Over a year since Covid-19 first disrupted global food supply chains and forced major cities across the globe into lockdown, manufactures are still struggling with increased shipping and raw material costs as an economic consequence of the pandemic.
Companies in the GCC also have to deal with relatively recently instated government fees or taxation schemes as the region proceeds with its economic diversification plans, explained Ahmed Bayoumi, CEO of Global Food Industries (GFI), the food and beverage arm of Sharjah-based conglomerate Albatha Group.
“Be it in raw materials, labour, government fees or new taxation schemes, it’s definitely becoming more challenging from a cost point of view as costs are progressively rising,” said Bayoumi.
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“The GCC region as a whole is working through a diversification plan and this means that governments will charge for services, indirect taxes, value added taxes etc. Up until around 2015, we were not being charged anything of the sort so this is a changing feature of the landscape that is causing more cost pressures,” he continued.
But it is coronavirus that has had the biggest impact on costs, creating “a shock with raw material prices going up along with logistics or container costs”, said Bayoumi.
Raw materials used by GFI to produce their frozen food line of products from their facility in Sharjah includes commodities such as corn, sugar, flour and poultry, all of which have experienced a “sharp spike” in price over the last few months.
“We export our products to more than 30 markets and have seen the container-cost triple from the UAE to the US, for example, and that really makes the whole business almost not viable,” explained Bayoumi.
“We hope that this is a temporary phenomenon because, in theory, there is a lot of capacity that has been idle during Covid and it is going to take time for it to come back on stream. The price outlook remains the same for the next few months” he continued.
Ahmed Bayoumi, CEO of Global Food Industries (GFI).
In order to alleviate this challenge, GFI has been “meticulously reviewing its cost structure and selectively looking at its pricing and discounting policies”, said Bayoumi.
The company is also trying to identify alternative sources for its raw materials and developing a geographical and product line growth strategy to offset the rising costs.
“We have been experiencing significant growth in our business this year and that is helping, to an extent, mitigate the cost pressures,” commented Bayoumi.
“This year, we expanded our factory capacity to add a new line of fully-cooked products to capitalise on the consumers’ switch towards convenience,” he continued. The new line has experienced an almost 100 percent growth since its launch in February.
GFI is also entering into the plant-based food market through introducing chicken and meat flavoured burger patties to its Al Areesh brand, said Bayoumi.
Introducing plant-based chicken and meat flavoured burger patties to its Al Areesh brand.
“Thereafter, we have more ideas in the in the pipeline to cater to a growing trend of people becoming flexitarian and desiring to reduce their animal protein intake,” said Bayoumi.
“This is a trend which started in the US and is now in full swing the UK and Western Europe. Our assessment is that it’s going to come to this part of the world and therefore we started working on it from last year with a plan to launch the first two products in the next few weeks,” he continued.
Geographically, Bayoumi sees the UAE, Saudi Arabia and Egypt as the three main markets in the MENA region and said GFI plans to have a strong presence in all three.
“The UAE is our home market where the group has been operating for the last 70 years and the food business has been operating for 30 years so we have a good presence here,” explained Bayoumi.
“Our current focus this year and the next is on Saudi Arabia, where the group has a distribution company and we are looking to invest in manufacturing facilities in the kingdom to secure local supply for the market. Probably in the second half of 2023, we’ll be looking at Egypt to enter there as well,” he continued.