Halal is no longer a minority taste. Arabian Business reports on the intensifying $2 trillion fight to win the hearts and wallets of Muslim consumers.
It’s a scene replicated in Middle Eastern supermarkets every day; bustling abaya-clad women browse tables piled high with flatbreads, jarred olives, and rows of spices. Arabic signs flag cut-price halal meat, while mango juice, non-alcoholic wine and sweetmeats jostle for shelf space.
This store, however, is Wal-Mart; the world’s largest retailer and a brand as all-American as the Super Bowl. It’s based in Dearborn, Michigan, a town that is home to half a million Arabs; and its existence is one of the clearest signs yet that the Muslim consumer is on the rise.
From Malaysia to Manchester, the global halal industry has exploded. Spanning from food, to fashion, to finance and pharmaceuticals, buying Muslim is big business and multinationals globally are slugging it out for a taste.
At stake is what consultancy group AT Kearney estimates to be a $2 trillion market, underpinned by one of the fastest growing religions in the world.
In the past decade, Asia’s one billion-strong Muslim population has grown by 12 percent. In Europe, the gain is closer to 140 percent, rapidly outpacing the rest of the population. More than 30 million Muslims live in the Russian Federation.
In Britain, Muslims are the quickest-growing segment of the middle class, chalking up an average of 3.4 children against the national average of 1.9.
With mass, comes spending power. Globally, the halal food market is pegged at $560bn, with Islamic finance worth a hefty $400bn and growing at 15 percent a year. America’s eight million Muslims spend a reported $170bn annually while, across the Atlantic, those in the UK fork out $31.5bn. In France, the halal food market alone is worth $7.1bn a year. Little wonder, then, that some of the world’s biggest brands are going all-out to win over these big-spending consumers.
“Slowly but surely, halal is going mainstream,” says Lisa Mabe of Hewar Social Communications, a US firm that specialises in the Muslim market. “Brands are waking up to the fact that this is a whole other consumer segment, at a time when other markets are tapped out.”
Duncan James, a consulting director at The Brand Union, Dubai, describes it as a numbers game. “One in every 3.3 people on the planet is Muslim so there is sheer demography there. People are seeing that and investing,” he says.
Leading the dash is Nestlé, the Swiss retailing juggernaut, which has been churning out halal versions of its brands — including Kit Kat, Smarties and Nescafé — since the 1980s. Today, it’s the industry’s biggest food manufacturer, with around 18 percent of its 456 factories certified halal.
Payback has come in the form of profit; today, halal brands account for around five percent of Nestlé's annual sales, at a hefty $3.4bn.
Over at Al Islami, one of the Gulf’s largest halal food firms, GCC sales were up 23 percent last year to AED500m ($136.1m). Al Islami, whose tagline is ‘I take pride in my cooking and my faith’, began selling into the UK and France in 2007. It plans to launch its fast food franchise, Al Farooj Fresh, there later this year, going head-to-head with giants such as KFC and McDonald’s.
“The West has had a lack of large halal suppliers like us so we see an opportunity,” says Saleh Abdullah Lootah, managing director, Al Islami. “Next on our radar is the US, in the next two to three years. Halal touches every sector now; pharmaceuticals, cosmetics, baby food.”
He’s not wrong. Novartis, the Swiss drug maker, has churned out a halal meningitis vaccine, all the better to target Muslim pilgrims with, in line with Saudi Arabia's travel guidelines.
Darhim Dali Hashim, CEO of Malaysia’s International Halal Integrity Alliance, has watched a glut of mainstream players scrabble to gain halal certification.
“Certifiers can’t keep up,” he says. “Companies are going a lot more downstream than meat, and into cosmetics and clothes. I’ve even heard of industrial products such as chemicals.”
Retail is the most hotly fought-over sector, he adds.
“Supermarkets such as Carrefour, Tesco and Asda have all been certified halal in the last three years.”
This turf war has sparked a rise in demand for Sharia-compliant logistics, to ferry food and other goods to supermarkets. MSCI, a Malaysian-based global shipping company, launched a halal delivery service with four dedicated containers in 2004. Today, it has eleven vessels and the bulk of its business is Islamic.
New Zealand, Brazil and Australia have all carved out niches as large-scale suppliers of halal meat, despite being non-Islamic countries. The Netherlands, home to Europe’s biggest port, has purpose-built halal warehouses to ensure goods don’t come into contact with pork or alcohol. Now China, the relentless export machine, is muscling in on the game.
“Who’s not trading with China?” shrugs Muhammad Saliaman, commercial manager for MSCI’s Middle East office. “Malaysia has always been the traditional export country to the Middle East [but] China is significantly growing its manufacture of halal products.”
In 2009, China became the second biggest exporter to the UAE market, comprising about 10.7 percent, or $13bn, of the Arab state’s total imports.
The credit crunch has made financial losers of many industries, but halal has proved a winner. Its boom is, in part, thanks to the oil-rich Middle East’s top position in the New World order. Some 18 percent of the world’s 1.6 billion Muslims live in the Arab world and — thanks to its petrodollars — many are richer than ever.
According to Hedge Fund Research, the Middle East has roughly $4 trillion worth of capital sloshing around. To put it in context, that’s more than three times the size of China’s foreign exchange reserves. By any measure, these are consumers with clout.
For firms feeling the pinch in their domestic sectors, then, the Muslim market is a free-for-all. Some 70 percent of the Arab world is under 25-years-old, while two-thirds of the Muslim community in Europe and North America is under 30. Multinationals, says Mohamed El Fatatry, CEO of the social media site Muxlim.com, can scent a young, wealthy and untapped market.
“The financial crisis has forced brands to go and find new sectors. They need to create revenue streams through non-traditional customers,” he says.
For its part, Muxlim.com lures more than ten million people each year, across 190 countries.
“The Muslim community is a very young demographic; they’re online and tech-savvy and if you want to reach them, you have to shine online."
Nokia has been one of the first firms to learn this lesson. For the last three years, the Finnish phone-maker has offered a range of phone apps to its Muslim consumers; from mapping out their closest mosque, to tracking prayer times around the globe. Apple offers the aptly named iPray, which pinpoints Makkah from anywhere in the world.
I’mHalal, meanwhile, is the brainchild of Reza Sardeha, a Kuwaiti-Iranian based in The Netherlands. Billed as the first Islamic search engine, it flags content that might be considered haraam (un-Islamic) by Muslims. The site, which has just celebrated its first birthday, turns over a brisk 300,000 searches a day, and counts the US as its second largest traffic source after Pakistan.
By Sardeha’s measure, most Western firms are missing a trick.
“The concept of halal goes beyond food and drink,” he observes.
“I eat halal, I think halal, I live halal. Many industries like the internet, clothes… could expand their target group significantly by launching halal services aimed for Muslims.”
Faith-based buying is nothing new. But, say industry insiders, the behaviour behind its recent and rapid growth is.
Traditionally, halal meant avoiding pork and alcohol and buying specially slaughtered meat. Now, young, rich Muslims are hungry for more mainstream pleasures, tying up consumerism and piety in a drive that goes beyond halal meat and headscarves.
In France, a push for high-end cuisine (led by consumers known as the beurgeois; a combination of bourgeois and beur; slang for a French person of North African descent) has led to Islamic-approved foie gras and alcohol-free ‘champagne’ being stocked in supermarkets.
“My generation, we were worried to show our religion openly. My son and my daughters, it doesn’t even cross their minds. They want halal products and they are absolutely happy to ask for them. This generation is not afraid,” says Fazal Bahardeen, CEO of Crescent Rating, which ranks hotels worldwide by their ‘halal-friendliness’. “Muslims now are modern, they’re halal-conscious and they’re not prepared to settle.”
In part, this sharpening sense of identity is a backlash against the creeping Islamophobia that has followed in the wake of the 9/11 and 7/7 terrorist attacks. Faced with burqa bans in France and minaret threats in Switzerland, Muslims are fighting back by flexing their economic muscle.
“Young Muslims are, for want of a better phrase, ‘more Muslim’ than their parents,” says the US-based Mabe. “They do feel as though wearing their religion on their sleeve is a way to say; ‘Hey, this is who we are and this is what Islam stands for.’”
The glittering array of new products and services also reflects a primary shift underway in the Muslim world. The reason why goods such as cosmetics and frozen halal food are becoming more popular is because Muslim women globally are becoming more affluent and independent.
In Saudi Arabia, the Arab world’s wealthiest state, women are sitting on a cash pile of $11.9bn, according to Al Masah Capital. In the neighbouring UAE, women wield the highest disposable income in the Gulf at around $2,450.
It’s a figure set to rise to $2,990 by 2014, according to Euromonitor International.
The savviest advertisers are waking up to this potential. In 2008, Bank Saudi Fransi launched a television campaign featuring hijab-clad women in a variety of settings alongside slogans such as “You have your dreams. You have your ambitions”.
Dubai Islamic Bank has ten branches of Johara, a dedicated women-only bank while Emirates Islamic Bank, an Islamic offspring of Emirates NBD, also has a ladies-only banking service in Al Reem Ladies Banking.
Halal cosmetics are one of the fastest growing arms of the industry, worth around $560m annually, according to consultants Epoc Messe Frankfurt. The biggest demand is coming from the UAE, the second wealthiest Gulf state where $150m worth of halal products pass through every year. Consumption of cosmetics and perfumes in the Arab country ranks among the highest per capita worldwide. Average cosmetics spend is around $334 per head.
Muslim consumers are radically reshaping the face of mass consumerism. But what’s the payoff for big business? For a start, a widespread, loyal consumer base that is prepared to pay over the odds for a product that meets its needs — prized qualities indeed in the fickle retail industry. Then there is the appeal of a consumer that registers a better-than-average response to ad dollars.
“[Firms] are basically getting customers at a lower cost, with a higher ROI,” Muxlim.com’s El Fatatry says matter-of-factly. “When you target a non-traditional consumer, you get more bang for your buck because it’s a less competitive market. It’s easier to shine.”
Mabe concurs: “A lot of the time, all a firm needs to do is acknowledge Muslims — period — in its marketing communications. It’s really that simple.”
Simple it may be, but some firms have stumbled. When the popular French burger chain, Quick, said last week it would boost its halal-only outlets from eight to 22 to meet demand, it was hit from all sides.
Right-wing politicians accused it of selling out its mainstream clientele, while Islamic groups branded the gesture pointless, unless its restaurants become halal through-and-through.
Quick’s general manager, however, was unrepentant. “We are not a philanthropy [organistaion] or a charity,” Jacques-Edouard Charret told a news conference. “Our ambition is to develop Quick’s turnover and create jobs. And it’s going well.”
Not all companies are as brave. Many are wary of alienating their customers or being labelled a ‘Muslim brand’. It’s for this reason that Crescent Rating only grades hotels for their ‘halal-friendliness’, rather than for being directly ‘halal’, says CEO Bahardeen.
“Hoteliers prefer the label. There is so much negativity about Muslims, so for a firm to openly say it wants to target this market, it can be a problem.”
In some cases, companies make the move to halal, only to discover the demand they’d banked on simply isn’t there. In the UK city of Birmingham, Domino’s Pizza chain ditched its halal-only menu after just eighteen months, when sales of the pork-free pizzas plummeted.
Add in the costs of making the switch – halal meat, for example, must be hand-slaughtered, a labour-intensive act that rules out giant-scale mechanized operations – and the murky divide over what is classed as halal, and it’s easy to see why some companies choose not to dabble. Get it wrong, and the cost is high.
Nike, for example, failed miserably with the launch of its 1996 line of Air basketball shoes. The brand logo, a flame-like graphic of the word ‘air’, was deemed by the Council on American-Islamic Relations to look too similar to the Arabic script of ‘Allah’.
In a high-noon standoff, Nike was forced to recall 38,000 shoes, scrap the logo and make its apologies in the form of sports facilities for Islamic schools and free Nike products to Muslim charities.
In the pursuit of the Muslim consumer, a second race is being run for the title of global halal hub. Malaysia has taken an early lead, staking its claim as a leader in halal standards and in creating products that are religious, but also part of a new global Muslim lifestyle.
In Pakistan, its rising middle class has bolstered the halal trade, creating Islamic products that are ripe for export into poorly served countries.
This momentum is helping to carve out opportunities for smaller Islamic firms, keen to make their mark on foreign markets. Singapore-based El Hajj skincare, for example, which develops body products for pilgrims during the Hajj and Umrah, is searching for a business partner to foster its expansion into the Gulf region.
“When we started seven years ago the market was very small; now we’re registering double digit growth,” says managing director Mohammed Hamudi.
Ambitious advocates of halal see the sector growing far beyond its anchor product of food to include housing, cars and furniture, all built in accordance with Islamic principles.
“I have the ‘third F’ theory, which says after food and finance, the third ‘F’ in terms of where the halal market is going is fun,” says Muxlim.com’s El Fatatry.
“So lifestyle products, a lot of halal tourism outlets, entertainment. We’ll see a surge as companies around the world realise where this consumption could go.”
Some halal advocates even see the market moving into the mainstream, following in the path of organic products by wooing eco-conscious consumers. A few Islamic firms already say a portion of their consumers are non-Muslim.
Hani Lashin, the general manager at Al Jawhara Group of Hotels & Apartments, a UAE-based chain of Sharia-compliant hotels, estimates that 30-40 percent of his hotel’s guests are non-Muslims, drawn to the hotel because of its family-friendly atmosphere and its close links to UAE culture.
Saaf Pure Skincare sells halal, vegetarian and vegan-certified products, and its founder, Dr Hussain-Gambles, says she is careful not to target its marketing exclusively to Muslims.
“Depending on which markets are Muslim, the regional distributor will focus the marketing activity on the halal aspect. If it’s in Europe, we push the organic, vegetarian and vegan aspect,” she says. It’s all about how you spin it, agrees The Brand Union’s James.
“Even though it is halal do you communicate that to everyone? Maybe to the Western consumer it’s an ethical product whereas to the Islamic consumer it’s Sharia-compliant.”
Crossover appeal aside, the Muslim market is on track for phenomenal growth, and what’s good for the industry is good for the economy, says Mabe of Hewar Social Communications.
“Brands are constantly looking for new ways to move the needle on their business and to enhance their bottom line,” she says.
“Millions of Muslim consumers are waiting to see which brands will be smart enough to embrace them. So really, my question is, can any brand afford not to engage with them?”
Halal: a fragmented market
In its simplest form, halal refers to a product that complies with Islamic law and the teachings of the Qur'an. Traditionally, this stamp has been restricted to meat, but the concept is now applied to a whole host of items; from travel to finance, food and cosmetics.
While certifying cosmetics halal, for example, an independent body will look at the source of the raw ingredients and how and where it is manufactured.
It is a consumer myth that anything that is not certified as halal is automatically assumed haraam. Halal certification is simply a reassurance from an independent third party. “Halal is a default meaning everything is halal except for these haraam items,” says Darhim Dali Hashim, the CEO of the Malaysia-based International Halal Integrity Alliance.
Halal food standards, however, vary significantly depending on the country of origin, simply because there are no global halal standards. While all certifiers agree that a halal animal must have its throat cut using a swift, deep incision which severs the neck, the jugular vein and the carotid arteries on both sides but leaves the spinal cord intact, that is usually where the similarities end.
The process of stunning an animal prior to its death comprises one of the biggest debates among halal certifiers. Other significant differences include mechanical slaughter and whether or not gelatin is halal. Brunei, which does not allow stunning, gelatin or mechanical slaughtering, is one of the strictest countries in the world when it comes to halal meat. Halal bodies in Malaysia, Indonesia and the Gulf states, which do allow stunning, are less strict.
The issue of stunning is a heated one among the Muslim community. When the supermarket chain Ahold began selling halal food in Holland it faced a backlash from animal rights activists for its use of non-stunned meat. It was quickly forced to switch certifiers to a body that permitted stunning, but then came under fire from conservative Muslims.
Several countries, including Malaysia, are working to streamline regulations but the industry remains deeply fragmented. In the UK, for example, there are over 20 different certifying bodies and in France there are more than 50, all of which have various rules and regulations. The GCC Standardisation Organisation (GSO), which oversees the halal process in the six Gulf states, has achieved a degree of homogeny.
“The GSO covers all six [countries] but that’s only in theory. In practice they do vary even within the emirates. Even from Dubai to Sharjah there may be some issues,” says Hashim.
In 2007, Turkey announced plans to develop a set of unified halal standards, which it hoped to spin out across all Islamic countries. To date, however, a global standard remains a pipedream.
“Turkey acts like a gateway to Europe so there maybe neighbouring countries such as Turkmenistan or Azerbaijan who comply with that standard but I don’t see the stronger countries like Egypt, Saudi or Pakistan going with it as I’m sure they feel that they have the best standard,” observes Hashim. “The initiatives are there to try and harmonise [the industry]. There may be a stage where there will be three standards based on the largest trading blocs.”