Global Dairy eBrief Exclusives
Market Situation Report: Middle East/North Africa Region
by Nina Bakht Halal
The 17 countries that make up what we call the "MENA" region have differing sets of issues and drivers. Here’s an update on what’s happening in some of the top dairy-importing markets.
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Middle East/North Africa (MENA) dairy import demand has come back very strong in 2018. In the first half of the year, imports of milk powder, cheese, butterfat and whey were up 17 percent from the prior year, and U.S. volume was up 75 percent.
Here’s an update in the key nations of Egypt, Saudi Arabia and United Arab Emirates.
EGYPT
General market update: Egypt’s economy is gradually improving. Annual economic growth is reported to have accelerated and government revenues were up in January–March, the latest period for which government data is available, to reach a multi-year high. At the same time, much of the population is still dealing with high inflation. Hikes in piped drinking water, electricity, and other utilities are noticeable, some as much as 50 percent.
To help alleviate financial pressure on consumers, the government approved an increase in public-sector salaries and pensions, which came into effect on July 1. The economy is expected to continue to improve, with strong investment and improving regulatory environment. Major infrastructure projects include the expansion of the Suez Canal, construction of a new administrative capital to the east of Cairo and building of the world's largest coal-fired power plant. Ramping up the tourism sector, a major pillar in Egypt’s economy, is witnessing major developments.
To help alleviate financial pressure on consumers, the government approved an increase in public-sector salaries and pensions, which came into effect on July 1. The economy is expected to continue to improve, with strong investment and improving regulatory environment. Major infrastructure projects include the expansion of the Suez Canal, construction of a new administrative capital to the east of Cairo and building of the world's largest coal-fired power plant. Ramping up the tourism sector, a major pillar in Egypt’s economy, is witnessing major developments.
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The food segment in Egypt is thriving, driven mainly by the dairy, confectionery and bakery sectors.Among the key developments in the dairy sector:
- The Ministry of Agriculture and Land Reclamation developed a national plan to boost dairy productivity in Egypt. The aim is to double Egypt’s milk production by the end of 2018. The plan includes genetic improvement of cows and buffalos, establishing farms specialized in foreign breeds of high-yielding dairy cows and reducing milk waste by expanding the milk collection centers.
- Juhayna Food Industries, the leading Egyptian dairy, yoghurt, and juice manufacturer, recently launched a new lactose-free milk under the Juhayna brand. The product, sold in 1-liter cartons and distributed throughout Egypt, is made with fresh milk, with all milk nutrients. The company also reported total consolidated revenue in the first quarter of $90 million, up 21 percent year-over-year. The highest contributors to the top line were the dairy and yogurt segments, representing 51 percent and 20 percent of revenues, respectively. Moreover, Egypt’s pioneering dairy producer is focusing on exports to Africa’s major markets.
- Kraft Heinz approved Soudanco/Riyada as a producer and packer starting December 2017. It will start producing and packing spreadable cheese and mozzarella once paperwork is finalized.
- Egyptian Minister of Trade Tarek Kabil and his Russian counterpart Denis Manturov signed a deal to improve Egypt’s infrastructure in dairy, foods and pastries in cooperation with several Russian companies. This is a three-year-deal, with a possible extension, intended to increase cooperation in the field of manufacturing as well.
In addition, local snack giants are seeking ways to expand their operations and geographical presence, further competing with international brands. For instance:
- Lesaffre (a global key player in yeasts and fermentation) opened a new Baking Center in Egypt.
- Edita will expand into Saudi Arabia and UAE. The company also began exporting packaged snacks to Morocco after Ramadan. Edita plans to spend $10 million in its Egypt operations this year.
- Tetra Pak aims to boost Egypt sales in 2018 following improved inflation conditions.
SMP: Manufacturers are importing SMP from the United States, Germany, Sweden, Ireland and Belgium on a consistent basis. Egypt SMP imports in the first half of the year were up 56 percent. Major European brands include Hanza (Germany), Fresh Li (Belgium), Arla Foods (Sweden), and Irish Dairy Board (Ireland). Prices are in the range of $1,700-$1,800/ton.
However, some manufacturing companies have shifted from European to Canadian SMP due to the lower prices presented to them (around $200 less per ton).
WMP: Imported mainly from New Zealand (Fonterra, Synlait and other brands), at prices in the range of $3,150/ton.
Fat-filled milk powders: Several companies are blending fat-filled milk powders in their own facilities, mixing New Zealand milk powders with vegetable fat. This FFMP is exported to other African markets; FFMP is not widely used within Egypt.
MPC 70%: MPC is mainly sourced from the United States for production of white cheeses. Major manufacturing companies previously sourced MPC 70% from Europe, specifically France. However, U.S. product is less expensive (about $500/ton less) and U.S. quality is considered superior.
Still, German and French MPC 70% are still widely available in the Egyptian market.
Butter: Prices are relatively high from all sources, but most volume is coming from New Zealand (Fonterra brand) because Egyptians still prefer the lighter color of New Zealand butter. In addition, some companies are seeking Indian butter and butteroil, which are further distributed to Egyptian dairy manufacturing plants. The 82%-fat butter, in 20kg blocks, is mainly use in the production of processed cheese, yogurts and combined milk.
However, some manufacturing companies have shifted from European to Canadian SMP due to the lower prices presented to them (around $200 less per ton).
WMP: Imported mainly from New Zealand (Fonterra, Synlait and other brands), at prices in the range of $3,150/ton.
Fat-filled milk powders: Several companies are blending fat-filled milk powders in their own facilities, mixing New Zealand milk powders with vegetable fat. This FFMP is exported to other African markets; FFMP is not widely used within Egypt.
MPC 70%: MPC is mainly sourced from the United States for production of white cheeses. Major manufacturing companies previously sourced MPC 70% from Europe, specifically France. However, U.S. product is less expensive (about $500/ton less) and U.S. quality is considered superior.
Still, German and French MPC 70% are still widely available in the Egyptian market.
Butter: Prices are relatively high from all sources, but most volume is coming from New Zealand (Fonterra brand) because Egyptians still prefer the lighter color of New Zealand butter. In addition, some companies are seeking Indian butter and butteroil, which are further distributed to Egyptian dairy manufacturing plants. The 82%-fat butter, in 20kg blocks, is mainly use in the production of processed cheese, yogurts and combined milk.
Cheese: White cheese, mozzarella and Roomy cheese are popular in Egypt. Medium-sized factories producing Roomy and mozzarella use fresh milk, while white cheese (such as Istanbully and balady cheese), is made with affordably priced SMP purchased from importers and local distributors. Sources of SMP are always different and processors do not depend only on one source.
Imported U.S. and European cheese blocks (20-25 kg) are further cut into 5 kg or 2.5 kg blocks. These are distributed to both the retail (Lulu Hypermarket, Spinneys, Panda and Carrefour) and foodservice sector. Cheese varieties imported from the United States and Europe include colby, colby jack, cheddar, mozzarella, parmesan, emmental, gouda, edam, provolone, jalapeno jack and swiss cheese. Egyptian factories are now seeking to upgrade their operations, facilities and machines to be able to grate, shred or cut the cheese into cubes, or convert the cheese into smaller retail portions.
Cheese for the foodservice sector is linked to the tourist business. Tourism in Hurghada and Sharam El Sheikh is thriving, especially during summer. However, four- and five-star hotels in these tourist regions of Egypt primarily offer locally processed cheese and white types of cheeses (Nabulsi, Akkawi, feta, and double cream) during breakfast buffets and on lunch and dinner menu. Prices of French and Italian specialty cheeses, such as parmesan, edam, brie, gouda and even blue cheeses, are outside their budget scope.
Whey powders: U.S. whey permeate is generally priced more than $150/ton above comparable permeate from the Europe. Although U.S. whey permeate is considered to be high quality, Egyptian importers say their customers and clients prefer not to pay this premium, because whey permeate is not a main ingredient in their formulations.
Major whey permeate import sources include Poland, Italy and the Netherlands, for distribution to flavor and meat processing plants, as well as to some confectionery processors inside Egypt. EU prices are around $750/ton.
SAUDI ARABIA
General market update: The Saudi Arabian economy is forecast to grow by 1.6 percent this year due to a moderate recovery in oil production levels and marginally higher public spending. Growth is projected to rise to over 2 percent in 2019.
Saudi Arabia’s decision to shelve the proposed IPO of state-owned oil giant Aramco, billed as the biggest share sale ever, is a major blow to the credibility of Crown Prince Mohammed bin Salman. The high-profile IPO of 5 percent of Saudi Aramco was a centerpiece of the Crown Prince’s plan to diversify the kingdom’s economy beyond oil by raising $100 billion for investment in other sectors.
The 32-year-old ruler also promised that listing Saudi Aramco on international stock markets would help create a culture of openness in the secretive kingdom and make it more appealing to foreign investors. The decision to shelve the IPO raises doubts about the management of the process as well as the broader reform agenda, sapping the momentum generated by Prince Mohammed’s dramatic 2030 Vision announcement that helped propel him to power.
Both the international and domestic legs of the IPO are postponed indefinitely. However, energy minister Khalid al-Falih says the government remains committed to conducting the IPO at an unspecified date in the future.
Food sector: Foodservice outlets are further expanding in the Middle East, especially in Saudi Arabia. Alshaya International Trading Co., one of the leading international retail franchise operators, launched a new dining destination in Riyadh, Sidra, bringing together a host of international food brands.
The organic food segment is gathering pace in Saudi Arabia as well, with over half of Saudi consumers purchasing organic foods more than once a month. The trend is bolstered by consumers’ growing interest in health and wellness. In addition, shoppers are increasingly looking for more natural foods, reporting that animal welfare and environmental concerns are considered attractive product attributes that influence their purchasing decisions.
Local dairy activities point to growth and development. For instance:
- Almarai announced progress in securing 100 percent of its alfalfa requirements outside the Kingdom of Saudi Arabia to support its dairy business. However, recent price hikes are leading to some consumer boycotts of Almarai products.
- SADAFCO posted $69 million net profit during the 12-month period ending March 31. The company acquired a 76-percent stake in Poland’s Mlekoma and its subsidiaries Foodexo and Mlekoma Dairy at an enterprise value of $32 million. The Mlekoma group owns two manufacturing plants in Poland and is engaged in production and trade of dairy products. It sells both within Europe but also through distributors in Africa, the Middle East and Far East.
- UAE’s Al Rawabi Dairy is currently assessing the feasibility of an operations base in Saudi Arabia.
- The ongoing boycott against Centrale Danone, a subsidiary of the giant French dairy company Danone, is taking its toll, with Almarai emerging as an attractive future investor in the company. The Saudi company is planning to open a dairy factory in Morocco by 2019.
- A total of 128 tons of Italian Parmigiano Reggiano was shipped to Saudi Arabia, indicating that the market can absorb a good quantity of specialty and artisanal cheeses. The challenge is positioning the product in the market at a profitable price.
SMP: New Zealand (Fonterra brand) is the leader in the market. Importers and manufacturing companies prefer this product because of its high quality and good prices. German SMP also is attractive, at prices around $1,860/ton. In addition, SMP from France and Switzerland are available at about $1,750/ton. Imported SMP goes to the dairy, bakery and confectionery sectors.
MPC 70%: U.S. MPC 70% is preferred for its high quality in production of white salty cheeses (such as Akkawi cheese). Local dairy manufacturing plants are working on new applications to be released in the next months. These new product formulations will include MPC 70%. Trials are being conducted on Turkish labneh (similar to yogurt) and cheese filling for croissants, which will be further distributed to Riyadh and Dammam bakeries.
Fat-filled milk powders: Fat-filled milk powder is gaining popularity in the Saudi market as an attractive low-cost ingredient. It is mainly imported from Europe (Czech Republic and Ireland) and is used primarily by bakeries, and on a smaller scale in some dairy manufacturing plants for production of cream and ice cream. Importers and manufacturing plants in Saudi Arabia expect demand for FFMP to continue to increase due to its affordability.
Butter: Imported butter is used primarily in the bakery sector, in manufacture of breads, bread crumbs, croissants, pies and pastries. Most butter imports come in the form of 25kg blocks from New Zealand or Australia. European suppliers provide some butter as well. U.S. suppliers are generally absent from the market due to lack of availability.
Cheese: U.S. cheddar and monterey jack are used in the foodservice market, mainly American concepts in fast-food menu items. Steak House, a well-known steak restaurant throughout the Kingdom, recently released a new menu item, the “Cheese Burger,” which is made with U.S. cheddar.
Demand for European cheeses, mainly French cheese, is increasing. French dairy companies are promoting to consumers and importers, and discounting prices by 15-20 percent. Mozzarella is imported mainly from Europe and, to a lesser extent, from the United States.
Whey powders: Sweet whey powders, imported from Turkey and Poland, are widely available at a price of $780/ton.
Butter: Imported butter is used primarily in the bakery sector, in manufacture of breads, bread crumbs, croissants, pies and pastries. Most butter imports come in the form of 25kg blocks from New Zealand or Australia. European suppliers provide some butter as well. U.S. suppliers are generally absent from the market due to lack of availability.
Cheese: U.S. cheddar and monterey jack are used in the foodservice market, mainly American concepts in fast-food menu items. Steak House, a well-known steak restaurant throughout the Kingdom, recently released a new menu item, the “Cheese Burger,” which is made with U.S. cheddar.
Demand for European cheeses, mainly French cheese, is increasing. French dairy companies are promoting to consumers and importers, and discounting prices by 15-20 percent. Mozzarella is imported mainly from Europe and, to a lesser extent, from the United States.
Whey powders: Sweet whey powders, imported from Turkey and Poland, are widely available at a price of $780/ton.
UNITED ARAB EMIRATES (UAE)
General market update: Despite the growing trend of protein-enriched foods, 80 percent of UAE residents claim that they do not reach the daily intake of protein. It was also found that in the UAE, most residents tend to rely on meat as a source of protein, not knowing that natural dairy, legumes and grains also are protein-rich foods.
International manufacturing facilities are targeting the UAE to expand their footprint in the region. Nestlé launched a new range of flavors of its celebrated chocolate brand KitKat for the Middle East market, which are produced in Dubai.
As for local manufacturing facilities, the Emirates Industry for Camel Milk and Products, also known as ‘Camelicious,’ developed a baby formula from camel’s milk. The camel milk formula was designed for babies and infants between the ages of one and three years old, and is expected to hit the shelves of the UAE in the next few months, before going global.
A total of 394 tons of Italian Parmigiano Reggiano was shipped to the UAE. The UAE is the region’s biggest and one of the fastest-growing importers of hard Italian cheese. Foodservice outlets are expanding rapidly, with new menu innovations, presenting opportunities for various cheese applications. A new Pickled Jalapeño cheeseburger was released by Shake Shack only in the UAE.
Work continues in collaboration with FAS and USDA to understand implications of new product registrations requirements recently announced for the UAE.
Sweet whey powders, whey permeate, SMP and MPC 70%: The UAE imports dairy ingredients from a variety of sources, including the United States, France, Belgium, Ireland, the Netherlands, Oceania and India. Imported dairy ingredients are mostly used in confectionery and dairy production. Some also are re-exported, to Egypt, Pakistan, Bangladesh and Southeast Asia.
Sweet whey powders and demineralized whey is mainly imported from Turkey, Poland, Ukraine, Latvia and Lithuania, at prices in the range of $680-$870/ton. Importers are being offered Canadian sweet whey powders for a very competitive price of $700/ton. U.S. sweet whey powder is being offered at around $950/ton.
Butter: Butter in 25kg blocks is imported from Europe at about $7,450/ton. Product also is coming in from Ukraine and Belarus as low as $4,050/ton to satisfy the needs of more price-sensitive customers.
Fat-filled milk powders: Dubai-based trading company Silver Line Gate (known locally as Delta) is importing fat filled milk powder to the UAE. Silver Line Gate usually imports milk powders from different continents and packs it locally under different brands. As for FFMP specifically, it is currently coming from Ireland, and packed under the Silva brand for both local and export customers. Others are importing FFMP as well, mainly for confectionery applications.
Cheese: Cheddar, mozzarella, blue cheese, colby, pepper jack and monterey jack are imported from the United States, Europe and from elsewhere in the Middle East, in different formats and packaging sizes for the retail and foodservice sector (mainly restaurants, hotels and catering facilities), with a price range of $4,200-$5,700/ton.
There’s a growing interest in cottage cheese, and in 20 kg blocks of cheddar and monterey jack, which are intended for further cutting in the UAE to smaller blocks and distribution to the foodservice and retail sector.
Nina Bakht Halal is USDEC’s Middle East/North Africa representative. Global Dairy eBrief Exclusives are confidential, password-protected articles for USDEC members only.
International manufacturing facilities are targeting the UAE to expand their footprint in the region. Nestlé launched a new range of flavors of its celebrated chocolate brand KitKat for the Middle East market, which are produced in Dubai.
As for local manufacturing facilities, the Emirates Industry for Camel Milk and Products, also known as ‘Camelicious,’ developed a baby formula from camel’s milk. The camel milk formula was designed for babies and infants between the ages of one and three years old, and is expected to hit the shelves of the UAE in the next few months, before going global.
A total of 394 tons of Italian Parmigiano Reggiano was shipped to the UAE. The UAE is the region’s biggest and one of the fastest-growing importers of hard Italian cheese. Foodservice outlets are expanding rapidly, with new menu innovations, presenting opportunities for various cheese applications. A new Pickled Jalapeño cheeseburger was released by Shake Shack only in the UAE.
Work continues in collaboration with FAS and USDA to understand implications of new product registrations requirements recently announced for the UAE.
Sweet whey powders, whey permeate, SMP and MPC 70%: The UAE imports dairy ingredients from a variety of sources, including the United States, France, Belgium, Ireland, the Netherlands, Oceania and India. Imported dairy ingredients are mostly used in confectionery and dairy production. Some also are re-exported, to Egypt, Pakistan, Bangladesh and Southeast Asia.
Sweet whey powders and demineralized whey is mainly imported from Turkey, Poland, Ukraine, Latvia and Lithuania, at prices in the range of $680-$870/ton. Importers are being offered Canadian sweet whey powders for a very competitive price of $700/ton. U.S. sweet whey powder is being offered at around $950/ton.
Butter: Butter in 25kg blocks is imported from Europe at about $7,450/ton. Product also is coming in from Ukraine and Belarus as low as $4,050/ton to satisfy the needs of more price-sensitive customers.
Fat-filled milk powders: Dubai-based trading company Silver Line Gate (known locally as Delta) is importing fat filled milk powder to the UAE. Silver Line Gate usually imports milk powders from different continents and packs it locally under different brands. As for FFMP specifically, it is currently coming from Ireland, and packed under the Silva brand for both local and export customers. Others are importing FFMP as well, mainly for confectionery applications.
Cheese: Cheddar, mozzarella, blue cheese, colby, pepper jack and monterey jack are imported from the United States, Europe and from elsewhere in the Middle East, in different formats and packaging sizes for the retail and foodservice sector (mainly restaurants, hotels and catering facilities), with a price range of $4,200-$5,700/ton.
There’s a growing interest in cottage cheese, and in 20 kg blocks of cheddar and monterey jack, which are intended for further cutting in the UAE to smaller blocks and distribution to the foodservice and retail sector.
Nina Bakht Halal is USDEC’s Middle East/North Africa representative. Global Dairy eBrief Exclusives are confidential, password-protected articles for USDEC members only.
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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. The password-protected article above is intended for USDEC member organizations only and should not be shared with anyone outside your organization.