Full basket: Food processing promises to serve growing regional appetites

Food consumption across the GCC region is set to increase by over 3% annually over the next five years, according to a report released by finance house Alpen Capital. In Oman, an expanding youth population, combined with a rise in the number of expatriates and growing disposable incomes, has fuelled the growing demand for protein. While the sultanate is likely to remain highly reliant on food imports, this increasing demand has left a gap in the local marketplace, creating opportunities for the private sector to satiate the Omani appetite, particularly in the food processing industry. As Prem Maker, CEO of Areej Vegetable Oils and Derivatives, told OBG, “Growth for fast-moving consumer goods has been robust in the Middle East. The population in this region tends to consume more, especially fatty foods.” Large-scale government investments in the state’s transportation and logistics infrastructure would also serve the industry’s development and assist in promoting Oman’s food security.

Poultry

Some 60% of Oman’s poultry demand is met through imports, leaving room for local producers to expand operations. A’Saffa Foods, Oman’s largest poultry producer, recorded an OR7.29m ($18.9m) net profit growth in 2012, and net sales stood at OR25.9m ($67.1m) for the year. A’Saffa now holds over a quarter of the market share, and in 2012 it expanded its production capacity from 17,000 tonnes per annum (tpa) to more than 20,000 tpa of processed poultry products. According to A’Saffa Foods CEO Nasser Al Mauli, the company is diversifying its product range, which now includes red meat, fish products and frozen vegetables under the Taybat and Khayrat brand names, and it plans to enter the egg market in the near future as well.

Sugar

Another food segment that relies heavily on imports is sugar. It is estimated that the Middle East has a 3m tpa shortfall in sugar processing capacity, and Oman currently imports 100% of its refined sugar demand, measured at 120,000 tpa. To supply local demand and generate export capacity, the new Oman Sugar Refinery Company (OSRC) was established as a joint venture between Britain’s Tate & Lyle Sugars and an Omani investment firm. The $200m facility is planned to sit on 180,000 sq metres of land at Freezone Sohar and is expected to produce 1m tpa of refined sugar.

Such an operation, which is planned to come on-line in 2015, would serve Oman’s domestic consumption demand while allowing OSRC to export a majority of its refined sugar across the Middle East. The refinery plans to import raw sugar cane from Brazil, Thailand, India and Australia; the shipments are set to arrive at the Sohar Bulk Terminal, which becomes fully operational in 2014. While predominantly a heavy-industrial dry bulk facility for Sohar-based mineral companies such as Vale, agro-bulk import and export capacity should increase as well. The dry bulk facility expects to have a capacity of 10m tpa once it is complete.

The new refined sugar capacity may help serve Atyab Bakery, which was inaugurated in April 2013. The $44m facility in Barka is the first industrial bakery in Oman, with an operation that can produce more than 200 varieties of products, including an hourly production capacity of 24,000 buns, 5000 sliced loaves of bread and 12,000 Arabic breads. Another potential sugar buyer is the Côte d’Ivoire-based CK Group, which has signed a memorandum of understanding with the Salalah Free Zone to develop a $150m cocoa derivatives processing facility. The plant, to be located on a 200,000-sq-metre plot, is expected to begin operations in 2014.

Fresh Produce

Oman’s growing processing capacity is important for the food industry, providing it with more export capacity since the country’s climate is ill-suited to produce fresh fruits and vegetables. According to a July 2013 Times of Oman report, the ongoing crises in Syria and Egypt have led to delays in Oman’s import of fresh produce and daily price fluctuations. “Prices of tomatoes and some fruits are fluctuating on a day-to-day basis. It all depends on the availability. We can’t predict the price of vegetables and fruits,” said a trader in the Mawelah market. Mushrooms, however, fall into a category of their own, as Gulf Mushrooms Products Company runs the largest mushroom farm in the Middle East based out of Barka. The mushrooms are exported throughout the Middle East.

Supplies

While fruits and vegetable supplies are uncertain, there are no reported shortages of basic commodities like sugar, rice and lentils, according to Rashid Al Masroori, chairman of the General Authority for Stores and Food Reserves. Furthermore, to maintain adequate fish supplies for the domestic market over the 2013 summer when demand peaks, the Ministry of Agriculture and Fisheries (MAF) temporarily decreased Oman’s fish exports. Government subsidies and interventions have therefore kept these food prices stable, and the same is true for wheat, which is a major crop in Oman’s farming system. Salalah Mills Company (SMC) owns the largest flourmill in Oman, which produces 1500 tonnes per day of wheat products and imports 300, 000-400,000 tonnes annually. SMC announced in April 2013 that it plans to build new silos with a production capacity of 120,000 tpa at a cost of $9m.

Fisheries

Government investments into Oman’s budding fisheries and aquaculture segments have drawn investor attention. The MAF has allocated $259m during Oman’s eighth five-year development plan ( 2011-15) specifically for fisheries development, and $1.3bn of government investment is expected by 2020. Across the sultanate, 10 new fishing ports are under development, and by 2020 this would increase the number to 31. Local fish production has risen significantly over the past few years, with the annual local catch increasing from 158,000 tonnes in 2011 to 191,000 tonnes in 2012. Oman Fisheries Company, the country’s largest fisheries supplier, has increased its catch size from 11,980 tonnes in the 2007-08 financial year to 26,029 tonnes by the end of the financial year on March 31, 2013. The company received 24 new fishing licences from the MAF in mid-2013, and it plans to invest in a black tiger shrimp farm in the near future.

A majority of the upcoming processing plants would be located at the Fisheries Industrial Zone at the Port of Duqm, set to be largest multi-purpose fisheries facility in the Middle East. According to the ministry, the $250m fisheries centre would accommodate 60 processing plants, storage facilities, landing areas, boat repair shops, aquaculture projects, and research and training centres. The new zone is set to provide Oman with a significant boost in processing capability. Since a majority of fish is exported and processed in the UAE, due to the current lack of domestic processing facilities, the government’s plans to increase processing capacity would enable Oman to rely less on international demand, to address its own food security and to develop a downstream industry in the fisheries sector. The government investments in the sector are considered highly important as they will help to diversify the economy away from fossil fuels and to promote small and medium-sized enterprise growth around the major developing port cities of Sohar, Duqm and Salalah.