Government subsidies bar better bread in the Middle East
Feb. 28, 2014
by Lamine Lahouasnia, head of Packaged Food at Euromonitor International
Cheap bread is all over the Middle East and has been for years, but with a growing number of health problems, is it time governments reconsidered how bread subsidies are actually affecting its citizens? The Middle Eastern bread market is dominated by subsidized products that place a strong emphasis on affordability rather than health or even quality. Looking at 2013 data, it’s clear that the highest levels of diabetes can currently be found in Bahrain, Qatar, Saudi Arabia and Kuwait with North African markets set to join them in the not too distant future. As white bread often causes spikes in blood sugar levels, many Middle Eastern governments could be unknowingly contributing to the early deaths of millions of their own citizens by making bread so cheap.
A question of quality
In the Middle East the majority of wheat and other grains imported is controlled by government buying agencies that pay market price for the commodities before distributing them to local flour millers at a much lower price. This allows millers to provide their flour at a much lower cost to bakers and, in turn, for bakers to sell their finished baked goods to consumers at an affordable price. In recent years, however, many millers and bakers have raised concerns about lower quality flour, and some in the industry have gone so far as to blame ”cheap” wheat from the Black Sea region as the primary perpetrator. In some ways the perceived deteriorating quality of baked goods in many Middle Eastern markets has created opportunities for private bakeries that have focused on supplying higher quality products in the market.
The saturation of staples
Bread currently constitutes approximately 18% of the share of a consumer’s diet in the Middle East, and consumers there have historically grown to become somewhat over-dependent on bread as an essential staple food. To put things into context, bread is just 4% for the average North American diet, but things are starting to shift in the Middle East. A growing number of consumers in the region, particularly in countries such as Algeria, Morocco and Egypt, are moving out of lower income brackets into demographic segments, which can start to spend their cash on more discretionary food items. This has led to the saturation of some baked goods categories such as bread as a far higher “share of stomach” is going towards meat, vegetables, snacks and, crucially, added value baked goods products.
An absence of awareness
Over the past five years retail volumes of baked goods have grown or even declined at a slower pace than retail value, and what this tells us is that unit prices are rising steadily indicating that consumers in the region are willing to pay more for baked goods despite the market being flooded with subsidized products. Initially this seems to be in the form of indulgent and convenient products, but there is definitely a huge potential for healthier bread such as whole wheat and high-fiber varieties. The primary challenge at this stage for manufacturers of these products is educating consumers on the health benefits of their products and persuading people to part with additional cash, given just how cheap subsidized bread can be.
For further enquiries, please contact Lamine Lahouasnia, head of Packaged Food at Euromonitor International, at email@example.com.