Food Logistics in the GCC: Recent Trends, Implications and Opportunities PRESENTED BY: Gopal R Global Vice President Transportation & Logistics Practice Oct 24, 2018 1
Agenda Implications for Emerging Current Why is Food Food Supply Chain Growth Approaches and Logistics & Logistics Opportunities Developments Important in the GCC region? 2
Why is Food Logistics important in the GCC region? 3
Economy: GDP Growth Trends Revival in oil market is expected to support economic diversification initiatives GDP Trends, GCC, 2010-2025 Growth drivers 3.0 4.0 3.8 2010-2017 3.5 2.5 4.9 • Economic Diversification 1000.0 • Infrastructure Investment 900.0 800.0 • Priority on Logistics 2010-2017 : 3.8 % GCC 700.0 • Connectivity with Asia and GDP ($ Billion) 2017-2025: 2.5 ~ 3 % Economic Growth Trends 600.0 Europe - Strategic position 500.0 400.0 connecting Europe, Asia, and 300.0 Africa and trade 200.0 • Improving Oil Prices 100.0 • Government Focus on 0.0 Bahrain Oman Kuwait Qatar United Arab Saudi Arabia Digitalization Emirates 2010 2017 2025 Note: Numbers in the boxes indicate GDP growth rates for 2010-2017 Source: IMF, Analysis by Frost & Sullivan 4
Demography: Structure of Population Shifts in demographic composition likely to alter food consumption pattern Age Structure of Population, GCC, 1990-2030 Share of people below 35 is expected to be 50 % by 2030. 70.00 2 6 Silent Generation 65 + 60.00 7 17 Population (In Million) Baby boomers 50-64 50.00 40.00 35-49 24 27 Generation X 30.00 33 25 Millennials 21-34 20.00 8 6 15-20 Generation Z 10.00 25 19 0-14 Digital Kids 0.00 Note: Numbers in the boxes indicate changes in the share of population 1990 2000 2010 2020 2030 Source: United Nations, Analysis by Frost & Sullivan 5
National Development Plans Master plans to focus on industrialization and infrastructure development Saudi Arabia UAE Oman Focus Areas • Industrialization and High End Manufacturing and Food Processing • Infrastructure Development and Digitalization • Economic Diversification Focus Areas Qatar Bahrain Kuwait • Economic Diversification • Knowledge Economy • Logistics and Transshipment Hub • Public-Private Partnership Source: National Sources, Analysis by Frost & Sullivan 6
Transportation and Logistics Industry Size in GCC Significant logistics cost due to fragmented nature of logistics network Transportation and Logistics industry size by Country, GCC, 2018 Food Logistics Trends, GCC, 2018 GCC Strong and established distribution transportation $73 Billion network in UAE, but fragmented in other 2 and logistics 4 4 GCC countries. market in 2018 6 40.0 KSA Large importers usually integrate with 35.0 logistics and distribution companies. UAE 23 30.0 25.0 Qatar Role of unorganised channels in food 20.0 retailing is significant. Oman 15.0 Increasing Investment in local food 35 10.0 Kuwait processing likely to increase logistics 5.0 Bahrain 0.0 demand. 2017 2018 E 2019 F Note: E: estimated; F: forecasted Source: Industry sources, and Frost & Sullivan Analysis 7
Current Scenario and Developments 8
Food and Beverages Market in GCC Reliance on food imports expected to continue in both KSA and UAE Food and Beverages Manufacturing , GCC, 2017 Food and Beverages Consumption , GCC, 2017 Food and Beverages Food and Beverages Manufacturing ~$ 19 B Consumption ~$ 100 B 100.00 Bahrain Manufacturing Value Added ($ Billion) 1 6 80.00 Kuwait 8 4 60.00 Oman 40.00 21 Qatar 60 20.00 UAE 0.00 Bahrain Kuwait Oman Qatar UAE Saudi KSA Arabia Food Non Food Saudi Arabia and United Arab Emirates Accounted for 81 Saudi Arabia and United Arab Emirates Accounted for 85 percent of GCC food production in 2017 percent of GCC food consumption in 2017 Note: Estimates based on value addition of Food and Beverages from National Accounts statistics Source: National Statistical Agencies and Frost & Sullivan Analysis 9
Food Imports and Major Suppliers Strong linkages with oil price trends, diverse suppliers spread across Europe, Africa and Asia Food Imports and Major Suppliers, GCC, 2010-2017 60.00 Food Trade ($ Billion) Europe 50.00 $10.7 B (22.9%) 40.00 30.00 20.00 America ASIA $9.59 B (20.4 %) 10.00 $8.64 B (18.4%) 0.00 GCC Food GCC Food Intra GCC Food Africa Imports Exports Trade $ 3.2 B (6.7%) Oceania Middle East 2015 2016 2017 $ 3.14 B (6.7%) $10.5 B (22.3%) • Drop in food imports in 2016 • Processed food products exports is duty-free within the GCC region Key • Common external tariff of 5 % is applicable to food imports from other countries Features • Asia, Africa and Europe are Major Suppliers of Food Products to the GCC region Source : UNCTAD and Frost & Sullivan Analysis 10
Concentration of Population in Major Urban Centers in the GCC Connectivity and storage facilities in ports and consumption centers is key for food logistics Major product categories Major consumption centers in the GCC Kuwait (2.3 M) Dairy Beverages Fruits & Meat Processed Food Vegetables Products Products Al Jubail (0.2 M) Manama (0.2 M) Doha (0.3 M) Dammam (0.7 M) Sharjah (1.5 M) Dubai (2.7 M) Urbanization rate is more than 80 percent among the GCC Medina (2.0 M) Riyadh (6.9 M) Abu Dhabi (2.7 M) Yanbu (0.3 M) countries. Mecca (1.6 M) Jeddah(4.5 M) Muscat (1.5 M) About 80% of the products sold in retail outlets are imported At-Taif (1.3 M) as processed food / ready-to-eat food products Fresh fruits and vegetables, chilled beef, and dairy products Salalah (0.4 M) are imported from countries such as Egypt, Pakistan, India, and the United Kingdom in containers. Source: Industry sources and Frost & Sullivan analysis Image source: flaticon.com 11
Food and Beverages Value Chain Market in GCC Most of the food imports into GCC is through sea Given the increasingly globalized nature of food markets and the importance of year-round supply to GCC food markets, international collaboration between producers is essential at every stage of the supply chain Sourcing Transport Processing Storage Transport Distribution End customer Imports from sea Cold Storage ports Inbound Logistics Last – mile Wholesale / Retailer delivery Distribution Outbound Logistics Packaging / Exports Processing Major Import Upstream value chain origins India China USA Brazil Egypt Sourcing: Processing: Distribution: End customer: From multiple geographies due to The imported goods are Processed and semi processed Goods are transported from the unfavorable local food production transported to cold storage or to food products are transported distribution centers to the retailers climate. the processing centers for further mostly by road to the distribution for sale. processing. centers . Source: Frost & Sullivan Analysis 12
Logistics Performance Not on Par with Advanced Economies Key challenges to be addressed include regulatory reforms and connectivity Logistics Performance Index 2018 National Logistics Development Initiatives • Nine Point Strategy for • Dubai Transportation Plan 2030- Rank Country Transforming Logistics Sector • Dubai 2021 -economic • Infrastructure Enhancement component that aims for the city and reforms in the logistics 11 UAE Saudi UAE to become one of the top five market segments such as Arabia logistics centres in the world. road, rail, air and Sea 30 Qatar • • Integrated Transport Logistics Strategy SOLS 2040 - Infrastructure Master Plan. Ideal location for redistribution • Kuwait is investing in the related hub for South Asia and East Africa 43 Oman • supply chain as well as making Oman Logistics Group created to Kuwait Oman efforts to boost local farming develop logistics sector with focus and commodity processing. on market development 55 Saudi Arabia • • Transport Master Plan - (2006- Transportation master plan to 2026) - Road and maritime improve the road transportation network with Sector Reforms with integrated 59 Bahrain Bahrain new highways, bridges and and effective transport system. Qatar overpasses. • Development of multi purpose • Bahrain Airport Modernization Hamad Port and FIFA 2022 63 Kuwait Program. Infrastructure and Connectivity. Source : Industry Sources and Frost & Sullivan Analysis 13
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