UAE food consumption to grow by 3pct in 2010

Food spending in the UAE is expected to post a minimal growth of 3 per cent in 2010 as consumers gradually regain their confidence and as the crisis-battered domestic economy moves toward recovery, says an analyst.

Shonil Chande, food and drink analyst at Business Monitor International (BMI), admits that the growth forecast is not substantial, but the one-digit figure still holds potential considering the current economic climate.

“It’s not great, but it’s still fairly healthy and better than the 2 per cent growth posted in 2009. As the economy gets better, the natural effect on all consumer industries (food being the main one) will likewise improve,” Chande said.

Speaking on the sidelines of Gulfood, an annual food and beverage exhibition at the Dubai International Convention and Exhibition Centre, Chande said the UAE food market, which is currently valued at about $6.78 billion (Dh25 billion), could expect a yearly average growth of 4-5 per cent between 2011 and 2014.

“An annual growth of 4-5 per cent is perfectly normal for a mature market such as that of the UAE. People will continue to spend more as long as the economy is faring well,” he added.

Consumer confidence goes north

According to the MasterCard Worldwide Index of Consumer Confidence, UAE’s consumer confidence jumped in the second half of 2009 to post a score of 86.1. This index has shown significant improvement from the 29.6 posted in the first half of 2009 and the 75.4 registered in 2008 at the height of the global economic meltdown.

The report mentioned that Dubai had a higher consumer confidence score (90.8) compared with that recorded by Abu Dhabi (70.8).

Likewise, it noted that UAE consumers during the last six months of 2009 have been optimistic about the status of key economic indicators such as equities, economy, employment, quality of life and income.

However, recent economic happenings have undoubtedly affected food consumption trends in the country, says Chande.

Job uncertainties and a flagging domestic economy have tamed the once vibrant spending habits of UAE consumers.

“There was less premiumisation so people were more careful in spending their money. They’re thinking twice on spending on high-value products [and instead buying] cheaper goods in general,” he said.

The analyst added that this is the expected trend in an environment where consumers’ economic condition becomes weak due to unsteady earnings.

UAE’s premiumisation potentials

The slowdown may have temporarily toned down consumer confidence, but the Emirates remain to be an attractive market for local and foreign companies, says Chande.

BMI forecast that through 2018, the Emirates’ GDP per capita will increase by 26.3 per cent to reach about $63,000.

“I still think there are big opportunities that could attract food and beverage companies, both regionally and internationally, to the UAE. The per capita food consumption in the UAE is much lower than that of the United Kingdom even though the GDP per capita here is much higher than in the UK. So as a market matures, there will be opportunities for growth,” he said.

This indicator is expected to drive premiumisation or the consumers’ preference for high-value (premium) products – a trend seen especially in a country such as the UAE that has a huge expatriate population with high disposable income.

According to BMI’s Food and Drink Report for Q1 2010, UAE has managed to retain its status as an attractive market for food and drink investors looking to expand their private-label sales.

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