The region’s abundant energy revenues have supported its food imports as well as enabled its governments to make multi-billion dollar investments towards improving the countries’ food security.

According to Alpen Capital, food consumption in the GCC, backed by encouraging macroeconomic drivers, is expected to grow at a 3.5 percent compound annual growth rates (CAGR) between 2014 and 2019 to reach 51.9 million metric tonnes (MMT).

Cereals are likely to remain the most consumed food category, accounting for 46.5 percent of the region’s total food consumption in 2019. However, rising consumption of high-priced protein-rich and healthy foods is expected to gradually eat into the share of cereals in the total food consumption.

Qatar is expected to be the fastest-growing market for food consumption during 2014 to 2019 at a CAGR of 5.5 percent, followed closely by the United Arab Emirates. Saudi Arabia is the largest food-consuming nation in the GCC and is anticipated to remain so for the foreseeable future. Food consumption in Saudi Arabia is estimated to show an annual average growth of three percent from 2014. Oman, Kuwait and Bahrain also show similar growth patterns, ranging from 2.7 percent to 3.2 percent.

Food consumption in Qatar is expected to reach 2.2 MMT in 2019, registering the region’s estimated highest annualised growth of 5.5 percent from 2014. This growth rate is attributed to its rapidly rising population (4.8 percent compared to the GCC average of 2.4 percent), coupled with an urban lifestyle that has led to an increased demand of processed and Western foods. Also, Qatar’s high obesity rate is leading to an increased consumption of healthy foods. Consequently, the consumption of fruits and meat is expected to grow at a CAGR of above 5.5 percent during the forecast period.

There are several trends boosting the growth of the GCC food industry, which also in turn create opportunities for local as well as international players. In tandem, there are ample opportunities in the GCC’s packaged food market due to the rising demand for international foods.

The concept of private labels is steadily evolving as a highly profitable option for food retailers in the region, as it lifts profit margins by eliminating the intermediaries in the value chain.

In order to reduce the high reliance on imports, governments are encouraging domestic and global food producers to establish new manufacturing units. GCC governments have been investing in fish farming initiatives to boost domestic seafood production and meet the rising demand. Hydroponics and aquaponics are among the technologies the region has already adopted to enhance its agricultural output.

The organic food market in the region, estimated at USD300 million (QAR1 billion) in 2009, is anticipated to reach USD1.5 billion (QAR5.5 billion) by 2018 due to increased health consciousness. Halal food imports into the GCC region are expected to almost double from USD25.8 billion (QAR93.9 billion) in 2010 to USD53.1 billion (QAR193.3 billion) by 2020, registering a 7.5 percent CAGR.

Unfavourable climatic conditions, including water scarcity, have an adverse impact on the agricultural productivity of the region. Securing a steady supply of food remains a key challenge for the GCC governments due to their dependence on imports. An unstable sociopolitical environment in the Middle East poses a threat to the import of food into the region. Being largely dependent on food imports, the Gulf nations are always exposed to the fluctuations in international food prices. The regional governments’ efforts to enhance food supply are encouraging international as well as local players to enter and expand in the sector.

Sanjay Bhatia is managing director, Alpen Capital Investment Bank (Qatar) LLC.