Rice sector swells in Middle East

Sales of rice are increasing across the GCC, but changing tastes and a glut of cheaper brands have created a fractured market

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By  Roger Field Published  August 2, 2006

|~||~||~|As a dietary staple of more than half the world’s human population, rice is one of the most consumed grains on the planet. And while people in Asia and Latin America are the biggest consumers of rice, the Middle East is also a key market for the grain. Indeed, the market for dried processed foods – of which rice is the biggest category - had a value of SAR 5.1 billion (US$ 1.35 billion) in 2005, an increase of 4% on 2004, according to market researcher, Euromonitor International. But despite this strong growth, the Middle East rice sector is quite fractured, with tastes and buying habits varying significantly across the region. Saudi Arabia remains the biggest market for rice in the Middle East, mainly because of the size of its population, but also because rice has remained a staple of home cooking, despite an increase in consumption of convenience-type foods. “Rice is growing with the population, because it is an everyday lunch dish. It is a very stable commodity in the Middle East. Saudi Arabia is performing best not only because of the population size, but also because lunch is still eaten at home,” said Ahmed S. Al Muhaidib, eastern sales manager at AK Al-Muhaidib & Sons, which is the leading player in Saudi Arabia’s rice sector, with more than 60 SKU’s available in the country. “Pasta, pizza, or sandwiches have taken over the dinner, but didn’t replace the rice dish in the lunch meal.” Par-boiled rice is the biggest selling variety in Saudi Arabia, but white rice – also known as raw rice - is fast moving in the other gulf countries, according to Al Muhaidib. “Our rice has very different varieties and countries of origin, such as India, Pakistan, America, Thailand and Egypt. Each country has white and par-boiled rice. While India and Pakistan have different types of rice, they even have a duplicate basmati variety which is taller than the basmati, but has no aroma and taste,” Al Muhaidib said. He added that India supplies about 70% of the rice to the Saudi Arabia. Thai rice was previously the market leader in the country, but was overtaken by rice from the USA, which advertised long grain rice heavily, and this in turn opened the market up to longer grain Indian basmati rice, according to Al Muhaidib. American rice now accounts for about 9% of the market. Deepak Thawani of Tilda Rice, which sells rice across the Middle East, is also familiar with the peculiarities of the Saudi Arabian rice sector. Thawani said the Saudi Arabian market differs from many other countries in the region. “It’s a different market, they prefer parboiled basmati rice against the regular basmati. Parboiled rice is good for slow cooking,” he said. “It’s good for the Saudi cuisine – they prefer to cook it for two or three hours on a low flame.” Tilda Rice, which is based in the UAE but has an office in Saudi Arabia, sells various types of rice in the region although pure basmati is its core category. The company is present in most of the GCC countries as well as Kuwait, Egypt and Lebanon. KSA, followed by the UAE are Tilda’s biggest markets. Its main brand in KSA, Abushmagh, is performing well, according to Thawani, although the company’s strongest market, in terms of market share, is the UAE. “In Indian basmati in the UAE we are number one, but if you include Pakistani basmati as well, we are number two,” he said. “In the UAE, our market share is 20% and in Saudi Arabia it is around 12% and in Kuwait it is about 5%.” Thawani attributes growth in the rice sector to a consistent consumption, with many families eating rice twice a day, strong economic growth and a steady tourism sector supporting the food service industry, which accounts for about 10% of Tilda’s rice sales in the country. But growth is not the only trend in the Middle East rice sector. There are also changes in terms of the type of rice that sells. “Some time ago, bigger packs of 20 kg and 10 kg were selling more, but there was a shift towards smaller packs as family sizes fell and there are more nuclear families coming in, as well as working couples,” Thawani said. “People are shifting towards 2 kg and 5 kg bags.” Another trend in the rice sector is a shift towards people buying higher quality rice and this is certainly something that Tilda is keen to encourage. Indeed, the company is one of the few producers to market pure basmati rice, according to Thawani. “Tilda has always been propagating on a quality aspect,” he said. “We deliver a pure basmati, we don’t mix it.” He added that the company has invested some US $4 million in a laboratory in India to test the purity of its rice. Many of the rice brands on the market in the region that claim to be pure basmati are a mix of different types of rice, according to Thawani. “They could be 60% basmati, 40% non-basmati grains,” he said. “Tilda costs about 30% more than its nearest competitors because our offering has been not to mix and to deliver pure quality to the consumers.” Part of the problem is that there are less food labeling regulations in the Middle East than other regions such as the EU. “You can’t label a non-basmati brand in the EU as basmati because you have to provide a certificate at the time of exports and even the Food Standards Authority in the EU checks that,” Thawani said. “Our market share is growing but there is a certain consumer segment that is looking for a cheaper rice, but there is a segment that looks for quality also, and our consumer is niche. Our market share in Saudi Arabia and the UAE has grown by about 2% compared with last year.” He added that being a premium brand, the main retail channel for Tilda rice is supermarkets and hypermarkets, which account for more than 50% of sales. Another major brand in the KSA market is Abu Siouf, a long-grain rice produced by Master Foods. Ehab Jaber, a category development manager at Master Foods, said that the market for long grain rice, which accounts for about 35% of KSA’s rice sector, has lost market share to basmati rice in recent years. Master Foods’ main presence in the Middle East is in Saudi Arabia. In the rest of the Gulf, the company only markets one brand of rice, Uncle Bens, which is not a big focus for the company. Jaber said basmati rice has become increasingly popular in the past few years, which he attributes partly to advertising and a perception of quality. “Historically there was only long grain rice in the market and over the past decade, basmati has come in and become more the preferred rice. It’s more expensive, and when products are more expensive, they’re perceived to be better.” Basmati rice has a market share of about 65% of the Saudi Arabian rice market, with the remainder made up mostly of long grain rice. And in the long grain sector, Master Foods is the second biggest player in Saudi Arabia, after Abu Bint brand. As one of the market leaders in the sector, Master Foods has a has an 11% share of KSA’s overall rice sector. “Even though an 11% market share of the total rice is a small number, when it comes to tonnage, it’s huge,” Jaber said. Furthermore, Master Foods has been supporting its long grain rice brand, which is sourced from the USA, with a significant marketing campaign. “We’ve been seeing a lot of growth in the past two months, because we just started aggressively supporting the brand,” Jaber said. “We launched a TV campaign, which started in April. “We did some displays in store and sponsored a cooking programme. From everything we’ve done, we’re seeing growth of about 30%.” Master Foods is also trying to communicate the benefits of long grain rice, Jaber added. “We don’t deny that balsmati has its benefits but long grain American rice is a more robust rice. It’s more resilient and can be cooked with so many different dishes,” he said. “There is always going to room for long grain rice because of the nature of the product.” In other GCC countries, Master Foods sells Uncle Ben’s rice, although Jaber admits that the brand has a small share of the market, accounting for about 10% of the company’s rice sales in the region. “The higher end market is not growing as much as lower end,” he said. “There is something like 28% or 29% of other players who are in the market that have less than a 1% market share,” he said. “There are a lot of new entrants and a lot people who have just come up with a brand name and import rice.” In Kuwait meanwhile, Shabbir Sura, a marketing manager at Jassim al Wazzan, the largest rice producer in the country, said that cheaper brands of rice are growing faster than higher-quality products in Kuwait. “The higher end market is not growing as much as lower end,” Sura said. “Almost 30% of the market is taken up by other players who each hold less than about 1% of the market. There are a lot of new entrants and a lot people who have just come up with a brand name and import rice.” Wazzan Group, which has a number of premium basmati rice brands, has a market share of about 45% in the Kuwait sector. The company’s rice is imported from India and its biggest brands are Al Razan and Country Rice brands, which account for about 23% of the Wazzan Group’s business. Sura estimates that sales are growing by about 16% in volume and 13% in value, although the rate of growth is slowing down over time. Basmati rice accounts for the majority of the category in Kuwait with about 82% volume share. Sura added that pack sizes of between 22 kg and above show the highest volume growth among. The value of the sector in Kuwait has grown by about 13% year on year and now has a value of about KD 9.8 million (US $33.8 million). Sun White, a brand of rice from Australian company Sun Rice, is another heavyweight player in the Middle East sector. Russell Heffernan, regional general manager of Sun Rice for the Middle East, said the company is the dominant brand in the medium grain segment of the total rice category across the Middle East. The Sun White brand, which is sourced entirely from Australia, is available across the Middle East. Sun Rice has other brands, but they are only available in certain markets, rather than across the region. Sun Rice’s biggest markets are Jordan and Saudi Arabia, where a growing population is aiding the market. “There is a natural growth occurring, and certainly in Jordan where the natural demand is for medium grain rice,” Heffernan said. “There is a population growth of 3% and more driving that increase and similar population growth in Saudi Arabia,” he added. “With Saudi Arabia, the medium grain rice is not growing as fast as other rice categories simply because the Saudi Arabian nationals mainly consume the basmati and parboiled rice,” he added. “Only about 20% of our consumer base in Saudi Arabia is nationals. The rest of our consumer mix is expatriate Arabs and Filipinos.” The Levant countries are also experiencing solid growth according to Heffernan. “One of the things we’re seeing is there are still a lot of consumers who are interested in quality. They reflect that through their confidence in a brand that delivers on the quality aspect.” Heffernan added that consumers also seem to be becoming more astute in terms of their buying habits. “No-one should underestimate a consumer, and particularly not housewives who are always looking for what is good for her family,” he said. “Ours has become a leading brand because of its focus on quality and the assurance that consumers have that when they buy it they’re not going to have to pick out sticks, stones and other things.” ||**||

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