The Middle East’s dairy market is expanding fast and the emerging opportunities have not gone unnoticed by local and international suppliers.
Dairy producers have found themselves at the eye of a perfect storm: health-conscious consumers are raising the awareness of dairy products, the exploding population continues to drive demand and the maturing F&B industry ensures that local operators are looking at a wider range of dairy products making it easier for international brands to enter the market.
With the region’s dairy industry valued at US $2.8 billion in 2010, it is no surprise that the market has caught the attention of international companies.
“The Middle East’s dairy market is growing considerably faster than the European market,” says First Food Projects managing director, Neil McDonald. “Consumer demand is changing thanks to a growing population, a younger demographic and international influences entering the market. So there’s a real sense of ongoing development amongst dairy manufacturers and suppliers to adapt to and satisfy these new needs.”
This sentiment is reflected in the dairy consumption of the region’s F&B outlets, with chefs utilising a wide range of products in high volume every month.
Le Méridien Abu Dhabi uses a combined 850 litres of fresh liquid dairy products each month, while the Taj Palace Hotel Dubai exceeds 2200 litres — and a combined 1200 kilograms of butter, cheeses, yogurt and ice cream.
“The demand for dairy is high in the Arabic region because it is the base for many Arabic dishes and Mezzeh,” says Le Méridien Abu Dhabi executive chef, Daniel Brooker.
“The popularity of Indian cuisine also drives demand. As the region’s population continues to grow, demand will increase and dairy will likely play a major role in Middle Eastern life.”
Evidently, dairy products play an important role in the region’s kitchens. The Dusit Princess City Centre Dubai approximates that dairy accounts for 15-20 per cent of the total food spend.
“Dairy is a vital component in many of our dishes and we don’t see that changing dramatically for a long time to come,” says Dusit’s chef de cuisine, Ananto Hadi.
“We use a lot of milk-based products and their derivatives ��� things such as cooking cream, cheese, butter and sour cream.
“So, demand for dairy products remains strong despite a growing trend for healthier low-fat options.”
Similarly, the use of dairy is prevalent throughout the Taj Palace Hotel Dubai’s F&B operations, as general manager Andreas Mueller confirms: “The demand generally is strong and dairy is a large part of the food production in the hotel,” he says.
“We use a variety of dairy products in our kitchens. The breakfast buffets and the Middle Eastern restaurants use yoghurts, labne, a variety of local and imported cheeses, and milk. In our Indian restaurant, Handi, we use yoghurts for sauces, marinades, drinks such as lassis and as an accompaniment for various dishes including Biryanis.
“In other areas of our F&B operation we use milk for coffees, cappuccinos and milkshakes. We also use a lot of dairy in our desserts. Guests in this region have developed a sweet tooth and a liking for western-style desserts.”
The ice cream segment has become a key area of growth and demand proved resilient during the economic downturn.
In the UAE alone, 10 million litres of ice cream were sold in 2010 — a growth of 3% in volume from 2009, according to figures from Euromonitor International. The country also experienced an 8% growth in value reaching AED 219 million ($59.6m) last year — and is forecast to grow by AED 57 million ($15.5m) by 2015.
This strong performance in 2010 proved the financial resilience of the ice cream segment throughout the economic downturn. However, ice cream parlours did experience a marginal volume decline in sales. Euromonitor puts this down to consumers economising away from the comparatively expensive parlours and the rising commodity price of dairy.
Saudi Arabia, which accounts for a massive 61% of the GCC’s dairy market, has become the hub for the expanding ice cream segment and international brands are competing for visibility.
In June, Al Safwa Foods opened the Kingdom’s first Dairy Queen Grill and Chill concept, a US franchise offering self-serve ice cream products. As part of its aggressive expansion plan, Al Safwa Foods aims to open 50 outlets in the kingdom by 2015.
With so much imported into the region, many chefs are now looking to partner with local suppliers when sourcing their dairy products. The quality of local dairy has dramatically improved over the years and a wide range of local produce is now on offer in most markets across the region.
“A supplier is a partner and they have to be 100% reliable,” says Radisson Blu Hotel Dubai Deira Creek director of kitchens, chef Uwe Micheel.
“They have to have adequate stocks, deliver on time and provide consistent quality — and I feel the quality of local dairy has improved. The variety and availability of local dairy products is much better than in the past and the quality of locally produced milk, yoghurt and laban has significantly improved. Also, the introduction of more local dairy products has reduced purchasing prices, so a product like yoghurt can now be competitively priced from local sources.”
However, small local dairy producers may find it difficult to remain competitive in the long-term as a dark cloud looms on the horizon: dairy production is reliant on water — a rare commodity in some parts of the region.
“The availability of water is a real problem, and we’re not quite sure how it will affect the region’s dairy market,” explains First Food Projects’ McDonald. “The governments really need to look at this issue seriously.
“The issue is driving some companies to look outside of the Middle East for the raw milk product. That’s why so many people are looking to Egypt to solve their dairy supply needs.”
By all accounts, the region’s chefs are noticing a slight consumer shift towards healthier dairy products. Low-fat milks and yoghurts are rising in popularity and many ice cream suppliers have started to introduce low-sugar products on the retail side, like Unilever’s Breyers Light Half-Fat Creamy Vanilla.
“We haven’t noticed any dramatic changes as yet, but there is a steadily increasing number of requests for healthy or low-fat dairy products,” says Mueller.
“Globally, there has been an increase in demand for organic products and some of the recent scandals such as the dioxin contamination of animal feed in Germany will reinforce the drive for healthy and organic products.
“In this region, I think we will see camel milk products becoming increasingly more popular because of its health benefits. Suitable for lactose intolerant customers it is therefore a great alternative to cows’ milk. I also think organic farming will take a stronger hold here with more qualitative high-end products coming into the market, again driven by the demand for healthy food items.”
UK-based Delamere Dairy, a supplier of goats’ milk dairy products, is experiencing an increase in its Middle East exports, in part thanks to the health benefits associated with goats’ milk.
“We’ve seen the figures for the Middle East go up and up and the region now accounts for around 25% of our total exports,” explains Delamere Dairy export manager, Henry Elsby.
“Interestingly, our rate of sale in the Middle East is higher for the number of shops we’re in. There simply aren’t the same barriers to sale like we have in the UK when you try and introduce a product.
“Goats’ milk is the most commonly drunk dairy across the world, and in the Middle East, consumers are more familiar with it as a day-to-day produce.”
It is ironic that the Middle East is importing a dairy that has traditionally been sourced locally.
“Goats are no longer milked on a commercial scale in the region,” explains First Food Projects’ McDonald. “The tradition of goat milking goes back some time and it was once the main dairy source for the Middle East’s indigenous population — along with sheep and camel. But today, the region’s livestock are hardy creatures raised to survive the region’s high temperatures. The majority of the region’s goats are bred for meat production.”
Delamere’s plan for growth in the region centres on the flourishing café culture scene. Boutique, high-end coffee and café concepts are looking to identify products that provide a point of difference from the competition.
“We identified this trend when we attended Gulfood earlier this year,” says Elsby. “The rise of the Middle East’s café culture offers a natural customer base for us and we know that some outlets are offering camel’s milk as a speciality.”
Ultimately, the shift towards dairy alternatives is still in its infancy and is yet to be fully exploited. But with new products entering the market and a developing awareness of health issues, the trend is certainly gathering pace. Suppliers are carefully monitoring developments and are ready to adapt their product lines around changing consumer behaviour.
“Currently, there’s only a small percentage shift to healthy dairy products, but this will grow,” says Pritchitts Middle East sales manager Paddy Darcy. “As a whole, I think the market will eventually shift to healthier products.”
With more dairy products on the market, the race is on for suppliers to innovate and create new products. Some suppliers are responding to the growing need for “functional” dairy products — ingredients that are dedicated to a specific cooking need.
For example, Pritchitts supplies a range of functional creams to chefs enabling them to substitute healthy option creams into their dishes or creams that perform better for specific tasks like whipping. To ensure taste and usability standards are met, the product was created by a team of development chefs.
“I wouldn’t say there’s pressure to continually innovate, but it is definitely one of our commitments,” concludes Pritchitts’ Darcy. “We have some functional dairy products in the pipeline for 2011-12 designed to make a chef’s life easier — where he might have two or three products to purchase, store and cook, he’ll be able to achieve the same dish with just one functional dairy product.
“The needs of chefs are changing and suppliers need to respond to these changes with new dairy products — but in the process we must ensure that we don’t sacrifice taste or functionality.”
On the Market
Millac Gold — Pritchitts
A blend of buttermilk, vegetable fat and dairy cream, this product offers a functional alternative to chefs. It can whip to three times its volume and is more stable than dairy cream when whipped and does not fall back.
Goats’ Milk – Delamere Dairy
Fresh goats’ milk is increasing in popularity in the region. It has been claimed that goats’ milk has nutritional characteristics beneficial to health.
Lacnor Milk - National Food Products Company
Lacnor is a Middle East favourite and has had strong market presence for decades. The range includes full cream, low fat, skimmed … or even chocolate milk!