Growth in UAE food & beverage sector outpaces demand

The UAE’s food and beverage sector, it seems, is eating itself. The F&B sector is growing faster than the demand for its products, according to a survey released today.

KPMG’s F&B report outlined that macroeconomic conditions have created a challenging climate for the sector with sales stagnating or declining for 64 per cent of the 840 businesses surveyed over the past 12 months.

“The F&B market is growing in the UAE, but the supply of new outlets and concepts outstrips the demand,” said Anurag Bajpai, partner-audit at KPMG. “The F&B sector is hugely resilient in the UAE, but that does not mean all F&B outlets will be successful. There was an overwhelming belief from the big and small operators that future opportunity would bring a larger return on investment.”

Only a quarter of respondents expected market conditions to improve in the short term. However, all respondents believed the mid to long-term horizon was positive, with two-thirds of operators looking to expand their numbers of outlets in the UAE with investment key to harnessing the potential.

Key challenges faced by F&B operators are increasing rents, staff turnover, finding good locations for new outlets and the rising price of food with price- sensitive customers.

“We did not hear of any operator looking to exit outlets or locations,” said Mr Bajpai.

He said more than a quarter of respondents were actively looking for new brands and franchises to open in the UAE.

The survey found that the UAE’s consumer demand for F&B offerings remains robust, with the majority of respondents eating out as much as last year and a third of respondents eating out more frequently.

The frequency of the UAE’s use of F&B outlets was not the only positive from the survey – it also found that two-thirds of people have increased their spending per meal, with only 9 per cent saying they spent less than last year.

One operator that is a firm believer in a positive marketplace is Tablez, the F&B arm of the hypermarket chain Lulu. It runs Peppermill Indian Restaurant, Bloomsbury’s, Galito’s and London Dairy and has signed franchise agreements with Famous Dave’s, Genghis Grill, Sugar Factory and Pancake House.

It has 29 outlets at present with another eight set to open before 2017 and expects to have 70 outlets by 2020.

“This investment is not foolhardy, it is well planned and thoroughly researched,” said Sajan Alex, vice president of Tablez. “We believe there will be population growth and increasing amounts of tourism which will require F&B concepts. We feel that certain nationalities have been underserved and there are gaps in the market, such as the Filipino community, which is why we brought in Pancake House.”

He added that it is not an easy market at the moment but many UAE malls are realising they need to change some of their concepts and charge fair rents, which brings in new business opportunities.

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