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Bahrain Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 56
The Bahrain Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bahrain's food and drink industry.
The Bahraini economy does appear to be showing signs of improvement, although we do not see what will drive the recovery beyond government spending. As such, our forecasts are somewhat conservative. However, despite the subdued outlook for the economy, the food and drink industry continues to illustrate considerable potential, as it is far from maturity. For most residents, personal wealth growth is likely to remain subdued throughout the forecast period, with a concomitant effect on retail sales. Falling property and stock prices will have damaged savings, not to mention consumer confidence, and will add to the effect of job losses and pay cuts. However, while BMI estimates that consumer spending in 2009 was flat, we expect a rebound to 5.0% growth in 2010 and 6.0% in 2011.
Key Company Trends
Online Grocery Shopping Debut – In August 2010, Bahrain’s first virtual supermarket was launched. Called Cart, the company has started a new grocery shopping website (cart.com.bh) in Bahrain. The website helps the company to deliver food orders directly to shoppers' doorsteps, with the site having received about 250,000 visitors since its launch in July 2010, making it the seventh most visited website in the country, according to visitor tracking website Alexa Rank. Project Development Co-Ordinator Ebrahim Haroon said the retailer aims to deliver 100 orders per day in three months. Haroon added that the company is also looking to expand its service outside of Bahrain. The initial success of Cart reflects the growing importance of convenience in consumers’ shopping decisions, particularly with increasingly modern lifestyles and longer working hours.
Investments By Local Player – In October 2010, local retail operator BMMI announced its plans to launch a major retail expansion in Bahrain. The retailer said that it plans to have opened five large supermarkets as well as five neighbourhood stores in the country within five years. The first large supermarket will be opened shortly in Amwaj under the Alosra banner. The Alosra supermarket chain specialises in sourcing Western brands and specialty products, and the company plans on also carrying prepared salads, sandwiches and sushi which will be offered as both take-away and at the in-store cafes, as BMMI looks to target high-spending and health-conscious consumers who value quality and convenience.
Key Risks To Outlook
National Debt Growing – Bahrain has already doubled its national debt (to 25% of GDP) and earned itself a ratings downgrade by Moody's. Any problems in the financial industry could further delay a privatesector recovery and derail investor and consumer confidence, leaving the government in charge of growth, which is all well and good as long as oil prices stay high. However, as Moody's pointed out recently, the breakeven price has been getting higher and higher. We estimate Bahrain needs an average oil price of US$72/bbl just to balance its books, with anything lower than that likely to entail deficits and further borrowing.
A drop in oil prices – While a drop in oil prices does not look likely at the moment, it is certainly not beyond the realm of possibility if BMI’s double-dip global downturn scenario plays out. Bahrain will muddle through if the oil price stays high, as is our core scenario, but if it drops again, making the implementation of income tax necessary, then there are serious risks to growth, the size of the expatriate population and the financial sector.
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