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Gulf Social and Economic Outlook for the F&B Industry
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Friday, 01 February, 2019, 08 : 00 AM [IST]
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P V Naik
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Gulf countries represent one of the most affluent and exotic food and beverage markets in the world.
Under the Gulf Co-operation Council (GCC) economic diversification motion, large investments have been allocated for tourism sector which has positively impacted foothold of F&B industry in the Gulf. In order to boost tourism sector, governments are investing in theme parks, mega malls and massive construction properties.
Upcoming events such as Expo 2020 Dubai and FIFA World Cup 2022; are catalysing F&B sector by virtue of significant resource allocation for sports and related tourism sector. This has also lead to embedment of international cuisine in Gulf countries. Increasing tourists from Europe and the United States are also fueling demand for Western and casual culinary dishes.
Expanding F&B markets
The Gulf F&B markets have consistently followed CAGR around 10% during past decade. The UAE market expanded by CAGR of 12%, while Saudi Arabia and Qatar experienced growth; with CAGR of 9.9% and 7.4% respectively. Increasing population is one of the main reasons for expanding F&B markets in Saudi Arabia.
Led by various market enablers, the GCC market for food and beverages is poised to reach a figure of US$34 billion by 2020. Apart from GCC economic zones, countries such as Qatar, Kuwait and Bahrain also present a promising investment focus in food sector.
Raising disposable income is key reason for robust growth in Gulf F&B markets. With increasing awareness on health, people are willing to pay more and turn towards healthy food products and organic ingredients.
Hakkasan, LaPetite Maison, Nobu, Zuma and Catch are few of the topmost fine dining restaurant outlets in GCC. Also, the single-unit operations such as Tom & Serg and Roberto’s and smaller networks such as Tree Café are changing the F&B demand landscape. Casual dining category has witnessed high growth in the UAE, Saudi Arabia and Qatar due to increasing demand for premium experience at an affordable price. Dubai is major tourist attraction and makes the most happening place in GCC.
As the most populated nation, Saudi Arabia has highest share in food space with more than 30,000 outlets, reports GCC F&B Sector Report by Ardent Advisory and Accounting of April 2017.
One of the fastest growing
On account of limited entertainment options in GCC, “eating out” has become almost necessity pleasure in GCC. The expat population has added to variety and changing demand patterns. Population rise in GCC is one of the fastest growing, four times higher than emerging economies and seven times higher than Chinese population growth rate.
In the year 2020, the population is expected to reach 59.1 million. Youth population forms a significant part of GCC demographics. More than 40% people are below the age of 25 years. Therefore, marketers focus more on this lucrative age group for seeking attention to newer brands and options in F&B space.
Growth in region’s per capita income by virtue of increasing affluence has really benefitted food sector.
Development of rich urban centres is another reason for F&B growth. Examples, being Riyadh, Doha, Muscat and Abu Dhabi.
The 5.7% of GDP in GCC region is due to tourism sector. Tourist arrival in the GCC region is expected to reach a high of 74 million by 2020, providing maximum impetus to food service demands. Saudi Arabia would welcome more than 25 million tourists for performing Haj and Umrah at the city of Mecca.
New projects which will boost F&B sector
Mall of the World in Dubai, the UAE, plans to add 20,000 rooms to the city across 80 hotels and 20 hotel apartments.
RasAl-Hadd, an eco-themed project in Oman, would feature five-star hotels, resorts and retail stores. It would include 100 rooms, 50 hotel villas, 150 residential villas and an area of 7,000 sq m for a market.
Deira Islands in Dubai, the UAE, is a 15.3 km2 water front city that would add over 23,000 hotel keys and 31,000 apartment keys to the city.
Jeddah Gate, Saudi Arabia, is a mixed-use project spread over 413,000 sq m, featuring hospitality outlets.
Dubai Creek Harbour at the Lagoons would feature 22 hotels, with 4,400 rooms apart from other establishments.
Place Vendome, Qatar, would be used for conducting opening and closing ceremonies during the FIFA World Cup 2022. It would include two five-star hotels, service apartments and entertainment units, and up to 400 retail outlets.
Heart of Europe, Dubai, the UAE, would house six hotels and various F&B brands.
Palm Boardwalk, Dubai, the UAE, is a shopping and dining destination, featuring café and restaurants, with a view of the Arabian Gulf.
Apponomics
GCC has highest penetration of smart phones in the world. The food delivery mobile apps are fueling the F&B industry all across the Gulf region. Consumers are choosing convenience of ordering food at any location of their preference. In addition, the infrastructure required by F&B operators for food delivery erstwhile is not mandatory in the era of apponomics. This has created level playing field for small and medium scale F&B operators to entice customers with niche products and dishes; without incurring infrastructure costs.
While technology is having a notable impact on the F&B industry, the heart of the business, and its real propulsion, is still its operators and its food. The quality of food and service is by far the biggest differentiator for an F&B business, and both of these relate to the human element of the business. Primarily through better staff training and quality sustenance, it will be possible for F&B retail industry to seek maximum advantage from apponomics. Otlob.com – a food delivery platform provides more than 400 restaurants on its app with rich variety and choice to the consumers.
However, any fast moving industry faces challenges at some point, and the GCC F&B market is not an exception to this. The market faces several issues such as high costs, growing competition, skilled labour shortage and high reliance on food imports. The market has been significantly resilient to these challenges and continues to grow at a rapid pace, with glazing prospects. By 2020, the GCC F&B market size is expected to expand at a CAGR of 9.2%.
(The author is founder, Chemistry Innovations. He can be contacted at chemistryinnovations@gmail.com)
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