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Bahrain’s political crisis is far from being resolved despite several apparent concessions to protestors in recent months. Without a negotiated political compromise between the regime and the main opposition group the Al Wefaq National Islamic Society, stability will remain tenuous at best. The risk of power shifting towards the more hard-line elements within the regime and opposition are growing and will undermine the possibility of a lasting solution to the crisis. Another issue dragging on consumer confidence is consumer price inflation, which looks set to continue trending higher in 2012 following a prolonged period of deflation in 2011. On a more positive note, that the economy did not experience a more prolonged recession is encouraging. Furthermore, given the recent announcement that Bahrain has been reinstated on Formula One’s 2012 race schedule, there would appear to be growing confidence that the country is past the worst of its troubles.

Headline Industry Data (local currency):
- 2012 food consumption growth= +8.7%; compound annual growth rate (CAGR) to 2016 = +8.5%
- 2012 soft drink value sales growth = +7.4%; CAGR to 2016 = +7.3%
- 2012 mass grocery retail sales = +10.9%; CAGR to 2016 = +10.3%

Key Company Trends:

Ice Cream Sector Heating Up: In late 2011, two US firms announced major investments in Bahrain’s ice cream sector. First, Baskin-Robbins, a subsidiary of Dunkin’ Brands, announced that it would pursue further expansion throughout the Middle East. Baskin-Robbins has more than 4,000 international outlets, with a massive presence in developing markets, and plans to open 25 new stores in the Middle East by 2013. Frozen dessert chain Tasti D-lite announced that it will be expanding in the Middle East via a franchising agreement. Al-Himmah International Limited reached an agreement to expand the chain in six countries in the region – Bahrain, Kuwait, Qatar, Saudi Arabia, Lebanon and Jordan, with the first stores expected to be opened in Saudi Arabia in March and plans to open 30 stores over the next five years.

Coke Makes A Major Move: In December it was reported that Coca-Cola had acquired a 50% stake in Saudi Arabian beverage manufacturer Aujan Industries. The deal is worth US$980mn and will allow Aujan to pursue its international expansion plans for brands including Barbican and Rani, as well as building upon the regional success of its Vimto brand. Coca-Cola will also acquire 49% of Aujan’s bottling and distribution company, under which aegis Vimto will remain. The deal is expected to be completed during H112 and will help Coca-Cola make headway in one of the few markets in which its rival PepsiCo leads. The deal represents the largest-ever investment by a multinational firm in the Middle’s East’s fast-moving consumer goods sector and follows Coca-Cola’s announcement that it plans to invest US$5bn in the Middle East and North Africa region over the next 10 years.

Key Risks To Outlook:

Long-Term Impact Of Current Crisis: Should the government fail to address some of the protestors’ main grievances, Bahrain’s political crisis could go on for longer than expected, with risks of the opposition becoming radicalised increasing by the day. It also remains unclear what impact this current political crisis will have on Bahrain’s long-term economic outlook. Regarding the food and drink sector, sales of alcoholic drinks could be at risk in Bahrain, as there have been efforts in the past by parliamentarians to push for a widespread ban on its consumption. If King Hamad al-Khalifa’s regime decides to accede to demands and undertake more pronounced political reforms by granting increased legislative powers to parliament, we would not be surprised to see another push by conservative policymakers to prohibit the sale of alcohol in hotels and restaurants, as was proposed in 2009.