After the oil and petrochemicals, food industries play a significant role in GDP, as average annual of 95% equivalent to 130 mn tons food stuff are produced domestically. A share of 18.3% of the total industries is dedicated to food sector, accounting for 15.1% of employment, 8.93% of the investment and 9.64% of the value added. The annual turnover more than 20 bn USD indicates the magnitude and great potential of this sector. Given the impact on the economy, the industry has direct relation to the health of the people, addressing technology and innovation in food industry will lead in development of the economy and the people’s health. Iran’s contribution to the 2,000 bn USD of Halal market turnover is less than 1%. However, Halal has a very strong background in the global market and non-Islamic countries are paying more attention to the market and have a good place in the world in this regard. Iran is not among the 10 investor countries in Halal pharmaceuticals, food, cosmetics and transportation markets.
– An increase of 8% in food export in the year ended March 2017.
– Iraq increased import tariffs on dairy product up to 40% and milk, yogurt and cream tariffs increased from 20 to 25% unilaterally, which caused uncompetitive price.
– Turkish MT-Royal has signed an agreement to an Iranian company to build a manufacture in the Aras Free Zone as brand of LataMarco on food production. The project includes three phases, which is expected to launch in June 2018, December 2018 and June 2019, respectively.
Raw material capacity in food & processing industry
The total Iranian agricultural processing industry was approximately 44 mn tons in the year ended March 2016, based on 6 th development plan is expected to reach 54 mn tons. According to the statistics of Ministry of Industry, Mines and Trade, the total food production capacity by licensed units amounted to 260 mn tons and semi-finished projects capacity were more than 500 mn tons, in the year ended March 2016. The capacity of the operating units is about 90 mn tons.
Various food products have a higher export advantage in terms of creating higher value added than agricultural products. Food products export value increased by 8%, to 2,077.5 mn USD and in weight reached 1,178,400 tons, the year ended March 2017, compared to the year ended March 2016. The following 9 groups have the highest export value in the year ended March 2017: vegetable oil, pasta, macaroni and dough, tomato paste, sugar, candy and its products, during that time, four groups faced to decline in export value which includes: compote and canned, concentrate and juice, honey and beverage.
Dairy, biscuit, bread, cookies, various compote and canned are as the main export products, so that these products allocated 30.9%, 23.9% and 9.6% of total export of food products in the year ended March 2017, respectively.
Food and beverage import has declined, from 4,330 mn USD in 2012 to 2,242 mn USD in the year ended March 2016.
Food and beverage expenditure in household budget
Food and beverage share has been 90 mn IRR of household budget, accounting for 22.9% of the total household expenditure in the year ended March 2017, compared to 23.6% of the previous year.
Although the turnover of beverages industry is very high, but the quality is far away the optimal global indicators. Totally, 16,895 licenses were issued in the year ended March 2017, the most of which belong to the food and beverage group with 2,732 items. also, it has the highest expected employment rate 16.1% of the total population. The beverages production makes up 7% of the food industry’s value added.
Currently, the juice and concentrate is a young industry with 257 units, while there were only three production units operating before 1987.
The nominal production capacity of fruit concentrates remain at 290,000 tons per year. In addition, 200 fruit juice production units have 4 mn tons production capacity annually.
Despite the attractive markets all over the world, the juice market is facing some problems in Iran. As the first issue is the shortage in juice per capita consumption by 11 liters per year. Due to the seasonal varieties in Iran and less fresh meal consumption and abundance in European countries, their per capita for consumption is 35 to 40 liters per year.
There are up to 120 mineral water plants in Iran with average bottled mineral water about 1.3 bn liters per year. beverage export was about 100 mn USD which 75% were fruit juice and concentrates, in the year ended March 2017.
Afghanistan, Pakistan, Iraq, Turkey and Russia as export targets and Brazil, Thailand, Spain, Belgium and Ireland, were the main import origins for concentrates and juices, in the year ended March 2017.
Iran exported 21,000 tons of mineral equal to worth 25 mn USD, mainly to Iraq, Lebanon, Afghanistan, Azerbaijan and Pakistan, in the year ended March 2017, which had no significant change since the last year, while the total value of mineral water import was 7 mn USD and weighs 9,000 tons, from Turkey, Germany, the Netherlands, the Republic of Korea and Austria, in the year ended March 2017.
Cookies, Chocolate & Biscuits
The variety and volume of cookies and chocolates have grown dramatically in recent years and these products are existing in most stores. Since the early years of the establishing large factories and production units, Iran has more than 40 years’ history in cookies and chocolates industry.
There are about 1,100 active production units in confectionery industry, over 99% of which belong to the private sector and 1% is owned by banks or semi-public sector. The industry contributes to 16%, 10% and 20% share in employment, value added and food export, respectively and has an annual production capacity of 2,500,000 tons, while it accounted for 1,600,000 tons of production, which is 900,000 tons less than its actual capacity in the year ended March 2017.
The turnover of the cookies and chocolate industry is about 5 bn USD per year, with consumption Per capita of 20 to 21 kilograms, which is 30 to 40% lower than the Europe. The cookies and chocolate industry is very diverse and have six branches including: chocolate, caramel taffy, candy bars, snacks, chewing gum, etc. The chocolate holds the first place in the food industry export and is competitive with the world because the companies enjoy world-class technology, so that the best German, Italian, Turkish and even domestic packaging machines are used.
Iran exported 194,000 tons of cookies and chocolates for 489.3 mn USD, with increase of 10% and 2.5% growth in value and volume, in the year ended March 2017. Iraq and Afghanistan were the major export targets for these products.
The legal imported chocolate is very less than the smuggled amount. The cookies and chocolates import amounted131 mn USD, in the year ended March 2017.
The cookies and chocolate industry has suffered a severe recession, in the past years, resulted by sanctions, low working capital and currency fluctuation. The most important reasons include the closure of factories, unwillingness to invest, lack of proper packaging, machinery and marketing, inadequate raw materials such as high price of sugar, countless intermediaries for raw materials.
Iranian oil industry has started along at the same time with oil refining and packaging factories in since 1928, most of which have been established in the 1950s. In general, oil extraction units are located close to the place of production of raw materials, mostly in the provinces of Khorasan, Mazandaran and Golestan. Vegetable oil is one of the most important and the 2 nd strategic element in Iranian household basket, which is used in various industries such as canning, confectionery, biscuits, chocolates, dairy products, etc.
Of 1,500,000 tons of required crude vegetable oil which 1,400,000 tons of sunflower, soybean and palm oil imported from Ukraine, South America and Malaysia, respectively and the rest are supplied domestically. The consumption per capita of oil in Iran is estimated at 20 kg, which is 7 kg more than the global rate. Iran annually produces and packages about 1.5 mn tons of vegetable oil, 860,000 tons of which are solid and 650,000 tons are liquid.
Iranian vegetable oil export has been rising to 51,000 tons and 76.7 mn USD in the year ended March 2017 and had a growth of 37% and 15% in weight and value, respectively, compared to previous year. Since April to August 2017, due to the restrictions on crude and palm oil, Iran was able to export 22 mn USD and 16,000 tons, compared to the same period of last year, that experienced a drop of 27% and 20% in value and weight.
More than 15.8 bn USD has been spent on the import of various types of cooking oil, over the past 15 years.
Concerning the high demand for vegetable oil, a significant portion is supplied by import. As a major commodity in food basket and in order to control prices, oil has received many subsidies from the government, over the past years. Given the dependency of 95%, more than 90% of domestic oil is supplied from import annually.
Afghanistan, Iraq, Turkmenistan, Pakistan and Turkey were the main export destinations, while Malaysia, Singapore, Ukraine, Argentina and Switzerland were the major import origins for vegetable oil in the year ended March 2017.
Iran sugar factories capacity is around 2.5 mn tons a year, the maximum domestic production has been about 1.6 mn tons so far, while the average domestic consumption of sugar was 2.6 mn tons in 2012 to 2014 annually. The surplus demand is supplied through the import.
The limited capacity in beet and cane sugar production has resulted in the vacant production capacities in this industry despite the demands. The high cost of transportation prevents the raw materials import for sugar production to fulfill domestic capacity. Due to the climate and lack of water resources, it is not expected to increase cultivation in the coming years. Except a few years, the amount of production has followed almost a mild trend, but sugar import has fluctuated a lot, by two reasons; 1.The amount of import has been made due to domestic demand surplus for market regulation, 2. The states arbitrary policies is to determine the import tariffs.
The sugar industry, with a history of one hundred years and 43 factories (34 beets and 9 cane units), has a special place of strategic goods production. More than 1.6 mn tons of sugar was produced in the year ended March 2017, indicating a growth of 7.7% year-on-year.
With consumption per capita more than 30 kg per year, Iran’s demand for sugar is close to 2,400,000 tons, 1,600,000 tons of which are produced by domestic units and the rest is supplied through import.
By reaching about 521,000 tons, the sugar import decreased 36% in the year ended March 2016, year-on-year, while 30% of import was made by the government and the rest was imported by the private sector (the share of public sector year ended March 2015 was 46%). About 55% of brown sugar was imported to refine by domestic companies and the rest was white sugar in the year ended March 2016.
Sugar and its products export were valued at 25.3 mn USD and up 34,600 tons, the year ended March 2017, up 4.1% in value and 9.4% in weight have been faced to increase export in comparison with the same period of the last year. The slowdown of export process is reasoned to the temporary restrictions of raw sugar as well as the high price of sugar delivered by the government to the production sectors during the year ended March 2017, which led to an increase of the finished product price and decrease of the market competitive power. The most important export destinations include Iraq, Turkmenistan, Afghanistan, Spain and France.
The fast food market has had rapid growth in the last two decades,This type of nutrition has risen, especially among young people and the most frequently employed Iranian households. For the past 10 years there has been no fast-food industry, excluding raw materials production. But since the past decade, with the import of equipment and the construction of kitchens and restaurants, it became an important industry in Iran.
According to Central Bank statistics, generally Iranian households spend 255 USD in the restaurants, while the most low-income household spends 12 USD per year on restaurants.The rich families allocate the high share in restaurant and fast food costs, so that the richest households spend about 950 USD per year for the restaurant.
On average, the share of household expenditure in fast-food and beverages has been 2% over the past few years. By the end of the March 2012, every Iranian household spent 126 USD annually on fast food. The average expenditure of a household for fast-foods and beverages amounted to 255 USD, in the year ended March 2017, which despite an increase of 12% compared to last year, it’s share decreased from 2.1% in the year ended March 2016 to 2% the same period.
The ongoing growth of the fast food market is expected, because of the young population, students and working families and the increase in the marriage age and single-person households.
After more than two decades of pasta production in Iran, about 75 years ago, Turkish brands were introduced to their Iranian customers. Today, however, foreign brands do not show up in the Iranian macaroni market and about 10 domestic factories produce more than 450,000 tons of macaroni each year. About 10% of the volume is exported and the remaining 90% is consumed in domestic markets. The nominal capacity of the industry is estimated at 1,300,000 tons in the year ended March 2016. The domestic consumption per capita is also about 6.5 kg, which is negligible compared to some countries, such as Italy with 30 kg per capita. However, the macaroni industry has gained a steady and respectable position and despite its short lifespan has managed to take on an important role in the food basket of Iranian households.
- Appropriate access to major raw materials in Iran
- Efficient, educated and expert human resources
- Extend land, climatic variation and enjoying full natural resources
- Access to export markets of the region and the world
- Creating appropriate capacity in food industry
- New food resources enriched with micronutrients based on social health
- Food products adaptation with standards and healthcare requirements in international area
- Vast job creating in supply, production, distribution and sell fields in food and beverage value chain
- Developing food industries capacity and capability of designing and making machines and equipment
- Desirable flavor in agricultural raw materials
- Access to inexpensive energy sources
- Lack of liquidity in production units
- 130 mn tons of food are produced annually, which is wasted about 20-25 mn tons due to the lack of appropriate processing industries.
- Lack of sustainable raw materials supply by the agricultural sector
- Inadequate attention to quality and health, packaging and branding
- Old machines and equipment
- Lack of mass production of agricultural products on a large scale and reliable continuous supply
- Population growth in Iran, region and international make markets for foods and beverages
- Society trends to consume appropriate foods by means of easy making and fast cooking
- Appropriate geographical and geopolitical location in the region
- Change in global export from raw materials to processed products with higher value added
- Decline in the world’s grains and other raw materials price
- No food processing capacity in some neighboring countries
- Growing demands for Halal products in the world
- Import of raw materials: as the biggest problem to make food industry vulnerable
- High transportation cost per unit rather than value of commodity
- The economic stagnation in recent years, led to less productive activities, declining demand and increased bargaining power for distribution and sales channels
- Reduced consumer purchasing power
Sanctions & post-sanctions
In sanctions era, producers had a lot of problems in procuring the materials .Since 2012, after the sanctions and exchanging problems resulted in cooking oil export prohibition. This restriction caused vegetable oil producers and exporters lose export markets. However, JCPOA had positive effects on the food products in domestic and foreign markets, as supply problem resolved, the price and quality of the materials increased and world markets opened up to Iran, which led to competition in the market. In recent years, with the government support and exchange and economic improvement, the gates for exporting companies to operate were gradually reopened.
Investment advantages & Potentials
Having the potential and the actual capacity in agriculture and food industry, Iran is the world 3rd country in food diversity, since production of 30 food products out of 70 items. The taste of Iranian crops is desirable, the sunshine and the climate, create good conditions and taste for agricultural products.
In addition, unique products are produced, including saffron, pistachio, dried fruits and vegetables. Therefore, food industry has a great potential compared to other industrial sectors. On the other hand, due to young population growth, there is a high demand for energy, which is an advantage in developing different food industries.
Iran has a lot of potential for investment in the food and beverage industry, as being the best choice for entering the Middle East market. Iran has a potential food market of 80 mn people and immediate vicinity to the regional countries has created a 400 mn market, most of which importing food, Also there is the potential to expand products under the large brands.
- Access to the raw materials
- Native technical knowledge and expertise in the country
- Ability to provide technical and engineering services
- Possibility to become one of the production and export hub in Halal foods
- Dextrose, Maltose, Fructose
- Food essential oils
- Production and packaging of various vegetable essential oils
- Edible food color
- Production of probiotic bacteria as feed supplements for livestock, poultry and aquatic animals.
- Beta-carotene food grade and medication Supplements Beta-carotene (soft gel) 15 mg
- Omega-3 dietary supplement
- Specialized refrigerators tailored to regional needs and food export
Food industry in Capital Market
The share of companies active in the food industry is traded under the name of two groups including food and beverage products and sugar. The market value of food and sugar sector are 1,128 mn USD and 401 mn USD. Also, the P/E ratios of food and sugar groups are 8.77 and 13.88, respectively.