The Food and Beverage Market Entry Handbook: Iran

A Practical Guide to the Market in Iran for European Agri-food Products and Products with Geographical Indications

July 2017 Prepared by:

Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

EUROPEAN COMMISSION Consumers, Health, Agriculture and Food Executive Agency Promotion of Agricultural Products Unit

E-mail: [email protected]

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2 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

Table of Contents

The Exporter’s Handbook: Iran ...... 8 How to use this Handbook ...... 8 Country Overview ...... 10 Iran at a glance ...... 10 The Iranian Food and Beverage market ...... 17 Operating in the Iranian market ...... 24 Logistics services and infrastructure ...... 24 Distribution ...... 31 Business environment ...... 32 Consumer profile ...... 34 Market Access and Entry ...... 36 SWOT analysis ...... 37 Market information ...... 38 Cultural sensitivities ...... 38 Market size, market share, growth drivers and trends ...... 38 Market access and market entry strategy ...... 40 Key Markets by Geography ...... 41 Legislation, Regulations and Administrative Information ...... 46 Import – Export rules ...... 47 GI and IP protection ...... 48 Customs, SPS requirements, and Labelling ...... 49 Iran’s relationships with the GCC 6 and other regional bodies ...... 53 Market snapshots ...... 55 Beverages ...... 55 Consumption ...... 55 Offer ...... 59 Distribution ...... 61 Summary ...... 62 Products with Geographical Indications ...... 64 Consumption ...... 64 Offer ...... 68 Distribution ...... 76 Summary ...... 79

3 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

Fresh meat ...... 80 Consumption ...... 81 Offer ...... 83 Distribution ...... 87 Summary ...... 87 Processed meat ...... 88 Consumption ...... 88 Offer ...... 90 Distribution ...... 94 Summary ...... 95 Olive Oil ...... 96 Consumption ...... 96 Offer ...... 99 Distribution ...... 104 Summary ...... 104 Fresh Fruit and Vegetables ...... 105 Consumption ...... 106 Offer ...... 108 Distribution ...... 114 Summary ...... 115 Processed Fruits and Vegetables ...... 116 Consumption ...... 117 Offer ...... 120 Distribution ...... 124 Summary ...... 125 Dairy Products ...... 126 Consumption ...... 127 Offer ...... 132 Export ...... 133 Distribution ...... 137 Summary ...... 137 Processed Cereals ...... 139 Consumption ...... 139 Offer ...... 143 Export ...... 144

4 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

Distribution ...... 148 Summary ...... 148 Baked Goods ...... 150 Consumption ...... 150 Offer ...... 152 Distribution ...... 155 Summary ...... 156 Chocolate ...... 157 Consumption ...... 157 Offer ...... 159 Export ...... 160 Distribution ...... 163 Summary ...... 163 Confectionery ...... 165 Consumption ...... 165 Offer ...... 168 Import ...... 170 Distribution ...... 174 Summary ...... 175 Honey Products ...... 176 Consumption ...... 176 Offer ...... 177 Export ...... 179 Distribution ...... 181 Summary ...... 182 Cotton Plants ...... 183 Consumption ...... 183 Offer ...... 184 Distribution ...... 189 Summary ...... 189 Communication ...... 191 Advertising in Iran ...... 191 Presenting a Product in Iran ...... 198 Target Audience ...... 199 Communications Campaigns in Iran ...... 200

5 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

Promoting your Product ...... 200 DOs AND DON’Ts ...... 202 DO ...... 202 DON’T ...... 203 Quick Facts ...... 204 Synopsis ...... 207 SWOT and 4P analysis ...... 207 4P Analysis ...... 210 Conclusion ...... 212 Support Service Directory ...... 214 Relevant Business Associations in Europe ...... 214 Directory of EU member State Embassies ...... 215 Useful Organisations and Service Providers in Iran ...... 220 Calendar of Trade Events in Iran ...... 221 Annex I - EU Products Registered as GIs in Iran ...... 222 Annex II - Professionals Contact Database ...... 228 Major Retailers ...... 228 Restaurants and Hotels ...... 228 Importers and Distributors ...... 229 Media ...... 230 Bloggers...... 231 VIP Chefs ...... 232 Annex III: Case Study: Choosing the Right Local Partner is the Key to Success in Iran ...... 233 Company Profile ...... 233 Distribution Channels and Customer Base ...... 233 Challenges in Iran ...... 233 Marketing Strategy and Key to Success ...... 234 Table of figures ...... 235 List of tables ...... 239

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List of Acronyms

CAGR Compound Annual Growth Rate F&B Food and Beverage FDA Iran Food and Drug Administration GTC Government Trading Corporation of Iran ICCIMA Iran Chamber of Commerce, Industries, Mines and Agriculture IDICC Iran Dairy Industries Corporation IMI Industrial Management Institute IQIS Iranian Quarantine and Inspection Service IRR Iranian Rial ISIRI Institute of Standards and Industrial Research of Iran IVO Iran Veterinary Organization MENA Middle East and North Africa PPO Plant Protection Organization RAJA Iranian Railway Company TISC Technology and Innovation Support Centre TRIPS Trade Related Aspects of Intellectual Property Rights Agreement TSP Targeted Subsidies Policy WIPO World Intellectual Property Organisation

7 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook

The Exporter’s Handbook: Iran This Handbook is intended to act as a reference for those agri-food producers planning for, or in the process of entering the Iranian market. This Handbook provides step-by-step guidance on the operationalisation of the market in Iran, including relevant information such as analysis of product-specific markets, market access and market entry procedures - including as applicable at the bilateral and regional levels - Intellectual Property Rights (IPR) for products with Geographical Indications (GI), a signposting and referral system providing useful contacts to professional buyers and strategies for penetrating the Iranian market. How to use this Handbook The applicability of each section of this Handbook will depend on your stage of market entry, company profile, product range and existing business strategies. For those wishing to learn more about the Iranian food and beverage (F&B market in general, Sections 4 and 5 provide an overview of the business climate. These sections include political, geographic, economic and cultural information relevant to successful market entry and performance. The information contained within these sections is of a general nature so may not be relevant for those in the more advanced stages of market entry. If you are interested in the market, in Section 6, you may find out more information relevant to your product through the 14 Market Snapshots for selected products. These sections illustrate market dynamics, including overview, entry procedures, sanitary and phytosanitary requirements and more, specific to each of the following product categories: 1. Beverages 2. Products with Geographical Indication 3. Fresh Meat 4. Processed Meat 5. Olive Oil 6. Fresh Fruits and Vegetables 7. Processed Fruits and Vegetables 8. Dairy Products 9. Processed Cereals 10. Baked Goods 11. Chocolate 12. Confectionery 13. Honey, Gum Resins and Plant extracts 14. Cotton, living plants This information will provide more industry-specific intelligence to consider as part of any market entry or market expansion strategies. The information contained in this Handbook is a first resource to consult in deciding how to export your product to the Iranian market and does not constitute legal guidance. Applicable legislation, regulations and market information are

8 | P a g e Enjoy It’s from Europe – Market Entry Handbook The Exporter’s Handbook: Iran: How to use this Handbook frequently updated or changed in Iran and should be reviewed with a knowledgeable export support service or import counsellor prior to market entry. If you have already decided to market your product in Iran, but need some assistance getting there, then the detailed information in Sections 7 onwards can point you in the right way. In Section 7 you will find the necessary information to build your communication strategy, including statistics on social media usage, main media channels and the local rules on advertisement. Section 8 provides practical tips and a concise list of recommendations on what to do and what not to do. The Synopsis in Section 9 presents an overview of the F&B market in Iran through SWOT analysis and 4P Analysis. Finally, Section 10 provides a Support Services Directory which includes a well-informed contact network of service providers, business facilitation support organisations and business contacts, which can be vital in entering and building a brand in the Iranian market.

9 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

Country Overview Iran at a glance Iran is a Middle Eastern country sharing a land border with Turkey, Armenia, Azerbaijan, Turkmenistan, Afghanistan, and Pakistan. Its coastal borders open to the Caspian Sea in the North, and the Persian Gulf and Gulf of Oman in the South.

Figure 1 Map of Iran1 ©

10 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

Modern Iran has its foundations in the Islamic revolution of 1979, led by Ayatollah Khomeini. There is a clerical and religious hierarchy on which political power in the country rests. Members of parliament (the Islamic Consultative Assembly) are popularly elected, and must be vetted by a 12-member Council of Guardians, which includes six clerical members appointed by the head of state (Supreme Leader Ayatollah Ali Khamenei). This body must also approve all legislation coming from the parliament.2 In May 2017 Hassan Rouhani (pictured3) won a second term as President of Iran, with 57 per cent of the vote.4

Figure 2 Hassan Rouhani, The country has the second largest economy in the President of Iran © Middle East and North Africa (MENA) region after Saudi Arabia, principally focused on the hydrocarbon, agriculture, and services sectors. It is characterised by large natural gas reserves and proven crude oil reserves, both of which are relied upon by the government to a large extent (oil exports account for around 80 per cent of total export earnings and make up roughly 40-50 per cent of the government budget5).6 In Iran, agricultural production accounts for nearly 10 per cent of its economy and the sector offers employment to about 18 per cent of Iran’s population. Currently, about 27 per cent of Iran’s population is rural, however, this number has been steadily declining over time due to increasing economic development that has brough about rapid urbanization and industrialization.7 Many international sanctions imposed on Iran were lifted in January 2016 following the reaching of an agreement between Western powers and the country to limit Iran’s nuclear programme. New sanctions imposed by Washington, due to a ballistic missile test carried out by Iran, are specific to entities and individuals linked to the missile programme. This re-entry into the

2 United States Institute of Peace. “The Parliament”. Iran Primer, August 2015, available at: http://iranprimer.usip.org/resource/parliament 3 Hamed Malekpour, Tasnim News Agency, Image obtained from Wikimedia Commons, avalailable at: https://commons.wikimedia.org/wiki/File:Hassan_Rouhani_in_Saadabad.jpg ; Copyright © 4 Financial Tribune. “Rouhani’s Inauguration Heralds Stronger International Ties”. August 2017, available at https://financialtribune.com/articles/national/69995/rouhani-s-inauguration-heralds-stronger- international-ties 5 Cordesman, Anthony. “The Iran Nuclear Agreement and Iranian Energy Exports, the Iranian Economy, and World Energy Market”. Center for Strategic and International Studies, August 2015, available at https://csis-prod.s3.amazonaws.com/s3fs- public/legacy_files/files/publication/150817_Impact_Agreement_Iran.pdf 6. World Bank. “Iran Overview”. April 2017, available at: http://www.worldbank.org/en/country/iran/overview 7 Mesbah Motamed, Developments in Iran’s Agriculture Sector and Prospects for U.S. Trade, United States Department of Agriculture, A Report from the Economic Research Service. July 2017, pp. 2 , available at: https://www.ers.usda.gov/webdocs/publications/84408/aes-100.pdf?v=42937

11 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance global economy could have far-reaching economic effects, given the large size of its economy.8

Table 1 Country factsheet

Iran

Official name Islamic Republic of Iran (Jomhuri-ye Eslami-ye Iran)

Political system Theocratic republic

Head of state Supreme Leader Ayatollah Ali Khamenei

Head of Government Hassan Rouhani

Capital Tehran

Flag

Official languages Persian is the official language, others include Azeri Turkic and Turkic dialects, Kurdish, Gilaki and Mazandarani, Luri, Balochi, and Arabic

GDP, PPP USD 1.359 trillion (2014, World Bank latest, 1.185 trillion EUR) - Per capita, PPP - Trend - USD 16,507 (2014, World Bank latest, 14,397 EUR) - Following sustained growth in both indicators from 2005, Iran experienced a dip in GDP and GDP per capita from 2011 – 2013, with a rebound from 2013-2014

8 International Monetary Fund. “Economic Implications of Agreement with the Islamic Republic of Iran”. Regional Economic Outlook Middle East and Central Asia Report, October 2015, pp. 81 – 88, available at: http://www.imf.org/external/pubs/ft/reo/2015/mcd/eng/pdf/mreo1015ch5.pdf

12 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

1,400 GDP, PPP (billion, 19,000 current international 1,350 $) 18,000 1,300

1,250 17,000

1,200 16,000 GDP per capita, PPP 1,150 (current international $) 15,000 1,100

1,050 14,000

1,000

13,000 GDP, PPP (billion, current international $) international current (billion, PPP GDP,

950 $) international (current PPP capita, per GDP

900 12,000

Currency Iranian Rial (IRR) - Exchange rate trend - From 2002 to 2011 IRR per USD increased from roughly 6,907 to 10,616. From 2012 to 2016 the rate of increase has been higher, with a move from 12,176 in 2012 to 30,915 in 2016

13 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

Major cities Tehran (Capital) - Metropolitan population - 8.4 million (CIA, 2015) - Tehran - Province Mashhad - 3 million - Razavi Khorasan Esfahan - 1.88 million - Isfahan Karaj - 1.81 million - Alborz Shiraz - 1.66 million - Fars Tabriz - 1.57 million - East Azerbaijan

14 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

Population density

Land area 1,628,750 sq. km

Population 79,926,270 (2016) - Median age - 29.40 - Trend - The previous three national censuses show Iran’s population grew at 6.60% from 2008-2011, and at 6.36% from 2011-2016 - Age by cohort:

15 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Iran at a glance

100 and over

90-94

80-84

70-74

60-64

50-54 Age 40-44

30-34

20-24

10-14

0-4 5 4 3 2 1 0 1 2 3 4 5 Population (million)

Labour force (economic 26.40 million participation of population aged 10 and over, 2016) Agriculture sector 19.40%; - Employment share by - sector Manufacturing sector 31.50%; Services sector 49.10% - Unemployment rate of population aged 15 and - 12.70% over

16 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview:

Provinces - Population (million, 2016):

Alborz 2.71 Ardebil 1.27 Bushehr 1.16 Chaharmahal & Bakhtiyari 0.95 East Azarbayejan 3.91 Esfahan 5.12 Fars 4.85 Gilan 2.53 Golestan 1.87 Hamedan 1.74 Hormozgan 1.78 Ilam 0.58 Kerman 3.16 Kermanshah 1.95 Khorasan-e-Razavi 6.43 Khuzestan 4.71 Kohgiluyeh & Boyerahmad 0.71 Kordestan 1.60 Lorestan 1.76 Markazi 1.43 Mazandaran 3.28 North Khorasan 0.86 Qazvin 1.27 Qom 1.29 Semnan 0.70 Sistan& Baluchestan 2.78 South Khorasan 0.77 Tehran 13.27 West Azarbeyejan 3.27 Yazd 1.14 Zanjan 1.06

Information aggregated from World Bank; Statistical centre of Iran; CIA world factbook; World Food Programme

The Iranian Food and Beverage market Overview Globally it is estimated that the Muslim consumer category spent USD 1.17 (EUR 1.02) trillion on Food & Beverage (F&B) in 2015, representing 17 per cent of global expenditure in the category. Additionally, the 2015 Halal Certified F&B Market is estimated to have been USD 415 (EUR 362) billion. In

17 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market this year, of Muslim countries, Iran ranked 6th in terms of the F&B market at that time.9

Table 2 Top Food & Beverage markets by Muslim country

Size of Food & Beverage Muslim country mkt, 2015 (USD, billion) Indonesia 155 (135 EUR) Turkey 116 (101 EUR) Pakistan 106 (92.45 EUR) Egypt 78 (68 EUR) Bangladesh 69 (60.1 EUR) Iran 59 (51.45 EUR) Saudi Arabia 48 (41.86 EUR)10

Food and Beverage is a very important category in terms of household expenditure in Iran, the latest information available in this area shows that in the period March 21st, 2015 – March 19th, 2016 gross expenditure per urban household on F&B was 83,276,315 IRR (roughly EUR 2,253), this made up 23.60 per cent of total urban household expenditure.11 Iran’s F&B market is growing, due primarily to a growing population. The Iranian government has set a policy which aims to make the country as self- sufficient in this area as can be, particularly from Western countries. This has led to a widely regulated food market. Iran is largely self-sufficient in vegetables and nuts as well as wheat and barley, and has the world’s largest production of pistachio nuts, saffron and berberies. There is little import of chicken meat, cheese and milk, though the country does import a significant amount of red meat, butter, fish, fruit and wheat. There is opportunity for EU F&B companies to import in several areas including specialised products in the processed foods sector due to small variation in products in the country.12 The Iranian government outlines its ambitions for the Iranian Food and Beverage category in its 20 year outlook plan, which is currently just over halfway through (2005-2025). Here the government states that production capacity of food and beverage within the country should hit 100 million tons by the end of the period. In addition to this, it is aiming for value added of food and beverages to the economy of 15.70 per cent. Finally, with respect to

9 Thomson Reuters. “State of the global Islamic economy report 2016/2017”. 2016, available at: http://ceif.iba.edu.pk/pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf 10 Thomson Reuters. “State of the global Islamic economy report 2016/2017”. 2016, available at: http://ceif.iba.edu.pk/pdf/ThomsonReuters-stateoftheGlobalIslamicEconomyReport201617.pdf 11 Central Bank of the Islamic Republic of Iran. “Household Budget Survey”. March 21st 2015 – March 19th 2016 Report, October 2015, available at: http://www.cbi.ir/simplelist/1421.aspx 12 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da

18 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market exports it plans that value by the end of the period reaches USD 6.5 (EUR 5.67) billion.13 To be taken into consideration in this market is Halal. Halal is defined as “Food permitted per Islamic dietary guidelines from the Quran. Muslim followers cannot consume: pork or pork by-products, animals that were dead prior to slaughtering, animals not slaughtered properly or not slaughtered in the name of God, blood and blood by-products, alcohol, carnivorous animals, birds of prey”. Currently Iran has the fifth largest market for Halal food products, after Indonesia, Turkey, Pakistan, and Egypt.14 Knowledge of market competitors when entering any market is an advantage in any sector, in February 2016, the Industrial Management Institute (IMI) published names of the first 500 domestic food manufacturing companies with the highest sales rate in 2015 in Iran, the top companies are listed here:15

Table 3 Top domestic companies in Food & Beverage sector in Iran, by sales, 2015 ©

Company Sales 2015 (USD MLN)

Sina Food Industry Group 613.54 (EUR 535) Iran Dairy Industries Corporation 49.54 (EUR 43.21) (IDICC) Dashte Morghab Co. (1&1: Industrial 38.97 (EUR 33.99) Production Group) Pakdis Co. 35.16 (EUR 30.67) Taliseh Nemooneh Co. 26.89 (EUR 23.45) Chaharmahal Sugar Co. 17.7 (EUR 15.44) Zamzam Mashhad Co. 17.43 (EUR 15.20) Minoo Group 13.54 (EUR 11.81) Biscuit Gorji Company 13.48 (EUR 11.76)

Sayeh Gostar Pars Managers – Economic and Business Consultancy16

13 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016 14 Islamic Chamber Research and Information Center. “Halal Food, Lifestyle sectors to be worth $2.47 Trillion by 2018”. Halal World Institute, May 2015, available at: http://halalworldinstitute.org/news/detail/475?lang=en#.WUEJ_GjyhhF 15 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016 16 “Iran’s Food Sector”, SGPM Economic and Business Consultancy, October 2016 ; Image Copyright ©

19 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market

Iran F&B Trade profile Currently the EU overall ranks as Iran’s 5th largest trading partner, accounting for 6 per cent of Iran’s trade. Whilst before the sanctions regime the EU was Iran’s first trading partner, The United Arab Emirates and China are currently Iran’s most important partners.17 Exports to Iran in the F&B category have seen a rather sharp decline in the recent past. World exports have seen from 2012-2016 a drop in total value of exports here of 47 per cent, whereas the EU-28 from 2012-2015 have seen a drop of just over 50 per cent. Iran’s F&B related exports center mainly on horticultural crops, including tree nuts, fruits, and vegetables, with pictachios being a major export article.18

Figure 3 Exports to Iran of Food & Beverage categories

9.00

8.00

7.00

6.00

5.00 World 4.00 EU-28 3.00

Exports to Iran, USD billion USD Iran, to Exports 2.00

1.00

0.00 2012 2013 2014 2015 2016

© UN Comtrade19 Data on Harmonized System categories relevant to F&B from the UN Comtrade database shows that imports to Iran from all countries is concentrated in a relatively small number of categories, the top five categories listed below made up just over 80 per cent of imports to Iran in 2016.

17 European Commission. “Iran Trade”. Countries and Regions: Iran, April 2017, available at: http://ec.europa.eu/trade/policy/countries-and-regions/countries/iran/ 18 Mesbah Motamed, Developments in Iran’s Agriculture Sector and Prospects for U.S. Trade, United States Department of Agriculture, A Report from the Economic Research Service. July 2017, pp. 6, available at: https://www.ers.usda.gov/webdocs/publications/84408/aes-100.pdf?v=42937 19United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

20 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market

Table 4 Imports of selected Food & Beverage categories to Iran, 201620

Percentage of Category total trade value Cereals 44.57% Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable 14.64% waxes Meat and edible meat offal 9.52% Coffee, tea, mate and spices 6.95% Sugars and sugar confectionery 5.45% Fish and crustaceans, molluscs and other aquatic 3.72% invertebrates Miscellaneous edible preparations 3.44% Edible fruit and nuts; peel of citrus fruit or melons 2.96% Dairy produce; birds' eggs; natural honey; edible products of animal origin, not elsewhere specified or 2.71% included Preparations of vegetables, fruit, nuts or other parts 1.99% of plants Cocoa and cocoa preparations 1.75% Preparations of cereals, flour, starch or milk; pastry 1.13% cooks' products Edible vegetables and certain roots and tubers 0.81% Beverages, spirits and vinegar 0.26% Animal or vegetable fats and oils 0.06% Preparations of meat, of fish or of crustaceans, 0.03% molluscs or other aquatic invertebrates Preparations of vegetables, fruit or nuts 0.01% Preparations of cereals, flour, starch or milk; bakers' 0.00% wares

20 Data used in this table is a mirror data collected by UN Comtrade from world export data, it is not directly obtained from Iran. 21 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

21 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market

Iran has, within the F&B categories mentioned above, a number of partners which are more important than others. The top 20 trading partners provided just under 96 per cent of imports in the studied categories in 2016. Further, Brazil is by far the biggest partner, and the top four countries importing to Iran in 2016 (Brazil, India, Russia and Malaysia) make up just over 63 per cent of the total. In terms of EU countries there are four which figure in the top 20: Germany, France, Spain, and Romania.

Figure 4 Percentage of total selected Food & Beverage exports to Iran of top 20 exporters (2016)22

Brazil 31.76% India 17.05% Russian Federation 9.19% Malaysia 6.94% Germany 5.54% China 3.80% Sri Lanka 3.71% Turkey 3.43% Kazakhstan 3.01% Argentina 2.43% New Zealand 2.10% Indonesia 1.34% France 0.82% Philippines 0.81% Spain 0.77% USA 0.65% Rep. of Korea 0.63% Romania 0.61% Australia 0.59% Ecuador 0.51%

22 Total trade value for all exporters was USD 4.458 billion, data available at comtrade.un.org/data/, extracted June 2017. HS codes extracted: 2-4; 7-10; 15-22. 23United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

22 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: The Iranian Food and Beverage market

Figure 5 Percentage of top seven selected Food & Beverage categories attibutable to partner countries (imports to Iran)

100% Other Other Other Other Kazakhstan India

90% Germany Other

Turkey China Other

80% Other Argentina Russia Sri Lanka 70%

Turkey 60%

India

50% Malaysia China

Brazil Turkey Brazil China 40%

30%

India Germany 20% Brazil

Russia 10% India

Brazil Malaysia 0% Cereals Animal or Meat and Coffee, tea, Sugars and Fish and Miscellaneous vegetable fats edible meat mate and sugar crustaceans, edible and oils and offal spices confectionery molluscs and preparations their cleavage other aquatic products; invertebrates prepared edible fats; animal or vegetable waxes

24 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

23 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market markets can raise imports for many food and beverages products such as rice, barley, corn, and soybeans, for which Iran is not nearly self-sufficient25 as well as for new products from different markets including the European Union markets. Operating in the Iranian market Logistics services and infrastructure

Although Iran has access to five important international transit and business corridros (International North-West Transport Corridor, Transport Corridor Europe Caucasus Asia, International East-West Transport Corridor, South Asia Corridor and Asian Land Transportation Infrastructure Development) 26 The country does not have a particularly well-developed infrastructure environment, compared to the rest of the region it scores rather low on Logistics performance according to the World Bank (see graph below). One of the reasons for this current situation is believed to be high levels of red tape in the country which cause delays in construction. The country is however trying to improve the landscape by increasing investment in infrastructure after the lifting of economic sanctions in January 2016. This should help the country to attract more FDI in infrastructure from several countries, including most notably India, as demonstrated by the announcement in February 2016 of Iran’s interest in gathering 8 billion USD (6.9 billion EUR) of infrastructure related investment from India.27

25 Mesbah Motamed, Developments in Iran’s Agriculture Sector and Prospects for U.S. Trade, United States Department of Agriculture, A Report from the Economic Research Service. July 2017, pp. 18, available at: https://www.ers.usda.gov/webdocs/publications/84408/aes-100.pdf?v=42937 26 Financial Tribune. “Iran Logistics Industry Overview”. January 2017, available at https://financialtribune.com/articles/economy-business-and-markets/56843/iran-logistics-industry-overview 27 The Dollar Business. “Iran Invites India to Invest in $8 Billion Project”. Countries and Regions: Iran, February 2016, available at: https://www.thedollarbusiness.com/news/iran-invites-india-to-invest-in-8- billion-project/41106

24 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market

Figure 6) Logistics Performance Index 2016

United Arab Emirates Region: Middle East & North Africa Iran, Islamic Rep.

Customs 5

3 Timeliness Infrastructure 2

Tracking & tracing International shipments

Logistics competence

World Bank28 The following section gives an overview of the main distribution networks within the country, to aid with company logistics planning. Road Most domestic trade in Iran takes place via roads. Road infrastructure links all cities and the majority of towns in Iran. Most roads (around 73 per cent in 2011) are paved, and there is good connection to neighbouring countries to the north, west, and east. In total, there are roughly 83 thousand KM of main roads, highways, freeways, and access roads. There is control of the roads by the Traffic Police (supervised by the Ministry of Road and Transportation),

28 Global Rankings 2016. The World Bank, available at: https://lpi.worldbank.org/international/global

25 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market aided by the fact that all trucks / transit trailers are equipped with GPS to control location and speed.29

Figure 7) Main road networks of Iran30 ©

Travel time for products in the F&B sector is important, for this reason average travel times between a number of the main cities and towns is stated below.

Table 5 Travel time from capital city to major towns in Iran, road

Tehran Tabriz Isfahan Shiraz Mashhad Hamedan Yazd Tehran - 7h 5h 11h 10h 4h 7h Bandar 16h 22h 11h 8h 17h 16h 10h Abbas

29 Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 30 United Nations, Image obtained through Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Un-iran.png Copyright ©

26 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market

Bandar Anzali 5h 7h 10h 16h 14h 6h 13h (Rasht) Bandar Imam (Port 13h 16h 11h 7h 20h 10h 12h close to Ahvaz)

World Food Programme31 Air Throughout the country there are 54 major airports. Iran Air is the national airline, and operates both domestic and international flights. The main national airport, Mehrabad, is located in the country’s capital, Tehran. Following this, Mashhad airport is the second most crowded airport in the country in terms of air traffic. It can be said that in general international connections with Iran’s airports have been improving over the recent past, as long ago as 2007 international flights were moved from the main airport Mehrabad, to the Imam Khomeini International Airport (which is outside of the capital), due to a need for further capacity.32

31 Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 32 Ibid.

27 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market

Figure 8 Airports of Iran

World Food Programme Maritime Shipping For exporters looking to enter the Iranian market the Seaway is a key point of entry. Overall capacity at Iran’s ports in the recent past has been increasing, by the end of 2015 it was expected that container unloading and loading capacity at ports would be around 7 million.33 There are 16 ports in the country, with three points of concentration. Bandar Abbas is a highly important port amongst these, given that it handles an estimated 90 per cent of the country’s container throughput. Bandar Anzali in the north is the biggest port in this part of the country, on the Caspian Sea. Finally, The Imam Khomeini Port is located in the northern part of the Persian Gulf, and due to good rail connections (which link it with the entire country) is an important transit entry point for cargo.34 Iranian seaports are expected to play even greater role in contributing to the development of country’s economy as major European shipping companies are looking to return to Iran. The government is welcoming these big international

33 Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 34 Ibid

28 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market shipping companies and it has indicated that no limitations will be posed on the returning shipping companies.35 Further information on Iranian ports can be found at the website of the Ports and Maritime Organization here.

Figure 9 Ports of Iran36

World Food Programme Rail In Iran there are around 11,106km of railroad track..37 This is small when compared to countries with similar size, for example, Germany has 19 times more than Iran and Poland 11 times more. Goods coming from the major port Bandar Abbas are distribuned through trucks and freight trains, the Tehran- Bandar-Abbas railroad specifically connects this port with the railroad system

35 “No Limitations for Liners Returning to Iran”, World Maritime News, February 2017, available at: http://worldmaritimenews.com/archives/212061/no-limitations-for-liners-returning-to-iran/ 36Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 37 Iran Journey. “Transport in Iran”. 2011, available at: http://www.iranjourney.com/contents/TI

29 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market of Central Asia via Tehran and Mashhad. Railroads are generally in good condition throughout the country, though it should also be noted that the network as a whole is rather under-developed in terms of reach. This is expected to improve over time, especially as within infrastructure one of Iran’s strategic goals is to expand the railway network, with 25,000km of track expected in 2025.38 A current example of this expansion is the investment project of EUR 1,176 million in a stretch of railway connecting Shiraz, Bushehr, and Asalouyeh.39

Figure 10 Railroads of Iran

World Food Programme The Islamic Republic of Iran Railways is the national state-owned railway system of Iran, freight transport management specifically is coordinated by the Railway Transportation Company (The Raja Passenger Train Company manages passenger trains), all of these are overseen by the Iranian Ministry

38 Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 39 The Swedish Trade and Invest Council. “A new dawn for Swedish Business in Iran”. Business Sweden, 2016, available at: http://www.business-sweden.se/globalassets/business-sweden---a-new-dawn-for- swedish-business-in-iran.pdf

30 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market of Roads and Transportation. It was estimated in 2015 that 33 million tonnes of goods were transported annually by the rail network, 9 per cent of all transportation in the country.40 Again, travel time for the F&B sector is an important factor to take into consideration, an indicative list of travel times by train to major towns and cities in Iran is provided below.

Table 6 Travel times from capital city to major towns in Iran, rail

Bandar Bandar Tehran Tabriz Mashhad Imam Khosravi Abbas Khomeini Tehran - 7h 12h 17h 15h 10h Tabriz 7h - 16h 21h 15h 10h Mashhad 12 16h - 15h 21h 18h Bandar 17h 21h 15h - 12h 18h Abbas Bandar Imam 15h 15h 21h 12h - 10h Khomeini Bazargan 10h 3h 20h 1 day 17h 12h Sarakhs 12h 20h 2h 17h 1 day 19h Khosravi 10h 10h 18h 18h 10h -

World Food Programme Distribution Currently the focus of grocery retailing is on traditional forms of retail in Iran. Independent outlets (traditional grocery retailers) accounted for 98 per cent of value sales in grocery retailers in 2016. There is a large number of small groceries and food/drink/tobacco specialists in the country which are convenient for shoppers. Bakers, butchers, greengrocers and confectioners were the dominant types of food/drink/tobacco specialist retailers in the country in 2016. Within other grocery retailers, the Kiosks in the country (which sell grocery items, among other products) were the dominant format in 2016.41 There is however a shift occurring in shopping habits and the retail landscape. Traditional grocery retailers are moving towards more modern forms of shopping, with independent groceries that have high turnover tending to

40 Logistics Capacity Assessments. “Iran Logistics Assessment, World Food Programme”. Regional Economic Outlook Middle East and Central Asia Report, June 2016, available at: https://dlca.logcluster.org/display/public/DLCA/Iran%2C+Islamic+Republic+of 41 Iran Here. “Retail in Iran”. March 2016, available at: https://iranhere.com/retails-in-iran/

31 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market convert to the supermarket format to fulfil demand and increase shelf space. Supermarkets and hypermarkets, more modern types of grocery outlets, continue to increase market share due to price competitiveness and promotional activities. Consumers however continue to have preferences for items such as bread, meat and fruit through more traditional channels due to perceived higher levels of freshness and quality.42 Internet retailing of grocery items is also a small but emerging distribution point in the country, expected to grow in importance through platforms such as Digikala.com.43 Whilst traditional grocery is clearly dominant in the country in terms of value, growth in these areas is expected to slow over the next few years, with more modern grocery formats expected to continue to grow market share. Business environment Generally, the business environment in Iran is quite difficult, though there are several steps being taken to improve in this area by the government. Relevant authorities have established a “one stop shop” for businesses which should allow for more simplified administrative procedures. This should be a positive for EU F&B sector companies looking to do business in the country. However, further steps, such as regulatory reform, are required to increasingly attract foreign companies and investment. Iran is also characterised by a high level of state interference in the economy, as well as some red tape, which in some cases further complicate the environment.44 In comparison with the other 190 countries studied by the World Bank in 2017 it would seem that, relatively, Iran is more difficult to do business in than the average, given that its 2017 ‘doing business’ rank was 120/190 (more info here). This however does not show the whole picture as there is variation depending on the topic, for example in the sub-sector “dealing with construction permits” Iran ranked 27/190.

42 Financial Tribune. “Why Grocery Stores Outnumber Any Other Shop in Tehran”. June 2015, available at: https://financialtribune.com/articles/economy-business-and-markets/19404/why-grocery-stores- outnumber-any-other-shop-in-tehran 43 Muftah. “Digikala: An eCommerce Success Story in Iran”. September 2014, available at: https://muftah.org/secret-digikalas-success/#.WWTiioiGOUk 44 World Bank. “Ease of Doing Business in Iran”. Doing Business Report. 2017, available at: https://doingbusiness.org/data/exploreeconomies/iran

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Table 7 Iran ease of doing business rank (no./190 other countries)

Overall 120 Starting a business 102 Dealing with Construction 27 Permits Getting Electricity 94 Registering Property 86 Getting Credit 101 Protecting Minority Investors 165 Paying Taxes 100 Trading across Borders 170 Enforcing contracts 70 Resolving Insolvency 156

World Bank For further information and insight into doing business in Iran the World Bank’s “Doing Business 2017” for Iran is suggested, available here. The legal system in Iran is poorer in quality when compared to other countries in the region, there is also a heavily regulated private sector, as well as regulatory weakness. An important point to consider for F&B sector companies looking to enter the Iranian market is the differential treatment given to domestic versus international investors: international investors are required to obtain a licence of operation from the organisation of Investment, Economic and Technical Assistance of Iran.45 The Regulatory Quality Ranking for 2014 of Iran is very low, owing to the high level of state interference in economic activities. This ranking for Iran is in the bottom ten in the world, as well as regionally in 2014.46 There are a number of positives for the business environment in the country. This includes ICT which is developing at a strong pace, which would increasingly facilitate business opportunities. The government has initiatives to remove the cap on internet speeds and introduce 3G and 4G in the country. The government is also planning to expand internet services to rural areas via

45 Ministry of Economic Affairs and Finance Organization for Investment, Economic and Technical Assistance of Iran. “Guidance and FAQs on Foreign Investment in the Islamic Republic of Iran”. Invest in Iran. 2017, available at: https://investiniran.ir/en/faq 46 World Bank. 2015. Doing business 2016 : measuring regulatory quality and efficiency - Iran, Islamic Republic of. Doing business 2016. Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/890901467986376633/Doing-business-2016-measuring- regulatory-quality-and-efficiency-Iran-Islamic-Republic-of

33 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market deployment of 4G LTE mobile technology.47 . In addition to this, higher education rates are increasing in the country, a positive for the business environment, however Iran is still faced with a brain drain problem, which complicates the business environment further. This is due to educated and skilled Iranians leaving for better jobs and higher wages. Consumer profile Since 1979 Iran has been fairly isolated from the international economy, a factor which has affected consumer behaviour. Iranians over the past five years particularly have become more cautious when purchasing items, either by holding off on impulse purchases or price checking products. Given this historical restraint it is believed that there is a desire for high quality Western products now that sanctions are being lifted. The cultural shift in society seen over the past decade is particularly acute in the young consumer section of the economy. Where in the past dining outside home was not the norm, the situation is now relatively more relaxed and younger generations feel comfortable going out to cafes and restaurants where before they would have organised activities at home. This more relaxed attitude is a positive for EU exporters given that there is openness to Western goods and services in Iran. In addition to this desire for Western brands, well off Iranians often look to buy luxury goods as a status symbol.48 Furthermore, Iranian cosnumers expect the top quality from products as they have been accustomed to high-qulity products provided at a an affordable price in the past. At the same time majority of Iranian consumers are relatively price sensitive and look for the products with best value for money. The diet of the Iranian population varies depending on the region, however many dishes include fresh meat and nuts, Figure 11 Chelo Kabab © pomegranate, yoghurt, sumac, turmeric and saffron. Fruit consumption is relatively high, whilst eating raw vegetables is not particularly common. Popular dishes include: ‘Chelo Kabab’ (pictured49), a national dish of Iran consisting of steamed saffron Persian rice and Kabab; ‘Khoresht’, a stew served with Iranian rice; ‘Aash’, thick soup; ‘Kookoo’, vegetable soufflé;

47 “Iran to boost internet speeds, cooperate with Kazakhstan”. TeleGeography, May 2016, available at: https://www.telegeography.com/products/commsupdate/articles/2016/05/17/iran-to-boost-internet-speeds- cooperate-with-kazakhstan/ 48 Lens Culture. “Iran’s Booming Consumer Culture”. June 2014, available at: https://www.lensculture.com/articles/thomas-cristofoletti-iran-s-booming-consumer-culture 49 Image obtained through Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Kababi_alborz2.jpg ; Copyright ©

34 | P a g e Enjoy It’s from Europe – Market Entry Handbook Country Overview: Operating in the Iranian market and ‘Pollo’, white rice with meat or vegetables and herbs.50 A lot of Iranian dishes are a combination of rice with meat, lamb, chicken or fish with onion, vegetables, nuts and herbs. The consumer profile is dictated to a certain extent by the distinction that is made between ‘hot’ (lamb, chicken, fish, sheep’s milk, mint and generally all sweets) and ‘cold’ (beef, cow’s milk, lettuce, spinach, and generally all sour things) foods, with a balance between hot and cold being considered ideal. Additionally, given the importance of religion in the country, consumer eating habits are affected by religious leaders, a clear example of the influence of religion is the banning of the eating of pork or animals that do not have vertebras.51 There is a growing demand by the consumer in Iran for Western food. In addition to this there is a shift particularly in the younger generations towards more convenient foods, for example packaged foods including yoghurts, due to time savings. Traditionally popular, and also time saving, is street food in the country. Popular dishes in this market for the Iranian consumer include falafel, Persian Pizza, Shish Kabob and hot/cold soups and stews.52 Alcohol is banned though smuggled often through the port town of Kish. Pepsi and Coca-Cola amongst the consumer population are popular, in addition to the domestic version, Zamzam. Here there is a split between younger and older consumers, with younger preferring these ‘black’ soft drinks, whilst older generations opt more often for orange coloured fizzy soft drinks referred to as ‘Kanada’. In addition to this at meal times the drink ‘dough’ is popular, a yoghurt based mint drink in carbonated and non-carbonated versions. Tea is also extremely popular, as is fruit juice. There is a growing demand for milk based products due to calcium deficiencies that affect many Iranians, as well as bottled water due to its link with weight loss and healthier skin.53 Bazaars (tradirional markets) are still the favoured palces for Iranian consumers to shop for food and beverage products. At the same time big shopping malls are also gaining popularity as they offer entertainment together with shopping. Younger generations are especially drawn towards super- and hypermarkets as most of the foreign brands get marketed in supermarkets and hypermarkets.54

50 Food in Every Country. “Food in Iran – Iranian Cuisine”. Foods of the Iranians. Available at: http://www.foodbycountry.com/Germany-to-Japan/Iran.html 51 Ibid 52 Food Republic. “Persian Food Primer: 10 Essential Iranian Dishes”. 2014, available at: http://www.foodrepublic.com/2014/10/29/persian-food-primer-10-essential-iranian-dishes/ 53 Trend News Agency. “Iran is world’s largest consumer of soft drinks”. November 2013, available at: https://en.trend.az/iran/2215398.html 54 Lens Culture. “Iran’s Booming Consumer Culture”. June 2014, available at: https://www.lensculture.com/articles/thomas-cristofoletti-iran-s-booming-consumer-culture

35 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Operating in the Iranian market

Market Access and Entry A number of EU F&B products, including those with GI, are already being exported to Iran. This includes for example Nutella (Italy), Bavaria non- alcoholic drinks (Netherlands), Haribo (Germany), Delverde (Italy), Royal Dansk (Netherlands), Evian (France), Badoit (France), Twinings (UK), Frico Cheese (Netherlands). To help you navigate this shifting market, this section includes information on: Cultural Sensitivities; Market Size and Market Share; Growth Drivers and Trends; Market Access and Entry Strategy; Key Markets by Geography; Customs, SPS Requirements and Labelling; Status of GI and IP protection; Role and influence of GCC6 and other regional bodies. The information contained in this section is designed to be used as a complement to the product-specific Market Snapshots in Section 4. You can find a list of F&B products covered by this handbook below. Beverages; GI products; Fresh Meat; Processed Meat; Olive Oil; Fresh Fruits and Vegetables; Processed Fruit and Vegetables; Dairy Products; Processed Cereals; Bread, Pastry, Cakes, Biscuits and other bakery products; Chocolate and derived products; Confectionery; Honey, Gums, Resins and Plant Extracts; Cotton, Living Plants.

36 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: SWOT analysis

SWOT analysis

Strengths Weaknesses • EU already has presence in • Relativly high pricing for EU Iran in the F&B sector, easing products compared to awareness of EU products domestic substitutes dampens • EU products in the country are demand regarded as high quality, • Local knowledge in the driving demand country is key to success, and not easily established by new entrants

Opportunities Threats • Increasingly westernised • Iranian government pushes population open to EU domestic production which products can be targeted could hamper EU entrants • Growing population with • Trade with ECO may be higher disposable income strengthened, pushing out EU should be increasingly exporters receptive to EU products • Iran has a difficult relationship with the West which weakens certainty in the market

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Market information Cultural sensitivities Iran is a deeply religious country with the strong majority of the population, 99.4 per cent55, being Muslim. This religious aspect permeates into all aspects of life, including sensitivities around food and drink. Islamic decrees forbid the eating of Pork, other foods must be ‘Halal’, products which are definitely Halal are: Milk (from cows, sheep, camels, and goats); Honey; Fish; Plants (which are not intoxicant); Fresh or naturally frozen vegetables; Fresh or dried fruits; Legumes and nuts like peanuts, cashew nuts, hazelnuts, walnuts; Grains such as wheat, rice, rye, barley, oat. Animals are also Halal, but they must be slaughtered according to Islamic Law (Zabihah).56 Additionally, Alcoholic consumption is forbidden in the country, and their importation is prohibited.57 The opposite of Halal is Haram (unlawful), products which are Haram are (some already mentioned above): pigs; blood; carnivorous animals; almost all reptiles and insects; the bodies of dead animals; Halal animals that are not slaughtered according to Islamic Law; Wine, Ethyl Alcohol, and Spirits. These must be avoided by all Muslims.58 Further, reports of supposedly Halal meat containing significant levels of Pork (Haram) in Iran mean that consumers are aware of the possibility that what they are purchasing is not necessarily what it purports to be, making it even more important for EU exporters to follow guidelines and show their products compliance with these local cultural sensitivities.59 Market size, market share, growth drivers and trends EU exports to Iran in the Food and Beverage category grew just over 11 per cent during the period 2008-2016, with a varied picture depending on the sub category. Currently ‘Primary’ food and beverage mainly used for industry is the most important export, and has over the years experienced highs (2014) and lows (2010-2011). This category is similar in importance to EU exports as Processed Food and Beverage mainly for household consumption which has followed an opposite flow to the previously mentioned category in that in 2010- 2011 it experienced a boost whilst in 2013 it was at a low for the period studied.

55 U.S. Central Intelligence Agency. “Iran”. The World Factbook, 2017, available at: https://cia.gov/library/publications/the-world-factbook/geos/ir.html 56 Eat Halal. “What is Halal”. 2014, available at: http://www.eat-halal.com/what-is-definition-of-halal/ 57 European Commission. “Iran Fiche”. July 2017, available at: http://madb.europa.eu/madb/viewPageIFPubli.htm?doc=overview&hscode=2200&countryid=IR#h1 58 Eat Halal. “What is Haram”. 2014, available at http://www.eat-halal.com/haram/ 59Muslim Village. “Scientists Develop New Halal Meat Test”. February 2014, available at: https://muslimvillage.com/2014/02/01/49491/scientists-develop-new-halal-meat-test/

38 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Market information

Figure 12 Value (EUR) of exports of Food and Beverage from EU-28 to Iran over time, by sub-category

€ 1,000,000,000 Primary, mainly € 900,000,000 for industry

€ 800,000,000

€ 700,000,000 Processed, € 600,000,000 mainly for household consumption € 500,000,000

Processed, Value in EUR in Value € 400,000,000 mainly for € 300,000,000 industry

€ 200,000,000 Primary, mainly € 100,000,000 for household consumption € 0 2008 2009 2010 2011 2012 2013 2014 2015 2016

Eurostat60 As seen in the country overview section of this handbook the EU in 2015 made up just over 11 per cent of world exports to Iran in the Food and Beverage category. Generally, the trend in the future in the Food & Beverage sector in Iran is expected to be positive. A number of factors will influence the outlook for the category, one of these is the general stance of the Iranian government to encourage domestic production of products over importation, for example in the Agricultural Food Sector, relevant to Food & Beverage. Iran is also, in the agriculture / horticulture field, rather self-sufficient, it is estimated that around 90 per cent of products here come from within the country. The economy is built on a concept of resilience which requires self-sufficiency, this trend is also likely to impact on EU Food and Beverage importers to the country, in that it is probable that there is stiff competition from domestic companies, as well as the attitude that domestic is better.61 A growing population in the country also inevitably means that for the majority of products and sectors, including F&B, there will be increased demand in the future for products, which is a positive for EU entrants to the market. A general increase in per capita income also in the country means that consumers have more disposable income, and are also more likely to try potentially more expensive EU product offerings. The recent

60 Eurostat, available at: http://ec.europa.eu/eurostat 61 Netherlands Chamber of Commerce. “Road2IranXL Conference”. 2017, information is based on the interviews with companies and trade representatives.

39 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Market information lifting of sanctions also is likely to continue to boost the prospects for this sector.62 Market access and market entry strategy Having a strategy when entering any market in any sector is extremely important, there are a number of factors to take into consideration in the Food and Beverage sector in Iran, which are generally applicable to other sectors of the economy as well. A reliable local partner is seen as possibly the single most important step in the market entry process. This relationship should ease workings with government agencies and intermediaries in the marketplace. It goes without saying that the local partner should have a good understanding and knowledge of the Food and Beverage sector in the country, but in addition to this good government contacts are important for the partner to have.63 As a corollary to finding a local partner, within Iran it is important for Food and Beverage exporters to build trust and personal relationships with the market. Oftentimes it is the case that on first contact there is simply the establishing of the relationship, without necessarily talk of business being conducted. This is an important factor to take into account when thinking about market access strategy for Iran, a word of caution also however as ‘middle-men’ will be keen to present themselves as invaluable for new market entrants from the EU, all will not be so. 64 Oftentimes going solo when entering a market is an arduous process, given the significant amount of local knowledge which is required in order to make the process a success. This is also part of the reason why domestic companies are strong in Iran, as they of course have more knowledge about Iranian consumers, their habits, and the local market.65 To ease entry into the Iranian market therefore it is suggested that Food and Beverage exporters look to join trade missions (either at the EU or national level) that will help to guide them through the process. The format of the mission may vary though generally the main goal is to establish long lasting business collaborations in the country, as well as to provide legal know-how and advice on market entry strategies.66 Indeed, EU Agriculture and Rural Development Commissioner Phil Hogan will be leading a Food and Beverage delegation to Iran (and Saudi Arabia) on 7-12 November 2017. When entering a new market, the question of what representation / presence to have in the country arises, this is also something Food and Beverage exporters will want to look at when devising a strategy for the Iranian market.

62 Italian Trade Agency. “Market Overview of Iran’s Agricultural Food Sector”. ICE, January 2016. 63 Netherlands Chamber of Commerce. “Road2IranXL Conference”. 2017. 64 Ibid. 65 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016 66 Netherlands Chamber of Commerce. “Road2IranXL Conference”. 2017.

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It is believed to be valuable for new market entrants to establish a presence in Iran with either a local branch or potentially otherwise a joint venture, this would be an alternative to direct export from the EU. One of the reasons for this strategy would be tax benefits, The Head of Iran’s Tax Administration has pointed out that Iran plans to attract EUR 80bn of FDI and is therefore offering tax exemptions ranging from 5 to 20 years. In addition, Iran’s Investment Organization provides investment guarantees. Having a physical presence in Iran would also potentially be a first step into other countries in the region.67 Another challenge when entering the Iranian market are the currently still limited relations between Iranian and European banks, this is even after lifting of the sanctions against the country. Most large European banks do not process transactions with Iranian banks because of their exposure to US sanctions. Smaller banks that do not have this exposure do have banking relations with Iran. Larger banks such as ABN AMRO apply a case-by-case approach although ABN AMRO has a ‘white-listing’ method which means transactions involving agricultural products face less difficulties. Large European banks will likely continue their current approach towards Iran for the next few years.68

Table 8 Selection of Iranian banks with presence or correspondence in the EU and vice versa

European banks with Iranian Iranian banks with subsidiary in correspondent relations Europe KBC (Belgium) Bank Melli (Germany) Danske Bank (Denmark) Bank Sepah (Germany) DZ Bank (Germany) EIH-Bank (Germany) Banque Wormser Frères (France) Bank Tejarat (France) Banca Popolare di Milano (Italy) Bank Saman (Italy) Banca Popolare di Sondrio (Italy) Persia Bank (UK) Oberbank (Austria) Bank Melli (UK) Raffeisen (Austria) BCP (Switzerland)

Key Markets by Geography Iran is split into 31 provinces governed from a local centre which is usually the largest local city. The most populous provinces, which will be explored in more detail in this section, are Tehran (13.27 million), Khorasan-e-Razavi (6.43 million), Esfahan (5.12 million), Fars (4.85 million), and Khuzestan (4.71

67 Netherlands Chamber of Commerce. “Road2IranXL Conference”. 2017. 68 Ibid.

41 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Market information million). Most populated cities correlate to a large extent with size of province, see country overview section for more data. Tehran Tehran is the most populated province in the country and over 60 per cent of its about 13 million provincial population lives in the capital Tehran (pictured69) of the country situated in this province of the same name. The province was proclaimed the capital of the country by Agha Mohammad Khan in 1778. Since then the province has only grown in importance in the country, today it has roughly 26 per cent of all Figure 13 Tehran (capital) © industrial units in the country, accounts for roughly 30 per cent of the Iranian economy, and makes up about 40 per cent of Iran’s consumer market. This province hosts a large proportion of the total Iranian population, and at 18,909 km2 is relatively small especially when compared to provinces further to the West and South of the country. For this reason, the province and especially the capital are likely to be highly important markets for EU Food & Beverage exporters when entering the Iranian market. The province has relatively good transport links when compared to other regions in Iran, in particular it hosts the main national airport Mehrabad, as well as an international airport outside of the city for international flights (Imam Khomeini International Airport). 70 Khorasan-e-Razavi This province in Iran is situated to the East of Tehran, and has land borders with Turkmenistan and Afghanistan. With around 6.4 million inhabitants it is the second largest province in the country, but has only about 40 per cent the population of the province of Tehran.71 Khorasan-e-Razavi was part of a larger province which in 2004 was split into three, North Khorasan and South Khorasan being the two other provinces which split. Mashhad is the capital, and with about 3 million inhabitants makes up over 40 per cent of the total population in Khorasan-e-Razavi.72 After Tehran, the capital of the province has the second most crowded airport in the country, and goods from the major

69 Milad Mosapoor, Image obtained from the Wikimedia Commons website available at: https://commons.wikimedia.org/wiki/File:Tehran_tower_view.jpg 70 SOLA Iran. “About Tehran”. August, 2017, available at: http://www.sola-iran.com/en/page.php?rid=32 71 City Population. “Iran: Major and Midsize Cities”. September, 2016, available at: https://www.citypopulation.de/Iran-Cities.html?admid=1387 ; Copyright © 72 Ibid

42 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Market information port of Bandar Abbas can reach the capital via the Tehran-Badar-Abbas railroad.

Figure 14 Mashhad, capital of Khorasan-e-Razavi, Iran73 ©

Mashhad is Iran’s holiest city, the name means ‘the burial place of a martyr’ and millions make the pilgrimage to the holy Shrine of Imam Reza every year. Partly because of this the city is primarily focused on the tourism trade. Mashhad is situated about 900 km East from Tehran. The city’s main agricultural products include dry fruits, various kinds of nuts, sweets and saffron. Esfahan Esfahan is a province in the centre of Iran, close to Tehran province which is to the north. It forms the start of a part of a set of a larger group of provinces which extend down to the south and east of the country, as opposed to the provinces to the west and North-West which are mostly relatively small in comparison. This region is slightly smaller than Khorasan-e-Razavi, with roughly 5 million inhabitants. The capital of Esfahan is Isfahan, which has roughly 37 per cent of the total population of the province.74

73 Arian Zwegers, Picture obtained from Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Mashhad,_the_holy_shrine_of_Imam_Reza_(6209041600).jpg ; Copyright © 74 City Population. “Population of the Counties of Esfahan”. September, 2016, available at: https://www.citypopulation.de/php/iran-esfahan.php

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Figure 15 Isfahan, capital of Esfahan © In addition to a large potential market, the Capital Isfahan (pictured75) should in the next few years see improvements in its infrastructure, which should facilitate business for Food and Beverage exporters as well as of course other industries. In general, the current administration is keen to boost the country’s railway network, and the managing director of the Iranian Railway Company (RAJA) announced in late 2016 that an express railway from Tehran capital to Isfahan would be constructed in the next three years.76 In addition to this, Austrian Airlines announced in late 2016 that they would be adding a route from Vienna to Isfahan, in addition to their already established service to Tehran. This indicates growing interest in the country, and will further facilitate access of F&B companies to this part of the country.77 Fars Fars is a province located in the south west of Iran, whilst it does not reach to the Persian Gulf it is close and so is within relatively easy reach of a number of ports along this part of Iran’s maritime border, useful for EU Food & Beverage exporters to the country. The Province has around 4.85 million inhabitants. This province is also one of the cultural centres of Iran, in fact it is the original homeland of the ancient Persians, and it is also the economic centre of Southern Iran. Here the major industry is predominantly agriculture with the main products being cereal, citrus fruits, dates, sugar beets, and cotton, something which Food exporters from the EU would want to take into account when deciding where to distribune products in the country. Khuzestan Khuzestan province is situated in the West of the country and has a land border with Iraq, the population of the province is around 4.71 million, Ahvaz is the

75 Author: Arad Mojtahedi, Image obtained from Wikimedia Commons,available at: https://commons.wikimedia.org/wiki/File:Naghshe_Jahan_Square_Isfahan_modified2.jpg ; Copyright © 76 Iran Business News. “Tehran-Isfahan Railway to be built in 3 yrs”. August, 2016, available at: https://iran- bn.com/2016/08/31/tehran-isfahan-railway-to-be-built-in-3-yrs/ 77 Iran Business News. “Austrian Airlines to Launch Flights to Isfahan”. August, 2016, available at: http://www.iran-bn.com/2016/08/23/austrian-airlines-to-launch-flights-to-isfahan/

44 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Market information capital.78 It also opens to the Persian Gulf to the south. This makes it a rather easily accessible province by sea for all industries including that of Food & Beverage, for example it has been seen in the country overview section that the Imam Khomeini Port in the province has good connections by rail to the entire country. One aspect for EU Food & Beverage exporters to think about when entering the market is the various ethnic groups and peoples in the country. In Khuzestan for example there are, amongst others, Indigenous Persians, Iranian Arab tribes, and Armenians throughout the region. Another thing to think about is the varying diets of the Iranian people, which will impact on sales of exporters in the different cities and provinces of the country. Given that Khuzestan has a maritime border it is not surprising that seafood is a very important part of the cuisine in the province.

Figure 16 Iranian provinces reference map79 ©

78 City Population. “Iran: Major and Midsize Cities”. September, 2016, available at: https://www.citypopulation.de/Iran-Cities.html?admid=1387 79 Author: Ali Zifan, image obtained through Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Map_of_Iran_with_province_names_and_neighboring_land.svg ; Copyright ©

45 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Legislation, Regulations and Administrative Information

Legislation, Regulations and Administrative Information For rules and guidelines related to legislation, regulations, and administrative information in Iran The Trade and Promotion Organization of Iran’s Ministry of Industry, Mining and Trade can provide general information. In addition to this the Ministry has published a number of links to some of the relevant legislation, which can be accessed by interested parties in the Food & Beverage sector, see en.mimt.gov.ir/index.php for the home page. In this area, there are further relevant agencies that EU exporters of Food & Beverage to the country should be aware of. These include but are not limited to: - The Iran Food and Drug Administration (FDA), which Provides licenses for food imports based on examination by its experts; - The Plant Protection Organization (PPO) which is responsible for implementing the Plant Protection Law, issues permits, and can take quarantine decisions; - The Iran Veterinary Organization Quarantine & Biosecurity (IVO) which is responsible for setting standards regarding animal products, ranging from production to packaging, labelling, and transport; - The Institute of Standards and Industrial Research of Iran / Iran National Organization of Standardization (ISIRI), which is the Iranian agency for standardisation and certification and is Iran’s representation to the ISO. The ISIRI has an office for evaluation of the quality of import/export products. These agencies have published many product-specific and phytosanitary rules on their websites. This section therefore gives an overview of relevant information for EU Food and Beverage exporters looking to enter the Iranian market. It is further recommended for better understanding of the rules regarding food imports that potential market entrants seek local partners with further specific knowledge of the situation on the ground. These partners should be able to provide further guidance on the basic entry flow show here:

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Figure 17 Import process for Meat, Processed Foods, Fruits & Vegetables, Dairy Products, Confectionery/Chocolate

EU Producer: finds local agent with relevant expertise

Local Agent / Importer (with Commercial Card): seeks approval of relevant agencies (FDA, IVO, PPO, ISIRI) based on producer's information. Obtains Letter of Credit from a bank.

Transport: often arranged by Local Agent/Importer

Customs Inspection (and sampling) at port of entry (by Customs officers and representatives of the relevant agencies)

Distribution: (often arranged by Local Agent / Importer)

Elaborated on the basis of review of legislation of above mentioned agencies, and semi-formal interviews with both locally engaged and EU based stakeholders Import – Export rules EU Food & Beverage exporters wanting to do business in Iran will need to register with the Ministry of Industry, Mine and Trade and with the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA). Registration will yield a commercial card and code to use on commercial documents, as well as an import licence which is required for importations into Iran. In addition, online registration is required with the Trade Promotion Organization of Iran for electronic processing of trade transactions.80 The Export-Import Regulations Act, full version available via Trade Promotion Organization of Iran which can be accessed here, is a key document and provides information on regulations related to import into the country. A number of pertinent articles for the EU Food & Beverage exporter are shown here:

80 European Commission. “Overview of Import Procedures”. European Commission Trade Database, May 2017, available at: http://madb.europa.eu/madb/viewPageIFPubli.htm?doc=overview&hscode=2200&countryid=IR#kap58

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Article 3 - Engaging in the business of exportation and importation of goods for commercial purposes, requires a commercial card which shall be issued by Iran Chamber of Commerce, Industries and Mines and approved by the Ministry of Commerce. Article 5 - All productive ministries are required to forward to the Ministry of Commerce, not later than the 4th of February (15th of Bahman) of each year, their proposals for the following year concerning the export and import conditions in respect of goods similar to those produced domestically, having taken into account the internal requirements and exigencies of the country. Article 6 - Iranian means of transport shall have priority to transport all goods imported into the country. However, the directive pertaining to the use of foreign means of transport whether sea, air, road and railway carriers shall be drawn up by the High Council for the Co-ordination of National Transportation, in conformity with the ordinance approved by the Council of Ministers. Article 8 - Importers of various goods, whether governmental or not shall refer exclusively to the Ministry of Industry, Mine and Trade, for licensing their imports and registration of their orders. Note 1. The import license shall serve also as a clearance permit, and no separate permit shall be required. As with other sections related to regulations and procedures the seeking of professional advice on the matter is encouraged. GI and IP protection Iran is a member of the World Intellectual Property Organisation (WIPO), within the country the Ministry of Culture and Islamic Guidance is the competent authority with respect to this area. Within this there are a number of relevant laws that Iran has enacted in the areas of GI and IP, as well as treaty memberships. These include: the act for the protection of geographical indications (enacted 2005); Customs law (enacted 2011); Lisbon Agreement for the protection of appellations of Origin and their international registration (since 2006); By-Law subject of Article 16 concerning Protection of Geographical Signs (since 2005); Act of Plant Varieties Registration, Control and Certification of Seeds and Seedlings (since 2003); and the Madrid Agreement for the Repression of False or Deceptive Indications of Source on Goods (since 2004).81 Specifically looking at the act on protection of geographical indications it can be seen in article 5 that:

“The following Geographical Indications shall not be protected:

81 World Intellectual Property Organization. “Islamic Republic of Iran”. 2017, available at: https://wipo.int/wipolex/en/profile.jsp?code=IR

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A- Indications that do not correspond to the definition in Article 1(A).82

B- Indications which are contrary to the principals of Sharia, public order or morality.

C- Indications that are not protected in their country of origin or their protection has been ceased or indications that have fallen into disuse in their country of origin within the framework of the conventions to which Iran has acceded.” The Deputy Head of Judiciary and Head of the State Organization for Registration of Deeds and Properties of the Islamic Republic of Iran noted in late 2016 a number of steps that Iran had taken over the past year to advance its progress in Intellectual Property rights: Revision of the laws and regulations related to intellectual property rights; Commemoration of IP Day and opening up the receiving office for filing international applications under PCT; Commencing the implementation of the biennium project for the establishment of Technology and Innovation Support Centre (TISC); Organizing several national training workshops and seminars in the various fields of IP rights in cooperation with the related national entities.83 For further information on relevant laws and treaty memberships see the WIPO website here.84 Geographical Indications can be registered with the Iran Intellectual Property Office, State Organization for Registration of Deeds and Properties. There is a searchable database on these on the relevant website found here.85 For more detailed enquiries related to the Food and Beverage sector it is recommended to seek the advice of a professional in this area. Customs, SPS requirements, and Labelling Customs IRICA, the Islamic Republic of Iran Customs Administration, is responsible for customs procedures at ports of entry into the country, see their website here. For the Food & Beverage sector specifically there is a wide range of potential import duties depending on the product.

Table 9 Import duties for selected products in 2016, Iran

Product Import duties Beef 5-15% Dietetic foods (chicken meat) 32% Fish 5-40%

82 “Geographical Indication” means an indication that identifies a good as originating in the territory, a region or locality of the country, provided that the quality, reputation or other characteristics of the good is essentially attributable to its geographical origin. 83 World Intellectual Property Organization. “Speech by His Excellency Mr. Toiserkani”. Fifty-Sixth Series of Meetings of the Assemblies of the Member States of WIPO, October 2016, available at: https://wipo.int/edocs/mdocs/govbody/en/a_56/a_56_i04.pdf 84 World Intellectual Property Organization. “Islamic Republic of Iran”. 2017, available at: https://wipo.int/wipolex/en/profile.jsp?code=IR 85 The searchable database is currently available only in Farsi

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Prepared fish 40-55% Butter packaged in packages of 55% 500 gr or less Butter packaged in packages 20% more than 500 gr Cheese 55% Frozen Vegetables 55% Wheat 10%

The Agriculture and Food market in Iran, Ministry of foreign affairs of Denmark Registration with the Ministry of Economic Affairs and Finance will be necessary for customs duties and tax payments. The import registration / Import Licence gained from registering with the Ministry of Industry, Mines and Trade also serves as a customs clearance permit.86 The Trade Promotion Organization of Iran provides further details on specific duties for all categories, divided into 21 different broad categories, a number of which of course are relevant to EU Food & Beverage exporters. For details please visit this page on the TPO website. Easing the customs process for EU Food & Beverage exporters to Iran is the implementation in the country of the Automated System for Customs Data (ASYCUDA World), which allows for electronic submission of the required documents. This system is not however universally available, though further integration can be expected in the future. The main documents usually required, along with a Customs Import Declaration are: Freight documents; Commercial Invoice or Pro Forma Invoice; Certificate of Non-Preferential Origin; Packing List; Insurance Certificate.87 SPS requirements Given that Iran is an observer at the WTO, the WTO SPS Agreement does not apply to the country. Measures in these cases for SPS are usually based on international standards and principles. There are a number of identified SPS requirements relevant to the EU Food & Beverage sector described in the Iran fiche of the EU Commission’s Market Access Database, an overview is given here:

86 European Commission. “Overview of Import Procedures”. European Commission Trade Database, May 2017, available at: http://madb.europa.eu/madb/viewPageIFPubli.htm?doc=overview&hscode=2200&countryid=IR#kap58 87 Ibid.

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Table 10 Selected SPS requirements for Iranian market

Area Details

Animals and products of animal origin are subject to veterinary control upon arrival and must be accompanied by Animals and a corresponding veterinary health certificate. Products of Required: Veterinary Health Certificate for Animal Products. Animal Origin Refer to: Ministry of Agriculture, Department of Livestock Affairs State Veterinary Law available here

A PRA is to be conducted on plants, plant products or other regulated articles by the National Plant Protection Pest Risk Organization (NPPO), i.e. the Plant Protection Organisation Analysis coming under the Ministry of Agriculture, if the risk (PRA) associated with their importation is unknown. Refer to: Ministry of Agriculture, Plant Protection Organisation

For the importation of plants and plant products as well as seeds and seedlings, import approvals by the Ministry of Agriculture are mandatory. Goods subject to phytosanitary control will be inspected at the customs office of entry and must be accompanied by a Phytosanitary Certificate.

Plants and Shipments of plants and plant products may only be entered Plant into the country through specific customs offices of entry Products authorised in the respective provinces to inspect consignments subject to plant quarantine requirements, see Iran fiche at here for full details Refer to: Ministry of Agriculture, Plant Protection Organisation Plant Protection Act available on this website

The Ministry of Health and Medical Education is the responsible authority for foodstuffs. In order to import food of any kind, the foreign manufacturer must be registered Foodstuffs with the Food and Drug Organization (FDO). An additional product registration with the same body results in a sanitary licence/health certificate for the products in question and may facilitate the market access of the goods.

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For designated foodstuffs, an additional import approval is to be obtained from the FDO. Prior to their release onto the Iranian market, imported foodstuffs are subject to documentary checks and, as the case may require, physical inspection and sample taking and analysis procedures. After successful inspection, the commodities may be released through customs and receive a marketing authorisation, which is a prerequisite for placing the products on the Iranian market. Depending on the type of good, various exporter's certificates may have to be presented either for the product registration or for its actual customs release, e.g. laboratory results declaring that the product is fit for human consumption or a certification of free circulation in the country of export. Additional certificates may be mandatory, e.g. sanitary certificates for foodstuffs of animal or plant origin. Please refer also to the corresponding sections above. Moreover, foodstuffs bearing higher risks, e.g. live animals, fresh bovine meat, poultry, eggs or milk, may require specific attestations, i.e. that they are BSE-free, free from foot and mouth disease, or that the residue levels (e.g. of dioxin or pesticides) remain below the threshold levels. For foodstuffs containing substances of animal origin, a halal certification is required, proving that the animal produce conforms to the food standards set by Islamic rules concerning the contents and the manufacturing process of the goods.

Selected information from EU Commission’s Iran Market Access Database Fiche Labelling Labels for Food and Beverage must be written in Persian.88 There are a number of labelling requirements for Foodstuffs on the Iranian market that must be followed, details required are listed here:

88 European Commission. “Overview of Import Procedures”. European Commission Trade Database, May 2017, available at: http://madb.europa.eu/madb/viewPageIFPubli.htm?doc=overview&hscode=2200&countryid=IR#kap58

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Table 11 Labelling requirements for Foodstuffs in Iran

Labelling requirements, Iran

Product and brand Ingredients and additives (in name/trademark descending order of importance)

Net weight (metric units) Nutritional information

Origin and name of fat or oil, Country of origin if applicable

Production and expiry dates on the Name and address of the original labels of the packages and manufacturer containers, no additional stickers are allowed

Meat and meat products must bear Special storage, transportation the indication that they have been and preparation instructions, if manufactured according to the applicable. Islamic rules.

EU Commission’s Iran Market Access Database Fiche Iran’s relationships with the GCC 6 and other regional bodies Iran is present in various international organisations and bodies, these include being a member of the D-8; the Economic Cooperation Organization; the G- 18; the Organisation of Islamic Cooperation; The South Asian Association for Regional Cooperation; the World Customs Organization; Observer at the WTO; and the World Intellectual Property Organization89. An important regional body, with which Iran has a quite tense relationship, is the GCC 6, made up of Bahrain, Kuwait, Oman, Qatar, Saudia Arabia, and the United Arab Emirates. Perhaps one of the more relevant regional bodies for Iran is the Economic Cooperation Organization, which is composed of nine other regional partners: Afghanistan, Azerbaijan, Kazakhstan, the Kyrgyz Republic, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. The aim of the body is to promote economic, technical and cultural cooperation amongst member states.90

89 U.S. Central Intelligence Agency. “Iran”. The World Factbook, 2017, available at: http://cia.gov/library/publications/the-world-factbook/geos/ir.html 90 Economic Cooperation Organization. “Introduction to ECO”. 2017, available at: http://www.eco.int/in2.htm

53 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market Access and Entry: Iran’s relationships with the GCC 6 and other regional bodies

Preferential trade agreements here are operational, which means that competition for EU Food & Beverage exporters is likely to be relatively strong from these countries than it would be given equal treatment. This is also the case with Iran’s participation in the Global System of Trade Preferences amongst Developing Countries. Further, goods from Belarus, Bosnia and Herzegovina as well as Syria may be given preferential treatment, another factor to take into consideration when entering the market.91 Given most recent data available it would seem that ECO members in terms of Food & Beverage exports to Iran are not so far behind the EU-28, especially given the difference in total number of countries, as well as the fact that below trade data was not available for three ECO member countries. However, it has to be noted that EU-28 data from 2012-2014 was substantially higher than ECO in Food & Beverages, and ECO over the period shown has a downward trend in terms of exports to Iran in this category.

Figure 18 Exports from ECO members and EU-28, over time, of Food & Beverage to Iran

$1,600,000,000

$1,400,000,000

$1,200,000,000

$1,000,000,000

$800,000,000 EU-28

$600,000,000 Trade value (USD) value Trade $400,000,000 ECO $200,000,000

$0 2012 2013 2014 2015 2016

91 European Commission. “Overview of Import Procedures”. European Commission Trade Database, May 2017, available at: http://madb.europa.eu/madb/viewPageIFPubli.htm?doc=overview&hscode=2200&countryid=IR#kap58 92 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

54 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages

Market snapshots Beverages

Strengths Weaknesses •Second largest soft drink retail •Iran is not part of the WTO market in the Middle East •Weak supply chain and low •Highly educated population, retail modernization with increasing Purchasing Power •Iranians' adoption of western modern life make European brands strong competitors on the market

Opportunities Threats •Post sanctions Iran is a market •Strong competition from local of eager consumers looking brands for new alternatives and •Iranian government policies products are highly protectionist •Iranian consumers are very •Foreign products face high health conscious and prefer level of tariffs natural or low sugar products

Consumption Iran is the second largest retail market for soft drinks in the Middle East, with value sales of EUR 2.45 billion in 2015, retail value sales are expected to grow 30 per cent CAGR from 2015-2020.93 Iranian soft drink consumption is largely dominated by carbonated drinks, however increasing health awareness and negative publicity have affected Iranian preferences in this category of beverage, the population generally is switching to healthier options like fruit juice, concentrates and alcohol-free beers. 4.1.1.1 Carbonated Drinks Eating out is considered a leisure activity, where there is an opportunity to socialise. A growing middle class and the modernization and Westernization of the Iranian traditional lifestyle have driven Iranian families to switch from

93 Bourse and Bazaar. “Arab Business in Iran: Looking Beyond Regional Rivalry”. June 2015, available at: http://www.bourseandbazaar.com/articles/2015/6/18/arab-business-in-iran-looking-beyond-regional-rivalry

55 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages eating at home to restaurants. Increasing demand for restaurants, especially fast food restaurants, has boosted growth of carbonated drinks consumption. Carbonated drinks account for a sizeable share of volume sales of soft drinks 94 in Iran.

Figure 19) Carbonated Drinks often Positioned In spite of this, carbonated drinks in Refrigerated Display in Combination with demand has grown at a slower Other Products to Appeal to Convenience- pace compared to other drinks oriented Consumers categories. Increasing concerns regarding health and wellness in Iranian society, as well as lack of innovation and diversification of the carbonated drinks offer, has driven consumers to switch to other types of drinks, including doogh (a local yoghurt-based beverage) and non-alcohol beer. Pepsi, Coca-Cola, and cola variants such as the domestic brand Zamzam, considered the Muslim alternative to American branded colas, are the main carbonated colas consumed by Iranians. Consumers pair soft drinks with meat- heavy meals as it is said the drink helps with digestion. The host at most dinner parties offer guests a choice between what are colloquially referred to as ‘black’” versus ‘orange’ or ‘kanada’ soft drink, the former referring to any orange-coloured fizzy soft drink. Parents tend to tell their kids not to consume soft drinks on an empty stomach, and soft drinks and other carbonated drinks are rarely consumed between meals. Considered a healthier alternative, low-calorie cola and ‘diet colas’ sales have been increasing, also responding to consumer´s health awareness.

4.1.1.2 Bottled Water Each Iranian consumes 15-20 litres of bottled water per year on average, considerably low compared with other countries in the region.95 There are growing opportunities for increased sales in these categories in the upcoming years.96 Even though most Iranians feel that it is safe to consume tap water,

94 How to invest in Iran. “Soft drinks Market”. November 2015, available at: http://www.howtoinvestiniran.com/soft-drinks-market/

96 Financial Tribune. “Bottled Water Consumption in Iran Meager”. June 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/65908/bottled-water-consumption-in- iran-meager

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Iran has experienced an extreme water crisis in the last few years. Population surge, water administration and agricultural policies, insufficient rainfall and the country´s climate conditions all threaten Iran´s water supply.97 In the following years, as the economy improves, the Iranian government will continue to struggle to improve the quality of water. As a consequence, Iranian’s are more likely to rely on imported bottled drinking water. Consumers already drink bottled water both at home and when they are out and about. In the past, Iranians would boil water to sanitize it and then keep it in the fridge. Bottled water offers a convenient alternative. Single-serve water bottles are growing in popularity. The link between drinking greater quantities of water and weight loss has become well-known amongst younger health-conscious Iranians. 4.1.1.3 Non- Alcoholic Beer Since the Iranian Revolution in 1979, alcohol production, possession and consumption is illegal and punishable in Iran. Only minorities are allowed to consume and produce alcohol, but not to commercialize it. However, non-alcoholic beer consumption has grown significantly. The law has given non-alcoholic beer a significant chance to be preferred by Iranian consumers. This is because drinking beer, even the non-alcoholic variety, offers a glamorous image and appeals to a popular desire for a global lifestyle. The Middle East accounts for one third of global consumption of Alcohol–free beer. In 2012 Iranians drank nearly four times as much non-alcoholic beer as they did in 2007.98 As a consequence, this product category has considerable market potential for EU producers. Producers have also attracted consumers with a diverse range of products in assorted flavours and packaging formats, an important factor which helps to explain the rapid development of per capita consumption. Non-alcoholic beer is also considered a healthy alternative to carbonated drinks. 4.1.1.4 Fruit Juice Consumption of Juice has been affected by high inflation. In response, producers have been diversifying their product ranges to more affordable options.The Juice sector is largely dominated by domestic manufacturers, including Alifard Co and Takdaneh Co. Production depends largely on imports of concentrates, as the country´s supply is not enough for required production. Local brands have maintained a significant market share, due to their low domestic production costs, local market knowledge, and product diversification, as well as their launching of affordable products for low income

97 The Media Express. “How Serious is Water Crisis in Iran?”. April 2017, available at: https://themediaexpress.com/2017/04/15/how-serious-is-water-crisis-in-iran/

98 How to Invest in Iran. “Non-alcoholic Beer Market in Iran”. November 2015, available at: http://www.howtoinvestiniran.com/non-alcoholic-beer-market-in-iran/

57 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages consumers. Iran has the capacity to produce most fruit juices and concentrates locally, except for exotic fruits and flavours, however current imports are sizeable and growing.99 Iranians enjoy drinking fruit juice but rarely drink it during breakfast or other meals. Fresh fruit juices are typically consumed in the afternoon between lunch and dinner, and in the evenings. In the hot summer months Iranians drink Sharbat, a mix of cooked sugar and water and a sweet fruit, to cool down. Tehran is packed with fruit juice stands that are always bustling during the afternoons and evenings. Pomegranate juice is a top seller among locals.

4.1.1.5 Energy Drinks Energy drinks have been hit by higher taxes, which will affect growth for this drinks category. Figure 20 Energy Drinks and Carbonated Drinks in Tehran Preferred mainly by the Supermarket young, energy drinks have continued to gain popularity among people aged between 15 and 31 for their high sugar and caffeine levels. Red Bull leads the energy drinks market. Energy drink brands use marketing campaigns to seduce and communicate with their young customers. Most of these campaigns involve Western and Iranian sport stars, and a fancy lifestyle with which the young population identify. 4.1.1.6 Challenges for EU products

The United Arab Emirates and other Middle Eastern countries are Iran’s key trade partners, and will be the greatest beneficiaries of Iran’s economic development once the country enters into a new sanctions-free era. High inflation and increasing price levels have reduced consumer purchasing power, affecting their preferences. In 2013, the inflation rate reached 34.7 per cent, its highest level in the last 10 years.100 Inflation in 2016 was 8.8 per cent,

99 International Trade Center. “Fruit Juice More Profitable Than Oil for Iran”. March 2016, available at: http://www.intracen.org/blog/fruit-juice-more-profitable-than-oil-for-iran/

58 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages falling below 10 per cent for the first time in a quarter of a century due to a less accommodating monetary policy.101 Poor supply chain management and infrastructure represents an obstacle for delivering products to final consumers.102 Offer 4.1.2.1 Domestic Offer Iranian production capacity of fruit juice is estimated to be between 130,000 and 140,000 tons, in spite of this total production stands at 60,000 tons. Packaging is imported from countries like Switzerland, France and Italy, however, local companies are starting to meet the needs of the industry and even export packaging machinery to other countries in the region. Producers also point out that the lack of a proper supply chain has affected sales and production of fruit beverages.103 4.1.2.2 Imports

Figure 21 Juice - % of value of imports to Iran in 2016, by country of origin

Italy Netherlands Germany Ireland 3% 3% 2% 2% United Kingdom 8% Thailand 34% Oman 8%

Brazil 12%

Spain Kuwait 15% 13% © ITC Trade Map104 Iran is an observer member of the WTO, therefore the Iranian government has overall control over the country´s trade policy. Importers must register with the Ministry of Economic Affairs and Finance for customs duty and tax

101 World Bank. “Iran Overview”. April 2017, available at: http://worldbank.org/en/country/iran/overview 102 Iran Meat International Exhibition. “Food Industry in Iran”. Iran Meat Exhibition Report, 2017, available at: http://www.iranmeatex.com/en/content/food-industry-iran 103 International Trade Center. “Fruit Juice More Profitable Than Oil for Iran”. March 2016, available at: http://www.intracen.org/blog/fruit-juice-more-profitable-than-oil-for-iran/ 104 Trade Map, International Trade Centre, www.trademap.org. Product: 2009 Fruit juices, incl. grape must, and vegetable juices, unfermented, not containing added spirit.

59 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages payments and must also register online with the Trade Promotion Organization of Iran. Foodstuffs are classified as conditional or restricted goods105, and require a license or authorization to be imported to Iran. Food importers are required to comply with standards specified by ISRI (Institute of Standards and Industrial Research of Iran), and must also register at the Ministry of Health. In addition, there is a tax or surcharge, equivalent to 10 per cent of the cost of transporting goods imported into Iran, when shipping is not carried out on an Iranian flag line, i.e. vessels belonging to the Iranian Republic Shipping Line (IRSL). The average tariff applied by Iran for imports of Fruit Juices is 61 per cent.106 Companies like Alifard export to markets like Saudi Arabia, the United States and EU.

Figure 22 Juice - % value exported to Iran in 2016, by country of origin

3% 2% Russian Federation 3% 4% Germany 4% Austria 34% Turkey 5% Kuwait Korea, Republic of 7% Netherlands Japan 7% Malaysia India 11% Canada 20%

© ITC Trade Map107 4.1.2.3 EU GI Products and labelling Iran is party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. Iranian food standards are based mainly on Codex Alimentarius regulations and to some extent on European and U.S. standards, but modified to reflect

105 Iranian customs regulations distinguish 3 categories of goods in terms of import procedures: 1. Permissible goods: Licenced or approved provided import criteria are met. 2. Conditional or restricted goods: require a licence or authorisation such as foodstuffs and telecommunications equipment prohibited goods which are forbidden under Islamic Sharia law or other Iranian law, for example alcoholic drinks. 3. Restricted and conditioned: can also apply to imports that are similar to locally manufactured goods. 106 Trade Map, International Trade Centre, www.trademap.org. 107 Ibid, www.trademap.org. Specific product is: 2009 Fruit juices, incl. grape must, and vegetable juices, unfermented, not containing added spirits.

60 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Beverages local conditions. The Food and Drugs Administration (FDA), an agency of the Ministry of Health, is the authority in charge of granting labelling and certifications to food products in Iran. Currently the Iranian government aims to implement the “Food Traffic Light plan”, as part of their health policy, in order to help consumers make healthier choices with regards to the amounts of unhealthy substances in food items.108 Distribution 4.1.3.1 Non Alcoholic Beer Total supply and consumption of non-alcoholic beer has been on the rise since 2012. Per capita consumption of this product was around 5.5 litres in 2014, and is expected to reach 10 litres in 2021.109 Popular brands include Delster, produced by State-owned and market leader Iran Behnoush Company, which dominates sales of non-alcoholic beer in Iran. The company engages in the production, marketing, and export of beer, soft drinks, fruit juices, and other beverages in Iran. Other producers include Arpanoosh Industrial Co., a company founded in 2002 and based in Tehran, which manufactures and markets non-alcoholic malt beverages under the brand Istak, Global giants, including Carlsberg’s Moussy are also sold in Iran. Sweet and fruity flavours are increasingly popular among younger Iranians. 4.1.3.2 Carbonated Drinks Khoshgovar Mashhad Co, Coca-Cola Co’s subsidiary, is the market leader for carbonated drinks. Rapid expansion of on-trade outlets, especially fast food restaurants, has boosted carbonated drinks consumption. However, cola consumption growth is being affected by a lack of product innovation and rising concerns regarding health and wellness. Low-calorie cola, perceived to be healthier, is the most popular category within cola carbonates and also had the strongest off-trade volume growth rate in 2016. Iranians consumed 9.2 billion liters of carbonated drinks in 2015, with an average of 42 liters per person per year,110 mainly through off-trade channels, from traditional grocery retailers, supermarkets and hypermarkets.

108 Tehran Times. “Traffic light’ labels to guide Iranians toward healthier food”. May 2017, available at: http://www.tehrantimes.com/news/413178/Traffic-light-labels-to-guide-Iranians-toward-healthier-food 109 How to Invest in Iran. “Non-alcoholic beer market in Iran”. November 2015, available at: http://www.howtoinvestiniran.com/non-alcoholic-beer-market-in-iran/ 110 Financial Tribune. “Iranians Top Guzzlers of Carbonated Drinks”. November 2015, available at: https://financialtribune.com/articles/people/30309/iranians-top-guzzlers-of-carbonated-drinks

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4.1.3.3 Fruit Juice Juice production is led by four key suppliers. Local producer Alifard Co leads the juice market, with its Sunich and Sherissa brands. Alifard uses its own distribution company, Sayesaman, to reach the majority of the population in Iran. Juice producers are completely dependent on high volumes of concentrate imports, as the domestic production of concentrates is not enough to cover the domestic demand. Popular juice flavours include orange, as the best-selling product, pineapple, mango, grape and cherry. Lack of diversification and a desire for a healthier lifestyle have driven Iranian consumers to switch to this category. Manufacturers have shifted their strategy towards developing more natural products, as consumers are increasingly aware of the side effects of preservatives, and are eager to consume products with little or no risk for their health. 4.1.3.4 Mapping On-trade Sector Restaurants and fast food chains are growing rapidly to satisfy demand of Iranian families, currently there are an estimated 20,000 fast food branches.111 It is estimated that Iranian families spend an average of 265.5 USD (241.3 EUR) per family eating in restaurants and fast food chains.112 Tourism is an important activity for Iran’s economy, and plays a major role in the development of on-sector outlets. In 2014, the tourism industry contribuned with 6.3 per cent of total GDP, and by 2025, this contribution is expected to grow to 7.8 per cent.113 Iran’s tourism industry has been growing rapidly following the lifting of economic sanctions. According to Iran’s Cultural heritage Handicrafts and tourism Organization, the country is expected to receive up to 20 million visitors by 2025.114 Summary Increased health consciousness amongst consumers creates opportunities for products branded with natural, organic and low sugar labels. Consumers’ eagerness to adopt Western customs and to have access to diverse and new products will create opportunities for European products to participate in the

111 Bourse and Bazaar. “Telepizza's Arrival in Iran Shows Supersized Ambition”. July 2016, available at: http://www.bourseandbazaar.com/articles/2017/7/1/telepizza-arrival-in-iran-shows-supersized-ambition 112 Financial Tribune. “Fast Food Industry in Iran”. July 2016, available at: https://financialtribune.com/articles/economy-business-and-markets/45173/fast-food-industry-in-iran 113 Iran Tourism News. “Iran international tourist arrivals to rise by almost 12% in 2017”. 2017, available at: http://irantourismnews.com/iran-international-tourist-arrivals-to-rise-by-almost-12-in-2017/ 114 Financial Tribune. “Iran's 2025 Tourism Target Elusive”. April 2017, available at: https://financialtribune.com/articles/travel/61770/irans-2025-tourism-target-elusive

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Products with Geographical Indications

Strengths Weaknesses • Iran is party to the Lisbon • Legal awareness and Agreement and thus offers enforcement of laws to protection to GIs registered protect GIs are still relatively with WIPO low in Iran •Iranians are increasingly looking •Low consumer awareness on to buy European quality GIs products • Majority of Iran's populations belongs to lower middle class

Opportunities Threats • Persisting economic stagnation • Rising awarenss of GIs could reduce consumers' could lead to increased willingness to buy high-priced GI consumption products •Good marketing campaigns •GI products could ‘get lost’ could lead to rising amongst other European quality awareness of GIs and to products, unless they are well consumers' increased marketed willingness to buy these products

Consumption Iran is a party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration, through which it offers protection to a good number of European products with GI status that are sold in Iranian supermarkets. Even though the country itself has several products that are protected with GI status, the products with PDO/PGI and TSG status are still not very well-known amongst Iranian consumers.115 As these labels are not very well-known, the consumers are also not very well educated about the value and benefits of the products with geographical indications. The consumers might not immediately recognize the European PDO/PGI or TSG labels and might not automatically associate these labels with premium

115 Therani and Manap. “Urgency and Benefits of Protecting Iranian Carpets using Geographical Indications”. Journal of Intellectual Property Rights, July 2012, pp. 72 – 82, available at: http://nopr.niscair.res.in/bitstream/123456789/15736/1/JIPR%2018%281%29%2072-82.pdf

64 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications quality. It could therefore be quite difficult to market products with GI status in Iran by only relying on the marketing power of the PDO/PGI or TSG label. At the same time, as more Western products continue to enter Iran as sanctions against Iran are being lifted, Iranian consumers are getting more and more used to European products and also to European quality products. Thus, good marketing based on the quality of the PDO/PGI and TSG label could help to raise consumer awareness of products with GI status, which in turn could lead to increased consumer willingness to buy products with GI status. Furthermore, the Iranian government is also in the process of strengthening the laws and regulations on the protection of products with GI status, thus further raising peoples’ awareness of products with GI status.116 4.2.1.1 Consumer profiles and trends The gradual lifting of some sanctions on Iran has led to greater availability of foreign products on the country’s market. As more sanctions are expected to be lifted, Iranian consumers are looking forward to buying more foreign food and beverage brands. Many Iranian consumers indicate that they are interested in buying imported products, which most believe offer better quality. In addition, in general, Western products (products from Europe and the United States) are perceived to have high quality by Iranian consumers.

Figure 23 European GI Products Sold in Furthermore, Iranian consumers Tehran Supermarket value the quality of products. Studies reveal that even though the purchasing power of the majority of people decreased in the eight years of the Mahmoud Ahmadinejad regime, Iran still has a demanding society when it comes to luxury brands and quality products and services. Many luxury malls selling luxury products and high-quality products and have opened in Tehran and other Iranian cities in recent years, and most of them are fully packed on weekends.117 Due to growing access of young Iranians to global trends and lifestyles through the internet and especially through social media, Iranians are becoming more and more brand-conscious shoppers who prefer quality products.118 This can potentially be advantageous for the European producers of products with GI status as the products are generally perceived to be of high

116 Therani and Manap. “Urgency and Benefits of Protecting Iranian Carpets using Geographical Indications”. Journal of Intellectual Property Rights, July 2012, pp. 72 – 82, available at: http://nopr.niscair.res.in/bitstream/123456789/15736/1/JIPR%2018%281%29%2072-82.pdf 117 M&M Global. “A guide to Iran’s marketing opportunities, ‘stylish’ consumers and burgeoning media scene”. Journal of Intellectual Property Rights, September 2016, available at: http://mandmglobal.com/a- guide-to-irans-market-opportunities-stylish-consumers-and-burgeoning-media-scene/ 118 Luxury Society. “The Promise of Iran”. June 2017, available at: https://luxurysociety.com/en/articles/2017/01/promise-iran/

65 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications quality and the GI label is considered to be the proof of this. Thus, as the Iranians are interested in high quality products, there could be a promising market in Iran for European products with GI status. At the same time, as consumers are not educated about GI products and as they might not know the added value that these products have, then products with GI status may run the risk of ‘getting lost’ amongst the flood of Western products entering Iran. These brands would likely need to compete with their non-GI counterparts that are also by default considered as quality products as consumers perceive the majority of Western products to be of high quality to begin with. Despite the above, consumers in Iran are looking forward to buying more Western high-quality products. However, the majority of the Iranian consumer base is currently not able to afford European high-priced products with GI status. For the past 10 years, Iran has had an unequal income distribution, which has led to the predominance of lower social classes meaning a large proportion of the population is trapped in a low-income status.119 The lowest- income class will need to sacrifice the quality to price considerations and would thus not be able to afford high-priced European premium products. Furthermore, the higher price of European product with GI status is not only a concern for the lowest-income classes, but also for the middle and upper middle classes. High inflation (inflation about 40%) during the term of Mahmoud Ahmadinejad increased the price of imported consumer goods as well as domestic consumer goods, which eventually reduced consumers’ purchasing power in Iran. This meant that foreign products became increasingly not affordable for many people including people from the lower and upper middle class. As an end result, consumers became generally more price-sensitive. This means that the majority of Iranian consumers are still very price-sensitive and willing to sacrifice the quality of the product to cheaper price. The fact that imported premium products tend to be expensive for Iranian consumers and that consumers in Iran are quite price-sensitive means that European products with GI status can expect some challenges when entering Iran’s market. At the same time, there are reasons to be optimistic. According to Danish market research Iranian GDP is expected to increase further, reaching 5.4 per cent in 2017 and 5.9 per cent in 2018 as the country is slowly coming out of recession. According to the study this positive development in the Iranian economy is then expected to contribune to a general increase in food consumption and demand, as it is likely to increase living standards for the gradually growing middle class in Iran, raise purchasing power, restore consumer confidence and possibly reduce unemployment. This is then

119 World Bank. “Iran Economic Monitor”. Global Practice for Macroeconomics & Fiscal Management MENA Region, Fall 2016, available at: http://documents.worldbank.org/curated/en/741891483046725613/pdf/111462-WP-P162048-PUBLIC- IranEcoMonitor-12-22-2016.pdf

66 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications expected to raise the demand for more expensive and specialized food products.120 This could potentially be good news for the European producers of products with GI status, as these products are likely to be more expensive on Iran’s market. 4.2.1.2 Cultural sensitivities When European companies are planning to export their products with GI status to Iran, there are a few cultural sensitivities to take into account. For religious reasons (to be in accordance with the Islamic laws), Iran bans imports of alcoholic beverages, live swine, pork, and foodstuff ingredients or additives that contain pork products, including pork fat, and gelatine.121 Thus, European PDO/PGI labelled products falling into these categories cannot be exported into Iran. Furthermore, according to Iranian export-import regulations, the importation of products, which are prepared form the meat of religiously banned animals or of religiously allowed animals but slaughtered according to non-Islamic rules is prohibited.122 This means that animals used to produce any products need to be slaughtered according to Islamic religious rules, which means that slaughterhouses need to be certified by respected Islamic Certification Organizations. European PDO/PGI and TSG labelled products that do not meet these standards cannot be exported to Iran. 4.2.1.3 Challenges for EU products As mentioned above, Iranian consumers have very low awareness of products with GI status as Iranian producers currently only market a few products as products with GI status on the local market. Thus, consumers might not always know the added value that products with GI status have. Therefore, products with GI status may run the risk of ‘getting lost’ amongst the flood of Western products to Iran, once more sanctions are lifted, because these brands would need to compete with their non-GI counterparts that are also by default considered as quality products as consumers perceive the majority of Western products to be of high quality to begin with. The main challenge for European producers would thus be the creation of a marketing strategy that educates consumers about the added value of products with GI status. Another challenge for European producers has to do with Iranian governmental policies. According to Danish research, Iranian import duties on food are relatively high, and the duty is increasing as the level of food processing of the imported food is increasing. As an example, the import duty for ‘prepared

120 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 121 Islamic Republic of Iran Ministry of Industry, Mine and Trade. “Export-Import Regulations 2016”. Trade Promotion Organization of Iran, 2016, available at http://eng.tpo.ir/index.aspx?siteid=5&fkeyid=&siteid=5&pageid=24256 122 Ibid

67 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications meat’ is substantially higher than it is for ‘meat’ not already processed. Similarly, the import duty for butter or cheese packed in small packages (less than 500 g) is much higher, than the import duty for butter or cheese that is to be repackaged in Iran. According to the research, this is a system put in place in order to stimulate bulk import and encourage food processing, packing or repacking to take place locally in Iran.123 For some European producers of products with PDO/PGI and TSG label, it might be important to do the packaging in Europe and thus their products might become very expensive on the Iranian market and would experience difficulties in competing with the products that have been repackaged in Iran. Offer As Iran offers protection to geographical indications, there are several local products with GI status available in Iran’s market. With the lifting of the sanctions, many European products with GI status also became available in Iran’s market. 4.2.2.1 Domestic offer Iran produces domestically several products with GI Figure 24 Pomegranate status. Most well-known are perhaps Iranian carpets, of Saveh © which have also been registered under the Lisbon Agreement with the World Intellectual Property Organization (WIPO). From food and beverage products, the most famous Iranian products with GI status are Anar de Saveh or Pomegranate of Saveh and Khorma e Mazafati de Bam or Mazafati date of Bam, which are also protected under the Lisbon 124 Agreement. The pomegranate of Saveh (pictured125) originates from the Saveh province of Iran and this variety of pomegranate tree produces an abundance of large, deep red fruit with very big juicy arils and soft seeds. The flavour of the fruit is sweet and tart with a great balance of sugar to acidity, and the skin rarely cracks. Iran is also the largest producer of pomegranate in the world with annual output of more than 1 million tons of pomegranate. The lion’s share of this production comes from the Saveh region, which is protected by geographical indications.126

123 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 124 World Intellectual Propertu Organization. “The Lisbon System: International Protection for Identifiers if Typical Products from a Defined Geographical Area”. Available at: http://www.wipo.int/edocs/pubdocs/en/geographical/942/wipo_pub_942.pdf 125 Image obtained from Pixabay, available at: https://pixabay.com/en/pomegranate-fruit-tropics-exotic- 2103105/ :; Copyright © 126 Islamic Republic News Agency. “Iran Known as the World’s largest Producer of Pomegranates”. December 2015, available at: http://www8.irna.ir/en/News/81876021/

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Another product with GI status, Mazafati dates from the Bam region, are one of the many different kinds of Iranian date fruits. This kind of Date, due to high moisture content, is not used as nuts. The date has an attractive black colour, its moisture depends on harvest time its size is between1.25 to 2.5.127 The Bam region has around 28,000 hectares of lands dedicated to this Date and 120,000 tons of the Date is harvested from the land annually.128 Albeit not registered under the Lisbon Agreement, another popular Iranian product with local GI status is the Iranian 129 Saffron from Khorasan (pictured . Its Figure 25 Iranian Saffron from superiority also comes from a rich heritage of Khorasan © indigenous knowledge and skills in growing the crop. Therefore, the technology of producing and processing saffron and even its uses have been shaped according to the indigenous knowledge of saffron growing areas. Iran is also the world’s largest producer of saffron and according to the governor of the Khorasan province, the province produces the lion’s share of Iranian saffron, amounting to over 170 tons annually. 130 4.2.2.2 Import Currently Iran imports many products with geographical indication status, including products from the European Union Member states. Cheese holds the largest share of imports into Iran amongst the products with GI status as many European cheeses enjoy GI protection in Iran due to being internationally registered under the Lisbon Agreement.131 4.2.2.3 Export Iran exports many of its products with GI status, as it is the largest producer of pomegranates and saffron and a major producer of dates. For example Iran exports annually about 10,000 metric tons of pomegranates, the main markets being China, the Persian Gulf Arab states and Europe.132 In Europe, the biggest receivers of Iranian pomegranates are Germany, the UK, Sweden and

127 Date Fruit. “Mazafati Date”. Available at: http://www.datefruit.ir/mazafati-date 128 Ibid 129 Author: Safa Daneshvar, Image obtained from Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Saffron-IMG_6640-2.jpg ; Copyright © 130 “Rural Development and Agrifood Product Quality Linked to Geographical Origin in Asia”, 2009 available at: http://www.fao.org/fileadmin/templates/olq/documents/Bangkok/ProceedingsQualityoriginAsiaFinal.pdf 131 World Intellectual Propertu Organization. “The Lisbon System: International Protection for Identifiers if Typical Products from a Defined Geographical Area”. Available at: http://www.wipo.int/edocs/pubdocs/en/geographical/942/wipo_pub_942.pdf 132 Islamic Republic News Agency. “Iran Known as the World’s largest Producer of Pomegranates”. December 2015, available at: http://www8.irna.ir/en/News/81876021/

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Switzerland.133 The majority of production comes from the Saveh region, and large amounts of these products with GI status will also end up on international markets, including in Europe. Similar to pomegranates, Iran is a major exporter of its GI status dates. It is estimated that Mazafati Date of Bam enjoys per cent of the nation's total export of ِ ِ Dates, with the products being 20 exported to all over the world including UAE, Iraq, India, Russia, Ukraine, Pakistan, Europe (UK, Sweden, Norway, Denmark and Germany), and other countries.134 According to the ITC trade map, Iran exports about 130,000 tons of dates annually.135 4.2.2.4 Focus on PDO, PGI, TSG and Organic Label Iran has currently a functioning system of GI protection that the Government is planning to make more effective. Iran is currently however, not party to the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, which would grant world-wide protection to its own GI products. The GI products are currently protected through domestic laws and through major international laws. The Act for Protection of Geographical Indications (2005) has in fact created a system that allows the registration of products with GI status and there are already quite a lot of Iranian products registered as GIs.136 However, there are as yet no European products registered as GIs in Iran. On the other hand, Iran is also party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. The Lisbon Agreement was specifically concluded in response to the need for an international system that would facilitate the protection of a special category of geographical indications, or “appellations of origin”, in countries other than the country of origin, by means of their registration with WIPO through a single procedure, for a minimum of formalities and expense.137 According to the Lisbon Agreement, Iran has committed itself to protecting around a hundred European products with GI status. Most of these products belong to the cheese category. For an overview of the European products with GI status protected under the Lisbon Agreement and not refused by Iran, please see Annex I.

133 Financial Tribune. “Pomegranate Exports Earn $3.8 Million”. February 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/59074/pomegranate-exports-earn-38- million 134 Date Fruit. “Mazafati Date”. Available at: http://www.datefruit.ir/mazafati-date 135 Trade Map, International Trade Centre, available at: www.trademap.org. 136 World Intellectual Property Organization. “Country Profile: Islamic Republic of Iran”. 2017, available at: http://www.wipo.int/directory/en/details.jsp?country_code=IR 137 World Intellectual Property Organization. “The Lisbon System: International Protection for Identifiers if Typical Products from a Defined Geographical Area”. Available at: http://www.wipo.int/edocs/pubdocs/en/geographical/942/wipo_pub_942.pdf

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Table 12) National Legal Framework for the Protection of GIs in Iran

National Legal Framework for the Protection of GIs in Iran

Relevant Act for Protection of Geographical Indications (2005) Regulatory Framework An International registration of foreign GIs through the Lisbon Agreement is possible under the following conditions: 1. The GI must come from a State signatory of the Lisbon Agreement; 2. This International registration will only have effect in the countries signatories of the Lisbon Agreement

Type of Protection of Geographical Indications (a collective Protection trademark, only collective accusations could apply)

Scope of Applicable to goods (agricultural and/or industrial) and/or Legislation services. Geographical indications for alcoholic beverages and pork products, as well as retail and wholesale service, are excluded.

Source The English version of the Law is available on the WIPO website here

Relevant Act for Protection of Geographical Indications (2005) Articles in the National Law Article I “Geographical Indication” means an indication that identifies a good as originating in the territory, a region or locality of the country, provided that the quality, reputation or other characteristics of the good is essentially attributable to its geographical origin. Article III A geographical indication shall be protected regardless of whether it has been registered or not. It shall be protected if it fulfills the conditions set forth in Article 1(A) above, and in the proceedings initiated under this Act, where the geographical indication has been registered, it shall raise the legal assumption that such an indication is a geographical indication within the meaning as prescribed in Article 1(A)

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Article V The following geographical indications shall not be protected: A- Indications that do not correspond to the definition in Article 1(A). B- Indications which are contrary to the principals of Sharia, public order or morality. C- Indications that are not protected in their country of origin or their protection has been ceased or indications that have fallen into disuse in their country of origin within the framework of the conventions to which Iran has acceded Article VII The application for registration of a geographical indication shall be filed by the following persons with the Organization for Registration of Deeds and Estates. A- Any natural person or legal entity or groups of such persons or entities who are engaged in the production of the goods indicated in the application in the geographical area specified in the application. B- Any competent authority in production, distribution or policymaking for the goods being registered. Article VIII Article 8- The following items shall be specified in the application: A- Name, address and nationality and the legal capacity of the applicant. B- The geographical indication registration of which is applied for. C- The geographical area to which the geographical indication relates. D- The goods the geographical indication relates to. E- The quality, reputation or other characteristics of the goods for which the geographical indication is used. Note: The applicant shall pay the prescribed application fees. Article IX Manner and stages of filing the application is as follows: A) The Organization for Registration of Deeds and Estates shall examine the application to determine if it complies with the requirements of Articles 5(B), 7 and 8 and the Regulations pertaining thereto and then shall proceed with its publication provided that it fulfils the required conditions. B) Where the provisions of paragraph (A) above are not fulfilled, the interested party or competent authority may, in line with the Regulations of the present Act, submit his opposition to the application for registration of the

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geographical indication to the Organization for Registration of Deeds and Estates. C) The Organization for Registration of Deeds and Estates shall notify a copy of the opposition to the applicant. The applicant shall respond to the opposition within the prescribed period. Failure to send a response by the applicant within the prescribed period shall be considered as withdrawal of the application. D) If the applicant sends a counter –statement, the Organization for Registration of Deeds and Estates shall furnish a copy of the same to the person filing the opposition and, after hearing the parties, shall make a decision about the opposition. E) Where the Organization for Registration of Deeds and Estates finds that the conditions set forth in paragraph (A) are fulfilled, and no opposition has been filed against the application or the opposition has 6 been rejected, the said Organization shall register the geographical indication, publish a notice to that effect and shall issue to the applicant the certificate of registration.

WIPO138 In reality, even though the Law for Protection of Geographical Indications was adopted in 2005, enforcement of GI protection is still relatively weak in Iran. The enforcement of GI protection is weak mainly because of problems such as the lack of a national institution for submission Figure 26 Grana Podano Being and follow-up on applications, the lack of an Sold in Tehran Supermarket implementation system and certifier body, and a shortage in the required legal awareness, professional knowledge and financial capabilities in existing organizations.139 At the same time, there are a good number of European products with GI status available in Iran’s market as many of them are also protected under the Lisbon Agreement. Examples include Grana Podano Cheese (Italy),

138 World Intellectual Property Organization. “Country Profile: Islamic Republic of Iran”. 2017, available at: http://www.wipo.int/directory/en/details.jsp?country_code=IR 139 Source: Food and Agriculture Organisation of the United Nations, 2009, Rural Development and Agrifood Product Quality Linked to Geographical Origin in Asia, http://www.fao.org/fileadmin/templates/olq/documents/Bangkok/ProceedingsQualityoriginAsiaFinal.pdf, Reproduced with permission.

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Camembert de Normandie (France), Aceto Balsamico di Modena (Italy) and Pecorino Romano (Italy). For the whole list of European products with GI status protected under the Lisbon Agreement and not refused by Iran, please see Annex I. There is, however, no protection for geographical indications in Iran for wines and spirits, not even under the Lisbon Agreement, because alcoholic beverages are prohibited from being produced, sold, consumed, imported or exported in Iran, pursuant to Islamic Law. Despite this, there are many European alcoholic beverages registered under the Lisbon Agreement, Iran has legally refused to protect these GIs.140 4.2.2.4.1 Organic Label

According to German market research, knowledge of organic food in Iran is very superficial and the organic market in Iran is only slowly beginning to form, although "organic" products are relatively frequent in Iranian supermarkets and traditional markets due to natural production Figure 27 EU Organic methods.141 According to the same study, in some Products Sold in Tehran Supermarket areas, Iran has also been exporting certified organic products abroad, even to Europe, and among the producers of organic food in South Asia, Iran already occupies a considerable position today. The study further clarifies that Iranian organic livestock products mainly include fish, chicken and other poultry species and domestic markets are the main production and consumption centres of these products.142 According to German market research, with respect to Iranian dry fruits and vegetables, more than 40 per cent of saffron and barberries and up to 100 per cent of pomegranates are produced organically. The former Iranian Deputy Minister of Agriculture, Mohammed Ali Nikbakht, explained that Iranian agriculture has the potential to operate in several markets with their organic products. He further explained that about 20 per cent of meat and fisheries products and about 20 per cent of grain production come from organic production.143

140 World Intellectual Property Organization. “The Lisbon System: International Protection for Identifiers if Typical Products from a Defined Geographical Area”. Available at: http://www.wipo.int/edocs/pubdocs/en/geographical/942/wipo_pub_942.pdf 141 Bundesministerium fur Ernahrung und Landwirtschaft, “The Food Market in Iran ” [Der Lebensmittelmarkt im Iran], October 2016, available at https://agrarexportfoerderung.de/fileadmin/SITE_MASTER/content/files/Marktstudien/2016/Kurzstudie_L ebensmittel_Iran_COMMIT_Dezember2016_-_Internetdatei.pdf 142 Ibid 143 Ibid

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The German study further reveals that according to the Director General of the Office for Rural Cooperatives, there is as yet no integrated market for the supply of healthy and organic food. He sees the responsibility, especially in the private sector, which now has to create suitable shops for organic food to meet demand, which is mainly evident in the big cities.144 Organic food must also bear the organic label in Iran. An updated version of the "Requirement of production, processing, inspection & certification, labeling and marketing of organic food (INSO - 11000)" was published by the Institute of Standards and Industrial Research of Iran (ISIRI) in 2014, which deals with organic standards in Iran. In these standards, a list of permitted organic inputs was also included.145 The standards can be downloaded from the ISIRI website. 4.2.2.5 Mapping of Main Competitors For European products with GI status, the main competitors on the market are similar products with no GI status. These could be local products, similar to the European products with GI status or other European products that are similar but do not have GI status, since European products are already perceived as premium quality by Iranian consumers. Consumers, who are generally price-sensitive, are likely to prefer the lower priced European products with no GI status to the pricier European premium products awarded GI status. As Iranian consumers are considered price-sensitive, and as there are many non-GI counterparts of European products available in Iran’s market, European products with GI status could potentially run the risk of losing market share to some of their non-GI counterparts unless marketed properly. Additionally, the agriculture and food market in Iran is heavily regulated through subsidies for local producers, as well as having import quotas, import duties and lengthy license and approval processes which will also be challenges for European producers of GI products, especially packaged goods. Also, according to Danish market research, veterinary rules are used as practical trade barriers vis-à-vis imports. These factors also complicate access for international companies to the Iranian market.146

144 Bundesministerium fur Ernahrung und Landwirtschaft, “The Food Market in Iran ” [Der Lebensmittelmarkt im Iran], October 2016, available at https://agrarexportfoerderung.de/fileadmin/SITE_MASTER/content/files/Marktstudien/2016/Kurzstudie_L ebensmittel_Iran_COMMIT_Dezember2016_-_Internetdatei.pdf 145 International Society of Organic Agriculture Research. “Country report: Iran”. Available at: http://www.isofar.org/isofar/index.php/2-uncategorised/120-country-report-iran

146 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da

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4.2.2.6 Specific customs and SPS requirements European products with GI status would not face any different customs and SPS requirements than their non-GI counterparts. Customs and SPS requirements vary according to product. Any products containing alcohol or pork are forbidden from entering Iran. European producers of products with GI status should keep in mind that the Iranian government has also set import duties for each product entering the country. The duties vary from each product to the other. In case of foreign production, import duties are very high in order to support local manufacturers. The import duties change each year and are available in the Iran Import/Export regulation book.147 Companies should also keep in mind that engagement in exportation and importation activities for commercial purposes requires a commercial card to be issued by the Iran Chamber of Commerce, Industries and Mines and approved by the Ministry of Commerce. Moreover, importers are required to register their import orders with the Ministry of Commerce.148 The Iran export-import regulations are accessible also via the Iran Trade Promotion Organization website. Distribution European products with GI status are already sold in many supermarkets and smaller stores of the biggest cities in Iran. Products with GI status are also probably best sold in the bigger supermarkets and hypermarkets as these are the preferred retail outlets for younger consumers, who are eager to buy Western products. 4.2.3.1 Structure of the distribution Iranian agri-food distribution is quite fragmented and it involves quite many players. According to the Danish study, traditionally both cooperatives, individual farmers and ranchers do not have direct access to the retail market when they distribune their products. Instead, the produced food passes through several different distribution channels before finally reaching the retail buyers. The prices of many products also increase considerably due to inefficient distribution channels in which each dealer involved in the process charges relatively high sales commissions.149 This could also be the case with some international imports. According to the same Danish study, in Iran, food is generally distribuned via 1,202 refrigerated centres with a total capacity of approximately 2 million tons, 4,584 warehouses with a capacity of 8.7 million tons and 216 silos with a capacity of 8.4 million tons. According to the study,

147 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 148 Ibid 149 Ibid

76 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications a method to improve and increase the efficiency in the food distribution system in Iran would be to expand the Agricultural Commodities Exchange. The Agricultural Commodities Exchange currently distribunes twenty commodities, including sugar, saffron, corn, wheat, oil, rice, pistachios and barley.150 For European producers of products with GI status, it would be recommended to work with local distributors and buyers, as they generally have better knowledge of the local market and they could get the products to different retail outlets. In Iran, distribution of agricultural produce is largely done through agents or wholesale distributors. Distributors can supply to both modern and traditional retail outlets, depending on what the focus of the producer is.151 In Iran European producers could also work with wholesalers. Wholesalers normally supply large quantities of commodities to retailers, mainly in rural areas as well as to the food service industry restaurants.152 European producers of products with GI status are likely have limited cooperation with the wholesalers, as their quantities tend to be smaller and many focus on selling already packaged goods. For European producers of products with GI status, it could also be desirable to work together with importers. Importers generally purchase goods from foreign countries and supply these then to distributors. Key food products that are most often imported through importers include meat and wheat.153 Iranian distribution network covers different types of players. Importers, wholesalers, distributors and retailers are interconnected in a fragmented industry dominated by bazaars which are marketplaces located in almost every city in Iran. In these bazaars, individual retailers bauy their products from a few wholesalers.154 Currently, Iran still has a very traditional retail environment with strong dominance of traditional grocery outlets which account for almost 90 per cent of sales in in the food and beverages sector. However, the process of conversion to modern channels started since 2008 with the launch of Carrefour supermarket chain in Iranian market. This process has been very slow and the main reason for this has been the sanctions in place against the country.155 At the same time, with the removal of sanctions, rapid growth of Carrefour and entry of other modern retailing giants has been slowly occurring and this has

150 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 151 Italian Trade Agency. “Market Overview of Iran’s Agricultural Food Sector”. ICE, January 2016. 152 Ibid 153 Ibid 154 Financial Tribune. “Beating the Bazaar: Retailing in Iran’s Consumer Market”. March 2016, available at https://financialtribune.com/articles/economy-domestic-economy/37730/beating-the-bazaar-retailing-in- iran-s-consumer-market 155 Industry Sourcing. “Iran’s food and beverage market”. November 2016, available at http://www.industrysourcing.com/article/iran%E2%80%99s-food-and-beverage-market

77 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications led to more popularity of hypermarkets at the expense of the loss of independent small groceries. This has much more benefit for multinational brands as modern channels give them better opportunity to increase visibility and brand awareness. Usually, domestic brands are not very strong in using space and opportunity in modern channels and multinationals use this chance more efficiently due to their better experience.156 This means that European producers of products with GI status could have their best chances to market their products in big supermarkets and hypermarkets. At the same time the majority of Iranian consumers still shop at the bazaars or traditional smaller shops for their groceries. Similarly, to many other emerging markets, Iran’s e-commerce sector is quickly gaining popularity, the young population is technologically more sophisticated and the penetration of internet is increasing. At the same time e-commerce in the food and beverage sector is still negligible. 4.2.3.2 Mapping on and off Sector There are about 1,149 hotels, guest houses and other accommodation facilities in Iran that also offer food services. There are also estimated to be about 30,000 restaurants, cafes, and other relevant places in the cities of the country. In addition, there are 3,162 restaurants and venues outside of cities supported by the Cultural Heritage, Handcrafts and Tourism Organization. However, other official bodies, which work without permission, must also be added to these official figures. Currently however there is no reliable data on this.157 According to German market research, the HoReCa sector is similar to small and medium-sized foodstuffs. Hotels, restaurants and cafés either buy from small, regional wholesalers or they supply directly through a distribution company.158 4.2.3.3 Challenges for EU products As mentioned above, Iran has a very fragmented distribution network and succeeding in Iran really comes down to finding a good partner in the country to work with. Furthermore, issues like the amount of red tape involved might make it little more challenging to find good partners.159 Also, the fact that relationships and partnerships matter a lot in Iran’s business environment,

156 Industry Sourcing. “Iran’s food and beverage market”. November 2016, available at http://www.industrysourcing.com/article/iran%E2%80%99s-food-and-beverage-market 157 Bundesministerium fur Ernahrung und Landwirtschaft, “The Food Market in Iran ” [Der Lebensmittelmarkt im Iran], October 2016, available at https://agrarexportfoerderung.de/fileadmin/SITE_MASTER/content/files/Marktstudien/2016/Kurzstudie_L ebensmittel_Iran_COMMIT_Dezember2016_-_Internetdatei.pdf 158 Ibid 159 The Swedish Trade and Invest Council. “A new dawn for Swedish Business in Iran”. Business Sweden, 2016, available at: http://www.business-sweden.se/globalassets/business-sweden---a-new-dawn-for- swedish-business-in-iran.pdf

78 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Products with Geographical Indications might make it difficult for smaller European companies with more limited budgets to do business in Iran’s market. Summary Even though Iran has functioning laws on protection of geographical indications and the country is party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration, the concept of geographical indications is still not very well-known amongst Iranian consumers. When consumers make their purchasing decisions, they are interested in the quality of the product, however they might not yet associate the PDO/PGI and TSG labels with superior quality. To most consumers European products are of higher quality than local products or products from many other countries and thus they may fail to see the added value of the PDO/PGI and TSG label. Furthermore, Iran’s market is still relatively price- sensitive, which means that many consumers might not be able to afford European premium products with GI status. At the same time, as Iran is also promoting its own products with GI status, consumer awareness of GIs is likely to rise. The European producers of products with GI status should focus on appropriate marketing strategies in order to raise consumer awareness of their superior products.

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Fresh meat

Strengths Weaknesses

•Readiness for the • Prohibition of Non-Halal opening up of the meat market and signing of •Control of distribution new trade agreements channels by local players

Opportunities Threats •Growing demand and • Pressure against insufficient local imported meat from production are likely to local producer increase the demand organisations is likely to persist.

The opening of the Iranian market following the lifting of sanctions by the west is evident also in the fresh meat market, which has started to recover in the past year after a few years of little or no imports and exports in this sector. Recently signed agreements, such as the one between Iran and New Zealand, imply that the Iranian government is ready to enter into commitments which open up the meat market. With this being said, imports of fresh meat products have to comply not only with health requirements, like other agriculture products, but also with Halal requirements, which is a disadvantage for European exporters. Poultry meat production is especially protected, and imports in this category require a specific import permit. Another difficulty faced by European economic actors is that local distribuners and wholesalers control distribution in the agriculture sector, both for domestic products and for imports and exports. To succeed in the Iranian market foreign companies are strongly advised to establish cooperation with local companies.

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Consumption In 2016, average per capita consumption of meat was 29.86 kg, comprised of 23.53 kg of poultry meat (78.8 per cent), 3.18 kg of beef and veal meat (10.08 per cent) and 3.32 kg of sheep meat (11.12 per cent).

Figure 28: Consumption of meat in Iran by category, 2016

sheep, 11.12%

beef & veal, 10.08%

poultry, 78.80%

OECD – FAO After a relatively sharp decrease in consumption between 2011 and 2013, consumption has since recovered and is expected to continue growing, albeit slowly. Demand is likely to gradually grow following the lifting of the sanctions and the resulting expected increase in household income. According to prospects, consumption will rise to 31.27 kg per capita by 2021.160

Figure 29: Consumption of meat in Iran 2011-2016 and prospects for 2017-2021 (kg per capita)

capita 29

28 Consumption, kg pr pr kg Consumption, 27 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

OECD – FAO

160 OECD/FAO (2016), OECD-FAO Agricultural Outlook 2016-2025, OECD Publishing, Paris. http://dx.doi.org/10.1787/agr_outlook-2016-en

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4.3.1.1 Consumer Profile and Trends In Iran, poultry is preferred to red meat as it is cheaper than red meat. Within the red meat category, there is a preference in the Persian cuisine for lamb meat. It is used in traditional dishes such as Chelo Koresh, Tah Chin (layered rice, yogurt and lamb) or the many Dolmeh dishes. The growing importance of health considerations is also affecting meat consumption trends in Iran. As part of this trend, vegetarian diets are becoming more popular, although for many among the wider public vegetarianism is still considered strange, as the Iranian cuisine is very meat- intensive. The first vegetarian restaurant in Iran was established as part of the Iranian Artist’s Forum in 2001, followed by other restaurants offering vegetarian options. Customers of the vegetarian restaurants are usually middle class, young, and educated. The primary meat that is consumed in Iran is lamb. Until the mid-20th century, beef was not commonly consumed in Iran. It used to be considered as a poor type of meat, to the extent that Persian royalty would look down upon Europeans for eating this kind of meat. Chicken used to be considered a delicacy, though this has changed with the growing influence from Western culture which increased the popularity of growing and eating chicken. Fish is currently quite popular in Iran, which was not the case traditionally outside of the coastal areas. Pork meat of course is not consumed in Iran since the Islamic revolution.

Iranians usually serve meat as part of Figure 30 Koresh - a popular Iranian a dish rather than by itself. A famous meat and vegetable stew © traditional dish common in almost every Iranian household is the Khoresh (version of koresh pictured161) sometimes pronounced “khoresht”, in which the meat is cooked in a stew together with fried (sautéed) onions/garlic, veggies, and herbs. The version of this dish popular today in Iran has developed over hundreds of years during which Central Asian cuisines melded with different Persian ingredients. According to travellers’ testimonies, it was served in dinners during the era of the Safavid dynasty of Iran (in the 18th century). There are at least 13 different types of Khoresh, as recorded in texts

82 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh meat from the Safavid court. That number has since increased, as new ingredients became available in Iran.162 Offer Historically, Iran’s meat production has faced considerable challenges. Livestock companies typically operate at 20–30 per cent of production capacity, and animals delivered to slaughterhouses are often underweight and fail to meet international standards. Moreover, International sanctions and inflated feed grain prices have negatively affected meat production in the country over the past few years.163 According to the Statistical Centre of Iran, about 476,000 tons of red meat was produced in official slaughterhouses across the country during the fiscal year 2015-2016, indicating a 12 per cent rise compared to the previous year. Production of lamb meet has risen by 11 per cent, goat meat 1 per cent, beef and veal 14 per cent, bison 5 per cent and camel meat 21 per cent. As of 2016, Iran’s meat production is still not self-sufficient. According to the Association of Cattle Breeders, Iran’s total annual red meat production is over 820 thousand tons, while consumption is about 880 thousand tons.164 In poultry, however, Iran is a net exporter. Poultry exports reached 120,000 tons already in 2014. These exports increased by 28 per cent CAGR to reach 109 million USD (97 million EUR) between 2010 and 2014, resulting in net exports of 75 million USD (67 million EUR) in 2014.165 Iran’s 'halal' poultry is being exported to a number of countries and the government aims to become a net poultry exporter in the Middle East and North Africa (MENA) region by 2022.166 Obtaining a Halal Food Standard is currently not obligatory in Iran. Yet, according to the Halal World Institute, more than 1,000 famous Iranian industrial food products obtained the Halal Food Standard label as a promotional measure. This label is approved in 57 Islamic countries. 4.3.2.1 Import As evidenced in the table below, exports of fresh meat from the EU to Iran are quite limited. In 2016, the total value of exports from the EU to Iran was 1.15 million USD (1.025 million EUR), which constitute less than 0.3 per cent of

162 The Unmanly Chef. “Food With a Backstory: Persian Food”. Available at: http://theunmanlychef.com/history-of-food-in-iran/food-back-story-persian-food/ 163 Global Islamic Economic Gateway. “Overview—Halal food opportunities in Iran’s $61 billion F&B market”. April 2016, available at: http://www.salaamgateway.com/en/food/story/overviewhalal_food_opportunities_in_irans_61_billion_fb_ market-SALAAM12042016112326/ 164 Financial Tribune. “Red Meat Production Rises 12”. August 2016, available at: https://financialtribune.com/articles/economy-business-and-markets/47704/red-meat-production-rises-12 165 Global Islamic Economic Gateway. “Overview—Halal food opportunities in Iran’s $61 billion F&B market”. April 2016, available at: http://www.salaamgateway.com/en/food/story/overviewhalal_food_opportunities_in_irans_61_billion_fb_ market-SALAAM12042016112326/ 166 Italian Trade Agency. “Market Overview of Iran’s Agricultural Food Sector”. ICE, January 2016.

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Iran’s total imports in this category. The major part of EU exports (valued EUR 932 thousand) is from Denmark. Other EU countries exporting fresh meat to Iran are Poland, Germany and France. The leading exporter of fresh meat to Iran is Brazil (about 89 per cent of Iran’s imported value), followed with a large gap by India (7.6 per cent) and Armenia (2.3 per cent).

Figure 31: Iran’s imports of fresh meat167 (value in € thousands, 2016)

1,000,000 100,000 10,000 1,000 100

Value, EUR '000sEUR Value, 10 1

© ITC Trade Map168 However, trade is expected to grow following the opening of the Iranian market, and it may be an opportunity to advance trade agreements with Iran. For instance, in February 2017 New Zealand signed an agreement with Iran to resume the exports of chilled and frozen sheep and beef to the Islamic Republic.169 Before the sanctions against Iran took effect, EU countries were important trade partners of Iran. Italy in particular was among Iran’s top trading partners, with estimated trade valued at around 7 billion USD (6.2 billion EUR).170 Challenges to imports of meat into Iran may be raised by local livestock breeders. The association of Cattle Breeders claims that contrary to certain publications, there is no shortage of meat in the market but rather imports exceed domestic demand by about 40 thousand tons.

167 Export and import data are for products under HS chapter 02: Meat and edible meat offal. 168 Trade Map, International Trade Centre, www.trademap.org 169 Global Islamic Economic Gateway. “Iran, New Zealand sign agreement on resumption of meat trade”. March 2017, available at: http://www.salaamgateway.com/en/food/story/iran_new_zealand_sign_agreement_on_resumption_of_mea t_trade-salaam01032017034343/ 170 Global Islamic Economic Gateway. “Overview—Halal food opportunities in Iran’s $61 billion F&B market”. April 2016, available at: http://www.salaamgateway.com/en/food/story/overviewhalal_food_opportunities_in_irans_61_billion_fb_ market-SALAAM12042016112326/

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4.3.2.2 Export Although Iran’s growth in exported value of fresh meat in the period 2012- 2016 has been negative (minus 3 per cent per annum), from 2015 to 2016 the exported value grew by 136 per cent as seen from the figure below. The EU accounted for 39.56 per cent of Iran’s exports of fresh meat. These exports however only include the meat category of offal, animal fats and other meats. During the past five years no bovine meat, sheep meat, pork meat or poultry meat has been imported from Iran to Europe mainly because of the SPS requirements and the trade embargo.171 France was the export destination which attracted the highest value of Iranian meat (offal, animal fats and other meat only) exports in 2016, followed closely by Senegal. Other EU countries importing from Iran are Spain, Slovakia and Luxembourg. The growth in meat exports, of poultry in particular, has been facilitated by the establishment in 2007 of the Iran Chamber of Commerce’s affiliate Halal World Institute, which is approved as a halal food certifying body by Malaysia’s JAKIM (Department of Islamic Advancement of Malaysia). It is the only recognized international halal certification authority in Iran. Iran aims to triple the amount of poultry it currently supplies to Oman in 2016—an estimated increase of 15,000 tons. Iran also continues to export poultry to Saudi Arabia and Iraq and is targeting exports of 1 million tons of poultry in the near future. However, currently Iran remains a small player in the global halal food market.172

171 European Commisson, DG AGRI, “Agri-food Trade Statistical Factsheet” February 2017, available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood- iran_en.pdf 172 Global Islamic Economic Gateway. “Overview—Halal food opportunities in Iran’s $61 billion F&B market”. April 2016, available at: http://www.salaamgateway.com/en/food/story/overviewhalal_food_opportunities_in_irans_61_billion_fb_ market-SALAAM12042016112326/

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Figure 32: Iran’s exports of fresh meat (value in € thousands, 2016)

10000

1000

100

10 Value, EUR '000sEUR Value,

© ITC Trade Map173 4.3.2.3 Main Competitors Agricultural production in Iran, including cattle breeding, is mainly carried out by independent small-scale farmers. Suppliers play a key role by sourcing the produce from several farmers and supplying to retailers, distributors, wholesalers and food processing companies. Leading local distribution companies are Solico Food Industries and Alin Meats. Leading retailers in the agriculture sector are Refah supermarkets, Majid Al Futtaim hypermarkets and Shahrvand supermarkets. 4.3.2.4 Specific customs and SPS requirements for import, needed documents Like all other imports of animals or animal products, meat imports to Iran require a health certificate from the country of origin. The Iranian Veterinary Organization (IVO), affiliated with the Iranian Ministry of Agriculture, is the responsible authority controlling the health requirements for food and animal products, including unprocessed meat. The body responsible for the examination of meat products at the border is the Iranian Quarantine and Inspection Service (IQIS), who works closely with other Iranian government agencies, such as the Iranian Customs, the border guards, the police and the Ministry of Health. Along with the health certificate, documents required by the authorities at the border include organoleptic and laboratory test results which comply with IVO standards.174 Meat and poultry product imports also require a Halal certificate and a certificate for veterinary products, which assures that the products are free

173 Trade Map, International Trade Centre, www.trademap.org 174 Bundesministerium fur Ernahrung und Landwirtschaft, “The Food Market in Iran ” [Der Lebensmittelmarkt im Iran], October 2016, available at https://agrarexportfoerderung.de/fileadmin/SITE_MASTER/content/files/Marktstudien/2016/Kurzstudie_L ebensmittel_Iran_COMMIT_Dezember2016_-_Internetdatei.pdf

86 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh meat from disease and toxicity.175 In addition, poultry products require an import permit, which must observe general regulations, and also submission of health and usability certificate from the country of origin. Distribution Like other agricultural products, distribution of meat produce is largely done through agents or wholesale distributors. Local distributors supply to modern and traditional retail outlets. They also hold a key role in distribution of export and import products. The majority of meat products are sold through traditional retail channels such as independent family-owned grocery stores and bazaars. However, sales through Modern retail formats such as supermarkets and hypermarkets are growing rapidly.176 In 2015, the Iranian government invested 47 million USD (41.83 million EUR) in loans to encourage production of red meat by nomads. In 2016 yearly production of meat by nomads amounted to 175 thousand tons, which constituted about 25 per cent of the total red meat production in Iran. Nomads reportedly own nearly 4 per cent of the country’s total livestock and 28 per cent of poultry. The first market to offer red meat products from nomadic tribes officially opened in Tehran in July 2016. The market offers quality meat products, including organic produce, at reduced prices. According to the Iran Nomadic Affairs Organization, other similar markets are expected to be opened across the country.177 Summary While traditional Persian cuisine include many meat dishes, especially lamb meat, in recent years increasing prices and decreasing purchasing power of the Iranian population has led to decreases in the consumption of fresh meat. Poultry meat, which is cheaper than red meat, is the main type of fresh meat currently consumed in Iran. As of 2016, production of red meat in Iran is still not sufficient to supply the local demand. Yet, in Poultry meat Iran is a net exporter. Moreover, the Iranian government is aiming to increase poultry meat exports, especially Halal poultry meat exports to MENA countries.

175 Islamic Republic of Iran Ministry of Industry, Mine and Trade. “Export-Import Regulations 2016”. Trade Promotion Organization of Iran, 2016, available at http://eng.tpo.ir/index.aspx?siteid=5&fkeyid=&siteid=5&pageid=24256 176 Italian Trade Agency. “Market Overview of Iran’s Agricultural Food Sector”. ICE, January 2016. 177 Financial Tribune. “Red Meat Production Rises 12”. August 2016, available at: https://financialtribune.com/articles/economy-business-and-markets/47704/red-meat-production-rises-12

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Processed meat

Strengths Weaknesses • Products such as • The market is sausages and kielbasa dominated by domestic are deeply embeded in companies which have Iranian culinary culture strong distribution networks •Prohibition on non- Halal products

Opportunities Threats • Changing lifesyles and • Foreign companies urbanisation process allying with local leads to growing players might develop demand for processed over dependency, meat products among impeding their sales in Iranians the long term

Consumption Iranian processed meat and seafood experienced fairly rapid growth in 2016 in terms of value and variety. This development reflects the ongoing urbanisation and change in consumer lifestyle in Iran. The number of working women has experienced major growth, which means less time for preparation of traditional Iranian meals at home. Likewise, Iran has witnessed a significant increase in the number of university students, who are looking for inexpensive food that requires little preparation. Moreover, a more varied and improved product range combined with more advanced marketing strategies by key suppliers has led to significant increase in sales under this category.178 This trend is expected to continue over the coming years.

178 SATPR News. “Processed Meat and Seafood Market in Iran”. June 2017, available at: http://www.satprnews.com/2017/06/21/processed-meat-and-seafood-market-in-iran/

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In 2016, consumption of meat in Iran amounted to nearly 2.8 million tons, a 3.4 per cent increase from the previous year. Iran’s share of global meat consumption in 2016 was 1.39 per cent. 4.4.1.1 Consumer Profile and Trends Particularly popular processed meat products in Iran, both in homes and in fast food outlets, are hamburgers, sausages and kalbases (like Poish kielbasa, but instead of posrk meat it’s made of beef or turkey). These products, especially sausages and kalbas, have a long history in Iran. They are considered as the most affordable products that can be used in a single serving. Many small grocery retailers and supermarkets offer prepared kalbas sandwiches. Iranian cuisine shares many similarities with other Central Asian and Figure 33 Jujeh kabob - Mediterranean cuisines. Pork is not available in came back to Iran after Iran due to Halal restrictions. However, it used to becoming popular in the be part of the Persian cuisine in the past, before West © Islam came to the country. Historically, eating processed sandwich meats was a status symbol. Yet in the 1960s it became popular among Iranian teenagers. The trend remained after the Islamic revolution, only with pork products being replaced by non-pork substitutes. The popular Jujeh kabob (pictured179) , made of chicken breast, was not common in Iran until after the Persian diaspora popularized it in the West. In Iran Jujeh kabob was primarily done with Cornish hens.180 Household expenditure in Iran indicates preference of fresh meat over processed meat. However, lower income households tend to spend more on processed meat than on fresh meat.

179 Author: Coffeetalkh, Image taken from Wikimedia Commons, available at: https://commons.wikimedia.org/wiki/File:Juje_kabab.jpg ; Copyright © 180 The Unmanly Chef. “Food With a Backstory: Persian Food”. Available at: http://theunmanlychef.com/history-of-food-in-iran/food-back-story-persian-food/

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Figure 34 Figure 4: Household expenditure on meat by income level (1st to 10th decile181)

30.00%

25.00%

20.00%

15.00% Processed meat

10.00% Fresh meat

5.00%

0.00% Total 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th decile decile decile decile decile decile decile decile decile decile

Statistical Centre of Iran182 Offer 4.4.2.1 Domestic offer In 2015, production of meat in Iran amounted to 2.6 million tons, a 3.8 per cent increase from the previous year. FAO projection for 2016 was an additional increase of 1.2 percent. Iran’s share of global meat production in 2015 was 1.86 percent, almost equal to the share of the Iranian population in world population (about 1 percent). In sheep and poultry meat Iran’s share of world production is a bit higher (2.07 per cent and 1.86 per cent respectively).

181 The 1st decile refers to the lowest income households and the 10th decile to the highest. 182Household expenditure by income level, Statistical Centre of Iran, available at: https://www.amar.org.ir/english/Statistics-by-Topic/Household-Expenditure-and-Income#287686- statistical-surveyb

90 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed meat

Figure 35 Meat production in Iran 2011-2016 (in 1000 tons)

2726 2654 2694 2556 2595

2235 Production, 1,000 tons 1,000 Production,

2011 2012 2013 2014 2015 2016

© United Nations Food and Agricule Organisation183 4.4.2.2 Import Exports of processed meat from the EU to Iran amounted in 2016 to a value of 704 thousand USD (626 thousand EUR), which constitutes about 2.5 per cent of total imports of fresh meat by Iran that year. EU exports to Iran originated in 2016 mainly from Spain and Germany, with beef and beef-related products as the main products being imported to Iran. Main exporters of processed meat to Iran in 2016 were Indonesia and Thailand, followed by Turkey and Kuwait. Growth in the overall imported value of processed meat by Iran between 2015 and 2016 was about 2 thousand USD (1.78 thousand EUR), which is an improvement compared to the negative growth in imported value in the period 2012-2015 (about minus 20 thousand EUR per annum).

183 Source: Food and Agriculture Organisation of the United Nations, 2017, FAOSTAT, Livestock Primary, http://www.fao.org/faostat/en/#data/QL. Reproduced with permission.

91 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed meat

Figure 36 Iran’s imports of processed meat184 (value in € thousands, 2016)

2500

2000

1500

1000 Value EUR '000sEUR Value

500

© ITC Trade Map185 4.4.2.3 Export As seen from the table below, Iran’s exports of processed meat recorded a negative annual value growth of minus 24 thousand USD (minus 21.39 thousand EUR) over the period 2012-2016. Decline in value was even sharper between 2015 and 2016, reaching minus 41 thousand USD (minus 36.49 thousand EUR). In 2016, exports to the EU accounted for 36.34 per cent of Iran’s total exports in this category, as in the case of fresh meat, the EU only imports offal, animal fats and other meats. Main importers of processed meat from Iran that year were Hong Kong and Oman, followed by the United Kingdom and Spain. Other EU importers (offal, animal fats and other meats) were Italy, Luxembourg, Belgium, Germany France, the Czech Republic and to a smaller extent the Netherlands.

184 Export and import data are for products under HS chapter 16: Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates. 185 Trade Map, International Trade Centre, www.trademap.org

92 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed meat

Figure 37 Iran’s exports of processed meat (value in € thousands, 2016)

2000 1800 1600 1400 1200 1000 800

600 Value, EUR '000sEUR Value, 400 200 0

ITC Trade Map186 4.4.2.4 Main Competitors

Processed meat and seafood is dominated Figure 38) Fresh Red Meat Products by domestic companies. The presence of on Offer in Iranian Hypermarket international players remains weak or even non-existent, which is mainly the result of a lack of international investments in this sector. Local produce has been long known to be of high quality and Iran is strong in the production of fish, red meat and poultry. It is therefore unlikely that local players be threatened by imported products. An example of a prominent meat producer is Solico Group, which based on vast local market experience and special consideration to vertical integration as a means to business expansion, has established itself as a main player in Iran and the Middle-East. Tehran Meat Products Co. (falling under Solico) established in 1977 with a daily production of 192 hamburger patties, has now grown to a producer of over 100 tonnes per day of various meat products.187 Another

186 Trade Map, International Trade Centre, www.trademap.org 187 Solico Production Group. “The Biography of GholamAli Soleimani: The CEO of the Solico Production Group”. Available at: http://www.solico.ir/about-founder.php

93 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed meat example would be Alin Meat Co., a 40-year old family business. It has been operating mainly in Tehran and is now one of the major red meat distributors, supplying products to over 200 butchers and retail sellers. 4.4.2.5 Challenges for EU Products/ Expert testimonials A main challenge to foreign companies in Iran is the prolonged period of inflation, resulting in low spending, as many middle-income shoppers opt for essentials over more indulgent items. That creates an advantage to local providers over foreign ones, since locally-produced goods are cheaper. A European firm which has been exploring opportunities to enter the Iranian market is the French poultry firm processor Doux. The company exports to markets across the Middle East, and used to be present in Iran between 1975 and 2010, until the trade embargo was put in place. With the lifting of the trade embargo, it seeks to retain its position. Familiarity with Doux’s brand among the older generation in Iran may be an advantage.188 4.4.2.6 Specific customs and SPS requirements for import, needed documents Import of products containing blood and meat of animals banned by Islamic Halal regime is prohibited in Iran. This includes products under HS headings 1602.4100 to 1602.4900. Import of chicken meat products is subject to the discretion of the Ministry of Health, Treatment and Medical Education.189 According to a study published by the German Federal Ministry of Food and Agriculture, processed meat products190 may be subject at Iranian customs to an extended Investigation process, including a microbial characteristics test.191 Distribution The Iranian market is dominated by traditional grocery retailers. In recent years modern retailers, including supermarkets and hypermarkets, have gradually increased their share of the retail value to the disadvantage of traditional grocery retailers, including independent family-owned grocery stores and bazaars as well as Food, drink and tobacco specialists. Key players in the processed meat market use common marketing methods such as in- store advertisements, including leaflets, posters and sampling sessions as well as billboards.192

188 Just Food. “How attractive could Iran be for food majors?”. August 2015, available at: https://www.just- food.com/analysis/how-attractive-could-iran-be-for-food-majors_id130842.aspx 189 Islamic Republic of Iran Ministry of Industry, Mine and Trade. “Export-Import Regulations 2016”. Trade Promotion Organization of Iran, 2016, available at http://eng.tpo.ir/index.aspx?siteid=5&fkeyid=&siteid=5&pageid=24256 190 Products under HS codes 16010000, 16025031 and 16042000. 191 Bundesministerium fur Ernahrung und Landwirtschaft, “The Food Market in Iran ” [Der Lebensmittelmarkt im Iran], October 2016, available at https://agrarexportfoerderung.de/fileadmin/SITE_MASTER/content/files/Marktstudien/2016/Kurzstudie_L ebensmittel_Iran_COMMIT_Dezember2016_-_Internetdatei.pdf 192 Italian Trade Agency. “Market Overview of Iran’s Agricultural Food Sector”. ICE, January 2016.

94 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed meat

4.4.3.1 Challenges to EU products According to an A.T. Kearney expert on consumer industries and retail practice for the EMEA region, in order to establish their brands in the Iranian market foreign companies should in parallel ally with local distribuners and act to develop their own distribution system. On the one hand, local distribuners may be essential in the beginning to reach the popular bazaars, markets, and small mom-and-pop stores”. On the other hand, in the longer term dependency on such local partners might hamper sales in otherwise high-growth markets.193 Summary Although currently the EU’s trade with Iran in the processed meat sector is quite limited, the Iranian market offers several opportunities to foreign companies. Changes in Iranian society, such as more working women and more students, are reflected in increasing demand for processed meat products. Low purchasing power, which in other sectors is a disadvantage, may constitute an opportunity in this sector, since processed meat products are consumed as a cheaper alternative to fresh meat. On the other hand, domestic actors dominate the market and their production capabilities and variety of offer has improved over the past few years. While foreign companies may be able to operate in the market through allying with local players, in order to maximise opportunities in the longer term and gain significant market share there is a need to invest more in the sector, for example by developing independent distribution capabilities.

193 Just Food. “How attractive could Iran be for food majors?”. August 2015, available at: https://www.just- food.com/analysis/how-attractive-could-iran-be-for-food-majors_id130842.aspx

95 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

Olive Oil

Strengths Weaknesses •Olives have important • Low consumption role in Iranian culture mainly due to high price •Increasing awarness of of olive oil health issues is expected to increase consumption

Opportunities Threats •Production is not self • Consumers' negative sufficient, creating experience with low demand for imports of quality olive oil affects products and perception of the knowledge product •High taxation on bottles of olive oil

Consumption Olive oil consumption among Iranians in recent years has been relatively low. Per-capita consumption reported in 2016 was between 140-200 grams, while the global average is 430 grams.194 For the period 2010/11 to 2015/16 the average total consumption of olive oil in Iran was about 10 thousand tons per year, while the average for the Middle East region for the same period was around 47 thousand tons per year.195

194 Central Bank of the Islamic Republic of Iran. “Household Budget Survey”. March 21st 2015 – March 19th 2016 Report, October 2015, available at: http://www.cbi.ir/simplelist/1421.aspx 195 Ibid

96 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

Figure 39: Consumption of olive oil in Middle Eastern countries 2010/11-2015/16 (1,000 tons per annum)

160

140

120

100

IOC196 According to the Central Bank of Iran, average annual household expenditure on olive oil in 2016 was 1,918,433 IRR (about 52 EUR) – 0.5 per cent of the total household expenditure. In a survey conducted in 2016 less than half of the respondents said they have used olive oil in the past year. Of those using olive oil, 27 per cent said they use it once a day or a couple of times in a week. Around 34 per cent use it once a week or 2 to 3 times in a month, while the other 34 per cent only sometimes or occasionally use olive oil.197

196 International Olive Council, http://www.internationaloliveoil.org/ 197Badkobeh. “The History of Olive in Iran”. December 2016, available at: http://badkoobeh.com/en/Blog/Detail/history-of-olive-in-iran

97 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

Figure 40: Frequency of using olive oil among Iranian households

sometime or occasionally 17%

once a week or 2 not at all -3 times a month 51% 18%

once a day or 2 times a week 14% Badkoobeh However, according to the International Olive Council, in 2014/15 Iran recorded a 33 per cent increase in olive oil consumption - the highest increase that year globally. The growth in consumption was projected to continue in 2015/16 and 2016/17.198

Figure 41: Iran's olive oil consumption 2010/11-2016/17 (in 1,000 tons)

0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 (prediction) (prediction)

IOC199

198 International Olive Oil Council. “International Olive Oil Council Market Newsletter”. November 2016, available at: http://www.internationaloliveoil.org/news/view/686-year-2016-news/797-market-newsletter- november-2016 199 International Olive Council, http://www.internationaloliveoil.org/

98 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

4.5.1.1 Consumer Profile and Trends With growing awareness of health considerations, consumption of olive oil is Figure 42 Olive Oil Sold in Tehran expected to grow relatively fast in the Supermarkets coming years. In 2010, Iran was marked as one of the Middle Eastern countries with the strongest growth rates (7 per cent volume growth), alongside South Africa and Algeria. The same year olive oil recorded the fastest value growth within the oils and fats category in Iran (19 per cent increase). Yet, it constituted only an 8 per cent share of total oils and fats value sales in the country. Two main factors have negatively affected the consumption of olive oil in Iran in recent years. First it is its high price compared to other oils. In 2010 the unit price of olive oil was 12.4USD (about 11 EUR) – the third highest in the Middle East region after Saudi Arabia and Egypt. Yet, the lifting of sanctions and the growing competition from hypermarkets and supermarkets in the country may bring down unit prices and thus encourage consumption. The second factor is that in the past the olive oil which was available in Iran, of both domestic producers and importers (principally Turkey and Italy) was of low quality. This has created a negative perception of the product among Iranian consumers. This, however, is likely to change with the availability of higher quality products.200 Offer 4.5.2.1 Domestic offer Iran’s olive oil production in 2016 was close to 5,700 tons. Although production has increased in recent years, it still only provides for about a half of the local demand, and export is almost non-existent. Iran’s geographical characteristics make it a potential leading producer of olive oil, like other Mediterranean countries such as Spain, Italy, Greece, Turkey, Syria and Tunisia. Olives are a part of the Persian history and culture. They are mentioned in ancient Iranian religious hymns dating back 2,000 years and some say the origins of the olive tree is in Iran. Most of the regions in Iran are sub-tropical. This allows olive trees which grow there to be exposed to direct sunlight for a prolonged period of time, which is considered a comparative advantage. However, the

200 All About Olive Oil. “Olive Oil Retail Performance in Middle East and Africa”. November 2013, available at http://www.allaboutoliveoil.com/olive-oil-world/olive_oil_in_the_middle_east_and_africa.php

99 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil productivity of Iranian olive cultivation is considerably lower than those of other Mediterranean countries. According to Ahmad Bolandnazar, the head of Iran’s National Olive Council, the average yield of Iran's olive farms is 1 ton per hectare, while the figure for Spain and Italy, for example, is between 3 and 7 tons per hectare. Bolandnazar has estimated that Iran would not be able to export olives in the next ten years.201 As described by Mahmoud Emami, head of the Expansion and Improvement of Olive Orchards Group in Iran’s Ministry of Agriculture: “Among the impediments in the way of production is that our farmers lack the latest knowhow in olive cultivation. Poor farming methods decrease production. Out of the 84,000 hectares of olive cultivars in Iran, 60 per cent have fruit bearing trees.” Emami said that the ministry is engaged in continuous educational courses for farmers on methods of watering, pruning, grafting and fighting pests and on efficient use of resources such as water and soil. Yet, he explained, there is a problem in communication between the authorities and farmers and owners of oil extraction factories, given that the latter have no well organised and disciplined union or association.202

Figure 43: Iran's olive oil production 2010/11-2016/17 (in 1,000 tons)

0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 (prediction) (prediction)

International Olive Council 4.5.2.2 Import Iran’s imports of olive oil from the EU amounted in 2016 to a value of about 8.2 million USD (7.3 million EUR), accounting for 1.1 per cent of the total EU

201 Islamic Republic News Agency. “Iran’s olive consumption meagre”. September 2016, available at http://www.irna.ir/en/News/2739087/ 202 Financial Tribune. “Iran a Major Olive Producer”. March 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/61196/iran-a-major-olive-producer

100 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil agriculture exports that year and a 33.3 per cent increase from 2015.203 Over the past 5 years, Iran’s imports of olive oil from the EU almost doubled in value – from 4 million EUR in 2012 to 7.2 million EUR in 2016 as evidenced in the table below.

Figure 44: Iran's imports of olive oil 2012-2016 (value in EUR millions)

20 Total 15 EU

0 2012 2013 2014 2015 2016

© UN Comtrade204 EU exports of olive oil to Iran accounted in 2016 for 69 per cent of the country’s total value of imports from the world that year (11.4 million USD or 10.2 million EUR). The vast majority of these EU exports came from Spain and Italy. An important competing exporter of olive oil is Turkey, which accounted for 27 per cent of Iran’s imports under this category in 2016 as evidenced in the figure below.

203 European Commission. “Agri-Food Trade Statistical Factsheet: European Union – Iran”. Directorate General for Agriculture and Trade Development, February 2017, available at https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood- iran_en.pdf 204 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

101 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

Figure 45: Main exporters of olive oil to Iran in 2016 (% of total imported value)

Kuwait, 3.90% Others, 1.00%

Italy , 15.40%

Spain , 52.70%

Turkey, 27%

© UN Comtrade205 4.5.2.3 Export As mentioned above, Iran’s exports of olive oil are almost non-existent. The value of its total exports to the world in 2016 was 6.2 thousand USD (5.5 thousand EUR). The only EU country which imported olive oil from Iran in 2016 was Germany, with the value of 1.4 thousand USD (1.2 thousand EUR) – about 22 per cent of Iran’s total exports. Germany was the main importer of olive oil from Iran between 2013 and 2015. In 2016 it was surpassed by Switzerland, whose imported value was 2.3 thousand USD (2 thousand EUR). A peak in EU imports from Iran under this category was recorded in 2013, when Germany and Spain imported olive oil with the value of 8.1 and 6.6 thousand USD (7.2 and 5.9 thousand EUR) respectively, constituting 98 per cent of Iran’s imported value that year.

205 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org

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Figure 46: Iran's exports of olive oil 2012-2016 (value in thousand EUR)

40 Total 30 EU

0 2012 2013 2014 2015 2016

© UN Comtrade206 4.5.2.4 Main Competitors Figure 47 European Olive Oil Iran does not have significant exports in olive oil Sold in Tehran Supermarkets and its local production is insufficient to supply local consumption. Domestic producers of vegetable oils, including olive oil, are dependent on import of raw materials. Therefore, competition from local producers may be considered relatively low. On the other hand, leading local companies have established efficient distribution networks. For instance Behshahr Industrial, a leader in vegetable and seed oil ,has a wide distribution network carried out by Bahpakhsh. Its distribution was further strengthened through its joint venture with Savola. Another dominant company in the oils category is Khorramshar Extraction Oil Co, which is holding about one third of the olive oil market. European olive oils (especially olive oil from Italy and Greece) as quality olive oil products have also been introduced to Iranian market. Examples include Felippo Berio (Italy) and Monini (Italy).

206 Ibid

103 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Olive Oil

4.5.2.5 Taxation and customs In order to protect its manufacturing sector, Iran has a high taxation rate on olive oil in bottles (60 per cent) as compared to olive oil in bulk (20 percent). It is therefore recommended for foreign companies looking to import olive oil to Iran to consider using local packaging in cooperation with their partners in the country.207 Distribution Like in other sectors, distribution is still predominantly done through independent groceries. However, the role of hypermarkets and supermarkets is growing. In 2010 the latter accounted for a 12 per cent share of retail value sales of oils and fats, an increase of three percentage points over 2004, made largely at the expense of independent small grocers.208 The first Western-style hypermarket – Hyperstar - was opened in Tehran in August 2009 through a joint venture between Majid Al Futtaim Group and the French retail company Carrefour. The chain has since expanded to branches in Esfahan and Shiraz.209 Carrefour has since become a successful hypermarket chain in Iran. Summary Iran is a net importer of Olive oil. Despite the historic role of olives in the country, consumption is low relatively to other countries in general, and particularly in comparison with other Middle Eastern countries. The main reasons are high unit price and negative experience of consumers with low- quality olive oil imported to the country in the past. However, demand is likely to increase with the growing awareness of health considerations among consumers. Production of olive oil in the country is only sufficient for about a half of the local demand and is dependent on import of raw materials. Export of olive oil by Iran is almost non-existent (total value in 2016 was less than 20 thousand EUR). The EU is the leading exporter of olive oil to Iran (69 per cent of Iran’s imported value under this category in 2016), followed by Turkey (27 per cent). EU exports to the country are mainly from Spain and Italy. Foreign companies are advised to establish partnerships with local players, who are able to reach all parts of the country. Although the role of supermarkets and hypermarkets has been growing in recent years, independent small groceries are still the main distribution channel for olive oil, as is the case for other products. In addition, foreign companies are advised to consider local packaging, since the tax on bottled olive oil (60 per cent) is considerably higher than that on olive oil imported in bulks (20 per cent).

207 Be the First in Iran. “About Iran: Be the First in Iran”. July 2017, available at http://bethefirstiniran.com/about-iran/ 208 All About Olive Oil. “Olive Oil Retail Performance in Middle East and Africa”. November 2013, available at http://www.allaboutoliveoil.com/olive-oil-world/olive_oil_in_the_middle_east_and_africa.php 209 Bourse and Bazaar. “For Iran's Supermarkets, Bigger May Not Be Better”. November 2016, available at http://www.bourseandbazaar.com/articles/2016/11/28/building-supermarkets-in-iran

104 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables

Fresh Fruit and Vegetables

Strengths Weaknesses •Fresh fruits and vegetables are a •Few foreign players in the sector big part of the local diet due to prevailing self-sufficiency •Lifting of sanctions expected to •Abundance of local fruit and increase income and food vegetables spending •European premium products (juice, organic) will be in demand, due to higher disposable incomes

Opportunities Threats •Water shortage will increase •Inflation remains persistently high demand for imports •Government could impose stricter •Hypermarket growth creating regulations on imports to project demand for exotic, imported fruits local producers from foreign and vegetables competition •Soft drink industry (incl. fruit juices) forecasted to grow rapidly

Iran is a global powerhouse in the production of fresh fruits and vegetables. The diversity of climate and geography in Iran allows for production of a wide range of fruits, vegetables and nuts. According to 2015 FAO data, Iran produces about 12 million tons of fresh fruits and 23 million tons of vegetables yearly, ranking as the eighth and fifth world producer, respectively.210 Iran is a top producing country of dates, figs, pomegranate, melons, grapes, apples, fresh vegetables, and olives. It is also the leading global producer of pistachios and saffron, two very high-value crops.211 Much of the fresh produce that is produced in Iran is consumed domestically; however, a significant share is exported to neighbouring countries, as well as globally. According to the Agriculture Jihad Ministry, Iran exports over 2.87 billion USD (2.5 billion EUR) to over 100 countries around the world.212 Domestic companies have a distinct

210 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf 211 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 212 Payvand. “Iran is the ninth largest fruit producer in the world: Agriculture Ministry”. October 2012, available at http://www.payvand.com/news/12/oct/1126.html

105 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables advantage in the sale of fresh fruit and vegetables market in Iran. The local government has prioritized self-sufficiency in agriculture since the revolution in 1979 in order to achieve food security and decrease dependence on foreign countries. Currently, Iran is self-sufficient in fresh vegetables, and mostly sufficient in fruit.213 That being said, a combination of factors is likely to challenge Iran’s prevailing independence in fresh produce, including the recent lifting of sanctions, and the serious shortage of available water for Iranian farmers. The resulting effect is a growing economy, with consumers demanding more and greater varieties of fruits and vegetables, while at the same time Iran will be increasingly unable to meet these demands domestically due to environmental constraints. Consequently, imports are likely to increase in the coming years, presenting a market opportunity for European producers. Consumption The recent lifting of sanctions in early 2016 in Iran is positively impacting the local economy; GDP growth increased from a paltry 0.9 per cent in 2015 (before sanctions were removed), to 4.6 per cent in 2016. The Economist Intelligence Unit expects this trend to continue, with GDP growth reaching 5.4 per cent in 2017 and 5.9 per cent in 2018.214 These developments will inevitably increase demand in the food sector, especially for non-essential and premium food items that were not affordable to consumers in recent years. Per capita yearly consumption of fruit and vegetables in 2010 was 173kg, and 186kg, respectively. Iranians eat two times more fruits and vegetables than people in other developing countries, which is largely attribuned to a traditional diet that preferences fruit and vegetables intake. 4.6.1.1 Consumer Profile and Trends The sanctions affected purchasing habits of fresh fruits and vegetables by consumers in Iran. Fresh fruits and vegetables have traditionally been a staple component in most meals: fresh fruit is common on most tables and dishes of vegetables and herbs are standard sides to most meals. Iranians eat two times more fruits and vegetables than people in other developing countries.215 Recently however, a lower level of consumption for fresh fruit and vegetables has been observed due to the poor economy and price inflation. Between March and July of 2012, the price of fruits and vegetables increased by 79 per cent and 86 per cent respectively.216 Lower and middle income families simply shifted consumption habits towards cheaper, less nutritious foods. Obesity rates jumped during this period as many Iranians consumed larger quantities

213 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 214 Ibid 215 Financial Tribune. “Eat fruit, be happy”. July 2016, available at: https://financialtribune.com/articles/people/45416/eat-fruit-be-happy 216 Future Directions. “Iran’s Food Security”. August 2014, available at http://www.futuredirections.org.au/publication/iran-s-food-security/

106 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables of sugar, fat and oils.217 These dietary changes by large parts of the population were made out of necessity, not preference. Therefore, as the economy grows, we can expect a return to eating habits based on Iran’s traditional diet, including greater consumption of fresh fruits and vegetables. Figure 48 Fruits and Vegetables Sold at Traditional Bazaar Iran’s consumers have an enduring preference for fresh ingredients (including fruit and vegetables) over packaged and processed counterparts. This can be traced to traditional eating habits, where Iranians have a long history of consuming a wide variety of fresh fruits, vegetables and herbs. Onions and garlic, pomegranate, and sabzijat (various green herbs) are regular ingredients in many Persian dishes. Eggplant is also a very common, and often used in place of a potato in many Iranian dishes, as is the case in stews such as Khoresh Bademja. Other stews such as Dizi, and Khoresh Fesenjan (Pomegranate Walnut Stew) also incorporate a variety of vegetables, beans and specialty fruits such as pomegranate. A main dish is typically accompanied by various fresh vegetables, including tomatoes, cucumbers and scallions, as well as fresh green salad. Rice dishes such as Bogoli Pulao are also very common in Iran, and incorporate all kinds of vegetables that are seasonally available, such as pumpkin, spinach, green beans, broad beans, zucchini, and various kinds of squashes. Traditional diets are still prevalent in Iran, but its growing base of young, urban, and educated people are looking to experiment with new products, including foreign food and beverage brands from Europe. Polls indicate that local consumers overwhelmingly think importing more foreign-made goods is a positive, and expressed a preference for European and American goods, which are perceived to be higher-quality.218 That being said, EU producers will encounter difficulty competing with local players for standard food items that Iranians consume with high frequency. Due to protectionist policies enacted after the Iranian revolution in 1979, local food producers have built-up brand loyalty and wide distribution networks for their offerings. 95% of Iran’s food market has been “captured” by local companies. It is recommended that EU

217 Future Directions. “Iran’s Food Security”. August 2014, available at http://www.futuredirections.org.au/publication/iran-s-food-security/ 218 Lens Culture. “Iran’s Booming Consuming Culture”. June 2014, available at https://www.lensculture.com/projects/40183-iran-s-booming-consumer-culture

107 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables producers focus their product offerings on new areas and product lines that were previously not available in Iran. In the fresh fruit and vegetables category, soft drinks and fruit juices present a potential market opportunity for EU producers. Iran’s retail value for soft drinks is the second largest of all Middle Eastern markets, and as disposable incomes increase due to the lifting of sanctions and improving economy, consumers will gravitate towards premium fresh juice offerings. EU beverage producers can attract young, urban consumers with clever marketing and packaging of their products. 4.6.1.2 Cultural sensitivities The Constitution of the Islamic Republic of Iran mandates that the official religion of Iran is Shia Islam, and most Iranians subscribe to this religion. However, the level of devoutness greatly varies from person to person in their private lives. The younger generation that live in big cities tend to be more open-minded and experimental towards new products, making them an important target market for EU product exports. As mentioned, Iranians prefer fresh foods over processed varieties based on their traditional dietary habits. It is customary for local households to have a variety of fruits on offer, which are often grown in the backyard. As a guest in a local’s home, it is common to be offered fruit, which is typically peeled by the host as a sign of respect. Fresh fruit is frequently mentioned in Persian mythology; figs are used as offerings to God, and Halva, a candy made from ground sesame seeds, is mixed with dates and given to the poor when a relative dies. 4.6.1.3 Challenges for EU Products The fresh fruit and vegetables market in Iran is dominated by local players, and the long-standing protectionist environment has made it challenging for EU producers to gain significant market share outside of a few niche products. Consumers are price-sensitive when it comes to standard grocery purchases, and Iranian companies have an edge over international rivals because of their knowledge of Iranian consumers and their habits.219 It is unlikely that EU producers will be able to challenge local players in product categories where the market has already been captured. Offer

4.6.2.1 Domestic offer Iran is the largest producer of fresh fruit and vegetables in the Middle East; according to 2015 FAO data, it produces 12 million tons of fresh fruits and 23 million tons of vegetables, ranking it eighth and fifth in the world, respectively.220 It ranks near the top globally in the production of a number of

219 “Iran’s Food Sector”, SGPM Economic and Business Consultancy, October 2016 220 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf

108 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables high-value fruits and vegetables, including apricots, cherries, sour cherries, cucumbers and gherkins, dates, eggplants, figs, pistachios, quinces, walnuts, and watermelons. The table below is adapted from a report prepared by the Italian Trade Agency, based on data from the Ministry of Agricultural Jihad. It indicates Iran’s global ranking in a range of fruit and vegetable products. Table 13 Iran global rankings of fresh produce

Commodity World Ranking Commodity World Ranking Pistachio 1st Date 2nd Saffron 1st Apricot 2nd Pomegranate 1st Almond 3rd Walnut 3rd Kiwi 3rd Cherry 3rd Quince 4th Apple 4th Hazelnut 4th Fig 5th Sour Cherry 5th Plum 5th Peach & 6th Nectarine Lemon 6th Orange 7th Grapes 11th Tangerine 12th Grapefruit 15th Pear 20th Strawberry 24th Tomato 5th Watermelon 3rd Onion 5th Eggplant 3rd Pumpkin & 4th Gourd Cucumber 3rd Cucurbita 5th

Adapted from Italian Trade Agency report The majority of fruit and vegetables produced in Iran are consumed locally, but a large share of few high-value crops such as saffron, pistachios and dates are exported.221 The agricultural sector in Iran is heavily regulated, and protectionist policies were established in to project local farmers. The lack of competition and isolation from international markets has led to inefficiencies in the sector, due to a lack of investment and modernisation. Furthermore, agriculture in Iran faces a major threat from water shortage and soil erosion. Limited rainfall, combined with overconsumption of water resources by the agricultural sector has greatly depleted Iran’s water supplies. It is estimated that Iran is exploiting 97 per cent of surface waters, and 70 per cent of its ground water supplies.

221 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf

109 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables

The agricultural sector is responsible for more than half of total water use, despite only contributing 11 per cent to Iran’s GDP.222 The government recognizes the seriousness of the water shortage threat, and has prioritized in its 6th Five Year Economic Development Plan funding and incentives for mechanization of the sector, as well as better water management programs.223 This presents a major market opportunity for EU companies selling equipment and expertise in agriculture production. According to a report commissioned by the Ministry of Foreign Affairs of Demark, Danish companies have a major opportunity to supply Iran with machinery, technology and expertise.224 Furthermore, greenhouse farming is experiencing growth in Iran as a means of addressing the water shortage, and many EU companies (particularly from Spain and the Netherlands) are investing in new projects in Iran. 4.6.2.2 Import Few fresh fruit and vegetables are imported into Iran. In recent years, this has primarily been attribuned to the sanctions and protectionist policies enacted by the government. Furthermore, as of 2012, legislation was established that banned the imports of fresh fruits and vegetables, except for those products that do not compete directly with local farmers. As a result, only banana, coconut, pineapple and mango, as well as a few exotic fruits like papaya were allowed to enter Iran.225 This is reflected in figure 6, where imports beyond these four types of fruit are almost non-existent. However, due to natural resource constraints, Iranian food production is expected to decrease, and it will be forced to import increasing quantities of fruit and vegetables that are water-intensive to grow.226

222 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 223 Information provided by Sayeh Gostar Pars Managers: “Iran’s Food Sector”, SGPM Economic and Business Consultancy, October 2016 224 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 225 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf 226 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available at http://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da

110 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Fresh Fruit and Vegetables

Figure 49 Imports of fresh fruit and vegetables (2012-2015), unit: Euro millions

500 450 400 350 300 2012 250 200 2013 150 2014 100 2015 50 0 Bananas Coconut Pineapple Mango Other Fresh Fruit and Vegetables

Adapted from Italian Trade Agency report 4.6.2.3 Export Due to the sanctions that were previously in place, limited export opportunities were available for Iran’s sizeable fresh fruit and vegetables industry. In recent years exports of fresh produce has been mainly focused on neighboring countries, Russia, China and some African countries such as South Africa.227 According to data income derived from exports of fresh fruit and vegetables in 2015 amounted to over 2.3 billion euros. However, this figure also includes nuts as pistachios are a major source of export revenue, accounting for about 40 per cent of the total value. In the 6th Five Year Economic Development Plan (beginning in 2016), the government has prioritized increasing the export of dried and fresh fruit.228 Exports to the EU are expected to increase significantly following the lifting of sanctions, particularly for specialty fresh and dried fruit and nuts.

227 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf 228 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016

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Table 14 Total exports of fresh fruit and vegetables (incl. nuts) from 2012-2015

2012 2013 2014 2015

$1,316,569,482 $953,109,704 $1,109,620,866 $861,965,515

(no

nuts) (€1,144,843,028) (€ 828,791,047) (€ 964,887,710) (€ 749,535,230)

Fruits

$711,570,489 $484,545,293 $818,264,285 $683,361,778 (€ 618,756,947) (€ 421,343,733) (€ 711,534,161) (€ 594,227,633)

Vegetables

$1,158,578,088 $1,668,882,856 $1,029,098,880 $1,111,863,632 (€ (€

Nuts (€ 894,868,591) (€ 966,837,941) 1,007,459,207) 1,451,202,483)

$3,186,718,059 $2,466,753,877 $3,596,768,007 $2,657,190,925 TOTAL (€ (€ (€ (€ 2,771,059,182) 2,145,003,371) 3,127,624,354) 2,310,600,804)

Adapted from Italian Trade Agency report 4.6.2.4 Main Competitors The market for fresh fruit and vegetables in Iran is dominated by local players. Due to market entry barriers and strong local competition, locally produced fruit and vegetables are generally cheaper. Local companies also have an advantage over international rivals because of their understanding of local habits.229 Farmers producing fresh fruits and vegetables are predominantly small scale operations: small private farmers perform 93 per cent of cultivation activities. Given their size, they rely on warehouses and other distribution channels to get their produce to market.230 Fruit and vegetables in Iran typically pass through several distributors before reaching the consumer. In the fruit juice sector, Alifard Co was the leading domestic player in 2014 Its Sunich brand offers a variety of 100 per cent fresh fruit juices that are popular with local consumers. The product lines cater to local tastes with uniquely Iranian flavours such as sour cherry. Alifard has been active in Iran for many years, benefitting from the high quality image of its products and its strong distribution network.

229 “Iran’s Food Sector”, SGPM Economic and Business Consultancy, October 2016 230 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016

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4.6.2.5 Challenges for EU Products The lifting of sanctions has officially opened Iran up for business; however, there are an array of market entry and other challenges facing prospective EU exporters in the fruit and vegetables sector. Iran is still a heavily regulated economy, and currently ranks 120 out of 190 countries in the World Bank’s Ease of Doing Business survey.231 Custom duties are high on most food products entering Iran, and there is an outright import ban on many fresh fruit and vegetables that are produced domestically.232 There is also a high level of uncertainty concerning the direction of macroeconomic policy in Iran. A failure to follow through on needed structural reforms could reduce prospects for economic growth, and lead to a return of high food price inflation. If this happens, demand for premium products that are exported by EU producers will be greatly reduced. In 6th Five Year Economic Plan explicitly states that Iran wants to reduce imports of essential agricultural products from abroad.233 This is a clear indication that Iran will resist opening its domestic market to foreign producers of fresh fruit and vegetables – besides some exotic fruits that cannot be produced locally. 4.6.2.6 EU GI Products and Organics

Iran has potential to become a major exporter of several high-value organic crops, such as Saffron, Pistachios and Pomegranate. National guidelines for organic farming were first prepared by The Institute of Standards and Industrial Research of Iran (ISIRI) in 2009, with further updates as recently as 2014.234 No official certified label has been published as of today. 4.6.2.7 Specific customs and SPS requirements for import, needed documents The Food and Drug Department operates within the Ministry of Health and Medical Education in Iran. It is mandated with food and health products regulation, licensing, registration, marketing authorization, and labelling.235 Importantly, it is responsible for the issuance of health certificates for imported food products. A health certificate is required for imports of all fresh fruit and vegetable products.236

231 World Bank. 2015. Doing business 2016. Washington, D.C. : World Bank Group. http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB16- Full-Report.pdf 232 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf 233 “Iran’s Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016 234 International Society of Organic Agriculture Research. “Country report: Iran”. Available at http://www.isofar.org/isofar/index.php/2-uncategorised/120-country-report-iran 235 “Iran’s Food Sector”, SGPM Economic and Business Consultancy, October 2016 236 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available athttp://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da

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The Institute of Standard and Industrial Research in Iran develops official standards for products, which exist for all processed fruit and vegetables. It is strongly advised that labels, including instructions and description of imported goods be produced in Farsi.

Of particular relevance to the fresh fruit and vegetables sector, the Ministry of Jihad Agriculture is in charge of food security. Policies aimed at protecting Iran’s local producers originate from this governmental department. Distribution

The modernisation of the food retail sector in Iran has accelerated in recent years. However, Figure 50 Vegetables Sold at Iran Bazaar small grocery stores and outlets still represent 90% of the food and beverage sales.237 Indeed, sales of fresh fruit and vegetables are dominated by small-scale and traditional retail outlets. Producers of fresh fruit and vegetables in Iran are mostly small private farmers that do not have direct access to the retail market. Most depend on a complex network of distribution channels and traders, and fresh produce often passes through many layers of distributors before reaching the retailer.238 Inefficiencies in this system causes considerable food wastage: Inefficiencies in the local distribution system for fresh produce results in considerable food wastage. Given the seriousness of the water shortage in Iran, improving the distribution system is a major priority of the government. The government has prioritized this issue with the creation and expansion of the Agricultural Commodities Exchange as part of the 6th Five Year Economic Development Plan.239

237 The Business Year. “Focus: Iranian Food Industry”. 2016, available at https://www.thebusinessyear.com/iran-2016/surgery-now-open/review 238 Ministry of Foreign Affairs of Denmark. “The agriculture and food market in Iran”. March 2017, available athttp://www.lf.dk/~/media/lf/for-medlemmer/virksomhedsmedlem-hos- os/ingrediensnyhedsbrev/2017/april17/report-the-agriculture-and-food-market-in-iran-.pdf?la=da 239 “Iran Agriculture Machinery and Internal Combustion Engine Market Study”, SGPM Economic and Business Consultancy, October 2016

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In terms of modern retailing, the four biggest modern retail brands in Iran in terms of sales value in 2016 were Etka (478 stores in Iran), Koorosh, Hyperstar and Refah.240 Sales at modern retailers are experiencing strong demand from young, educated city-dwellers. However, it is unlikely that European companies will be able to penetrate the market for fresh produce at modern supermarkets due to the affordability of local choices, and consumer preference for fruit and vegetables that are not neatly sorted and packaged. Even at Hyperstar, considered the most international hypermarket that operating in Iran, fruits and vegetables are sold in unsorted and unpacked form.241 EU producers will find better market opportunities selling premium products at modern retail outlets that are not currently available in Iran. In the fresh fruit and vegetables sector, this includes exotic fruit, premium fruit juices, and certified organic products. Summary Iran is a leading global producer and exporter of fresh fruit and vegetables. Prospective EU exporters of fresh produce will encounter a challenging market landscape in Iran due to strong domestic competition and protectionist policies designed to protect local farmers. It is expected that demand for fresh fruit and vegetables will grow due to improving economic prospects, and a strong preference of local consumers for fresh produce based on traditional diets. New opportunities could emerge as it becomes increasingly clear that Iran cannot meet its growing domestic demand with local production due to environmental constraints resulting from water shortages and soil erosion. Furthermore, Iran has few varieties of food products, and there is big potential for producers to market premium products to Iran’s educated and experimental consumers. The growth of modern grocery retailers presents an opportunity for EU products in this category, such as premium juices and organic foods, to penetrate the local market.

240 Bourse and Bazaar. “For Iran's Supermarkets, Bigger May Not Be Better”. November 2016, available at http://www.bourseandbazaar.com/articles/2016/11/28/building-supermarkets-in-iran 241 Italian Trade Agency. “Iran Fruits and Vegetables Market”. ICE, 2016, available at http://www.macfrut.com/public/allegatinews/1099/1099_iran_fruits___vegetable_market_l_1_143.pdf

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Processed Fruits and Vegetables

Strengths Weaknesses •Increasingly busy lifestyles bolstering demand for processed •Most Iranians still prefer fresh, fruits and vegetables, and ready- home-cooked meals made meals •High import duties on processed •Lower inflation and opening of foods, including fruit and sanctions creating favorable vegetables economic conditions •Local manufacturers dominate the •Favorable demographics will processed fruit and vegetables increase demand and consumption sector for food products

Opportunities Threats •Expansion of modern grocery retailers •Tight supervision by the government strongly benefits frozen fruit and on prices vegetables •Continued protectionism and strict •Sales base is very low; early movers regulation of the food sector can establish market presence and build brand loyalty •Currently very little product diversity; growth in demand for specialized products in in this category expected

The lifting of sanctions in January, 2016 marks the beginning of a period of re- entry for Iran into the global economy. The outlook is indeed significantly more positive than in recent years, and it is expected that both domestic and international brands in the processed fruit and vegetables category will have strong growth prospects. Presently, there is a very low base of foreign players and product lines for processed fruit and vegetables in Iran: most of Iran’s food market is dominated by local companies. Virtually all of the major brands in this category, including industry leaders such as Dasht Morghab Group (1+1 tobrand), are Iranian companies that benefitted from the protectionist environment during the sanctions period. The brands produce high-quality and affordable offerings of canned and frozen fruit and vegetables, but there is limited product diversity and few specialized offerings242. The young and

242 The Ministry of Foreign Affairs of Denmark,“The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017

116 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables growing population in Iran is generally educated and interested in trying new products that they previously didn’t have access to.

One of the fastest growing sectors is frozen processed vegetables and potatoes, where sales have nearly doubled since 2011. The sector will also benefit from socio-cultural trends such as greater urbanisation and more hectic lifestyles will cause a shift from fresh fruit and vegetables towards processed varieties, as well as ready-made meal solutions. Finally, an expansion of modern retailers and hypermarkets will also bolster demand for processed fruit and vegetables (especially frozen), and provide an entry point for EU producers looking to get their products on the store shelves in Iran243. Conducting business in Iran will continue to be challenging due to heavy regulation and protectionism, high inflation, and a banking system with few connections to international markets. EU producers of processed fruit and vegetables that successfully penetrate the market with strong product innovations and savvy marketing will be rewarded with early mover advantages, carving out significant market share and building brand loyalty that will pay off in the longer term. Consumption Overall demand for processed fruit and vegetables grew modestly in recent years. Inflation has slowed significantly since last year; average unit prices only increased by approximately 8 per cent in 2016244. Greater parity between the volume and value growth is therefore expected in the coming years.

Frozen vegetables and potatoes are the fastest growing types of processed fruit and vegetables due to the emergence and expansion of hypermarkets and supermarkets. This growth is likely to accelerate since the removal of sanctions.

Going forward, frozen vegetables and potatoes will continue to be the most dynamic area in this space, albeit starting from a low sales base.

4.7.1.1 Consumer Profile and Trends Several factors are expected to cause food consumption in Iran to increase significantly in years to come, including for processed fruit and vegetables. Immediately prior to the removal of sanctions, disposable income was falling and economic growth was a paltry 0.9 percent.245 Economic growth is expected to continue at a stable level of 4.5% over the next few years while real GDP

244Trading Economics, “Iran Food Inflation”, accessed 21 August 2017 via https://tradingeconomics.com/iran/food-inflation 245 Ministry of Foreign Affairs of Denmark “The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017

117 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables growth is expected to increase to 6.6%.246 This acceleration will lead to higher levels of disposable income and consumption of food. The food market is projected to grow by 60 billion USD (52.60 billion EUR) per year.

The demographic outlook for Iran is very promising: Iran has a young and growing population of 80 million people that is also increasingly urbanised. Almost half of Iran’s population is below 25 years old.247 Key for processed fruit and vegetables is that this growing segment of the population is consuming less traditional products such as unpackaged rice, breads, oils and cheese, and instead purchasing more processed and packaged items. This is primarily attribuned to urbanisation, and the more hectic lifestyles that come with it. On top of this, there are greater numbers of working women in Iran, which is also generating demand for processed fruit and vegetables, as well as Figure 51 Processed Fruits ready-made meal solutions, which contain some and Vegetables Sold in Tehran element of processed fruit and vegetables such Supermarket as frozen pizzas. Irish frozen foods producer Green Isle Foods is expanding into Iran, with plans to offer a range of frozen pizzas and other frozen foods at grocery retailers. Recently, more Irish companies have discovered Iran as a potential market. This is partly to be explained by Iran’s continued economic development, which sees the rise of a growing middle class with a taste for premium, European, food and beverage products. As European products are often known for their high quality, high safety standards as well as sustainably produced.248

Food consumption habits in Iran are still heavily influenced by traditions. This poses a set of challenges for exporters of processed fruit and vegetables, as growth will be limited by the popularity and availability of fresh products, and a persisting preference for homemade traditional-style meals. Furthermore, Iran has its own range of local canned and preserved products that complement its local cuisine. For

246 Financial Tribune, “Iran economic outlook, stocks performance 2017-2018”, available via https://financialtribune.com/articles/domestic-economy/61337/iran-economic-outlook-stocks-performance- 2017-2018 247 The World Factbook, “Iran”, accessed 21 August 2017 via https://www.cia.gov/library/publications/the- world-factbook/geos/ir.html 248 Financial Tribune, “Ireland to consider reopening Iran embassy”, May 2016, available at: https://financialtribune.com/articles/economy-domestic-economy/40732/ireland-to-consider-reopening- iran-embassy

118 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables instance, torshi (derived from “torsh” in Farsi – meaning sour) are the pickled vegetables that can be made from a range of ingredients including garlic, celery, cauliflower, carrots, beets, shallots, cabbage, aubergines (eggplant) and other vegetables. There are hundreds of varieties popularized in different regions of the country, and it is considered a staple for many households.249 It is sold to consumers at most traditional grocery stores in Iran.

Traditional stews such as Fesenjan (Pomegranate Walnut Stew), Bademjan (Eggplant And Tomato Stew), and Gormeh Sabzi (Green Herb Stew) use a range of locally produced processed fruit and vegetables, including pomegranate molasses, canned beans, and tomato paste.250

Compared to many other countries in the Middle East, Iran’s traditional diet is relatively healthy. It is a leading producer of many varieties of fruits such as melons, tangerines, citrus fruits, kiwifruits, dates, cherries, pomegranate, peaches, oranges and raisins.251 A bowl of fresh fruit is common on most Persian tables, and salads and herbs like parsley, sage, rosemary and thyme are standard sides to most meals. Iranians tend to consume twice as many fruits and vegetables than people in other developing countries, and consequently there is no need to influence tastes through public campaigns for the sake of consumer health.252

In large cities, increased consumer demand for brands and packaged food was bolstered by the rise of modern grocery retailers such as supermarkets and hypermarkets. The pace of this growth has notably accelerated since the lifting of sanctions in 2016. This trend is contributing to increased sales for processed fruit and vegetables – especially in the frozen category. Traditional retailers that dominate food sales in Iran are rarely equipped with big freezers and equipment that are needed to sell frozen foods. Furthermore, the removal of sanctions has the potential to create new opportunities for these modern supermarkets to import products directly from abroad. EU producers looking to reach consumers in Iran should consider seeking partnerships with local retailers wishing to source products directly.

4.7.1.2 Cultural sensitivities Most Iranians are officially Shi’ite Muslims, but it is not necessarily the case that all are strongly devout. Political and public life in Iran are characterized by high levels of religious orthodoxy; however, many Iranians are more moderate in their private lives. There is also a large cultural gulf between

249 The Persian Fusion, “Spicy Persian pickles (Torshi Bandari)”, September 2016, available at: http://www.thepersianfusion.com/spicy-persian-pickles-torshi-bandari/ 250 SHAFIA, Louisa, “Persian Food Primer: 10 Essential Iranian Dishes”, October 2014, available at http://www.foodrepublic.com/2014/10/29/persian-food-primer-10-essential-iranian-dishes/ 251 Financial Tribune, “Eat Fruit, Be Happy”, July 2016, available at https://financialtribune.com/articles/people/45416/eat-fruit-be-happy 252 Ibid.

119 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables different demographics in Iran. Young urbanites tend to be more open-minded and experimental towards new products, making them an important target market for EU product exports.

Another feature of households in Iran is that they tend to be male-dominated, reflecting the country’s fairly conservative society. This has significant consequences for the consumer market since men are largely responsible for major household purchases. This means that male-driven consumer sectors such as cars and houses will tend to perform well, compared to other product categories.

Within more traditional segments of the population, cooking from scratch with fresh ingredients is still preferred to processed and ready-made products. This is a hindrance on the growth of the processed fruit and vegetables category since many Iranians are unwilling to alter their consumer habits in the near- term.

4.7.1.3 Challenges for EU Products Many consumers in Iran still have a strong attachment to their traditional food habits, which focus on fresh ingredients as opposed to processed and packaged options. Furthermore, the ingredients in these foods are predominantly from local producers, and purchased in traditional retail outlets. This ecosystem for local foods precludes much involvement from foreign producers of processed fruit and vegetables. The local market is also very competitive, and consumers are price-sensitive when it comes to standard grocery purchases. Fierce competition in the processed fruit and vegetables space meant that companies were investing heavily in in-store promotions and advertising. The affordability and built-up brand loyalty that local producers have worked to develop will make it difficult for EU producers to compete in similar product categories. Therefore, it is recommended that EU producers focus their product offerings on new areas and product lines that were previously not available in Iran. There is a shortage of premium products that experimental Iranian consumers would be willing to pay-up for. Offer 4.7.2.1 Domestic offer A major policy objective of the government since 1979 has been to achieve virtual self-sufficiency in foodstuffs, including fruits and vegetables. This was achieved through a range of policies such as government subsidies, targeted assistance to farmers in the form of loans and tax credits, and prohibitively high import duties for strategic products in the agricultural sector. In effect, Iran currently has a self-sufficiency rate of 96% for essential food & beverage products.253 The government has also prioritized the establishment of the agro-

253 “Food Security Index at 96%”, available at https://web.archive.org/web/20091001021913/http://www.iran-daily.com/1387/3323/html/economy.htm

120 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables processing industry to meet local needs for products such as canned fruits and vegetables.

Iran is the number one producer of fruit in the Middle East and North Africa, and ranks in the top 10 globally. Roughly 2.7 million hectares in Iran are cultivated for fruit production specifically; these orchards produce up to 16.5 million tons of fruit per year.254 It is also a major producer of a range of vegetables including tomatoes, onions and cucumbers, and a range of spices and herbs. The fruit and vegetables processing industry primarily uses inputs derived from local produce.

The Iranian food market provides relatively few varieties within processed foods, leaving big potential for modernization of the sector and specialized products to be imported from abroad.255

4.7.2.2 Import Imports of most categories of processed fruit and vegetables were very low from 2012-2016. It was only frozen vegetables that experienced any import activity, as indicated in figure below. This is a result of the sanctions that were imposed during this period on Iran, as well as political goals aimed at achieving self-sufficiency in food production and processing. It should be noted that the official data will likely not capture all trade activity due to the prevalence of black markets during the sanctions period. According to the formal data, total imports of frozen vegetables in 2016 were 12,066 tonnes. From 2012-2016, the total volume of imports grew by 17 percent, and the top five import sources were Thailand, Hungary, China and India.256

Table 15 Imports of processed fruit and vegetables in Iran (2016), unit: tonnes

Product Total Canned Fruit 0 Canned Vegetables 2 Frozen Fruit 1 Frozen Vegetables 12,066 © ITC Trade Map257

4.7.2.3 Export According to ITC Trade Map, Iran exported a negligible quantity of processed fruit and vegetables in 2016, as was also the case from 2012-2015. Iran

254 Financial Tribune, “Eat Fruit, Be Happy”, July 2016, available at https://financialtribune.com/articles/people/45416/eat-fruit-be-happy 255 The Ministry of Foreign Affairs of Denmark,“The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017 256 Trade Map, International Trade Centre, www.trademap.org 257 Trade Map, International Trade Centre, www.trademap.org

121 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Processed Fruits and Vegetables primarily exports fresh and fried varieties of fruits, such as dried fruit, as well as nuts such as pistachios.

Figure 52 Exports of processed fruit and vegetables in Iran (2016), unit: tonnes

300

250

200 Canned Fruit

150 Canned Vegetables Frozen Fruit 100 Frozen Vegetables 50

0 2016

4.7.2.4 Main Competitors Policies aimed at making Iran self-sufficient in food production and processing, as well the extended period of sanctions resulted in an environment where domestic manufacturers of processed fruit and vegetables dominated the local market. In effect, many supermarkets and small retailers in Iran have mostly locally produced products for sale. Dasht Morghab Group (under its flagship brand “1&1”) is the unrivalled leader in this food category with a 32 per cent value share in 2016. 1&1 brand has a long history and reputation for quality and affordability with the local population259. It also has a strong distribution network for its canned products, allowing for sales in remote areas of Iran. In the frozen processed fruit and vegetables category, Domestic producers are expected to continue dominating the local market due to their affordability and reasonable quality. Given the steep competition in the processed fruit and vegetables category, many of the leading brands are trying to lure customers with new product launches and savvy marketing campaigns. In-store advertising is the most common marketing channel for canned products, while newer frozen food brands are using modern communications medium such as television and online marketing to increase their exposure.

4.7.2.5 Challenges for EU Products Despite the lifting of sanctions, Iran still presents a challenging business environment for potential EU exporters of processed fruit and vegetables. Iran currently ranks 120 out of 190 countries in the World Bank’s Ease of Doing

258 Ibid. 259 For more information have a look at: http://1and1group.com/new/en/entries?section=8

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Business survey.260 Furthermore, although inflation has receded it remains a persisting threat; the average price increase for processed fruit and vegetables in 2016 was 8 percent. Import duties on food products are high, and this is especially true for the processed food sector. Food products that are imported into Iran as raw materials (i.e. fresh fruit) have substantially lower duties than their processed or packaged counterparts. For instance, the import duty for frozen vegetable products was 55 per cent in 2016.261 Therefore, it is advisable for EU producers in the processed fruit and vegetables sector to consider partnering with a local processing company, or to set up a local subsidiary in order to process and package their products.

4.7.2.6 Specific customs and SPS requirements for import, needed documents The Food and Drug Department operates within the Ministry of Health and Medical Education in Iran. It is mandated with control and supervision of production, including the issuance of health certificates for imported food products. A health certificate is required for imports of all processed fruit and vegetable products.

The Institute of Standard and Industrial Research in Iran develops official standards for products, which exist for all processed fruit and vegetables. The list of standards can be viewed at: http://www.isiri.org/EN/File/ENSaderat.pdf. It is strongly advised that labels, including instructions and description of imported goods be produced in Farsi.262

260 The World Bank, “Doing Business 2016: measuring regulatory quality and efficiency”, 2016, available at http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual- Reports/English/DB16-Full-Report.pdf 261 The Ministry of Foreign Affairs of Denmark,“The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017 262 Ibid. 263 ARDAKANI, M. Reza, “Country report: Iran”, accessed 22 August 2017 through http://www.isofar.org/isofar/index.php/2-uncategorised/120-country-report-iran

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Distribution The food retail environment in Iran is still heavily dominated by traditional grocery stores; currently, most of food and beverage sales are conducted Figure 53 Organic Processed Fruits through traditional small grocery outlets and Vegetables Sold in Tehran and local bakeries. However, many Supermarket observers are convinced that this will change dramatically in years to come. The entry of Majid Al Futtaim Hypermarkets LCC – operating under the name “Hyper Star” – has seen a dramatic shift in the country: many Iranian shoppers have embraced ease of buying a wide variety of products through one centralised place. As recent as 2014, small grocery outlets have converted to supermarkets offering a wider range of products while remaining their indepdent status.264 This is an especially positive development for frozen fruit and vegetables, which require the proper freezers and storage equipment.

Some of the biggest modern retail brands in Iran in terms of sales value were Etka, Koorosh, Hyperstar and Refah.265 Sales at modern retailers are experiencing strong demand from young, educated city- dwellers. The main pricing strategy of modern retailers in Iran is to offer two types of food goods: competitively-priced domestic products that are mass- consumed, and premium imported products. This presents a significant market opportunity for EU producers of processed fruit and vegetables, who should be focused on creating new and innovative product lines as opposed to competing with local producers in the same space. There is a significant portion of Iran’s population that wants to experiment and try new products that were previously not on offer. EU producers in processed fruit and vegetables are advised to consider cooperating with modern retailers that are interested in stocking their products.

264 Financial Tribune, “Retailing in Iran: slow shift to modernization”, September 2015, available at: https://financialtribune.com/articles/economy-domestic-economy/25475/retailing-in-iran-slow-shift-to- modernization 265 Financial Tribune, “Why grocery stores outnumber any other shop in Tehran”, June 2015, available at: https://financialtribune.com/articles/economy-business-and-markets/19404/why-grocery-stores-outnumber- any-other-shop-in-tehran

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Summary The market for processed fruit and vegetables in Iran is promising, but also full of challenges for EU exporters. The lifting of sanctions at the beginning of 2016 threw open the doors for international brands to a market that has promising growth potential, combined with strong demographics, including a young and increasingly urban population. Consumers in Iran are experimenting with Western products, and modern supermarkets and hypermarkets are expanding quickly, offering a range of new premium products, including frozen fruit and vegetables which could not be sold in traditional grocery outlets before due to a lack of freezing capacity. Importantly to EU producers of processed fruit and vegetables, Iran has few varieties of processed foods, meaning that Iran is ripe for new and innovative product lines. Certain challenges do exist, including the high duties on packaged and processed foods entering into Iran. Furthermore, local manufacturers and small, traditional retailers continue to dominate in Iran’s food landscape. Finally, uncertainties concerning inflation and the direction of economic policy are real. EU producers of processed fruit and vegetables should take a longer- term approach to the market, understanding that it will require time to penetrate and generate brand awareness and loyalty.

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Dairy Products

Strengths Weaknesses • Tenth largest growing • Political instability dairy market globally • Very low unit price compared to multinational brands

Opportunities Threats • The lifting of sanctions • Demand for products by the west is opening which are perceived to up the market contain preservative may decrease due to growing awareness to health considerations

The lifting of sanctions from Iran by the west is expected to open up the Iranian market and create many opportunities for European and other international companies. On top of opening the market for foreign companies, the lifting of sanctions would enable producers in Iran to purchase advanced machinery and modernise the production of dairy products. As a result, trade barriers are expected to be reduced in upcoming years and growth in the sector is expected to improve, with a high compound annual growth rate (CAGR) of around 22 per cent forecasted for the period 2016-2021266. However, the political landscape is still highly unstable. Monetary policies of the Iranian government have been reflected in continued declining trend of inflation rate, resulting in diminishing value growth and low growth in unit prices across most of the products categories. Purchasing power of the population is still low, and most Iranians cannot afford imported dairy products.

266 Financial Tribune, “Iranian dairy market offers strong growth prospects”, December 2016, available at: https://financialtribune.com/articles/domestic-economy/55665/iranian-dairy-market-offers-strong-growth- prospects

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Consumption As indicated in the table below, Iran’s per-capita consumption of dairy products in 2016 was 29.79 kg, comprising of 23.48 kg of fresh milk (78.82 per cent), 3.17 kg of butter (10.64 per cent) and 3.14 kg of cheese (10.54 per cent). While consumption of dairy products dropped between 2011 and 2014, it has since gradually but steadily increased, and the trend is expected to continue over the next 5 years.

Figure 54: Consumption of dairy products in Iran 2011-2016 and prospects for 2017- 2021 (kg per capita)

32 31.5 31 30.5 30 29.5 29 28.5 28 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

OECD-FAO

Figure 55: Consumption of dairy products in Iran by category, 2016

Cheese, 10.54%

Butter, 10.64%

Fresh dairy products, 78.82%

OECD-FAO

During 2011-2015, the Iranian dairy products market experienced high demand for value-added dairy products such as butter and margarine, cheese, yogurt, ice cream, etc., across the country. In order to address this demand, a large number of domestic as well as international dairy manufacturers operating in Iran are offering high-quality products without adulteration. With market growth expected to increase over 20% in the next five years, dairy

127 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products collection and cooling centers in both urban and rural areas are expected to become more commonplace. Irish delegates in the dairy sector for example, have already visited the country in April 2016 to scope the future potential of this market.267 This is part of a trend of international dairy brands expected to enter Iran in coming years.

Figure 56: OECD-FAO Data on Dairy Consumption in Iran 1997-2016 in tonnes (thousands)

600 500 400 300 200 100 0

OECD-FAO

Figure 57 OECD-FAO Data on Dairy Consumption in Iran with forecast 2017-2021 in tonnes (thousands)

535.878 533.525 538.65 528.255 522.462 516.247 523.532 509.214 522.648 503.284

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

OECD-FAO

Dairy consumption in Iran fluctuated substantially in recent years, with a general increase through 1997-2016 period ending at 509.21 tonnes in 2016.268 Consumption in 2015 consisted mainly of butter and margarine as the main dairy products, as well as milk to a lesser extent. Cheese consumption has been growing due to new tastes developed by a growing middle class.

267 Financial Tribune, “Iranian dairy market offers strong growth prospects”, December 2016, available at: https://financialtribune.com/articles/domestic-economy/55665/iranian-dairy-market-offers-strong-growth- prospects 268 “OECD-FAO Agricultural Outlook 2016-2025” available at: https://knoema.com/OECDAO2017/oecd- fao-agricultural-outlook-2016-2025

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Similarly yoghurt consumption has been steadily growing, mainly due to an increased consumption of “doogh” – a local yoghurt-based beverage.269

4.8.1.1 Consumer Profile and Trends While traditionally products such as rice, Figure 58) Refrigerated Dairy Shelf in bread, yoghurt and cheese were Iranian Hypermarket consumed mostly loose/unpackaged, in recent years consumption of packaged items has been growing, especially in key urban areas. This trend is mainly due to two reasons: firstly, a large part of Iran’s population is aged between 15- 34 years old. This group is more conscious about health and sanitary concerns, and in effect is more inclined to purchase new packaged food items. Additionally, an increase in the number of malnutrition cases in the country has led to higher awareness among people, regarding consumption of packaged milk and other packaged dairy products. Furthermore, dairy products originating from Europe or the US not available for domesting consumers prior to the lifting of sanctions offer attractive alternatives for Iranian consumers270.

On the other hand, growing awareness about health considerations has been reflected in decreasing demand for products such as shelf stable drinking milk, which many young consumers consider to be unhealthy due to the common perception that it contains preservatives.

4.8.1.2 Cheese Unlike other Middle Eastern countries, Iran’s absolute value growth for cheese products declined during the period 2011-2016. This reflects a general trend for the Iranian economy, as inflation rates continued to decline in light of government initiated monetary policies.271 Cheese recorded 7 per cent retail value growth in 2016. This is much lower than the 18 per cent value CAGR for

269 Financial Tribune, “Iranian dairy market offers strong growth prospects”, December 2016, available at: https://financialtribune.com/articles/domestic-economy/55665/iranian-dairy-market-offers-strong-growth- prospects 270 Iran Daily, “Iran’s dairy products market to grow”, November 2016, available at: http://www.iran- daily.com/News/172971.html 271 The World Bank, “The World Bank In Islamic Republic of Iran”, accessed 21 August 2017 through: http://www.worldbank.org/en/country/iran/overview

129 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products the period 2011-2016, mainly due to low unit price growth in 2016 compared to previous years.

Figure 59 OECD-FAO Data on Cheese Consumption in Iran in tonnes (thousands)272

272.415 268.527

259.214 255.522 250.001 251.535

2011 2012 2013 2014 2015 2016

OECD-FAO

Figure 60 Variety of Cheese Available in Tehran As displayed in the graph Supermarkets above, 2016 saw the first increase in cheese consumption in Iran following a declining trend for the period 2011 -2015.

A higher consumption of yogurt and sour milk can similarly be expected in Iran, mainly due to a preference for these products over fresh/pasteurised milk. Similarly, the markets for fat and butter products in Iran have already been targeted by international companies for expansion.273

Innovative manufacturers like Kalleh Dairy have introduced the market to a wide variety of cheeses, in effect stimulating a growing number of products gaining popularity in Iran. This includes cream cheese, processed cheese, Edam, Gouda and Parmesan. This has allowed for a continued growth of the cheese sector throughout 2016 – mainly focussed in urbanised areas across the country.

4.8.1.3 Drinking milk products Iran has one of the lowest per capita consumptions of milk in the region according to the Iranian Ministry of Health and Hygiene. Growing health concerns have been evident in an increase in the popularity of fresh milk over

272“OECD-FAO Agricultural Outlook 2016-2025” available at: https://knoema.com/OECDAO2017/oecd- fao-agricultural-outlook-2016-2025 273 The Italian Trade Agency, “Market Overview of Iran’s Agricultural Food Sector”, January 2016.

130 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products shelf stable milk – as this is commonly connotated with the preservatives it contains. Yet at the same time, this perception is gradually changing as nearly all items in this category now carry a “No additives or preservatives“ label and the availability of shelf stable milk products is growing.274 Likewise, as health awareness increases so does demand for low fat/lactose milk as well as soy- based drinks and soy milk. Iranian consumers are slowly getting familiar with the taste of these kind of products as lactose-free, reduced fat or reduced cholesterol diets become more common.

Figure 61 OECD-FAO Data on milk production in Iran in tonnes (thousands) with forecast 2017-2021

8.64 8.5 8.35 8.21 8.07 7.93 7.8 7.69 7.7 7.57 7.61

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

OECD-FAO

As illustrated in the graph above, milk production in Iran increased from 4,895 tonnes in 1997 to 7,934.31 tonnes in 2016 growing at an average annual rate of 2.69 per cent. Forecasts for the period 2016-2021 envision a significant annual increase in unit prices by 2021 when measured at constant 2016 prices.275 Iran currently has roughly 9 million head of cattle, 1 million of which are of the dairy-specific Holstein breed and produces on average 32 kg of milk per day.276 This type of livestock is concentrated around urban centres throughout Iran. As such, Iran is self-sufficien in its production of cheese, butter and milk powder.

Implementation of the next phase of the subsidies cut-off programme is expected during this period during which the price for milk could be affected. Yet, at the end of 2016 the Iranian government’s official policy on this matter was still extremely unpredictable.

274 Iran Daily, “New nutrition labels to hit market soon”, April 2015, available at: http://www.iran- daily.com/News/115398.html 275 “OECD-FAO Agricultural Outlook 2016-2025” available at: https://knoema.com/OECDAO2017/oecd- fao-agricultural-outlook-2016-2025 276 Financial Tribune, “Iranian dairy market offers strong growth prospects”, December 2016, available at: https://financialtribune.com/articles/domestic-economy/55665/iranian-dairy-market-offers-strong-growth- prospects

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Additionally, the growing popularity of flavoured milk drinks is likely to continue. New product launches, including various flavoured milk drinks as well as fortified milk and products low in lactose, may expect to benefit from increasing popularity, albeit at a slow pace.

4.8.1.4 Yogurt and sour milk products Iran consumes a significant amount of yoghurt. Traditionally, yoghurt is considered a healthy food which is often served alongside main dishes at lunch and dinner. A type of yoghurt, known as mast in the Farsi language, is prepared at home from milk and plain yogurt. Likewise, A traditional Iranian sour milk drink, known as doogh in Farsi, is also prepared simply by adding salt and water to yoghurt and is used as a drink in place of carbonates or non- alcoholic beer. Consumption of yoghurt and yoghurt like deserts is expected to continue increasing – albeit slowly – and is among other dependent on public policy developments for these kind of products specifically. Offer Iran’s production of liquid milk in 2015 was 7,800 million tons. Given the relatively low local consumption – 2.7 million tons in the same year – Iran is self-sufficient in milk production.277 Leading revenue generators regions in the dairy sector in Iran are Tehran and Tabriz. The Iranian government is increasingly investing and initiating new programs in the sector, as part of a larger trend shifting the economy towards greater diversification into non-oil sectors.

Some of the countries most prominent dairy companies include: Pegah Dairy Company, Kalleh Dairy Company, Mihan Dairy Group, Teen Dairy Products Company and Pak Dairy Company among others, offering a wide variety of products to domestic consumers.

4.8.2.1 Import Iran’s imports of dairy products from the EU in 2016 amounted to a value of 26.83 million EUR, which constitutes 23.4 per cent of Iran’s total imports of dairy products. While value growth over the period of 2012-2016 has been negative, between 2015 and 2016 it has significantly increased.278 Germany and Ireland lead in dairy exports to Iran, both among EU countries and globally (constituting respectively 7.2 and 5 per cent of total imports of dairy products by Iran). These are only surpassed by New Zeeland, which is the primary exporter of dairy products to the country, with a value of 88.4 million USD (79.15 million EUR), constituting 69.3 per cent of imports by Iran.

Figure 62 Iran's imports of dairy products from the EU, 2016 (value in € millions)

277The Italian Trade Agency, “Market Overview of Iran’s Agricultural Food Sector”, January 2016. 278 Trade Map, International Trade Centre, www.trademap.org

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30 25 20 15 10 5 0

Figure 63 value growth in Iran's imports of dairy products from leading EU countries (% p.a)

1200

1000

800

600

400 2012-2016 2015-2016 200

-200

© ITC Trade Map280 Export According to ITC Trade Map statistics, Iran’s total exports of dairy products in 2016 amounted to a value of 5 million EUR. The main target of Iranian exports in this category is the Russian federation, whose imports’ value in 2016 amounted to 1.3 million USD (1.16 million EUR), 22.8 per cent of the total exports by Iran in this sector. Iran’s trade balance with its main EU trade

279 Trade Map, International Trade Centre, www.trademap.org 280 Ibid.

133 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products partners, France and Ireland, was in 2016 about minus 3 million and minus 6 million EUR respectively.

Figure 64 Iran's exports of dairy products to the EU (2016 value in € thousands)

200 180 160 140 120 100 80 60 40 20 0 France Luxembourg Spain Ireland

Figure 65 OECD-FAO Data on Exports of Cheese in Iran 2011-2016, Unit: thousands of tonnes

48.43 45 38.25 34.08

22.57 22.64

2011 2012 2013 2014 2015 2016

OECD-FAO

Exports of cheese in Iran increased from 0.04 tonnes (thousands) in 1997 to 48.43 tonnes (thousands) in 2016 growing at an average annual rate of 140,672.49 per cent. Rising demand for packaged cheese is forecasted in the next few years in Iran.

281 Trade Map, International Trade Centre, www.trademap.org

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4.8.3.1 Main Competitors The key players In Iran dairy products market are Iran Dairy Industries Co. (Pegah), Kalleh Dairy Company, Mihan Dairy Group, Sahar Dairy, Damdaran Holding, Teen Dairy Products Company and Pak Dairy Company. However, the top brands in dairy as announced by the Trade Promotion Organization of Iran for the year ending 20 March 2017 are Pegah, Kalleh and Mihan. Listed on the Tehran Stock Exchange are Pak Dairy, Kalber Dairy, Isfahan Pegah Dairy, Khorasan Pegah Dairy and West Azarbaijan Pegah.282 These leading companies offer a wide variety of dairy products through a well-established distribution network.

Pegah Dairy283 is a state-owned company with nationwide coverage and the largest share of Iran’s dairy market – at roughly 21% of the market284. It leads in the drinking milk products category and also has several factories across the country, including in Pegah Khorasan, Pegah Gilan and other areas, which supply all urban and rural areas with fresh dairy products. It has recently opened the biggest milk powder factory in the country, located in Lorestan Province, and at the same time has over 2,000 head of cattle in its Aligudarz Animal Husbandry Complex alone.285 The bestselling cheese in Iran is considered to be “Pegah Shabnam”, a brand by Pegah Dairy. It is a very simple soft cheese packaged in salted water.

As one of the leading companies in the dairy sector, Kalleh Dairy has a strong profile for yoghurt, sour milk drinks as well as cheese, and currently has roughly 21% market share286. It is a part of Solicio food Industries, one of the largest food processing companies in Iran, who manufacture a large variety of products, including milk, yoghurt, ice cream, and sour milk. Kalleh Dairy’s range of main products includes milk (variety of low fat milk, high fat, vitamin, low-lactose and flavoured with chocolate flavour, bananas, dates, chocolate), cheese (more than 100 types of cheese such as white, cream, Cheddar, processing, cumin, Lyqvan, etc…), natural cheeses (eight kinds of natural cheese such as Gvda, Bluecheese, Kmmbr, parmesan, which in Iran only are produced in Kalleh Co.), yogurt (variety of fat yogurt, low fat, cream , Shallot, Fruity), buttermilk (types of simple buttermilk, flavoured, sparkling,

282 Trade Map, International Trade Centre, www.trademap.org 283 For more information, please visit http://pegahdairy.com/en/ 284 Financial Tribune, “Iran’s dairy industry booming, as exports expand”, August 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/70617/iran-s-dairy-industry-booming-as- exports-expand 285 Ibid. 286 Financial Tribune, “Iran’s dairy industry booming, as exports expand”, August 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/70617/iran-s-dairy-industry-booming-as- exports-expand

135 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products probiotic), powder (cheese powder, milk powder, dry powders and other types of industrial powders), and dessert (pudding desserts in different flavours).287

Mihan Dairy Group holds strong positions in shelf stable milk and flavoured milk drinks and also has very effective distribution network and advertising campaigns. Teen Dairy has recorded a strong increase in value share over the year 2016, mainly due to the improved availability and visibility of its Damdaran brand, which has managed to be listed among the most important and greatest fresh milk production units in the country.288 Saina Food Part provides the most popular soy milk in Iran. Its Manda soy brand takes the greatest share of soy beverages in the country.289

4.8.3.2 Challenges for EU Products Figure 66 Kibi Promotion The Iranian dairy sector is characterised by Campaign domestic manufacturers. Unit prices of domestic products are very low compared to multinational brands, which make imports unreasonable. In cheese, for instance, The French Bel Group multinational is very active in Iran. It has joint production with Sahar Dairy Co for its Kiri (known as Kibi in Iran) and Laughing Cow brands. Under its agreement with Sahar Dairy Bel Group has 70 per cent of the joint venture.290 Going forward, the group intends to introduce its own products. Similarly, the only active multinational in the drinking milk category is Danone Group, which has joint production of its flavoured milk drink (Danette) with Sahar Dairy Industrials.291

4.8.3.3 Specific customs and SPS requirements for import, needed documents Like all other imports of food products, plants, animals or animal products, dairy products imports to Iran require a health certificate from the country of origin. Special requirements apply for products for feeding infants: such products are subject to the discretion of the Ministry of Health, Treatment and Medical Education. Powdered milk for the consumption of infants is subject to a reduced import duty of 5 per cent.292

287 For more information, please visit: http://www.fooddirectories.com/goldsupplier/KallehDairy 288 For more information on Damdaran brand, please visit: http://damdaran.ir/en/articles/page/1/pagesize/30 289 For more information on Saina Food Part, please visit: http://www.mandasoy.com/en/about-us 290 Retail Business Review, “Bel to form Iranian JV”, June 2007, available at: http://www.retail-business- review.com/news/bel-to-form-iranian-jv 291 Financial Tribune, “Iran’s dairy industry booming, as exports expand”, August 2017, available at: https://financialtribune.com/articles/economy-domestic-economy/70617/iran-s-dairy-industry-booming-as- exports-expand 292 “Export - Import Regulations 2016” Available at: http://farsi.tpo.ir/uploads/mogarrarat1395_1_ok_16238.pdf section I, chapter 4

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Distribution The main distribution channel for both drinking milk products and cheese in Iran is independent small grocers. In small cities and rural areas it is common to purchase unpackaged milk from special outlets known as labaniati in Farsi.

Local companies hold a Figure 67 European Cheese Sold in Tehran strong advantage over Supermarkets foreign companies. The strength of domestic brands is partly caused by the international sanctions imposed upon Iran by the EU and the US previously: this has meant that Iran was unable to develop its position in international trade and in effect its government looked for alternative ways to keep its economy afloat. Self- suffiency was prioritised, which meant that national companies were nurtured through policies of import substitution or by imposing high on imports of foreign goods.293

Common advertisement approaches used by all key players are: national television and radio and strong point-of-sale displays in various distribution channels, especially in supermarkets and hypermarkets. Leading companies use different strategies to target new groups of consumers and raising product awareness, in order to gain competitive advantage.294 Summary Although trade in dairy products by Iran is low in global terms, the lifting of the sanctions by the west may constitute an opportunity for EU exporters. Sales of dairy products in recent years and forecasts for the upcoming years indicate a positive trend towards growing local demand. Iran is going through a process of modernisation and urbanisation. Combined with growing awareness to health issues, this process is altering consumers’ preferences, although slowly. A greater variety of products become available in the country, and consumers gradually get accustomed to new tastes. The market is currently dominated by local providers. The very few international companies

293 ELMJOUIE, Yara, “Heinz or Delpazir: the state of Iran's homegrown industries”, The Guardian, February 2016, available at: https://www.theguardian.com/world/iran-blog/2016/feb/02/western-brands-competition- market-iran-poll-tehranbureau 294 M and M Global, “A guide to Iran’s marketing opportunities, ‘stylish’ consumers and burgeoning media scene”, September 2016, available at: http://mandmglobal.com/a-guide-to-irans-market-opportunities- stylish-consumers-and-burgeoning-media-scene/

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Processed Cereals

Strengths Weaknesses •High dependancy on •Increasing food prices imported products are affecting •Lift of sanctions will consumers create opportunities •Iranians have not for EU companies included breakfast cereals as part of their diet

Opportunities Threats •Shift of dietary choices •Government has put in towards Western place strict regulations products will create and holds a monopoly opportunities in Iran over imports

Although the market for European processed cereals in Iran faces a few challenges such as a slow-growing interest and taste for these food products and strict government oversight which includes protectionist tendencies, a new window of opportunity has opened following the lifting of sanctions and an interest in Western products.

Consumption Boasting a diverse and deep-rooted culinary culture, Iranian cuisine is primarily based on two staples: rice and bread. These two cereals are highly important in the Iranian diet and food consumption. The local flat bread, known in English as ‘pita’, is subsidised by the central government.

Other cereals, for example barley, are used mainly for malt-based products. Breakfast cereals are generally considered to be a children’s meal. However, this conception is slowly changing, as younger generations have begun to

139 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products adopt Western food habits. In effect, cereals as a food category in Iran has been well established295.

Next to barley, wheat also is a prominent crop cultivated in Iran and often included in cereals. Toegether, these two crops account for almost 3/4th of domestic cereal production.296 Wheat makes up an essential portion of the Iranian economy, as it is the base for producing flour, also used to cook bread, which is a staple in the Iranian diet.

Iran´s wheat production in 2015/2016 reached 13.5 million tonnes297. However, increasing demand from the growing population and urbanisation has led the country to rely heavily on substantial wheat imports. In addition, Iran may rely heavily on imports especially during droughts as the current agricultural technology may not be able to sustain the steady demand in intense dry periods. Modernized machinery and climate resistant seeds will drastically change production levels of wheat in Iran. Expected production for cereals in Iran currently reaches over 20 million tons – an estimated increase of nearly 1% from the production level of 2016298

Wheat domestic production and imports are controlled by the Government Trading Corporation of Iran (GTC).

295 Financial Tribune, Kellogg relaunches cereals, pringles in Iran, December 2016, available at https://financialtribune.com/articles/economy-domestic-economy/55595/kellogg-relaunches-cereals- pringles-in-iran 296 Source: Food and Agriculture Organisation of the United Nations, 2017, GIEWS, Country Brief - Iran (Islamic Republic of), http://www.fao.org/giews/countrybrief/country.jsp?code=IRN, Reproduced with permission. 297 Ibid. 298 Financial Tribune, “FAO: Iran to produce 20m tons of cereals in 2017”, June 2017, available at https://financialtribune.com/articles/economy-domestic-economy/66653/fao-iran-to-produce-20m-tons-of- cereals-in-2017

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Figure 68 Main cereal importers into Iran (Products of the milling industry; malt; starches; inulin; wheat gluten), by % value imported 2016

Italy Georgia Malaysia 5% 4% 4% France 5% India Thailand 40% 6% Germany 6%

Belgium 10% Netherlands 20% © ITC TradeMap299

Barley is used in Iran for producing malt, which in turn is used in various food production including malt vinegar, confections, flavoured drinks, baked goods, as well as non-alcoholic beer. A high-protein form of malted barley is often used as an ingredient in blended flours typically used in the manufacturing of yeast breads and other baked goods.

Even though alcohol consumption and production is banned in Iran, several brewing companies produce non-alcoholic beer, which is a popular beverage consumed in Iran, as well as in other Muslim-majority countries throughout the region. 300 Barley is imported by companies including state-owned and leading manufacturer, Behnoush Company to produce malt extract and malt products.

299 Trade Map, International Trade Centre, www.trademap.org 300 Financial Tribune, “Opportunities in Barley Malt Industry”, May 2015, available at https://financialtribune.com/articles/economy-business-and-markets/16684/opportunities-in-barley-malt- industry

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Figure 69 Barley imports value into Iran

France Estonia 6% 4%

Germany 18% Kazakhstan 43%

Russian Federation 29% © ITC TradeMap301

4.9.1.1 Consumer Profiles and Trends As Western high-end products gain popularity in Iran, the demand for food products and cereals from the West also increase. A traditional Iranian breakfast often consists of flatbread which can be topped with butter or jam and paired with an omelet and tea. It can also include sheep, porridge or (lentil) soup.

Although traditional breakfasts remain a staple, Breakfast Cereals are also gaining popularity in Iran, with some national companies and a few international companies gaining more ground. (Please refer to section 1.1.2.3:” Main Competitors”) in this chapter.

4.9.1.2 Challenges for EU products While there is growing awareness among the Iranian population regarding processed cereals as a food option, there is still potentially not enough popular knowledge about EU products to gain a significant market share in the country within the near future. This factor combined with the perception that breakfast cereals / processed cereals consist of a luxury item, may contribune to a slow demand growth among lower-income consumer groups.

In addition, distribution may be an issue in the Iranian market. In order to encourage take-up wide distribution must take place which would increase awareness, and consequently demand for products. In Iran, the distribution landscape is currently highly fragmented, with a large percentage of products, including processed cereals, being sold in independent small grocers. While consumers are shifting to purchasing in Hypermarkets and Supermarkets,

301 Trade Map, International Trade Centre, www.trademap.org

142 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products these small independents are likely to continue to have a large market share in the near future. It may therefore be difficult to distribune country-wide given that arrangements will potentially need to be made with various independents, rather than a processed cereal EU exporter who is able to sign distribution agreements through a small number of large nationwide Supermarkets/Hypermarkets capturing a large percentage of the market.

Finally, while there is presence of multinational brands in the country in the processed cereals category, a national dominance exists (raw materials for processed cereals are also in abundance in the country302), which may prove a barrier to overcome. Alternatively, Iranian consumers’ interest in Western lifestyles and eating habits may soften this to a certain extent. Offer Iran has a large production of wheat, barley, rice and other which totalled 19,930 tons in 2016 with an anticipated 20,110 tons, according to FAO statistics as apparent in the table below. The forecasted production for 2017 shows a possible change of 3 per cent and no change for the wheat and other categories.

Table 16 National average cereal production for Iran from 2012-2016, forecasted amount for 2017 in tonnes and the anticipated change percentage for 2017

2012-2016 2017 Change 2016 average forecast 2017/2016

000 tonnes percent

Wheat 10,774 13,500 13,500 0

Barley 2,776 3,000 3,100 3

Rice 2,405 2,520 2,600 3 (paddy)

Others 1,486 910 910 0

Total 17,410 19,930 20,110 1

There are currently no processed cereal products registered under any Geographic Indication protection. (Please see Annex 1: GIs in Iran for further

302 Financial Tribune, “An Overview of Breakfast Cereals Market”, May 2015, available at https://financialtribune.com/articles/economy-business-and-markets/17814/an-overview-of-breakfast- cereals-market 303 Source: Food and Agriculture Organisation of the United Nations, 2017, GIEWS, Country Brief - Iran (Islamic Republic of), http://www.fao.org/giews/countrybrief/country.jsp?code=IRN, Reproduced with permission.

143 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products information) Therefore, the cereals market does not currently have any GI products in this country at this time. Export Since 2012, as apparent in the graph below, Iran has experienced an upward trend in trade value and trade weight of exports of processed cereals to international markets.

Figure 70 Export from Iran of prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ©

Trade Value (US$) Netweight (kg)

$600,000 300,000 $500,000 250,000 $400,000 200,000 $300,000 150,000 $200,000 100,000

$100,000 50,000 (kg) Netweight Trade Value (US$) Value Trade $0 0 2012 2013 2014 2015 2016

Over this time period, Iran has received an increasingly higher price per kg for processed cereals on international markets. The price per kg in 2016 was 198 per cent higher than in 2012, according to UN Comtrade statistics.

Table 17: Price per kg of exports from Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared

2012 2013 2014 2015 2016

Price per kg 0.98 (EUR 1.27 (EUR 1.88 (EUR 2.04 (EUR 1.94 (USD) 0.85) 1.01) 1.64) 1.78) (1.69)

Iran’s main trade partners are concentrated in a relativly small number of countries with respect to processed cereals.

Figure 71 Export from Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form,

304 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org 305 Ibid.

144 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products pre-cooked or otherwise prepared, by partner country % share (2012-2016, total trade val

Azerbaijan, 2.05% Oman, 1.52% Canada, 2.06% UAE, 21.72% Bahrain, 2.62% Armenia, 7.60% Sweden, 6.88%

Other, 10.46% Jordan, 20.18%

Germany, 10.79% Poland, 14.10%

4.9.3.1 Import Following a drop in worldwide processed cereals exports to Iran in 2013, a constant upward growth in trade value for this category has taken place over the past few years, which can be seen in the graph below.

Figure 72 Import to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ©

Trade Value (US$) Netweight (kg)

$3,500,000 1,200,000

$3,000,000 1,000,000 $2,500,000 800,000 $2,000,000 600,000 $1,500,000 400,000

$1,000,000

Netweight (kg) Netweight Trade Value (US$) Value Trade $500,000 200,000 $0 0 2012 2013 2014 2015 2016

306 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org 307 Ibid.

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Interestingly, importers to Iran in 2013 also saw a drop in the price per kg they were receiving from this category, from which they have now recovered. The current price levels are above those experienced in 2012.

Table 18: Price per kg of imports to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared

2012 2013 2014 2015 2016

2.91 Price per kg 2.79 (EUR 2.11 (EUR 2.12 (EUR 2.51 (EUR (EUR (USD) 2.43) 1.84) 1.85) 2.19) 2.54)

©UN Comtrade308

The main exports of processed cereals to Iran come from partners who are, with the exception of the United Arab Emirates and Turkey, outside of Iran’s regional proximity.

Figure 73 Import to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared, by partner country % share (2012-2016, total trade value USD)

China, 2.82% Other, 3.76% Switzerland, Malaysia, 4.64% 19.19%

Spain, 9.55%

France, 12.25% Poland, 5.71%

Germany, 9.56%

UAE, 11.43% Italy, 10.21% Turkey, 10.88%

308 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org 309 Ibid.

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4.9.3.2 Main Competitors The main international competitors in the processed breakfast cereals market for Iran include Nestle and Kellogg’s310. Tak Macaron is one of the leading processed food companies in Iran. Among other products, it produces processed cereal flakes. Elphy is also a large Iranian processed foods company which also includes several varieties of breakfast cereal.

In recent years there seems to be a general trend of consolidation in the market, as fewer brands start to take up a larger percentage of the market. To note here also is the presence of Kellogg Co with its Kellogg’s Special K brand, which is popular amongst the affluent urban population, distribution of Kellogg products in Iran is through local distributor Tehran Bouran.311

4.9.3.3 Specific customs and SPS requirements for import, needed documents For any foreign business to gain the right to import products and make them available in the market it is mandatory for the applicant to first register with the Ministry of Commerce and follow the local packaging requirements.312

310 Iran Times, “Snap, Crackle and Pop back in Iran”, December 2016, available at: http://iran- times.com/snap-crackle-pop-back-in-iran/ 311Financial Tribune “Kellogg relaunches cereals, Pringles in Iran”, December 2016, available at https://financialtribune.com/articles/economy-domestic-economy/55595/kellogg-relaunches-cereals- pringles-in-iran 312 The Ministry of Foreign Affairs of Denmark,“The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017

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Figure 74 Processed Import duties may be charged on Processed Cereal Cereals Sold in Tehran products. (For the complete list of specific products Supermarket along with the tariffs please see the Iranian “Export- Import Regulations 2016, Section IV, Chapter 19”)313 Distribution The Iranian food retail market is still quite traditional and is comprised mostly of small independent food shops which will support local communities. In 2015, there were 300 000 traditional trade store with only 8.5 per cent of the sold goods going through large retailers such as supermarkets. 314 This can pose a significant distribution challenge for foreign companies entering the country.

In order to overcome language barriers and to facilitate the market entry, parties wishing to import food products into Iran mostly adopt one of the following strategies: Connecting with an agent, opening an office directly in Iran or starting a joint venture with a local partner. 315

On another note, restaurants, especially fast food

restaurants have become more and more popular in recent years with an increase in fast food spending from 2005-2012 of 120 per cent.316 This is primarily due to the emergence of more Western chains now available in the capital, Tehran. This new trend may also provide an opportunity for European producers.

Summary Consumption: Consumption in the Processed Cereals category has grown in the recent past and is expected to continue this trajectory in the near future. Children’s Breakfast cereals are growing in popularity and are expected to continue to do so. Competition: The competitive landscape for the category is currently rather fragmented. A large percentage of the market is made up of small sellers. Of the identified brands on the market currently domestic brands remain very

313 Iran Trade Promotion Organization, “Import-Export regulations 2016”, Section IV, Chapter 19 available at http://eng.tpo.ir/index.aspx?siteid=5&fkeyid=&siteid=5&pageid=24256 314 Financial Tribune, “FMCGs and Typical Retailing”, June 2016, available at https://financialtribune.com/articles/domestic-economy/44423/fmcgs-and-typical-retailing 315 The Ministry of Foreign Affairs of Denmark,“The agriculture and food market in Iran: Opportunities and challenges for Danish companies”, March 2017 316Financial Tribune, “Fast Food Industry in Iran”, July 2017, available at https://financialtribune.com/articles/economy-business-and-markets/45173/fast-food-industry-in-iran

148 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Dairy Products popular in Iran though there are well known multinational players who in the last few years have been gaining market share, this trend is expected to continue. Distribution: Distribution, as with competition, is fragmented. This is the picture with retail in Iran in general and is not specific to Processed Cereals. Currently a large percentage of the market goes through independent small grocers. Recently supermarket and hypermarkets, more modern forms of retail, have been gaining ground, and should continue to do so in the future. Challenges: Awareness amongst the general population of Processed Cereals as a food option is growing, though may not be at high enough levels to support new market entrants. Given the fragmented nature of distribution in Iran there may be difficulties achieving national distribution throughout the country. In addition, there is domestic competition which could make the entry of EU companies potentially difficult. Opportunities: There is a growing trend for the Iranian consumer to purchase through Hypermarkets and supermarkets, an easier channel to gain country- wide distribution through. There is interest amongst the consumer population for EU / Western products, and the Processed Cereals category is no exception. Increased awareness of the health aspects of the food is a fact which can be used to increase demand.

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Baked Goods

Strengths Weaknesses • Growing middle class' • Mature market, with increasing preference established domestic for European style producers delivering breads goods through fragmented distribution channels

Opportunities Threats • Lifting of sanctions by •Domestic brands' the west is opening up attempt to produce the market their own European • Removal of local style breads subsidies by Iranian •Uncertain economic government growth prospects

The sector of baked goods in Iran is generally fairly mature and sizeable. The positive common development of the west lifting sanctions on exports to Iran opens up opportunities for European exports. It is expected that the traditional artisan bread culture will slowly lose ground to industrial bread production, although the latter’s market share is still significantly smaller than the former’s. Nevertheless, with potential deriving from change in consumers’ attitudes towards the bread diet, European exporters may look into better prospects offering authentic European products to a newly opened market.

Consumption 4.10.1.1 Consumer Profile and Trends The baked goods sector is of significant importance in Iran in terms of consumption: Iranians love bread and baked goods. In fact, Iranians find themselves on the second place of biggest consumers per capita globally with 160 kg. of bread per person per year 317. This is six times more than the global

317 Financial Tribune, “Iran bread consumption six times global average”, June 2017, available at https://financialtribune.com/articles/economy-domestic-economy/65968/iran-bread-consumption-six-times- global average

150 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Baked Goods average per capita consumption, and only topped by Turkey, for which the figure is 199 kilograms per person. To put this in perspective, French and German consumption reaches merely 56 and 70 kilograms of bread per person per year respectively.

Together with rice, bread is one of the core components to any Iranian meal. Iranian consumers preferred their meals to be hot, and fresh-out-the-oven styled breads fit perfectly Figure 75 Baked Products Sold in Tehran 318 Supermarket with this . Due this high consumption and importance of bread, the Iranian government has for many years installed large subsidy schemes, leading to products such as artisanal bread being sold at much lower amounts than the actual costs per piece. The artificially low unit prices have strongly impacted Iranian consumers’ behaviour. In fact, a large number of Iranian families see bread as such a staple food that they are unwilling to consume anything but the best and freshest breads – throwing away large quantities of older, yet unspoiled, bread.

Against the significance of the size of the baked goods sector in Iran, growth rates have shown a slowdown. A number of contributing factors are mentioned by Market Research World, one of them being the expansion of supply of other ready-made products such as pasta, which are substitutes to bread as a staple part of the Iranian menu319. Another contributing factor is the maturity of the category and gradual change of Iranian consumers’ eating habits: traditional Iranian meals accompanied by a large quantity of bread or rice have shown to lose ground to modern fast food meal options. Finally, the Iranian government is also making efforts in the area of removing subsidies from key products such as bread.

318 Market Research World, ‘‘Bakery Retail Performance In The Middle East And Africa’’, November 2010, available at http://marketresearchworld.net/content/view/3579/77/ 319 Financial Tribune, “Story of macaroni industry in Iran”, April 2015, available at https://financialtribune.com/articles/economy-domestic-economy/13827/story-of-macaroni-industry-in-iran

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A major change in consumer attitudes is furthermore expected, in particular the per capita consumption of unpackaged and artisanal bread, which is likely to decline strongly.320

4.10.1.2 Challenges for EU products The most important development for EU producers is the gradual loosening of sanctions, which will ease doing business for exporters. At the same time, Iranian government is making efforts to reduce subsidies on in particular bread products. However, Iran is still facing uncertain economic times and the strength of changing attitudes towards foreign baked goods in the light of this uncertainty associated with disposable income is still questionable. This comes in addition to the observation that the average import tariff applied by Iran for foreign baked goods is still significant: 35.1 per cent.321 Offer 4.10.2.1 Import According to Trade Map statistics322, Iran imported a total of 8.29 million EUR’s worth of baked goods from European Union countries in 2016. This is just over one third (33.9 per cent) of their total imports in this sector (24.44 million EUR). Only looking at EU countries, most of the baked goods come directly from Italy (3.01 million EUR, which is 12.3 per cent of total imports and only second to Turkey), Belgium (1.79) and Germany (1.59).

Figure 76: Iran’s imports of baked goods from EU countries (2016 value in EUR million)

3.01

1.79 1.59 0.86 0.49 0.23 0.11 0.09 0.06 0.04

320 Market Research World, ‘‘Bakery Retail Performance In The Middle East And Africa’’, November 2010, available at http://marketresearchworld.net/content/view/3579/77/ 321 Trade Map, International Trade Centre, www.trademap.org 322 Ibid. 323 Ibid.

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Looking at the import developments, Iran’s import grew in the period 2012- 2016 by 51 per cent annually in retail value (48 per cent in quantity).324 In the period 2015-2016, this growth rate was even higher at 123 per cent, showing the effects of the lifting of export sanctions to Iran by a number of western countries. Almost all of the EU countries exporting to Iran followed this general trend, with the largest growth proportionally in the latter period achieved by Spain at 610 per cent. The Netherlands, Italy and Germany also experienced a strong growth in this regard with 223 per cent, 179 per cent, and 126 per cent respectively. Only Bulgaria saw the loss of a considerable share, with 64 per cent decrease in exports to Iran.

Figure 77: Value growth in Iran’s imports of baked goods from EU countries (% p.a.)

700 600 500 400 300 200 2012-2016 100 0 2015-2016 -100

4.10.2.2 Export Iran’s export of baked goods to the EU in 2016 amounted to 676,000 EUR, significantly less than its import326. The EU countries together imported approximately 23.9 per cent of Iran’s total exports of baked goods (2.8 million EUR). On the level of individual countries, Germany is the largest importer of Iranian baked goods, for a retail value of 288,000 EUR. This is a share of 10.2 per cent, only slightly above the next biggest importers Kuwait, Canada, and Australia. Other relatively large importers among EU countries are Sweden (retail value share of all Iranian exports 6.2 per cent), the United Kingdom (3.5 per cent) and the Netherlands (2.8 per cent).

Figure 78: Iran’s exports of baked goods to the EU (2016 value in EUR thousand)

324 Ibid. 325 Trade Map, International Trade Centre, www.trademap.org 326 Ibid.

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288

175

99 79 28 5 1 1

4.10.2.3 Main Competitors Iran itself produces 15 million tons of bread every year.328 This happens in a modern industrial mode (the large-scale bread industry, where most of the production work is done by machines), but also according to the traditional way (baked manually in traditional ovens). Twenty per cent of the produced bread comes from the industrial bread bakeries; the rest belongs to traditional bread bakers. Comparatively, industrial bread is targeted for exports, as only twelve per cent of actual domestic bread consumption is industrial bread.

Iran’s stark preference for traditional bakeries becomes apparent if we look at the division between traditional and industrial bakeries. For flour allocated among all bakeries in Iran, only two per cent is accounted for by industrial bakery, while the rest is distribuned to traditional bakeries. Additionally, important to know is that eighty per cent of the flour distribuned across Iran is subsidised, while only twenty per cent of the supply is against real market rates.329 The Iranian government thus supports its local bakery business, aiming to reduce imports and promotes the self-reliance of the country.

It is predicted for the coming years that Iran will experience a shift from unpackaged artisanal bread to more modernized packaged industrially- produced bread330.

327 Trade Map, International Trade Centre, www.trademap.org 328 Financial Tribune, “Iran bread consumption six times global average”, June 2017, available at https://financialtribune.com/articles/economy-domestic-economy/65968/iran-bread-consumption-six-times- global-average 329 Ibid. 330 Financial Tribune, “Industrial bread makes more economic sense”, March 2016, available at: https://financialtribune.com/articles/economy-business-and-markets/38073/industrial-bread-makes-more- economic-sense

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The recent reform efforts (since 2010) of the Iranian government of its subsidy programme on key staples – which include bread - has resulted in moderate improvement in the efficiency of expenditures and economic activities.

There are many different suppliers of baked goods in Iran, and it should be kept in mind that the retail market is generally very fragmented. Examples of some of the players on the market among the industrial bread producers include Nanavaran, Nami-Nik-Nahad food industries, and Dorna food industrial group. Nanavaran, literally meaning ‘breadwinner’, produces bread and pastries complying to high quality standards. In particular, they produce different types of pastry products (strudels, donuts, brownies) and bread (brand product Lavash, and diet bread brand Pronan).

Nami-Nik-Nahad food industries is better known under its brand name Cenan Bakery. This manufacturer, established in 2008, produces mainly bread products, a quantity amounting to 50 tonnes per day. Another supplier, Dorna food industrial group, has grown from the foundation of its first cake factory in 1965 and currently produces over 80 types of different cakes, cookies, biscuits, and powdered products such as cake powder.331 It distribunes and sells its products through its company Erike Dorna.

4.10.2.4 Challenges for EU Products An important challenge for EU products in Iran would still be the traditionally low local unit price, due to the subsidies on Iranian bread. The Iranian government originally implemented these to ensure that this key part of the Iranian diet is affordable to all. In effect, it has also meant that local bakeries are forced to comply to set pricing restrinctions. Some bakeries have found creative solutions to circumvent these restrictions, especially in light of an increasing trend to more European style products preferred by a growing middle class. These new inventions are not subject to government price controls as they fall outside the traditional ‘pita’ or ‘naan’ categories. This strategy however is not always successful; Iranian wheat flour does not lend itself well for western-style bread making.

4.10.2.5 Specific customs and SPS requirements for import, needed documents As all imports of food products, plants, animals or animal products, baked goods imports to Iran too require a health certificate from the country of origin. Furthermore, baked goods may need a Free Sale Certificate, which should state that the sold commodities are in free circulation in the exporting country. Distribution The baking industry in Iran is still mainly distributing its products through small artisanal bakeries; there are thousands of small bakeries across the country

331 Dorna food industrial group, accessed 18 August 08 through http://en.dorna-co.com/v- 1/%DA%A9%DB%8C%DA%A9

155 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Baked Goods open from early morning to late night.332 Therefore, in this food category the distribution landscape is fairly fragmented which would constitute a challenge for international players. Summary With the Iranian market opening since the lifting of the sanctions by a number of western countries, and the rollback of subsidy schemes for local producers in the baked goods industries, prospects for foreign products are certainly on the rise. Further decreasing the competitive gap are the slowly changing preferences of the growing middle-class consumers, tending to become more interested in European style baked products. However, Iran’s domestic producers have already made attempts to follow this latter trend by developing such products, be it with varying success due to the nature of the base wheat- flour ingredient. It remains to be seen to what extent the removal of subsidies will stimulate the development of efficient economic activity by the domestic producers, and whether this will be in time to limit the opportunities for foreign companies entering the market effectively.

332 Financial Tribune, “Industrial bread makes more economic sense”, March 2016, available at: https://financialtribune.com/articles/economy-business-and-markets/38073/industrial-bread-makes-more- economic-sense

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Chocolate

Strengths Weaknesses • Consumers' increasing • Existing competitive preference for higher environment among quality products, domestic brands, with associated with foreign lower unit prices brands

Opportunities Threats • Lifting of sanctions by the •Domestic brands' growth west is opening up the developments and market opportunities due to easier access to raw materials and machinery imports •Uncertain economic growth prospects

The common development of the west lifting sanctions on exports to Iran, opening up opportunities for European exports, also applies for prospects in the chocolate products sector and some countries have seen significant increases in their exports to Iran the last year. Domestic demand for chocolate is low compared to western countries, however increasing due to a growing middle class having stronger preferences for luxury goods. Nevertheless, remains to be seen whether this development could be hampered by uncertain general economic outlooks. Consumption 4.11.1.1 Consumer Profile and Trends In comparison with other countries, chocolate does not yet have high popularity among Iranian consumers. The per capita consumption of chocolate in Iran is significantly lower than that of Europe and the US: each Iranian eats 3 kilograms of chocolate annually whereas the figure for the same indicator in the latter two is near 10 kilograms.333 In total, an estimated 1.5 million tons

333 Financial Tribune, ‘‘Sweet, Creamy Investment!’’, 2015, available at https://financialtribune.com/articles/economy-business-and-markets/25578/sweet-creamy-investment

157 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Chocolate of domestically-made chocolate were consumed in the country during March 2014 to March 2015. Nevertheless, consumption in the country is on the rise.

Concerning Iran’s urban society, research by the Center of Developing Economy Advisers shows that nearly half of the population of Tehran consumes chocolate (48 per cent), which is the highest share in comparison with other cities. Significantly lower figures are shown in Mashhad, Isfahan, Tabriz, Ahvaz and Rasht, where only 14, 11, 8, 6 and 4 per cent of the local respondents respectively indicated to consume chocolate.334

The research also revealed that education level has an inverse relation to chocolate consumption, at least when looking at Iranian chocolate brands. For instance, 39 per cent of Iranians with only a high school diploma appeared to consume chocolate, while 9 per cent college graduates and 5.1 per cent of postgraduates did so. However, those who have higher education and higher income tend to consume foreign brand chocolates.

Looking at age groups, another inverse relation to chocolate consumption shows according to the same study. Of the age group 15-24 year olds, 31 per cent consumes chocolate, whereas age categories 25-34, 35-44, 45-54, and above 55, the numbers are 25, 19, 13, and 12 per cent respectively (urban society).335

In terms of different types of chocolate products, a report of the Iran Economy Online shows that among those Iranians who like chocolate, individually portioned chocolates are most popular (55 per cent), before chocolate bags (35 per cent) and bar chocolates (25 per cent).336

4.11.1.2 Challenges for EU products The important development of 2016 is the gradual loosening of sanctions, which will ease doing business for importers with lower prices for their quality products that would more appeal to the Iranian consumer. Nevertheless, the uncertainty of the economic development in Iran may be one of the main challenges EU exporters will face. Despite openings in relationships between Iran and the West, forecasts of the economy are not unambiguously optimistic, leading to a likelihood that many consumers will have to spend their money on necessity products (e.g. bread). This could have a negative effect on the growth of more luxury product sectors like chocolate products.

334 Parmida, accessed on 17 August 2017 through http://www.parmidachocolate.com/en/news/13/Chocolate- consumption-percentage-in-cities-of-Iran/default.aspx 335 Ibid. 336 Financial Tribune, ‘‘Sweet, Creamy Investment!’, 2015, available from https://financialtribune.com/articles/economy-business-and-markets/25578/sweet-creamy-investment

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Offer 4.11.2.1 Import In 2016, as apparent in the graph below, Iran imported a total of 15.49 million EUR’s worth of chocolate products from European Union countries, which is just over half of their total imports in this sector (50.3 per cent). Most of the products come directly from Germany (6.47 million EUR, only second to Turkey), the Netherlands (3.51) and Poland (3.04).337

Figure 79: Iran’s imports of chocolate products from EU countries (value in EUR million)

6.47

3.51 3.04 1.69 0.30 0.18 0.14 0.09 0.04 0.02 0.00

Looking at the import developments, on balance growth in the period 2015- 2016 goes at a higher rate than in the period 2012-2016 as a whole. The largest growth proportionally in the former period among EU exporting countries is shown by Italy and Romania.

337 Trade Map, International Trade Centre, www.trademap.org 338 Ibid.

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Figure 80: Value growth in Iran’s imports of chocolate products from EU countries (% p.a.)

1800

1600

1400

1200

1000

800

600 2012-2016

400 2015-2016

200

-200

It should be noted that an estimated figure of almost 80 per cent of imported sweets and chocolates sold to Iranian customers reach the market through illegal ways.340 Export Iran’s export of chocolate products to the EU is significantly less than its import (67 thousand EUR versus 15.49 million EUR). The country exported a total value of 461 thousand EUR of Iranian chocolate products, meaning the share of exports going to the EU is only 14.5 per cent of the total. While the main destinations are Oman, Russia, China and Bahrain, the fifth largest share in this regard is held by Luxembourg (31 thousand EUR). Estonia (23), Germany (6), France (5), and Romania (2) each also import relatively modest amounts of chocolate products from Iran.341

339 Trade Map, International Trade Centre, www.trademap.org 340Financial Tribune, ‘‘Chocolate Boxes Deceptive’’, 2015, available at https://financialtribune.com/articles/people/12068/chocolate-boxes-deceptive 341 Trade Map, International Trade Centre, www.trademap.org

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Figure 81: Iran’s exports of chocolate products to the EU (2016 value in EUR thousands)

6 5 2

Luxembourg Estonia Germany France Romania

These exports are expected to increase in the coming years. With the regional countries being Iran’s original export priority, a shift is happening to European markets due to instability as well as wars.343 The average Iranian chocolate export price is 3 USD (2.6 EUR) per kilogram. Between March 2016 and March 2017, the total exports from Iran in sweets and chocolates increased in value (13 per cent) and volume (3 per cent).

4.11.3.1 Main Competitors Iran has a number of well established local chocolate producers, the industry in Iran itself dating back some sixty years.344 According to the registration statistics of the Association of Iranian Confectionery Manufacturing Companies, Iran counts 400 chocolate producing companies. Most of these are located in Tabriz, East Azarbaijan Province (also known as the chocolate capital of the country). Some of the bigger players among the domestic suppliers include Parand Chocolate, Dadash Baradar Co, and Rezvan Chocolate Co, which offer wide ranges of products against relatively low prices.

The biggest supplier in the chocolate products market is Parand Chocolate – with a daily capacity of 160 tons345. It was established in 1994, with a wide variety of products from tablets and boxed assortments to chocolate cards, chocolate chips and cocoa cream. Parand Chocolate markets these products under the Farmand Trademark, a brand which is sold in Iran itself as well as

342 Trade Map, International Trade Centre, www.trademap.org 343 Financial Tribune, ‘‘Iran’s Sweets, Chocolate Industry Hitting Big Time’’, 2017, available at https://financialtribune.com/articles/domestic-economy/65276/iran-s-sweets-chocolate-industry-hitting-big- time 344Financial Tribune, ‘‘Sweet, Creamy Investment!’’, 2015, available at https://financialtribune.com/articles/economy-business-and-markets/25578/sweet-creamy-investment 345 Global Companies, “Parand Chocolate Co. Farmand”, accessed 17 August 2017 through http://www.companiess.com/parand_chocoalte_co_farmand_info752545.html

161 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Chocolate across the borders. Farmand products are exported to over 14 countries in the Commonwealth of Independent States, the Middle East, Asia and Africa.

Another supplier is Dadash Baradar (Food Industrial) Co, established in 1944 and operates under the AIDIN brand name. It has over 300 different products, among which a lot of variety in chocolate products. In addition to its targeting Figure 82 Nutella Chocolate the domestic market, Dadash Baradar exports Promoted in Tehran Supermarket 35 per cent of its production to neighbouring countries, the Persian Gulf District, Eastern Asia and Europe.

A third important player in the chocolate products market is Rezvan Chocolate Co, with its brand name Baraka Chocolate offering over 40 different types of products. These include for example boxed assortments, tablets, and cocoa cream, and are apart from the domestic market also produced for export purposes.

Other domestic brands that are popular in Iran are Nani, Chichak, Anata, Shirin Asal, Shoniz, Aysuda, and Parmida. In terms of popularity, a report by Iran Economy Online shows that Aidin chocolates have the largest share of Iran’s chocolate market: 27 per cent of the chocolate consumers purchase this brand, with Shirin Asal having the second place (17 per cent). Farmand and Anata each have 14 per cent, Shokopars 13 per cent, Chichak 10 per cent, and Aysuda and Minoo each 9 per cent.346

Domestic manufacturers are developing ways to improve quality and packaging for increased market visibility for specific target markets.347 Chocolate products are frequently advertised through TV, for example around children’s programmes, where a large number of commercials focus on food products.

4.11.3.2 Challenges for EU Products An important challenge for EU products in Iran would be pricing. The international brands present in Iran and relatively popular are: Milka, Merci, Twix, Toblerone, Ritter sport, ELIT, LINDT, SNICKERS, BOUNTY, Mars, CADBURY, M&M, KITKAT, Galaxy, Kinder, Quality Street, and Nutella. However, they are considerably expensive compared to the local brands (the average import tariff for chocolate products being 71.7 percent348) for the

346 Financial Tribune, ‘‘Sweet, Creamy Investment!’’, 2015, https://financialtribune.com/articles/economy- business-and-markets/25578/sweet-creamy-investment 347 Ibid. 348 Trade Map, International Trade Centre, www.trademap.org

162 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Chocolate

Iranian consumer. Nevertheless, the significant amount of smuggled foreign chocolate products into the country shows a higher popularity than the official records would conclude.

It remains to be seen to what extent the opening of the market due to the lifting of sanctions against Iran, will balance in foreign players’ favour. As the CEO of Iranian manufacturer Rezvan Chocolote Co remarked that even though production levels and sales conditions have reinforced each other, one major problem remains: equipment. With often old, malfunctioning and out-dated machinery, Iranian chocolate producers find it difficult to compete in international markets. Now the lifting of sanctions has arrived, updating and upgrading of machinery becomes feasible for some.349 This signifies that different competitive advantages are developing on both sides, and the domestic producers have also made efforts in recent years to overcome the quality gap with their international competitors.

4.11.3.3 Specific customs and SPS requirements for import, needed documents All imports of food products, plants, animals or animal products, chocolate product imports to Iran too require a health Figure 83 European certificate from the country of origin. Any chocolate Chocolate Sold in Tehran Supermarket products that contain saccharin furthermore require pre-approval for importing from the Ministry of Health. Distribution Currently, over 90 per cent of food and beverage sales, including chocolate products, are conducted through traditional small grocery outlets and local bakeries.350 Modern hypermarkets in Iran, which have increased in number as well as size ever since before the revolution, only have a domestic market share of four percent in Iran’s grocery market. However it should also be noted that in Tehran, this share is nearly fifteen percent.351 Summary Some of the EU countries have in 2016 shown promising growth rates exporting their products to Iran, which follows a general trend of growth in

349 SOHRABI, Zeinab, , ‘‘A Sweet Return for Confectionery Industry’’, Financial Tribune, September, 2016, available at https://financialtribune.com/articles/economy-business-and-markets/49831/a-sweet-return-for- confectionery-industry 350 Financial Tribune, “Why grocery stores outnumber any other shop in Tehran”, June 2015, available at: https://financialtribune.com/articles/economy-business-and-markets/19404/why-grocery-stores-outnumber- any-other-shop-in-tehran 351 Ibid.

163 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Chocolate chocolate product sales. Traditionally, there are a lot of domestic alternative suppliers for chocolate. It will therefore be challenging for EU exporters to firmly establish themselves in the Iranian market, especially due to the still significant difference in unit prices. However, preferences of the local consumers may slowly change towards foreign, higher quality chocolate products, although the national brands are making efforts to improve themselves in this regard as well.

164 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery

Confectionery

Strengths Weaknesses •confectionery has strong • European products have association with holidays relatively high tariffs, •confectionery making the products noy consumption is affordable to wider projected to grow range of consumers

Opportunities Threats • with stable economic • slowly rising health growth in Iran, Iranian awareness could limit consumers may buy market growth in the more European products long run as European products are associated with high quality.

Consumption Confectionery production and consumption in Iran is a long-established tradition and the country is a destination for unique and renowned sweets. Iran has both a deep market of traditional artisanal production as well as a large domestic production of more industrial-scale confectionery products. There is a relatively high rate of sugar consumption per capita in Iran, above several regional comparators and on par with the EU average.352 This is reflective of the important presence of confectionery products in Iran’s culinary tradition.

At the same time, consumption of sugar in confectionery products has fluctuated in recent years. In line with other countries with high-sugar intake, there is increasing pressure from the government to reduce confectionery and sugar consumption through awareness-raising of the associated health and nutritional risks, including obesity, diabetes and other non-communicable diseases.

Nonetheless, confectionery consumption remains entrenched in Iranian culture and culinary habits through its strong association with holidays and

352 Helgi Library, “Sugar Consumption Per Capita in Iran”, 2017, available at http://www.helgilibrary.com/indicators/sugar-consumption-per-capita/iran/

165 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery celebrations. Annual consumption of sugar-derived products In Iran is more than 2 million tonnes, with growth forecasted to be around 20.5 per cent into 2018. Continued demand for confectionery products will be driven by Iran’s large youth consumer segment, with over 40% of the population under the age of 24 and almost one-quarter under the age of 14.353 Confectionery consumption in Iran is projected to grow ahead of other major markets in the near term. As illustrated in Figure 90 for example, sugar consumption in Iran for 2015-2024 is expected to increase by 2.39 per cent, whereas the commensurate figure for the EU is a contraction in market size of -0.15 per cent.

Figure 84 Comparative Rates of Per Capita Sugar Consumption and Projected Growth

Asia-Pacific Region

Iran 2024 Projection 2012-2014 Average

0 10 20 30 40 50 Per Capita Consumption in KG

Organisation for Economic Cooperation and Development354

4.12.1.1 Consumer Profile and Trends Consumption of confectionery products in Iran has been increasing in recent years from an already high and stable rate. This trend is partly driven by population growth, but also reflected in growing per capita consumption of confectionery. High confectionery consumption in Iran is cross-sectional. For example, the market has the highest rate of chewing gum consumption as well

353 The World Factbook, “Iran”, accessed on 17 August 2017 via: https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html 354 OECD, “A 12.2 Sugar Projections: Consumption, Per Capita”, 2015, available at http://www.oecd- ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2015/sugar-projections-consumption-per- capita_agr_outlook-2015-table135-en.

166 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery as an overall per capita sugar consumption more than 6 times greater than the global average.355

In fact, confectionery products are extremely prevalent in Iranian culture. A commonplace practice, for example, is to return chewing gum, candy or other sweets in lieu of change following a cash transaction. This reinforces regular routine consumption habits, product familiarity and loyalty.

Gums and other confectionery products are also associated with certain health or homeopathic qualities. Some consumers report consuming chewing gums or confectionery products to benefit from perceived stress relief properties, as well as a range of other characteristics ranging from treating symptoms of acute and chronic illnesses, memory, insomnia and others. This consumer segment typically seeks out confectionery products emphasising a composition of natural ingredients, including herbs, sugars and fruit essences.356 In-line with comparable markets, health-consciousness is anticipated to become an increasingly important driver defining confectionery sales in Iran into the medium-term. Public programmes and awareness campaigns to reduce sugar consumption are expected to gradually drive preference for natural, low- or zero- sugar confectionery products.

Increasing health-orientation of confectionery products and consumption in Iran is however likely to struggle to find balance with the strongly entrenched traditional perception of these products in Iran. There are more than 28 public holidays in Iran, several of which entail feasting and engaging in celebration in social and family settings. Sweets and confectionery are an integral part of many of these celebrations, including the Nowruz Persian New Year in March and Eid-e-Fitr at the end of Ramadan. In these settings, sugar confectionery products are not only in demand by younger attendees but also figure prominently into habitual Iranian practices such as tea drinking and socialising.357 Confectionery products are frequently offered as gifts to welcome guests in business and home settings, or are otherwise exchanged when conducting a visit. This underscores the social and shared-consumption nature of the product.

Whereas many types of confectionery products are ubiquitous and exchanged freely in Iran, EU products are well-positioned to perform in higher value market segments. Despite a suite of public measures to stimulate domestic production of confectionery products in Iran, quality concerns remain and are

355 Canadian Vending Magazine, “Highest Chewing Gum Consumption Worldwide Revealed”, August 2012, Available at https://www.canadianvending.com/consumer-behaviour/highest-chewing-gum- consumption-worldwide-revealed-3057 356 Iran Daily, “Iran Produces Gum for Reducing Stress”, October 2014, Available at http://www.iran- daily.com/News/13458.html 357 Iran Unveiled, “Iranian Culture 101: Persian Food (Desserts), May 2016, available at: https://iranunveiled.wordpress.com/2016/05/28/iranian-culture-101-persian-food-desserts/

167 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery recognised by consumers for several brands. To the extent that output is increasing in Iran, this is still dependent in large part on imports of capital goods from the EU.358 EU confectionery products are recognised for their quality and originality, and are therefore sought after by Iranian consumers seeking to share new experiences with their family and friends during special occasions.

The total volume of consumption was 180,000 tonnes in 2015, with expected demand growth above 6 per cent until 2020. Domestic production continues to grow in-step, but imported products will become increasingly important in helping to fulfil Iranian confectionery demand - particularly across novelty and premium segments.359

4.12.1.2 Cultural Sensitivities Whereas sugar confectionery consumption is overshadowed by similar categories such as chocolates and baked goods, it is nonetheless expected to present high growth potential in the near-to-medium term. Iranian consumers are receptive to European confectionery products, but the market is also highly competitive due to interest in and the presence of products from other Asian markets - particularly those that are seen as Islamic and aligned with Iran - as well as increasing domestic output. Note that Iranian consumers are far more accustomed to unpackaged confectionery products, which allows some domestic producers to compete primarily on the basis of price. 360 These products are produced and purchased by the end consumer in bulk.

Confectionery products containing prohibited ingredients, notably alcoholic or pork-derived components, are not eligible for import and sale in Iran. At the same time, Iranian consumers tend to be more predisposed towards confectionery products incorporating spices, herbs and fruit essences that may not be on common offer in other markets. These include for example saffron, cardamom and other unique ingredients. This trait may advantage certain EU confectionery products considered unique and prepared with ingredients unique to Europe. Offer 4.12.2.1 Domestic Offer Increasing sugar consumption in Iran is in large part indicative of the growing presence of refining and manufacturing industries. In-line with high anticipated

358 SOHRABI, Zeinab, “A Sweet Return for Confectionery Industry”, Financial Tribune, September 2016, available at https://financialtribune.com/articles/economy-business-and-markets/49831/a-sweet-return-for- confectionery-industry 359 FRITSCHE, Vera, “German Federal Ministry for Economic Affairs Supports Official German Pavilion”, Bundesbeteiligung, 2017, available at http://www.iran-foodbevtec.com/iran-food-bev-tec-german-pav.html 360 SOHRABI, Zeinab, “A Sweet Return for Confectionery Industry”, Financial Tribune, September 2016, available at https://financialtribune.com/articles/economy-business-and-markets/49831/a-sweet-return-for- confectionery-industry

168 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery demand for confectionery products, investment and development of new production facilities in Iran is significant.361

This is in part due to greater access to capital, at the same time as traditional methods of production become increasingly integrated in industrial-scale, modern production operations. It is estimated for example that around 70 per cent of Iran’s rock-candy production is through traditional means. This share is expected to decrease as industrialised production creates greater price competition through achieving economies of scale. Still, traditional production is likely to continue to fill an important niche in Iran, catering to both localised markets as well as demand for unique and new flavors as well as packaging.362

Figure 85 Historical Domestic Sugar Production and Consumption Trend in Iran

1.8 31

1.6 30 Millions 1.4 29

1.2 28

1 27 Sugar Production

Tonnes 0.8 26 Per Capita Consumption 0.6 25

0.4 24 Gross Domestic Output of Sugar in in Sugar of Output Domestic Gross

0.2 23 KG in Consumption Sugar Capita Per

0 22 2002 2003 2004 2005 2006

Statistical Centre of Iran

The confectionery industry is now estimated to employ more than 100,000 people directly, with secondary employment created in the packaging, agriculture, logistics and distribution sectors. Leading confectionery brands in Iran include Shirin Asal, Aydin, Anata, Baraka and Chichak.363 Despite subsidisation and public measures to facilitate the growth of the industry, a significant share of confectionery production in Iran remains dependent on imported ingredients.

361 Financial Tribune, “Investment Opportunities Series: Rock Candy Production. February 2016”, available at https://financialtribune.com/articles/economy-business-and-markets/35505/investment-opportunities- series-rock-candy-production 362 Ibid. 363 Iran Project, “Iran Brings Sweet Treat to 100 Countries”, May 2015, available at http://theiranproject.com/blog/2015/05/28/iran-brings-sweet-treat-to-100-countries/.

169 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery

Import Figure 86 Imports of Raw and Processed Sugar Confectionery in Iran

500 0.6

450

Millions 0.5 400

350 0.4 300 Cane and Beat Sugar 250 0.3 Processed Sugar Confectionary 200 Annualised Sugar Price 0.2

150 Imported Value in Euro in Value Imported 100

0.1 KG per Euro in Price Sugar Annual 50

0 0 2011 2012 2013 2014 2015 2016

The overall value of imported sugar in the Iranian market has decreased by nearly half since 2011. This trend is observed despite relatively stable sugar prices, reflecting the increasing difficulty of reaching the Iranian market in recent years. Nonetheless, the domestic market is incapable of producing to meet growing demand for raw and eventually processed sugar confectionery products, let alone meet the country’s growing export ambitions.

Reliable import flow data is relatively lacking in the case of the confectionery industry in Iran, however the trade is defined by a few notable partners including EU Member States. The largest country of origin for imported sugar and confectionery products into Iran is reported as the United Arab Emirates, however this more reflects the latter’s importance as a regional logistics and transhipment hub rather than a significant original producer. Bilateral trade flows with unique partners have historically been subject to considerable year- on-year fluctuations.

Brazil has traditionally been the largest originating market for exports of raw sugar products to Iran, whereas European markets have accounted for a larger share of processed sugar confectionery products. These include leading export markets such as Germany, France and the Netherlands as well as other markets such as Switzerland.365

364 Trade Map, International Trade Centre, www.trademap.org 365 Ibid.

170 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery

Figure 87 Iran Import Flows for Confectionery Products by Partner

700

600 Millions 500

400

300

200 Imported Value in Euro in Value Imported 100

0 2004 2005 2006 2007 2008 2009 2010 2011

United Arab Emirates Switzerland Brazil Germany Turkey China France Netherlands Viet Nam Spain India Thailand Belgium Colombia Korea, Republic of Denmark Austria Canada Italy Hong Kong, China Greece Indonesia Australia Bahrain Armenia Bulgaria Finland Hungary Iraq Ireland Kuwait Lithuania Luxembourg Malaysia New Zealand Pakistan Romania Russian Federation Saudi Arabia

The import outlook for confectionery products in Iran is positive as the administration continues to take steps to streamline international economic transactions and integrate with value chains. At the same time, reduction of external economic pressure on Iran will increase spending power and currency exchange rate to improve the trade balance in the coming years.

366 Trade Map, International Trade Centre, www.trademap.org

171 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery

4.12.3.1 Export Iran has the ambition to become a major exporter of confectionery products and has been developing a domestic output capacity that is outsized compared to the local demand market. At the same time, Iranian producers have been active in promotional activities to expand the scope and market reach of domestically manufactured confectionery products. These include dispatching the equivalent of large trade missions in the form of candy-laden trucks to nearby markets. Heavy investment in advanced manufacturing technologies and facilities has been recorded in the industry in recent years.367

Iran exported EUR 116.8 million worth of sugar and confectionery products in 2010, the latest year for which data is available. Iran’s largest export markets were regional partners: Iraq, Afghanistan, Tajikistan, Turkmenistan, Kyrgyzstan and Azerbaijan. Exports to several western markets, such as the United Kingdom, Canada, Sweden and the Netherlands were significant prior to 2006 however have not recovered in terms of performance in recent years.368 Iranian confectionery exports are in part driven by the scope of the country’s expatriate community in many markets.

4.12.3.2 Main Competitors Competition in this sector can be mainly attribuned to the growing trend in Iran to import from Asian markets, elsewhere as active encouragement of domestic production. These markets often offer highly competitive prices and economies of production and distribution that are able to compete at the same segment as local products. The increasing variety and innovation-driven nature of the market can make it difficult to achieve profitable sales, particularly in early stages of market entry. Nonetheless, volume growth is expected to grow whereas higher value per unit may remain difficult to achieve. This outlook will depend in part on political and macroeconomic factors, such as currency performance and its effect on purchasing power.

Currently, there are a wide variety of companies and brands in the market, which remains relatively fragmented. There are a few large producers, such as Shirin Asal, Aydin, Anata, Baraka and Chichak. At the same time, the majority of confectionery output in Iran remains concentrated in the collective segment of artisanal and localised producers. Rather than producing standardised and packaged products, this latter segment tends to drive innovation in the sector and outputs bulk unpackaged products. Artisanal producers tend to directly market their product to a local clientele, where convenience and loyalty are significant and overhead costs kept to a minimum. However, these producers are increasingly under pressure from top-level initiatives to promote

367 Financial Tribune, “Investment Opportunities Series: Rock Candy Production”, February 2016, available at https://financialtribune.com/articles/economy-business-and-markets/35505/investment-opportunities- series-rock-candy-production 368 Trade Map, International Trade Centre, www.trademap.org

172 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery industrialised confectionery production, at the same time as Iran becomes increasingly open to international markets.369

4.12.3.3 Challenges for EU Products The relative absence of most EU and international confectionery products will be a significant barrier to entry as brands initially build up trust and consumer interest. At the same time, EU exporters of confectionery products will need to balance the potential of the Iranian market with susceptibility to political and other vulnerabilities. EU producers in the region have in the past been targeted for consumer boycotts or exclusion from market access as a reflection of diplomatic developments.

Specific to the confectionery market, EU producers will compete with a well- established and highly price competitive market. There is a general association between EU confectionery products, quality, authenticity and exoticism, however exporters will need to leverage sound understanding of key markets in Iran and savvy engagement strategies in order to convince first-time consumers of the added value of consuming EU products over lower-price local and regional imports.

4.12.3.4 Product Import Requirements The necessary regulations and requirements should be followed when exporting to Iran. A list of requirements can be accessed through the EU Market Access Database, available here. 370

In addition to general product import requirements, the following are necessary to import sugar confectionery products into Iran:

 Agent Contract

 Imports by the Government Trading Corporation

 Registration of Foodstuff Manufacturers

 Registration of Foodstuffs

 Approval to Import Foodstuffs

 Authorisation of Foreign Foodstuffs Manufacturers

 Marking Authorisation for Foodstuffs

 Verification of Conformity

369 Financial Tribune, “Investment Opportunities Series: Rock Candy Production”, February 2016, available at https://financialtribune.com/articles/economy-business-and-markets/35505/investment-opportunities- series-rock-candy-production 370 European Commission Market Access Database, “Procedures and Formalities: Sugar and Confectionery Products”, available through http://madb.europa.eu/madb/datasetPreviewIFpubli.htm?countries=IR&hscode=1701.

173 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery

 Certificate of Analysis

 Declaration of Conformity

 Free Sale Certificate

 Certificate of Good Manufacturing Practice. Distribution One of the main commercial figures to enter the Iranian market is the agent. The selection process of the agent is very important and must be carried out with rigor since this can determine to a large extent the success in this market. It is also necessary to take into account the Figure 88 European Confectionery Sold in Tehran Supermarket legal difficulties that could be reached in case of conflict, since it is a considerably different legal system than most originating markets in the EU. Once the agent is chosen, a fluid interrelation with support and frequent trips to the country is necessary.

The retail sector has been continuously modernising and this expansion has allowed the food sector to grow considerably. Virtually all confectionery sales in Iran take place off-trade. A proliferation of retailing outlets, including the increasing prevalence of convenience-oriented distributors, increasing the accessibility to consumers for confectionery food items. At the same time as the retail sector overall expands, it remains highly fragmented with more than 100,000 grocery outlets being serviced by over 500 local distributors – a number which has steadily increased over the past few years.

Banking and foreign investment remain restricted in Iran, even as the market becomes increasingly open to imported products. This affects the efficacy of distribution channels. The most prevalent distribution outlets in Iran are Etka and Refah, followed by Shahrvand, Qods and Yas chain stores among others. However, the generally low value per unit of confectionery products coupled with long shelf life renders it well-suited for widespread distribution, including

174 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Confectionery through the large collective of independent grocers and retailers who together account for the majority of market share and sales in Iran371.

4.12.4.1 Challenges to EU Products In the near-to-medium term, EU exports of confectionery products will remain highly reliant on the cooperation and knowledge of local partners to help connect with targeted consumer segments. The easiest distribution level to penetrate may be large chain retailers, however the highly fragmented nature of the market disproportionately affects EU exporters who may have greater difficulty achieving diffused market reach, particularly outside of large urban markets. Summary The EU is recognised as a quality supplier of confectionery products in Iran and will be important in meeting growing demand in the market. EU confectionery products are best-adapted for premium, novelty-seeking consumer segments - particularly in the early stages of market entry. Conversely, the Iranian confectionery market is characterised by substantial and increasing domestic production of fairly ubiquitous products sold at low quality and price.

EU confectionery exports are best-positioned to cater to Iran’s growing middle class with increasing purchasing power and receptiveness to foreign products. There is strong potential for complementarity between EU confectionery products and Iranian cultural traditions, such as confectionery consumption during holidays and with tea drinking. Building trust and loyalty among middle- and upper- income consumers will allow EU suppliers to establish a presence in the market as it continues to mature, from which they can then realise wider distribution chains.

371 Financial Tribune, “Why grocery stores outnumber any other shop in Tehran”, June 2015, available at: https://financialtribune.com/articles/economy-business-and-markets/19404/why-grocery-stores-outnumber- any-other-shop-in-tehran

175 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Honey Products

Honey Products

Strengths Weaknesses •Consumption of • Decresing value of honey products is imports from several especially high in Iran EU countries •Honey has an important role in the Islamic culture

Opportunities Threats • Openess to new • Competition from trade agreements in leading the sector following manufacturers like the lifting of China sanctions by the West

Consumption Honey consumpertion per capita in Iran equals roughly 1 kg compared to the global annual average of more or less 250 to 300 grams.372 This is partially to be explained due to the important role honey plays for Persian traditional medicine. Honey is described in the Quran as a source of healing and is also mentioned as one of the foods of Paradise. Therefore, it has an important role in the Islamic culture in medical use as well as religious ceremonies.

Among those who have historically reaffirmed the healing qualities of honey was the Persian philosopher and scientist Avicenna (b. 980 AD – d. 1037 AD). Through his most famous works – the Book of Healing and the Canon of Medicine – he has detailed the correlation between one’s diet and one’s health. Not only was honey used as the basis to prevent minor ailments like bacterial and fungal infection, it was also believed to prevent tuberculosis as well as speed up the healing abilities of the skin during wound treatment373. If

372Post Online Media, “Honey Production Increases in Iran”, June 2017, available at: http://www.poandpo.com/agrifish/honey-production-increases-in-iran-2062017839/ 373 Iran Daily, “10 benefits of honey”, July 15, available at: http://www.iran-daily.com/News/122477.html

176 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Honey Products consumer on a regular basis, it would simultaneously contribune to one’s life expectancy, detoxification and improve movability during old age. Even more so, honey was believed to contribune to a better skin, better hair and an improved physique in general. It therefore is a core component of oxymel – also known as Sekanjabin in Persian, a syrup containing water and vinegar alongside honey – which beside to being consumed for its medicinal purposes is also a sweet tasting beverage.374 Offer 4.13.2.1 Domestic offer Iran has consistently ranked within the top 10 largest producers of honey in the world375, which also includes China, Turkey and the US among others. The Iranian honey is known for its high quality. Official documentation on the beekeeping industry indicates 75,000 active people and 6.7 million colonies in the country. Throughout March 2016 to March 2017, total production of honey in Iran reached 81,500 tonnes. This constitutes a 9.1 per cent increase since 2014 levels. According to Iran’s deputy agriculture minister, production is expected to further rise 5.5 per cent this year to reach 86,000 tons, in a further attempt to boost domestic production of honey.376 Fifth of the honey production in Iran is done in Ardabil province, where 7,000 tonnes of honey are produced every year. It is the third largest producer in Iran after East and West Azarbaijan provinces. But it is the country's top distributor of honey.

Beekeeping is deeply rooted in Iran’s society and economy. It has traditionally been part of the country’s farming system, predating many other farming systems. Beekeeping is a very long-standing practice in the rural communities of the country plays a significant role in the subsistence smallholder farmers. Beekeeping products include, on top of honey, bee wax, queen and bee colonies, pollen, royal jelly, bee venom, and propolis in cosmetics and medicine.

4.13.2.2 Import In 2016, the total value of imports of honey products377 by Iran was around 20 million EUR, about half of which originated from the EU. The main EU exporter of honey products to Iran was Germany, which accounted for about 4 million EUR of Iran’s imported value under this category in 2016, making it the second largest exporter of honey products to Iran after China. Other

374 Fig & Quince, Kahoo va Sharbat ‘e Sekanjabin, accessed August 16, 2017, via: https://figandquince.com/2014/08/04/sekanjabin-sharbat-honey-mint-persian-syrup-drink-lettuce-dip/ 375 The Financial Tribune, “Iran 7th biggest honey producer”, May 2016, available at: https://financialtribune.com/articles/economy-domestic-economy/41392/iran-7th-biggest-honey-producer 376Post Online Media, “Honey Production Increases in Iran”, June 2017, Available At: http://www.poandpo.com/agrifish/honey-production-increases-in-iran-2062017839/ 377 Refers to exports under HS Chapter 13: Lac; gums, resins and other vegetable saps and extracts

177 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Honey Products important competitors in this sector are India, South Korea, Switzerland and Chile.

Figure 89: Iran's imports of honey products from the EU, 2016 (value in EUR millions)

25 20 15 10 5 0

ITC Trade Map378

Figure 90: main exporters of honey products to Iran (share of imported value 2016)

Belgium Philippines Other Spain 2% 2% 2% 2% Netherlands 3% China Chile 23% 3% Denmark 3% Switzerland France 4% 6% Korea, Republic of Germany 20% 4% Italy 12% India 14%

ITC Trade Map379

378 Trade Map, International Trade Centre, www.trademap.org 379 Ibid.

178 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Honey Products

Growth in imported value from the EU to Iran under this category is very different between EU member states, as apparent by ITC Trade Map statistics in the table below. While imports’ value from some EU countries such as France, Spain, Ireland and Austria dropped by 9 to 77 per cent between 2015 and 2016, imported value from other EU countries grew significantly that year. The largest increase was recorded by the Netherlands - more than 70 times the imported value of 2015 (an increase of 7,722 per cent). Other significant growth in imported value was recorded from Denmark (146 per cent), the UK (113 per cent), Italy (70 per cent) and Germany (40 per cent).

Table 19: Iran's imports of honey products from EU countries, value growth 2015- 2016

Growth in Iran’s imported value 2015- Exporter 2016 (%)

Netherlands 7722% Denmark 146% United Kingdom 113% Italy 70% Germany 40% Belgium 3% Spain -9% France -16% Austria -60% Ireland -77% ITC Trade Map380

Other EU countries are looking to enter the Iranian honey market in the near future. Bulgaria, for example, has signed an agreement with the Islamic republic to start exporting honey to the country as announced during the Bulgarian agriculture minister’s visit in Iran in 2016.381 Export Iran’s export of honey products represents 0.5 per cent of world exports for this category according to ITC Trade Map statistics.382 This makes Iran the 13th largest exporter globally. Iran’s strong position among the world’s producers and exporters of honey products allowed it to continue exporting large quantity of honey even under the Western sanctions. Between March 2014 and March 2015 Iran has exported 900 tonnes of honey to countries such as Malaysia,

380 Trade Map, International Trade Centre, www.trademap.org 381 Novinite – Sofia News Agency, “Bulgaria to Export Honey to Iran”, July 2016 available at: http://www.novinite.com/articles/175404/Bulgaria+to+Export+Honey+to+Iran 382 “ITC Trade Map” available at: http://www.trademap.org/Index.aspx?AspxAutoDetectCookieSupport=1

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Indonesia, Brunei, Saudi Arabia, Iraq and Yemen.383 In 2016, the total value of exports of honey products by Iran was around 32 million EUR, which constitute a 5 per cent increase in exported value from 2015. Around 28 million EUR of this value (88 per cent) came from exports to the EU. The main EU country importing products under this category from Iran is Germany, which imported in 2016 about 23 million EUR worth of honey products. Together with France, the UK, the Netherlands, and Italy EU countries represent 5 of the 10 top destinations for Iranian exports under this category. In the specific category of natural honey only Germany and Austria have had imports from Iran, with a total value of around 188 thousand EUR.

Figure 91: Iran's exports of honey products to the EU, 2016 (value in EUR millions)

35 30 25 20 15 10 5 0

ITC Trade Map384

The impact of the lifting of the sanctions against Iran was reflected in the exported value under this category from Iran to the EU. While since 2012 the value of exports to the EU remained relatively flat, between 2015 and 2016 it has increased by over 33 percent, representing a 6 per cent share in EU total agriculture imports in 2016.385 Yet, Iran’s share in EU’s imports of honey is currently not significant. The main suppliers of honey to the EU in the first half of 2016 were China and Ukraine, followed by south and Central American countries.

383 Iran Daily “Honey Export at 900 Tons” March 2015 available at: http://www.iran- daily.com/News/113662.html 384 Trade Map, International Trade Centre, www.trademap.org 385 The European Commission, “Agri-Food Trade Statistical Factsheet European Union – Iran”, February 2017, available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside- eu/countries/agrifood-iran_en.pdf

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Figure 92: Exports of honey products from Iran to the EU, evolution 2012-2016 (value in EUR millions)

0 2012 2013 2014 2015 2016

EU Commission, DG Agri

Figure 93: EU imports of honey by origin Jan-Jun 2016, 1,000 tons

50 45 40 35 30 25 20 15 10 5 0 China Ukraine Argentina Mexico Chile Cuba Brazil Thailand Others

EU Commission, DG Agri

4.13.3.1 Main Competitors Several Iranian companies are engaged in exports, including: Noosh Exir Saba, Sab Saman, Rojan Company LTD, Delkhah Food Ind, and Quran & Etrat Economic Cooperation 386 Distribution Iran has a number of Honey production hotspots from where distribution of the product originates. This would include for example Ardebil province in the north west of the country.387 Another hub is Khoy in West Azerbaijan, here

386 List of bee honey companies in Iran available at: http://www.listofcompaniesin.com/iran/bee-honey/ 387 Iran Daily, “Iran exports 5,000 tons of Honey in 12 months”, April 2015, available at http://www.iran- daily.com/News/116630.html

181 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Honey Products there is around 6,000 tons of honey produced every year, making it one of the top producers in Iran, the city is home to 1,400 beekeepers.388

From these hubs Honey products are distribuned out to the rest of the country. The majority of agricultural products in Iran are distribuned through agents or wholesale distributors. These intermediaries deliver to local stores and bazars, and are an important part of the distribution process.389

The distribution network in Iran for the Food & Beverage sector as a whole is highly fragmented, this is no less the case with honey distribution in the country. There are over 100,000 grocery outlets in the country which are distribuned through a large network distributors. Most honey products in Iran go through these outlets in addition to local bakeries.

This makes distribution of honey product in Iran, in addition to other Food & Beverage products, highly complicated. EU honey exporters will want to partner up with knowledgeable distributors and buyers in the country who will have better understanding of the market and will be able to form relationships with what is a large patchwork of sellers.

It is known that the retail market is modernising itself in Iran, there is a move to supermarkets and hypermarkets as an increasingly important point of sale. Whilst the process is rather slow, should this gain momentum (Carrefour for example launched in 2008) this would ease distribution of Honey and other F&B products in the country.390 Summary Iran is one of the leading producers and exporters of honey globally. Honey and honey products have an important role in Iranian society with significance not only in nutrition but also in medicine and in the Islamic culture. The EU is one of Iran’s important trade partners in this sector, accounting for about 88 per cent of its exported value and 50 per cent of its imported value. Like in other sectors, the lifting of sanctions by the West created an opportunity for new trade arrangements with Iran and has been reflected in significant growth of imports and exports’ value between 2015 and 2016.

388The Financial Tribune, “Khoy, Iran’s top honey producer”, February 2016, available at https://financialtribune.com/articles/economy-domestic-economy/36665/khoy-iran-s-top-honey-producer 389 Italian Trade Agency, “Market Overview of Iran’s Agricultural Food Sector”, January 2016, accessible through: http://webcache.googleusercontent.com/search?q=cache:p4TeoQTT1ksJ:iran.exporthub.it/wp- content/plugins/download- attachments/includes/download.php%3Fid%3D286+&cd=1&hl=nl&ct=clnk&gl=jp 390 Iran Daily, “Iran retailers feel cornered by foreign brands”, March 2017, available at: http://www.iran- daily.com/News/188818.html

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Cotton Plants

Strengths Weaknesses •Iran is heavily •Strong relying on imports competition from to provide for it's Asian countries local demand •Special SPS requirements

Opportunities Threats •Growth in the • Local Industry textile industry in pressure for Iran, which relies government on cotton as raw subsides on Cotton material

Consumption In 2016, Iran’s cotton consumption was about 134 thousand tonnes. This constitutes a growth of about 2 per cent from the previous year, as apparent in the graph below. Although this growth rate is still moderate, it is a positive indication considering the stagnation in the level of consumption in the previous 3 years. Consumption is projected to keep growing gradually over the coming 5 years, to reach close to 150 thousand tonnes by 2021.

Figure 94: Iran's cotton consumption 2012-2021 (in 1,000 tons)

160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

OECD-FAO

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4.14.1.1 Consumer Profile and Trends The textile industry, for which cotton is a prominent raw material, currently accounts for 11 per cent of all licensed industrial entities in Iran. 9,818 industrial units provide 90,000 direct jobs, accounting for 13 per cent of all industrial jobs in the country.391 In 2015 the Iranian Ministry of Industries, Mining and Trade published its “Strategic Plan” – a long term plan for the industrial sector in the country 15 years ahead. In this plan the government expressed its intention to invest in the textile industry with the aim of increasing textile production by 50 per cent over 10 years. Following the publication of the plan, Iranian cotton industry advocated for restoring subsides on cotton to support the expected growth in textile production.392 According to projections of the Cotton Research Institute in Iran done in 2014, consumption of the cotton fabric could grow up to 250 tonnes (2 kg per person) over a period of 10 to 15 years.393 Offer 4.14.2.1 Domestic offer Historically, cotton has been an important agriculture production sector in Iran. After the Islamic revolution in 1979 production level fell from a pick of over 1 million bales per year in 1974 to less than 300 thousand bales in 1980. While during the 1990s production started increasing again, since the early 2000s it once more dropped. In effect, for the past 5 years production level has been stagnating to around 300 thousand bales per year.394 The Deputy Agriculture Minister Abbas Keshavarz has recently announced the intention to dedicate 130 hectares of farms to the cultivation of cotton in the in Iran in the current Iranian year (started March 21). This is part of a wider plan of the Iranian government to increase domestic production levels – including innovative production methods that decrease water consumption on cotton farms for example.395

Figure 95: Iran's cotton production 2012-2017 (in 1,000 480 lb. Bales)

391 The Financial Tribune, “13% of Industrial Jobs Generated by Textile Industry”, July 2017, available at: https://financialtribune.com/articles/economy-business-and-markets/67785/13-of-industrial-jobs- generated-by-textile-industry 392 The Financial Tribune, “Textile Future Hinges on Cotton”, September 2015, available at: https://financialtribune.com/articles/economy-business-and-markets/25481/textile-future-hinges-on-cotton 393 The International Cotton Advisory Committee, “Cotton Roadmap in Iran”, June 2014, available at: https://www.icac.org/getattachment/tech/Regional-Networks/Asian-Cotton-R-D-Network-6th- Meeting/Cotton-Roadmap-in-Iran.pdf 394 US. Department of Agriculture, Foreign Agricultural Service, “World Agricultural Production”, August 2017, p. 30, available at: https://apps.fas.usda.gov/psdonline/circulars/production.pdf 395Eghtesad, “1st Cotton Seedling Cultivation in Iran”, June 2017, available at: http://www.en.eghtesadonline.com/Section-economy-4/16496-st-cotton-seedling-cultivation-in-iran

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330 320 310 300 290 280 270 260 250 2012 2013 2014 2015 2016 2017

US. Department of Agriculture

Mohammad Hossein Kaviani, CEO of Iran’s Cotton Fund Company, has detailed the decreasing cultivation of cotton in the country in his interview to the Iranian Financial Tribune. He explained the decline in Cotton area cultivation, which reached 80,000 hectares in March 2017 (end of the Iranian year) is due to the high cost of advanced machinery, leading to low productivity and in effect to farmers turning to traditional methods of production, or other agriculture sectors altogether.

Kaviani continues that Iran is heavily dependent on imports to meet the domestic cotton demand, and refers to the historical comparison, saying that in the past Golestan Province alone exported about 100 tonnes of cotton. However, the cultivated area for cotton in the country is expected to increase to about 90,000 hectares in the coming year as a result of imports of high quality seeds and supplies of fertilizers and pesticides to farmers along with government subsidies.396 As a sector that is starving for innovative solutions to common problems, European producers that have been able to deal with these problems for decades will find a ready market in Iran.

According to the Cotton Research Institute of Iran, the ratio between benefits and costs of production in cotton is 13 percent, which is considered rather low compared to the benefit to cost ratio in other corps such as wheat (35 percent), soybean (33 percent), rapeseed (30 percent), rice (30 percent) and corn (21 percent)397. A main reason for the low profitability is lack of planning and advanced knowledge in the sector. In the early 2000s the Iranian government

396 The Financial Tribune, “Iran Cotton Industry Risks Losing Viability” August 2015 available at: https://financialtribune.com/articles/economy-business-and-markets/64860/iran-cotton-industry-risks- losing-viability 397 The International Cotton Advisory Committee, “Cotton Roadmap in Iran”, June 2014, available at https://www.icac.org/getattachment/tech/Regional-Networks/Asian-Cotton-R-D-Network-6th- Meeting/Cotton-Roadmap-in-Iran.pdf

185 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Cotton Plants halted its plan for cotton sustainable design meaning that crops resistant to certain type of weather conditions are not commonly used in Iran. Other issues, such as the Iranian government’s aim for self-sufficiency in wheat, were prioritised on the expanse of the cotton sector. Yet, 18 of the provinces in the country (see map below) have cotton production with the potential to grow given the appropriate research investment in more advanced and efficient cultivation methods and tools. Several factors contribune to Iran’s potential in cotton production:

 Low pest and disease population.

 Different suitable agro-ecological zones for cotton production in the country.

 Improved varieties (high yielding, good quality, early mature and compact genotypes).

 Large number of dependent industries, including 3800 spinning in the textile industry, 113 ginning factories and 35 oil refining factories. 398

4.14.2.2 Import According to UN Comtrade statistics outlined in the graph below, Iran’s imports of cotton grew in recent years from a value of 100 million EUR in 2012 to almost 240 million in 2016. However, EU share in Iran’s imports have remained insignificant accounting for imported value of 0.63 million EUR that year - about 0.26 per cent of Iran’s total imports. The main exporters of cotton to Iran are China, which accounted for 42 per cent of Iran’s imported value in 2016, followed by Turkey (22 percent), the United Arab Emirates (22 percent) and India (13 percent).

398 The International Cotton Advisory Committee, “Cotton Roadmap in Iran”, June 2014, available at https://www.icac.org/getattachment/tech/Regional-Networks/Asian-Cotton-R-D-Network-6th- Meeting/Cotton-Roadmap-in-Iran.pdf

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Figure 96: Iran's imports of cotton 2012-2016 (value in million EUR)

300.00

250.00

200.00

150.00 World EU 100.00

50.00

0.00 2012 2013 2014 2015 2016

Figure 97: Top exporters of cotton to Iran (share in Iran’s imports 2016)

Other 1%

India United 13% Arab Emirates 22% Turkey 22%

China 42%

4.14.2.3 Export Iran’s total exports of cotton dropped sharply in recent years, falling from an exported value of about 195 million EUR in 2012 to around 477 thousand EUR in 2016, which is outlined in the graph below. The most significant decrease in exported value has been between 2012 and 2014. Exports to the EU have also dropped during that period, although the share of the EU in Iran’s total exports considerably increased in the past couple of years, from 2.9 per cent in 2014

399 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org 400 Ibid.

187 | P a g e Enjoy It’s from Europe – Market Entry Handbook Market snapshots: Cotton Plants to 24.7 and 28.1 per cent in 2015 and 2016 respectively. The main export destination of Iranian cotton in 2016 was China, accounting for 51 per cent of Iran’s exported value, followed by France (21 percent) and Germany (7 percent). Cotton products, including flax, hemp and plaiting materials, constituted 0.2 per cent of EU’s total Agri-food imports in 2016.401

Figure 98: Iran's exports of cotton 2012-2016 (value in million EUR)

1,000

100

10 World EU 1

0 2012 2013 2014 2015 2016

Figure 99: Top importers of cotton from Iran (share in Iran’s exported value 2016)

KazakhstanTurkey Georgia Other 4% 4% 1% 2% Armenia 5%

Sri Lanka 5% Germany China 7% 51%

France 21%

401 The European Commission, “Agri-Food Trade Statistical Factsheet: European Union – Iran”, February 2017, available at: https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside- eu/countries/agrifood-iran_en.pdf 402 United Nations International Trade Statistics Database, Department of Economic and Social Affairs/Statistics Division available at: https://comtrade.un.org 403 Ibid.

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4.14.2.4 Main Competitors About 30-40 local companies in Iran are involved in the production, distribution and processing of cotton according to different local business directories.404 Iran Cotton Fund is particularly important in terms of investments in the sector. It is one of the major stakeholders of Iran agriculture Investment Company, alongside large companies and institutions such as the Agriculture Bank of Iran and the Central Union of Rural and Agricultural Cooperative of Iran.

4.14.2.5 Specific customs and SPS requirements for import, needed documents As detailed in Iran’s Plant Quarantine Regulations, all plants and plant parts entering the country must obtain phytosanitary and treatment certificates from the country of origin. Article 9 of the Plant Protection Implementing Regulation list Cotton as one of the corps for which a phytosanitary certificate cannot be issued. However, the same article has an exception for imports deemed necessary by the government for nutritional or industrial purposes. In such cases, the government’s Plant Protection Organization would issue a decree to remove the ban. In addition, article 17 of the regulation specifies that on top of the phytosanitary certificate and treatment certificate, sound double wrappers are required for all cotton products and seeds.405 Distribution Like other agriculture products, distribution of cotton in Iran is largely done through agents or wholesale distributors. Local distributors and wholesalers supply the products to the local manufacturers, stores and bazars. Wholesalers play a particularly important role in more rural areas, where they form the backbone of distribution channels in Iran. They also hold a key role in distribution of export and import products. Therefore for any company wishing to succeed in Iran, having a stable distribution network in place is fundamental for success.406 Summary Iran may be seen as a growing market for Cotton, given its textile industry which is reliant on cotton as raw material and the relatively low local production. Current plans to increase textile production in the country are likely to lead to an increased demand for cotton. Likewise, demand is likely to increase for advanced machinery to improve the efficiency of local production.

404 See for example: http://www.listofcompaniesin.com/iran/cotton/ 405 The International Plan Protection Convention, “Plant Protection Implementing Regulation (Iran)”, November 2016, available at: https://www.ippc.int/static/media/files/publication/en/2016/11/Iran_plant_protection_act_and_implementin g_regulation.pdf 406 Italian Trade Agency, “Market Overview of Iran’s Agricultural Food Sector”, January 2016, accessible through: http://webcache.googleusercontent.com/search?q=cache:p4TeoQTT1ksJ:iran.exporthub.it/wp- content/plugins/download- attachments/includes/download.php%3Fid%3D286+&cd=1&hl=nl&ct=clnk&gl=jp

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However, the Iranian government is currently investing in increasing the plant cultivation area and is under pressure from local industry to further support the sector through investment in research as well as through subsides. Furthermore, imports of cotton require a special decree from the Iranian Plant Protection Organization and must be have sound double wrapping in addition to the Phytosanitary certificate and treatment certificate required from all plants and plants products entering the country. The majority of Iran’s imports of the plant come from countries in Asia and the Middle East, particularly China, the United Arab Emirates, Turkey and India. EU share in the country’s imports is marginal (less than 1 per cent). The EU role as an export destination for Iranian cotton, however, has grown in recent years despite overall decrease in Iran’s exports in the sector.

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Communication Advertising in Iran The Iranian advertising market has only recently opened up to Western companies wishing to promote their brands in the country, as sanctions against Iran were lifted in early 2016. Since it is a new market with some considerable entry barriers and strict regulations, it is best that European companies wishing to market their products in Iran work together with local marketing agencies.

Companies wishing to market their products in Iran need to understand the local media landscape as well as their target audience. Experts say there are some ‘complexities’ to the Iranian market which advertisers will need to understand before investing millions in marketing campaigns. The main issue is of course the distinctions between Persian and Arabic language and culture. Repurposing marketing strategies used in other Middle-Eastern countries however, might not be the best approach to get footing in Iran marketing experts warn – Iranian consumers will likely reject this.407

Another thing to bear in mind is that Iran itself is also not a homogenous market, as the experts explain that in Iran European companies are communicating with one of the most diverse audiences in the world. With a population of 80 million, diversity is one of its core characteristics.408 Iranian ethnic composition is very diverse consisting of Persians (51 per cent), Azeris (24 per cent), Gilaki and Mazandaranis (8 per cent), Kurds (7 per cent), Arabs (3 per cent) and other ethnic groups who all have their different cultures and preferences in terms of food and beverage products and how these products are communicated to them.409 Persian is the official language of the country, but it has several dialects that could in some cases influence marketing campaigns. Furthermore, Arabic is also spoken in the country and approximately 28 per cent of the population speaks various dialects of Turkish.410

According to Dr. Damoon Mir, CCO of ZIGMA8 | 360º Creative Communications, for the past 30 years the National TV channels were the main avenue for advertising and branding in Iran, and outdoor media was second, followed by newspapers and magazines. In the last eight years however the

407 BROWNSELL, Alex “Is Iran the next big market for advertisers and media companies?”, MandMGlobal, September 2015, available at: http://mandmglobal.com/is-iran-the-next-big-market-for-advertisers-and- media-companies/ 408 M and M Global, “An interview on M&M Global with our CCO, Dr Damoon Mir, about Advertising and Marketing in Iran”, accessed 2017, available at: https://zigma8.com/on-the-media/advertising-and- marketing-in-iran.html 409 The World Factbook, “Iran”,accessed 15 August 2017, available at https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html 410 Ibid.

191 | P a g e Enjoy It’s from Europe – Market Entry Handbook Communication: Advertising in Iran national TV channels started to lose audiences to digital media.411 Even though it is losing popularity, TV is still the biggest source of information for Iranians as Iran’s terrestrial TV. This channel of communications is run by the Islamic Republic of Iran Broadcasting – the IRIB – which is state-controlled but simultaneously has one of the widest reaches in Iran in terms of advertising. It contains 12 national television channels, 4 international news television channels, 6 satellite television channels available for international audiences, as well as 30 local television channels available throughout the country which specifically target audience in local dialects or accents.412

Similar to TV, radio is another major source for information in Iran. Like television, IRIB is also prominently represented among radio broadcasts in Iran. IRIB’s most popular national stations include the Sarasary which frequently airs news and talk shows. As it simultaneously functions as the main state radio station, it is more commonly known as Radio Iran. Javan is a more youth-orientated station that mainly focusses on broadcastsing Iranian music. The broadcasting channel Payam on the other hand combines both news and music programming and specifically targets an urban demographic, specifically in Tehran. Finally, Maaref, a more conservative radio station, is based in the city of Qom specifically, and its content focusses mainly on religious content.413 The majority of these radio channels are also open to advertising.

In Iran’s media landscape, printed media also plays a huge role in disseminating information to Iran’s consumers, especially in the countryside. With over 50 daily publication, Iran’s press landscape is considered to be very competitive. However, as most of these are state-ioerated that are simultaneously rather conservative.414 Below is an overview of the major daily newspapers in Iran that also accept advertisements. All of these newspapers also have online presence.

411 Zigma8, “An interview on M&M Global with our CCO, Dr Damoon Mir, about Advertising and Marketing in Iran”, accessed 2017, available at: https://zigma8.com/on-the-media/advertising-and- marketing-in-iran.html 412 MCGILL, Bobby, “Branding in Iran: A Conversation with PGt Advertising’s Sam Cordier from Tehran”, Branding in Asia, April 2017, available at: https://brandinginasia.com/branding-in-iran-sam-cordier/ 413 Chronicle Fanack, “Iran’s Media Landscape: An Overview”, 2017, available at: https://chronicle.fanack.com/iran/society-media-culture/media/ 414 Ibid.

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Table 20) Overview of the Press in Iran

Overview of the Press in Iran

Kayha Founded in 1943, and is considered one of the more conservative papers. Preferred over some of its competitiors by the Iranian judiciary and security branches, Kayhan is considered one of the most influential newspapers of the country.

Resalat Founded in 1985, Resalat is owned by the conservative Resalat Foundation. It focusses on political, cultural and social news-items presented through a traditionalist or religious lense.

Shargh Shargh can be considered one of the most well-received reformist newspapers in the country. Ever since its founding in 2003, the newspaper has clashed with existing press regulation – leading to it being closed four times in the first decade since its founding. It has since taken up a more neutral tone. Tehran Times An English-language daily publication, ever since 1979 the Tehran times has brought a more international appeal without losing sight of a conservative foundation. As such, it invites contributions from foreign writers that stay

within bounds of its own views.

Chronicle415

415 Chronicle Fanack, “Iran’s Media Landscape: An Overview”, 2017, available at: https://chronicle.fanack.com/iran/society-media-culture/media/

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Even though traditional advertising channels have the widest reach in terms of engaging different customer bases, online media is by far the preferred media outlet for advertising to majority of the companies. Currently, Iran boasts the highest number of internet users in the Middle East at 46.8 million compared with the next highest, Saudi Arabia, at 18.3 million. When brought into the context of Iran’s population online advertisement has the chance to reach about 57.2 per cent of Iran’s population. A significant part of internet users are youth (15-30) living in urban areas, with Tehran having the highest rate of internet users.416

Sam Cordier, Managing Director at PGt Advertising states that many large international brands are focussing their marketing budgets on the digital marketing realm alone while using physical marketing elements as mere side- components.417 Online marketing is also considered to be the fastest growing advertising sector in Iran, which is increasingly becoming profitable as according to Adro, an Iranian ad exchange platform, the digital ad spending in Iran is speculated to be more than 53 million USD (46.4 million EUR).418

In Iran, the digital media space is quite diverse, raging from traditional online publications to online e-commerce platforms and social media platforms. Below are the main online publications platforms.

Table 21) Major Online Publications in Iran

Online Publications in Iran

Islamic Republic News Agency First founded in 1934, IRNA is (IRNA) considered to be Iran’s official news agency and has initiated its online activity since 1997. It publishes in eight different languages.

Fars News Agency Founded in 2003, Fars News Agency is a semi-official state news agency. While it offers content in Farsi, Arabic, English and Turkish,

416 MCGILL, Bobby, “Branding in Iran: A Conversation with PGt Advertising’s Sam Cordier from Tehran”, Branding in Asia, April 2017 available at: https://brandinginasia.com/branding-in-iran-sam-cordier/ 417 Ibid 418 JAFARI, Hamed, “Digital Ad Spending in Iran Accounts for More Than $53M”, Tech RASA, January 2017, available at: http://techrasa.com/2017/01/29/digital-ad-spending-iran-accounts-53m/

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it is known for a more conservative and often hardline editorial stance.

Chronicle419

Rapidly increasing in popularity among the general population of Iran, the e- commerce industry has become a commong tool to acquire a wide variety of goods offered online.420 Though the main Western e-commerce sites are blocked in Iran, there are some successful local e-commerce platforms. Below are the main e-commerce sites in Iran where companies can also advertise their products.

Table 22) E-commerce Platforms in Iran

E-commerce Platforms in Iran

Digikala As one of the more popular internet based companies in the country,

Digikala has gained a dominating position in Iran’s online market. One of the first to explore the country e-opportunities, Digikala has since paved the way for

newcomers. Taking up roughly 85 per cent of the market, its networth is estimated to be over 300 million USD (262.7 million EUR). Even more so, with over 850 thousand visitors per day, Digikala is considered the biggest online shop in the Middle East.

Bamilo Bamilo has followed Digikala’s footsteps and is currently the

second largest e-commerce

419 Chronicle Fanack, “Iran’s Media Landscape: An Overview”, 2017, available at: https://chronicle.fanack.com/iran/society-media-culture/media/ 420 JAFARI, Hamed, “8 Popular E-Commerce Websites in Iran”, Tech RASA, April 2016, available at: http://techrasa.com/2016/04/06/8-popular-e-commerce-websites-in-iran/

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platform in Iran. However, it should be noted that the difference in market-share between these two rivals is quite large, and Bamilo’s main appeal is its more competitive pricing. This in combination with the wide variety of goods its sells, its seasonal sales and discounts as well as financial support to boost its growth from the MTN group has solidified Bamilo’s position in Iran’s e-commerce landscape.

Techrasa421

A great deal of advertising also happens on social media, which is mostly consumed by urban youth. In Iran, Twitter and Facebook are blocked, and consumer prefer alternative social media tools like Instagram and Telegram. Although Instagram has added advertising to its platform, this marketing tool is still in its infancy in Iran. Most Iranian companies prefer in stead to collaborate with Instagram influencers and local celebrities to spread brand awareness.422

Telegram is another popular social media outlet in Iran. Originally foundes as a messaging app, Telegram has rapidly taken up the general characteristics of Iran’s main social media platform. Through groups and channels providing a qide variety of selected content – and consumers interested in this content – companies have been able to create marketing value through Telegram. It is predicted that Telegram channels have generated 23.3 million USD (19.5 million EUR) in revenue in 2016 alone.423

Advertising in Iran is, however, strictly regulated even though since the 2013 election of President Hassan Rouhani. Although country experts assure that the media environment has become less restrictive, at the same time censorship and online surveillance have remained pervasive while media outlets are closed down on a regular basis if deemed to have crossed media- related red lines.424

421 JAFARI, Hamed, “8 Popular E-Commerce Websites in Iran”, April 2016, available at: http://techrasa.com/2016/04/06/8-popular-e-commerce-websites-in-iran/ 422 JAFARI, Hamed, “Digital Ad Spending in Iran Accounts for More Than $53M”, Tech RASA, January 2017, available at: http://techrasa.com/2017/01/29/digital-ad-spending-iran-accounts-53m/ 423 Ibid. 424 Chronicle Fanack, “Iran’s Media Landscape: An Overview”, 2017, available at: https://chronicle.fanack.com/iran/society-media-culture/media/

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According to Sam Cordier, all local creative work officially published and viewed by the public, regardless whether on TV, on radio, on out-door billboards or print, must obtain prior approval from the national Ministry of Islamic Guidance and Cultural Affairs, known in Iran as Ershad. The organization is particularly strict when it comes to TV, radio, and out-door billboard advertising, but is known to be more lenient in terms of print or online advertising.425

It goes also without saying that all advertising in Iran must follow the Islamic values laid out by the Islamic Republic of Iran, and this leads to agencies having to do some very creative thinking when it comes to certain brands or products, as for example it is restricted to use luxury visual or verbal elements in creating the advertisements.426 Experts also say that some brands will also find it easier than others to launch in Iran. Similarly, certain products are restricted in Iran – like energy drinks for example – and other types of foods or industrial goods are regulated tougher than others to protect local producers.427

European companies should keep in mind that in Iran all businesses have a legal responsibility to ensure that their advertisements do not provide deceiving information or break the law in any way. At the same time, keep in mind the regulations set by formal organizations, such as the Ministry of Commerce, Ministry of Islamic Guidance, the advertising organization, or the Management and Planning Organization among other, which all have established specific criteria and regulations for TV commercials, billboards, internet advertising etc. specifically.428

According to advertisement agencies, there are a few common rules to follow, though this list is by no means exhaustive. Companies are suggested to:

1. Not publish atheistic articles or issues which are prejudicial to Islamic codes or in any other way bring forward topics which might harm the core beliefs and values of the Islamic Republic of Iran.

2. Not spread obscene or religiously forbidden acts nor publish indecent pictures or issues openly violating public decency.

425 MCGILL, Bobby, “Branding in Iran: A Conversation with PGt Advertising’s Sam Cordier from Tehran”, Branding in Asia, April 2017 available at: https://brandinginasia.com/branding-in-iran-sam-cordier/ 426 Zigma8, “Challenges of Branding and Advertising in Iran”, 2016, available at: http://www.zigma8.com/on-the-media/challenges-of-branding-and-advertising-in-iran.html 427 BROWNSELL, Alex “Is Iran the next big market for advertisers and media companies?”, M and M Global, September 2015, available at: http://mandmglobal.com/is-iran-the-next-big-market-for-advertisers- and-media-companies/ 428 MAAT Agency, “First step to invest in Iran is to know about the laws”, 2016, available at: http://maat.ir/en/first-step-to-invest-in-iran-is-to-know-about-the-laws/

197 | P a g e Enjoy It’s from Europe – Market Entry Handbook Communication: Presenting a Product in Iran

3. Not encourage or instigate its subjects – either in singularity or as a group – to unify against the security interests of the Islamic Republic of Iran both domestically and abroad.

4. Not insult Islam, its rituals, holly places, recognised senior religious authorities or attack the Leader of the Revolution

5. To ensure that all subjects displayed through advertising – in particular women – to comply with the Islamic hijab as specified in the Iranian constitution. Although to a lesser extent, men should also comply with the guidelines provided.

6. To bear in mind that advertising is only allowed if the products and services have been officially verified through one of the recognized research centers in the country prior to the advertisement’s recording. As such, all products and services comply with the provisions of the article – and its related paragraphs – of the regulations covering the establishment and supervision of the methods that advertising organizations would operate.

7. It is also worth remembering that suppliers of advertising on e- commerce platforms are obliged to provide accurate, correct, complete and non-deceptive information of the products or services to its consumer-base. This includes the name and identity of the benefitting person or firm from the advertisement in question.429 Presenting a Product in Iran Muslims in Iran spent an estimated USD 61 billion (EUR 23.20 billion) on food and beverages in 2015. With the lifting of sanctions against the country, a substantial growth in food demand is expected, which will consequently result in an increase in demands for investments and modernisations of the Iranian food industry and the agricultural sector – areas that have suffered from a backlog during the sanction period.

In order to understand how it would be best to approach the Iranian F&B market in the advertising sector, it is necessary to assess the consumption patterns and the consumers’ profiles, as well as their cultural and ideological backgrounds. In places where cultural factors largely determine the way various phenomena are perceived, communicating and presenting a product becomes more difficult because it involves considerations of cultural conventions and expectations, and application of the most appropriate translation techniques. For instance, English advertisements are mostly translated into Farsi based on Iranian translators’ cultural filters in order to

429 MAAT Agency, “First step to invest in Iran is to know about the laws”, 2016, available at: http://maat.ir/en/first-step-to-invest-in-iran-is-to-know-about-the-laws/

198 | P a g e Enjoy It’s from Europe – Market Entry Handbook Communication: Presenting a Product in Iran have impacts that are more impressive and effective on the religious consumers of a specific culture in Iran.

Another important element that must be taken into consideration in Iran is the profound dichotomy of a country that has been isolated over decades and lives under its own rules, has its own deeply rooted habits, but is at the same time ready to surf the waves of modernity and open up to westernized social and cultural concepts.

Television and radio commercials and even advertising in social media enjoy freedom of expression provided that Islamic principles or the civil code are not violated. Many laws regulate this field, however the most important laws that all kind of ads are obliged to observe in Iran include the prohibition to publish atheistic articles or issues which negatively affect the Islamic codes; promote obscene and religiously forbidden acts; encourage and instigate individuals or groups to damage or diminish the security, dignity and interests of the country Iran both domestically or abroad. Moreover, in all kind of advertising men and women, in particular women, are expected to comply with the Islamic hijab as defined and specified in the Iranian constitution. Finally, before advertising, a product or service should have its qualities formally verified by one of the officially recognised research centres in Iran.430 Target Audience Iran is the second-most-populous country in the Middle East, behind only Egypt. Iran's profile as a key player in the region renders it an important market for EU F&B producers with agro-export related ambitions, it therefore has the potential to function as a gateway to the wider region.431 With a population that amounts to roughly 80 million, the country is host to a large group of young people. This group shows a great interest and desire for imported goods, and following the lifting of sanctions Iran is a country that shows tremendous buying potential.

However, European SMEs should not forget that the market is currently already conquered by its wide variety of domestic brands. This is likely to remain the same especially for the low-to-mid segments of society, with EU food and beverage exports likely to compete on quality, not price. Nonetheless, EU F&B products are likely to appeal to a middle-class or more affluent consumers in Iran.

Despite a rising interest in premium-segment products from the EU, it is vital to approach the Iranian market as one that is shaped by frictions between

430 MAAT Agency, “First step to invest in Iran is to know about the laws”, 2016, available at: http://maat.ir/en/first-step-to-invest-in-iran-is-to-know-about-the-laws/ 431The Financial Tribune, “Ireland Sums Up Option in Iran Food Market”, June 2016, available at: https://financialtribune.com/articles/economy-domestic-economy/43259/ireland-sums-up-options-in-iran- food-market

199 | P a g e Enjoy It’s from Europe – Market Entry Handbook Communication: Presenting a Product in Iran conservatism and a hunger for foreign and innovative products. Whereas some EU F&B products could be integrated with Iranian cuisine based on quality, others are better suited for direct consumption by a demographic that is predominantly young, high income, urban, professional and convenience- oriented.

Within the Iranian market there are regional variations in terms of consumer types and market segments. A profound understanding of these regional differences and disparities in the consumer base will facilitate the development of a balanced strategy to enter the market.

The Support Services Directory included with this Handbook can help you establish contact with knowledgeable experts established in the market to better understand how to reach the audience best-suited for your product. Communications Campaigns in Iran Entering a market of nearly 80 million consumers is by no means a walk in the park. A sound communication strategy combined with targeted advertising can be quintessential in establishing one’s name, and to gain momentum in a complex market that is opening up. A particularly attractive sector for international F&B companies is the young local population – about 65 per cent is under 35 years old.

Food and agricultural fairs and exhibitions held in Iran during 2017 include:

 The 24th Agricultural, Food and Related Industries Trade Fair432

 The 16th Iran International Confectionery Fair/The 8th Int’l Exhibition Of Dairy, Beverage, Tea, Coffee & Related Industries433

 The 11th International Flour and Bakery Industry Exhibition

 The 16th International Exhibition of Poultry, Livestock, Dairy and Related Industries in December 2017

Promoting your Product As already stressed, Iran’s opening up to the world presents great opportunities and has an increasingly high potential for foreign investors, but defining the scopes and objectives of a market expansion strategy is crucial to getting strong internal support in Iran.

A sustainable market entry strategy should encompass differentiation from the competition and a sustainable medium- to long-term approach. A key factor towards becoming successful in the Iranian market is localization – copy- pasting one company business model into a foreign market like Iran not only

432 For more information, please view: www.iranagrofoodfair.com 433 For more information, please view: www.iranianacm.com

200 | P a g e Enjoy It’s from Europe – Market Entry Handbook Communication: Presenting a Product in Iran will not be useful, but also harmful if there is not deep market insight and cultural understanding.

One strategy to establish a first point of contact is to conduct promotional campaigns, participate in tasting sessions with local distributors, but also taking part in trade fairs and other related activities before embarking upon any implementation phase. Secondly, carefully monitoring of progress is of paramount importance in a dynamic market like Iran, where business adjustments might be needed and new opportunities might arise very quickly. This is probably one of the most important challenges for foreign companies that are used to operating in saturated, predictable and regulated markets. As in Iran things change at a rapid pace, some might see this as a threat the country poses. However, for those entrepreneurs with a watchful eye and foot on the ground, this could also provide immense opportunities.434

It should be noted that most food export to Iran must pass lengthy health and quality control procedures at the Ministry of Health and the Ministry of Agricultural Jihad. In order to obtain the necessary license, it might be beneficial to set up a direct presence locally by finding the right local partners through in-person due diligence.

Multiple TV channels in Iran host TV-shows dedicated to food and cooking. One study found that during one week, culinary TV-shows made up 13 hours of programming across 8 different TV channels.435 In addition, although not legal, almost every modern Iranian household has access to satellite TV, which means access to a large number of banned content produced outside of Iran. Examples of such channels are the Persian Music Channel (UAE) and Manoto TV (UK). One of the most popular Manoto programs is a culinary show called “Welcome to Dinner”.

تلویزیون-آشپزی-های-برنامه-از-جالب-آمار/http://www.tabnak.ir/fa/news/621941 435

201 | P a g e Enjoy It’s from Europe – Market Entry Handbook DOs AND DON’Ts: DO

DOs AND DON’Ts To avoid cultural misunderstandings, it is advisable to take into account the following information:436 DO  Take time to know your colleagues and business associates on a personal level, this is a key area for doing business in Iran.

 Greet associates using a formal handshake. Men should wait for a woman to extend her hand before making the gesture. A simple nod of the head and smile will suffice if not offered.

 Address colleagues using the correct terms. For males ‘agha’ followed by their surname. For females ‘Khanoom’ followed by their surname.

 Arrive on time to create a good impression, although be prepared for delays.

 Do consider ta’arof when accepting hospitality. Ta’arof is an offer out of politeness best not to accept right away, though do agree if they insist.

436 Information for this section comes from three main sources: http://www.kwintessential.co.uk/resources/guides/guide-to-iran-etiquette-customs-culture-business/; http://www.commisceo-global.com/country-guides/iran-guide; and semi-formal interviews conducted with industry stakeholders

202 | P a g e Enjoy It’s from Europe – Market Entry Handbook DOs AND DON’Ts: DON’T

DON’T  Instigate conversations regarding politics or Islam. It is also best to avoid asking about relatives of any colleagues.

 Criticise your Iranian counterparts in front of other colleagues as this may cause a loss of face.

 Give the ‘thumbs up’ sign while in Iranian as this is considered to be an offensive gesture.

 Display affectionate behaviour to people of the opposite gender. However it is not rare to see two men holding hands or kissing each other on the cheeks.

 Confuse Iranian culture or ethnicity (especially language) with Arab culture. This is a common mistake and one Iranians are most offended by.

203 | P a g e Enjoy It’s from Europe – Market Entry Handbook DOs AND DON’Ts: Quick Facts

Quick Facts The People

Islam is practised by the majority of Iranians and influences both their social and business lives. Ta’arof is a core element of this social culture, it is a system of politeness where Iranians protest compliments and belittle themselves to appear humble. In Iran, a great respect is shown for elders and extended family, this has shaped how business is conducted today. You will find no business deal will be conducted without an important level of trust and friendship between the two partners. With a population of 80 million, increasing every year, and over 70 per cent of this number living in urban areas, the F&B market is a sector of growing demand in Iran.

Meeting and Greeting

 The universal Islamic phrase when greeting people is salaam.

 Address your Iranian associates by their title and their surname.

 Age is highly respected in society, you are expected to greet the oldest people first.

 A handshake is the usual greeting gesture in a business setting. It is polite to wait for the eldest in the room to extend their hand. However bear in mind physical contact between opposite sexes should be avoided.

 It is common practice to introduce the younger person to the older person, not the other way round.

 In an informal setting Iranians kiss three times on each cheek.

 You should arrive at meetings on time, although it is an accepted custom to keep foreigners waiting.

 If possible avoid arranging meetings during Ramadan as the need to fast would negate any associates from offering hospitality.

 The first business meeting is often about getting to know your associates. The business discussions will begin in the following meetings.

Language

 The official language of Iran is Persian (Farsi in Iranian). However in business English is widely spoken throughout.

 Although many Iranians will speak English in business, it is polite to arrange for your own interpreter to make business easier.

Body Language

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 It is considered polite to stand up when someone enters the room, especially someone of importance and an older person.

 A downward gaze is seen as a sign of respect rather than looking disinterested.

 It is considered rude to look at your watch during business and social meetings.

 If a handshake is declined a simple smile and nod of the head will suffice.

Corporate Culture

 Appointments are necessary and should be made 3-4 weeks in advance.

 There is a large emphasis placed on relationships and connections, therefore business can occur at a slower pace. It is prudent to wait for your associate to change the discussions to business matters.

 Business hours are usually 8:00 am to 16:00 pm with the six day working week running from Saturday to Thursday. Some offices may close on Thursday or work reduced hours.

 Patience is important in Iran, pressuring or rushing the business process won’t be welcome.

 Business cards are usually only exchanged between senior level people. If you are going to exchange business cards ensure one side is translated in Farsi and it has your current position.

 During the holy month of Ramadan, Muslims are only permitted to work 6 hours a day.

 Nepotism is common in the business environment due the value placed on trust and friendships.

Banking Systems

 Although most financial sanctions on Iran were lifted in 2016 there are certain sanctions which remain in place and it is important to review the person/entity before doing business.

 Banking relations with EU banks are slowly resuming in Iran, although some may be hesitant about performing transactions because of US sanctions which are still imposed.

 Internet and mobile banking is common with the main Iranian banks (Bank Melli, Bank Tejarat, Pasargad and Bank Mellat).

 Although the main currency in Iran is Rials, in practice most people speak in Tomans which is 10 Rials.

205 | P a g e Enjoy It’s from Europe – Market Entry Handbook DOs AND DON’Ts: Quick Facts

 Discussions are ongoing in an attempt to unite the country’s official and open market exchange rates, currently they can differ by up to 18 per cent.

Dining and Entertainment

 It is considered rude to leave food on your plate. The best way to avoid causing offence is to try a little from all the dishes if communally served or ensure you do not order too much.

 A general rule is that the person who organises the meal will pay for the meal.

 When a guest at a local house, you should wait for the host to serve you the food.

 Meals are considered to be formal in Iran, you are best to wait to be told where to sit.

Business Holidays

 The main holiday is Norooz (Persian New Year) starting on March 21st until March 24th. Many offices usually close for 2-3 weeks over this period.

 There are 22 other national holidays which are observed throughout the year.

Dress

 Business attire for men consists of a suit, although ties are not necessary. In a social setting it best to avoid wearing shorts.

 Women are required to wear conservative clothing that covers their arms, legs and hair. The clothing should also be loose fitting.

 Dark conservative colours should be worn.

Gifts

 When greeting associates for the first time it is traditional to exchange gifts. Apologise for inadequacy of your gifts abiding by ta’arof.

 In general, gifts are not to be opened when received.

Helpful Hints

 During Ramadan although expatriates don’t have to fast, they must not eat, drink, smoke or chew gum in public.

 In adherence with ta’arof, if you are offered hospitality first decline it to appear humble, you can accept when they insist again

206 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: SWOT and 4P analysis

Synopsis SWOT and 4P analysis This section gives a concluding overview of the F&B market in Iran through SWOT and 4P analysis. It also offers some tips and recommendations for European F&B producers about how to successfully export their products to Iran.

SWOT analysis

Strengths Weaknesses

 There is a relatively large and  The Iranian economy is growing Food and Beverage currently rather dependant on market in the country, oil. Exports here account for attractive for F&B exporters around 80 per cent of total looking to enter a new export earnings and make up market. Of all Muslim roughly 40-50 per cent of the countries Iran ranks 6th in government budget. terms of the F&B market, in

2015 it was estimated to be roughly USD 59 billion (EUR  The Food and Beverage 51.46 billion). market in Iran is rather heavily regulated, as well as a

number of other sectors. This  The country is fairly easily makes entry for EU F&B accessible. As well as a exporters difficult, especially number of land borders with if no prior knowledge of the neighbouring countries it also market exists. Reliance on has two coastal borders: to partners knowledgeable about the north is the Caspian Sea the market is necessary. and to the South the Persian

Gulf and Gulf of Oman. This will be useful for logistics  Iranian rules on preparation operations of F&B market of foods may prove difficult entrants. for EU F&B exporters to comply with at first, and will

need to be looked at closely.  Food and Beverage is an Important to take account of important part of household is that food needs to be Halal, expenditure in Iran. In 2015- meeting Islamic dietary 2016 it was estimated that guidelines from the Quran. around 23.60 per cent of

207 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: SWOT and 4P analysis

gross expenditure per  Infrastructure within the household went to this country is rather weak category. compared to others in the region. This will make

movement of F&B products  There are a number of within the country potentially European brands, including tricky. with GI, present in the

country already. This makes entry for new EU players  Distribution in focused on easier. independent outlets, 98 per cent of F&B goes through this

channel. This makes  The country is party to the nationwide distribution Lisbon Agreement for the difficult due to a patchwork of Protection of Appellations of distribution arrangements. Origin and their International

Registration, offering protection to EU products with  Starting and running a GI Status. business in Iran is difficult compared to other countries, and no less so in the F&B sector. The country ranked 120/190 in ‘ease of businesses.

Opportunities Threats

 Iran’s geographic location  There is a strong clerical and lends itself well to trade with religious hierarchy, with a other countries in the region. Council of Guardians which Entry here would allow for must approve all legislation potential further future coming from the Parliament. expansion to neighbouring This concentrates important economies: the country decisions for all, including F&B shares a land border with market participants, in the Turkey, Armenia, Azerbaijan, hands of a relatively small Turkmenistan, Afghanistan, collective. and Pakistan.

208 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: SWOT and 4P analysis

 GDP per capita over time in  Iran has a sensitive Iran has been on the relationship with the West. increase. In the period 2005 Most recently international to 2014 this increased from sanctions were lifted in 13,012 USD (EUR 11,349) to January 2016 following 17,388 (EUR 15,165). This agreement on the limiting of ongoing increase is likely to the country’s nuclear affect demand across all programme. Whilst the future sectors including for F&B. is generally positive there is still some uncertainty.

 There are a number of areas in which imports to Iran are  The last decade has seen a high, due to domestic continual weakening of the production being low. These Iranian Rial against other include red meat, butter, fish, currencies, making imports fruit and wheat. See relatively more expensive, individual market snapshots therefore likely dampening for further information. demand.

 Domestic production in a  The Iranian government is number of F&B categories is keen to make the Iranian rather low in variation. This Food and Beverage market as creates space for EU F&B self-sufficient as possible, exporters to enter and particularly from Western provide wider varieties of countries. This could prove products to satisfy domestic problematic for EU F&B demand. exporters in the future.

 A shift to more modern forms of shopping, in Supermarkets  Iran already has a number of and Hypermarkets, should important trade partners in increase possibilities for EU F&B which are non EU: Brazil, F&B exporters to get their India, Russia, and Malaysia. products in front of target Increased trade from here will markets in the country. lower EU exporter Increased purchasing in opportunities. online channels also presents its opportunities.

209 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: 4P Analysis

 A consumer base which has in the past been rather shielded from international markets is keen for Western style Food and Beverage. Cultural shifts in the country mean that consumers are increasingly eager for Western lifestyles and the products that come with it.

 Western products are perceived by the consumer in Iran as higher quality, allowing for EU F&B exporters to capture parts of the market that domestic players may not be able to.

4P Analysis

Key criteria of success: 4P analysis

Product Promotion

 Iranians are increasingly  Given the importance of looking to buy Western style variety it is likely that in products. This is also the case promotional materials in the F&B sector. Therefore, showing ranges of products highlighting this fact should will attract more consumers help demand for products. to the product.

 Many Iranian consumers are  Regional trade shows and keen on buying luxury items, exhibitions are an important which are seen as a status starting point for companies symbol, this extends to Food looking to enter the Iranian and Beverage. Therefore, market. Here EU F&B

210 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: 4P Analysis

focusing on these aspects will exporters will gain visibility in influence product take-up. the market.

 Generally, especially with  Given that the Iranian younger generations, there is population is highly religious a desire for easily prepared and follows dietary and convenient meals. requirements laid down by Products which focus on this the Quran it is likely that should do well. products emphasising compliance do better in this

market.  Variety in Iran in the F&B

sector in certain outlets is wanting. Products or lines of  Working with local players products which offer variety who understand the Iranian to the consumer will likely be consumer will be an important taken up with gusto by sellers factor in the success of F&B in the country. products entering the market.

 The Iranian market is not homogenous, within the country there is a wide variety of cultures. This will need to be taken into account as a ‘one size fits all’ marketing strategy will likely fail in Iran.

 Whilst national television has traditionally been and still is the most important place to promote products, more and more social media (Instagram and Telegram) is gaining in importance. Radio is another major source of information for Iranians.

211 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: Conclusion

Placement Price

 Key market when first  Iranians are quite price entering the market are sensitive, though are willing Tehran, Mashhad, Isfahan, to pay more for items which Shiraz, and Ahvaz. are advertised as luxury and Western.

 EU F&B products are likely to do well in the growing number  Protection by the Iranian of supermarkets and government of domestic hypermarkets in the country. industry, including that of This should also ease F&B, means that in some distribution efforts. cases tariffs will be high, increasing difficulties for EU

F&B exporters.  The large number of

independent outlets in the country should not be ignored  Price promotions of products as an important distribution which are new to the Iranian point. Local partners may be consumer and recently on the able to help setting up market will likely increase arrangements here. initial take-up and demand, allowing EU F&B exporters to

get their foot in the door in  There is a growing tendency Iran. in Iran to buy products online, F&B exporters looking to gain visibility in the country would do well to sell here also.

Conclusion Iran, due primarily to sanctions which have only recently been lifted by the West, can be considered a relatively sheltered market when compared to other countries in terms of international penetration. This is a double edged sword as whilst it means that entry for EU F&B exporters is likely to be relatively difficult when compared to other potential markets of interest, there is a large and growing population within the country which is keen to experience Western lifestyles, including a demand for Food and Beverage products from Europe.

212 | P a g e Enjoy It’s from Europe – Market Entry Handbook Synopsis: Conclusion

The country is relatively easily accessible via land and maritime channels, important for EU F&B exporters to think about. Within the country itself transport infrastructure is sub-par, which will make movement of goods trickier than in other countries, though there is a focus of the Iranian government of improvement of this situation. Another question apart from how to transport is where to transport to: currently the F&B market is characterised as highly fragmented in terms of distribution. There are a large number of independent outlets which make up the majority of the market, complicating matters for new market entrants.

The market is rather difficult to navigate. As mentioned various times in this handbook there is a need for collaboration with local partners in order to ensure full understanding of the market. Religion in the country is one of the factors which complicates the situation, given the need for compliance guidance laid down in the Quran. The fact that in the Food & Beverage sector the Iranian government looks to protect national players means that EU exporters in this sector will likely face obstacles to entry, including often complicated forms for rather simple procedures.

The Iranian F&B market does have opportunities that EU exporters can look to exploit. A growing population with more and more disposable income amongst them will mean that demand for products should only increase, and consumers will often look for new products from new markets which have in the past been lacking. More modern forms of shopping, in Supermarkets and Hypermarkets, but also online, play well to EU F&B exporters, given that these forms should make entry to the market easier than in the past. Overall, even given the evident obstacles to entry to this market, it can be said that the future for EU F&B exporters looking to Iran is rather positive, especially when compared to historical expectations on the market.

213 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Relevant Business Associations in Europe

Support Service Directory Relevant Business Associations in Europe

Association / Organisation Contact details

Iran Netherlands Chamber of [email protected] Commerce and Trade

Stichting The Netherlands-Iran [email protected] Chamber of Commerce, niccima.com Industries, Mines and Agriculture +31 20 2400 794

Deutsch-Iranische [email protected] Handelskammer e.V. dihkev.de

+49 40 44 08 47

The British Iranian Chamber of [email protected] Commerce bicc.org.uk

+44 20 7233 4441

Italy-Iran Chamber of [email protected] Commerce and Industry ccii.it

+39 06 59 26 206

Netherlands Enterprise Agency english.rvo.nl

+31 70 379 80 00

Scandinavian Iranian Chamber [email protected] of Commerce scan-iran.com

+46 8 559 140 20

Nordic Iranian Chamber of [email protected] Commerce – Copenhagen niccc.eu

+45 3694 4444

214 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Directory of EU member State Embassies

Directory of EU member State Embassies

EU Member Representation Contact State

Austria Embassy of Austria in Tehran, Iran Bahonarstr., Moghaddasistr., Zamanistr Mirvali 11, Teheran

[email protected]

bmeia.gv.at/teheran

+98 21 22 75 00-38; +98 21 22 75 00-40; +98 21 22 75 00-42

Belgium Embassy of Belgium in Iran, No 4, Shirin Dead End, Agha Bozorgi St, Sh.Fayazi Ave,Vali Asr Ave., Tehran

countries.diplomatie.belgium.be/en/Iran/

+98 21 22 39 87 80; +98 21 22 39 19 06; +98 21 22 24 73 13; +98 21 22 23 91 160

Bulgaria Bulgarian Embassy in Tehran, 'Vali-e Asr' Ave. 'Tavanir' Str., 'Nezami-ye Ganjavi' Str. No. 16-18

[email protected]

+98 21 88 77 5662; +98 21 88 77 5037

Croatia Embassy of the Republic of Croatia in Tehran, Behestan 25, Ave Pasdaran, Tehran

[email protected]

+98 21 258 9923; +98 21 258 7039

Cyprus Embassy of the Republic of Cyprus in Tehran, Iran, 328, Shahid Karimi (ex. Bou Ali) Dezashib, Tajrish, 1834844681, Tehran

[email protected]

mfa.gov.cy/embassytehran

+98 21 22 21 98 42; +98 21 22 01 240

Czech Embassy of the Czech Republic in Islamic Republic of Republic Iran, Farmaniyeh, Lavasani Str. No 199 (between Yas and Sonbol) [email protected]

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mzv.cz/tehran

+98 21 22 28 81 49; +98 22 28 81 53

Denmark Royal Danish Embassy in Tehran, Iran Dr. Shariati Ave., Elahiyeh Ave., Dashti Str. 10, Tehran 19148

[email protected]

ambteheran.um.dk

+ 98 21 22 60 13 63; + 98 21 22 60 70 20

Estonia Estonian Honorary Consulate in Tehran, Iran

Armen Mootafian, Honorary Consul

N. Kheradmand Ave. 18th Str. No. 4, Tehran

[email protected]

+98 21 88 82 95 51; +98 21 88 82 95 28

Finland Embassy of Finland in Tehran, Shariati Ave. Soheil, Hadadian Ave, P.O.Box 19395-1733

[email protected]

finland.org.ir

+98 21 23 51 20 00

France Embassy of France in Tehran, 85 avenue Neauphle-le- Chateau - Tehran

[email protected]

ambafrance-ir.org/

+98 21 64 09 4000

Germany Embassy of the Federal Republic of Germany in Teheran, Ferdowsi Ave., No 320-324

[email protected]

teheran.diplo.de

+98 21 39 99 00 00

Greece Embassy of Greece in Tehran, Africa Express Way, 43 Esfandiar Ave., P.O.Box 11365-8151

216 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Directory of EU member State Embassies

[email protected]

+98 21 20 50 533; +98 21 20 53 784

Hungary Embassy of Hungary in Teheran. Darrous, Hedayat Square, Shadloo Street, No. 15 Teheran P.O.B.6363/19395

+98 21 25 50 452

Ireland Tehran Honorary Consul: Mr. Alireza Feizollahi

S.J. Assadabadi Avenue, Corner of 50th Street, No. 2/6, First Floor

[email protected]

+98 21 8804 1925

Italy Embassy of Italy in Teheran, Iran, 81 Ave. Neuphle le Chateau

[email protected]

ambteheran.esteri.it

+98 21 672 6955

Latvia Represented by Embassy of Hungary

Lithuania Embassy Of The Republic Of Lithuania To The Republic Of Turkey, To The Islamic Republic Of Pakistan And To Islamic Republic Of Iran

Mahatma Gandi cad. No:38, 06700 G.O.P., Ankara, TURKEY

[email protected]

tr.mfa.lt

+90 312 447 07 66

Luxembourg Represented by Embassy of the Netherlands

Malta Maltese Honorary Consulate in Tehran, Iran

Ms Faezeh Tabatabaei, Honorary Consul

Flat 21, 4th Floor, No 4, Khosravi Street Vaziripour Ave, Mother Square, Mirdamad Avenue

217 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Directory of EU member State Embassies

[email protected]

+98 21 2640 5277 / 8

Netherlands Netherlands Embassy in Tehran, No. 60 West Arghavan street, Dibaji North street, Farmanieh

[email protected]

+98 212 366 0000

Poland Embassy of Poland in Iran Africa Expressway, Pirouz str. 1-3 19-174

[email protected]

teheran.polemb.net/

+98 21 8878 7262

Portugal Embassy of Portugal in Tehran, Iran, Darrous Ave. Hedaiat, Rouzbeh Street 13

[email protected]

+98 21 254 3237

Romania Embassy of Romania in Tehran, Iran, 12 Fakhrabad Str., Baharestan Ave.

[email protected]

+98 21 77 53 90 41; +98 21 77 64 75 70

Slovakia Slovak Republic Embassy, Iran, No. 38, Sarlashgar Fallahi Street PO Box 11365-4451, 19887

[email protected]

mzv.sk/Tehran

+98 21 22 41 11 64

Slovenia Consulate of Slovenia in Iran, 7th Street, No.10, Khaled Eslamboli Ave PO Box 15175-159

[email protected]

+98 21 87 16 873; +98 21 87 16 661

218 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Directory of EU member State Embassies

Spain Embassy of Spain in Iran, Darrous, Boulevard Shahrzad, Shadi Street, First East Lane n 10

[email protected]

+98 21 225 68 681 / 682 / 683 / 684

Sweden Embassy of Sweden in Tehran, Iran, 2 Nastaran Street, Pasdaran Avenue (North of Dr. Lavasani) Tehran, Iran

[email protected]

swedenabroad.com/tehran

+98 21 2371 2200; +98 21 2371 2200

UK British Embassy in Tehran, 198 Ferdowsi Avenue Tehran

+98 21 6405 2000

219 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Useful Organisations and Service Providers in Iran

Useful Organisations and Service Providers in Iran

Organisation / Contact details Associations

Beverage & Foodstuff [email protected] Importers Association foodimporters.ir

Daarvag International daarvag.com (advertising)

Felesh Advertising Agency felesh.co

Iran and Greece Joint [email protected] Business Council igccm.ir

+981 21 66949103

Iran-Spain Business [email protected] Council isbc.ir

+98 21 88 38 1350

Iran, Belgium & blcca.org Luxembourg Chamber of +98 21 88 50 08 91 Commerce and Industry

Isfahan Union of etefood.com Restaurant Owners

Mashhad Association of etehadiehrm.com/static-1.html Restaurants, Chelo-kabab, Chelo-khoresh, Taverns

Shiraz Association of ghazakhorishiraz.ir/fa/start/ Traditional Restaurants and Taverns

-و-انبارها-جامع-سامانه/Tehran Food Sellers aghzieh.ir/ShowNews/1797 /كاال-نگهداري-مراكز Association

Trade Promotion eng.tpo.ir Organisation of Iran

220 | P a g e Enjoy It’s from Europe – Market Entry Handbook Support Service Directory: Calendar of Trade Events in Iran

Zigma8 360° Creative zigma8.com Communication

Calendar of Trade Events in Iran Attending trade events can help promote your product in Iran as well as forge relationships with industry figures and useful business contacts

Subject Date Organiser

The 8th 15 – 18 September Mr. Rabyi International 2017 +98 21 21 91 26 51 Exhibition of Dairy, Beverage, Tea, Coffee & Related Industries

The 16th Iran 15 – 18 September Mandegar Tejarat Shirin International 2017 Co. - +98 21 88 55 80 Confectionery Fair 66

iranicf.com

The 2nd 13 – 16 November Iran Meat Exhibition International 2017 (MeatEx) Exhibition of Halal +98 21 21 91 29 60; protein products and +98 21 22 66 26 90 related industries

The 11th 25 – 28 November Info & Trade Group. International Flour & 2017 Ibex.ir Bakery Industry Exhibition (Ibex +98 21 88 07 08 33; 2017) +98 21 88 07 06 93

The 16th 4 – 7 December 2017 Milad Mobtaker Shargh International Co. Exhibition of Poultry, Abolghasem Salar Livestock, Dairy and Rezayee Related Industries [email protected]

+98 21 44 44 8216

Information from iranfair.com

221 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Annex I - EU Products Registered as GIs in Iran Iran currently has a functioning system on GI protection that the Government is planning to make more effective. The country however is currently not party to the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement, which would grant world-wide protection to its GI products. The GI products are currently protected through domestic laws and through some international laws. The Act for Protection of Geographical Indications (2005) has in fact created a system that allows the registration of products with GI status and there are already quite a lot of Iranian products registered as GIs, however there are yet no European products registered as GIs in Iran.

On the other hand, Iran is also party to the Lisbon Agreement for the Protection of Appellations of Origin and their International Registration. The Lisbon Agreement was specifically concluded in response to the need for an international system that would facilitate the protection of a special category of geographical indications, or “appellations of origin”, in countries other than the country of origin, by means of their registration with WIPO through a single procedure, for a minimum of formalities and expense.437

According to the Lisbon Agreement, Iran has committed itself to protecting the following Geographical Indications (that are also registered in the EU databases) registered with the WIPO by the European Union Member States’ GI Associations:

Name of the GI Country Food Category

Bâlgarsko Rozovo Bulgaria Rose essence Maslo

Karlovarský Suchar Czech Republic Butter

Karlovarské Oplatky Czech Republic Wafers

Karlovarské Czech Republic Waffles Trojhránky

Pardubický Perník Czech Republic Spice Bread

Mariánskolázeňské Czech Republic Wafers Oplatky

Bleu des Causses France Cheese

Cantal France Cheese

437 Lisbon Agreement (http://www.wipo.int/edocs/pubdocs/en/geographical/942/wipo_pub_942.pdf)

222 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Fromage Bleu Du Haut France Cheese Jura Gex - Septmoncel

Comté France Cheese

Maroilles France Cheese

Reblochon France Cheese

Roquefort France Cheese

Saint-Nectaire France Cheese

Salers Haute- France Cheese Montagne

Chasselas De Moissac France Fruits and Vegetables

Noix de Grenoble France Walnuts

Volaille de Bresse France Meat

Beaufort France Cheese

Munster France Cheese

Neufchâtel France Cheese

Chaource France Cheese

Pouligny-Saint-Pierre France Cheese

Fourme D’Ambert France Cheese

Pont-L'évêque France Cheese

Olives de Nyons France Fruits and Vegetables

Huile D'olives De France Olive Oil Nyons

Laguiole France Cheese

Pintadeaux De La France Meat Drôme

Munster-Géromé France Cheese

Bleu D'auvergne France Cheese

Selles-Sur-Cher France Cheese

223 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Livarot France Cheese

Crottin De Chavignol France Cheese

Dinde Fermière De France Cheese Bresse

Beurre Des Charentes France Butter

Beurre Charentes- France Butter Poitou

Beurre Des Deux- France Butter Sèvres

Ossau Iraty France Cheese

Brie de Meaux France Cheese

Brie de Melun France Cheese

"Mont d'Or" ou / France Cheese "Vacherin du Haut- Doubs"

Beurre d'Isigny France Butter

Crème d'Isigny France Milk Cream

Picodon de la Drôme / France Cheese Picodon de l'Ardèche ou

Camembert de France Cheese Normandie

Abondance France Cheese

Brocciu Corse Ou France Cheese Brocciu

Taureau De Camargue France Meat

Huile D'olive De La France Olive Oil Vallée Des Baux De Provence

Miel De Sapin Des France Honey Vosges

224 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Miel De Corse - Mele France Honey Di Corsica

Pomme De Terre De France Fruits and Vegetables L'île De Ré

Chabichou Du Poitou France Cheese

Langres France Cheese

Rocamadour France Cheese

Sainte-Maure De France Cheese Touraine

Fourme De France Cheese Montbrison

Coco De Paimpol France Fruits and Vegetables

Olives Noires De La France Fruits and Vegetables Vallée Des Baux De Provence

Muscat Du Ventoux France Fruits and Vegetables

Kalocsa / Kalocsaer / Hungary Fruits and Vegetables Kalocsai

Szeged / Szegediner / Hungary Fruits and Vegetables Szegedi

Fontina Italy Cheese

Grana Padano Italy Cheese

Parmigiano-Regiano Italy Cheese

Provolone Valpadana Italy Cheese

Aceto Balsamico Di Italy Balsamic Vinegar Modena

Taleggio Italy Cheese

Quartirolo Lombardo Italy Cheese

Asiago Italy Cheese

Cotechino Modena Italy Meat Products

225 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Gorgonzola Italy Cheese

Mela Alto Adige / Italy Fruits and Vegetables Südtiroler Apfel

Montasio Italy Cheese

Mortadella Bologna Italy Meat Products

Mozzarella Di Bufala Italy Cheese Campana

Nocciola Del Piemonte Italy Fruits and Vegetables / Nocciola Piemonte

Pecorino Romano Italy Cheese

Pecorino Toscano Italy Cheese

Piave Italy Cheese

Pomodoro S. Marzano Italy Fruits and Vegetables Dell’agro Sarnese- Nocerino

Val Di Mazara Italy Olive Oil

Clementine di Calabria Italy Fruits and Vegetables

Valtellina Casera Italy Cheese

Agnello Di Sardegna Italy Meat

Cipolla Rossa Di Italy Fruits and Vegetables Tropea Calabria

Vitellone Bianco Italy Meat Dell’appennino Centrale

Melannurca Campana Italy Fruits and Vegetables

Soprèssa Vicentina Italy Meat Products

Formai De Mut Italy Cheese Dell’alta Val Brembana

Basilico Genovese Italy Fruits and Vegetables

226 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex I - EU Products Registered as GIs in Iran: Calendar of Trade Events in Iran

Limone Di Siracusa Italy Fruits and Vegetables

Umbria Italy Olive Oil

Arancia Di Ribera Italy Fruits and Vegetables

Nocciola Di Giffoni Italy Nuts

Ragusano Italy Cheese

Aglio Bianco Polesano Italy Fruits and Vegetables

Bitto Italy Cheese

Slovenský Oštiepok Slovakia Cheese

227 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex II - Professionals Contact Database: Major Retailers

Annex II - Professionals Contact Database Major Retailers

Name Type Contact

Etka Supermarkets Supermarket, 228 stores etkastores.ir nationwide

Hyperstar 4 Hypermarkets (Tehran, hyperstariran.com Shiraz, Isfahan), 5 Supermarkets (Tehran, Lavasan)

Refah 218 supermarkets across the refah.ir Supermarkets country

Shahrvand Hypermarket (34 stores across shahrvand.tehran.ir Supermarkets Tehran) + online shop

All the above offer procurement directly or through a distributor

Convenience stores

Name Type Procurement Contact

Bametehra Supermarket, Distributors [email protected] n foreign +982122123050 products

Family Supermarket (2 Importers/Distr +98 21 2611 7399 Market branches) ibutors instagram.com/familymark specialised in et.co/ international products

Sepah Supermarket Direct/Distribut [email protected] Consumers chain (18 ors +982143487 Cooperativ stores) e

Restaurants and Hotels

Restaurant Type of Food Contact information

228 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex II - Professionals Contact Database: Importers and Distributors

Aydin Casual Café / Sandwiches +98219301214005

Boof Popular Fast Food Chain +982144212199

Espinas Hotels Hotel +982188996658

Ferdowsi Hotel +982166727026 International Grand Hotel

Pelak Fusion chain restaurant +982122254535 serving Chinese, Thai, +982122252124 Italian, Pizza, and finger food

Persian Azadi Hotel Hotel +982122344458

Persian Esteghlal Hotel +982122660011 International Hotel

Shandiz: Traditional/ +98212043 Barbecue/Grill/Kabab

Tehran Grand Hotel Hotel +982188719610

Importers and Distributors

Name Type Contact

Bahar 82 Import (malt beer) +982166635005

DTP Import (olive oil) [email protected] Trading + 9821- 88879507

Farzan Import/Distribution/Logistics/Marketing [email protected] Rad en.farzanrad.com Consultin g Co. +982188339015

Nixan Import/Distribution/Logistics/Marketing [email protected] Trading nixanco.ir Co. LLC +98 21 4459 0790

229 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex II - Professionals Contact Database: Media

Paktab Import (instant coffee) +982126507903; Food +9126207645

Part Import (animal-based fats) +982144112051/6 Laban/Pal com

PIMCO Import/Distribution/Logistics/Marketing pim-co.ir (bakery, confectionery, beverages, +98 21 22630689-90 condiments and oils)

Zareen Import (olive oil, balsamic vinegar) zareengroup.com Group +982188702036; +982188702038

Media

Name of Media Contact info

Food Press (Food Industry Chief Editor: Mani Jamshidi Larijani News Agency) [email protected]

[email protected]

foodpress.ir

+989192056998; +9821 22379499

Hamshahri Daily Newspaper [email protected]

hamshahrionline.ir

Advertising: +982129482100

IRIB News Agency [email protected]

+98212781

IRINN News Agency [email protected]

irinn.ir

+982127866000

Jam-e-Jam Newspaper [email protected]

PR: +982122262142

230 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex II - Professionals Contact Database: Bloggers

Chief Editor: +982123004316

Mehr News Agency [email protected] (PR)

+982143051000

Shahrvand Newspaper http://shahrvand-newspaper.ir

+982144956101-7

Tabnak (Professional News tabnak.ir Site)

Tasnim News Agency [email protected]

tasnimnews.com

+982142139961 (PR)

Tehran Times (in English) tehrantimes.com

MD:

[email protected]

+98 (21)43051000

Editorial Dept.:

+98 (21) 43051601

Advertisements Department:

[email protected]

Bloggers

Bloggers name Info.

Chef Zolfi (Shahram Zolfi) [email protected]

shef.blogfa.com

Colourful Cooking (Mansooreh ashpazierangin.blogfa.com Ketabi)

Cooking Group groohashpazi.blogfa.com/post- 6060.aspx

231 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex II - Professionals Contact Database: VIP Chefs

Dr. Dorosty (Ahmadreza drdorosty.blogfa.com/cat-6.aspx Dorosty)

Fast Food instagram.com/faast_food/

Ladan’s Food Journal ladansfoodjournal.blogfa.com

Science & Food Industry [email protected] (Mohammadsadegh Arab) arabomid.blogfa.com

Shirin Tahanan (Persian Food instagram.com/shirin_tahanan/ Tour)

Sofrehkhune instagram.com/sofrehkhune/

+989392575396

VIP Chefs Saman Golriz: Famous TV Chef, star of the show Bahooneh (in English ‘An Excuse’).

Contact

[email protected]

samangolriz.ir

instagram.com/chefsamangolriz

+989128885154

Master Chef Ranjbar: Famous TV Chef & instructor

Contact

[email protected]

ranjbarchef.com

instagram.com/ranjbar_chef/?hl=en

+982188799474

232 | P a g e Enjoy It’s from Europe – Market Entry Handbook : Company Profile

Annex III: Case Study: Choosing the Right Local Partner is the Key to Success in Iran This case study is based on the interview questionnaire with the Export Area Manager of Monini S.p.A. Company Profile Monini S.p.A. is an Italian company established in 1920 and its core business is the production, bottling and distribution of superior quality extra virgin olive oil. The company exports olive oil all over the world and it has established branches in the USA and Poland. Besides olive oil, the company is also producing PGI Balsamic vinegar of Modena and distributing grapeseed oil, rice bran oil, pesto sauces, dressings and lemon juice. The company is also well-known for producing and distributing extra virgin olive oils with geographical indication, including PDO Umbria, PDO Sicily- Val di Mazara, PDO Dauno Gargano and PGI Toscano Iran is considered as one of the important markets to Monini and the company has been exporting extra virgin olive oil and olive oil to Iran for more than 10 years. As Olive oil is in relatively high demand amongst Iranian consumers and the company believes that there are several market opportunities in Iran for the olive oil sector. Distribution Channels and Customer Base In Iran, Monini S.p.A. is working with an exclusive importer HTCO Homayoun Trading Company (HTCO in further references) that helps Monini to reach its main consumer base. With the help of HTCO the company is able to reach the widest possible consumer base as its products are distributed not only in supermarket chains IRANIAN CONSUMERS ARE READY TO TRY where most of foreign products INNOVATIVE PROPOSALS FROM EUROPE get marketed, but also in bazaars and other traditional trade outlets frequented by the majority of Iranian consumers. The company is also able to reach the hotel, restaurant and catering (Ho.Re.Ca.) sector thanks to its importer. Challenges in Iran Iran has been negatively affected by the recent international sanctions that are currently being lifted, but still affect doing business in the country. According to the Export Area Manager of Monini S.p.A. “these sanctions at the end reduced drastically the consumer’s average income and increased considerably the complexity of exporting goods and payments process”. He further explains that “in this period, the country risk had increased very much

233 | P a g e Enjoy It’s from Europe – Market Entry Handbook Annex III: Case Study: Choosing the Right Local Partner is the Key to Success in Iran: Marketing Strategy and Key to Success and many international brands reduced their presence and commitment in the Iranian market”. However, Iran has been an important market to Monini and thanks to the efforts of their importer HTCO, the company has been able to overcome the difficulties. Furthermore, doing business in Iran is expected to become easier as a substantial amount of sanctions have been lifted and further sanctions are being lifted as the country cooperates on the international arena. Marketing Strategy and Key to Success According to the Export Area Manager of Monini S.p.A, the company owes its success in Iran to the excellent quality of their products, consistent presence in Iran’s market and to the efforts of their importer, as he further explains that “thanks to the generous efforts and commitment of our Iranian partner HTCO we have been able to establish the brand as leader in the market.” He explains that in the case of Iran, it is very important to make a personal visit to the country and spend enough time finding the best local partner who would be instrumental in helping the company to reach the desired CHOOSING THE RIGHT LOCAL PARTNER consumer base, as the right DEFINITELY MARKS THE DIFFERENCE FOR partner definitely makes the THE SUCCESS OF YOUR BUSINESS IN IRAN difference for business success in Iran. According to the Monini S.p.A. at least in trade in olive oil, cultural differences are not a big issue in Iran as “Persian consumers have an extraordinary food culture which is close to the Mediterranean one and they are looking for quality products” from Europe or the West. Furthermore, European products are generally perceived positively and consumers are “ready to try innovative proposals” from European producers. In regards to the olive oil, according to the company, Iranian consumers are well aware of the health benefits of olive oil and use it a lot in their cuisine, even though they might sometimes not be entirely accustomed to the taste of it. PDO and PGI products are not yet popular amongst Iranian consumers with the exception of some products like PGI Balsamic Vinegar of Modena, as Iranian consumers are not yet very informed about the value of PDI and PGI products. In terms of marketing their olive oil products in Iran, Monini S.p.A. is thus relying on marketing strategy focused on communicating to the end- consumers about the products’ quality and health benefits. The company is also organizing in-store tastings and other promotional activities to attract customers. The Export Area Manager of Monini adds that the consistency in the availability of products is one of the key points to successfully market products in Iran.

234 | P a g e Enjoy It’s from Europe – Market Entry Handbook Table of figures: Marketing Strategy and Key to Success

Table of figures Reproduced with the kind permission of the author(s) Figure 1 Map of Iran ...... 10 Figure 2 Hassan Rouhani, President of Iran ...... 11 Figure 3 Exports to Iran of Food & Beverage categories ...... 20 Figure 4 Percentage of total selected Food & Beverage exports to Iran of top 20 exporters (2016) ...... 22 Figure 5 Percentage of top seven selected Food & Beverage categories attibutable to partner countries (imports to Iran) ...... 23 Figure 6) Logistics Performance Index 2016 ...... 25 Figure 7) Main road networks of Iran ...... 26 Figure 8 Airports of Iran ...... 28 Figure 9 Ports of Iran ...... 29 Figure 10 Railroads of Iran ...... 30 Figure 11 Chelo Kabab...... 34 Figure 12 Value (EUR) of exports of Food and Beverage from EU-28 to Iran over time, by sub-category ...... 39 Figure 13 Tehran (capital) ...... 42 Figure 14 Mashhad, capital of Khorasan-e-Razavi, Iran ...... 43 Figure 15 Isfahan, capital of Esfahan ...... 44 Figure 16 Iranian provinces reference map ...... 45 Figure 17 Import process for Meat, Processed Foods, Fruits & Vegetables, Dairy Products, Confectionery/Chocolate ...... 47 Figure 18 Exports from ECO members and EU-28, over time, of Food & Beverage to Iran ...... 54 Figure 19 Energy Drinks and Carbonated Drinks in Tehran Supermarket ...... 58 Figure 20 Juice - % of value of imports to Iran in 2016, by country of origin ...... 59 Figure 21 Juice - % value exported to Iran in 2016, by country of origin ...... 60 Figure 22 European GI Products Sold in Tehran Supermarket ...... 65 Figure 23 Pomegranate of Saveh ...... 68 Figure 24 Iranian Saffron from Khorasan ...... 69 Figure 25 Grana Podano Being Sold in Tehran Supermarket ...... 73 Figure 26 EU Organic Products Sold in Tehran Supermarket ...... 74 Figure 27: Consumption of meat in Iran by category, 2016 ...... 81 Figure 28: Consumption of meat in Iran 2011-2016 and prospects for 2017-2021 (kg per capita) ...... 81 Figure 29 Koresh - a popular Iranian meat and vegetable stew ...... 82 Figure 30: Iran’s imports of fresh meat (value in € thousands, 2016) ...... 84 Figure 31: Iran’s exports of fresh meat (value in € thousands, 2016) ...... 86 Figure 32 Jujeh kabob - came back to Iran after becoming popular in the West ...... 89

235 | P a g e Enjoy It’s from Europe – Market Entry Handbook Table of figures: Marketing Strategy and Key to Success

Figure 33 Figure 4: Household expenditure on meat by income level (1st to 10th decile) ...... 90 Figure 34 Meat production in Iran 2011-2016 (in 1000 tons) ...... 91 Figure 35 Iran’s imports of processed meat (value in € thousands, 2016) ...... 92 Figure 36 Iran’s exports of processed meat (value in € thousands, 2016) ...... 93 Figure 37: Consumption of olive oil in Middle Eastern countries 2010/11-2015/16 (1,000 tons per annum) ...... 97 Figure 38: Frequency of using olive oil among Iranian households .. 98 Figure 39: Iran's olive oil consumption 2010/11-2016/17 (in 1,000 tons) ...... 98 Figure 40 Olive Oil Sold in Tehran Supermarkets ...... 99 Figure 41: Iran's olive oil production 2010/11-2016/17 (in 1,000 tons) ...... 100 Figure 42: Iran's imports of olive oil 2012-2016 (value in EUR millions) ...... 101 Figure 43: Main exporters of olive oil to Iran in 2016 (% of total imported value) ...... 102 Figure 44: Iran's exports of olive oil 2012-2016 (value in thousand EUR) ...... 103 Figure 45 European Olive Oil Sold in Tehran Supermarkets ...... 103 Figure 46 Fruits and Vegetables Sold at Traditional Bazaar ...... 107 Figure 47 Imports of fresh fruit and vegetables (2012-2015), unit: Euro millions ...... 111 Figure 48 Vegetables Sold at Iran Bazaar ...... 114 Figure 49 Processed Fruits and Vegetables Sold in Tehran Supermarket ...... 118 Figure 50 Exports of processed fruit and vegetables in Iran (2016), unit: tonnes ...... 122 Figure 51 Organic Processed Fruits and Vegetables Sold in Tehran Supermarket ...... 124 Figure 52: Consumption of dairy products in Iran 2011-2016 and prospects for 2017-2021 (kg per capita) ...... 127 Figure 53: Consumption of dairy products in Iran by category, 2016 ...... 127 Figure 54: OECD-FAO Data on Dairy Consumption in Iran 1997-2016 in tonnes (thousands) ...... 128 Figure 55 OECD-FAO Data on Dairy Consumption in Iran with forecast 2017-2021 in tonnes (thousands) ...... 128 Figure 56 OECD-FAO Data on Cheese Consumption in Iran in tonnes (thousands) ...... 130 Figure 57 Variety of Cheese Available in Tehran Supermarkets ...... 130 Figure 58 OECD-FAO Data on milk production in Iran in tonnes (thousands) with forecast 2017-2021 ...... 131 Figure 59 Iran's imports of dairy products from the EU, 2016 (value in € millions) ...... 132

236 | P a g e Enjoy It’s from Europe – Market Entry Handbook Table of figures: Marketing Strategy and Key to Success

Figure 60 value growth in Iran's imports of dairy products from leading EU countries (% p.a) ...... 133 Figure 61 Iran's exports of dairy products to the EU (2016 value in € thousands) ...... 134 Figure 62 OECD-FAO Data on Exports of Cheese in Iran 2011-2016, Unit: thousands of tonnes ...... 134 Figure 63 Kibi Promotion Campaign ...... 136 Figure 64 European Cheese Sold in Tehran Supermarkets ...... 137 Figure 65 Main cereal importers into Iran (Products of the milling industry; malt; starches; inulin; wheat gluten), by % value imported 2016 ...... 141 Figure 66 Barley imports value into Iran ...... 142 *Figure 67 Export from Iran of prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ...... 144 Figure 68 Export from Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared, by partner country % share (2012-2016, total trade val ...... 144 *Figure 69 Import to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ...... 145 Figure 70 Import to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared, by partner country % share (2012-2016, total trade value USD) ... 146 Figure 71 Processed Cereals Sold in Tehran Supermarket ...... 148 Figure 72 Baked Products Sold in Tehran Supermarket ...... 151 Figure 73: Iran’s imports of baked goods from EU countries (2016 value in EUR million) ...... 152 Figure 74: Value growth in Iran’s imports of baked goods from EU countries (% p.a.) ...... 153 Figure 75: Iran’s exports of baked goods to the EU (2016 value in EUR thousand) ...... 153 Figure 76: Iran’s imports of chocolate products from EU countries (value in EUR million) ...... 159 Figure 77: Value growth in Iran’s imports of chocolate products from EU countries (% p.a.) ...... 160 Figure 78: Iran’s exports of chocolate products to the EU (2016 value in EUR thousands) ...... 161 Figure 79 Nutella Chocolate Promoted in Tehran Supermarket ..... 162 Figure 80 European Chocolate Sold in Tehran Supermarket ...... 163 Figure 81 Comparative Rates of Per Capita Sugar Consumption and Projected Growth ...... 166

237 | P a g e Enjoy It’s from Europe – Market Entry Handbook Table of figures: Marketing Strategy and Key to Success

Figure 82 Historical Domestic Sugar Production and Consumption Trend in Iran ...... 169 Figure 83 Imports of Raw and Processed Sugar Confectionery in Iran ...... 170 Figure 84 Iran Import Flows for Confectionery Products by Partner ...... 171 Figure 85 European Confectionery Sold in Tehran Supermarket ..... 174 Figure 86: Iran's imports of honey products from the EU, 2016 (value in EUR millions) ...... 178 Figure 87: main exporters of honey products to Iran (share of imported value 2016) ...... 178 Figure 88: Iran's exports of honey products to the EU, 2016 (value in EUR millions) ...... 180 Figure 89: Exports of honey products from Iran to the EU, evolution 2012-2016 (value in EUR millions) ...... 181 Figure 90: EU imports of honey by origin Jan-Jun 2016, 1,000 tons ...... 181 Figure 91: Iran's cotton consumption 2012-2021 (in 1,000 tons) .. 183 Figure 92: Iran's cotton production 2012-2017 (in 1,000 480 lb. Bales) ...... 184 Figure 93: Iran's imports of cotton 2012-2016 (value in million EUR) ...... 187 Figure 94: Top exporters of cotton to Iran (share in Iran’s imports 2016) ...... 187 Figure 95: Iran's exports of cotton 2012-2016 (value in million EUR) ...... 188 Figure 96: Top importers of cotton from Iran (share in Iran’s exported value 2016) ...... 188

238 | P a g e Enjoy It’s from Europe – Market Entry Handbook List of tables: Marketing Strategy and Key to Success

List of tables Table 1 Country factsheet ...... 12 Table 2 Top Food & Beverage markets by Muslim country ...... 18 *Table 3 Top domestic companies in Food & Beverage sector in Iran, by sales, 2015 ...... 19 Table 4 Imports of selected Food & Beverage categories to Iran, 2016 ...... 21 Table 5 Travel time from capital city to major towns in Iran, road ... 26 Table 6 Travel times from capital city to major towns in Iran, rail ... 31 Table 7 Iran ease of doing business rank (no./190 other countries) 33 Table 9 Selection of Iranian banks with presence or correspondence in the EU and vice versa ...... 41 Table 10 Import duties for selected products in 2016, Iran ...... 49 Table 11 Selected SPS requirements for Iranian market ...... 51 Table 12 Labelling requirements for Foodstuffs in Iran ...... 53 Table 13) National Legal Framework for the Protection of GIs in Iran ...... 71 Table 15 Iran global rankings of fresh produce...... 109 Table 16 Total exports of fresh fruit and vegetables (incl. nuts) from 2012-2015 ...... 112 Table 17 Imports of processed fruit and vegetables in Iran (2016), unit: tonnes ...... 121 Table 18 National average cereal production for Iran from 2012-2016, forecasted amount for 2017 in tonnes and the anticipated change percentage for 2017 ...... 143 Table 19: Price per kg of exports from Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ...... 144 Table 20: Price per kg of imports to Iran of Prepared foods obtained by swelling, roasting of cereals or cereal products (e.g. corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared ...... 146 Table 21: Iran's imports of honey products from EU countries, value growth 2015-2016 ...... 179 Table 22) Overview of the Press in Iran ...... 193 Table 23) Major Online Publications in Iran ...... 194 Table 24) E-commerce Platforms in Iran ...... 195

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