x Abu Dhabi, UAEFriday 21 July 2017

Mena's growth lures Unilever, Nestlé and other big multinationals

Rising levels of income and population mean the Middle East and North Africa region is becoming a key region for growth, according to the world's largest consumer-goods manufacturers.

The spending power of shoppers in Egypt and the surrounding region is growing fast, providing new opportunities for companies. Dana Smillie for The National
The spending power of shoppers in Egypt and the surrounding region is growing fast, providing new opportunities for companies. Dana Smillie for The National

Rising levels of income and population mean the Middle East and North Africa (Mena) region is becoming a key region for growth, according to the world's largest consumer-goods manufacturers.

During the height of the revolution in Egypt in 2011, staff at Unilever, the consumer goods multinational, took to the streets to deliver supplies of food and other household basics to people unable to access shops because of the unrest.

The situation illustrates how despite repeated unrest across the region in the past two years, fast-moving consumer goods companies have not abandoned the region. Far from it.

With its booming population and growing affluence, the region has been pinpointed as one of the key areas for expansion against a backdrop of a global economy clouded by stagnant growth in the West and greater risks in other markets.

"The Arab Spring is a social phenomenon, which is not the first social phenomenon we've encountered in the region," said Arijit Ghose, managing director of Unilever Gulf."We haven't done badly as a company [as a result of the Arab Spring] and continue to do well in Egypt, Libya and Tunisia. In Egypt 100 per cent of our business is growing market share."

Together with the Bric nations - Brazil, Russia, India and China - the Anglo-Dutch company has highlighted Mexico, Indonesia, Turkey and the entire Mena region as the engines for consumer sales in the coming years.

Nestlé, a Swiss-based maker of food goods, is equally as focused on the region.

"Despite a sometimes uncertain environment in some of the 13 countries of our region, Nestlé Middle East is an important growth engine of our company globally," said Lynn Alkhatib,the media relations manager at Nestlé Middle East.

The commitment is understandable. In parts of the Middle East, levels of spending on fast-moving consumer goods are as low as US$5 or $6 per head, far below global averages, estimates Mr Ghose.

Even in the wealthier Gulf, where spending is higher, opportunities exist. A population growing at twice the global average along with rising income levels and a booming tourism industry is expected to boost levels of annual food consumption by 0.7 per cent per capita during 2012 to 2017, up from 0.2 per cent per capita over the previous decade, estimates Alpen Capital.

A combined population of more than 186 million make Egypt, Saudi Arabia and Iran the markets consumer goods companies are most excited about. Unilever expects Egypt to become its biggest market in the region in 10 or 15 years.

"The current situation in Egypt is that 50 per cent of the people are rural and 50 per cent are poor. As the bottom of the pyramid improves their lifestyle Egypt has the potential to become the most important market for Unilever," said Mr Ghose.

Egypt is also highlighted as one of the fastest-growing markets for Rani Refreshments, the fizzy drinks producer owned jointly by Coca-Cola and Aujan Industries.

Despite the squeeze to its economy caused by western sanctions, even Iran offers openings. The country has a population of more than 75 million and the sanctions allow for the flow of food and other household items to the country.

Still, challenges remain.

"Our challenge is uncertainty in some of the countries such as political instability, diverse and sometimes fast-changing laws and regulations," said Ms Alkhatib.

But the region holds less risk than other fast-growing consumer markets such as Africa, says Abhik Gupta, the executive director for consumer packaged goods at the information and measurement company Nielsen in the Middle East, North Africa and Pakistan

"The Mena region has as high a growth rate as Africa without the associated risks of Africa," he said. "Compared to Africa, Mena has better infrastructure and by and large is more stable than Africa."

 

tarnold@thenational.ae