MENA Millennials driving demand for bakery and snacks, says Golden Agri-Resources

Narayana K. Widjaja, head of Indonesia Industrial and Exports at PT Sinar Mas Agro Resources and Technology (SMART), a subsidiary of Golden Agri-Resources (GAR) told BakeryAndSnacks: “We're seeing big growth in consumption from Millennials across MENA, as incomes rise and they become an increasing part of the workforce.​

“This is driving demand for both convenient and affordable luxury products.”​

GAR is among the leading palm oil companies in the world and was listed on the Singapore Exchange in 2008.

The company tracks emerging trends in baked goods and snacks, particularly in the East and MENA regions that are its main markets.

“Demand for our shortening and specialty fats portfolio is rocketing as packaged snacks and confectionery look to outperform the wider food market in the region,”​ said Widjaja.

“The snack and confectionery market in the Middle East may be small, but it has huge potential and is growing at a fantastic pace.”​

Urban explosion​

He cited statistics from Euromonitor that show the Middle East is the world's fastest growing region in population terms and is one of the youngest and most rapidly urbanising areas globally.

Between 2012-2030, the population of the Middle East and North Africa region is expected to experience the fastest growth (46.9%) out of all world regions to reach 1.9bn in 2030.

It also continues to be the youngest of all world regions with a median age of just 22.8 years in 2030.

Widjaja noted World Bank figures that forecast MENA GDP growth to be 2.3% in 2016; anticipated to grow between 3.1% and 3.5% over the next two years.

“The number of high net worth individuals has been steadily growing on the continent in recent years and with it, the taste for luxury products. In addition, we see a growing number of middle class and aspirational consumers willing to pay more for quality food goods but retaining a keen sense of value for money,”​ he said.

“This means the mega trends that have revolutionized the world’s food industry elsewhere, such as rising incomes, the entry of women into the workforce and ever busier lifestyles, are all present.”​

Cross my palm in oil​

He told us that an emerging trend in MENA is a shift in traditional family mealtimes to a more fragmented and flexible eating style.

This is rapidly driving demand for convenience food, especially packaged and baked snacks.

“Baked snacks, in particular biscuits, are proving especially popular as an affordable sweet treat, and we can see a host of innovation opportunities in the category, particularly in terms of flavors and smaller package sizes better suited to on the go consumption,”​ he said.

The evolving donut​

Widjaja explained the demand for shortening and speciality oils is directly linked to the growth in the bakery sector.

“We see two broad trends here. The first is that cash-rich consumers are challenging manufacturers to come up with ever more elaborate treats and snacks, which, in turn, is driving demand for specialized ingredients.​

“The second is that MENA still has many lower income consumers who are also demanding affordable but good tasting food,”​ he said.

For example, he cited the increasing complexity of donuts, with the vast range of fillings and coatings available today, as well as a cocoa butter substitute for ice creams and chocolates.

GAR company profile​

Founded in 1996, Golden Agri-Resources is the world’s second largest palm oil grower and Indonesia’s largest – accounting for approximately 4% of the country’s planted estates. Its downstream business spans over 485,000 hectares (1.2m acres) of palm oil plantation, of which 21% is owned by smallholders, as well as part or full ownership of 489 processing mills.

This means the company employs around 174,000 people in Indonesia, contended Widjaja, breaking it down: 49,000 direct employees; 67,000 smallholder farmers; and 58,000 casual workers brought in to help with the harvesting and replanting.

Its primary activities include cultivating and harvesting of oil palm trees; processing of fresh fruit bunch into crude palm oil (CPO) and palm kernel; merchandising and refining CPO into value-added products such as cooking oil, margarine and shortening. It also has operations in China and India, including a deep-sea port, oilseeds crushing plants and production capabilities for refined edible oil products as well as other food products such as noodles.

The $2.9bn corporation has a portfolio of more than 30 consumer brands (sold mainly in China, Indonesia and India), as well as a wide portfolio of palm oil derivatives, used by food manufacturers in 70 countries, including the UK.

The Brexit question​

While Brexit may have some impact, particularly in terms of future currency movements, Widjaja does not see it affecting the fundamentals of the UK market.

“We see demand in the UK expanding, given the continued desire from consumers for high quality food, and the need from manufacturers to meet this need with quality and cost-effective ingredients,”​ he told BakeryAndSnacks.