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Kuwait Food and Drink Report Q3 2011
Business Monitor International, May 2011, Pages: 65
The Kuwait 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 Kuwait's food and drink industry.
This report believes Kuwait's economy will be only minimally affected by the political tensions that erupted in the start of 2011, with forecast growth remaining robust at 3.4% in 2011 and averaging 4.0% through to 2015. Hydrocarbon exports will remain the main contributor to growth, while the five-year Development Plan will drive a gradual uptick in the non-hydrocarbon sector. However, it should be noted that Kuwait is still not completely insulated from social upheaval. Indeed, in early March 2011 hundreds of people held demonstrations calling for a change of prime minister and more political reforms.
Going forward, this report stresses that if the government fails to address the population's grievances, further opposition movements are likely to emerge. Inflation will also remain a concern. After hitting an almost two-year high in December at 6.0% y-o-y, Kuwait's headline inflation eased to 5.2% in the first month of 2011. Although the Central Bank of Kuwait (CBK) does not publish a breakdown of the consumer price basket, the country's high reliance on imports clearly indicates that the inflationary outlook is being driven by fluctuations in global prices. The report forecasts CPI to come in at 5.5% in 2011, from 4.0% in 2010, in line with the CBK's 5.0-6.0% target band.
Headline Industry Data:
- 2010 food consumption growth = 2.8%; forecast to 2015 = 22.1%
- 2010 per capita food consumption growth = 0.42%; forecast to 2015 = 10.1
- 2010 soft drink sales growth = 11.1%; forecast to 2015 = 27.6%
- 2010 hypermarket sales growth = 6.6%; forecast to 2015 = 47.2%
Key Company Trends
Carluccio's Expansion Plans - In February 2010 it was reported that UK restaurant chain Carluccio's is set for expansion across the Middle East. The chain's owner, Bahrain-based Landmark Group, wants to open 25 outlets in the region by 2015. There are currently two Carluccio's, one in Qatar and the other in the UAE, with plans to open a third in Kuwait City in the near future. While traditional foods and eating habits still dominate, there is a major shift taking place in Kuwait's food sector as eating out on a regular basis, as opposed to just on special occasions, is becoming increasingly popular.
Americana Moving Ahead Despite Unrest - In March 2011 Kuwait Food Company (Americana) the country's leading food firm, confirmed its plans to move ahead with opening 60 restaurants across the region, with Red Lobsters planned for Dubai and Kuwait City. The company said the menus will require only minor alterations for the Middle Eastern market, but alcohol will not be available and the new restaurants will all be in shopping malls. However, with political tensions high in the region, Americana may have to reconsider some of its longer-term expansion plans.
Key Risks to Outlook
Growing Political Tensions - Despite a relatively bullish outlook for growth, constant tensions on the political arena could pose significant threats to Kuwait's economic outlook. Despite being the one GCC state with a functioning parliament, Kuwait scores relatively low in the short-term political risk ratings (73.1 out of 100), which may continue to deter investors away from its assets. Furthermore, lingering tensions in Kuwait's parliament, combined with the regional political crisis, could significantly distract the government from pushing through much needed reforms to the business environment.
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