"Too Much Competition" for Karbala's Biggest Business

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq's Canning Can't: Too Much Competition For What Was Once Karbala's Biggest Business

Once canning foods and juices was one of the biggest businesses in Karbala. Today, under pressure from imports and the security crisis, it's failing – and companies from places like Iran are taking advantage.

Shoppers patronising the centre of the Iraqi city of Karbala, on Talim Street, come out of the markets carrying all kinds of canned foods, from a variety of countries. The shelves are stacked high with canned products from Turkey, Lebanon, Jordan, Kuwait, Saudi Arabia and Iran and the cans are cleaned of dust by supermarket workers continuously during the day, so they are shiny and appealing to customers. Cans produced in Karbala are in the minority.

But shoppers here don't seem to mind; they may even prefer the imported cans of food as they leave the stores with bags of things like dairy products and date syrups that are not made locally.

Customer attitudes and a variety of other factors are leading to a decline in the manufacture of canned products from Karbala itself, a metropolis that was once renowned for it's canning businesses; a canning factory was one of the largest firms in the city once. Many Iraqis remember the advertisements that would always appear for Karbala's canned produce – the products were made even when Iraq faced economic sanctions.

And although there are still plenty of canning factories around the city, many of them look like they are badly in need of maintenance. Places that used to employ hundreds of locals and produce billions of cans stand dormant now.

It is hard to get accurate statistics but its is estimated that the canning business used to provide more than 3,200 jobs here and there's no doubt that it fuelled the local agricultural sector, especially in tomatoes, dates and certain fruits. There used to be around 14 production lines in local plants and now there are only two, employing about 80 people. A molasses factory that once boasted an output of about 7,000 tonnes per year produced just 300 tonnes in 2014.

“The reason why there's been a decline in canning is the high cost of production,” says Jafar Sadiq, the manager of a canning company in Karbala. “The materials for canning used to be produced in the country but now they are mostly imported from elsewhere. Containers of cheese, jams or molasses are imported from outside of Iraq at high prices. When you add the cost of importing to the cost of canning, then the price ends up higher than that of imported cans.”

There's also the fact that the country is open to relatively unrestricted imports. And, as Sadiq notes, “the packaging on the imported cans is elegant and attracts more customers.”

Previously his company had been producing all kinds of things, he said, including tomato paste, jam, syrup, soft drinks, juices, pickles and several kinds of sauces. Now the company only makes date syrup and a couple of juices.

“We haven't been able to renovate the plant properly and to bring in all new canning machines,” Sadiq explained. “So we're still using some of the older machines. The problem is that the new machines are expensive and, as a business, it's impossible to compete in the market properly under the unstable conditions that Iraq is currently experiencing.”

Local economist Abbas al-Haddad says that at the moment it seems that local industry can't continue without some sort of government support or market protection. “The fact that these factories have to import raw materials makes their products vulnerable to price fluctuations and forces them to have a higher price,” al-Haddad argues. He also believes that this kind of thing is a negative sign for the Iraqi economy in general.

“There's a lack of integration,” al-Haddad explains. Different industries should complement one another – as in, the raw materials should be made in Iraq and then manufacturing should follow suit.

International canning companies are taking advantage of the Iraqi businesses' problems and have also opened branches in Karbala. One Iranian company, Kala, now has a major storage depot and showroom facility in the city. The latter is very popular with local shoppers who believe the prices are better than local canned goods.

Karbala shopkeeper Ahmed Saidi says buying canned goods from the Kala warehouse saves him money because he doesn't have to go elsewhere to get all his supplies. “Almost all of the food items in my store are now from outside Iraq,” he adds. “Local products seem to slowly be disappearing from the market. If you compare them with imported foods, there are hardly any there.”

Saidi told NIQASH that people have all kinds of reasons for preferring international products.

In fact, during the interview one of his customers was standing beside him at the counter and agreed. “I trust the imported products more,” the customer, Jassim Ali, said. “I feel more comfortable with their production methods and their hygiene. The prices are better too.”

Ali said he'd heard a lot of bad stories about the conditions in which local products were made. “A lot of other people have also heard these stories and they have the same feelings as me,” Ali explained. “We don't trust the people responsible for the canning industry in Karbala any more.”

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