by Abdalhamid David Evans
Source: Global Arab Network
Feb 1 2010
Markets, like everything else, go in cycles, and we are all of us well aware that we are going through a period of market contraction. But contraction and expansion go together, they are one of the pairs of opposites upon which Allah has created existence, and we can be confident that contraction in any given time is the preparation, the source even, for an expansion to follow.
For the past five years, the market for Halal products and services has been emerging as a potent market force. With close to 2 billion Muslims making up the foundation, and with Halal products increasingly used by the general consuming public all over the world, the Halal market represents the appearance of a new economic paradigm that is on the tipping point of becoming a global movement.
There is a convergence of common interest – religious, political, economic, social – that is now clustering around the concept of Halal, and all that it implies, and these interests show all the signs of building into a perfect storm.
Blowing in from S E Asia
People have been working with Halal for many years, and in many places. But, for the purpose of this article, this particular storm started brewing in South East Asia. Although Halal food has been produced and sold all over the world for a long time, it is only in recent years that Halal emerged as a defining market parameter.
Malaysia, with a multi-cultural society, has a well-established Halal certification system, and under the previous Prime Minister, Tun Abdullah Badawi, Halal was identified as a potential engine of growth for both the domestic and export economy.
This was perhaps the first time that Halal was seen as an economic driver, and this lead to new initiatives such as MIHAS, (a Halal-only trade expo), the World Halal Forum (an industry-led forum) and The Halal Journal, (a business magazine for the Halal-sector stake-holders). These new initiatives, with varying degrees of success re-defined the way that Halal products were thought about, especially by government officers and industry players.
Because all of these projects had an international perspective, they attracted a strong response from like-minded individuals and companies keen to see the development of this new market. And so the international network strengthened, new ideas and initiatives emerged, and the notion of a Halal Industry began to take shape.
And although one may comment that Halal food has been around for 1400 years, it became clear that with the globalisation of trade and industry, with the new high-tech developments in manufacturing and processing of foods, and the complex world of ingredients, flavourings and additives, a new perspective of Halal and how it was to be applied to the 21st century needed to be developed.
The Birth of a Global Halal Industry
If we allow ourselves to recognise that Halal is now an industry, we can identify five key elements that form the dynamics of this market:
•Standards and Certification,
Halal as a political platform
Governments, especially in South East Asia, recognise that Halal has the potential to be a real engine of growth for their local economies. Impacting agriculture, processing, manufacturing, food service, restaurants, travel and hospitality, retail, import and export, logistics, standards development, training, media and events and more, Halal, once you encourage it to take root and grow, has the potential to have a real impact on the domestic economy.
Malaysia, Indonesia, Thailand, Brunei, Singapore and the Philippines all began a variety of government-led initiatives to use Halal as an effective engine of growth for the domestic economies, and in the case of Thailand, to build a Halal food export industry to supply overseas markets.
With varying degrees of success, and almost regardless of the actual outcomes, these initiatives have positioned Halal as a significant economic driver, and as a result, also as a political platform with a potentially unifying character. After all, in many countries, the Halal food is produced for the Muslims, but not by the Muslims. As one astute commentator noted, “We kill it and eat it…and in between everyone else is getting rich.” So in a country like Malaysia, the promotion of Halal food affects all cultural and racial groups; the Chinese who manufacture, the Malays who eat it and the Indians who run restaurants.
Certainly countries such as Australia and Brazil have built entire food industries based on supplying Halal food to the Middle Eastern markets. The Australian red meat export industry is a powerful machine that brings together the farmers, processors, government health and safety bodies as well as marketing agencies, and in collaboration with the local Muslim certification agencies, have made Halal Aussie beef a common sight in supermarkets all over the Muslim world.
And in an age when the corporations are often as powerful as the nation states, the Big Guns of manufacturing, retail and restaurant chains have all been on the ball when it comes to making the transition to Halal wherever the market demands it.
Leaving the politics of the free market aside for the moment, we can see that food giants such as Nestlé, by pioneering the development of international Halal manufacturing protocols, and with around 20% of their facilities worldwide now Halal only, have helped to establish Halal in the international arena.
The big retailers and restaurant chains, recognising that Muslims are as susceptible to marketing slogans and the taste of fast food as everyone else, have also been quick to jump on the bandwagon. You can have a Big Mac in Makkah. You can buy Halal in Tesco and Carrefour. It is too late to say that the big corporations don’t belong in the Halal market, they are already way ahead of us, waiting for us to show up hungry and ready to purchase something. The issue for us, as Muslims, is rather, “Are we just going to be passive consumers in the biggest new market paradigm of the century?”
And the Halal market is the only arena that I am aware of where the manufacturers are saying to the Muslims, “Just tell us what to do and we will do it.”
Are You Certified?
The issue of who sets the standards, who does the audit and issues the certificate is, with all due respect to those concerned, something of a can of Halal (or not!) worms. Generally speaking, in South East Asia, in their multi-cultural societies, this is a relatively well-developed government-run operation. In the Muslim majority countries, Halal is much lower profile, and Halal is by and large assumed more than it is enforced or regulated.
In the Muslim minority countries, and this is perhaps what concerns us all the most, it is something of a free-for-all where anyone can set themselves up as a Halal certifier and in addition to conducting the audit (to their own standard) and issuing the certificate, some are also acting as sales agents charging commission on sales.
Clearly the one-man certification agency auditing and certifying a multi-million dollar operation is an imbalanced and unsustainable situation. It is also totally out of synch with the practised norms of manufacturing procedures all over the world. A clear separation between standards, accreditation, audit and certificate issuance is the manufacturing industry norm, and in order for Halal to live up to its full potential, these protocols will sooner or later be practiced in the Halal industry also.
And not just for ethical reasons. The dynamics of the market have a role to play here. The large third-party auditing firms like Intertek and SGS have got their bottom-line radars focused on the Halal market, where the revenue from auditing is highly attractive and is now clearly in their cross-hairs. It is now only a question of time before those Big Guns join the other Big Guns in the Halal sector.
And then there is the question of Finance…
Halal products and Islamic Finance are the two major Shariah-compliant industries that, combined, are already in the trillion dollar bracket, and growing. The curious fact is that there is currently very limited relations between these two, with very few Islamic Banks doing anything to promote the Halal market, and very few Halal producers even thinking about their sources of finance.
The inevitable convergence of common interests here is likely to lead to a new collaboration between these industries. One hopes that the current emphasis on ethical investment and business practices will filter through on both sides, and that a new Halal market economy will emerge in which our finance and food will both come from pure sources.
In this respect, the current recession opens a new door to examine the core principles of the Shariah requirements for trade and commerce. With entire economies collapsing through the false foundations of the ‘riba-upon-riba’ credit schemes upon which they were built, and when the proposed cure for the disease is to create more zero-worth credit to bail out the very institutions that are the root of the disease (and indebting the entire population in the process), it is sometimes hard to be optimistic.
But we know Allah’s promise that with hardship comes ease, and that where there is a disease, the cure is close by, and we have every reason to see the current scenario as a turning point.
Halal Consumer Power
Without the Halal consumer, there is no market, no industry, no political platform. In the farm-to-fork equation, the fork is king.
Halal consumers are, at this point in time, actually in an unusually influential position. Manufacturers are desperate to find new markets, new trends and new customers, some magic bullet that will save them from the recession.
As the Halal market grows, the demographic of the Muslim consumer comes increasingly into focus. Unnoticed for decades, this New Halal Consumer suddenly opens up a new horizon of possibilities. At around 25% of the world’s population, we are probably the largest single niche market in existence. It is no surprise that A T Kearney, in their paper “Addressing the Muslim Market – can you afford not to?” conclude that ‘since Muslims are the fastest growing consumer segment in the world, any company that is not considering how to serve them is missing a significant opportunity…with many of the world’s largest consumer segments reaching a saturation point, the Muslim consumer is fast becoming a new outlet to build a base for future growth.’
Written in 2007, this comment is even truer today than it was at the time of writing. And they are not alone in this view. Advertising giants JWT reached a similar conclusion in their review of the US Muslims consumers, noting that no one was really targeting this consumer group, 75% of whom feel that they are ignored by marketing campaigns. And this in the country that gave us the expression ‘the customer is always right!’
In today’s economic and political climate, it seems inevitable that the marketing directors will quickly recognise that there is a huge untapped reservoir under their noses. At a recent Halal Industry conference in Chicago, we were interested to note the presence of Big Brand multinational manufacturers of soft drinks, chewing gum, health supplements, army rations, vaccines, infant formula, ingredients and more…all of whom were already targeting Halal as a new market segment.
And here comes the Perfect Storm
And this is where the Perfect Storm comes in. Given the easier political climate in the US now, given the economic hardship that is demanding new marketing strategies, given the dawning awareness of the spending power of the world’s 1.6 billion Muslims, given that Halal products can be consumed by everyone, and given the global momentum that is gathering around this topic…yes, I think it is fair to say that there is a Perfect Halal Storm on the horizon.
A convergence of common interest is a powerful phenomenon. When groups of any kind and size voluntarily come together for a shared common goal – any goal, they can become an unstoppable force.
How much more so when the common goal is pleasing to Allah, subhanahu wa ta’ala, and His Messenger, salallahu alayhi wa salam.
Abdalhamid David Evans is Managing Director and Senior Analyst at Imarat Consultants, a niche consulting firm specializing in Halal market intelligence and analysis. News updates on the Halal market can be found on www.halalfocus.com