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THE POULTRY MARKET

IN THE UAE

2012

IMES CONSULTING (MENA) FZ LLC

Loft Building 1, Office 206 Dubai Media City PO Box 500594

Dubai, United Arab Emirates

Tel: +971 4 367 2177 Fax: +971 4 367 8609

Email: [email protected] Website: www.imesconsulting.com

July 2012

©COPYRIGHT by IMES Consulting, July 2012

"The Poultry Market in UAE 2012"

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Copyright owner. Every effort has been made to ensure that the information given herein is accurate, but no legal responsibility is accepted for any errors or omissions in that information and no responsibility is accepted in regard to the standings of any firms or companies or individuals mentioned.

The Poultry Market in the UAE 2012

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TABLE OF CONTENTS Page

PART A: MARKET ENVIRONMENT 1 1. ECONOMIC ENVIRONMENT 1 2. POPULATION AND DEMOGRAPHICS 2 3. LOCAL POULTRY INDUSTRY CAPABILITY AND STRUCTURE 3 3.1 Production Cost 4 3.2 Quality 5 3.3 Disease 5 3.4 Government Support 6 4. DISTRIBUTION OF POULTRY PRODUCTS IN THE UAE 7 4.1 Retail Environment 7 4.2 Foodservice Environment 7 5. KEY SUPPLIER PROFILES 9 5.1 Emirates Modern Poultry Company (EMPCO) 10 5.2 Al Ain Poultry 11 5.3 Arab Poultry Breeding and Production Company (TASIL) 11 5.4 Ras Al Khaimah Poultry & Feeding Company 12 5.5 Federal Foods LLC 12 5.6 EMKE Group 13 5.7 Al Islami Foods 13 5.8 IFFCO-Emirates National Poultry Farm 14 6. REGULATORY ENVIRONMENT 15 PART B: THE MARKET FOR POULTRY 16 1. OVERALL DEMAND LEVELS 16 2. CONSUMPTION PATTERN AND PROJECTED DEVELOPMENT 18 3. LIVE CHICKEN 23


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4. FROZEN CHICKEN (WHOLE & PARTS) 24 4.1 Overall Demand Level 24 4.2 Consumption Pattern& Projected Development 25 4.3 Supply and Distribution 26 4.4 Pricing 35 4.5 Top frozen chicken brands 36 4.6 Comparison of frozen whole chicken and frozen parts by channel weight, origin and share for leading competitors 37

5. CHILLED CHICKEN (WHOLE & PARTS) 40 5.1 Overall Demand Level 40 5.2 Consumption Pattern and Projected Development 41 5.3 Supply and Distribution 42 5.4 Pricing 48 5.5 Top chilled chicken brands 49 5.6 Comparison of chilled whole and chicken parts by channel weight, origin and share for leading competitors 50

6. VALUE ADDED PRODUCTS 52 6.1 Overall Demand Level 52 6.2 Consumption Pattern and Projected Development 54 6.3 Supply and Distribution 54 6.4 Pricing 61 6.5 Top value-added chicken brands 62 6.6 Comparison of frozen and chilled value-added products by channel weight, origin and share for leading competitors 63


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7. POULTRY INDUSTRY CHALLENGES & OPPORTUNITIES FOR THE FUTURE 66 7.1 The ‘’Almarai’’ Effect in the UAE market 66 7.2 The Product/Market strategy of the Saudi Poultry Marketers and the impact on the UAE market 68 7.3 The key issues facing the Poultry markets in the UAE 69 7.4 Product/Market Strategy of Key Players 70 7.5 Compare & Contrast the Saudi market with the UAE 71 7.6 The Future of poultry in UAE 71 Appendix: Contact Details of Key Processors and Importers, 2012 72


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PART A: MARKET ENVIRONMENT 1. ECONOMIC ENVIRONMENT

• The UAE has an open economy with a high per capita income and sizeable annual trade surplus. Extensive government spending on job creation and infrastructure expansion over the last decade have helped to increase the diversity of the economy, such that the UAE is no longer quite as dependent on oil revenues as previously, but much of the country’s GDP is still derived from the petroleum sector and fluctuations in world oil prices still have profound effects.

• Oil prices had risen sharply during 2008 to reach USD 100 per barrel, while

in 2009 oil prices declined to about USD 60 per barrel. There has been some increase in oil prices in 2010 after reducing the oil output to 2.3 million barrels per day in 2010. Overall, the economic outlook for the UAE is very positive at present, especially since oil reserves are expected to last at least another 100 years at current production levels.

Table A1 summarises the development of GDP during the period 2007-2011. Table A1:UAE Key Economic Indicators, 2007-2011

2007 2008 2009 2010 2011

GDP (US$ billion) 258.2 314.8 270.3 311.4 357 GDP per capita (US$) 47,759 50,723 38,955 41,450 45,241

Source: World Bank.



2. POPULATION AND DEMOGRAPHICS

• The UAE is an open multicultural society as a result of a strong expatriate presence. Of the estimated 5.27 million living in the UAE in 2011 around 35% are Indian or Pakistani expatriates, 26% are expatriate Arabs, 24% are local Arabs and the remaining percentage is made up of Far Eastern and European expatriates. More than half of the total population does not speak Arabic.

• Following the slowdown and near stoppage in construction activity many

expatriate male labourers have returned to their home countries. This is particularly the case in Dubai, although in Abu Dhabi there still are many male labourers working in the oil sector.

• Three-quarters of the UAE population lives in urban areas, particularly the

Abu Dhabi and Dubai/Sharjah/Ajman conurbations. Abu Dhabi Emirate, the largest of the seven emirates, can be considered as the most ‘rural’ with 45% of Abu Dhabi’s population living outside the main cities of Abu Dhabi City and Al Ain.

• As the UAE’s oil resources are concentrated in Abu Dhabi, the rest of the

emirates rely on the federal budget, whose resources tend to be spent more on the areas where greater returns can be expected - i.e. in Abu Dhabi, Dubai and Sharjah. There have been increased calls for a ‘fairer’ distribution of the UAE’s resources in favour of the North, and this has now materialised with Abu Dhabi announcing a robust budget for development activities in the Northern Emirates following the widespread unrest that enveloped the neighbouring countries.

Table A2: UAE Population by Emirate, 2007-2011 (‘000) Emirate 2007 2008 2009 2010 2011 Abu Dhabi 1,887 2,003 2,026 2,062 2,101 Dubai 1,470 1,560 1,418 1,450 1,477 Sharjah 784 832 811 839 855 Ajman 294 312 304 311 317 Umm Al-Quwain 73 77 86 88 90 Ras Al-Khaimah 245 260 253 259 264 Fujairah 147 156 167 171 174 Total 4,900 5,200 5,066 5,180 5,277

Source: Ministry of Planning, IMES estimates.



3. LOCAL POULTRY INDUSTRY CAPABILITY AND STRUCTURE

• The UAE poultry industry is made up of the larger scale industrial producers as well as a traditional poultry production sector. The traditional sector is described as being small scale with emphasis on highly localised consumption.

• Table A3 also plots the development of the specialised poultry producers in

recent years. The story is not a happy one and has seen an average annual reduction of 5.8% since 2007. The traditional producers have also dropped by over 14.1% per annum since 2007.

• In total we see that domestic production has fallen since 2007 by an

average rate of over 5.9%.

• The reasons for this reduction are varied, but do include poor animal health, actions taken by the Government to protect consumer health, low profitability, lack of investment and lack of scale.

Table A3: Domestic Production of Chicken, 2007 - 2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Specialised 50,700 63,000 49,000 44,000 40,000 -5.8% Traditional 1,100 950 850 700 600 -14.1% Total 51,800 63,950 49,850 44,700 40,600 -5.9%

Source: Ministry of Environment and Water, IMES estimates.

Share of total 2007 2008 2009 2010 2011 Specialised 97.9% 98.5% 98.3% 98.4% 98.5% Traditional 2.1% 1.5% 1.7% 1.6% 1.5% Total 100% 100% 100% 100% 100%



3.1 Production Cost

• Production costs in the UAE are seen to be a great deal higher than its international competitors, especially Brazil:

• Heavy dependence on imported feed which accounts for up to 70% of

the farming cost;

• Relatively high energy costs due to year round temperature control necessitated by the hot summer climate and cool winters;

• High water charges;

• Dependence on imported medication (disease outbreaks occur frequently);

• High mortality rates, which are typical of relatively small-scale production and expertise, base operating in such a harsh climate;

• Highly competitive market environment where both the grocery

retailing and the HORECA distribution channels are seen as well organised and demanding;

• Lack of economies of scale; • Lack of support from Government in the form of feed subsidy and

grants towards capital equipment upgrading; • Specific actions by Government to disallow consumer price increase

requests (even in light of clearly identified increases in world commodity and feed costs).

• UAE poultry processors spoken to suggest a dramatic reduction in

profitability in the past five years. This lack of profitability has already affected the ability of UAE producers to expand and develop their product offerings.

• The current environment does not encourage dramatic expansion in capacity

or capability in the UAE poultry industry. Unless the current downward trajectory in profitability can be reversed, the UAE poultry producers are likely to remain in a vulnerable condition.



3.2 Quality

• Trade sources claim that consumers prefer imported frozen product to domestic frozen chicken – that they have greater faith in imported product quality. In addition Sadia, the leading imported poultry brand often sells at a similar (or lower price) than local UAE brands. Sadia brand can do this because of its huge scale and also because of its strategy to keep prices lower and thus acting as a barrier to development for the local brands.

• Institutional buyers (the largest users of imported frozen chicken) have also

indicated that regardless of price they prefer to use imported frozen chicken particularly from Brazil. They claim that locally produced frozen broilers contain a high fat and moisture content which causes a high degree of shrinkage and makes the chickens look old when cooked on rotisseries.

• It is somewhat surprising that Brazilian and other poultry imports are

perceived to be of higher quality. While Brazilian logistics and production resources may be of a higher standard, this is counteracted by the quality of feed used in the UAE when compared to Brazil. Typically the UAE producers are required by Government to feed only corn and soya products (and derivatives) to their chickens, while Brazil and others can also feed animal derivatives. It should be expected that this would produce a better quality and tastier chicken for the UAE consumer.

• It is the case that other elements have entered the equation to amend this

expectation or that the logistics, branding and selling of domestic UAE poultry products has not kept pace with its international competitors.

3.3 Disease

• Disease has always been a problem in this market, although the UAE is far from unique in experiencing outbreaks of poultry related disease and indeed other food related scares in recent years.

• The reports of several slaughterhouses in various emirates being closed

down by the health and safety inspectors on several occasions in recent years is a cause for concern.The most common diseases found in the UAE are Newcastle disease (reportedly a major problem for smaller processors), infectious bronchitis, H9N2 variant avian influenza, salmonellosis and caccidiosis. There have also been cases of H5N1 variant avian influenza in recent years.



• Disease is of course a constant threat in the poultry sector and most major producers succumb to outbreaks of one type or another from time to time.

• Hygiene, health and safety are equally important factors that are mostly

under the control of UAE producers. This area has seen many recurring issues and points to a lack of the highest professional standards in management and in adherence to standard operating procedures.

• Perhaps not surprisingly most suppliers are reluctant to discuss their own

experience of disease and hygiene management so it is difficult to gauge the true impact of many of these reported outbreaks and incidents.

• What is not in question is that a combinations of internal and external

factors have come together to see a reduction in UAE poultry production in recent years as identified in Table A3 above.

3.4 Government Support UAE Government policy seems mixed and unclear in a poultry industry context. This is particularly so in comparison to Saudi Arabia where a coherent policy is in place to nurture the industry and counteract its (climatic) disadvantages by providing:

• A subsidy on imported corn and soybean meal (the principal ingredients of chicken meal). The subsidy is adjusted to reflect market conditions and support required by the industry.

• Under a subsidy program started in the 1970’s a 25% cash subsidy is

available towards imports of selected poultry equipment (i.e. feeders, drinkers, grinders, mixers and hatchery equipment). Another subsidy was introduced in 2004 to help producers to construct cold stores, buy refrigerated trucks, screeners, grading and farm packaging equipment.

• Protection against imports by way of a 20% customs duty. However this was

reduced to 5% in June 2009 in line with WTO commitments.

In comparison the UAE seems to have a set of mixed messages for poultry producers. It seems to be the case that there are different support mechanisms in place in different emirates. The emirate of Abu Dhabi seems to have the most developed set of supports for poultry producers, while those operating in the northern emirates complain of unfair treatment, indifference and yet have to deal with a rigorous inspection regime of facilities.



4. DISTRIBUTION OF POULTRY PRODUCTS IN THE UAE 4.1 Retail Environment Table A4: Grocery Retail Value by Outlet Type, 2011 Category Share of Sales Supermarkets /Hypermarkets 52% Other Self-service /Mini Markets 14% Large Grocery 19% Small Grocery 15% Total 100%

Source: IMES estimates.

• The UAE grocery market is seen as the most developed in the GCC from a Modern Trade perspective. Supermarkets and Hypermarkets account for 52% of grocery retail value as shown in Table A4. The UAE has attracted global scale retailers because of the acceptance of the supermarket model.

• In many ways the concentration at the top end of the retail pyramid plays

into the hand of the very large scale-poultry producers. Brands such as Sadia, Doux and Tanmiah can negotiate central agreements and generate selling space in very large and well-organised networks (such as Carrefour, Lulu and the Co-Ops). These brands are familiar with international retail practices from their home markets and have developed sophisticated trade marketing capabilities in response.

• This is often not the case for the local producers. In addition, retailers

spoken to in the UAE complain about lack of consistency among the local UAE brands. They point to supply issues and a lack of professionalism in almost all aspects of the product offering.

4.2 Foodservice Environment

• As a staple food item large quantities of chicken are used in all segments of the foodservice market – from fine dining to labour camps, to institutions and fast food. As the foodservice sector is a very cost sensitive market, operators tend to use frozen chicken which tends to be cheaper and preferably imported frozen chicken which is cheaper still. Government institutions and caterers which supply them are the main exception to this as they are often required to use local chicken for public sector contracts.



TableA5: UAE: Chicken Fast Food Restaurants by Brand, 2011 Brand Number of Outlets KFC 77 SOUTHERN FRIED CHICKEN 30 AL FAROOJ FRESH 27 TEXAS CHICKEN 15 CHICKEN TIKKA 8 MARRYBROWN 8 POPEYES 7 FRESH CHICKEN KING 5 AL TAZAJ 5


• The Quick Service Restaurants (QSRs) identified above are joined by the likes of McDonalds, Burger King and others who offer significant chicken product offerings.

• In addition, the UAE offers thousands of restaurants and hotel dining options

that all serve chicken as the main meat product offering.

• While chilled chicken is often provided to the foodservice sector, it seems that frozen imported chicken once again dominates the supply situation.

• The QSR operators as well as the majority of hotels and restaurants seem to

prefer the convenience of use of frozen imported chicken in their establishments.



5. KEY SUPPLIER PROFILES

• Table A6 shows a breakdown of poultry production in the UAE by supplier (poultry farms/marketing organisations) for 2011.

Table A6: Processors Share of Production by Specialised Farms, 2011

Company Birds Per

Day* (BPD)

Birds Per Annum

Share of Production

(%)

Emirates Modern Poultry Co (EMPCO) 40,064 12,500,000 20.3% Al Ain Poultry 32,051 10,000,000 16.3% Al Khazna Poultry 22,436 7,000,000 11.4% Arab Poultry Breeding and Production Co (Tasil) 16,026 5,000,000 8.1% Ras Al Khaimah Poultry Farm 16,026 5,000,000 8.1% Arab Poultry Production Co (Farouj Al-Wadi) 12,821 4,000,000 6.5% Al Rahba LLC/Liwa Poultry Farm 11,218 3,500,000 5.7% Abu Dhabi Modern Poultry Farm 9,615 3,000,000 4.9% National Poultry Production Co 8,013 2,500,000 4.1% Biladi Chicken Farm 3,205 1,000,000 1.6% Emirates Poultry Farm 3,205 1,000,000 1.6% Unifood Poultry Farm 3,205 1,000,000 1.6% Village Poultry Farm 3,205 1,000,000 1.6% Other 16,026 5,000,000 8.1% Total 197,115 61,500,000 100%

* assumed at 312 days production per annum. Note: Some minor inconsistencies due to rounding error. Source: UAE Ministry of Environment and Water, IMES estimates.

• Some of the largest UAE producers have experienced specific supply issues in recent years brought about by disease and hygiene management issues. This has led to a lack of confidence in some local suppliers and has curtained the development of the overall industry in the UAE.

• The largest producer (EMPCO) has had its share of difficulties and its

Rawdah brand has suffered as a consequence of supply curtailments.

• It is interesting to note the relatively even split between the southern emirates and the northern emirates in terms of poultry production. For example, the largest producer (EMPCO) is situated in the Dubai Emirate while Al Ain (the second largest) is based in the southern emirates.



• This may suggest a more complicated feed subsidy regime than is presented by the producers (i.e. that the southern emirates get more support from Government than is the case in the northern emirates).

• The reality is that none of the current UAE producers are of significant scale at the present time. EMPCO, the biggest producer currently operates at 40,000 birds per day. In comparison the largest Saudi producers (Watania, Almarai etc.) are currently (or planning to process) over 1 million birds per day.

• The owners of the Sadia brand in Brazil slaughter and process several million birds per day.

5.1 Emirates Modern Poultry Company (EMPCO)

P.O. Box 4316 Dubai UAE

T: +971 4 832 6565

F: +971 4 832 6774 E: [email protected] W: www.empcouae.com

Emirates Modern Poultry Company was founded in 1990 and is based in Dubai, UAE. In 2000, the company merged Al Rawabi Dairy Company and now operates as a subsidiary of Emirates Rawabi PJSC. Primary activities include poultry farming and slaughtering, and poultry products processing and trading business under the brand name Al Rawdah and Al Salwah. It was the first company in the Middle East certified for ISO 22000 Food Safety Management System in poultry farming in 2007. EMPCO has a production capacity of 12.5 million birds per annum making it the biggest local poultry producer in the UAE contributing a share of 20.3% on domestic poultry production in 2011.



5.2 Al Ain Poultry P.O. Box 16021 Al Ain, UAE T: +971 3 782 6022 F: +971 3 782 7851 E: [email protected] W: www.alainpoultry.com

• Established in 1981, Al Ain Poultry is the second largest poultry company in

the UAE with an annual production capacity of 10 million birds per year (32,051 birds per day). In 2011, it contributed 16.3% on domestic poultry production in the UAE.

5.3 Arab Poultry Breeding and Production Company (TASIL)

Shoka Kadra Street P.O. Box 28658 Sharjah, UAE T: +971 6 882 8222

F: +971 6 882 8666

E: [email protected] Established in 1997, the company is a subsidiary of Arab Company for Livestock Development (Acolid), a pan-Arab joint stock company established in 1974 as a pioneer with leading role in livestock development fields. Shareholders are twelve Arab states. Other subsidiaries include: The Arab Company for Poultry Production/Farouj Al-Wadi (UAE), Arab Saudi Company for Poultry Production/ Al Asyah (KSA), Takamul Company for Poultry Production (KSA), The Arab company for Manufacturing of cattle & Poultry Equipment (UAE), The Arab Company for Animal Production/Al Digdaga (UAE), Arab Qatari Company for Dairy Production/Ghadeer (Qatar), and The Arab Qatari Company for Poultry Production Doha (Qatar). Tasil’s major shareholders are Syria’s Arab Company for Livestock and Development (70%) and the Government of Sharjah (30%). Its annual broiler production capacity is 5 million birds accounting to 8.1% of the total domestic poultry production in the UAE in 2011. Its hatchery on the other hand, has an annual capacity of 25 million parent eggs and parent hatching eggs unit with annual capacity of 6 million chicks.



5.4 Ras Al Khaimah Poultry & Feeding Company P.O. Box 184, Ras Al Khaimah, UAE T: +971 7 246 2222 F: +971 7 246 222 E: [email protected] W: www.rapco.co.ae

Ras Al Khaimah Poultry & Feeding Co. is a public shareholding company engaged in the construction and purchase of poultry farms and in the trade of chicken meat and eggs, as well as carrying out investment fund placements. The company’s project is spread over an eight million square meters plot of land located in the Digdaga area of Ras Al Khaimah. The Company holds a 50% stake in RAK Packaging Limited LLC, a subsidiary set up to manufacture and import papers, cartons and related products. It started its poultry production in 1980 and egg production in 1983. RAK Poultry’s production capacity is estimated at 5 million birds per annum having a share of 8.1% on the overall domestic poultry production in the UAE in 2011, while layer production is at 16 million table eggs per year. The company has 10 sales centres and three branch offices for the distribution. 5.5 Federal Foods LLC

P.O Box 54066, Al Quoz Industrial Area, Dubai, UAE T: 971 339 0005

F: 971 339 0032

E: [email protected] W: www.federalfoods.com

Federal Foods was established in 1991. It is a subsidiary of Al Nowais Investments LLC, a privately owned UAE conglomerate with diverse business portfolio including energy & contracting, technology & telecommunication, healthcare & medical and food & consumer goods. It has three strategic business units: (1) Retail – modern trade, co-operatives, traditional trade and direct selling (cash vans); (2) Food service – hotels, restaurants, catering, and bakeries; and (3) wholesale. Federal Foods is the exclusive distributor of Sadia products in the UAE.



5.6 EMKE Group P.O.Box 4048, Abu Dhabi, UAE T: +971 2 6421800 F: +971 2 6421716 E: [email protected]

The FMCG distribution and trading operations of EMKE Group are handled by four HACCP certified companies: EMKE Stores, EMKE General Trading, Al Tayeb Cold Stores and Al Tayeb Meat Establishment. EMKE is one of the major distributors of Doux, Frangosul, Tyson and A’Saffa poultry products in the UAE. 5.7 AL ISLAMI Foods

Al Islami Foods P.O.Box: 3922 Dubai, UAE T:+971 4 885 3333 F: +971 4 885 2333 Website: www.alislamifoods.com

The AL ISLAMI story must be seen as a success story for poultry in the UAE. This company’s poultry operations concentrate on the processing and marketing of value-added poultry and meat products. Much of the raw materials used by AL ISLAMI are sourced in Brazil with further processing taking place in Dubai. The company has been able to develop export markets over the years. The major focus of AL ISLAMI is on frozen chicken products. The company has been able to convince authorities and consumers in the UAE and beyond that its sourcing and production methods warrant a price premium for its products – this is considered to be a significant marketing success and clearly adds to the company’s overall financial performance.



5.8 IFFCO-Emirates National Poultry Farm Al Ain Zip Code: 23456 City of Abu Dhabi T: +971 3 7372014, +971 3 7372037

Over the last three decades, IFFCO has developed brands that have built a strong market share in the United Arab Emirates by offering their customers good value for money. IFFCO is a leader in the fresh Halal Chicken segment with “Al Khazna Fresh Chicken” and “Khaleej Farm Fresh Eggs” are proven brands introduced by IFFCO in order to pass on the company’s expertise in fresh, quality poultry produce to its health conscious consumers. IFFCO has proven to be innovative in terms of entering joint ventures in the UAE and in Oman. In addition it has used good key account management practices to become a reliable and trusted supplier to the modern retail trade in the UAE. IFFCO is seen as the third largest producer in the UAE – with about 7 million birds produced per annum and accounts for just over 11% of UAE annual production.



6. REGULATORY ENVIRONMENT

• The regulatory environment in the UAE is considered to be quite helpful by both producers and consumers of chicken.

• Much of the regulatory environment is similar to that encountered in the

much larger poultry industry in Saudi Arabia – from a disease control and public health standpoint.

• However the authorities in the UAE do not provide as comprehensive a

package of financial support and assistance to the industry as is seen in Saudi Arabia.

• In a Saudi context, the poultry industry is seen as a major source of growth

and a policy has been adopted to support the industry in a myriad of ways. These include significant feed subsidies, capital investment supports, water and electricity supports, diesel subsidies and a supportive regulatory framework.

• In the UAE the situation is rather different. Subsidies are not nearly as

widespread and the various emirates seem to have adopted different priorities in relation to the poultry sector.

• For example, it would seem that the authorities in the northern emirates are

more concerned with public health issues (disease control, hygiene issues) while the southern emirates seem to provide more financial support to producers.

• It is not clear whether the UAE has a coherent regulatory strategy that is in

line with the Government’s development plans for the sector. Indeed it could be said that there is currently no coherent development strategy in place in the UAE for poultry.

• In many ways this is similar to a comparison between Saudi Arabia and the

UAE in other food product sectors. For example, Saudi Arabia has a highly developed dairy industry that has grown rapidly over the past thirty years in a highly growth conducive regulatory environment. This has seen the development of a vibrant dairy sector that has resulted in a reduction of imported dairy product and indeed to the development of a thriving export market for Saudi dairy products (including the UAE). A similar strategy seems to have developed in relation to poultry in Saudi.

• In comparison to Saudi, the UAE seems to be unsure whether it makes

sense to have a strong poultry sector. This is an understandable dilemma but does lead to uncertainties in the minds of producers and makes development more difficult.



PART B: THE MARKET FOR POULTRY 1. OVERALL DEMAND LEVELS Poultry species commonly consumed by humans include turkey, duck, goose, quail and pigeon as well as chicken. Poultry other than chicken in the UAE accounts for less than 2% in volume terms of the total UAE market. Thus, when referring to poultry in this report IMES will consider only chicken and chicken products. These include:

• Live chicken • Frozen chicken (whole, parts and further processed) • Chilled chicken (whole, parts, and further processed) • Value-added chicken (e.g. burgers, nuggets, sausages)

Table B1: Estimated Consumption of Chicken, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

2011 Retail Value

(AED million) Domestic 51,800 63,950 49,850 44,700 40,600 -5.9%

Imported 312,900 314,446 308,700 319,500 336,500 1.8%

Less: (Exports) (55,090) (65,731) (57,100) (32,200) (26,400) -16.8%

Total 309,610 312,665 301,450 332,000 350,700 3.2%

Less: Traditional Sector (21,882) (22,704) (17,928) (18,210) (15,084) 8.9%

Commercial Poultry Consumption

287,728 289,961 283,522 313,790 335,616 3.9% 4,286

Source: Ministry Of Environment & Water, UAE Federal Customs, IMES estimates.

Share of total 2007 2008 2009 2010 2011 Domestic 14.2% 16.9% 13.9% 12.3% 10.8% Imported 85.8% 83.1% 86.1% 87.7% 89.2% Total 100% 100% 100% 100% 100%

• Table B1 provides a useful picture of the recent consumption of poultry in the UAE. Domestic supply of chicken products fell by 3.5% per annum on average since 2007.



• Imports have seen an increase of about 1.8% per annum over the same period. Imports dominate supply accounting for more than 89% of total market consumption.

• Exports have fallen at an average rate of nearly 14% per annum while the traditional sector has also seen a fall of 7% per annum on average.

• Total commercial supply of chicken has increased at an average rate of 2.5% per annum since 2007.

Table B2: Market Segmentation by Distribution Channels, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

HORECA 164,151 168,887 166,110 185,186 200,660 5.1% Retail 86,480 86,813 84,309 90,241 92,190 1.6% Food Processing 37,097 34,262 33,103 38,363 42,766 3.6% Total 287,728 289,961 283,523 313,790 335,616 3.9%


2007 2008 2009 2010 2011

HORECA 57% 58% 59% 59% 60% Retail 30% 30% 30% 29% 27% Food Processing 13% 12% 12% 12% 13% Total 100% 100% 100% 100% 100%

• The HORECA dominates the UAE chicken market accounting for 60% of market volumes in 2011. Retail Grocery follows on with a 27% share, while Food Processing accounts for 13% of consumption.

• HORECA share has been growing at over 5.1% per annum on average, while

retail sales have grown at 1.6% per annum on average since 2007.

• Food Processing consumption has grown at over 3.6% per annum over the same period.



2. CONSUMPTION PATTERNS AND PROJECTED DEVELOPMENT Chicken is a staple source of protein and an integral part of the diet of all groups within the UAE population. It is popular with all age groups and consumers at all income levels. The Co-operative Society for Poultry Producers claim that chicken meat accounts for some 65% of the UAE’s total meat supply. Poultry consumption per capita has grown strongly in recent decades from an estimated 30 kg in 1979 to about 44 kg per capita in 2011. This is among the world’s highest consumption levels. The very high per capita consumption can be attributed to a number of factors:

• Pork is not generally produced and consumed in the UAE for religious reasons;

• Chicken meat is substantially cheaper than beef and lamb.

There is a small but growing local poultry industry and there is ready access to imported product. Clearly the UAE consumer is prepared to pay a price for chicken that ensures adequate supplies of chicken from the local producers with the vast bulk of product provided by imports. The UAE consumer prefers a white skinned chicken, believing that yellow skinned birds look unhealthy while a bland taste is preferred so that the cook can add flavour. Chicken meat consumption is seasonal and declines:

• during Ramadan - the Muslim fasting month;

• around Hajj (when lamb consumption is more traditional);

• during the summer vacation period when a large number of both locals and expatriates leave the country.



Table B3: Consumption of Chicken per Capita in the GCC (Kg)

2005 2015 (f)

UAE 42.1 46.3 Kuwait 57.1 60.0 Saudi Arabia 38.5 42.4 Bahrain 35.0 38.5 Qatar 28.7 37.2 Oman 15.4 18.5

Source: FAO.

• While the figures in table B3 are from the FAO they should be taken only as an indicative assessment of the UAE poultry situation. It is clear that the per capita includes both the population of the UAE as well as visitors. It is possible to say that the UAE has a very high per capita chicken consumption market. Indeed according to the FAO the UAE per capita consumption is higher than Saudi Arabia and significantly higher than Oman.

Table B4: Consumption of Chicken by Shelf Life, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Frozen 211,031 221,342 220,035 249,933 270,925 6.5% Chilled 69,403 68,619 63,487 63,857 64,691 -1.7% Total 280,434 289,961 283,523 313,790 335,616 4.6%


Share of total 2007 2008 2009 2010 2011 Frozen 75.3% 76.3% 77.6% 79.6% 80.7% Chilled 24.7% 23.7% 22.4% 20.4% 19.3% Total 100% 100% 100% 100% 100%

• Table B4 provides a split of market volumes between frozen and chilled chicken. Frozen Chicken dominates accounting for 81% of 2011 market volumes, while Chilled Chicken accounts for 19%.

• Frozen chicken saw an average annual increase of over 6.5% per annum

since 2007.

• Chilled Chicken has seen an annual decline of 1.7% since 2007. This fall in chilled consumption is counter-intuitive and is a result of the supply issues faced by the UAE producers over the past five years.



Table B5: Consumption of Chicken by Type and Source, 2007-2011 (tonnes) Supply 2007 2008 2009 2010 2011 CAGR Commercial Supply

Chilled Whole 48,943 46,543 41,556 40,089 39,266 -5.4% Local Production 38,665 36,303 32,206 30,267 29,253 -6.7% Imports 10,278 10,239 9,350 9,822 10,013 -0.7% Frozen Whole 173,524 186,171 177,160 176,610 185,109 1.6% Local Production 11,800 12,101 9,744 8,830 8,330 -8.3% Imports 161,725 174,070 167,416 167,779 176,779 2.3% Parts (Chilled & Frozen) 94,822 102,167 98,601 101,976 107,474 3.2% Local 4,741 4,904 4,437 4,079 3,762 -5.6% Imports 90,081 97,263 94,164 97,897 103,712 3.6% Live 7,294 0 0 0 0 0% Value Added 18,235 20,812 23,306 27,315 30,168 13.4% Local 6,747 7,908 9,089 10,926 12,369 16.4% Imports 11,488 12,903 14,217 16,389 17,799 11.6% Total 342,818 355,692 340,623 345,990 362,016 1.4% Adjustment (for exports) (55,090) (65,731) (57,100) (32,200) (26,400) -16.8% Commercial Poultry Consumption 287,728 289,961 283,523 313,790 335,616 3.9%

Traditional Sector 21,882 22,704 17,928 18,210 15,084 -8.9% Total Consumption 309,610 312,665 301,450 332,000 350,700 3.2%

Note: Minor discrepancies due to rounding. Source: IMES estimates.

• Table B5 provides a complete Market Map of the chicken market in the UAE. It is possible to follow the development of major chicken products and formats by reference to this map.

• In many ways this provides a quite stable picture of a market that is hugely

dependent on imported product (mostly from Brazil, the USA and France). It is possible to plot the decline in local supplies and the ability of imports to pick up the void left behind by the downward trend in local supply.



Table B6: Forecast Consumption of Chicken by Shelf Life, 2012-2016 (tonnes)

2012 2013 2014 2015 2016 CAGR

Frozen 286,394 290,199 301,560 313,024 326,429 3.3% Chilled 67,269 68,654 71,056 73,587 75,034 2.8% Total 353,663 358,853 372,616 386,611 401,463 3.2%


Share of total 2012 2013 2014 2015 2016 Frozen 81% 80.9% 80.9% 81% 81.3% Chilled 19% 19.1% 19.1% 19% 18.7% Total 100% 100% 100% 100% 100%

• Table B6 sees a continuation of the dominance of frozen chicken to 2016. The total market volumes will grow at an average of 3.2% to 2016, while frozen will grow at 3.3% and chilled will grow at 2.8% per annum to 2016.



Table B7: Forecast Consumption of Chicken by Type and Source, 2012-2016 (tonnes) Supply 2012 2013 2014 2015 2016 CAGR Commercial Supply

Chilled Whole 38,957 39,585 40,482 40,990 40,235 0.8% Local Production 28,828 28,501 28,945 29,103 28,164 -0.6% Imports 10,129 11,084 11,537 11,887 12,070 4.5% Frozen Whole 197,144 200,325 204,866 207,435 211,232 1.7% Local Production 7,886 7,612 7,170 6,223 5,281 -9.5% Imports 189,258 192,713 197,695 201,212 205,951 2.1% Parts (Chilled & Frozen) 114,115 115,957 118,516 122,071 129,262 3.2% Local 3,423 3,247 2,726 2,441 2,327 -9.2% Imports 110,692 112,710 116,145 119,630 126,936 3.5% Live 0 0 0 0 0 0.0% Value Added 33,448 35,987 40,753 47,115 50,734 11.0% Local 13,713 14,754 16,301 17,904 18,264 7.4% Imports 19,734 21,232 24,452 29,211 32,470 13.3% Total 383,663 391,853 404,616 417,611 431,463 3.0% Adjustment (for exports) (30,000) (33,000) (32,000) (31,000) (30,000) 0.0% Commercial Poultry Consumption 353,663 358,853 372,616 386,611 401,463 3.2%

Traditional Sector 9,838 7,997 11,228 10,708 9,706 -0.3% Total Consumption 363,500 366,850 383,844 397,319 411,169 3.1%

Note: Minor discrepancies due to rounding. Source: IMES estimates.

• Table B7 provides a forecast of consumption and source of chicken to 2016. This table suggests that the development of the market will follow a similar trend to what has been seen in recent times – with no major changes in either source (local versus imports) or destination of supplies (HORECA, Retail and Food processing).



3. LIVE CHICKEN Table B8 below shows estimated consumption of live chicken over the period 2007 to 2011: Table B8: UAE: Estimated Consumption of Chicken, 2007-2011(tonnes)

2007 2008 2009 2010 2011

Live 7,294 0 0 0 0 0 Source: IMES estimates.

• Until recent years there was a strong trade in live chickens in the UAE. Live birds were supplied to “chicken shops” where broilers were slaughtered on the spot and then immediately processed according to consumer requirements. There were several hundred live chicken retail stores in the UAE.

• For many years the government was concerned with hygiene aspects of the

live trade and gradually tightened regulations on the business. To help control the spread of disease such as Newcastle Disease the Ministry of Agriculture banned transportation of live chickens from one region to another in 2005. This also reduced the high chicken mortality experienced in transportation. Subsequently all poultry producers were forced to establish slaughtering houses and a ban was imposed on new shops selling live chicken. However, the inevitable decision was delayed because of the adverse economic impact on both retailers and their suppliers, many of which were small poultry farmers. Finally to reduce the risk of possible human infection with poultry related diseases, the relevant Ministries banned the sale of live chickens within the UAE from 2007. While it is likely that ‘live’ sales continue in rural areas particularly among traditional suppliers, this practice is now effectively finished as far as the major commercial suppliers are concerned.



4. FROZEN CHICKEN 4.1 Overall Demand Level Table B9: Overall Frozen Chicken Consumption by Product Type, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Whole 145,428 152,648 148,039 160,188 171,645 4.2% Parts 57,127 59,385 59,467 70,633 77,003 7.8% Value added 8,476 9,309 12,530 19,112 22,277 27.3% Total 211,031 221,342 220,035 249,933 270,925 6.5%


Share of total 2007 2008 2009 2010 2011 Whole 68.9% 69.0% 67.3% 64.1% 63.4% Parts 27.1% 26.8% 27.0% 28.3% 28.4% Value added 4.0% 4.2% 5.7% 7.6% 8.2% Total 100% 100% 100% 100% 100%

• Frozen Whole Chicken dominates the frozen market accounting for 63.4% of consumption. Frozen Parts account for 28.4%, while Value Added products account for 8.2% of the frozen chicken market in the UAE.

• However, Value Added products have grown at over 27.3% per annum on

average since 2007, while Parts have grown at over 7.8% and Whole Chicken has grown at 4.2% per annum.

• The overall frozen chicken market has grown at 6.5% per annum on average

since 2007.

• TableB10 below and the remainder of section 4 will deal with frozen whole and frozen parts chicken only.

• Frozen value-added products will be covered in section 6 of this report.



Table B10: Estimated Consumption of Frozen Whole and Chicken Parts, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR 2011 Retail

Value (AED million)

Frozen 202,555 212,033 207,506 230,820 248,648 5.3% 2,859 Source: IMES estimates.

4.2 Consumption Pattern Table B11: Frozen Whole and Chicken Parts by Distribution Channels, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

HORECA 117,482 125,099 124,503 140,800 154,162 7.0% Retail 60,767 59,369 56,026 57,705 57,189 -1.6% Food Processing 24,307 27,564 26,976 32,315 37,297 11.3% Total 202,555 212,033 207,506 230,820 248,648 5.3%


Share of total 2007 2008 2009 2010 2011 HORECA 58% 59% 60% 61% 62% Retail 30% 28% 27% 25% 23% Food Processing 12% 13% 13% 14% 15% Total 100% 100% 100% 100% 100%

• Table B11 provides an analysis of frozen whole and parts by distribution channel since 2007.

• While overall frozen whole and chicken parts’ volumes grew at an average

5.3% since 2007, HORECA volumes have grown at 7%, Retail by -1.6% and Food Processing at 11.3% on average per year.



4.3 Supply and Distribution 4.3.1 Domestic Supply Table B12 shows a breakdown of domestic supply of frozen chicken for both whole and parts in 2011: Table B12: Domestic Supply of Frozen Whole and Chicken Parts, 2011 Supplier Share (%) Emirates Modern Poultry Co (Al Rawdah, Al Salwah) 34% Al Islami Foods (Al Islami) 32% Al Ain Poultry (Al Ain Chicken) 9% IFFCO/Emirates Poultry Farm (Al Khazna) 9% Arab Poultry Breeding and Production Co (Tasil) 8% Ras Al Khaima Poultry Farm (Rapco) 5% Other 3% TOTAL 100% Total Domestic Frozen Chicken (tonnes) 10,236


• Al Islami is classified here as a local UAE brand even though its product in this category is all imported from Brazil. The domestic production of frozen whole and parts is relatively small at 10,236 tonnes and is dominated by EMPCO and by Al Islami in 2011.

4.3.2 Imports The UAE is heavily dependent on supplies of frozen whole and parts. In 2011 238,412 tonnes were imported while 10,236 tonnes were produced locally. Table B13 below shows a breakdown of frozen poultry imports (whole and in parts) by brand for 2011.



Table B13: Leading Imported Brands - Frozen Whole and Chicken Parts, 2011 Supplier/Brand Share Sadia 41.3% Other Brazilian brands 27.6% Tyson 13.3% Other American brands 5.7% Doux 1.7% Frangosul 1.3% Sabco 0.9% Other French brands 0.4% Total French-owned brands 4.3% Al Watania 3.1% Other Saudi brands 0.8% A'Saffa 1.4% Other Omani brands 0.9% Other 1.6% TOTAL 100% Total Imported Frozen Chicken (tonnes) 238,412


• Brazil (69%) and the USA (19%) dominate frozen supply with 88% of the market in the UAE in 2011.

• French owned brands (Doux, Sabco and Frangusol) account for a further

4.3% of supply.

• Saudi and Omani brands account for much of the remainder.



Table B14: Overall Leading Brands – Frozen Whole and Chicken Parts, 2011 Supplier/Brand Share Sadia 39.6% Other Brazilian brands 26.5% Tyson 12.8% Other American brands 5.5% Al Watania 3.0% Other Saudi brands 0.8% Doux 1.6% Frangosul 1.2% Sabco 0.9% Other French brands 0.4% Total French-owned brands 4.1% Emirates Modern Poultry Co (Al Rawdah, Al Salwah) 1.4% A'Saffa 1.3% Other Omani brands 0.9% Al Islami Foods 1.3% Al Ain Poultry 0.4% IFFCO/Emirates Poultry Farm 0.4% Arab Poultry Breeding and Production Co (Tasil) 0.3% Ras Al Khaimah Poultry Farm (Rapco) 0.2% Other (Domestic) 0.1% Other (Imported) 1.5% TOTAL 100% Total Frozen Chicken Products (tonnes) 248,648

Source: IMES research.

• Table B14 provides a historical perspective on all the major brands in the frozen whole and parts market.

• As expected the situation remains dominated by imports and especially from Brazil and the USA.

• This next section provides more insights into where the frozen whole and chicken parts come from and an assessment of the differing focus among the major importing countries – in terms of market, product and channel focus.



Table B15: Source of Imported Frozen Whole and Chicken Parts, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Brazil 135,827 154,255 164,266 10.0% US 34,449 40,767 45,298 14.7% France 13,780 11,018 9,536 -16.8% Saudi Arabia 7,874 7,052 6,676 -7.9% Oman 2,953 3,526 4,053 17.2% Other 1,969 3,746 8,583 108.8% Total 196,851 220,364 238,412 10.1%


Share of total 2009 2010 2011 Brazil 69.0% 70.0% 68.9% US 17.5% 18.5% 19.0% France 7.0% 5.0% 4.0% Saudi Arabia 4.0% 3.2% 2.8% Oman 1.5% 1.6% 1.7% Other 1.0% 1.7% 3.6% Total 100% 100% 100%

• Table B15 provides a three-year history of volumes supplied to the UAE market by importing country. Brazil and the USA dominate and both have shown increased volumes into the UAE market in 2010 and in 2011.

• On the other hand, France has shown a decline in frozen chicken volumes in

the same period. While imports from Saudi have remained fairly constant, Oman has made some progress - but Oman remains a minor supplier.

4.3.5 Imports Analysis by Leading Countries of Origin This section takes a look at key importing countries and whether their emphasis is placed on frozen whole or parts. In addition the channel emphasis is studied for the major importing countries.



Brazil Table B16: Imports of Frozen Chicken from Brazil by Product Type, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Frozen Whole 115,510 127,554 139,980 10.1% Frozen Parts 20,318 26,701 24,286 9.3% Total 135,827 154,255 164,266 10.0% % of Total Frozen Chicken Imports 69% 70% 68.9%

Source: IMES research


• Table B16 provides a summary of the Brazil supply trend by product as well as its emphasis by channel. Brazil dominates in whole frozen chicken but is also very strong in frozen parts. In addition, Brazil is hugely strong in all distribution channels and its sales volumes reflect the overall market channel distribution – with HORECA accounting for 63% of Brazil frozen chicken volumes.



United States Table B17 Imports of Frozen Chicken from US by Product Type, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Frozen Whole 2,783 4,555 4,912 32.9% Frozen Parts 31,666 36,212 40,387 12.9% Total 34,449 40,767 45,298 14.7% % of Total Frozen Chicken Imports 17.5% 18.5% 19%



• Table B17 for the USA provides quite a different picture to that of Brazil. The USA concentrates heavily on the classic Leg Quarter product, much favoured by HORECA customers. IMES is told that the USA producers can offer these Leg Quarters to markets such as the UAE at very competitive prices given the emphasis in the US market for Breast and other premium cuts – thus making Leg Quarters surplus to requirements and available in huge quantities to export markets in the Middle East and elsewhere.



France Table B18: Imports of Frozen Chicken from France by Product Type, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Frozen Whole 11,133 9,870 9,005 -10.1% Frozen Parts 2,646 1,148 532 -55.2% Total 13,780 11,018 9,536 -16.8% % of Total Frozen Chicken Imports 7% 5% 4%



• Table B18 provides an insight into French priorities to the UAE market.

Whole frozen chicken dominates and it seems as if the emphasis on frozen parts has fallen in the past three years. The French brands seem to emphasise the retail market – accounting for 65% of imports in 2011.



Saudi Arabia Table B19: Imports of Frozen Chicken from Saudi Arabia by Product Type, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Frozen Whole 6,263 6,074 6,221 -0.3% Frozen Parts 1,611 978 454 -46.9% Total 7,874 7,052 6,676 -7.9% % of Total Frozen Chicken Imports 4% 3.2% 2.8%



• Table B19 provides a three-year history of Saudi imports into the UAE. Not a

lot of change in evidence with a relatively constant performance – with a strong emphasis on whole frozen chicken.



Oman Table B20: Imports of Frozen Chicken from Oman by Product Type, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Frozen Whole 2,088 3,037 3,274 25.2% Frozen Parts 865 489 779 -5.1% Total 2,953 3,526 4,053 17.2% % of Total Frozen Chicken Imports 1.5% 1.6% 1.7%



• Table B20 provides a summary of the Omani frozen imports to the UAE since 2009. Oman is seen as a small supplier that has made some market progress – but from a low base.



4.4 Pricing of Selected Frozen Chicken Products, 2011 Table B21: Average Retail Prices of Frozen Chicken, 2011

Brand/Producers Product Weight Average Retail

Price (AED)

SADIA

Whole Chicken 1Kg 11.80 Wings 900g 18.75 Thighs 900g 18.45 Half Breast 450g 18.00

DOUX Whole Chicken 1Kg 11.75 Drumsticks 1Kg 11.46 Chicken Wings 1Kg 13.49

FRANGOSUL Whole Chicken 1Kg 10.73 Whole Chicken 900g 9.25 Wings 1Kg 13.50

AL WATANIYA Whole Chicken 1Kg 10.81 Whole Legs 1Kg 18.90

AL ISLAMI

Whole Chicken 1.3Kg 19.50 Whole Legs 900g 18.90 Thighs 900g 19.78 Wings 900g 24.75

A'SAFFA Whole Chicken 1Kg 13.00 Source: Retail Audit, IMES.

• Table B21 provides a 2011 snapshot of typical retail prices for various frozen chicken products. It is interesting to note the wide range of prices for whole frozen chicken. Al Islami is seen as commanding a very high price, while Saudi products seems to be at a slight discount to Sadia and Doux brands

• IMES has heard about the razor-thin margins to be earned on imported

frozen chicken into the UAE. This seems odd and if margins are solow in the UAE then why do well-organised global chicken suppliers continue to serve the market. It seems as if the Brazilians and the Americans have developed well-honed strategies that allow them to operate successfully in the UAE market.

• Indeed, rather than reducing their focus on the UAE market it seems as if

the major suppliers are increasing their emphasis and investment.



• This suggests to IMES that the UAE market remains a highly attractive market to those suppliers who have developed a sound product/market strategy and who have organised themselves accordingly.

• Sadia as an example is currently finalising a major investment in Dubai and

has developed its distribution capabilities in Saudi dramatically in the past three years. Supreme Foods, out of Saudi has opened a value-added poultry plant in Dubai (November 2011).

• A leading Saudi supplier has told IMES that the margins to be enjoyed in the

UAE market are higher than in Saudi – provided you have the right products, logistics and distribution.

• It does need to be emphasised that the relevant authorities in the UAE have

made it increasingly difficult to implement price increases – especially in the (politically sensitive) retail markets. Therefore suppliers of chicken, along with bread, rice, dairy and other food staples are encountering stiff objections to even well-founded price increase requests.

4.5 Top Frozen Chicken Brands Table B22: Top Frozen Chicken Brands – Whole and Parts, 2011 Supplier/Brand % share Sadia 39.6% Tyson 12.8% Al Watania 3.0% Doux 1.6% Emirates Modern Poultry Co 1.4% A'Saffa Foods 1.3% Al Islami Foods 1.3% Frangosul 1.2% Sabco 0.9% Al Ain Poultry 0.4% IFFCO/Emirates Poultry Farm 0.4% Arab Poultry Breeding and Production Co (Tasil) 0.3% Ras Al Khaimah Poultry Farm (Rapco) 0.2% Other brands 35.6% TOTAL 100% Total Frozen Products (tonnes) 248,648




• Table B22 looks at the major importer brands of frozen whole and parts. As expected, the situation is dominated by Sadia and Tyson.

4.6 Comparison of frozen whole chicken and frozen parts by channel

weight, origin and share for leading companies

• This section takes a look at frozen whole and frozen parts separately. The report highlights where each product comes (origin) from and also what channel in the UAE market it ends up in.

Table B23: Supply of Frozen Whole Chicken by Origin, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Domestic 8,870 8,338 7,926 -5.5% Brazil 115,510 127,554 139,980 10.1% US 2,783 4,555 4,912 32.9% France 11,133 9,870 9,005 -10.1% Saudi Arabia 6,263 6,074 6,221 -0.3% Oman 2,088 3,037 3,274 25.6% Other 1,392 759 327 -51.5% Total 148,039 160,188 171,645 1.1%


Share of total 2009 2010 2011 Domestic 6.0% 5.2% 4.6% Brazil 78.0% 79.6% 81.6% US 1.9% 2.8% 2.9% France 7.5% 6.2% 5.2% Saudi Arabia 4.2% 3.8% 3.6% Oman 1.4% 1.9% 1.9% Other 0.9% 0.5% 0.2% Total 100% 100% 100%

• Brazil and France are seen to dominate frozen whole chicken imports. However it must be stated that Brazil is by far the dominant single country in terms of volume.



Table B24: Supply of Frozen Chicken Parts by Origin (tonnes)

2009 2010 2011 CAGR

Domestic 1,784 2,119 2,310 13.8% Brazil 20,318 26,701 24,286 9.3% US 31,666 36,212 40,387 12.9% France 2,646 1,148 532 -55.2% Saudi Arabia 1,611 978 454 -46.9% Oman 865 489 779 -5.1% Other 577 2,987 8,255 278.2% Total 59,467 70,633 77,003 13.8%


Share of total 2009 2010 2011 Domestic 3.0% 3.0% 3.0% Brazil 34.2% 37.8% 31.5% US 53.2% 51.3% 52.4% France 4.4% 1.6% 0.7% Saudi Arabia 2.7% 1.4% 0.6% Oman 1.5% 0.7% 1.0% Other 1.0% 4.2% 10.7% Total 100% 100% 100%

• The UAE frozen parts market is dominated by the USA and Brazil. The USA industry allows it to produce huge volumes of leg quarters that are found in thousands of HORECA outlets across the UAE.




• The HORECA markets dominate frozen parts accounting for 60% of volumes (mainly from the USA and Brazil). In addition, HORECA accounts for over 50% of frozen whole chicken imports.

• The leading competitors in terms of frozen whole chicken are Sadia, other Brazil brands, Doux, Frangusol, Watania and Sabco.

• In terms of frozen parts the leading brands are Tyson, other US brands,

Sadia and other Brazilian brands.



5. CHILLED CHICKEN 5.1 Overall Demand Level Table B25: Overall Chilled Chicken Consumption by Type, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Whole 48,943 46,543 41,556 40,089 39,266 -5.4% Parts 18,964 20,433 19,720 20,395 21,495 3.2% Value added 1,496 1,643 2,211 3,373 3,931 27.3% Total 69,403 68,619 63,487 63,857 64,691 -1.7%


Share of total 2007 2008 2009 2010 2011 Whole 70.5% 67.8% 65.5% 62.8% 60.7% Parts 27.3% 29.8% 31.1% 31.9% 33.2% Value added 2.2% 2.4% 3.5% 5.3% 6.1% Total 100% 100% 100% 100% 100%

• Table B25 provides a product split for chilled products for the five years to 2011.

• Whole chilled chicken has fallen at an average 5.4% per annum over the

period. The key reason for this has been the inconsistency in supply from the domestic UAE producers.

• Chilled parts have shown a 3.2% average increase per annum over the

same period.

• Value added has been the star performer with a 27.3% average increase per year for the five years to 2011.

• The overall chilled chicken market has fallen by 1.7% per year on average

over the five years



Table B26: Estimated Consumption of Chilled Whole and Chicken Parts, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

2011 Retail Value

(AED million)

Chilled 67,907 66,976 61,276 60,485 60,760 -2.7% 851 Source: IMES estimates.

• Table B26 provides a history of the chilled whole and chicken parts in the UAE for the period 2007 to 2011. This chicken category has declined at an average of 2.7% per annum over the period.

• Chilled value-added products are discussed separately in section 6 of this

report. 5.2 Consumption Pattern Table B27: Chilled Whole and Chicken Parts by Distribution Channels, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

HORECA 30,558 28,800 25,736 24,799 24,912 -5.0% Retail 30,558 30,809 28,800 28,428 28,557 -1.7% Food Processing 6,791 7,367 6,740 7,258 7,291 1.8% Total 67,907 66,976 61,276 60,485 60,760 -2.7%


2007 2008 2009 2010 2011

HORECA 45% 43% 42% 41% 41% Retail 45% 46% 47% 47% 47% Food Processing 10% 11% 11% 12% 12% Total 100% 100% 100% 100% 100%

• Table B27 provides a five-year history of chilled whole and parts by distribution channel for the period 2007 to 2011.

• HORECA has fallen at an average rate of -5% over the period while Retail

has fallen at an average -1.7% per annum. Food Processing increased at an average rate of 1.8% per annum while the total market for chilled and parts chicken fell at an average -2.7% per year.



5.3 Supply and Distribution 5.3.1 Domestic Supply Table B28 shows a breakdown of domestic supply of chilled whole and chicken parts in 2011: Table B28: Domestic Supply of Chilled Whole and Chicken Parts, 2011 Supplier Share (%) Emirates Modern Poultry Co (Al Rawdah, Al Salwah) 20% Al Ain Poultry (Al Ain Chicken) 17% IFFCO/Emirates National Poultry (Khazna) 12% Al Islami Foods (Al Islami) 11% Arab Poultry Breeding and Production Co (Tasil) 8% Ras Al Khaimah Poultry Farm (Rapco) 9% Arab Poultry Production Co (Farouj Al-Wadi) 7% Al Rahba LLC/Liwa Poultry Farm 7% Other 9% TOTAL 100% Total Domestic Chilled Chicken (tonnes) 47,738


• There is no single dominant domestic producer of chilled chicken in the UAE. The scale of the domestic producers is relatively small (when compared to the Saudi and the international producers)

5.3.2 Imports Table B29 below provides a breakdown of poultry imports (whole and in parts) by country for 2011.



Table B29: Leading Brands - Imported Chilled Whole and Chicken Parts, 2011 Supplier/Brand Share Tanmiah/Supreme 51.0% Home Choice/Dhofar Poultry 18.0% A'Saffa 11.0% Other 20.0% TOTAL 100% Total Imported Chilled Chicken 13,022


• Chilled chicken imports are dominated by neighbouring countries – specifically Saudi Arabia and Oman. Tanmiah brand (owned by Supreme Foods) from Saudi is seen as the dominant supplier with a 50% share. Dhofar Farms from Oman supply significant own label and house brands chilled chicken to major retailers in the UAE.

• The largest Omani poultry producer (A’Saffa) is also a significant supplier of chilled chicken whole and parts to the UAE market.

Table B30: Leading Brands - Overall Chilled Whole and Chicken Parts, 2011 Supplier/Brand Share Emirates Modern Poultry Co (Al Rawdah, Al Salwah) 15.7% Al Ain Poultry (Al Ain Chicken) 13.4% Tanmiah/Supreme 10.9% IFFCO/Emirates National Poultry (Khazna) 9.4% Al Islami Foods 8.6% Ras Al Khaimah Poultry Farm (Rapco) 7.1% Arab Poultry Breeding and Production Co (Tasil) 6.3% Arab Poultry Production Co (Farouj Al-Wadi) 5.5% Al Rahba LLC/Liwa Poultry Farm 5.5% Home Choice/Dhofar Poultry 3.9% A'Saffa 2.4% Other (domestic) 7.1% Other (imported) 4.3% TOTAL 100% Overall Chilled Whole and Chicken Parts - tonnes 60,760




• Table B30 identifies the key suppliers of chilled whole and parts to the UAE. The domestic UAE producers dominate as expected along with Tanmiah from Saudi Arabia.

Table B31: Source of Imported Chilled Whole and Chicken Parts, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Saudi Arabia 7,024 7,606 7,987 6.6% Oman 3,694 3,550 3,383 -4.3% Other 1,393 1,521 1,654 9.0% Total 12,111 12,677 13,024 3.7%


• Table B31 provides a three-year history of imported chilled chicken by country of origin.

• Saudi Arabia and Oman dominate and further supplies are available from

near countries including Kuwait and Egypt. 5.3.5 Imports Analysis by Leading Countries of Origin This section looks at the products imported by country as well as the distribution channel emphasis for each major importing country in the UAE market.



Saudi Arabia Table B32: Imported Chilled Chicken from Saudi Arabia, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Chilled Whole 5,470 5,697 5,908 3.9% Chilled Parts 1,555 1,910 2,080 15.7% Total 7,024 7,606 7,987 4.6% % from Total Chilled Chicken Imports 58% 60% 61.3%



• Table B32 identifies that Saudi accounts for 61% of chilled imports. The Saudi producers concentrate on whole chilled chicken, but have also developed a significant chilled parts position in the UAE market.

• Saudi chilled whole and parts chicken is marketed in HORECA (52% of sales) and Retail (41%) with the remaining 7% going to Food Processing.



Oman Table B33: Imported Chilled Chicken from Oman, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Chilled Whole 2,758 2,780 2,703 -1.0% Chilled Parts 936 770 680 -14.8% Total 3,694 3,550 3,383 -4.3% % from Total Chilled Chicken Imports 30.5% 28% 26%



• Table B33 identifies that Oman provides 26% of chilled imports to the UAE. Omani imports are dominated by whole chilled chicken.

• Omani imports are sold in HORECA (50%) and Retail (44%).



Other Countries Table B34 Imported Chilled Chicken from Other Countries, 2009-2011 (tonnes) Other 2009 2010 2011 CAGR Chilled Whole 1,122 1,346 1,402 11.8% Chilled Parts 271 176 252 -3.6% Total 1,393 1,521 1,654 0.3% % from Total Chilled Chicken Imports 11.5% 12% 12.7%



• Table B34 charts a history of chilled imports from other countries. This is seen as relatively small volumes and accounts for 13% of chilled imports.



5.4 Pricing

• Table B35 below shows indicative pricing on a selection of chilled chicken products i.e. whole birds and parts.

Table B35: Pricing of Selected Chilled Chicken Products, 2011

Brand/Producers Product Weight Retail Price

(AED)

AL RAWDAH

Whole Chicken 1kg 17.00 Wings 500g 6.50 Boneless Breast 500g 21.50 Thighs 500g 12.00

AL AIN CHICKEN Boneless Breast 500g 19.50 Thighs 500g 9.75

AL KHAZNA

Whole Chicken 1kg 17.00 Boneless Breast 500g 22.00 Whole Legs 500g 15.75 Thighs 500g 15.75 Wings 500g 9.50

RAPCO Whole Chicken 1kg 17.00

AL ISLAMI Wings 900g 24.75 Drumsticks 900g 22.75

HOME CHOICE (DHOFAR)

Whole Chicken 1kg 15.75 Whole Baby Chicken 600g x 2 21.95

Source: Retail Audit, IMES.



5.5 Top Chilled Chicken Brands in the UAE Table B36: Top chilled whole and parts brands in 2011 Supplier/Brand Share (%) Emirates Modern Poultry Co 15.7% Al Ain Poultry 13.4% Tanmiah/Supreme 10.9% IFFCO/Emirates National Poultry (Khazna) 9.4% Al Islami Foods 8.6% Ras Al Khaimah Poultry Farm 7.1% Arab Poultry Breeding and Production Co (Tasil) 6.3% Arab Poultry Production Co (Farouj Al-Wadi) 5.5% Al Rahba LLC/Liwa Poultry Farm 5.5% Home Choice/Dhofar Poultry 3.9% A'Saffa 2.4% Other brands 11.4% TOTAL 100% Overall Chilled Whole and Chicken Parts - tonnes 60,760

Source: IMES estimates

• Table B36 identifies that there is no dominant brand in the chilled chicken market in the UAE.



5.6 Comparison of chilled whole chicken and chilled parts by channel weight, origin and share by leading companies

Table B37: Supply of Chilled Whole Chicken by Origin, 2009-2011(tonnes)

2009 2010 2011 CAGR

Domestic 32,206 30,267 29,253 -2.4% Saudi Arabia 5,470 5,697 5,908 1.9% Oman 2,758 2,780 2,703 -0.5% Other 1,122 1,346 1,402 5.7% Total 41,556 40,089 39,266 -1.4%


Share of total 2009 2010 2011 Domestic 77.5% 75.5% 74.5% Saudi Arabia 13.2% 14.2% 15.0% Oman 6.6% 6.9% 6.9% Other 2.7% 3.4% 3.6% Total 100% 100% 100%

• Table B37 identifies domestic UAE producers as the dominant source of whole chilled chicken. However the more consistent supply patterns from the large Saudi producers has allowed them to make progress in the UAE whole chilled chicken market.

Table B38: Supply of Chilled Chicken Parts by Origin, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Domestic 16,959 17,540 18,485 2.2% Saudi Arabia 1,555 1,910 2,080 7.5% Oman 936 770 680 -7.7% Other 271 176 252 -1.8% Total 19,720 20,395 21,497 2.2%


2009 2010 2011

Domestic 86.0% 86.0% 86.0% Saudi Arabia 7.9% 9.4% 9.7% Oman 4.7% 3.8% 3.2% Other 1.4% 0.9% 1.2% Total 100% 100% 100%



• Table B38 examines the supply of chilled parts by origin. Once again domestic supply dominates with Saudi as the main import source.

• It is clear that domestic producers are the main source of chilled whole and parts. This is as would be expected. The investments taking place in chilled chicken in Saudi Arabia would suggest that this picture is likely to change in the near future. It is highly likely that Saudi chilled exports to the UAE will increase dramatically over the next five years (see discussion in section 7 of this report).


• The Retail market provides an outlet for up to 47% of chilled whole and parts.



6. VALUE-ADDED CHICKEN PRODUCTS 6.1 Overall Demand Levels Table B39: Overall Value-Added Chicken Consumption by Shelf Life, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Frozen 8,077 8,762 11,719 17,763 20,442 26.1% Chilled 1,895 2,190 3,022 4,722 5,766 32.1% Total 9,972 10,952 14,741 22,485 26,208 27.3%


Share of total 2007 2008 2009 2010 2011 Frozen 81% 80% 79.5% 79% 78% Chilled 19% 20% 20.5% 21% 22% Total 100% 100% 100% 100% 100%

• Table B39 charts the development of the value added chicken market since 2007. Overall the growth is an impressive 27.3% average per year over the past five years in the UAE.

• Frozen value–added products have grown at an annual rate of 26.1%, while chilled value-added products have grown at an average 32.1% per annum over the same period.



Table B40: Estimated Consumption of Value-Added Chicken Products, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR 2011 Retail Value

(AED million) Domestic 6,747 7,908 9,089 10,926 12,369 16.4% Imports 11,488 12,903 14,217 16,389 17,799 11.6% Exports (8,264) (9,860) (8,565) (4,830) (3,960) -16.8% Total 9,972 10,952 14,741 22,485 26,208 27.3% 576.6


2007 2008 2009 2010 2011

Domestic 11% 12% 13% 15% 15% Imports 89% 88% 87% 85% 85% Total 100% 100% 100% 100% 100%

• Table B40 charts the growth in value-added products by source. Domestic supply has increased dramatically, while imports have also seen impressive growth.

• A sign of the buoyancy of the UAE market for these products is the steady

reduction in exports. IMES believes that this is a reflection of the demand in the UAE and the re-direction of some products that used to be re-exported through the UAE ports to actual consumption in the UAE market.

• Domestic supply has grown at an average 16.4% per annum since 2007.

Imports have increased at an annual rate of 11.6%, while exports have fallen by -16.8% per year over the period 2007 to 2011. Overall value-added volumes have increased at an average 27.3% per annum over the period.



6.2 Consumption Pattern Table B41: Value-Added Chicken Products by Distribution Channels, 2007-2011 (tonnes)

2007 2008 2009 2010 2011 CAGR

Retail 5,983 6,681 9,287 14,390 16,773 29.4% HORECA 3,989 4,271 5,454 8,095 9,435 24.0% Total 9,972 10,952 14,741 22,485 26,208 27.3%


Share of total 2007 2008 2009 2010 2011 Retail 60% 61% 63% 64% 64% HORECA 40% 39% 37% 36% 36% Total 100% 100% 100% 100% 100%


• Table B41 segments the value added market into retail and HORECA. Retail

has grown at an average 29.4% per annum, while HORECA has grown at an average 24% per annum since 2007.

• The overall growth rate in value added products has been 27.3% per annum

over the period. 6.3 Supply and Distribution 6.3.1 Domestic Supply Table B42 shows a breakdown of domestic supply of value-added chicken products in 2011:



Table B42: Domestic Supply of Value-Added Chicken Products, 2011

Share (%)

Kabeer Foods 34.2% Khazan Foods 23.2% Freshly Frozen Foods 15.7% Al Islami Foods 12.7% Khaleej 6.5% Other domestic 7.7% Total 100% Total Domestic Value Added Chicken Products (tonnes) 10,153


• Value-added poultry products is an area where the UAE producers have enjoyed some considerable success. This success is reflected in the much healthier share of the market supplied by UAE producers.

• Kabeer Foods and Khazan Foods are seen as the leaders among the UAE

producers currently. 6.3.2 Imports Table B43 below shows a breakdown of value-added chicken imports by brand for 2011. Table B43: Leading Imported Value-Added Chicken Products, 2011

Shares (%)

Americana 38.9% Sadia 32.7% Tanmiah 9.9% A'Saffa 5.2% Doux 1.5% Emborg 0.8% Other (imported) 10.9% Total 100% Total Imported Value-Added Chicken Products (tonnes) 16,053




• Table B43 identifies the leading imported brands into the UAE value added poultry market. Currently imported supplies are dominated by Americana (38.8%) with supplies coming from Saudi, Egypt and Kuwait plants.

• Tanmiah brand from Saudi Arabia follows with a 9.9% share. This company

has opened a brand new value added plant in Dubai and is expected to become a leading player in this category in the near future.

Table B44: Leading Overall Value-Added Chicken Products, 2011 Supplier/Brand Shares (%) Americana 23.9% Sadia 20.0% Kabeer Foods 13.2% Khazan Foods 9.0% Freshly Frozen Foods 6.1% Tanmiah 6.1% Al Islami Foods 4.9% A'Saffa 3.2% Khaleej 2.5% Doux 0.9% Emborg 0.5% Other (domestic) 3.0% Other (imported) 6.7% Total Value-Added Chicken Products (tonnes) 100% Total Value-Added Chicken Products (tonnes) 26,208


• Table B44 identifies the overall leading brands in the UAE value-added products market. Americana, Khazan and Kabeer dominate while this sector is expected to develop rapidly into the future.

• This next section looks at the sources of imports of value added products to the UAE. Saudi and Oman are seen as major sources while the Others volumes includes Kuwait, Brazil, Egypt and a host of small contributors.

• France is not seen as a major source of these products to the UAE in 2011.



Table B45: Source of Imported Value-Added Chicken Products, 2009-2011

2009 2010 2011 CAGR

Saudi Arabia 3,239 4,564 4,817 22.0% Oman 2,403 3,138 3,372 18.5% Other 4,806 6,561 7,868 27.9% Total 10,448 14,264 16,053 24.0%


Share of total 2009 2010 2011 Saudi Arabia 31% 32% 30% Oman 23% 22% 21% Other 46% 46% 49% Total 100% 100% 100%

6.3.5 Imports Analysis by Leading Countries of Origin This section identifies the major importing countries and their product and channel emphasis in the UAE market.



Saudi Arabia Table B46: Imports of Value-Added Chicken Products from Saudi Arabia, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Value-added frozen 2,925 4,057 4,383 22.4% Value-added chilled 313 508 434 17.6% Total 3,239 4,564 4,817 22.0% % from Total Value-Added Chicken Imports 31.0% 32.0% 30.0%



• Table B46 shows Saudi Arabia with a 30% market share of value added products. The Saudi suppliers concentrate on frozen product currently. HORECA accounts for 72% of Saudi product currently with retail accounting for the other 28%.



Oman Table B47: Imports of Value-Added Chicken Products from Oman, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Value-added frozen 1,672 2,366 2,630 12.0% Value-added chilled 731 772 742 0.4% Total 2,403 3,138 3,372 8.8% % from Total Value-Added Chicken Imports 23.0% 22.0% 21.0%



• Table B47 charts the progress of the Omani producers. Once again, emphasis is on frozen value-added products but there is also a solid and growing base in chilled value-added products.



Other countries Table B48: Imports of Value-Added Chicken Products from other countries, 2009-2011 (tonnes)

2009 2010 2011 CAGR

Value-added frozen 3,761 4,845 5,511 21.0% Value-added chilled 1,045 1,716 2,357 50.2% Total 4,806 6,561 7,868 27.9% % from Total Value-Added Chicken Imports 46.0% 46.0% 49.0%



• Table B48 includes a number of countries that supply value-added products to the UAE market. Principal among these is Kuwait (both frozen and chilled), Brazil (frozen) and Egypt.



6.4 Pricing Table B49 below shows indicative pricing on a selection of value-added chicken products. Table B49: Pricing of Selected Value-added Chicken Products, 2011

Brand/Producers Product Weight Retail Price

(AED)

AMERICANA

Chicken burger 1kg 20.25 Chicken franks 400g 5.25 Chicken mince 400g 6.90 Chicken nuggets 400g 18.50 Chicken tikka 400g 16.95

KHAZAN Chicken sausages (jumbo) 500g 23.25

AL KABEER

Chicken burger 1200g (24pcs) 21.25 Chicken fillet (breaded) 450g x 2 21.75 Chicken kebab 320g 10.50 Chicken meatballs 300g 10.50 Chicken mince 400g 7.25

AL ISLAMI Chicken burger 360g 16.95 Chicken franks 400g 6.90 Chicken sheesh tawook 260g 9.25

FRESHLY FOODS Chicken burger 1kg (8pcs) 23.50 Chicken nuggets 1kg 18.00 Chicken tikka 240g 8.95

A'SAFFA Chicken mince 400g x 2 9.90 Chicken nuggets 400g x 2 20.50

Source: Retail audit, IMES



6.5 Top Value-Added Chicken Brands, 2011 Table B50: Top Value-Added Chicken Brands, 2011

Shares (%)

Americana 23.9% Sadia 20.0% Kabeer Foods 13.2% Khazan Foods 9.0% Freshly Frozen Foods 6.1% Tanmiah 6.1% Al Islami Foods 4.9% A'Saffa 3.2% Khaleej 2.5% Doux 0.9% Emborg 0.5% Other brands 9.7% Total Value-Added Chicken Products (tonnes) 100% Total Value-Added Chicken Products (tonnes) 26,208


• Table B50 identifies the key brands in value-added. It is interesting to note the absence of Brazil brands from the top of this share table.

• In addition it should be noted that the French brands do not appear to be active in this market.



6.6 Comparison of frozen and chilled value-added chicken products by channel weight, origin and share for leading companies

This section looks at the frozen and the chilled value added products separately – by source country as well as by distribution channel. Table B51: Supply of Frozen Value-Added Chicken by Origin, 2009-2011

2009 2010 2011 CAGR Domestic 3,360 6,495 7,918 53.5% Saudi Arabia 2,925 4,057 4,383 22.4% Oman 1,672 2,366 2,630 25.4% Other 3,761 4,845 5,511 21.0% Total 11,719 17,764 20,442 32.1%


2009 2010 2011 Domestic 28.7% 36.6% 38.7% Saudi Arabia 25.0% 22.8% 21.4% Oman 14.3% 13.3% 12.9% Other 32.1% 27.3% 27.0% Total 100% 100% 100%

• Table B51 identifies frozen value-added product by origin. The Domestic UAE

producers are seen as key suppliers of these products, with Saudi and Oman identified as key sources of imports to the UAE.

Table B52: Supply of Chilled Value-Added Chicken by Origin, 2009-2011

2009 2010 2011 CAGR

Domestic 933 1,727 2,234 54.8% Saudi Arabia 313 508 434 17.6% Oman 731 772 742 0.7% Other 1,045 1,716 2,357 50.2% Total 3,022 4,723 5,766 38.1%


2009 2010 2011

Domestic 30.9% 36.6% 38.7% Saudi Arabia 10.4% 10.8% 7.5% Oman 24.2% 16.3% 12.9% Other 34.6% 36.3% 40.9% Total 100% 100% 100%




• Table B52 sees the Domestic market as a major supplier of chilled value-added products, with Saudi and Oman also of significance. Kuwait and Egypt are also significant contributors of chilled value-added products.

• The chart below looks at the channel distribution of value-added products in

the UAE. It is interesting to note the importance of the retail channel as well as the appetite for both frozen and chilled products in both channels.




• Leading competitors for frozen and chilled value-added products include Americana (chilled and frozen), Khazan (chilled and frozen), Kabeer (chilled and frozen), Freshly Frozen Foods, Tanmiah and Al Islami in this rapidly growing market.



7. POULTRY INDUSTRY CHALLENGES & OPPORTUNITIES FOR THE FUTURE IN THE UAE

7.1 The ‘Almarai’ Effect

• Almarai acquired Hadco in 2009. Hadco was a medium sized poultry producer in Saudi with a strong emphasis on chilled poultry products. This was the first time in Saudi Arabia that a publicly-quoted company has been acquired by another publicly quoted company.

• Almarai is the largest and the most profitable GCC dairy and juice company.

It employs truly modern consumer led marketing practices that have resulted in a set of hugely impressive sales revenue and profit growth increases in the past twenty years. Published financials for 2011 show Almarai sales revenues of SR7.9 Billion and a consolidated net income of SR 1.14 Billion – yielding a Return on Sales of 14%.

• The Hadco acquisition is an interesting new business area for Almarai. The

company has published a broad development plan that will see up to US$1billion invested in poultry assets up to 2014.

• This is an extraordinary level of investment (even for Almarai). There is no

doubt that Almarai intends to be a major player in poultry in Saudi and beyond in the future.

• It is not yet fully clear what strategy Almarai will follow in the poultry

market. The emphasis is likely to be on chilled chicken products priced at a premium level.

As of June 2012, the following observations can be made:

1. Almarai is using the Al Youm brand for its poultry products. This is an old Almarai brand that was used on long life milk products in the 1990s. The Al Youm brand would seem to be highly relevant as the word Al Youm translates to Today in English. While there is a small Almarai endorsement on the back of the Al Youm pack, it is interesting to note that the Almarai ‘mother brand’ is currently not being used for poultry.



2. It seems as if Almarai will focus squarely on chilled poultry production and marketing. In many ways this is not surprising. Firstly chilled chicken commands a price premium over frozen chicken. Secondly, Almarai avoids the global giants such as Sadia, Tyson and Doux by not concentrating on frozen chicken. Thirdly, Almarai can focus on its heritage and Saudi credentials to wow consumers. Fourthly, Almarai will use all its powers to come up with compelling propositions for Saudi consumers that will change the rules of the game. Lastly Almarai will invest whatever is needed to come up with a compelling proposition. It is fair to say that Almarai is in a position to raise capital in ways, and at levels, that are simply not available to other poultry producers.

3. A major emphasis on chilled chicken is a sensible market focus for

Almarai. Short life dairy products still form the core of Almarai’s business and the whole company has geared up over decades to serve the fresh dairy market. Investment in assets, people, brands and markets are the hallmark of the Almarai dairy approach. It would seem that the same philosophy will be brought to bear on poultry.

4. This fairly detailed exposition on Almarai is to simply point out that the

poultry markets in Saudi and the GCC are likely to change dramatically as a result of Almarai’s entry. The rules of the game will now be changed and areas such as hygiene, quality, consistency, innovation, financial management and strong marketing will become the norm.

5. It is likely that many traditional poultry producers will simply not be able

(or want) to cope with the changes that will be brought about.

6. IMES understands that Almarai is very focused on the Saudi market for the time being. By all accounts the development projects in Saudi are taking far longer than expected and the build-up of supply of fresh poultry available for sale is not as rapid as was planned. However, once the supply situation is sorted and the Saudi market is moving, it is highly likely that the UAE will become a key development market for Almarai.



IMES estimates that Almarai will enter the UAE market (in a meaningful way) in 2012 or 2013. We note that a ‘soft launch’ of Al Youm in the UAE modern retail trade in early 2012 has been somewhat confused with many product shortages occurring within days of launch – it is very likely that this supply situation will improve radically in the remainder of 2012. We would see the following actions by Almarai as being highly likely:

1. A tightening up of sales and distribution practices with an emphasis on using Almarai’s commercial muscle to negotiate better trading terms with the modern grocery trade in the UAE.

2. The gradual adoption of modern sales management practices such as

hand-held terminals for sales operations and modern sales data management and analysis methods.

3. Improvement in production methods that could lead to more consistent

quality product as well as an opportunity to develop a quality driven competitive advantage in the consumer’s mind.

4. A transfer of trusted Almarai senior managers to develop and implement

a change programme in Hadco.

5. Development of marketing and sales practices that drive high rates of return on investment.

6. The product and packaging development of Almarai is highly likely to

focus on chilled products that command a premium price and that can be marketed successfully.

7.2 The Product/Market strategy of the Saudi poultry marketers and

its impact on the UAE market

• It is fair to say that as of June 2012 the UAE market has not been a major focus for the Saudi poultry producers. This is explained away by the growth in the Saudi market and the need to be fully focused on the home market.

• It surprising that Saudi products do not command a premium over product from Brazil in a UAE context. The poultry feed regimes followed in Saudi should produce a better quality poultry to that coming from Brazil. However, it seems that poor marketing, logistics and a lack of commitment to the market has negated what should be Saudi inherent product advantages.



• As the section above points out, the entry of Almarai to the poultry market is likely to bring rapid change to the chilled chicken market in the UAE.

• There are other examples of Saudi producers who have recognised the value

of the UAE market as a source of profitable business. Tanmiah (Supreme Foods) is to the forefront of this trend. These companies have sorted out the logistics issues and are offering consistently high quality product to customers in the UAE. This trend is likely to continue.

• Currently, the largest Saudi poultry brand (Watania) does not seem

particularly interested in the UAE market and takes an opportunistic approach. When product gets scarce, the Watania emphasis reverts to the Saudi market.

7.3 The Key Issues facing Poultry in the UAE

• There are more than ten poultry farms located throughout the UAE and a

number of smaller farms. In addition there are a number of companies who operate as poultry processors and marketers only.

• Discussion with the UAE producers and processors suggest that profitability

has been severely curtailed in recent years. The cost increases in vitally needed imported feeds and supplies have been absorbed, while the Government has tried to minimise consumer price increases. This has resulted in a classic margin squeeze.

• There is little evidence of significant investment in the poultry industry at

the present time. This is not surprising when the reductions in profitability in recent years are considered.

• The UAE poultry market is hugely dependent on imported product. Without

supplies from Brazil, the USA and France the poultry economy in the UAE would be severely disrupted.

• There does not appear to be a coherent plan or policy in place in the UAE

that identifies the poultry industry as a key priority and sets about implementing a well-defined plan. This approach contrasts sharply with Saudi Arabia.

• The current UAE poultry producers are small in regional and global

comparison terms. Unless a coherent strategy is put in place, it is likely that the UAE poultry producers will remain weak and relatively small players in the UAE market.



• A coherent strategy can either be put together by Government or by some major players coming together and recognising the need to focus resources and market efforts in the future.

• This report sees a continuation of the import dependence already in place in

the UAE.

• The origin of imports may well change in the future but the overall dependence on imports will continue to rise in the future.

7.4 Product /market strategy of key players

• Sadia (and other related Brazilian) brands are clearly the dominant suppliers of chicken to the UAE market. Sadia has maintained a highly focused and consistent strategy to the UAE market. Product has been made available to make up for shortfalls in domestic UAE poultry production and it would seem that Sadia should be recognised as a very reliable supplier.

• It is very likely that Sadia will invest in a significant value-added products

facility in Dubai. A project has been announced, but it seems as if progress is slow. However, it is highly likely that such a plant will be operating within the next two years.

• Tyson and the other USA producers supply huge quantities of leg quarters to

the HORECA markets in the UAE. This is likely to continue into the future as normal.

• The strategy of the French poultry players is not so clear. It seems as if

exports to the UAE have fallen in recent years and may be explained by emphasis on Saudi or other GCC markets instead of the UAE.

• Tanmiah and Wataniya are the major Saudi players currently and will be

joined by Almarai in the next few years.

• The strategy of the domestic producers seems to be survival at the present time.

• It should be pointed out that progress has been made in value-added

products. However, chilled and frozen whole and parts remain areas of real concern.



7.5 Compare and Contrast the Saudi and the UAE market

• The major difference between these two markets is the emphasis put on poultry in Saudi by the Government.

• This emphasis is characterised by feed subsidies, capital supports, a benign regulatory environment and a positive approach to enable producers to develop their businesses.

• The approach in the UAE is different in that the Government takes a much

less involved role and has not yet decided whether a significant poultry sector is viable in the UAE and what the Government’s role should be in bringing about this significant poultry sector.

7.6 The Future of Poultry in the UAE

• As of June 2012, the poultry market is likely to remain largely as it is now into the medium future.

• That is to say the UAE consumer will remain hugely dependent on imported supplies of poultry products from Brazil, the USA and France.

• The UAE producers will likely remain in difficulties and it is unlikely that

major investments will be seen in poultry production in the UAE.

• A coherent strategy is now required that will identify what is possible for the domestic poultry sector and how to go about implementing the changes needed to prosper in the future.

• It is not a straightforward process to identify a coherent strategy for poultry

development in the UAE.

• Efforts made in neighbouring countries such as Saudi Arabia and Oman have not always been successful.

• The current situation in the UAE is attractive from an importers point of

view.

• The threat to supplying countries is highly likely to come from other importers rather than from UAE producers.



Appendix: Contact Details of Key Producers, Processors and Importers Company Address Contact

ADNH Compass ME P.O. Box 46806 Abu Dhabi, UAE

T: +971 2 4447228 F: +971 2 4448495 E: [email protected]

Al Ain Poultry Farm P.O. Box 16021 Al Ain, UAE T: +971 3 782 6022 F: +971 3 782 7851 E: [email protected]

Al Islami Foods

Al Islami Foods Building Emirates Road Dubai Investment Park P.O. Box 3922 Dubai UAE

T: +971 4 885 3333 F: +971 4 885 2333

E: [email protected]

Americana Group (Kuwait Food Co)

Kuwait Food Building Plot 198 A Shuwaikh Industrial Area 3 P.O. Box 5087 Kuwait City Safat 13051 Kuwait

T: +965 2 481 5900

F: +965 2 481 5914

E: [email protected]

Arab Poultry Breeding & Production Company (Tasil)

ShokaKadra Street P.O. Box 28658 Sharjah, UAE

T: +971 6 882 8222

F: +971 6 882 8666 E: [email protected]

Emirates Meat (Galadari Edam)

P.O. Box 61036, Jabel Ali, Dubai, UAE

T: +971 4 340 0544 F: +971 4 340 0533 E: [email protected]

Emirates Modern Poultry Company

P.O. Box 4316 Dubai UAE T: +971 4 832 6565 F: +971 4 832 6774 E: [email protected]

EMKE General Trading P.O.Box 4048, Abu Dhabi, UAE

T: +971 2 6421800 F: +971 2 6421716 E: [email protected]

Federal Foods P.O Box 54066, Al Quoz Industrial Area, Dubai, UAE

T: 971 339 0005

F: 971 339 0032 E: [email protected]

Fine Fair (Al Seer) P.O. Box 677, Dubai UAE T: +971 4 508 9244 F: +971 4 355 5243

FoodCo LLC Port Zayed, Mina P.O. Box 2378 Abu Dhabi UAE

T: +971 2 673 1000

F: +971 2 673 2100 E: [email protected]

Freshly Frozen Foods P.O. Box 38404, Dubai, UAE T: +971 4 8802727 F: +971 4 8802772 E: [email protected]



Appendix: Contact Details of Key Producers, Processors and Importers (continued) Company Address Contact

International Foodstuffs Co (IFFCO)

P.O. Box 29220 Sharjah, UAE

T: +971 6 502 9000 F: +971 6 502 9910 E: [email protected]

Intercat

Pyramid Centre Building Office # 205 – 2nd Floor Oud Metha Road P.O. Box 52044 Dubai, UAE

T: +971 4 3345212

F: +971 4 3370942 E: [email protected]

Kabeer Foods/Sahar Enterprises LLC

P.O.Box: 7329, Dubai, UAE T: +971 4 267 1122 F: +971 4 267 1918 E: [email protected]

Khazan Foods Industrial Area 11 Sharjah, UAE

T: 971 6 535 0606 F: 971 6 535 0550 E: [email protected]

National Marketing & Trading Co

P.O. Box 3871 Ajman UAE T: +971 6 744 1188 F: +971 6 745 6041

Ras Al Khaimah Poultry Farm

P.O. Box 184, Ras Al Khaimah, UAE

T: 971 7 246 2222 F: +971 7 246 222 E: [email protected]

Source: IMES.

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