Since Pan Arabian Gourmet had a wide experience on and a thorough understanding of the local market, the BreadTalk decided to allow it to sub-franchise BreadTalk’s outlets. It gave BreadTalk access to extensive business networks in the Middle East region without spending unnecessary expenditures.
The survey conducted by the Bahrain Economic Development Board revealed that according to the level of freedom Bahrain’s economy occupies 1st position in the Middle East. With economic freedom score of 77.7, Bahrain’s economy is 10th freest on the global scale, ahead of Belgium, Austria, Germany, Sweden, and Norway. Furthermore, when the factor of ease of doing business is taken into consideration, Bahrain’s economy ranks 4th in the MENA region and ranks 42nd in the world amongst 185 economies. One more reason for BreadTalk to choose Bahrain to expand the business was the country’s political/cultural neutrality, language, and physical proximity. Also, a skilled labor force, low operating costs, and a favorable legal environment make Bahrain an accessible service center to other gulf markets. Therefore, BreadTalk’s reasons for choosing Bahrain were clear: the country offers one of the safest environments for business operations, and there were no restrictions implemented against foreign companies.
BreadTalk’s decision to expand production in Bahrain is based also on the Bahrain Food and Drink Report Q1 2013. In the report, it is anticipated that demand for packaged and convenience food will continue to increase as lifestyles get busier. Also, the food consumption rate exceeded anticipations by 7.7%. The major incentive of this growth is the investment in the food sector, as the market is still far from saturation, thereby fuelling food consumption growth. Furthermore, these predictions are amplified by the survey according to which there will be a gradual increment in Bahrain’s population by 2050. This will result in continuous growth and development of the consumer market in Bahrain, with the food sector being one of the main parts of it. These reasons give BreadTalk god perspectives on the Bahrain market from the perspective that the company’s profit is projected to grow in line with the growth of food consumption throughout the years to 2017.
On the other hand, Bahrain has experienced major civil unrest over the past year, which has clearly hurt consumer confidence and could affect total expenditures on food and drink, according to the Bahrain Food & Drinks Report Q1 2013. Furthermore, there is a threat that the situation may repeat in the foreseeable future which causes BreadTalk to take safe and well-thought steps in order not to lose business.
Also, statistical data have shown that the food and drink trade balance in Bahrain is very negative. Similar to other Gulf countries, Bahrain is highly dependent on food and drink imports because of the unavailability to meet consumer’s needs. The main reason for that is arid climate and geographic limitation as the country locates on a small island and has very limited opportunities for agricultural production, as reported by Bahrain Food & Drink Report Q1 2013. Such a situation will make BreadTalk increase food prices and, at a later date, will influence consumer’s choice in selecting other cheaper alternatives instead.
Finally, in the period from 2011 to 2016, food and drink exports are expected to remain largely flat, while imports are forecast to grow at a compound annual rate of 3.1%. Because of the high import rate, the control of food prices is limited, which creates high uncertainty for BreadTalk about the change of prices in the future.