Absolutely Scrumptious: The Scottish Sweet Factory Loved by the Middle EastPublished February 07, 2012 in Arabic Knowledge@Wharton
With its high glass windows, red-lit lettering, a Roman numeral clock and the image of a foil-wrapped teacake, the Tunnock's factory looms above the quiet Scottish village of Uddingston. But many of the sweet snacks that are produced here -- such as caramel wafers, caramel logs, and chocolate teacakes -- will not be served in a traditional British afternoon tea.
They're more likely headed for a pantry in the Middle East; half of the company's total annual exports are shipped to the region. The company's annual sales amount to approximately £34 million (US$52.2 million), of which 10% represents Tunnock's market share in the Middle East. Not bad for an old-fashioned, family-owned company, known for its distinctive red and gold wrappers and a blue-eyed, rosy-cheeked boy from the mid-1900s as its mascot.
"Just like Italian culture has been romanticized in the U.S., people in the Middle East may see British food as a sign of being cultured or worldly," says Jonah Berger, Wharton professor of marketing at the University of Pennsylvania.
The Middle East has proven to be a lucrative market for the snack industry. Euromonitor International, a strategy research firm in consumer markets, reported the industry grew 10% last year in Saudi Arabia, and forecasted sweet biscuit sales this year worth US$437.5 million. In the United Arab Emirates (UAE), the biscuit industry, including sweet and savory snacks, Euromonitor predicts 7.6% growth this year, valued at US$133.1 million.
Interestingly enough, economic declines in the Middle East actually help snack sales in the Middle East. According to a report from Euromonitor International, "The key trend since the financial crisis struck the UAE is the emergence of comfort eating. At times of economic slowdown when consumers dial back on luxuries and focus on necessities, food is the last thing on which they compromise."
Containers Of Sweets
Nearly 90% of food, raw materials and feed in the Middle East must be imported, according to Food Export USA, a nonprofit organization. Due to the desert climate, soil conditions, and limited water resources, there are not many agricultural products, which can be homegrown in the Gulf Cooperation Council (GCC) countries.
Saudi Arabia is the biggest importer of Tunnock's, purchasing around US$3.1 million worth of cookies annually. Kuwait is the next largest customer base, while the UAE, Jordan and Qatar are also buyers. Surprisingly, Bahrain and Yemen have put in orders recently, in spite of the Arab Spring protests. In fact, Yemen has doubled their order from a 20-foot shipping container of biscuits in November 2011 to a 40-foot container to be shipped out in February.
It's not the only one. Every 10 days to two weeks, a container, which holds about three-quarters of a million cookies in it, leaves Scotland for its two-week journey across the seas to the Gulf countries.
The Arab Spring's effect on sales isn't apparent, the company notes. "That's what we would like to know but we haven't seen any," says Alan Burnett, Tunnock's company's export manager. "We think it's because Saudi is our biggest market and they haven't been affected very much." Burnett is an affable, ginger-haired Scot who can read a spattering of Arabic from his years of selling teacakes, and before that, carpets to the Middle East.
While the annual run up to Christmas boosts profits in Britain, Ramadan also brings a healthy sales peak for Tunnock's. "I always know when it's Ramadan," Burnett says. After the daily fasting ends at dusk, Tunnock's cookies wrapped in its distinctive gold and red foil can often be found on tables as welcome, scrumptious rewards for iftaar.
An annual event, Ramadan obviously doesn't only explain Tunnock's popularity in the Middle East. Nancy Childs, professor of food marketing at Saint Joseph's University in Pennsylvania, explained, "In cultures without alcohol, the tea occasion is more important for socializing. The Tunnock's teacakes are a relatively affordable tasty indulgence and its presentation and packaging could lend it to small hostess gift giving."
Caramel Wafers, Caramel Logs and Teacakes are the most popular Tunnock's products in the Middle East. The ingredients for every cookie exclude anything artificial. The basic components are flour, sugar, eggs, yeast, and other essential baking ingredients you might find in any kitchen cabinet. Even the fluffy white cream inside a Tunnock's Teacake is not made of gelatin or marshmallow, a breach in halal regulations since they are derived from animal extracts, but rather whipped egg white and butter. The recipe hasn't changed in more than 60 years, according to Burnett.
A rarity in this age of global markets, each shipping container that goes to the Middle East is actually made to order. Everything is shipped as fresh as possible with an approximate shelf life of six to nine months for the snacks. In fact, the company does not even have a warehouse. The factory produces 5 million wafers and 3 million teacakes a week. The workers' shifts are adjusted to meet production demands. Quality is of the utmost importance, Burnett emphasized. The company currently employs 550 people.
The reputation of Tunnock's Teacakes has remained untarnished in Britain, as well as around the world. Sold in local newsagent stands and grocery stores in the U.K., Tunnock's products are also sold in upscale gourmet stores, such as Williams-Sonoma in the United States. However, the British company has a longer history in the Middle East than America.
Tunnock's foray into the Middle East began over 40 years ago, with a Lebanese buyer who was looking to diversify his portfolio of British food imports that he shipped to the Gulf. He wanted to add something sweet to his product offerings. After sampling the cookies himself and observing how popular Tunnock's was with the discerning London consumer, he decided to import them for his Middle Eastern consumers. He was so successful that at one point in the 1970s, the Saudi Arabian government provided a Tunnock's Caramel Wafer in every child's meal box as a dessert, according to Burnett. "It doesn't happen now but the point was there was a generation that grew up with the product."
No Halal Concerns
Although Tunnock's products seem like a traditional British snack, approximately 20% of the company's total sales are due to exports out of Great Britain. Looking closely at the packaging, even at those sold within the U.K., the labels often include Arabic. But though a good proportion of Tunnock's customer base are Muslim, Tunnock's has never applied for a halal certification.
Burnett says he has discussed this point with his buyers in the Middle East, wondering if the stamp of approval will help the company expand further into the Middle East. To his surprise, they discouraged him from pursuing that route, explaining that the longstanding reputation of Tunnock is enough to assure other potential clients that Tunnock's is halal compliant even if it isn't officially licensed as such.
Joe Regenstein, professor of food sciences at Cornell University and advisor for Islamic Food and Nutrition Council of America, the largest halal certification agency in North America, isn't surprised that food exports to the Middle East don't necessarily have to be halal certified. "Muslim countries are all over the place on these issues," Regenstein says. "There is not a tradition of labeling but they do check ingredients. With many products, it is more about checking ingredients, which can be done without formal certification."
Contrary to what some people may assume, the customers in foreign countries are "never the expats," says Burnett. "They're not enough expats. Expats don't often know about it. They shop at shops for expats, which don't always stock Tunnock's products," he adds.
Expats, Burnett adds, are hesitant to spend more money on a product that they know they can buy in their native country for half the price. "The problem is when you're sending out so little, the distribution costs are so high," he says. "So often you're paying three times to buy the same thing and often the expats won't buy it. It's too expensive for them. They'll look at it and say, 'I pay 60 pence for this at home and I'm not going to bother.' It's never the expats, even in places like Australia and Canada."
In fact, Burnett once ended a relationship with a buyer in Australia who was targeting the British expatriate community. The buyer would only order a pallet or two of cookies to be shipped to the other side of the world and the company couldn't justify the distribution costs. Tunnock's started selling again to Australia when Burnett found a buyer who shared the same sales philosophy as Burnett's: Persuade the mainstream grocers to stock Tunnock's cookies to sell to the local community. As a result of the marketing strategy, the orders have grown from a random pallet of cookies to 20-foot containers being shipped to Australia.
That British Appeal
Recently, Tunnock's brokered its first deal with South Africa's largest grocery store chain to sell their products in Shoprite Checkers. To their surprise, their first order was for US$46,000 worth of cookies. The deal came after a year of negotiations and began with a casual chat in Germany. Burnett was at an exhibition and started a conversation with a South African chocolatier who sold wholesale chocolates to Marks & Spencer in Great Britain. The businessman made the introduction for Burnett to his South African buyers and Burnett pursued the deal to bring Tunnock's to sub-Saharan Africa for the first time.
One important sales strategy that Burnett keeps in mind is this: "I've got a saying 'the second order is the most important.'" He explains that he's been through the mill countless times when he gets "an initial order and nothing comes of it." He's learned not to get his hopes up high on the first order but works hard at nailing the second order.
In addition, Burnett recommends that people trying to break into the Middle East market really "take time to learn the culture. They should be respectful of other people's culture because they might find our culture to be very frustrating," Burnett notes. Though he's only visited the Middle East on an airport layover in Dubai, he's educated himself with some of the cultural aspects of the Arab world.
Burnett says that while in America, it may take "five minutes to be on a first-name basis," in the Middle East, there is more negotiation involved. However, Burnett suggests negotiating "only if both sides will be happy with the outcome." Also, a deal can be sealed with a shake of a hand and honor plays a big part in trusting a business partner in the region.
"Foreign food has a general positive cache in most countries," Regenstein adds. "Britain has a long reputation historically with respect to products. But most importantly, the products have to be good now."