GCC Functional Food Market

Functional Food Market: GCC Industry Analysis and Opportunity Assessment 2014 - 2020

GCC Functional Food Market: The revenue generated from the sales of functional foods in GCC countries is estimated to be around US$ 4,895 Mn in 2014, and is projected to expand at a CAGR of 10.9% during the forecast period 2015-2020.

Considering the trends in a span of the past few years, the Middle East nutraceuticals industry is expected to grow at a significant rate. The market for dietary supplements is attaining relative maturity as compared to the market for functional food, thus there is a high potential for the growth of functional food products, which can be attributed to healthcare spending and self-medication.

These factors have resulted in a shift in consumer preference towards the consumption of essential nutrients to remain healthy and avoid medical expenses. The market for GCC functional food is expected to witness high demand in specific countries, such as the UAE and Saudi Arabia, whereas, other countries of GCC are likely to witness low demand.

Functional foods are nutritive foods that deliver additional benefits over and above their basic nutritional value. Functional food encompasses a large variety of food items, such as omega 3 fatty acid-fortified eggs, stanol/sterol-enriched low-fat spreads, probiotic yogurt and protein breads, which can be consumed daily.

GCC functional food market demand is directly related to the awareness and the disposable income of the population. The rising disposable income of the Middle East population due to increased employment rates and the economic independence of women has led to an overall development in the lives of the people, which is supporting the growth of the GCC functional food market.

Moreover, government spending on healthcare for the prevention of diseases arising from obesity and cholesterol has increased, and governments are heavily promoting the consumption of fortified or functional food. Governments of Saudi Arabia, Kuwait and the UAE conduct various awareness programs and exhibitions to promote the consumption of healthy foods among consumers in the region, which is adding to the growth of GCC functional food market.

GCC functional food market: Hypermarkets & A-class stores are currently gaining traction in the GCC functional food market followed by other modern retail formats

Currently, the sales of functional foods through hypermarkets & A-class stores is estimated to account for the highest value share, and they are expected to remain dominant during the forecast period. The retail industry is growing at a significant rate in the GCC countries, which has enabled manufacturers to increase the availability of functional food products in hypermarkets & A-class chains, and this is promoting the growth of this segment of the GCC functional food market.

On the other hand, consumer co-operatives and grocery stores are losing their popularity in the GCC functional food market across the region. Overall, these distribution channels are contributed a 28.3% share of the GCC functional food market in 2012, however they are expected to lose their share in 2020 due to higher consumer preference towards hypermarkets & A-class stores.

In-store promotions of functional food products, which include allocating budgets for generating awareness through branding, sampling or other means, tie-ups with school canteens and creating a whole new category of health foods in retail stores in co-operation with manufacturers & retailers, are among the key differentiating strategies adopted by manufacturers in the GCC functional food market. This is generating awareness and driving the overall demand for functional food in the GCC countries.

For instance, modern food retailers, such as Lulu Hypermarket, Al Maya Group, Al-Othaim Supermarket, Carrefour, Spinneys and Choithrams, are expanding in Saudi Arabia and promoting functional food.

With a rise in per-capita GDP in the Middle East region, there has been a significant increase in the purchasing power of the people. The middle-class population in the region is experiencing rapid growth, which has helped transform the country's consumer market.

Healthcare spending in GCC is expected to increase at a double-digit growth rate between 2015 and 2020 due to the rising concerns about health and wellness. Thus, rising purchasing power, coupled with increasing awareness about the consumption of fortified food products among consumers, is expected to support the growth of GCC functional food market.

For instance, the demand for yogurt/frozen yogurt in convenient packs and fresh fruity frozen yogurt has witnessed double-digit growth since 2011.

Beautiful Brands Internationals (BBI) FreshBerry Frozen Yogurt Cafe in Makkah, Saudi Arabia, recorded sales of US$ 11,000 on its opening day.

GCC functional food market dynamics: Consumers are getting influenced by the availability of new product variants majorly in the cereals, flakes & confectioneriesas well as dairy product segments

On the basis of product type, the GCC functional food market is segmented into functional dairy products, cereals, flakes & confectioneries, iodised salt, fortified eggs, fish & meat and oil & margarine. In 2014, the cereals, flakes & confectioneries segment in the GCC functional food market accounted for almost 41% market share in terms of value.

The region has witnessed an increase in the number of gymnasiums, diet centres and fitness centres, which promote the consumption of health food such as oat flakes, cereal bars and energy drinks. The robust growth of these segments can also be attributed to the novel varieties available in the functional food market in addition to customer preference for convenience foods such as yogurt, cornflakes and cereal bars.

In the region, 80% of the cereal products are being imported. Cereal bars, fortified pasta, noodles and corn/oat flakes are among the functional food products in demand in GCC countries. Al Ghurair Foods, one of the country’s leading fortified or functional food product producers, set up an oat plant in UAE in February 2011 after realising that there was higher demand for oat products in the functional food market.

Wheat flour fortification takes place in most of the GCC countries, however, the level of fortification is far less than that in the OECD countries, which indicates that there is scope for value addition in the fortification of cereals in GCC countries.

Functional dairy products is projected to be the second-largest segment in the GCC functional food market by 2020, and the fastest-growing one across the functional food category in GCC. It is projected to increase at a CAGR of 12.8% between 2015 and 2020.

In the GCC region, most dairy products are manufactured domestically, however, the fortification trend is only limited to milk and yogurt. Some companies voluntarily fortify cheese with calcium and vitamins. Probiotic yogurts still dominate the dairy segment in the functional food market.

Dubai-based Al Rawabi Dairy Co. LLC plans to launch a range of healthy fruit yogurt products after launching omega-3 fresh milk in September 2013. IFFCO launched its premium range of Noor Lite Mayonnaise in April 2014 with olive oil for health-conscious consumers and labneh to cater to the preferences of consumers for functional food products in the Middle East.

Dairy products score the highest in terms of profit margins in the functional food market. However, cold storage facilities and refrigerated vans are required to import and transport dairy products, which makes these products expensive for consumers seeking dairy-based functional food. However, the oil & margarine segment is expected to witness favourable growth rates in the GCC functional food market as the awareness about omega 3-fortified oil is rising in the region.

GCC functional food market regional analysis: In terms of value sales, Kuwait & Qatar are among the most lucrative markets for functional food as compared to other GCC countries

Regionally, the GCC functional food market is segmented into Saudi Arabia, United Arab Emirates (UAE), Oman, Kuwait, Qatar and Bahrain. Sales revenue of functional food in KSA has been estimated to account for the largest market value share of 48.3% in 2014. The country is expected to represent an incremental opportunity of US$ 1,879.10 Mn between 2014 and 2020. Sales revenue of the functional food market in the UAE was valued at US$ 1,390.5 Mn in 2014, and is expected to increase by 1.8X over the forecast period.

Kuwait & Qatar are among the most lucrative markets for functional food products as compared to other GCC countries. Qatar is one of the most robust economies in the rest of the GCC, which can directly affect the per-capita food expenditure of consumers. Qatar has the highest per-capita income in GCC, which is likely to drive the buying pattern of premium health food, thus fuelling the growth of the functional food market in the country.

Newer varieties of functional foods with convenient packaging has started attracting health-conscious people in rest of the GCC countries, thus transforming this niche sector into mainstream. Kuwait is expected to be the most lucrative market for functional food with a CAGR of 12.2% over the forecast period.

Regional players are relatively highly concentrated in the GCC functional food market as compared to local functional food manufacturers

Detailed profiles of companies are also included in the GCC functional food market report to evaluate their strategies, key product offerings and recent developments.

Some of the key players profiled in the  GCC functional food market study include Almarai, Danone, AL Rawaby Dairy, Pinar, Anchor, Kraft Foods, IFFCO, Nestlé, Oman Flour Mills Company, The Modern Flour Mills and Macaroni Factories, Al Ghurair Foods, Alyasra Foods, AL Jazira Poultry Farm LLC NEZO,ZAD INDUSTRIES & TRADING CO and Savola Foods. To increase the sales revenue, majority of players are focusing on generating awareness and launching new functional food product variants in the region.

Key Segment

On the basis of product type

  • functional dairy products
  • cereals, flakes & confectioneries
  • iodised salt
  • fortified eggs
  • fish & meat
  • oil & margarine

By distribution channel

  • hypermarkets/A-class stores
  • self-service & B-class chains
  • consumer cooperative & groceries
  • others

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GCC Functional Food Market