April 16, 2007

Forbes: Meeting the Halal Test

The Asian edition of Forbes magazine has a new article on Nestlé and its drive to become a leading marketer of halal foods. Nestlé has annual sales of $3 billion for its halal products out of the worldwide total of $580 billion. Much of the print article focuses on Nestlé Malaysia and the Malaysian government's efforts to make that country a "halal hub" for SE Asia (in competition with Singapore and Thailand).

Note: There are some very significant differences between the online version of this article vs. the print edition. The print version comes to 16 paragraphs, whereas the online edition has only 13 paragraphs. Moreover, one of the 13 paragraphs (#9, comparing the halal market to the American kosher market) is not in the print edition.

You might think of Nestle as the least likely company to venture into such a ticklish market as religious food. The Swiss multinational has, after all, attracted more than its share of protesters with other product lines (namely, infant formula and chocolate). But far from shying away from the halal market--food that passes muster with Islamic authorities--Nestlé has jumped in with both feet.

For centuries the men who decided whether food was halal were bearded and worked in mosques. But Othman Yusoff--not a mullah but a clean-shaven Nestlé executive--has forged a career as a halal expert. He's in charge of Nestlé Malaysia's halal lines, making sure they're free of alcohol, pork or any product from an animal not slaughtered according to Islamic guidelines. This covers everything right down to KitKat bars that are free of flavorings that have traces of alcohol.

Yusoff, 45, was a food engineer in Groupe Nestlé's R&D headquarters in Switzerland more than a decade ago when he was asked to help figure out how to keep some of his employer's supply lines halal. It proved to be a good career break. Nestlé has become the biggest food manufacturer in the halal sector, with more than $3 billion in annual sales in Islamic countries and with 75 of its 481 factories worldwide producing halal food. "Nestlé's set the pace on halal for multinationals," says Abdulhamid Evans of KasehDia, a Kuala Lumpur consulting company.

Nestlé is tapping into a vast market. With 1.6 billion Muslims worldwide and Islam the fastest-growing religion, halal food sales are now worth $580 billion annually, according to Malaysia's Halal Industry Development Corp. "Food companies are not going to be global unless they're halal," says Joe Regenstein, a professor of food science at Cornell University. And an increasingly affluent and savvy base of Muslim consumers means that the halal industry is growing in sophistication as well as size. Well beyond being just about meat, it now embraces products from lipstick to vaccines to savings accounts. In 1990 the Islamic Food & Nutrition Council of America had only 23 clients paying for its halal certification services. Last year it certified products for 2,000 companies worldwide.

Nestlé, which had $81 billion in sales last year and ranks number 51 on Forbes' Global 2000 list, caught the wave when the halal industry was pretty much a matter of uncle-and-auntie butchers and the neighborhood bazaar. In the 1980s Nestlé Malaysia started a halal committee--a group of 11 executives who oversaw halal standards from farm to fork. In the early 1990s this division decided to make all of its imports and exports halal, even though that meant its food scientists would have to occasionally engage in angels-on-the-head-of-a-pin debates. "Alcohol is not allowed," observes Nestlé Malaysia's managing director, Sullivan O'Carroll. "But if a product has natural alcohol in it, for example, from fruit, it is allowed. So there can be a debate as to whether the alcohol is there naturally or has been put in." Nestlé Malaysia has pioneered halal standards for Nestlé worldwide, with Yusoff and his staff flying off to consult with executives from India to West Africa.

The lengths that Nestlé must go to meet these standards can be seen at the Maggi noodle factory outside of Kuala Lumpur. It looks ordinary enough, with its bright lights, conveyor belts and white-coated workers bent over noodle vats. But for one thing, if animal bristles are used in the factory's machine brushes, they've been checked to make sure they don't come from pigs or animals not slaughtered in accordance with Islam.

Like the rest of Nestlé's hundred halal lines, the noodles have been subjected to an intensive screening process, starting with the R&D. A halal checklist runs around 30 pages for each product and includes such questions as "Does product contain pork or parts thereof, e.g. enzymes, bacon...?" Then the Muslim scholars at Jakim, Malaysia's Department of Islamic Development, must approve the checklist. And to help avoid hitches with its suppliers, Nestlé Malaysia established a halal training program for small businesses, with employees at 1,200 of them trained.

Scale--and building halal factories from scratch, rather than modifying old ones--have kept costs down, notes O'Carroll. "When we compare our factories in Malaysia with other Nestlé factories around the world, we are at least as cost-effective," he says.

Nestlé's hope is that halal will reach an audience beyond Muslims. Precedent for a religious food's breakout into the broader market comes from the American kosher sector. Because there are only 1,000 halal-certified products on American store shelves, many Muslims cross over to kosher products--there are 90,000--and Muslims now represent 16% of the $100 billion U.S. kosher food industry's consumers.

How do you sell halal to an infidel? Talk about health, purity and ethics. That image would dovetail with Nestlé's new push as a health-and-wellness company. "We see halal as something which can develop along the lines of organic food," says KasehDia's Evans. Opening the first World Halal Forum last year in Kuala Lumpur, Malaysian Prime Minister Abdullah Badawi invoked halal as "that which is good, healthy, safe and high quality in all aspects of life. [It] represents values that are held in high regard by all peoples, cultures and religions."

There could be a nice side effect from pushing the halal market beyond its original customer base. Halal's association with purity and animal welfare could help overcome Islamophobia. "Halal could be an extremely good platform for changing perceptions," notes Evans.

Still, selling foods internationally is harder than selling petroleum. Country-to-country differences in halal methods and standards have created headaches for manufacturers for decades. Middle Eastern import companies used to send halal slaughterers to South America to kill the chickens themselves. A couple of years ago, when Muslim scholars in Australia decided that stunning was an Islamically permissible way to kill animals, Australian beef--20% of Malaysia's beef imports--suddenly fell afoul of Malaysia's halal standards. The government banned Australian beef, and Nestlé Malaysia, which was importing all its beef fat from Australia, had to look for alternative sources overnight. The company scrambled to import from South America, but making the change took months. As long as different countries interpret forms of killing in slightly different ways, "it makes trade challenging," O'Carroll says.

Hammering out global standards is a key goal of the second World Halal Forum in Kuala Lumpur, to be held in May. But getting Islamic scholars from Dacca to Detroit to agree will be tricky. Darhim Hashim, a director of the Halal Industry Development Corp., argues that not just Islamic scholars but trade experts and food scientists must be involved in setting the standards. "We need to apply science to the discussion," he says. "There has been a tendency in Islam to make issues out of things that aren't issues." Nestlé's Yusoff says the industry needs to be demystified. "Halal is not that difficult," he says. "A lot of things are halal. Not so many things are not."

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