Confectionery Production magazine
By Paul Cochrane in Beirut and Damascus
The Middle East's confectionery market (the Gulf, the Levant, Egypt, Iraq, Iran, Turkey and Israel) was valued at USD$113 billion in 2009, while annual chocolate sales exceeded USD$4.2 billion, according to USA-based TNS Media Intelligence. While multinationals such as Cadbury, Masterfoods and Kraft are dominating, local manufacturers are expanding to retain and aiming for increased market share. These low to mid-priced confectioners have a strong national and regional market presence but there is less potential for expansion into the highly competitive and more mature European markets. There is, however, potential for expansion in the super premium chocolate category, which has grown over the past decade, particularly in the affluent Gulf economies.
Lebanon's Patchi produces a variety of high-end and decorated chocolates that are primarily sold in the Middle East through Patchi's deluxe boutiques, followed by the Far East, Azerbaijan and Europe. This year the company opened branches in South Africa, Moscow and two new branches in London in addition to a branch within Harrods. Producing some 4,000 tonnes of chocolate every year distributed through its 140 global outlets, Patchi plans to expand into the European market through franchises, says Nizar Choucair, Patchi’s founder and chairman. This is likely to lead to a further diversification of its offerings due to regional differences in chocolate demand. “Most of the Arab countries prefer milk chocolate while in Lebanon and Europe, it is mostly dark chocolates,” notes Choucair. The company has a very modern production process that includes Swiss technology and it uses no eggs, gelatin, preservatives or artificial ingredients are used, while Patchi has 30 fillings, including almonds, pistachios and hazelnuts to fruit dragees.
Re-attaining global status
Regional competitor Ghraoui, based in Damascus, Syria, has been in the confectionery business since 1931, producing over 120 types of confectionery, including a wide range of chocolates, fawakeh mujaffafa (Arabic for dried fruits), Turkish delights, nougats and marzipan.
“Every year we try to introduce a few new products, and keep the product line young and fresh,” says Mohamed Midani, Vice President of Ghraoui.
Ghraoui won gold medals for its products in 1937 in Paris and in 1939 in New York, but its international presence waned until 1996 when a new, state of the art factory was established. Over the past decade Ghraoui has worked to reposition itself in the Middle East and abroad, winning the prestigious Paris 2005 Salon du Chocolat's “Prix d’Honneur”.
Currently, Ghraoui has 18 stores in Syria and the region, including Jordan, Kuwait and Dubai. “We are in discussions with franchises in the region and looking to Europe, North America and the Far East. We are trying to reattain the global status of the company,” explains Midani. Sales are evenly split between domestic consumption and export, but Ghraoui aims to have exports account for 80 to 90 percent of all business.
With higher purchasing power in the Gulf and Europe, these will be focus markets. “We are exporting to France and Europe, and the European Union partnership agreement will help that as we are paying a high amount of tax,” said Midani. Boxes of chocolates retail for Euro 70-80 per kilogram in France, he adds.
To bolster export competitiveness, Ghraoui is applying for ISO and HACCP accreditation over the next year. “We try to do as much as possible of the A to B supply chain, we make our own chocolate mass as we buy our cocoa from west Africa origin, while other ingredients such as fruits and nuts are bought fresh directly from the farmers and processed in house to prepare the fillings used in our products,” says Midani. “High quality luxury products from Syria is not what people have in mind, so it draws a bit of attention,” he adds.
Money is certainly to be made by quality confectioners in the Gulf. In the United Arab Emirates, the chocolate market was valued at USD$148.7 million in 2008 by AC Nielsen, with strong growth in the premium range to cater to wealthy citizens and expatriate demand. In addition to the multinationals, some 20 confectionery companies are based in the emirates.
The UAE-based La Ronda, owned by Notions Trading, has a production capacity of some 3,000 metric tonnes and has a 5-15 percent market share in its chocolate categories in the Gulf and Levant.
“Our most popular item is Chocodate, a product discovered through trial and error many years ago and that is a combination of almonds, dates and chocolate,” says Razan Al Masri, Marketing and Communications manager at Notions. “Since production started 15 years ago, the owner insisted on not widening the range, so it's like Ferrero Roche in that we have one major product, although we offer collections of that product,” she adds.
Each chocodate weighs 10 grams, coming in 500 gram boxes, a three piece box of 33 grams, 90 grams, 180 grams and 800 grams, which sells for USD$13.60 (50 AED). Chocodates are exported to Europe, the United States, South America and Africa, while their main regional competitor is Masterfoods' Galaxy Jewels Assorted Chocolates box.
With plans to moves to the Dubai Investment Park to establish a new headquarters and purpose built factory by year end, La Ronda is to aggressively expand over the next five years.
“Our plans right now, after the summer, is to have a more constant exporting schedule to Europe, particularly to Britain and Germany,” says Al Masri.
EU offers access
Confectionery manufacturers in the Middle East are not only ideally placed geographically to sell their products to the rich European Union (EU) market, they are assisted by a series of free trade agreements either in place, or in the works.
Turkish confectioners can take advantage of a customs union with the EU which covers processed foods (although some restrictions and tariffs apply for unprocessed ingredients).
An association agreement with Jordan will establish a free trade area between it and the EU by 2014. Under an EU-Lebanon association agreement, many Lebanese confectionery products already enter the EU duty free. The European Commission has proposed the negotiation of trade.
The European Commission has proposed the negotiation of a trade and cooperation agreement with Iraq. There is currently no EU trade deal in place with Saudi Arabia.
Meanwhile, ratifications await new free trade deals between the EU and Egypt, Syria and Israel – all of which would liberalise the trade in confectionery products between the EU and these countries.
Photographs courtesy of Ghraoui