United Arab Emirates Country Profile

Market Overview:

Among the GCC-5 countries, the United Arab Emirates (U.A.E.) with its larger population, larger influx of tourists and businessmen coupled with its vibrant re-export activities is the largest market for food products, followed by Kuwait. Within the U.A.E., Dubai is the country’s commercial center and the region’s trade hub. Efficient infrastructure (sea, land and air ports), large free trade zones and a strong business orientation make Dubai an important commercial center in the Middle East. Dubai derives sizable revenue from the re-export business and invests heavily in infrastructure, while luring foreign investment and buyers. Other countries in the region and other Emirates in the UAE, particularly Abu Dhabi, the capital, are following Dubai’s lead and model to improve their infrastructure and attract business interests.

Euromonitor reports that the UAE economy will pick up in 2018. A rise in oil prices, an improvement in exports and a rise in investment associated with the Dubai 2020 World Expo will be the main drivers. OPEC-mandated oil production cuts are still a drag. The process of fiscal consolidation is another drag but constraints will ease in 2018. Growth of the non-oil sector should exceed 3% in 2018. Growth will improve but remain below trend in the future.

  • The UAE’s economy will see modest growth in 2018 but the country’s fundamentals remain sound
  • Real Gross Domestic Product (GDP) will grow by 3.4% in 2018 after gains of 1.3% in 2017
  • Private final consumption (in real terms) fell by 0.7% in 2017 - Growth of 1.2% is expected in 2018
  • Unemployment will be 3.4% in 2018 – the same rate as in 2017 - Unofficially, double-digit unemployment exists among nationals and is concentrated in the northern emirates
  • According to the national statistics agency, foreign workers represent about 88% of the workforce
  • Growth will improve but remain below trend in the future - Real GDP will be growing by about 3.1% per year in 2025

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 has 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).

Abu Dhabi and Dubai together contribute about 80% of the UAE’s income. Abu Dhabi’s diversification program has made impressive progress. Its non-oil industries now account for close to 50% of GDP. Dubai’s diversification efforts have been side-tracked by problems in the financial industry and the real estate market. However, both sectors now appear to be on the way to recovery.

The UAE is the second largest foreign direct investment (FDI) recipient among Arab countries after Saudi Arabia. As the UAE’s economy has developed into a major services hub in the Middle East, its dependency on oil exports has declined.

U.S. exports of consumer ready food products totaled US$829.2 million in 2017, down 3% from 2016. The UAE imported US$424.9 million of U.S. processed foods in 2016, a decline of 10%. Top U.S. exports of processed food products to the UAE in 2017 included:

  • Food preparations
  • Snack foods
  • Condiments and sauces
  • Processed/prepared dairy products
  • Chocolate and confectionery
  • Fats and oils
  • Non-alcoholic beverages

Retail Sector:

Euromonitor has estimated 2017 retail sales in the UAE packaged food market to be nearly US$5.1 billion. That represents an increase of 35.9% and nearly US$1.3 billion from 2013. They also forecast sales of packaged food in the UAE market to reach US$7.8 billion by 2022, an increase of US$2.2 billion and 39.6%. High growth items in the forecast include:

  • Savory snacks
  • Confectionery
  • Sauces dressings condiments
  • Processed meat and seafood
  • Baby food
  • Sweet biscuits snack bars and fruit snacks
  • Rice pasta and noodles
  • Ready meals
  • Baked goods

Euromonitor reports that Al Maya supermarkets maintained its position as the leading supermarket player in 2017. The retailer offered attractive sales promotions and inducements to retain customers as well continued outlet expansion in high-density areas such as Karama in Dubai and Al Reem Plaza in Abu Dhabi. The expansion of Carrefour’s supermarket and convenience store formats provided competitive challenges to Al Maya Supermarkets, which were subsequently managed by providing equivalent promotions and offers and partnering with third-party delivery platforms.

Carrefour’s multiformat expansion was led by greater expansion across its supermarket brand Carrefour Market in key neighborhoods in major cities. The brand’s leadership in grocery retail and assortment of items enabled the retailer to capture share in the supermarket channel following rapid growth. Carrefour’s mass market offering impacted premium-priced retailers such as Spinneys and Choithrams, due to its offering more affordable prices for fresh food items.

With various economic challenges as well as increasing market competition, Choithrams has begun to develop a niche market for itself by not only providing a premium product range but filling gaps in the market with unconventional services. The retailer launched a new supermarket concept “Marketplace by Choithrams” during the year, which focuses on fresh food items and a range of specialty import lines. With a premium ambience and retail experience and wider assortment of general merchandise for household items, cosmetics and personal care items, the concept differs from standard Choithrams outlets to enhance customer experience as well as the offering. Additionally, the concept is spread over two floors to offer laundry and tailoring services.

During 2017, Marks & Spencer opened its first food store in the country, which was well received. Though there are a number of Marks & Spencer department stores in the country, with a few having an in-store food section, the launch of the dedicated food store follows customer demand for favorite food items. Other specialized supermarket formats have also emerged during the year with food mart concepts to target customers with organic and healthy alternatives to the offerings of a traditional supermarket.

Dominance of regional modern grocery players such as Carrefour and Lulu and retail expansion across the Emirates will lead to continued development of hypermarkets at a steady pace, with growth coming from most retailers securing anchor tenancy in key malls and offering a wider variety of food and non-food products, household and textile items.

Euromonitor reports that more hypermarket brands are expected to focus on building up their private label offer with healthy and organic food products, which is also expected to drive growth for retailers over the next few years. However, hypermarkets are also expected to be innovative in offering ready-to-eat meals and on-site food preparation to further supplement the appeal of their private label lines to introduce a niche segment into a mainstream offering targeting more mature consumers as well as in developing a local organic farming sector to offer better-quality, fresh organic produce at competitive prices.

Majid Al Futtaim undertook strategic acquisitions during 2017 when it acquired Retail Arabia, which held the rights for Géant hypermarkets and supermarkets in the region; this acquisition gave Majid Al Futtaim the rights to rebrand existing Géant outlets as Carrefour. The acquisition furthered strengthened the company’s position as the leading hypermarket brand in the country. Earlier during the year, Carrefour also replaced Hyper Panda, which had one outlet in the country. Majid Al Futtaim is keen on following regional expansion as well as harnessing growth potential in countries with greater development opportunities for modern grocery retail.

Emke Group, widely known for its popular retail brand Lulu hypermarkets, retained its second position in the channel during the year and improved its value share. Lulu has successfully catered to Indian native expatriates in the country by importing Indian home market brands. It also has developed department store inspired layouts in its hypermarkets across a number of floors, with the ground floor featuring food and non-food groceries and other floors featuring fashion, electronics and household goods. Realizing developing market trends for healthy food products, Lulu hypermarkets also introduced a dedicated store in store for free-from food items with imported gluten-free, lactose-free, wheat-free, fat-free and other free-from food items.

Post advises that 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:

Euromonitor reports that with an overall slower macro-economic outlook, food service operators in the UAE were directly impacted by the increased operational costs such as rentals and prices of imported food items. The changing tourist profile in the United Arab Emirates also impacted the average tourist spend in food service outlets and the growth across various cuisine types and formats which impeded top line growth for operators. Meanwhile, the entry of new players into the market, motivated by the attraction and long-term outlook of the industry, led to increased competition not only for customers but also in securing good locations for expansion.

Lower oil prices during 2016 and a strong dollar led to an overall slowdown in the macro-economic outlook, which impacted the performance of most foodservice operators in the country as operational costs increased and revenues came under pressure. Global economic instability impacted the number of tourists from traditional source markets. Factors such as the announcement of Brexit, regional instability, and lower oil prices directly impacting the neighboring Saudi Arabia and the economic slowdown in Russia and China impacted the tourist profile for the country, with more sourcing of tourists from India and other neighboring countries

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.

The UAE food service landscape in the country remains fragmented, led by regional and domestic franchise partners with leading player Americana Group having regional franchise rights for Pizza Hut, KFC and Hardee’s, among others. Similarly, Emirates Fast Food Co. LLC is ranked second with rights to McDonald’s, while First Food Services is ranked third, operating the Burger King and Texas Chicken chains. While specialist franchisees in the food service landscape is one part of the picture, other business conglomerates, traditionally being experts in retail, are now looking to diversify their investment portfolios into the food service industry. Notable examples of these are Alshaya Group, Azadea LLC and Marka Holding PJSC. Most business groups hold sizeable investment appetite for introducing new international players into various channels in order to achieve a higher return on their investments in the industry.

According to Euromonitor, over the forecast period (to 2022), the food service industry is expected to see a robust performance supported by an increase in the consumer base as a result of many young professionals seeking career opportunities in the country and who are largely dependent on food service outlets for their nutritional needs. With the current challenges, players in the food service industry are likely to develop in terms of operational maturity with product development expected to revolve around more modern culinary methods and western taste buds, due to the rising level of affluence and quality standards in the country.

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 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:

Post had last reported that 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
  • 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 United States 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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