2011 Exporter Guide

An Expert's View about Food , Beverages and Tobacco in Kenya

Posted on: 15 Feb 2012

Kenya’s imports for consumer-ready food products have grown on average 19 percent per year from calendar years 2006 through 2010.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 2/1/2012 GAIN Report Number: Kenya Exporter Guide 2011 Exporter Guide Approved By: Stephen Hammond Prepared By: FAS/Nairobi Staff Report Highlights: Kenya’s imports for consumer-ready food products have grown on average 19 percent per year from calendar years 2006 through 2010, a trend likely to continue in the next few years as more Kenyans attain “middle class” status. FAS/Nairobi projects Kenya’s consumer-ready food imports to reach a record high of $240 million in calendar year 2012. The best prospects for consolidators or U.S. product include snack foods, processed fruits and vegetables, and sauces, mixed condiments, and seasonings. Post: Nairobi Executive Summary: SECTION I. MARKET OVERVIEW Economic Trends 2008 2009 2010 2011E 2012F 2013F Popu 1lation (millions) 37.95 38.6 39.6 40.5 41.5 42.6 Population Growth Rate (%)1 2.76 2.46 2.46 2.46 2.46 2.46 Fo 2rmal Sector Employment ('000s) 1,944 2,000 2,060 2,000 2,020 2,050 Informal Sector Employment ('000 2s) 7,942 8,339 8,830 9,000 10,000 10,250 Public Sector Employment ('000 2s) 638 654 663 650 655 660 Total Gross Domestic Product (GDP) (US $ Billion 3s) 30.5 30.6 32.2 36.2 40.8 45.6 GDP p 3er capita (US$) 797 793 809 840 870 880 GDP growth rate (%)3 1.5 2.6 5.6 4.3 5.0 5.5 Inflation (%)4 16.2 10.5 4.1 19 5 6 Exchange Rate (Kshs/US$ 4) 69.18 77.3 79.2 89.22 94.54 99.00 Agricultural Products Imports Total Agricultural Products Imports from the World ($ million 5s) 1,395 1,585 1,478 1,855 1,860 1,900 Total Agricultural Products Imports from the United States ($ million 5s) 76.6 193.3 97.6 162.9 165 170 Total Agricultural, Fish Forestry Imports from the United States ($ million 5s) 77.3 193.5 98.7 94 138 149 Total Import of Consumer-oriented foods and Edible Fishery Products from the World ($Million 5s) 163.3 157.1 193.3 226 247 267.1 Total Imports of Consumer-oriented foods and Edible Fishery Products from the United States($million 5s) 17.89 16.26 29.32 8.94 21 30 Da 1ta Sources: CIA World FactBook 2 3, Kenya National Bureau of Statistics (Economic Survey, 2011) Euromonitor 4 International , Central Bank of Keny 5a, Global Trade A E, F tlas, FAS/Nairobi Estimates and Forecasts Economic Situation The World Bank projects that Kenya’s economy will grow by five percent in calendar year (CY) 2012 and follow on through 2020 at about the same annual rate of increase. This growth forecast may be historically low but reflects stability and progress. The Economist Intelligence Unit forecasts an average annual growth rate of 5.6 percent 2011-to-2020 and 6.7 percent forecast during 2021-to-2030. In spite of the expected economic growth, albeit historically weak, it won’t be sufficient to decrease the high unemployment and poverty rates in Kenya. Relatively high inflation and a weakening Kenyan Shilling (Ksh) will contribute to the relatively slow growth during CY 2012, according to the latest World Bank report on Kenya. The Kenyan Shilling may continue under pressure during the period, adding to the inflation woes of the poor and middle class, even while benefiting Kenyan processors and exporters. Consumer-Oriented Foods and Edible Fishery Products Kenyan purchases of consumer-oriented foods will likely continue to expand at least at the rate of per capita GDP growth over the next five years. Euromonitor International (March 2011) confirms the prospects for stable growth and even forecasts a higher rate of increase in consumer spending when evaluated for comparable forecast periods. Kenyan importers will likely continue increasing imports to meet increasing consumer demand, however, Kenyan local production of consumer-ready products will also likely increase. Kenyan importers currently source about 60 percent of consumer-oriented food products from the United States, South Africa and Europe. While we expect that the sources of imports will remain the same during the mid-term, Kenya’s new labeling requirements may/may have a negative impact on consumer-ready imports from countries where products containing genetically modified organisms are not currently labeled. Key Demographics Characteristics of Kenya labor force (aged 15-64+), by income groups, 2007-2013 2007 2008 2009 2010 2011 2012 (F) 2013 (F) Population (1,000 1) 36,914 37,954 38,610 39,560 40,533 41,530 42,552 Labor Force (1,000 2) 17,000 17,000 17,000 18,000 18,000 19,000 19,000 Income Group 2 s $150,001+ 8 8 7 8 8 8 9 $70,001-80,000 3 3 3 3 3 3 3 $30,001-40,000 16 16 15 16 16 17 18 $7,501-10,000 86 83 82 83 86 90 95 $1,501-2,500 3,522 3,470 3,453 3,519 3,615 3,784 3,950 Other Income band 3s 13,365 13,421 13,440 14,372 14,272 15,098 14,926 Da 1 2ta Source/ Notes: CIA World Factbook; The Euromonitor International (March 2011 Edition 3); FAS/Nairobi defines "Other Income bands” as people with incomes not elsewhere included and/or specified in the Euromonitor’s classification. Advantages and challenges facing U.S. food products in Kenya Advantages Challenges Kenya's geographical location, industrial development Stiff competition from Europe, South and membership in *EAC and **COMESA make it a Africa, China and and *EAC and major gateway for trade in the east and central African **COMESA Member States that don’t regions pay tariffs Kenya has an expanding food retail sector (supermarkets Small market for consumer-oriented and hypermarkets) due to a growing urban middle class products - so small that U.S. products and an acceptance of developed-world lifestyles will be imported mostly by “consolidators” U.S. food-ingredients such as soy A growing middle class and expatriate community in protein isolates and vegetable oils Kenya provide a niche market for U.S. food products compete with low price Chinese and Indonesian products, respectively Imports enter the Kenyan market with a minimum of complication once they are accompanied by a Certificate of Conformity (CoC) issued by either the Société Générale de Surveillance (SGS) or Intertek International Ltd. *East African Community(EAC); **Common Market for Eastern and Southern Africa (COMESA) SECTION II. EXPORTER BUSINESS TIPS “Consolidators” dominate imports into Kenya’s consumer-products market. U.S. food production and distribution companies do not generally have a direct presence in Kenya. Consolidators most often source U.S. product in the United States, Middle East, Europe and South Africa; sometimes as a result of contacts at food shows, i.e. the Gulf Food Show in Dubai. Kenyan importers/processors collaborate with U.S. trade associations including: the World Initiative for Soy in Human Health (WISHH); U.S. Dry Bean Council; USA Dry Pea and Lentil Council; American Peanut Council; U.S. Wheat Associates; and, the U.S. Grains Council to develop the market for U.S. food ingredients. Market development activities include in-country technical seminars, trade servicing visits and short-term specialized training in the United States. General Consumer Tastes and Preferences Kenyan food retailers stock a wide range of products that consolidators believe will sell in this market of diverse consumer tastes and preferences. Consumers can’t always depend on a particular imported brand to be available in the supermarkets and must be flexible to stock up or try other, similar products. Many products known in the United States under brands from companies like Kraft Foods, Heinz, Post and Betty Crocker are sometimes available in the Kenyan marketplace, even though the product may have been produced outside the United States and with non-U.S. food ingredients. Food Standards and Regulations Please refer to FAS/Nairobi’s report: Food and Agricultural Import Regulations and Standards Country Report General Import and Inspection Procedures The Government of Kenya (GOK) facilitates the importation of consumer-oriented products through a Certificate of Conformity. To obtain a CoC, an imported product must satisfy Kenyan import requirements, as evaluated by the Société Générale of Surveillance (SGS) or Intertek International Ltd. Once SGS or Intertek has issued a CoC, the importer may present the CoC to the Kenya Bureau of Standards (KEBS) for clearance of the goods and to receive the Import Standardization Mark, a stick- on-label to be affixed to each retail container. The GOK has implemented mandatory labeling of all food containing or derived from genetically modified organisms (GM). GOK officials close to the regulation indicate that Kenyans have a “right to know,” even though they cannot point to any nutritional, allergenic, taste, or physical difference in the GM and non-GM products. SECTION III. MARKET SECTOR STRUCTURE AND TRENDS Food Retail Sector Kenya’s major supermarket chains include Nakumatt (the largest in terms of volume), Tuskys, Uchumi, Naivas, Ukwala, and Chandarana. The management strategists of the largest chains continue expanding in Kenya and within the east Africa region as well. Most stores are clean, well lit, and generally well stocked, in particular with locally-produced product. Retailers entice customers into their stores through a variety of product promotions and convenience services. They use 24-hour operations, customer loyalty shopping cards, and special offers. Local producers and importers of consumer-oriented products occasionally do in-store promotions, billboards, brochures and/or flyers to advertise products. For more information, please refer to the forthcoming 2011 Retail Food Sector Report. Food Processing Sector U.S. suppliers of food ingredients may, from time-to-time, find opportunities in Kenya's food processing sector. Local ingredient production does not always meet the processing industry’s demand, including for soy, corn, wheat and rice and their milled products. U.S. cooperators link Kenyan food processors with their members to supply the food ingredients. The market development activities by U.S. cooperators in Kenya and the east African region have increased the level of knowledge of U.S. food ingredients. For further information, please refer to the forthcoming 2011 Food Ingredients Report. Hotels, Restaurants and Institutions Kenya’s food-service sector sources products from consolidators/importers and retailers such as local grocery outlets. For further information, please refer to the forthcoming 2011 HRI Report. SECTION IV. BEST CONSUMER-ORIENTED PRODUCT PROSPECTS Kenyan importers buy mixed-containers of food products listed here below. Consumer-Oriented Products Market—Calendar Year 2010* P 1 1 1roduct Market Imports 5 2-Yr Import Key Constraints Market Category Size** (2010) Annual Tariff Over Market Attractiveness (Volume) Import Rate (%) Development for USA M ($1,000) etric Growth (2010) Tons (%) (2006- 2010) Jams, Fruit 252 $424,511 41 25 High landed costs Good growth Jellies and potential Purees, Nut Pastes Almonds 47 $220,163 37 25 High landed costs Strong growth potential Pasta 5,238 $3,360,578 30 25 High landed costs Good growth potential Snack Foods 174,695 $86,600,041 27 25 High landed costs Good growth potential Processed 8,581 $10,698, 23 25 High landed costs Good growth Fruits and 354 potential Vegetables Tomato 556 $749,143 20 25 No tariff Strong growth Ketchup and preferences potential other sauces Fruit and 5,542 $4,793,544 10 25 No tariff Good growth Vegetable preferences potential juices Sauces, mixed 726 $1,572,527 4 25 No tariff Good growth condiments preferences potential and seasonings Data 1 sources: Global Trade Atlas (GTA 2), East African Community Tariff Book Notes: *CY2011 GTA data not yet complete ** Reflects import volumes only Food Ingredients Market—Calendar Year 2010 P 1roduct Market Imports 5-Yr Import Key Constraints Market Category Size1 - (2010) Annual Tariff Over Market Attractiveness for 2010 ($1,000) Import Rate Development USA (Volume) Growth (%)2 Metric (%) (2010) Tons (2006- 2010 1) Protein 366 $737 6.4 10 Competition from Kenyans like meat Concentrates low cost suppliers products and Textured such as China Protein and South Africa Substances* Wheat 844,559 $211,998 17.7 0 Competition from The African low cost suppliers population continues of hard wheat to grow at very high rates and wheat products are popular Kenyans enjoy good Malt Extract 48,967 $31,161,299 103% 10 High landed costs beer Data Sou 1rces: GTA and 2 East African Community Tariff Book SECTION V. KEY CONTACTS AND FURTHER INFORMATION Office of Agricultural Affairs, Embassy of the United States of America United Nations Avenue, Gigiri P.O. Box 606 Village Market 00621 Nairobi, Kenya Tel: 254-20-3636340 Fax: 254-20-3636349 Email: Agnairobi@fas.usda.gov Website: www.fas.usda.gov/itp/Kenya/Nairobi.asp Foreign Commercial Service, Embassy of the United States of America United Nations Avenue, Gigiri P.O. Box 606 Village Market 00621 Nairobi, Kenya Tel: 254-20-3636424 Fax: 254-20-3636065 Email: office.nairobi@trade.gov Website: www.buyusa.gov/kenya Kenya Bureau of Standards (KEBS) P.O. Box 54974 Nairobi, Kenya Tel: 254-20-6948000 or 69028201/401/410 Fax: 254-20-609660/6004031 Email: info@kebs.org Website: www.kebs.org and www.kenyapvoc.com Customs and Excise Department Ministry of Finance P.O.Box 30007 Nairobi, Kenya Tel: 254-20-715540 Fax: 254-20-718417 Website: www.revenue.go.ke and www.kra.go.ke Kenya Plant Health Inspectorate Service (KEPHIS) P.O. Box 49592 Nairobi, Kenya Tel: 254-20-3536171/2 or 3597201/2/3 Mobile: 254-722516221, 254-733874274 Fax: 254-20-882265 Email:info@kephis.org Website: www.kephis.org Department of Veterinary Services (DVS) P.O. Private Bag 00625 Kabete, Kenya Tel: 254-20-8043441631383/2231/1287 Fax: 254-20-631273 Cell: 254-733783746 Email: veterinarydepartment@yahoo.com Ministry of Health Public Health Department P.O. Box 30016-00100 Nairobi, Kenya Tel: 254-20-2717077 Fax: 254-20-2710055 Website: www.publichealth.go.ke SGS North America Inc. 236 32nd Avenue Brookings, SD 57006 USA Tel: 605-692-7611 Fax: 605-692 -7617 Website: www.us.sgs.com/ APPENDIX Kenya’s Key Imports and Demographic Information Agricultural Commodities, Intermediate Products and Consumer-Ready Foods From All $1,900/5.3% Count 2ries ($ Mil)/U.S. Market Share (%) - 2011 Agricultural Commodities, Intermediate Products and Consumer-Ready Foods From All $1,486/6.6% Countries ($ Mil)/U.S. Market Share(%) - 20101 Consumer-Ready Foods From All Countries($ Mil)/U.S. Market Share (%) - 20112 $212/6.6% Consumer-Ready Foods From All Countries($ Mil)/U.S. Market Share (%) - 20101 $186/15.6% Edible Fish/Products From All Countries($Mil)/ U.S. Market Share (%) - 20112 $10.9/0% Edible Fish/Products From All Countries($Mil)/ U.S. Market Share (%) -20101 $7.3/4% Total Populations (Millions)/Annual Growth Rate (%) - Estimate 20126 41.5/2.46 % Total Populations (Millions)/Annual Growth Rate (%) - Estimate 20116 40.5/2.46 % Urban Population (Millions)/Annual Growth Rate (%) - Estimate 20114 9.4/4.2% Urban Population (Millions)/Annual Growth Rate (%) - 20104 9.1/4.2% Number of Major Metropolitan Areas* 5 Size of Middle Class (Millions)/Growth Rate (% 4) 4.5/5.00% Per Capita Gross Domestic Product($Mil) - 20104 809 **Unemployment Rate Estimate 2008 (% 6) 40 Food and Non-Alcoholic Beverages Expenditure 2011 (% 4) 41% ***Percent of Female Population (2009) Employed3 44% Exchang 2e Rate (Ksh/$) - 2012 (Estimate) 94.54/1 Exchange Rate (Ksh/$) - 20115 89.22/1 Data sour 1ces: G 2lobal Trade Data, FAS/Nairobi Es 3timates, Kenya National Bureau of 4 Statistics, Euromonitor International-March 2011 5, Central Bank of 6 Kenya, CIA World Factbook *Metropolitan area=Population of at least 1 million: Nairobi; Mombasa; Kisumu; Nakuru; and, Eldoret **CIA World Fact Book—latest estimate as of 2008 *** Female labor force as reported in a 2009 GOK publication Kenya's Imports of Consumer-Oriented Products, and Edible Fish and Seafood Imports from the World Imports from the U.S. U.S. Market Share (%) ($1,000) ($1,000) Product 20081 20091 20101 2011(E 20081 20091 20101 2011 2008 2009 2010 201 2 1 ) (E)2 1 1 1 (E)2 Tree 1,502 1,099 1,038 2,500 175 120 201 480 11.6 11 19 19 Nuts Processed 5,188 8,565 10,698 15,350 582 228 207 200 11.2 2.66 1.9 1.3 Fruit & Vegetable s Fruit & 3,473 3,347 4,794 4,600 2 0 8 0 0.05 0.01 0.2 0.00 Vegetable Juices Breakfast 3,484 2,273 6,095 5,800 995 266 3,274 4,00 28.6 11.7 54 69 Cereals 0 Snack 12,866 13,335 16,959 18,500 15 44 84 75 0.11 0.33 0.5 0.4 Foods Dairy 7,194 11,536 14,800 20,000 526 99 3 10 7.31 0.86 0.0 0.0 Products Wine and 11,524 10,086 13,076 16,500 165 133 209 220 1.44 1.32 1.6 1.3 Beer Red 1,416 679 604 1,500 0 0 0 0 0 0 0 0 Meats, FR/CH/F R Fresh 8,575 3,209 4,501 9,000 1,413 7 7 2 16.5 0.21 0.2 0.02 Vegetable s Red 155 250 232 210 0 0 0 0 0 0.01 0 0 Meats, Prep/Pres Poultry 1 2 5 15 0 0 0 0 0 0 0 0 Meat Eggs & 268 108 28 250 0 16 0 1 0 14.6 0 0.4 Products Fresh 7,229 7,847 9,201 10,000 0 0 5 0 0 0 0.1 0 Fruit Nursery 15,801 8,911 10,007 10,500 37 137 7 30 0.23 1.54 0.1 0.3 Products & Cut Flowers Pet Foods 1,130 9,62 1,499 1,400 0 0 0 0 0 0 0 0 (Dog & Cat Food) Other 77,381 79,589 92,512 100,000 13,97 15,20 25,28 4,50 18.1 19.1 27.3 4.5 Consumer 3 9 3 0 Oriented Total 157,18 150,83 186,04 212,290 17,88 16,25 29,28 8,20 11.4 10.9 15.7 4 Consume 7 6 9 3 9 8 0 r- oriented Foods Total 6,330 6,106 7,330 10,866 0 0 0 0 0.14 0 0.04 0.00 Fish and Seafood Products Grand 163,51 156,94 193,37 233,156 17,88 16,25 29,28 8,20 11.5 10.9 15.8 4 Total 7 2 9 3 9 8 0 Da 1ta Sources: GTA and 2 FAS/Nairobi Estimates—The “Breakfast Cereals” category above includes maize meal and corn- soy blends, imported food aid. Kenya's Top 15 Suppliers of Consumer-Oriented Products ($1,000) Partner Coun 1try 2008 1 20091 2010 2011E 2012F 2013F South Africa 17,012 18,056 25,537 24,000 29,800 33,700 United States 17,883 16,259 29,288 8,200 10,000 12,000 Netherlands 13,594 10,356 11,476 14,000 10,700 11,000 Tanzania 10,335 7,233 9,359 10,000 11,000 11,000 Ireland 12,988 11,786 10,138 16,000 14,000 15,000 United Kingdom 6,674 5,822 5,789 6,500 6,400 6,000 Italy 7,370 7,822 7,164 8,140 8,000 8,000 Egypt 7,613 8,499 10,118 12,200 13,000 14,300 India 4,781 5,726 5,926 6,000 6,900 7,500 United Arab Emirates 3,536 3,631 3,416 2,250 3,200 3,200 France 5,636 5,544 7,506 14,000 9,000 10,500 Brazil 2,716 1,233 3,046 4,400 5,000 5,500 China 4,429 3,579 4,563 4,900 5,100 5,500 New Zealand 3,831 3,445 2,822 3,200 3,500 3,600 Uganda 5,733 4,181 10,455 18,500 19,000 20,000 Others 33,056 37,663 39,443 60,000 65,000 65,000 World 157,187 150,836 186,049 212,290 208,900 231,800 Data Sou 1 E,Frce: GTA and FAS/Nairobi Estimates and Forecast Kenya's Top 15 Suppliers of Edible Fish and Seafood ($1.000) Partner Country 20081 20091 20101 2011E 2012F 2013F Seychelles 2,755 3,478 1,234 4,600 4,600 4,650 Thailand 80 172 449 320 450 450 Japan 315 59 296 750 700 750 Tanzania 440 366 540 400 450 480 Singapore 1,321 1 2,202 1,600 1,600 1,800 Norway 168 142 166 166 166 170 Oman 167 115 146 70 100 120 India 213 300 162 220 200 200 Uganda 47 19 81 110 100 100 United Arab Emirates 17 13 186 65 70 70 Vietnam 0 35 97 125 130 140 Netherlands 229 54 28 10 10 20 United Kingdom 39 94 319 250 250 250 New Zealand 0 155 323 100 110 120 China 54 14 420 680 700 700 Others 485 1,092 679 1,400 1,649 1,790 World 6,330 6,106 7,330 10,866 11,285 11,810 Data 1 Source: GTA ,F and E FAS/Nairobi Estimates and Forecast
Posted: 15 February 2012

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