USDEC President and CEO Krysta Harden is leading U.S. dairy farmers to the UAE on a November trade mission that highlights the high potential of increasing exports to the region.

Young people embracing dairy is one reason demand is expected to increase in the Middle East and North Africa. Photo credit: iStock

Demand gains for the Middle East and North Africa (MENA) seem certain—not only for traditional dairy products but for a variety of dairy ingredients and cheese, from whey protein to parmesan.

Assessing the opportunities for increasing U.S. dairy exports to the region is one reason USDEC President and CEO Krysta Harden is leading a November 5-12 trip to the region with U.S. dairy farmers.

The countries considered part of the region vary depending on how you define MENA. For the purposes of USDEC, MENA encompasses all the countries along the north coast of Africa, the Arabian Peninsula, the Levant, Iraq and Iran. That’s 19 nations in all, with a population of more than 540 million people.

Four U.S. dairy farmers are in the Middle East this week to learn about market opportunities for U.S. dairy exports. Visiting a USA Cheese display at a supermarket in the United Arab Emirates are, from left, Becky Levzow, dairy farmer from Wisconsin; Alex Peterson, dairy farmer from Missouri; Lauren Briones, USA cheese merchandiser from the UAE; Marilyn Hershey, dairy farmer from Pennsylvania, and Larry Hancock, dairy farmer from Texas. 

While market conditions, consumer buying power, infrastructure and other factors influencing demand differ by country, further dairy demand gains for the region as a whole seem certain for at least seven reasons:

1. Population growth

The MENA region’s population is growing at a rate of 1.7% per year, according to World Bank data. That’s significantly higher than the global growth rate of 1.1%. More mouths to feed with limited capacity to produce food equates to rising demand for imports.

Scarcity of water and arable land and an unfavorable climate limit milk production growth potential in the MENA region. 

2. Economic growth

Economic growth is a major factor in rising global dairy demand. A growing economy means greater disposable income, more dining out and an overall shift to higher protein diets.

Pandemic fallout significantly dented MENA economies in 2020. But the impact differs depending on the nation. Gulf Cooperation Council countries, for example, have implemented strong vaccine programs and are poised to recover more quickly than some neighboring states.

And some of the biggest potential markets in the MENA region are also some of the wealthiest in the world. Saudi Arabia, the UAE, Bahrain, Qatar and Kuwait all rank in the top 26 nations in terms of per capita GDP (constant prices; purchasing power parity), alongside places like France, the UK, Germany and Australia.

3. Oil dependency

Oil accounted for about 17% of the GDP in the MENA region in 2019 (the latest data available), according to the World Bank. That’s three times the level of any other geographic region in the world.

For some MENA markets, the percentage is even higher, including for Kuwait (42%) and Saudi Arabia (24%). So when oil prices are low—as they were for much of 2014-2016 and all of 2020—dairy purchasing is typically negatively impacted as well. Countries like Saudi Arabia are moving to diversify their economies to lessen oil dependency, an effort that will become increasingly important given sustainability and climate concerns.

4. Heightened health and wellness concerns

The pandemic heightened the focus on nutrition and healthy eating in the MENA region, as it did all over the world. Rising cases of diabetes, obesity, cardiovascular disease and other disorders in MENA have sharpened the focus even more.

That mindset has brought about an increased awareness of the benefits of milk, dairy proteins and related products. For example, consumers in the UAE reported that they increased dairy consumption by 39% during the pandemic as part of an overall effort to increase healthy eating, according to a YouGov survey.

5. Vibrant food and beverage manufacturing

The region is home to a sizable food and beverage manufacturing sector. Saudi Arabia alone boasts more than 1,000 sweets and chocolate manufacturing operations. It’s also home to some of MENA’s largest and most sophisticated dairy and meat processing plants.

Egypt is considered a food production innovator in the Arab world. Dubai has expressed interest in becoming a food and beverage development hub.

Companies across the region are increasingly using dairy ingredients in a variety of applications. SMP is used in dairy manufacturing, cheese processing, and the confectionery, chocolate and bakery segments. Butter is used for cheese and confectionery processing. Milk protein concentrate (MPC) is used in the production of dairy products, white cheese and yogurt.

Saudi Arabia, Egypt, Algeria, Morocco and Bahrain all have significant processed cheese manufacturing operations, buying cheddar and other natural cheeses to turn into the well-known and loved local brands. Some have grown into regional manufacturing hubs, exporting processed cheese to dozens of neighboring countries.

6. Foodservice growth

The MENA foodservice sector was going strong prior to the pandemic, expanding 6-8% per year, depending on restaurant format. While the region suffered a pandemic-related downturn in 2020, like nearly every foodservice sector in every country in the world, key MENA markets began to rebound quicker than most.

Dubai and Saudi Arabia began reopening restaurants and malls in June 2020. Dubai and Egypt began reopening to domestic tourism that same month.

Dubai added more than 1,300 new food and beverage outlets in 2020—an average of around 3.5 per day—despite the hardships of the pandemic. One reason for the growth revolves around local attitudes toward dining out: consumers consider a visit to a restaurant as a form of entertainment outside the home. As the pandemic eases, eager consumers are expected to ensure a return to pre-pandemic growth.

Virtually all major Western food chains—pizza, fast food, casual, sandwich shops, coffee shops, etc.—have set up shop in the MENA region. On top of that, places like Qatar and Dubai have become global fine dining destinations, known for high-end cuisine and attracting celebrity chefs.

7. Grocery retail growth

Local supermarket chains have boomed, and international retail chains have flocked to key MENA markets over the past two decades, eager to serve an increasingly large middle class. UAE-based Lulu Group, Spinneys and Union Co-op, France’s Carrefour, Australia’s Jones the Grocer, Saudi Arabia’s Panda Retail, the UK’s Waitrose and others continue to expand during the pandemic alongside increasingly popular and proliferating online grocery options.

A "Cheeses from the USA" pop-up truck graces this supermarket in the Middle East.

Mall construction—a faded enterprise here in the U.S.—remains a staple in the hot MENA climate. Malls often feature a major grocery chain and plenty of foodservice choices. The 32-million-square-foot Cairo Festival City Mall, for example, featuring nearly 100 restaurants and 300 stores, is on track to open by year-end.

Conclusion

Challenges exist. For example, the MENA market is highly price-sensitive, and competition is strong, particularly from Europe, which benefits from geographic proximity. But it's important to remember that MENA countries depend on imports for more than half their food needs, including dairy, creating a high-potential growth opportunity for U.S. dairy exporters for years to come.  

Paul Rogers is a correspondent for the U.S. Dairy Export Council who has covered the dairy industry for 25 years. 

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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.