value processed foods among consumers, driving their consumption. While there is a growing awareness and drive about healthy living, obesity rates are high and diabetes is a concern for the region. As a consequence, demand for health food (also known as the functional food segment) which is high on energy and nutrition is expected to grow.

Challenges

The high dependence on imports for the region is going to continue and this makes the issue of food security very important for the region. The Governments need to take necessary steps to secure imports for the growing population. Due to high dependence on imports the region is also susceptible to external food price shocks. The increase in food prices in the past few years has put significant inflationary pressure on the GCC economies with consumer prices reaching double digits during 2008–09.

However, the growing food market and the supply-demand mismatch provide many opportunities to local players. Overall, the outlook for the GCC Food industry remains positive and continues to be an attractive investment for long-term investors.