Reach for the sky

Professionals in the region’s FMCG sector see great potential in Bahrain’s rapidly developing grocery retail sector.

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By  Roger Field Published  September 7, 2006

|~|200Bahrain.jpg|~|Bahrain's Pearl Monument celebrates the natural pearl, the country's most valuable export before oil was discovered in the country.|~|Bahrain is often overlooked when it comes to the Middle East’s FMCG sector. The country covers just 717 sq km, and has a population of some 770,000 according to figures from 2004. But this has done little to stem the rapid growth of the country’s grocery sector, which is increasingly catching the attention of FMCG professionals in the region. Between 2004 and 2005, Bahrain’s total food and drink sector grew 8.1% to reach a value of US$ 12.1 million, according to market research organisation, ACNielsen. The products that helped create these increases also point to a modernising market; convenience foods including canned food and breakfast cereals experienced particularly rapid growth between 2004 and 2005, of 32.4% and 26.2% respectively. Small and large groceries accounted about 80% to 90% of ACNielsen’s research, followed by mini markets, which make up about 5% to 6%, and the rest is supermarkets, according to George Mikaelian at ACNielsen. Mikaelian added that while Bahrain remains a relatively small market, it is not a market that FMCG companies can neglect. In terms of growth, the country is on par with other GCC countries, he said. Rajkumar Waghnani, general manager of Bahrain’s MegaMart supermarket, which is part of the UAE-based Choithrams group, said the Bahrain grocery market has been growing by about 10% to 15% in 2005 and 2006. This level of growth is accompanied by significant changes in the sector, as strain is put on smaller groceries, and supermarkets and hypermarket become a far stronger force in the retail sector. “The major losers are the semi wholesalers and the small stores which are inconvenient for shopping,” Waghnani said. “They [consumers] want a place where they can conveniently shop and they are going toward that. That is helping medium sized groceries and bigger stores to come in.” Bahrain has a number of well-known supermarkets groups, including Geant, MegaMart, Muntazhar, Fucon and Last Chance. The biggest groups involved in the FMCG sector are Geant, Muntazhar, Fucon and MegaMart. Another Group, Aswaq Al Heli, is also thought to be performing strongly. Aside from Geant, which sells products such as electronics items as well as FMCG, Munazhar, which has 10 outlets, and MegaMart are the biggest grocery retailers in Bahrain, according to Waghnani. Big supermarket groups including Carrefour and LuLu are also setting up in the country, and Aswaq Al Awafi, a local supermarket, has recently opened up a second store in Bahrain, ACNielsen’s Mikaelian added. MegaMart, which employs more than 400 people across its five branches in Bahrain, is actively lookng to open more stores. Waghnani is also convinced that recent levels of growth in the country’s grocery retail sector will continue. “The market is still growing – it has not reached the peaks, so the potentiality is always there in the market,” Waghnani said. And one of the main reasons that there is plenty of growth left in the sector is that some 40% of the trade still lies with smaller groceries – and consumers are increasingly looking to shop in the more dynamic environment offered by larger groceries and supermarkets. “The consumer has become more competent wherein he understands the product, he needs the offers, he needs the pricing, he needs the product range, and youngsters don’t like going to the smaller outlets, they want to have a bigger variety,” Waghnani said. With the retail sector changing and consumers becoming more fickle, Waghnani thinks stores need to adapt to customer needs quickly. “You have to be very competitive because the customer is more educated and more sensible. Now the customers want to know about the products so you have to keep trained people who can respond to the enquiries. It is a competitive market so the pricing does play a major role.” Supermarket groups are not the only companies to be keeping a close eye on Bahrain; food manufacturers are also keen to tap the country’s potential. Sriram Iyer, general manager of distributor Bahrain Trading and Technical, which markets Unilever products worth some US $18 million in the country, said there are various important developments in the country’s FMCG sector. He estimates that sales of branded food goods have been increasing at about 15% or more, compared with single digit growth last year. “Two things driving the growth are increased spending from government workers and also expatriates,” he said. He also points to wider developments in the country, such as the its harbour development, and construction of Bahrain’s world trade centre as contributing to an increase in confidence, investment, and the population – which in turn increases the FMCG sector. “People are starting to believe in Bahrain,” he said. Sriram also points to some large scale retail projects that are taking place in Bahrain at the moment. “Al Futtaim is currently building up a big Carrefour City Centre mall that is expected to be open around 2008. This will be the fourth Carrefour in Bahrain,” he said. “LuLu, from Emke Group, is planning to open three stores in Bahrain in the next six to 12 months. These two big regional players are definitely helping in turning around some healthy business in Bahrain.” He added that Saudi Arabian supermarket group Geant opened another store in the country recently. Geant originally opened in Bahrain in 2001 but has not had the strong impact that players such as Carrefour and LuLu tend to have on market, they enter Sriram said. He added that the market currently lacks the presence of a large player such as Carrfour, which attracts people from all ethnic backgrounds. In Bahrain, the retail trade is more fractured – often along ethnic lines. “We still don’t have one single account or customer or outlet like Carrefour, which should be able to bring in all sections of the population,” Sriram said. “In terms of structure, I still believe there is a lot to do in terms of the market development and in terms of the market itself.” Furthermore, in Bahrain a bigger chunk of the retail sector is made up of smaller groceries than other GCC countries. Some 50% of the trade is made up of smaller groceries, while in the UAE, about 70% of the business comes from modern trade, and 30% from the general trade. There are also more subtle differences between the Bahrain FMCG market and that of some of its GCC neigbours. Siriam said that while the UAE is the most competitive market in the GCC, it is largely driven by promotions. “It has a promotion intensity that is probably not the same as what is required to drive sales in Bahrain at this time,” he said. “But this is also decided by the big retailers who are in the market. The UAE has got Carrefour and other big players that are not there in Bahrain, but once these big players come to Bahrain, they are also going to make sure the market goes in the same direction as the UAE.” Sriram is optimistic about Bahrain’s FMCG sector in the next few years. “I am sure the growth is going to continue and the investments will continue,” he said. “The World Trade Centre will open, and the financial office is going to open. There is no doubt that this will all lead to increased investment.” He added that the transformation to a more modern trade will be rapid. ||**||

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