Ice cream in the Middle East and Africa – demand grows in the face of uncertainty

Our market research shows that despite adverse economic pressures, ice cream sales continued to grow across Middle East and Africa countries. Ice cream’s performance was underpinned by warm weather conditions and robust demand from wealthier consumers.

Volume sales continue to rise

Retail value sales of ice cream reached US$2.4 billion in 2009 in the Middle East and Africa. This represents an increase of 8% (US$ fixed exchange rates) on the previous year, according to Euromonitor International estimates. This relatively robust growth, however, should be analysed in the context of high inflation in the region.

Retail volume sales grew by a more modest 4% in 2009, in line with the growth registered the previous year. Ice cream’s resilience to the global economic recession can be explained by two factors. Firstly, premium ice cream is mostly bought by an ‘elite of wealthy consumers’ in less developed Middle Eastern and African markets, and this consumer group was only slightly affected by the recession. Secondly, demand for ice cream in mass-market price brackets is heavily dependent on weather conditions and demographic growth, regardless of moderate fluctuations in disposable income.

In 2009, three countries – Iran, Israel and Saudi Arabia – accounted for around 50% of total ice cream retail value sales in the Middle East and Africa region, according to Euromonitor International’s estimates.

Younger Iranians switch to packaged formats

Ice cream sales in Iran grew by 4% in retail volume in 2009, according to Euromonitor International’s estimates. Demand for ice cream in Iran is being underpinned by middle and upper-class young Iranians in urban areas. Research shows that younger consumers are keener to switch from traditional artisanal ice cream to more modern packaged products in attractive packaging formats.

Furthermore, national television advertising from key domestic suppliers has positively changed younger consumers’ perception of ice cream and boosted demand. This growth in sales, however, should be seen in the context of very low per capita consumption in the country, far lower than in developed regions like Western Europe and North America.

Recession takes its toll on sales in Israel

Ice cream is a typical and favourite indulgence product in Israel, consumed almost on a daily basis during the summer months. Sales, however, declined by 0.4% in local retail value in 2009 as cash-strapped consumers reduced their expenditure on less essential indulgence products.

Impulse ice cream was the most important category, accounting for around 55% of total retail value in 2009. Take-home ice cream, however, registered the strongest performance, with sales growing by 6% in retail volume terms in 2009.

Research shows that take-home ice cream, cheaper and bigger in size than impulse formats, benefited from the uncertain economic situation in 2009 when GDP in Israel grew by just 0.5% in real terms. As consumers turned to more affordable indulgence products, take-home ice cream increased its penetration in household formats, underpinned not only by lower prices but also by an increase in home (more affordable) snacking.

Demographics and high temperatures save ice cream’s performance in Saudi Arabia

Demand for ice cream products remains high in Saudi Arabia, with sales growing by 5% in retail volume terms in 2009. Research shows that high temperatures prevailing all year round in the country, demographic factors illustrated by the high proportion of children and young adults in the overall population, the low prices of most ice cream products (particularly within impulse ice cream), widespread distribution and better activities in terms of new product launches and television advertising from leading players like IFFCO Group (International Foodstuffs Co) have all helped demand to stay dynamic despite the economic slowdown.

Albeit from a low base, multi-pack dairy ice cream maintained its position as the most dynamic product type in 2009 as sales grew by 33% in local retail value.

This category has benefited from new product launches such as Extreme and Magnum from Unilever (both of which were brought to the market by retailers like Danube and Tammimi) in 2009. Furthermore, demand is being underpinned by the rising popularity of many mid-priced products introduced in multi-packs over the last three years, such as the Igloo brand from IFFCO, Snickers, Mars and Galaxy from Master Foods and Carrefour’s range of private label products.

Future direction

Ice cream sales in Middle East and Africa are projected to grow by 20% in retail volume over the 2009-2014 period, according to Euromonitor International’s estimates. This growth will be driven by relatively warm weather conditions, rapid demographic growth and the steady trade up from artisanal snacks to packaged ice cream in urban areas.

Per capita consumption of ice cream (retail volume), however, will continue to be very low by the end of 2014 at 0.5kg in the Middle East and Africa compared to 6kg in Western Europe.

Preference for traditional desserts set to constrain ice cream growth in Iran

In Iran, retail volume ice cream sales are predicted to grow by 24% over the 2009-2014 period. Despite this relatively good performance, per capita consumption will continue to be low in relative terms. Research suggests that ice cream still has a long way to go in Iran before it becomes a regular alternative to artisanal desserts among older generations, still strongly attached to home cooking.

Health and wellness trend to gain importance in Israel and Saudi Arabia

In Israel, low/sugar-free ice cream is expected to steadily expand its consumer base over the medium term. Demand for low/sugar-free ice cream products will not only come from female consumers watching their weight, but also from diabetic Israelis looking to treat themselves. Overall, these products are predicted to see an increase in availability of formats/flavours, a trend that will be underpinned by intense innovation activity.

A similar trend is expected among middle/upper-class Saudi consumers, who are expected to pay increasing attention to ‘healthy’ ice cream. Research suggests that new ranges of low-sugar varieties and possibly vitamin-enriched, calcium or pre/pro biotic-fortified products will be introduced over the 2009-2014 period in Saudi Arabia. These new product developments will be testament to the increasing awareness of health issues in the country, particularly among its sizeable obese population.