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The changing face of UAE’s and GCC’s F&B space

A look at the F&B market dynamics, trends, and growth prospects for the UAE and GCC.

The value of online food and beverage sales in the UAE to reach $619 mn by 2025 Careem was able to demonstrate how to come to a balance between the needs of operators and aggregators There is an opportunity for retailers to offer private label brands at lower price points

Online sales within the UAE’s food and beverage market surged 255% year-over-year in 2020 to reach $412 million, a new analysis by the Dubai Chamber of Commerce and Industry has revealed.

Based on figures provided by Euromonitor, the analysis predicted the value of online food and beverage sales in the country to reach $619 mn by 2025 with an annual growth of 8.5% over the 2020-2025 period.

Let’s look at the F&B market dynamics, trends, and growth prospects.

Transforming F&B in the UAE

The UAE’s F&B sector, particularly vital to Dubai, has not been spared the terrible effect of the COVID-19 pandemic, according to a commentary in Gulf News by Peter Maerevoet, global CFO and regional CEO for Asia at Tradewind Finance. 

“One important trend that was starkly highlighted by the pandemic is that aggregators such as Talabat, Zomato, and Careem gained immense popularity in an environment in which deliveries grew as a result of health and safety precautions,” he said.  

Maerevoet went on to say that some aggregators also experienced significant changes of their own. 

“After traditionally charging 25-35% commission on delivery order values, they came under intense scrutiny for these fees cutting into the margins of operators who faced immense challenges due to reduced, or in worse case scenarios, zero footfall.”

Careem, he added, was able to demonstrate how to come to a balance between the needs of operators and aggregators by introducing a commission-free model to relieve some of the adverse impacts of the pandemic.  

 Traditional F&B outlets that survived are the ones willing and able to adjust how their businesses operated, i.e. negotiating leases, adjusting salaries, and increasingly focusing on more efficient usage of existing resources, he explained.  

“Changes are bound to accelerate in thenear future, particularly after many F&B operators have seen the benefit of shared cloud kitchens versus physical, on-site ones, and are perhaps now looking towards managed kitchens. 

Facilities in which both cooking, and delivery are both fully outsourced will allow businesses to focus more on brand, concept, and consumer demands while eliminating the need to spend significant sums on allocation decisions,” Maerevoet said.

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F&B trends and growth areas

Changing consumer behaviors enforced by the ongoing coronavirus pandemic has led to new areas of growth in the F&B market throughout the GCC, according to a new report by business strategy consultants Frost & Sullivan.

Among the areas seeing increased interest is the emergence of omnichannel food consumption, driven by more people working from home and increased safety and hygiene concerns, said the report.

The report also shows that with many customers facing downsizing or wage cuts in their jobs due to the pandemic, there is an opportunity for retailers to offer private label brands at lower price points.

According to Frost & Sullivan, “during the initial crisis period, consumers bought more private labels and entry price products that have now become their go-to choices. This has led to an opportunity for retailers to revise their portfolio and shift volume to products aligned to consumer choices for a simpler and cost-effective supply chain.”

The rise of the health and wellness sector is continuing unabated, said the report. “The advent of the COVID-19 pandemic has compelled the population to consume natural products such as citrus fruits, broccoli, ginger, garlic, turmeric, yogurt, almonds, and other natural products. Consumption of immunity supplements such as vitamin C, zinc, and omega-3 has increased amongst the 30+ age group as a means to increase resistance to various diseases. Within health & wellness, organic is the trend that has penetrated the most in the consumer market. The market currently stands at $3.5 billion.”

In the GCC, the F&B sector is expected to grow by more than 7% annually to an estimated $196 bn in 2021, according to Mena Research Partners.

By the end of 2020, it is estimated that 5,500 new restaurants and eating spaces would have entered an already overcrowded GCC market, which makes innovation essential for maintaining profitability.

In addition, the overall expenditure on F&B products in the UAE is estimated to increase by 7% on an annual basis from $37 bn in 2020 to $41 bn by the end of 2025.