Strategies for Halal Producers

The Halal market is on the move. The coming year will see specialist Halal trade shows in Malaysia, Indonesia, Dubai, France and the UK, showing a five-fold increase from 2004. With everyone from supermarket giants and fast-food chains through to small and medium-sized players wanting to get their share of the pie, what strategies can give Halal industry stakeholders a leading edge?

Know the Market
There is no substitute for research. Breaking into a new market is somewhat akin to throwing a ball through the window of a moving car; you have to be able to judge the speed and direction of the car in order to hit the target. Markets are not stationary objects, they are a continual state of change and fluctuation, and research clearly shows that the companies that have the greatest success with new products and markets are those that make a concerted effort to gain in-depth knowledge of relevant market trends. You have to understand the market.

As an example, let us take a look at the Western European Halal market where 15 million Muslims command a collective annual spending power of an estimated 25 billion Euros on food alone. The Halal sector is a subsector of the overall food and beverage market, so the underlying food retailing trends will have an impact on how the Halal food sector develops.

In both the EU and the UK, food retailing has changed significantly in the past 25 years. In France, the neighbourhood convenience stores have seen their market share drop from over 30% in 1980 to under 5% in 2004, while the giant hypermarkets have moved from 30% to over 50% in the same period. And while the regular supermarkets share has remained at around 31% during this time, the new ‘hard discount’ stores have seen an 80% growth in the last decade to take a 10% share in 2004, posing a serious threat to everyone.

Clearly, any moves made by the major retail giants LeClerc, Carrefour and Auchan, who between them control 75% of the market, will have far-reaching repercussions. Threatened by the rapid growth rates of the discount retailers like Lidl, Leader Price and Aldi, the market leaders are looking for ways to keep their noses in front. With their growth rates slipping from 2.8% in 2000 to just .8% in 2004, they are by necessity on the lookout for new markets.

Against this background trend of market share moving from the convenience store to the supermarket, and then on to the discount store, we can turn to look at the trends in the Halal sub-sector.

The Halal Opportunity
Currently, the small Muslim-owned Halal food stores still command around 80% of the Halal market. In addition to Halal meat, these neighbourhood shops also sell a variety of related products that fall loosely into the ‘ethnic food’ category, such as dates, olives, speciality breads, spices and condiments etc, as well as other standard convenience foods.

The retails giants, having had success in recent years with the ethnic food sector, has recognised that Halal overlaps and encompasses the ethnic sector in many respects, and represents an new homogenous market sector with increasing spending power.

The Muslim consumer who shops at the local Halal shop is still included in the 97% of the overall population who shop in the super and hyper markets, and therefore represents a significant opportunity for the giants to a) take custom from the Halal shops and b) offset losses to the discount stores.

The supermarket giants (like most of the rest of the world) have up until very recently only thought in terms of meat when they think about Halal; chilled and frozen beef, chicken, lamb or mutton. What they are fast realising is that the Halal sector includes an ever-widening spectrum of other foods – convenience foods, ready-cooked meals, sweet and savoury snacks, drinks – as well as non-food items such as toiletries, cosmetics, health products and even lifestyle electronics.

Not only does the Halal food sector include a dazzling array of ethnic and cultural cuisines from around the world, there is also a growing demand for indigenous European dishes to be available as Halal options for an increasingly Europeanised new generation of middle-income Muslim consumers with sophisticated tastes.

Retail giants to not like to take chances. Judging by the recent decisions by Carrefour and Auchan in Europe, and Tesco in the UK to take advantage of the growing demand for Halal food, we can be fairly certain that these moves are likely to represent long-term trends.

And as trends are indicative of speed and direction, they can give producers a good shot at getting their ball through the car window.

Right Product, Right Package, Right Shelf
A recent study on the future of successful innovation in the food and beverage industry concluded that

• success will be linked to in-depth market knowledge and consumer understanding;
• established health and safety criteria will provide less room for innovation;
• successful innovation will require investment in both competence and technologies;
• companies that fail to innovate, due to short term pressure, are likely to suffer long term losses;
• companies that make use of retailers issues and problems to their own advantage are most likely to succeed.

Our look at the European market clearly indicates that there are opportunities for producers of Halal products. So which products? The old adage about not taking coals to Newcastle, despite being an old cliché, is often overlooked and worth bearing in mind. You will have a hard time selling gateaux to the French.

Meat products are extremely difficult to sell into the European market; and as we have seen, the retail giants are now looking beyond the narrow band of Halal meat and are sourcing other Halal products.

A 300sqm Halal section in a typical supermarket will comprise around 350 different non-meat products, representing a significant opportunity for Halal producers to establish a foothold in what is likely to be a long term developing market.

It is probably fair to say that a product with a recognised Halal certificate and logo will be easier to position in the European markets than one without; and if it is not yet true today, it is highly likely to be true next week.

An expert from the world’s leading Halal manufacturer recently commented to me at MIHAS, ‘You need a good product, a Halal certificate, and the rest is all marketing.’ And in this respect packaging is of paramount importance.

The package is the meeting place of product and marketing. From the consumer’s immediate point of view, your package IS your product. What does it say to the consumer? What emotional response will it generate? Trust? Confidence? Desire? Or indifference, mistrust, poor quality?

People read packages, and it is more true now than ten years ago. The average European consumer is increasingly knowledgeable; many are semi-expert in the fields of nutrition and health maintenance.

An indication of this is shown by the US health food pioneer Wholefoods. This one-store start-up in the 70’s is now a 3.7 billion dollar company with 26,000 employees. Wholefoods recorded an average growth over the last 5 years of 19%, compared with the 2.5% of the general US grocery market, very similar to the European figures.

Your packaging is the opportunity to tell your story. In that few seconds, you have the chance to catch the passing eyes and draw them into the world of your product, your company, your philosophy, your values.

The success of the Fair Trade movement in the UK and elsewhere demonstrates that ethical and moral values are strong inducements to purchase, and if the product is good enough, to re-purchase and create every manufacturers dream, brand loyalty.

The Halal brand represents extremely powerful values that are common to 25% of the world in particular, and almost all of mankind in general. And yet, so few Halal producers take advantage of this to state what Halal really represents.

Brand Values
Halal is a massively under-utilised global brand. The possibilities of promoting products on the strength of their Halal qualities and values have hardly begun to be explored. It is a near certainty that the companies that take fullest advantage of this possibility will be successful brand leaders in the Halal markets of tomorrow.

However, as with any other set of brand values, they have to be more than skin-deep. The top branding gurus all say that to succeed, you have to live the brand, and this is even more true for Halal. It represents the deeply held core values of obedience to the Creator for close to 2 billion people. It is not just a logo.

The product has to be good; the branding has to represent this, along with the associated brand values; and the brand values have to permeate through the company, be it big or small. To succeed, the values also have to be the values of the company, of the directors and the employees, right the way down.

With their constant emphasis on customer service, the brand manager at Starbucks recounted his understandable delight upon hearing one of the lowly baristas saying, ‘We are not in the coffee business serving people; we are in the people business serving coffee.’ When he heard that, he knew that the core brand values were getting all the way through the corporation to the place where they ultimately count; the mundane front line that deals with the all-important customer.

Convinced Is Convincing
The ‘Food For Thought’ report also cited ambivalent or inconsistent levels of commitment by top management as one of the main reasons for failure. You will not be able to transmit the core values to your staff if you are not convinced yourself. If you do not live it, then why should they? If they do not get the message, then neither will the product, and nor will the customer.

The values have to get from top management through to the staff, into the product itself and into the package design and marketing material, in order to position the product on the right shelf to catch the customer’s roving eye…amid all the noise and competition.

For the food producers in Malaysia, the developing Halal market represents a unique opportunity to take advantage of a convergence of favourable circumstances to establish a strong market position.

It is like surfing. If you are on your board at the right time and place, you can catch the wave and have a long ride in to the shore. But you have to be in the water, ready and waiting before the wave comes; you won’t catch it if you are watching from the beach.