International Halal market has huge potential - but not for Canadian producers

International Halal market has huge potential - but not for Canadian producers
by Madeleine Baerg - 5, 2010

Given that almost one quarter of the world's population is Muslim, there is huge international demand for halal certified meat (meat that has been slaughtered and blessed according to Islamic Law in order to make it permissible for consumption by Muslims). In fact, the global halal meat market is currently worth a whopping $150B.

And, the halal export market opportunity is increasing quickly for many major beef producing countries. Islam is the fastest growing religion in the world, resulting in more and more halal-abiding mouths to feed. Further, because many Muslim countries are increasingly densely populated, they are becoming ever more dependent on imported food products, including halal certified beef.

Yet, back in September 2009, Canadian Beef Exporters Federation (CBEF) members voted not to spend additional funds pursuing international halal markets. Though CBEF plans on continuing its current small scale promotional efforts in the Middle East, CBEF's Vice President of International Programs, Chenier La Salle, says gaining significant, high volume traction in the retail sector in halal export markets is not a realistic goal in the short term.

If such a large and growing market exists, doesn't it make sense for CBEF to fight for market share?

If we're talking about large scale, industry marketing efforts, CBEF's short answer is no, as they've calculated that the potential returns don't justify the input costs. While CBEF does spend some dollars on limited Middle Eastern marketing opportunities (such as annual participation in the Gulf Food Show) as well as smaller scale partner marketing initiatives, CBEF members believe spending money over and above current efforts would generate little additional halal market gain.

As evidence, La Salle points south. The US produces a similar product to Canada in ten times the quantity. "They have a lot more political clout, marketing clout and marketing dollars." Yet, he says, "their success in the Middle East is very limited." In fact, he points out that a large percentage of beef the US does export to the Middle East is actually used to feed their own overseas troops.

Why is North American beef - or more specifically to us, our Canadian beef - not competitive?

La Salle explains that producers need to understand where Canadian beef fits into the global beef spectrum. "There are lots of suppliers out there. Though [Canadian consumers] don't realize it, on the world stage we have an expensive and high quality product." Therefore, we can only sell to markets that are willing to pay a premium for our product.

Consider, for example, a predominantly Muslim country like Indonesia. Like most densely populated Muslim countries, its people are poor. At best, they might afford lower end beef imported from Brazil or even Indian water buffalo, while their hospitality sector targeted at rich foreign tourists might offer niche opportunities for limited high quality imports. Canada's beef is essentially a luxury product that is priced out of reach for the vast majority of people in poorer countries.

Halal markets that can afford our product cannot buy in the quantities necessary to make them viable markets for large export efforts. Not only are many of these markets small to begin with, those that can afford our beef may not choose it: beef is not the meat of choice for many of the wealthiest halal consumers, and some that do choose beef prefer to purchase live animals (mostly from Australia) in order to have ultra-fresh meat.

Some smaller scale Canadian processors and exporters are focusing on niche Middle Eastern markets, such as high-end resorts and fine dining restaurants. However, these processors must be willing to work in small volumes and react nimbly as changing opportunities present themselves. While small companies may be willing and able to turn on a dime as small volume markets demand, the Cargill and XL sized processors need markets that are reliable and offer long term and large volume potential. They also need a predictable regulatory landscape. As La Salle explains, "The complexity of halal certification and processing, whose requirements can differ widely between Muslim countries, have made mass production for these markets a rather intimidating challenge."

Christoph Weder, a rancher in Northern Alberta and co-founder of Prairie Halal - a company that exports high end beef product to the Middle East - says, "We don't go in [to Middle Eastern markets] with the attitude of feeding the masses. We go in to sell a luxury product to high end clients. We have to be very aggressive and agile to gain market share."

While he admits it's "definitely a more difficult way to sell," he thinks selling in small quantities to high-end consumers is worthwhile for his company because "the margins are better."

The margins may indeed be better in these small scale markets; however, CBEF's membership has decided to spend the bulk of the organization's marketing dollars on large tonnage opportunities in lucrative markets. "We could come in with major campaigns if there was potential for tens of thousands of tons of exports," says La Salle, "but as it stands right now, the [halal] market opportunity doesn't justify much more than we're doing."