Each in GCC eats a tonne of food every year

For investors that are hungry for growth, there’s not better sector than the GCC Food Industry, which is turning out to be an eat-all-you-can buffet for investors.

Investment specialists Alpen Capital have just published their GCC Food Industry Report, and it says we all eat a lot.

Which is a good thing for the food industry’s bottom line – but I’m wondering what it’s doing to our waist and bottom lines!

Per capita food consumption for the GCC region currently stands at 957.3kg in 2013, and is forecasted to reach 971.2kg by 2015 and 983kg 2017. Considering the statistics would have included children, women and men, it’ll be safe to assume that, on an average, every adult would be consuming more than a tonne of food per year.

The report estimates that the food consumption in the region will expand at a CAGR of 3.1 per cent over 2012-17, reaching 49.1 million metric tonnes by the end of 2017. This increase is attributed to the rapidly growing population in the GCC, increase in foreign tourists as well as the rising income levels of the region.

“The GCC food sector is likely to experience healthy growth in the medium to long term,” says Sameena Ahmad, Managing Director, Alpen Capital. “Various factors such as rising affluence levels, growing population, urbanisation and proliferation of organised retail have fuelled demand for food products in the region,” she says.

So, what exactly are we eating? Being an affluent region, we will be consuming more of meat and fruits and perhaps less of cereals, although cereals will remain our staple, analysts at Alpen Capital say in their report.

“During 2012-2017, even though we expect cereals to maintain their dominant position among food categories, due to rising affluence, consumption of protein-rich and high-value products such as a meat and fruits is expected to increase,” the report states.

“During 2012-2017, we expect meat consumption to increase at the fastest pace at a CAGR of 3.9 per cent, followed by fruits, vegetables, milk, and cereals at a CAGR of 3.7, 3.4, 3.1 and 2.5 per cent, respectively. Others (pulses, sugar, oil, fish, eggs and potatoes) is expected to grow at a CAGR of 4 per cent during the period,” says the report.

Who is eating more than others?

From the consumption standpoint, Saudi Arabia would continue to lead the region’s food sector accounting for close to 60 per cent of the total consumption, notes the report. However, owing to rising population, and increase in tourist arrivals, food consumption growth in Qatar is expected to outpace that of other GCC countries, it adds. Qatar will be followed by UAE and Oman in food consumption growth.

Are we eating any healthier than before? Not really, but that might change in the future.

While there is a growing awareness and drive about healthy living, obesity rates are high and diabetes is a concern for the region, Alpen Capital analysts note. As a consequence, demand for health food which is high on energy and nutrition is expected to grow. Demand for healthy alternatives such as meal replacement products and low-fat dairy is expected to increase. There is also a rise in demand for organic foods which has been driven largely through the increasing use of agrochemicals and other harmful pesticides, together with growing consumer awareness.

Can we at east benefit from our own growing consumption? You bet.

“From an investor perspective, the outlook for the food sector continues to be positive. With favourable demographic factors and stronger balance sheet positions, GCC food companies potentially offer attractive investment propositions for long-term investors,” says Mahboob Murshed, Managing Director, Alpen Capital.

“We also see significant M&A activities taking place to satisfy investor appetite which are not just restricted to GCC businesses. There are a considerable number of companies and financial investors beyond the region who are also seizing the opportunities available,” he adds.

“The industry also continues to benefit from increasing government support, foreign investments and private sector participation. Although high dependence on imports poses a challenge for the economy, it creates several opportunities for private sector companies to position themselves and take advantage of the growing demand,” adds Ahmad.

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