United Arab Emirates Country Profile

Market Overview:

Euromonitor reports that the UAE economy will pick up steam in 2019.  The recovery in oil prices is the main driver; however growth is also aided by an increase in government spending - especially on large investments in infrastructure as part of the preparations for the 2020 World Expo. Consumer spending provides moderate support.  The economy’s performance will however, remain below trend for the next several years.  Growth of real Gross Domestic Product (GDP) will be about 3.6% in 2020 and will decline to 2.9% per year in 2023-2026.

  • The UAE will see stronger growth in 2019. Real GDP will grow by 2.9% in 2019 after gains of 0.8% in 2018.
  • Private final consumption (in real terms) grew by 3% in 2018. The same rate of growth is expected in 2019. Unofficially, double-digit unemployment is thought to exist among nationals and represents a drag on consumer spending.
  • Unemployment will be 2% in 2019 – the same rate as in 2018. According to the national statistics agency, foreign workers represent more than 80% of the workforce. The UAE has seen a huge inflow of immigrants as a result of the country’s massive investment program.

The standard of living in the United Arab Emirates is one of the highest in the world. A liberal, business friendly and market-oriented growth strategy has reshaped the economy. The non-oil sector steadily expanded as diversification of the economy proceeded. However, greater diversification meant that the UAE was hit more severely by the global financial crisis than its neighbors.  The economy continued to struggle in later years as low oil prices persisted and the fiscal deficit widened (despite significant reforms). Dragged down by austerity measures, growth of real GDP slipped to just 0.8% in 2017, although it grew by 2.9% in 2018 as oil prices recovered.

The UAE’s population has risen at a significant pace.  In 2018, the total number was 9.3 million, up from just 3 million in 2000.  Foreign citizens make up around 80% of total population and are mainly responsible for the rapid gains in population.  However, almost all immigrants are young or middle-aged adults and their presence ensures a relatively high median age.  In addition, immigration has led to an imbalance between the male and female populations – there are two men for every woman in the UAE.

U.S. exports of consumer ready food products totaled US$779.5 million in 2018, down 6% from the same period in 2017.  The UAE also imported US$401.4 million of U.S. processed foods in 2018, a decline of 5%. Top U.S. exports of processed food products to the UAE in 2018 included:

  • Food Preparations
  • Snack Foods
  • Condiments and Sauces
  • Processed/Prepared Dairy Products
  • Fats and Oils
  • Chocolate and Confectionery
  • Non-Alcoholic Beverages.

Retail Sector:

Euromonitor has estimated 2018 retail sales in the UAE packaged food market to be nearly US$5.7 billion.  That represents an increase of 33.4% and nearly US$1.4 billion from 2014.  That is the 3rd highest historical growth rate of Food Export markets after Vietnam and Guatemala.  They also forecast sales of packaged food in the UAE market to reach nearly US$7.7 billion by 2023, an increase of US$1.5 billion and 26%.  High growth products in the forecast include: 

  • Savory snacks
  • Sweet spreads
  • Baby food
  • Processed meat and seafood
  • Sauces, dressings and condiments
  • Breakfast cereals
  • Rice, pasta and noodles
  • Baked goods
  • Ready meals 

Euromonitor reports that the consumer trend of opting for healthy foods continues to grow in the United Arab Emirates, as more people, especially millennials, look for alternatives such as organic, vegan and gluten-free offerings.  Traditionally, such choices were exclusively the realm of premium offerings, but hypermarkets are continuing to address demand by offering more budget-friendly healthy foods.  This is mainly driven by the development of private label lines, which helps keep prices low.

In 2018, retail company Landmark Group from the UAE opened four outlets of Viva – the first discounter in the country; one in Dubai, one in Ajman and two in Sharjah.  Prior to spring 2018, the Emirates did not have any discounters.  Viva is a no-frills grocery format that claims to offer the lowest prices in the country.  Landmark Group says it will open another dozen stores in the coming years.  The majority of the products offered in Viva will be private label, with a small percentage of European or Asian brands.  The stores range from 400 to 800 square meters. 

Considering the desert landscape in the UAE, the vast majority of foods are imported; therefore, groceries tend to be very expensive in the country compared with countries with strong domestic production.  Furthermore, the demand for cheaper groceries has increased due to the imposition of a 5% value added tax (VAT), which led people in the lower-middle-classes to struggle. Viva is expected to appeal to price-conscious consumers in the Emirates with its discounter’s format.

Euromonitor reports that convenience stores remained one of the fastest-growing grocery retail channels in 2018.  These outlets have adapted well in terms of customising their offerings to the residential neighborhood in which they are located.  For example, stores near hospitals or offices tend to offer a wider variety of on-the-go food solutions, with some even expanding into organic and gluten-free food.  A large number of healthier options, such as fresh foods and vegetables, are gaining shelf space, optimizing their ability to appeal to a range of consumer segments and demographics.

After years of aggressive expansion, Zoom consolidated its position as the leader in convenience stores in value terms in 2018.  Zoom’s expansion of its food and beverage service through Pronto cafés in its outlets also attracted consumers interested in healthy and organic alternatives.  Zoom also acquired master franchise rights for Starbucks hot and cold beverages, and introduced these in its outlets, which have become popular amongst younger consumers.  Another reason for its success is that it has consolidated the most fertile segments in the market, positioning its convenience stores in busy urban areas and within office buildings.

Best Product Prospects: 

U.S. consumer food products with good potential into the UAE and rest of the GCC-5 region include:

  • Condiments and Sauces
  • Halal Poultry Meat And Beef (Chilled And Frozen)
  • Breakfast Cereals
  • Confectionary Products
  • Snack Foods
  • Frozen Vegetables
  • Fresh Apples and Pears
  • Edible Oils
  • Cheese
  • Fruit and Vegetable Juices
  • Pet Foods

Food Service Sector:

Due to rising concerns regarding health and wellness among consumers in the UAE and the greater impact of consumption patterns shaped around calorie counting and the intake of vital nutrients, the industry has begun to see the development of functional food items with more food service operators introducing gluten-free options under regular menu items.  This has also led to food service operators offering premiumization in their menus by using ingredients such as organic grass-fed meat, organic vegetables, olive oil, avocado, etc. and labelling the calorie intake for menu items.

Rapidly developing tourism and diversity in the population makes the UAE a very attractive market for expansion for both big and small international players from all around the world, given that a number of enterprises specializing in the Middle East are ready to provide franchise support and investment to new brands and malls looking to increase their presence through a greater number of food service outlets.

As the country prepares for Expo 2020, with it continuing to attract a global tourist audience through the development of real estate, leisure and entertainment experiences it is expected that this will help support a positive turnaround within the consumer food service industry.  The opening up of various projects in the capital city of Abu Dhabi has also gained global attention, which will likely drive investment in new concepts, thereby raising the profile of the UAE as a provider of unique culinary experiences and thus being able to attract global audiences.

Food-Processing Sector:

At last report about 430 food processing firms operate in the UAE and a smaller number of food processors in other Gulf countries such as Kuwait, Oman and to a much lesser extent in Qatar.  This sector consumes much of the bulk, intermediate, and semi-processed products the U.S. sells to the region.  In the food-processing sector, U.S. ingredients are mainly used in the following product categories: flour and bakery products, vegetable oil, canned beans, carbonated and non-carbonated beverages, chicken franks, manufactured snack foods and reconstituted juices.  

Two soybean crushing facilities with 6 million metric ton processing capacity/year are operating in the UAE.  They mostly crush canola seed for the production of oil and meals, targeting the European Union (EU) market.  Soybeans are sourced from the U.S. and Latin America.  Local dairies and poultry farms are not large enough to meet local demand.  Consequently, a number of local companies reconstitute dairy products from milk powder, primarily sourced from Europe, New Zealand, and Australia.  It is expected that an increasing number of multinational food companies will look to link up with local processors.     

While food processors often started small, the UAE’s strategic location, excellent ports, and strong infrastructure have helped many to expand.  Some locally produced foods are of very high quality with competitive prices compared to imported products.  As the number of food processing companies in UAE continues to increase, locally produced products are likely to compete directly with imports of consumer-ready foods, while boosting demand for ingredients and other raw materials.

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