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United Arab Emirates Food and Drink Report Q4 2009
Business Monitor International, Sep 2009, Pages: 52
The United Arab Emirates Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the United Arab Emirates' food and drink industry.
Despite the economic downturn, the UAE has retained its status as an attractive market for food and drink investors in search of near-term returns with premiumisation potential. Although some of the UAE’s leading mass grocery retailers (MGRs) have been reporting increased private-label sales, a sharp correction in consumer spending has yet to transpire. With the downturn expected to pass by 2010, multinational food and drink companies headed by New Zealand’s Fonterra and India’s Britannia Industries are expected to scale up investment into the UAE and the wider Gulf region as discussed in the recently published UAE Food & Drink Report for Q409.
In July 2009, the New Zealand-based dairy major Fonterra announced to investors that it expected the affluent Gulf region to be an important long-term growth market. The firm has reported double digit regional turnover growth in each of the last three years. Despite the downturn, the firm has accurately interpreted that instead of trading down to lower-cost brands, most consumers have instead preferred to make savings by buying smaller sizes of Fonterra’s value-added brands, which has allowed it to maintain volume sales. Over the long term, the firm will be encouraged by the author’s forecast that through to 2018, the UAE’s GDP per capita will increase by 26.3% and reach almost US$63,000.
Leading India-based food company Britannia shares Fonterra’s upbeat view on the UAE food industry. In June 2009, it announced plans to relaunch its popular Nutro biscuit label in the Gulf region. Britannia is intent on capturing a greater share of the region’s biscuit market, specifically the UAE’s which is reportedly worth more than AED500mn per annum. Per capita annual biscuit and wafer consumption is thought to stand at about 6kg.
The author notes that the structure of the UAE’s consumer market differs markedly from Britannia’s domestic market. India’s enormous yet price-sensitive population allows Britannia to register considerable volume sales through competitive pricing, while the high spending capability of consumers in the UAE and the dynamic consumption of biscuit products effectively circumvents the small size of the market and allows the firm to push up its margins considerably relative to its domestic market. Domestic companies have been expanding too. Earlier this quarter, the UAE-based conglomerate ANC Holdings bolstered its rapidly growing food business by acquiring a 60% stake in Oman-based fisheries processor Dhofar Fisheries for an undisclosed sum. From ANC’s point of view, Dhofar is a valuable addition to its promising frozen foods business. Dhofar’s product portfolio ties in well with ANC’s existing range of processed meat, shrimp and ready-meal products. The author expects ANC to specifically invest in Dhofar’s top selling Blue Ocean tuna brand – a brand that is already fairly well established with consumers across a number of Middle Eastern markets.
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