Answer to Question #265490 in Management for Abdi

Question

You are a consultant to a small size Company engaged in Halal Food Products. The company is interested to expand its business to Europe and North America.. Prepare a business report focusing on the business potential. Also, give advice on the entry mode and external risks if the decision is made to do business in the Middle East

Answer 1

The term “Halal” is an Arabic term derived from the Arabic language, meaning permitted or legitimate. Muslims have significant awareness regarding necessities for devouring only Halal food (Ali et al., 2017). All religion restricts food choices in some way. For a Muslim community, Halal food and its consumption pattern have become significant (Bonne et al.,).

The European market for halal food and beverage is projected to register a CAGR of 5.1 % during the forecast period (2020 to 2025) while the North American market is projected to register a CAGR of 3.5% during the same period. In both Europe and North America, there is a business potential for Halal food products. This is because Halal food items have become popular among both Muslim and non-Muslim consumers, as they have evolved from being an identification mark of religious observation to the assurance of food safety, hygiene, and reliability and also the presence of multinational manufacturers and exporters of halal food and beverages in the region is another major factor driving the market growth.

The demand for food products that are halal-certified is increasing. The market is growing due to the demand for healthy foods, such as processed meat, bakery products, and other food prepared foods, according to strict Islamic dietary laws, and thus, these foods are considered to be healthy and hygienic as compared to non-halal foods. The halal food and beverage sector has grown substantially during the recent years, owing to the halal certifications that meet the increased need for quality assurance. Multinational food producers also receive halal certifications, indicating this sector’s broader viability. The growing knowledge about personal health and nutrition among non-Muslims Americans and Europeans promotes halal food and beverages, which is based on the idea of clean, fresh, and hygienic, food & beverages. The consumers are more open to adopting unconventional food domains like halal food as a result of increasing awareness regarding nutritional benefits. However, strict rules and regulations are imposed by the government to regulate the halal food industry, and for controlling mislabeling and deceptive practices.

If the decision is made to do business in the Middle East where Islam is the most widely followed religion with about 20% of the world's Muslims living in the Middle East, the credibility of halal certification is very important. In the absence of a global standard for halal certification, it is imperative that brands identify a credible regulatory authority and label type. This is necessary to assure both consumers and business partners that the brand validates their religious commitments. However, risk in the Halal food supply chain is considered as the failure to deliver the product which complies with Halal standards. Also a lack of international halal food standards and uniform certification is threatening to curb the sector’s growth. There is also political risk, which is comprised of changes in the political government or governmental policy that relate to financial affairs. Changes in import and other export laws, tariffs, taxes, and other regulations may affect the business negatively.

Reference

Armanios, F., & Ergene, B. A. (2018). Halal food: A history. Oxford University Press.