Food industry craves for unified halal standards
Kuala Lumpur, June 16, 2014
By Stuart Grudgings and Trinna Leong
The storm of bad publicity that hit confectioner Cadbury in Malaysia highlights the costly, religious minefield food companies must navigate as they rush to tap the surging $1 trillion global halal market.
One of the biggest headaches for corporations like Mondelez International, Nestle and Unilever is the lack of a unified standard for what exactly is halal, or permissible under Islamic law, despite years of efforts by Muslim authorities to come up with a global benchmark.
As a result, global food firms face higher production costs as they must comply with a mix of national processing standards that can vary widely even within the same country.
Failing to navigate these differences leaves companies exposed to the risk of using ingredients permissible under one standard but not another.
"Obviously it's not good to have so many standards. It's confusing," said Jamil Bidin, the chief executive of Halal Industry Development Corporation, an agency linked to Malaysia's government. Muslim-majority Malaysia is regarded by many Muslim countries as a global leader in halal food processing due to its established certification experience and developed industry.
Islam requires practicing Muslims to consume halal products, and, at its most basic, that means foods and drinks that do not contain any alcohol or pork. To be deemed halal, livestock must be slaughtered as the name of Allah is invoked.
Big food firms have been ramping up their investment and expertise in halal, eyeing a fast-growing Muslim population that is forecast to add a billion people by 2050 with rising education and income levels.
The market to process, produce and distribute halal food and drinks will grow into a $1.6 trillion industry by 2018 from about $1 trillion in 2012, according to DinarStandard, a research firm specialising in Muslim markets.
But industry executives say the lack of global or regional benchmarks is stunting the industry's potential at a time when countries such as Japan and Australia are jumping on the halal bandwagon to cater to a rising number of Muslim travellers.
"We welcome efforts to ensure consistency in halal certification and would support a global standard, or perhaps wider regional standards, to help simplify the landscape," a spokesman for Cadbury's parent firm Mondelez said.
Halal standards are emotive topics in Muslim countries, as Cadbury's recent problems in Malaysia showed.
Several Muslim consumer groups called for a boycott of all Cadbury and Mondelez products after the health ministry said it had detected traces of pig DNA in Dairy Milk chocolates.
The news generated an online furore and prompted several rounds of testing by authorities from neighbouring Indonesia, home to the world's biggest Muslim population, to Saudi Arabia, the birthplace of Islam.
Further testing by Malaysia's Islamic affairs agency, the country's sole official halal certifier, however, showed that the initial tests had not been definitive and the chocolate was actually halal.
But the incident has sparked a heated debate among Islamic scholars in Malaysia over whether substances derived from pork such as gelatin can be considered halal.
"We expect there wouldn't be a repeat of such an incident as this could ruin the halal industry, in Malaysia especially," said Othman Yusoff, chairman of the halal committee of the Federation of Malaysian Manufacturers.
Domestic politics and vested interests have also proved to be a stumbling block so far.
The 57-member Organisation of Islamic Cooperation (OIC), which calls itself the collective voice of the Muslim world, is trying to draft global halal guidelines with the backing of Dubai, Turkey and Saudi Arabia.
But that movement, the Standards and Metrology Institute for the Islamic Countries (SMIIC), does not include Malaysia and Indonesia - home to large halal-certification centres.
"What is critical is that there is interoperability among standards, and transparency," said Rafi-uddin Shikoh, chief executive of New York-based consultants DinarStandard.
"An exporter intending to export food from Sudan should know and deliver easily the halal certification requirements from almost any market they feel they can grow in."
Defining what exactly constitutes halal is an issue of hot debate among Islamic scholars, which makes agreeing on a global standard difficult.
For example, more conservative interpretations hold that each animal must be slaughtered by a hand-held knife. Britain has two main halal certification boards with conflicting stances on whether animals can be stunned before slaughter.
The kingdom of Brunei, which has a strict interpretation of Islamic rules, sends auditors to neighbouring Malaysian factories to check imports for halal-worthiness.
Another factor complicating the search for a single standard is the intense rivalry between countries for a slice of the industry. US cereal maker Kellogg Co. and chocolate maker Hershey Co., for example, are building halal-compliant plants in Malaysia, with investments of $130 million and $250 million respectively.
Dubai is setting up testing and certification centres to profit from the halal business. Malaysia has been pushing its own standards, as has Turkey.
"It's silos," said Darhim Hashim, the director of the International Halal Integrity Alliance, which is working with the OIC to create common standards. He said one way forward would be for the Gulf countries, Malaysia and Indonesia to agree minimum standards.
"I think naturally the rest would follow - those are the key markets, the most regulated import markets." -Reuters