THE MIDDLE EAST
The economy of the Middle East is very diverse. The Middle Eastern states have been known to be relatively unstable in the past few decades, experiencing many growth and decline cycles. The individual economies in the Middle East range from free market economies to government-led socialist economies. Together, the region is most well known for their oil production and exportation. Therefore, the status of the oil industry significantly affects the entire region.
The Middle East experienced the greatest economic growth during a 20-year period from 1965-1985. The growth was facilitated by the dramatic global increase in gas prices, which were stimulated by the 1972 Arab-Israeli War and the subsequent Iranian Revolution. As oil prices reached new highs, most states in the Middle East benefited from the heightened economy. Not just the oil-producing states (Iran, Iraq, Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar) benefited from the high export earnings. Although oil-producing states benefited directly, non oil-producing Middle Eastern states also reaped some of the benefits.
Because of this newfound wealth, enormous social achievements occurred in the region. School enrollment went up dramatically, increasing adult literacy from 34% in 1970 to 53% in 1990. Adult life expectancy rose by 10 years, and infant mortality cut in half; however, not all results of this newfound wealth were positive. The income gap widened drastically among the Middle Eastern states. While some of the smaller, major oil-producing states, particularly those among the Gulf were able to achieve GDP per capita levels that challenged or surpassed Western European states, others—such as Jordan or Yemen—remained among the poorest in the world.
In 1986, the price of oil fell drastically as a result of the overproduction of oil. The foreign earnings that had driven large economic growth in the region were drastically reduced. The decline in exports created a major loss of jobs for people in both the oil-producing and non oil-producing states. The non oil-producing states lost all foreign aid form the oil-producing states, creating more of an economic gap in the Middle East.
Currently, economic developments in the Middle East continue to reflect the diversity of conditions existing among the region. Most high-income oil exporters (primarily in the Gulf Coast, including: Saudi Arabia, Kuwait, Oman, and the United Arab Emirates) continue to report solid economic growth and fundamentals. In contrast, other oil-producing countries—Iraq and Libya—are hindered in conflicts that result in vast humanitarian and economic consequences. Oil importers are predominately making continued, uneven progress in advancing economic status, often in line with difficult social conditions and poor political transitions. Most countries in the Middle East struggle with unemployment and overpopulation without the economic and structural reforms to improve conditions.
According to 2014 World Bank Statistics, the Middle East has the lowest regional GDPs in the world at US$1.52 trillion. The leading economy in the Middle East is Saudi Arabia, ranked 18th in the world—according to World Bank nominal GDP statistics. Growth in the Middle East is projected to remain flat at 2.2% in 2015 and beyond, according to the June 2015 issue of Global Economics Prospects. Countries with severe security challenges (Iraq, Libya, and Yemen) or limited economic cushioning (Iran and Iraq) are currently experiencing major economic challenges. According to President Obama, the real crisis in the Middle East is economic. The economies are not only detached from the rest of the world’s, but also from one another. Where most exports in North America, Asia, and Europe remain within those regions, only 16% of the Middle East exports to other Middle Eastern states. Although the economic future of the Middle East appears grim, a number of scientific publications listed in the Web of Science database shows that the standard growth in the Middle East, particularly in Iran, is nearly four times faster than the rest of the world.
NUTRITIONAL PRODUCT MARKET
Although the economics of the Middle East appear grim, the nutrition products market has gained footing. Vitamins and dietary supplements continue to soar in popularity in the developing Middle East, primarily due to nutrient deficiency in the region. Because of the political and social unrest in the Middle East, it is imperative to understand the market regulations in order to properly market and sell your product.
For example, health concerns have driven the need for supplements, but religious restrictions can shape the type of ingredients allowed in certain supplemental formulas. However, increased western health influences and a growing younger demographic will likely help push for health awareness in the Middle East. It will benefit marketers and manufacturers to pay close attention to the Middle Eastern market, as it will likely continue to emerge and make waves within the global market.
Middle Eastern states witnessed rapid changes in economy, health education, social services, and agriculture that have profoundly impacted the health of the region. Although the nutritional status of the Middle Eastern population has improved over the last four decades, micronutrient deficiencies have been a long-standing public health problem. Micronutrient deficiencies are highly prevalent in both the poor and rich countries as well as rural and urban populations. Deficiencies of iron, iodine, vitamin A, and vitamin D are especially significant concerns because of the serious health consequences to the public. Rickets and anemia are two of the most prevalent diseases in the Middle East, caused by lack of nutrients in diet. A recent study in Saudi Arabia shows that children who were breastfed had an 80% prevalence of rickets, and 90% of those with rickets lack adequate exposure to sunlight. Anemia has remained a widespread public health problem in Middle Eastern countries.
Prevalence figures in the region vary from a low of 17% to a high of 70% among children and adults. The main causes of micronutrient malnutrition are inadequate intake and impaired utilization of foods containing essential vitamins and minerals. It is crucial that children and adults supplement these essential vitamins and minerals into their diet. Increased awareness about the magnitude and the extent of this problem is needed in the region. Nutrition product sales will increase with increased education.
Religion is extremely important in the Middle East—the most popular religions being Judaism, Christianity, and Islam. Judaism and Islam, in particular, come with dietary restrictions that should be taken into account when manufacturing nutrition products for the region. Many religious adherents steer clear from any prohibited ingredient and prefer to purchase products that are certified to meet their specific religious standards. Certifying agencies like Star-K, Islamic Food and Nutrition Council of America (IFANCA), and the Islamic Society of North America (ISNA) have established kosher or halal certification programs for nutritional products that can ensure that your product meets customer standards.
The nutritional products market put in another good performance in 2014. The growth can be attributed to an increase in government-backed health campaigns and doctors prescribing vitamins and dietary supplements to their patients, along with medications. More affluent states like the United Arab Emirates and Saudi Arabia have included the local media as well as the government to attempt to draw attention to nutritional and health issues, taking steps to boost public awareness of the importance of absorbing the right nutrients.
Because of the prevalence of rickets, there were recent major campaigns, focusing on vitamin D deficiency and pregnancy health care. Middle Easterners would rather take dietary supplements than change their diet, which is low in nutrients and high in starch and fat. The trend has spread among all income groups. Pharmacists, even in regions of lower-income groups, have been known to dispense vitamins and supplements by the unit. Over the forecast period, the nutritional products market is expected to continue to grow by a value CAGR of 5% to 20%, depending on the region. As long as health education continues to grow in the region, nutritional products will likely follow suit.
Beauty Products Market
According to new research, the Middle East is has recently overtaken South America as the world’s fastest growing beauty products market in the world. The beauty products market is a real growth driver in the region, mostly because the local population typically wears traditional clothes, enabling them to pay more attention and spend more on makeup and perfumes in order to differentiate themselves.
According to Euromonitor International, the retail value for the Middle East’s beauty products in 2014 was US$25.7 billion. This number is only expected to rise, as its estimated 4.8% annual growth rate between 2014-2019 is almost double the global 2.6% average. Saudi Arabia, Iran, and the United Arab Emirates are the top three countries in the Middle East and Africa region, holding a 37% share of the 2014 beauty products retail sales.
Saudi Arabia’s beauty products market is the largest in the Middle East. Recent studies show that consumers in Saudi Arabia spent US$4.8 billion on beauty products. They join the other big spenders in Iran (US$3.5 billion), the United Arab Emirates (US1.4 billion), and Egypt (US1 billion). The Saudi cosmetics market is particularly thriving, with a forecast of 11% annual growth rate, according to Euromonitor International statistics.
The rising young, dynamic population in the Middle East is driving many of the beauty trends in the region. The internet and social media have increased awareness of global brands in the Middle East and have been important tools for learning about purchasing and using beauty products. The diversity of wealth of Middle Eastern states creates discrepancies in the market. Where some countries enjoy more premium products; others look for value-added, multi-functional products. For example, customers in the United Arab Emirates and Saudi Arabia are looking for products with specific benefits. Skincare products offering anti-aging benefits, oral care with whitening effects, and salon-inspired hair care is on the rise. However, in countries—such as Egypt, where the majority of the population originates from low-income households, spending money on non-essential items is limited.
Most opportunities for growth in the Middle East lie in the more developed countries, where the population has a more disposable income and consists of a younger demographic, interested in trendy new products. An increase in marketing and the expansion of distribution channels has created a strong demand for products that were previously unused. For example, men’s grooming products experienced 13% growth in 2014 in Saudi Arabia. Men’s grooming was once considered “taboo” to many Middle Eastern States, but strong marketing helped men break through the social stigma and take pride in their appearance. Similarly, Iran women are spending increasing amounts on color cosmetics. Because of the hijab law and traditional garb, the face is extremely important. Therefore, Iran offers growth opportunities in color cosmetics.
Halal beauty products have recently been introduced globally in its very early stages of growth. Although certification for halal products is inconsistent in most countries, there is great potential to develop as a key point of distinction for brands internationally. Because of the inconsistencies in certification, Muslims often prefer organic or vegan products that do not use animal derivatives. Increasing the availability and gaining the trust of consumers through proper labeling of halal products can ensure that Muslim consumers are buying products that adhere to the standards based on Islamic values.
Multinational companies dominate the Middle East’s competitive landscape. Procter & Gamble and Unilever are the leading companies in the United Arab Emirates and the key players in Saudi Arabia and Israel remained multinationals in 2014. However, in Iran, local companies dominate. Domestic suppliers like Paxan Co. and Pakshoo Co. are more active in basic, essential products; therefore, they are cheaper than multinational brands, appealing to the population.
Socioeconomic factors and the increasing young consumer base in the Middle East offers much potential for growth in the forecast. Because the region is so diverse, focused strategies are needed when producing and marketing beauty products.
Food & Beverage Market
The functional food and drinks market remains relatively unknown to most countries in the Middle East. More wealthy countries, such as Saudi Arabia and the United Arab Emirates have witnessed slight growth in the past year, predominately due to increased awareness of general well-being among consumers. Less wealthy countries—such as Egypt and Israel—have seen negative growth in the market in 2014, mostly due to a lack of knowledge and income to spare.
Middle Easterners, in general, are not willing to change their diet for health reasons and would rather use supplements to incorporate vitamins and minerals into their diets. Although functional foods are not popular with consumers in the region, functional beverages appear to be a major focus in the Middle East. According to recent market research, functional fruit and vegetable drinks comprised one fifth of soft drink retail value in the Middle East in 2013. As obesity rates rise and the prevalence of micronutrient deficiency diseases remain an issue, it will be beneficial to explore opportunities within health and wellness juice. Health and wellness still remains a niche in the Middle East, as the majority of consumer and resident nutritional knowledge remains limited. Because juice is very popular in the region, producing naturally healthy juice will likely be a strong opportunity for manufacturers to enter the marketplace. Many companies have attempted to introduce sugar-free or Stevia juices into the marketplace without much luck. What have been popular in the region are functional beverages that include superfruits in the ingredients. It is imperative that manufacturers create flavors that resonate with local consumers.
In Israel, functional products saw a slight decrease in value compared to previous years. The market is growing in the region. Though the competition is intensifying, dropping prices and affecting overall sales, the market is experiencing growth—particularly in United Arab Emirates and Saudi Arabia. Government initiatives and exhibitions in these countries have served to raise awareness of the importance of following a healthy diet. Because obesity rates are skyrocketing, it is extremely important for consumers to increase the amount of functional food and beverage products into their everyday diets. Manufactures are now focusing on labeling products with specific, associated health benefits. Helping spread awareness of the health benefits of functional food and beverage products through labeling and advertisement will likely help increase popularity, especially in the more affluent countries.
The competitive landscape in the Middle East is fragmented between domestic and international players, both of which enjoy brand recognition and loyalty. Targeting prime locations in shopping centers and hypermarkets that receive high customer traffic has helped companies increase sales. Because independent, small grocers have not been successful selling functional products, consumers can typically only find them in larger markets. Internet retailing has not yet made a significant impact in the region, mostly due to the lack of a presence of domestic websites within health and wellness. However, the Internet has and will remain a valuable tool for garnering information about health and wellness products.
Although the immediate future of the functional foods and beverages products market looks grim for most countries in the Middle East, there is hope for United Arab Emirates and Saudi Arabia. Functional products are expected to gain further ground in 2015 as well as over the forecast period. The expected increase in the number of high-income consumers should also help support a higher consumer demand over the forecasted period.