Halal Food Industry and Middle-class Muslims: Opportunities and Challenges

Indonesia as one of the countries that occupies the top 5 ranking of the largest population in the world which is projected to amount to 271,066.40 million people in 2020 is a country with a geographic structure in the form of islands. Geographical isolation has caused a high level of diversity in the community. There are six official religions recognized by the state, as well as hundreds of tribes with very rich mother tongues. Most of Indonesia's population lives in urban (urban) areas, which amount to 53.5% in 2015 and is projected to rise to 56.7% in 2020 according to BPS data, even in some provinces in Java, more than half of the population are resident’s urban areas.  If we focus on the Muslim middle class alone, assuming Indonesia's Islamic population is 87.7%, the population of Indonesian Islam in 2020 will reach 233 million, and by using data from the middle class proportion of the Boston Consulting Group, at 62.8%, the population of the Indonesian Muslim middle class in 2020 is predicted to reach 147 million; with details of the Muslim upper middle class of 27 million, Muslim middle class 37.5 million, and Muslim lower middle class 27.7 million. It is not surprising that the lucrative and lucrative market potential has come to the attention of business people. Based on this data, if the number of Muslims is 87.7% (Population Census in 2010), then assuming 56.7% of Indonesia's population is in the city, by 2020 the number of Muslims living in the city will reach almost 137 million, while those who living in villages totaling 104 million. This trend will continue, the number of Muslim population living in the city will be even greater given the percentage of the urban population that is always increasing every year. The character of the people who live in cities (urban) certainly has its own characteristics when compared to rural communities (rural). Not only about geographical differences, but also differences in mindset, mental attitude, etc. The city community likes something symbolic, not least in Muslim society. Religious symbols as a symbol of piety in the last five years have been very popular among urban Muslims, especially the Muslim middle class.

Opportunities from the Halal Food Industry

Whatever definition is used to explain the middle class phenomenon, one thing cannot be denied, that their numbers in the Asian region have grown very rapidly in the last two decades. Even if compared to the middle class in the West, the middle class in Asia tends to have lower levels of income and expenditure, but the growth in the amount of expenditure by the middle class in Asia has shown a significant number. In Indonesia itself, as described in the introduction, the number of Muslim middle classes in 2020 is predicted to reach 147 million; with details of the Muslim upper middle class of 27 million, Muslim middle class 37.5 million, and Muslim lower middle class 27.7 million. Indonesia itself is still a very potential market. Referring to the report published by Thomson Reuters and Dinar Standard on 2018, it shows that Indonesia is still a market, and not as a player, especially if it is associated with the world's halal industry. 

Globally, Muslims represent 23% of the world's total population or around 1.8 billion consumers with an annual growth rate of 3%. Based on a survey conducted by Global Halal Economy, the number of trades in the global halal market for the period of 2012 - 2018 reached US $ 2.67 trillion, while for the ASEAN region itself was recorded at US $ 1.38 trillion, with Indonesia as the largest halal food industry market in the world with consumption levels of US $ 197 billion per year. 

The increase in religious awareness also helped boost demand for halal products and services. Changes that occur in the Muslim community, especially the middle class, have caused a shift in taste. Young people who dominate the demographic structure of the Muslim middle class have a character that can be called cosmopolitan Islam. They are young, educated, have a modern lifestyle, but still want to look religious. This generation of Muslim middle class has an interest in the Western lifestyle, which makes them an important part of the global economy. They act as consumers, employees, travelers, investors, producers, retailers, and traders. This has led to increased demand for products and services that can accommodate the Islamic values ​​they hold. The potential of the halal food industry is influenced not only by the increase in religious awareness among the Muslim middle class, but also by several factors, namely:

1) Islam is the fastest growing religion in the world. This has led to an increase in the number of requests for halal products. Growth in the consumption of halal food per year is estimated to grow by around 16%;

2) There is an increasing trend for consuming halal food among non-Muslim communities. Many non-Muslims now switch to consuming halal food for ethical reasons and security reasons;

3) Increasing the halal consumer market as a new market force, combined with the growth of the Muslim population and increased income, especially among the middle class. 

According to the 2018 State of the Global Islamic Economy Report compiled by Thomson Reuters & Dinar Standard, there are several challenges in the halal industry

1)   Halal certification is an important key in the halal food industry, but the process is still very complex.

2)   There is no single institution that has the authority to issue halal certification, causing the cost of halal certification to double due to producers must administer halal certificates in several different places or countries.

3)   Around the world, there are around 300 institutions that issue halal certificates, but the scope is limited (for example, only applies to the issuing country of certification, not applicable in foreign countries).

4)   Not yet there is a global Muslim agreement regarding halal standards themselves, which causes misconceptions and opens opportunities for conflicts of interest.

5)   There is no international institution that has the authority to audit halal certification issuing institutions throughout the world. The majority of halal food is actually produced in non-Muslim countries, and is certified by an independent halal certification issuing institution, which does not receive full supervision from the competent authorities.

6)   Difficult to develop a business due to funding constraints. Committing to becoming a producer in the halal industry means trying to justify the entire production process including funding. Most obstacles are that very few sharia-based financing institutions offer large amounts of funding.

7)   The demands of the Muslim middle class for product diversification still cannot be fully carried out by the halal food industry. Urban Muslims, especially young people, are very concerned about the development of culinary trends that they commonly refer to as the "current culinary", so the halal food industry must be innovative in developing the products and promotional strategies used. 

8) Indonesian halal food industry players still have not been fully concerned about the importance halal certification, so it has not been able to capture opportunities amid increasing religious awareness among the Muslim middle class.

*Rimayanti