Why is Halal Certification Needed?
The Halal Times staff recently discussed in detail what the Halal standards are and why you, as a business need to obtain Halal certification if you want to serve Muslim consumers in your country or around the globe. Due to health reasons, the supplements industry has become an important source of income for a lot of ingredients companies everywhere.
The ingredient industry is no stranger to the concept of halal. It simply comprises the Islamic dietary guidelines about food, pharmaceuticals, and personal care products. When globalization opened up commerce between developed countries and emerging economies in the 1990s, U.S. food companies rapidly embraced the concept of halal certification to overcome entry barriers into Muslim-majority countries. The strategy paid off: U.S. companies gained access and market share to large, newly thriving economies in the Muslim world.
Who Are The Major Beneficiaries Of Halal Certification?
Nutritional, dietary, and functional foods, as well as ingredients, are a prominent category in halal-certified products. Among Halal-certified companies, large nutritional corporations like Sunrider, Nutrilite, Abbott, DSM, Naturex, Kerry Group, Cargill, and Danisco have used halal as an important growth strategy for many years.
Sunrider International was first certified in 1994. By 2009, the company had 415 different halal-certified products for worldwide distribution. In a 2009 interview, Dr. Tei-Fu Chen, chairman of the board and founder of Sunrider International, said that halal certification was important to the company’s customers.
Similarly, Nutrilite successfully introduced 67 halal-certified products in 11 markets from 2000 to 2010.
In a 2010 interview, Nutrilite’s research scientist in technical and regulatory affairs and halal program coordinator Liliana Totoiu said that halal certification was a natural process for the company as it listened to and worked to fulfill customer needs in halal markets around the world.
According to Ms. Totoiu, the success of Nutrilite’s halal product strategy was its commitment to total customer satisfaction. “Approximately 240 million people, who translate to about 40% of the entire population of South Asia, with the majority in Malaysia, Indonesia, and Brunei, are halal product consumers,” added Totoiu.
Another halal success story is with Abbott’s nutritional products. Abbott first procured halal certification in 2003 after a Southeast Asian market request. When Saudi Arabia made halal certification mandatory for all edible imports, halal certification gained even more importance. By 2009, almost all of Abbott’s special dietary and nutritional products obtained halal certification.
While Abbott initially only certified products for large Muslim regional markets like Southeast Asia, it later decided to obtain global halal certification for all its halal product lines. “Not only did it make good business sense, but it was also the right thing to do,” said Donald Sgontz, Abbott’s manager of halal and kosher programs, in an interview in 2008.
Sgontz attributed the decision in favor of social responsibility because Abbott “wants to provide nutritional products to as many people as possible.” That included the 8–9 million American Muslims.
In 2011, Abbott received the Company of the Year award from IFANCA, a US-based Halal certification body, for its Halal compliance in manufacturing practices, proactive approach to certification, and message positioning in Southeast Asian markets.
Ingredient companies have also done well when they have communicated their products’ halal status.
Take the example of DSM, a leading nutritional ingredient supplier. DSM began its halal global strategy in 2008, even though its products were halal for many years.
According to Stephan Heck, senior director of quality management at DSM Nutritional Products, halal certification “stimulated curiosity from management to the shop floor level, creating the desired outcome in culture, diversity, and inclusion.” As a B2B player, DSM supports its B2C customers with meaningful information about the nutritional value of DSM’s Halal products and their corresponding manufacturing and distribution process.
Heck said the halal certification experience has been positive and that “beyond growth, halal certification is also an acknowledgment of [DSM’s] Quality Policy to be ‘First Choice.’”
Is The Halal Certification Industry For Nutritional Products Growing?
Today, the growth in the Halal-certified nutritional product category shows no signs of slowing down. Halal dietary supplements, vitamin pills, and nutritional foods are crossing regional borders; Halal certification auditors from different certification organizations are now traveling to China and Peru as much as they travel to companies in the United States and Canada.
In recent years, the number of private and mid-size companies gaining halal compliance has also increased. Chemi Nutra, a privately held pharmaceutical and nutraceutical company best known for its introduction of phosphatidylserine (PS) and alpha-glyceryl phosphorylcholine (A-GPC), received halal certification in 2009.
According to Chase Hagerman, Chemi Nutra’s business development and marketing manager, the company decided to get Halal certification for its branded ingredient SerinAid PS due to its worldwide appeal and to prevent any limitations to the brand. “In addition to enhancing the marketability of SerinAid PS, non-Muslims appreciate the third-party credibility major Halal certification organizations offer,” said Hagerman.
He also added, “It’s hard to pinpoint a direct monetary impact halal certification made, but it was certainly worth it as we are regularly asked by contract manufacturers and finished-product marketers for the paperwork.”
Today, nearly every consumable business with an eye on global trade has incorporated Halal as part of product formulation. What changed?
Factors Behind The Growth Spree
According to the Pew Research Center’s Forum of Religion and Public Life, Muslims make up 1.9 billion of the world’s population and are one of the fastest-growing consumer demographics.
The center projects the global Muslim population to grow at twice the rate of the non-Muslim population over the next two decades, estimating that by 2030, Muslims will make up 26% of the global population, at 2.2 billion.
Experts also highlight the Muslim market’s “youth bulge” as another driver of halal goods demand. Sixty percent of the Muslim market is under 30 years old, and 87% of Muslims describe the religious aspects of their lifestyle as “very important.
These facts point to increasing demand for halal-certified nutritional and wellness products as this Muslim population grows and ages.
What Is The Size of The Halal Pharmaceutical Industry?
To further visualize the size of this demand, let’s take a quick overview of the numbers surrounding halal pharmaceutical demand, which are based on expenditure data from various national statistical agencies and pharmaceutical industry associations.
Thomson Reuters’s 2013 “State of the Global Islamic Economy” report estimates the combined global Muslim spending on pharmaceuticals was $70 billion in 2012, accounting for 6.6% of global pharmaceutical expenditure ($1,094 billion).
Thomson Reuters also estimates that by 2018, global Muslim pharmaceutical spending will climb to $97 billion and make up 7% of global expenditure.
Comparatively, this means that the global Muslim pharmaceutical market is the third-largest market compared to the top national spenders. In 2012, the United States’ pharmaceutical expenditure was $360 billion, Japan’s was $128 billion, and the global Muslim pharmaceutical spending of $70 billion was followed closely by China at the US $66 billion.7
The individual Muslim pharmaceutical market size ranked by country is also noteworthy. Top countries with Muslim pharmaceutical consumers include Turkey ($10.4 billion), Saudi Arabia ($5.2 billion), Indonesia ($5 billion), Iran ($3.7 billion), the United States ($3.6 billion), and Algeria ($3.1 billion), based on 2012 data.
It is interesting to note that Muslim minority countries, such as the United States ($3.6 billion), Russia ($2.6 billion), France ($2.5 billion), Germany ($2.1 billion), and the UK ($1.5 billion), account for a total expenditure of $12.3 billion.
The combination of these minority countries is larger than the largest Muslim consumer pharmaceutical market, Turkey. This disproves the idea that halal-certified wellness and nutritional products can only find profit in large Muslim-population markets.
We also believe the demand for halal nutrition and dietary supplements has increased due to growing global consumer awareness and desire for wellness products. Take the example of Indonesia. The largest halal spending country ($197 billion in 2013), Indonesia now ranks third in terms of Muslim pharmaceutical spending. Could it one day become a leader in halal pharmaceutical spending as well?
As the fourth most populous country in the world, it is an attractive market for nutritional companies. Despite the low spending on healthcare ($17 per capita on pharmaceuticals), health-consciousness has made vitamin and nutritional supplements more popular and increased total sales by 11% from 2009–to 2010.
According to Global Business Guide, consumers prefer over-the-counter drugs to prescription drugs. This has fueled a 17% growth rate for over-the-counter drugs compared to a 10% growth for prescription drugs.
As has been pointed out in the lines mentioned above the halal-certified companies have a clear advantage over their non-halal–certified competitors. However, while participating in the halal market requires halal certification, communicating with halal consumers is also important.
Given the speed at which information travels through social media and the Internet, it is prudent to show halal consumers in non-Muslim majority markets the halal status of products. A conscious strategy, combined with proactive consumer engagement, will provide the best results to halal-certified manufacturers in the dietary nutrition industry.