Indian food processors are competitive in certain product categories. The travel time between India and the Middle East is short and goods can move by both ship and air, as required. Most importantly India enjoys age-old and historical business and trade relations with the Middle East countries. All these factors have made India a preferred destination for importers and traders in processed food and fresh agricultural produce for Middle East countries, writes Rajat K Baisya
Middle East countries have always been a very attractive market for Indian processors. It is also an important market for semi-processed as well as fresh food and agricultural commodities also. There are many Indian food processors actually surviving from this opportunity and even thriving. The Middle East market actually covers the Gulf Cooperation Council (GCC) consisting of members including Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE), and Saudi Arabia. The largest market, however, are UAE and Saudi Arabia.
There are several factors that make GCC countries an attractive market for Indian processors and agriculture products. These are: close proximity and easy to communicate by Indian food processors with their partners or importers in Middle East countries, Indians are employed in large numbers in most of the corporations and business houses in GCC countries helping the trade to grow for mutual benefit and co-operation.
There are good economic reasons and Indian food processors are competitive in certain product categories such as spices and condiments, meat, fish and poultry including processed and frozen as well as fresh, the travel time between India and the Middle East is short and goods can move by both ship and air, as required making it flexible and market-oriented, the age-old and historical business and trade relations that India enjoys with its counterpart in the Middle East and most importantly we have a very good relationship with these countries.
Indian food processors know these markets and its consumers very well and there is the even great deal of similarities in food habit and lifestyle. All these factors have made India a preferred destination for importers and traders in processed food and fresh agricultural produce for Middle East countries. Some of the fresh products are exported from India to these countries every day on a real-time basis which is possible as the market is so close to India giving an additional advantage to us.
Indian food processors are more competitive in comparison with EU and US-based processors for many items. US export of processed food products in Middle East countries of late is growing because they have a better economy of scale for many categories of products like beverages, chocolates, snacks and many varieties of ready-to-eat products. But when it comes to fresh produce including fresh fruits and vegetables, spices, meat, fish and poultry, rice and similar such items the requirement of GCC countries are largely met by the Indian food processors.
Daily shipments of fresh produce are landing in these countries from various destinations from India and in these trade, India has a big role to play and also many business houses just existing because of this great opportunity. There are industries in Middle East countries and more particularly in UAE which was set up by Indian business houses in co-operation with the local entrepreneurs and these types of trading houses derive a lot of advantages in terms of getting entry into these markets. They also have better flexibility to respond faster to any change in market dynamics.
Brook Bond had set up the largest meat processing plant in Aurangabad but they could not run it and it was taken over by Allanasons, a Mumbai based meat trading group that has a significant presence in the Middle East. Allanas were able to grow this trade over the years because they were directly importing from India and marketing in Middle East markets through their own registered outlets, giving them a significant cost advantage over others. Freight advantage, local business knowledge as well as direct presence and control of the businesses in the Middle East has given them an edge over others. The same is the story for other categories of fresh and frozen trade like products including fish and poultry.
These are, in reality, traded daily and shipments are going also daily from Delhi, Mumbai, and Cochin. Other agricultural commodities that are being exported to Gulf countries include tea and coffee. Some of these products are even re-exported from Middle East countries to other countries in the region. For example, several types of processed food products are imported into Kuwait from India and re-exported to Iraq largely for the consumption of the US army.
There are many export traders in India who are supplying on a regular basis all commodities packed in-store label or private label brands for many local retail stores in the Middle East including large organized retailers in UAE. These export traders in India are acting, in fact, as sourcing agents for large organized retailers in Middle East regions. This trade is gradually increasing and it is mutually beneficial. Middle East countries are a great opportunity for Indian fruit and vegetable processors. A sizable quantity of semi-processed fruit pulps is exported to large companies in GCC countries for conversion to ready-to-drink (RTD) beverages. Before mango season starts in India all most all processors will be trying to secure orders for mango pulp in cans as well as in large aseptic bag in box packing for processing in Middle East countries.
Some of the processed food products like snacks, RTD etc. are growing phenomenally offering significant opportunities for the Indian food processors and investors. The factors that are favorable as explained earlier are unique for the Indian investors which are not available for investors from other countries including developed economies like EU and USA. It is, therefore, imperative for Indian investors to forge local tie-ups and set up ventures in Middle East countries and more particularly in UAE not only for capturing the local opportunity but also to re-export to other countries where getting entry direct from India may not be that easier. Some of our investors and Indian food processors have taken advantage of these opportunities and set up their operations already in Middle East countries.
There are frequent trade development activities happening of late. Gulfood Manufacturing exhibition is one such trade promotion activity happening at regular intervals and Indian food processors, promoters, investors, exporters are participating in this trade fair with great enthusiasm. Gulfood Manufacturing trade show which is organizing its next trade fair in Dubai during 6- 8th November 2018 is one of the largest food trade show in the region being attended by large numbers of the Indian processed food products’ manufacturers and also exporters as well as traders of horticultural and agricultural products from India.
About 85% of overall investment from India in GCC countries is going in UAE where it is the third biggest corporate spenders after the USA and UK. These food trade in both India as well as in UAE are helping that to grow faster. A Dubai based banking advisory firm has observed that investments in select sectors including food processing industries in UAE are steadily increasing as the Gulf government is not only proactive but also changing trade policies making the investment destination for the Indian investors more friendly as hence attractive.
The author is the chairman of Strategic Consulting Group and served as Professor and Head of the Department of Management Studies, IIT Delhi.