There is no doubt that the Middle East is a region that has a permanent commercial appeal for Chile. Its desert features make it highly dependent on foods, primarily perishables like fresh fruit.
The group of 6 countries that are members of the GCC (Gulf Cooperation Council: Saudi Arabia, United Arab Emirates, Oman, Qatar, Bahrain and Kuwait) import 90% of their food, and have a greater stability in the region [1] to make business as they have an average per capita GDP that is higher than the rest of the Arab countries (USD 72,000). As such, we can understand the opportunities that this region presents to Chile in fruit, since most of the Chilean competitors are in the counter season, with the exception of South Africa, New Zealand, Brazil, and Argentina.
Even though the demand is constant throughout the year, it is possible to know that consumption increases in a notorious way in the month of Ramadan, as fruits are especially suitable to break the daily fast in the Muslim world.
Chile's commercial relationship with this geographical area is not new, the country has shipped fresh fruits to this destination for more than 25 years, which currently stands at more than $ 93 million [2], with an average annual growth of 4% in the last 10 years.
In 2016, shipments to this destination increased by 12%. Chile's historically relevant destinations have been Saudi Arabia and the Emirates, both concentrating 90% of the total exported. This is mainly due to two reasons, the size of each market, as Saudi Arabia has a population of more than 31 million people and, even though the Arab Emirates is 1/3 as big as Saudi Arabia, it has a large floating tourism population, as in 2016 it had 15.2 million visitors.
On the other hand, the EAU, thanks to its international avant-garde logistics services (port, airports, roads, etc.) and special supply centers for the fruit sector, has been transformed into the gateway to the Middle East, giving access to 190 million of Muslims. It is not surprising that re-exports of fresh fruits from the Emirates (apples, kiwis, cranberries, and grapes, among others) amount to just over $38 million dollars, i.e. 1.5 times more than Chilean shipments (of the same varieties) to that country, whose main markets have been Oman, Iran, Pakistan, and Qatar.
However, there are important logistical challenges that this productive sector must overcome. Due to the absence of direct sea routes, shipments from Chile take between 40-45 days (usually via Rotterdam) to arrive there, which limits the varieties that can reach this region. The consolidation of cargo in charter boats could be a solution, as it would shorten transit time by 10 days. So far, apples, grapes, kiwis and pears have performed well and account for 90% of Chilean fresh fruit shipments to the GCC. Meanwhile, the current air routes are more direct, which has allowed cherry and berry exports to have had an average growth of 20% and 56%, respectively, in recent years. An increase in shipments is expected when Qatar Airways starts having direct flights between Chile and the Middle East, scheduled for January 2018.
This zone possesses a unique dynamism, which, faced with the high quality standards of the Chilean fruit, could offer seasonal opportunities, such as the recent ban imposed by the UAE on fruits from Yemen, Oman, Lebanon and Egypt, as a result of the content of Chlorinated pesticides present in them or the recent blockade of Qatar, where 40% of its food transits through Saudi territory and where the UAE sends 12% of its trade in food.
An important point to consider is the presence in the market. Long distance businesses are very ineffective, especially if there are no preferential tariffs for any country (0% for all suppliers). Cultivating a relationship of trust and understanding the dynamics of the market becomes relevant not only for commercial prospects but for the maintenance of business, in a market where margins are not abundant. This is why Chile needs to strengthen sectoral activities. Last December, for example, the president of Asoex, Ronald Bown, was invited to visit the Middle East for the first time. His agenda included not only important exhibitions as keynote speaker but also in activities framed in assessing the UAE consumption and re-export potential.
Chile should also move towards promotional activities in retail outlets for products that do not have a large market share (i.e. avocado and citrus) and strengthen business activities, such as commercial missions, in the framework of fairs like the World of Perishables (Dubai), to improve its market share and expand the export horizons of Chilean companies.
[1] With the exception of the recent political blockade of Qatar, whose impact and commercial opportunities for Chile are under evaluation.
[2] taking into account shipments to the GCC in 2016
Source: simfruit.cl