The Economist Intelligence Unit reports on the Shariah conscious consumer
Earlier this month, the Economist Intelligence Unit published the report “The Sharia-conscious consumer”.
Drawing their analysis from a combination of a global survey of executives, along with in-depth interviews with industry experts – Ogilvy Noor included – their finding was that
“demand for Sharia orientated products and services is strong, and expected to grow. Among the reasons: expanding Muslim populations, rising purchasing power, shifting consumption patterns, and a broader range of products and services on offer. The range of Sharia-orientated products and services is broadening, from food and Islamic finance products to pharmaceuticals, fashion and tourism, among others.”
From our brand building perspective, a key finding is that creating and establishing convincing branding is a major worry for this industry, and a possible barrier to its success.
The report also echoes our own consumer research which we published in “Brands, Islam and the New Muslim consumer.” First, that religious conviction drives demand: the Muslim Futurist segment believes fiercely that faith and modernity are combined, and that they live this through their own lives – not as a dichotomy, but as mutual and complementary.
The report also highlights are strong belief that it is the lived values of brands that create Muslim consumer engagement. And among the values that appeal most strongly to this segment are integrity and community. This is an important point that the report re-inforces: that Muslim consumers are rigorous in checking the claims of brands and expect the brand to exhibit its integrity not just in the product being purchased, but throughout its corporate being.
Key findings from the report:
The Sharia-conscious consumer is an increasingly important segment across the world. More than one-half (54%) of survey respondents say that the market for Sharia-compliant products and services is already significant for their business. Asked the same question but for their business in three years’ time, the number of respondents giving the same answer jumped to 68%. Businesses are seeing this translate into sales: over one-half (51%) of respondents are currently enjoying annual growth in revenue of at least 5%, while 34% are registering higher than 15% growth. The same participants are sanguine about the future: over 60% of respondents foresee at least 5% growth in three years, while 43% envisage growth in revenue higher than 15%.
Religious conviction is a major driver of demand. When asked to select the top three factors influencing demand, most (56%) respondents chose the growing acceptance of Islamic precepts. Muslim population growth in both Muslim (46%) and non-Muslim (39%) countries were also cited as important drivers of demand.
Three categories of regions are propelling demand: the “Muslim heartland” or Muslim majority countries; “mixed culture” countries such as those in South-east Asia; and non-Muslim countries such as those in North America and Western Europe. However, it is Muslim-majority countries that are seeing the fastest-growing demand. When asked to select the top three regions where Sharia oriented demand is currently growing strongest, 70% of respondents chose the Arabian Gulf countries, followed by North Africa (36%) and South Asia (34%). In three years’ time, respondents see largely the same trend: around 62% selected the Arabian Gulf countries, while 41% picked North Africa and 38% see growth in demand coming from South Asia.
Although areas such as halal-friendly tourism and Islamic fashion are growing in demand, halal food and Islamic finance are still the mainstays of the broader sector. Respondents see food and finance as having the fastest growth, both now and in three years’ time. Improving standards related to issues such as labelling and marketing communications could help to grow the businesses. No fewer than 81% of respondents to our survey agree that labelling products as halal, which is an integral part of the food industry, is important. This is a higher percentage than those (77%) who judge corporate branding, a key thought for banks, to be important.
Barriers to growth in the industry do exist. No fewer than 44% of those surveyed say that a lack of professional management and awareness on the part of the seller is holding business back. Almost as many respondents (42%) worry about a lack of convincing branding for products and services that comply with Sharia. Standardisation and certification, a troublesome issue within the global market for halal food, is seen by industry experts as a chief concern within the segment’s development.
There is no question that Islamic finance is seen as a vitally important enabler of the broader industry. More than one-half (55%) of survey respondents cite access to Sharia-compliant finance as important. An even higher percentage (58%) believe that easy access to such finance is crucial for their customers as well.
Demand for Islamic bonds (or sukuk) is expected to grow. Nearly 30% of survey respondents say they expect demand for sukuk to grow strongly, a view shared especially by those who work in finance. With international banks, particularly European ones, lending less in order to meet stricter requirements for capital, there is little doubt that banks and other such institutions in the Middle East and North Africa (MENA) will be encouraged to take up the slack, particularly in raising money for infrastructure and the like. As a result, Islamic bonds are likely to grow in popularity as a means of financing projects, particularly around the Gulf.
In the future, firms will have to show that they share the values of integrity and community to which Muslims aspire if they are to build a brand which endures. When considering what best promotes demand for goods and services that comply with Sharia, just over one-half (52%) of survey respondents point to a reputation for honesty and integrity on the part of the company offering the goods or services.