Canned Tuna in the Middle East: A market in turmoil? September 2017 Arnab Sengupta Phoenix Commodities
This document aims to answer the following: Key Questions 1 Is Middle East an interesting market for canned tuna? 2 Parameters processors should take into account while entering ME 3 What should be done to gain more market share
Table of Contents Tuna Market Overview Market Entry Opportunities Communication Review
Middle East Canned Tuna Market The regional canned tuna market is about USD1B Its one of the few growing markets for canned tuna Though categorized as a region, habits for tuna consumption differ A growing category, but facing a challenging future Price sensitivity & Local devaluation Raw tuna ( frozen) picking up in high end restaurants of Dubai. But even then a very small % Source: Retail Audit/Customs Data 4
Middle East Tuna Market: Overview Frozen is limited to very niche sushi stores and some local coastal catch near Oman and Yemen and some in Iran. Catching's are seasonal, near coast and not consistent Tuna consumption in Middle East and North African is primarily in canned format (not fresh) or Frozen Growing Interest from international brands, though the market is driven by familiarity and heritage. Rio Mare, John West carving a niche in the premium segment The region does not have any non tariff barriers. Arab league 0% rest of the world 5%. Sustainability growing interest 5
Market Sizes Canned Tuna Tuna market size is big, and growing in value The canned tuna market in the region is around USD 1 Billion, (at the store level) with major markets being Saudi Arabia, Libya and Egypt, and UAE. Tot. Val in Millions (USD) 873 942 923 589 2011 2012 2013 2014 THAI & GFI TUNA Sl. No Country 2015 FY 2016 FY 2016 YTD JUN Qty Apprx. FCL Val. USD Millions Qty Apprx. FCL Val. USD Millions Qty Apprx. FCL Val. USD Millions 2017 YTD JUN Qty Apprx. FCL Val. USD Millions 1 SAUDI ARABIA 1,586 102.6 1,508 101.5 779 51.6 682 50.3 2 U. ARAB EMIRATES 940 59.5 855 58 457 30.8 549 39.5 3 KUWAIT 266 20 249 19.3 127 10 171 13.8 4 OMAN 99 6 107 6.7 66 4.2 56 4 5 QATAR 117 7.5 114 7.7 65 4.4 57 3.9 6 BAHRAIN 30 2.2 33 2.6 20 1.5 14 1.1 7 EGYPT 3,899 169 3,438 157.9 2,103 97.5 539 25.8 8 LIBYA 1,149 71.2 1,655 107.5 475 31.5 525 34.8 9 LEBANON 311 23.4 375 28.2 191 14.3 176 14.5 10 IRAQ 73 4 58 3.4 25 1.4 34 2.3 11 JORDAN 396 24.1 513 32.2 284 17.5 261 18.1 Tot. To Spcific. Mkts 8,867 489.7 8,905 525.1 4,592 264.5 3,063 208.1 Conversion Factors: 18,000 Kg = 1 FCL Volume declining due to downsizing and reduced share of stomach as prices go up Exchange rate devaluation increasing prices in North Africa Credit tightening in Arab countries after oil price collapse. 6
Sinusoidal Volume Behavior with 50%+ Value Captured by Libya and Egypt Tuna Volumes Full Year Trend Tuna Value Market Distribution 4,000 3,401 2,999 3,092 3,013 3,000 2,578 22 2,206 2,205 1,967 2,080 2,092 1,872 2,000 2,193 36 35 33 1,000 1,431 1,555 0 2011 12 13 14 15 16 17 Tuna Volumes Jun YTD Trend 75,000 74,202 73,882 70,000 66,734 65,000 60,000 55,000 50,000 57,074 63,614 44,938 0 2011 12 13 Africa VOL-FCL Mid-East VOL-FCL YTD JUN 73,412 69,779 66,636 64,253 58,330 59,388 51,910 48,299 14 15 16 17 Africa Avg. Price per FCL in USD Mid-East Avg. Price per FCL 40 3 29 6 2011 Val by mkt in USD LIBYA 36 36 2 2 22 23 33 27 4 4 4 2012 Val by mkt in USD EGY 2013 Val by mkt in USD KWT KSA 3 2014 Val by mkt in USD UAE 7
THAILAND dominates export of canned Tuna market; MENA attracts 17% of all Thai exports circa $350m market Canned tuna has become a commodity where volume over profit% counts. Efficiency matters Thailand Canned Tuna & Tuna Loin Exports Footprint (2014-16) (In % and In $m) USA EU Others MENA Japan 2,378 460 1,998 1,992 Production (In 000 Tons) 349 239 181 325 341 334 341 (17%) 209 171 155 162 84.4 92.7 41.9 35.5 1,149 975 977 305.2 2014 2015 2016 marketing-insider.eu/porter-diamond-model/ 8
Canned Tuna Typical Cost Analysis Thai Tuna Category Scope Without having any local tuna catching as well not the cheapest labour, Thailand has been the most competitive origin the market, focusing on efficiency and clustering effect Cost Breakdown Low RM Cost Breakdown High RM Advantages of Thailand 100 100 Impact of inter industry cold storage. Local canning industry, fruits, seafood etc. Fish Cost 57 Fish Cost 70 Printing and packaging industry. Processes and RND knowledge. Logistic Condiments Condiments Packaging Labour Utilities Overhead Profit 2 9 30 3 2 1 Packaging Labour Utilities Overhead Profit 6 21 2 2 2 1 Illustrative Price structure for a canned of tuna when raw material is low and when high Price Policy is just for illustration and not for a particular factory 9
Typical Value Chain of Middle East Market for Tuna Typical Seafood Value Chain Importers Scope of Direct Influence Wild-Caught (WC) Harvesting Retailer Dist. Regional wildcapture Transfer to processing Farm-Raised (FR) Production Insignificant Processing Primary Processing Freezing for storing and transport Secondary Processing (fileting, trimming, packing) Canning or retail pack frozen Transfer to port of exit Import to M.E. Import clearance validation Regulatory audits Transfer to domestic distribution Payment alignment Wholesaler Dist. HORECA Dist. Warehousing, Transfer to store Quality Assurance Product & Shipment Audits Specification verifications Merchandising and assortment Price control. Variable margin Sales & Promo Planning 10
Within MENA, KSA & Egypt Captures 55-60% of Canned Tuna Market ALL Canned Tuna Exports Footprint (2014-16) (In % and In $m) 588 330 4% 5% 11% 15% 22% 37% 1% 1% 3% 2% 4% 5% 8% 26% 21% 32% 494 5% 5% 4% 10% 31% 20% 24% 510 3% 4% 7% 11% 24% 17% 31% 490 2% 4% 5% 5% 12% 15% 21% 35% Bahrain Iraq Oman Qatar Kuwait Lebanon Jordan UAE Libya KSA Egypt 2011 2012 2013 2014 2015 11
KSA Market Overview Market Size +11% on volume +16% on value Total Market (KSA) MAT'15 MAT'14 Diff-15/14 Sales Volume 1000KGS 25046.9 22878.7 9% Sales Value SR 100000 8932.7 7727.1 16% Solid: Biggest segment (68.4%), yet declining (-2.6ppts). Chunks: Fastest growing (+1.1ppts), reaching 11%. Flakes: Grew (+0.4%) to reach 11.9%. Total Market VOLUME SHARE VOLUME SHARE Diff YTD'15 YTD'14 Diff CHUNK 11 1.1 9 1 FLAKES 11.9 0.4 9.1 0.3 SOLID 68.4-2.6 69.2-2.7 READY TO EAT 2.9 0.5 5.4 0.7 SLICES 5.7 0.6 7.3 0.6 12
Egypt Market Overview Market Size -8.5% on volume -5.5% on value Total Market MAT'15 MAT'14 Diff-15/14 Sales Volume 1000KGS 61901 72590-8.5% Sales Value LE 100000 25770 24655 +5.5% Flakes: Biggest segment (53.2)% declined a few points (2.3%) Solid: Growing segment (13.7%), growing Chunks: Fastest growing (+1.1ppts), reaching 30.8% Egypt currency has devalued ( 8.5 to 18) pushing the prices in the market 13
UAE Market Overview Market Size +6% (volume and value) Total Market MAT'15 MAT'14 Percentage Growth Sales Volume 1000 KGS 3781.9 3554.5 6% Sales Value 1000 AED 144165 132041 6% Solid: Remains to be the largest cut at 54.9% (flat vs. YA), followed by Chunks: at 18.8% (also flat), then Flakes: at 16.2% (+0.4ppts) Total Market VOLUME SHARE YTD'15 YTD'14 Diff SOLID 54.9 55.0-0.1 CHUNK 19.8 18.7 0.0 FLAKES 17.2 15.8 1.4 READY TO EAT 7.9 7.6 0.3 SLICES 1.4 2.8-0.4 14
Main markets for Tuna in the region. Libya, KSA and Algeria and Tunisia. Libya is the largest per capita tuna consumer in the world. With its small population, it consumes more chunks pack than Egypt around 3 Million cases of 48 cans in 2016, a low year. KSA is a growing market for chunks pack, while being predominantly a solid market. The market of chunks and flakes are around 22% of around 3.3 M Cs Total market. Tunisia and Algeria are potential markets, which are protected by hi tariff for non Arab league tuna, competition is limited. Domestic consumption of tuna in Egypt is around 6.5 M cases of 48, of which 48% are flakes and rest chunks& solid. Algeria Egypt Tunisia Libya KSA 15
Opportunities in the Middle East Market Seafood Category Overview ME Internal Demand Market demand's cheap source for protein. Tuna satisfy key criteria Devaluation of regional currencies in North Africa. Demand of tuna at the HORECA level Demand falling, lead by North Africa Sourcing Process Tuna pricing is driven by commodity index hence spot purchased in favorable periods A mix of and spot buy are popular. Usually contacts are in 20 fcl or 2 fcl lots Market Outlook Canned tuna market in Middle East has seen more than 15% dip this year due to currency. Frozen Fresh tuna demand increasing in GCC. Pet food market in UAE 65% of human food Benefits Potential ~12-15 M USD Low hanging fruits Key Strategic Initiatives Tuna Efficiency of production, work on ancillary business. Packaging and printing technology. Catering size opportunities Restaurant Items Focus on Horeca needs. Ready to serve sushi, pouch tuna, opportunity to consolidate Pet Food Hit directly, high margin category. Allowing for efficiency gaps 16
Consumer Insights
Tuna Category is Driven by Familiarity Mainly by BRAND CONSIDERATION Driving BRAND EQUITY Equity Drivers For Tuna Sources of Brand Equity Industry Norms Awareness: 30% Consideration: 10% Associations: 60% Awareness 11% Consideration 64% Association 25% Importance of Association Factors Based on FMCG & Retail categories 8% 8% 7% 2% LIGHT & HIGH QUALITY Source: Winning Brands Categories HEALTHY & PROVIDES VALUE AESTHETICS MEAT QUALITIES 18
Purchase & consumption frequency remain stable, so has the quantities purchased in each type of shopping trip WITH AN INCREASE IN QUANTITY PURCHASES IN THE TOP UP SHOPPING TRIP THIS QUARTER CONSUMPTION FREQUENCY WEEKLY MEAN: 1.8 times 44% 46% 49% 42% 45% 41% 46% 49% 47% 51% 3% 2% 1% 0% 0% 6% 4% 6% 2% 2% 4% 2% 2% 1% 1% Once or more a day 4-6 Times a week 2-3 Times a week Once a week Bi-Weekly W4 '14 W1 '15 W2 '15 W3 '15 W4 '15 Cans of Tuna Bought Main Shopping Trip Cans of Tuna Bought Top Up Shopping Trip Average 5 cans 5 cans PURCHASE FREQUENCY WEEKLY MEAN: 1 time 2% 1% 1% 0% 0% 2% 3% 3% 0% 1% 14% 14% 17% 18% 14% 34% 39% 42% 36% 28% 25% 27% 27% 21% 23% 24% 29% 17% 22% 14% 2% 0% 0% 0% Once or more a day 4-6 Times a week 2-3 Times a week Once a week Bi-Weekly Once a month Less than once a month W4 '14 W1 '15 W2 '15 W3 '15 W4 '15 Base: W3 14: 201, W4 14: 206, W1 15: 192, W2 15: 190, W3 15:209, W4 15:210 Source: Q37ab, Q35ab 19
Consumer Perceptions on tuna Perceived to be a VALUABLE variant of fish protein and meat that is affordable It is a main and regular meal, that they happily arrange the appropriate setting for, to strengthen their bond with the product and create a pleasant eating experience. With some additions it becomes a main meal It has a ritual and special way of eating Its valuable its fish Tuna is very versatile, and family members accustom it to their taste preferences using simple ingredients The main trigger of purchase is the eating experience and its affordability, plus convenience and time saving A protein within reach It tastes good, and everyone eats it in their special way 21
Consumer Consumption habits Who consumes it? All Family members: Each one has his/her taste preferences, but everyone consumes tuna either alone, or with the family as a family dish Who prepares it? Usually, Mothers prepare tuna for the whole family. However, at occasions when family members eat it alone/ quickly/as snack, they may prepare it for themselves. When do they eat it? Tuna can be eaten at lunch or dinner, or as a late snack. It can be put as a main dish during lunch/dinner, or as part of a dish (pasta, salad). C1 and C2 class eat tuna in lunch, dinner, and late night snack. B class consumers mainly consume Tuna for dinner (with other small dishes), and serve it at lunch only when it is an ingredient in another dish (pasta/salad). 23
Consumer Purchase habits How often? High consumption families (C1 and C2): 3 times/week. Lower consumption (B-class): 1-2 times/week. How many cans opened per serving? Depending on the occasion, the number of cans varies. Generally, ONE can per family member is the NORM. When tuna is served as a main dish along with other sides/additives, 3 cans can be enough for a family of 4-5 members. 24
Communication Review
Communication: Tuna middle East Mostly promotions, with secondary display Merchandising support growing ATL in certain premium brands, category lead by Rio Mare Internet based tools are gaining popularity 26
Activations 27
In-Store 28
In-Store Presence 29
Communication review Going beyond display campaigns few tuna brands are building microsites on popular portals that included games/competitions as well as content sharing and knowledge sharing about tuna From the Internet 30
Digital 31
TV Copy KSA Sunshine https://youtu.be/036k7kgw-fg Goody https://youtu.be/s6kpax0jc3m 33
Recommendation Middle East is big enough and easy enough to enter to make it a market of focus, for new origin for canned tuna. No preapproval needed. Basic Cordex specs followed All variants/ quality finds a market here Price competitiveness being paramount in large part of the market, current high price of tuna gives a good opportunity to beat Thailand advantage of clustering Regional semi-govt. groups could market, freshness of regional tuna, sustainability, at the grass route consumer level, while demonstrating the quality and texture of the product. ( eg. Australia Meat Work at retail level) Focus on high value & profitable pet food and frozen fish market: Focus on a niche or a single market and create success Source: Ipsos Pan Arab-GCC 2012-2013 34
Thank you arnab@cantab.net