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United Arab Emirates Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 58
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 United Arab Emirates's food and drink industry.
Although the food and drink sectors in the UAE - and particularly in Dubai – have shown signs of improvement in recent months, consumer confidence remains some way off that of that seen during the premiumisation-led boom years. On a relative basis, discretion remains in play in the Emirates, with households continuing to exercise caution, especially in Dubai.
Many expatriates (and locals) have had their fingers burnt by falling property and equity valuations, major factors themselves in the deterioration in large-scale premiumised consumer spending. However, high salaries and low taxes on offer in the UAE suggest that once a strong recovery occurs, there should be a strong inflow of high-spending expatriates back to the area; again to Dubai in particular.
Headline Industry Data
- 2010 per capita food consumption = +3.64%; forecast to 2015 = +30.11%
- 2010 soft drinks value sales = +8.00%; forecast to 2015 = +65.32%
- 2010 mass grocery retail sales = +8.02%; forecast to 2015 = +53.04%
Key Company Trends
MNC Expansion Ongoing – multinational companies are continuing to pursue fixed asset investments in the UAE despite the ongoing downturn in consumer spending. In May 2010, Mars GCC announced the launch of a US$40mn manufacturing facility in Dubai as the Gulf Cooperation Council (GCC) region assumed greater strategic significance for the company. In March 2010, it was announced that Nestlé had launched a new plant in Dubai with an annual production capacity of 100,000 tonnes.
Duty Free Sales Flying – The ongoing strength of Dubai Duty Free (DDF) continues to contrast with onthe- ground caution in Dubai – up until now the driving force behind the Gulf premiumisation wave. DDF H110 sales increased 16% year-on-year (y-o-y) to US$607mn. We see that DDF’s performance matters a great deal to premium food and drink companies targeting the Gulf region as the company is the world’s largest duty-free retailer in annual sales terms, and is responsible for nearly 50% of duty-free sales in the Middle East region.
Key Risks to Outlook
The UAE will remain vulnerable to external forces over the coming months, namely energy prices. On the downside, lower oil prices would probably dampen investor confidence towards the Gulf region and affect government spending power.
A sustained period of strong economic momentum will be necessary to revitalise the consumer sector and re-attract high-spending expatriates. Forecasted real private consumption growth of just 1% in 2010 suggests that this revitalisation will take some time.
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