Food security concerns fuel change in wholesale food market

The UAE in fact imports approximately 80% of its food supplies, while the wider region imports approximately 90%. Predictions for the UAE's reliance on imports put the figure at $5.5b by 2015 and $8.4bn by 2020. In 2010, food imports into the GCC stood at a value of $25.8bn and this dependence on food imports is predicted to last.

At the end of 2009, the global food market was estimated to be worth $4.2 trillion, with fresh food and agricultural produce taking 52.6% and packaged foods taking 47.4% of the total value.

Estimates of the value of the region's wholesale food sector can be deduced as follows.

Regionally, wholesale and retail trade combined totals $38-40bn, with the entire wholesale sector accounting for $25bn of this (and therefore retail at approximately $15bn). This amounts to 12.8% of the UAE's GDP: regional GDP totals $1.1 trillion. While Saudi Arabian combined trade amounts to 5%-5.5% GDP (excluding oil), Kuwait's combined trade amounts to 4% of its GDP, meaning the UAE has a larger wholesale trade component in terms of GDP percentage in comparison to some of its regional neighbours.

Of the $25bn wholesale trade in the UAE, approximately $10bn of this is food/grocery (40%) and $15bn is non-food (60%). Applying a similar logic to the wholesale sector means that of the $25bn-worth of trade, an estimated $15bn would be attributed to non-food and $10bn to food.

Factors affecting the UAE's wholesale food market remain widespread. The UAE's tourist industry, set for growth, will also impact the wholesale food sector, including in-flight catering demanded by the 120 airlines that operate out of Dubai alone. 2010 figures put the UAE's visitors at 11.6million, and the Dubai International Airport handled 46.3million passengers in the same year (placing it fourth globally). The Dubai Chamber of Commerce and Industry puts annual growth of the sector at 6.5% annually, between 2011 and 2021.

The increasing population will undoubtedly affect the wholesale food sector, with demand increasing across the market. In the GCC, the population is expected to increase to 45.6 million by 2015, from 40.6 million in 2010. Between the year 2000 and 2010, the GCC population expanded at an annual average of 3.3%, compared to a global average of 1.1%.

Finally, the UAE's re-export industry will impact the sector, which succeeds due to its strategic location on the base of the Arabian Gulf.Reportedly, the Emirates re-export almost 50% of the food it imports to other regional countries - along with Russia, India, Pakistan and East Africa.

Mahboob Murshed, Managing Director, Alpen Capital, made some predictions for the future of the sector: "The UAE will continue to rely on imports big time... they will try to continue to take care of the poultry needs and their vegetable needs locally but for the bigger things like wheat or rice they continue to be dependent on the imports. That's why the UAE is concerned about food security - the Emirates is buying land, in various countries in Africa, in Asia, Pakistan, Indonesia, Sudan, etc. Food security will remain to be a concern for them and it will keep on investing in this on an on-going basis," he said.