Food updates in the GCC amid COVID-19 outbreak

With 85% of its food and beverage imported, GCC countries are affected by price fluctuations. Alpen Capital forecast that food demand will grow to 60.7 million tonnes in GCC by 2023, at 3.3% CAGR. But the biggest concern that people are interested in, and this was addressed during the opening of Gulfood 2020 (16-20 February, Dubai World Trade Centre), is the impact of the coronavirus outbreak on pricing and sourcing.

In the course of the COVID-19 outbreak, there is no other way but for companies to source their ingredients and products from other countries, although many of those based in the UAE said they are not reliying on China suppliers alone. Other major products are imported from the United States, Europe, and other parts of Asia.

Beyond China

While many products are imported from China, trading companies like Al Adil Food Stuff Trading source from suppliers in several countries namely India, Malaysia, South Korea, Thailand, and Vietnam for Asian such products as spices and meat. Others say their F&B sources come from the United States and Europe, so the impact to them is limited. For now, companies say products are on stock, so they will be able to absorb price surges.

Salim Musa Al Kandy, director of meat exports at Lulu Group, was quoted in the Gulf News report, as saying: “Imports of certain items such as Ajinomoto, China grass etc, have been impacted while most others we are able to import from Turkey, India, Malaysia, Vietnam and other countries. The UAE ministry has taken all necessary precautions with recommendations from WHO and it’s not a cause for concern as of now. In fact, import of certain frozen items such as cabbage is still coming via seaports. We just got a container of frozen cabbage from China.”

Also at Gulfood 2020, industry players assured trade visitors that products in the UAE are safe despite COVID-19, and that output is stable because either they don’t rely directly from China or they source elsewhere. Al Rawabi Dairy Co. said it does not import from China. The Khaleej Times report quoted Al Rawabi CEO Dr. Ahmed Eltigani saying, “All of our imports are from the well-known companies across Europe and the USA. In fact, most of local F&B companies are importing from Italy, France, Germany, Denmark, and Sweden because UAE residents have good purchasing power, therefore, they always look for high quality products. All companies in the FMCG sector here are sourcing good products from reliable companies."

Not looking good for some

Meanwhile, traders who re-export to the Middle East region said that food imports from China have been affected as a result of the outbreak, and should it continue, trade between China would be affected, and prices will surely rise in the next six months. In a Gulf News report, Amit Sethi, managing director of Asia and Africa Food Trading, said that as a re-exporter, the company will feel the impact as freight tariffs will also rise. In the said report Sethi explained: “We as re-exporters to various countries from the UAE will be impacted. China was a major exporter to Africa. If we have 100 containers of food items we imported from China, in return there were limited amounts of agro items such as soya beans, raw almonds, beans and legumes coming in from Africa. So now freight tariffs have gone up as there are few containers coming from China. We are able to negotiate good rates in exchange for the few containers coming in from Africa. This is becoming difficult. If things continue this way for six months and the wholesale prices as well as freight tariffs continue to go up, it will impact food prices.”

As of first week February, Turkey banned imports of living and non-living animals, animal products and waste products from China for the time being, according to news from Turkish site, Anadolu Agency. The ban includes poultry, seafood, mollusks, animal fats and similar products. Jordan is also banning animal and vegetable products, and for now suspended import licenses from China until further notice, said the Middle East Monitor. In Egypt, traders in general are also worried because China accounts for 25% of imports to this country. In the food sector, a temporary suspension has been imposed on garlic, green ginger and carrots, in particular, to allay consumer fears, said Al Monitor.

Food security in place

The UAE continues to strengthen its capability to be food secure and sees itself ready in the event of natural disasters and outbreaks similar to COVID-19. The report in the Khaleej Times also quoted Tariq Al Wahedi, the CEO of Agthia Group who said, “As part of the nine-member Food Security Alliance for the UAE food security initiative, we are well-prepared to be sustainable in the face of any such emergency such as national disaster or epidemic outbreak. We were able to help neighbouring countries such as Oman during cyclone Gonu.” He also said that the country’s military are trained manage food banks and activate logistics of supply and distribution from the existing stocks when the situation calls for it.

Alpen Capital assessment

Food consumption is expected to grow at a CAGR of 3.3% from an estimated 51.5 million MT in 2018 to 60.7 million MT in 2023. This as the GCC sees a rise in population, tourism, and high per capita income, according to Alpen Capital’s report. The food consumption for the UAE and Saudi Arabia is estimated to reach 10.3 million MT and 39.0 million MT by 2023, respectively. The forecasted growth rates largely reflects the population and GDP projections for the countries.

“We anticipate the GCC food sector will continue to grow at a steady pace owing to factors such as growing population, higher per capita income, a vibrant tourism market and changing dietary habits and preferences.”, says Sameena Ahmad, Managing Director, Alpen Capital (ME) Limited.

Krishna Dhanak, executive director, Alpen Capital, expects the COVID-19 outbreak to impact all industries and geographies given the wide supply-chain network from China to the rest of the world. "Accordingly, the impact on the trade between the UAE-GCC and China will be similar to the impact on the global supply-chain from China.”