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Fast moving; fast growing – Bahrain’s FMCG sector

FMCGLogisticsManufacturing

The Middle East is enjoying one of the fastest-growing FMCG sectors and markets in the world, driven by a rapid population boom coupled with a marked increase in consumer spending. According to Alpen Capital’s latest GCC Food Industry Report, food consumption in the GCC is expected to grow at a CAGR of 3.3% from an estimated 51.5 million to 60.7 million metric tonnes between 2018 and 2023. Over the same period, Alpen estimates the size of the region’s retail sector will grow at a CAGR of 4% to US$308 billion. Within this fast-evolving region, Bahrain is emerging as the regional manufacturing and distribution hub of choice for a growing number of FMCG industry businesses.

US$1.5 trillion opportunity in the FMCG industry

Take Arla Foods – the fourth largest dairy company in the world – and the launch of their processed cheese factory in Bahrain. From this factory, the European dairy cooperative will export to USA, West Africa, South East Asia and the MENA region. Increasingly, global manufacturers are seeking to access the growing US$1.5 trillion GCC markets, where demographic growth – particularly of the middle class – and economic expansion are driving greater demand for consumer goods, food and beverages. The question for every manufacturer with Middle Eastern ambitions is where to set up shop to take advantage of the FMCG industry opportunities?

Hyper-connected logistics hub

In the hyper-competitive world of the FMCG industry, a strong logistics sector is essential for quickly getting short shelf-life goods to your target market. With continuous improvements to its air, sea and road networks, Bahrain has positioned itself as the region’s de facto logistics hub, where several global logistics leaders, including Fedex, UPS and DHL have based their regional operations. The Kingdom enjoys unrivalled access to GCC markets – including its largest, Saudi Arabia – to which it is connected by the 25km King Fahd causeway, and a second Saudi causeway is in the works. Also due for completion in the first quarter of next year is a new terminal for Bahrain International Airport, which will increase annual passenger capacity to 14 million, up from 8 million, and cargo capacity to 1 million metric tonnes per annum. The ideal logistics industry in Bahrain makes it easier to stay competitive in the FMCG sector.

Launcpad to the region

Small wonder so many consumer goods manufacturers in the FMCG industry are flocking to the island. Take Mondelez, which chose Bahrain as the site of its sixth global mega-plant – a factory of the future the size of 300 football fields.

The company is producing biscuits, including its famous Oreo brand, and exporting across the Middle East and Africa. And of course, Arla, which has more than doubled its sales organically across MENA since 2010 – its largest market outside Europe. The company’s new setup will allow it to expand even further across the region, with Bahrain as its launchpad.

Cutting Costs

In the FMCG sector, goods fly off the shelf quickly and the margins are slim. Keeping costs down is essential. That’s why Bahrain is attractive for FMCG manufacturing, due to lower setup and operating costs – by up to 49% according to a recent KPMG report. Zero corporate taxes, 100% foreign ownership with no free zone restrictions and a highly skilled workforce heavily subsidised by labour fund Tamkeen are key factors here. Two major players in Bahrain’s FMCG sector and market that have both cited the Kingdom’s competitive costs as reasons for basing their manufacturing and regional distribution hubs there are UK hygiene products producer Reckitt Benckiser and US and Saudi-owned personal care product producer Olayan Kimberly Clark. Reckitt Benckiser’s hygiene products include notable brands such as Dettol, Varnish and Veet, most of which are exported to the Middle East. Meanwhile Olayan Kimberly Clark produces jumbo tissue rolls for brands such as Huggies, Kleenex and Kotex, 100% of which are exported to its sister plant in Saudi Arabia to produce tissue boxes. Bahrain provides the environment to cut costs and sty ahead in the FMCG sector.

Opportunity to scale

In short, the Arla launch is just the latest exciting chapter in Bahrain’s – and indeed the entire region’s – rapidly developing FMCG sector story. As one of the world’s fastest-growing FMCG sectors and markets, the Middle East offers consumer goods producers the opportunity to scale. And in Bahrain they will find the nimble, cost competitive logistics hub needed to kickstart their regional operations.