Packaged Food in the United Arab Emirates

Executive Summary

The generally hot and dry climate in the United Arab Emirates (UAE) makes agriculture challenging and consequently causes a high reliance on food imports. Packaged food sales in the UAE had a retail value of US$4.3 billion in 2015, with three key categories including dairy, baked goods, and rice/pasta/noodles. The packaged food market also saw an increasing demand for health and wellness food products, which are products with perceived health benefits. The purpose of this paper is to explore market conditions and identify opportunities and challenges for packaged food in the UAE market, particularly for these identified key categories. Food processors in the UAE are challenged by the strict government-enforced price caps on staple foods; however certain products, such as those categorised as “value-added,” are exempt from these regulations. As input costs rise, another strategy used by food processors seeking to mitigate the impact of the price caps has been to reduce the size of their packages. The population of the UAE is mostly made up of working expatriates from Asian and Western countries, which has resulted in the formation of two significant consumer groups: a large group of low income expatriate workers, mostly from India, the Philippines, Pakistan, and Bangladesh; and a smaller group of high-income professionals, often with Western and Middle Eastern backgrounds. Many retail outlets have identified niche target consumer segments based on these groups of expatriates and have tailored their product portfolio and price ranges according to their target segment’s shopping expectations and consumption habits.

Economic Trends

The population of the United Arab Emirates (UAE) largely consists of foreign citizens. In 2014, approximately 88% of the country’s 8.5 million inhabitants were expatriate workers from Asian and Western countries, attracted by the strong economy and good job opportunities. The expatriate population can largely be categorised into two groups: the majority being low-income labourers, mainly from India, the Philippines, Pakistan, and Bangladesh, and a smaller group of professionals with a high disposable income, often from Western countries such as the United Kingdom or other parts of the Middle East. The UAE’s major source of income is the oil and gas sector, accounting for US$107.9 billion in 2014, 28.4% of the country’s total exports (Global Trade Atlas, 2016). Considering that the oil industry plays a key role in supporting the UAE’s economy and that the recent oil glut is expected to last for a few more years, it is reasonable to expect that the country’s economy may be negatively impacted. Consequently, the influx of expatriates, who tend to be drawn to the UAE for work, may slow down resulting in little population growth for the next five years. However, a moderate growth rate is expected to return for the rest of the forecast period leading up to the year 2020. Tourism is another major source of revenue in the UAE. Although tourism continued to see growth in 2014, the 5% increase in the number of arrivals was a much slower rate of increase than the 10-11% growth rates seen in previous years. According the Euromonitor International report, Flows in the United Arab Emirates, this slower growth in the number of arrivals could be due to safety concerns in surrounding countries, competition from other Middle Eastern countries, and a weakened Russian ruble. Although political tensions and instability in the Middle East could have a negative impact on the UAE’s tourism industry in the short term, this industry is expected to see increased growth toward the end of the forecast period, and will benefit from Expo 2020, which will take place in Dubai.

Packaged Food Market Characteristics

The retail value of all packaged foods sold in the UAE, including those in the health and wellness category, was US$ 4.3 billion in 2015 (Euromonitor, 2016). The value of packaged food sales has increasing by 48.1% since 2010, with a compound annual growth rate of 8.2%. The retail value of packaged foods sales is expected to reach US$ 5.6 billion by the year 2020, representing 31% growth from 2015 and a compound annual growth rate of 5.5% (Euromonitor, 2016). Almarai Co. Ltd. led the market in 2015 with a 5.7% market share, followed by Nestlé SA with 5.3%, and Mars Inc. with 4.5%. The top three segments in terms of sales were: dairy, baked goods, and rice/pasta/noodles. However, the highest growth in 2015 was seen in the sweet and savoury snacks category (14%), followed by confectionary (12.4%) and spreads (10.7%). A potential challenge that should be noted by Canadian exporters is that the government in the UAE enforces a strict price policy for most packaged food products, which results in manufacturers rarely being permitted to increase their prices. However, many value-added products are exempt from these regulations.

Retail Sales

In terms of sales, the most important categories in 2015 within packaged food were dairy (led by drink products), baked goods (led by bread), and rice/pasta/noodles (led by rice). The spreads category grew the most from 2010 to 2015, with a 95.8% value increase, followed by confectionary products (78.2%) and sweet and savoury snacks (72.5%). It is predicted by Euromonitor International that by the year 2020, the most important categories within packaged food will be dairy, confectionary, and rice/pasta/noodles.
Retail Sales of Packaged Food in the United Arab Emirates, by Segment – Historic Retail Value in US$ Millions and Period Growth (%) – Current Prices – Fixed 2015 Exchange Rates
Categories 2010 2011 2012 2013 2014 2015 % CAGR 2010-15
Source: Euromonitor International, 2016. Compound Annual Growth Rate (CAGR)
Total Packaged Food 2,928.0 3,147.2 3,410.4 3,697.5 3,989.6 4,337.1 8.2
Dairy 891.6 943.6 1,002.5 1,072.2 1,141.4 1,215.8 6.4
Baked Goods 344.1 372.0 405.6 432.9 462.2 499.4 7.7
Rice/Pasta/Noodles 323.4 346.9 374.4 405.4 438.0 481.5 8.3
Confectionery 242.2 273.4 299.4 347.8 383.9 431.5 12.2
Sweet and Savoury Snacks 207.0 219.9 249.8 276.9 311.6 357.1 11.5
Processed Meat and Seafood 176.8 189.8 205.8 222.1 239.6 259.9 8.0
Oils and Fats 166.6 180.7 196.0 207.7 219.9 234.2 7.1
Biscuits and Snack Bars 105.9 113.9 126.3 138.4 151.4 166.2 9.4
Sauces/Dressings/Condiments 102.8 109.6 118.0 126.7 135.3 145.5 7.2
Baby Food 84.2 93.2 100.9 107.5 116.5 127.9 8.7
Ice Cream and Frozen Desserts 76.5 82.0 88.2 95.0 102.4 108.3 7.2
Processed Fruit and Vegetables 74.5 78.8 84.9 92.0 97.0 103.0 6.7
Breakfast Cereals 61.8 65.8 70.4 74.6 78.6 83.9 6.3
Spreads 40.5 45.2 53.5 60.9 71.6 79.3 14.4
Ready Meals 15.2 16.4 17.8 19.0 20.3 22.0 7.6
Soup 14.8 15.8 17.0 18.5 20.0 21.7 7.9
Retail Sales of Packaged Food in the United Arab Emirates, by Segment – Forecasted Retail Value in US$ Millions and Period Growth (%) – Current Prices – Fixed 2015 Exchange Rates
Categories 2016 2017 2018 2019 2020 % CAGR 2016-20
Source: Euromonitor International, 2016. Compound Annual Growth Rate (CAGR)
Total Packaged Food 4,590.7 4,868.1 5,148.5 5,442.4 5,680.3 5.5
Dairy 1,265.0 1,318.7 1,376.5 1,435.3 1,483.2 4.1
Baked Goods 521.9 544.8 567.2 590.4 613.1 4.1
Rice/Pasta/Noodles 515.4 553.1 590.0 627.4 635.4 5.4
Confectionery 473.2 520.3 569.6 622.4 672.7 9.2
Sweet and Savoury Snacks 398.5 445.3 493.2 544.0 592.9 10.4
Processed Meat and Seafood 274.8 291.8 308.1 325.0 338.6 5.4
Oils and Fats 240.3 245.7 251.0 255.5 259.5 1.9
Biscuits and Snack Bars 176.5 187.0 197.3 209.7 219.3 5.6
Sauces/Dressings/Condiments 154.0 163.4 172.9 183.2 191.4 5.6
Baby Food 136.1 144.7 152.6 161.5 169.1 5.6
Ice Cream and Frozen Desserts 111.2 114.3 116.1 118.9 121.3 2.2
Processed Fruit and Vegetables 105.8 109.5 113.0 116.7 120.1 3.2
Breakfast Cereals 87.7 91.9 96.1 100.3 104.6 4.5
Spreads 84.3 89.2 94.0 98.9 103.8 5.3
Ready Meals 23.1 24.4 25.7 27.1 28.0 4.9
Soup 22.8 23.9 25.1 26.3 27.2 4.6
Retail Sales of Packaged Food in the United Arab Emirates, Year on Year Growth (%) – Historic Retail Value in US$ Millions Current Prices – Fixed 2015 Exchange Rates
Categories 2010-11 2011-12 2012-13 2013-14 2014-15
Source: Euromonitor International, 2016.
Total Packaged Food 7.5 8.4 8.4 7.9 8.7
Dairy 5.8 6.2 6.9 6.5 6.5
Baked Goods 8.1 9.0 6.7 6.8 8.0
Rice/Pasta/Noodles 7.3 7.9 8.3 8.1 9.9
Confectionery 12.9 9.5 16.2 10.4 12.4
Sweet and Savoury Snacks 6.2 13.6 10.9 12.5 14.6
Processed Meat and Seafood 7.4 8.4 7.9 7.9 8.5
Oils and Fats 8.5 8.4 6.0 5.8 6.5
Biscuits and Snack Bars 7.6 10.8 9.6 9.4 9.8
Sauces/Dressings/Condiments 6.6 7.6 7.4 6.8 7.6
Baby Food 10.7 8.3 6.5 8.4 9.8
Ice Cream and Frozen Desserts 7.2 7.5 7.7 7.8 5.8
Processed Fruit and Vegetables 5.8 7.7 8.3 5.5 6.2
Breakfast Cereals 6.4 7.1 6.0 5.3 6.8
Spreads 11.7 18.3 13.8 17.6 10.7
Ready Meals 7.7 8.4 6.7 6.9 8.2
Soup 6.4 7.7 8.7 8.1 8.9

Key Categories 2015

The following section provides market information for the three key categories within packaged food; dairy, baked goods, and rice/pasta/noodles, as well as for the growing cross-categorical class of health and wellness products. The information used has been sourced from Euromonitor International (2016).

Dairy

Retail sales value for the dairy category was US$1.2 billion in 2015 and saw 36.3% growth in value from 2010 to 2015, for a compound annual growth rate of 6.4%. Main Sub-Categories
  • The retail sales of products categorised as “drinking milk products” were valued at US$400 million in 2015. Within this sub-category, non-dairy milk alternatives saw the most volume growth with an increase of 70.3% from 2010 to 2015, for a compound annual growth rate of 11.2%. Powdered milk had a negative volume growth rate of −5.76% from 2010 to 2015.
  • The yogurt and sour milk category saw product retail sales of US$339 million in 2015, representing 204,610 tonnes.
  • Cheese saw 8% value growth in 2015, reaching US$276 million.
  • Other dairy products including condensed milk, “fromage frais” and quark (which are types of soft cheese), coffee whiteners, cream, as well as chilled and shelf stable desserts saw retail sales of US$200 million.
Main Companies
  • Al Ain Dairy Co. (18.9%), Almarai Co. Ltd. (18.3%), and Al Rawabi Dairy Co. (15.3%) respectively led the sub-category of drinking milk.
  • Yogurt and sour milk product sales were led by Almarai Co. Ltd. with 23% share of market, followed by National Food Products Co. LLC (16.5%), and Al Safi Danone Ltd. (12.1%).
  • Almarai Co. Ltd. led the cheese sub-category with a 14% market share in 2015, followed by Arla Foods Amba (13%), and Kraft Heinz Co. (9%)
Forecasts for 2015-2020
  • The drinking milk products sub-category is projected to see 31% volume growth and a 7.59% value growth by the year 2020.
  • The volume of yogurt and sour milk products sold is anticipated to increase from 204,610 tonnes in 2015 to 288,200 tonnes in 2020, an increase of 40.9%.
  • The value of cheese sales is expected to increase by 30% by the year 2020, reaching US$360 million.
Sales of Dairy by Sub-category: Value 2010-2015
Sub-category 2010 2011 2012 2013 2014 2015 % CAGR 2010-15
Source: Euromonitor International, 2016. Compound Annual Growth Rate (CAGR)
Drink Products 327,531 338,851 352,057 370,714 386,446 400,150 4.09
Yogurt and Sour Milk Products 223,453 241,702 262,958 287,437 310,267 339,417 8.72
Cheese 195,354 208,540 224,071 239,336 257,105 276,405 7.19
Other Dairy 145,430 154,646 163,594 174,855 187,727 199,948 6.57
Total 891,768 943,739 1,004,692 1,074,354 1,143,559 1,217,936 6.43

Baked Goods

Sales in this sector saw 45% growth from 2010 to 2015. Between 2014 and 2015, sales increased from US$462 million to US$499 million, an increase of 8%. Main Sub-Categories
  • Bread is a staple for most nationalities in the UAE and was the largest sub-category with a value of US$306 million in 2015, an increase of 8.1% from 2014.
  • The sales value of the pastries sub-category increased by 7.8% in 2015, reaching US$110 million.
  • Cakes had an increase in sales value of 8.8%, reaching US$74 million in 2015.
Main Companies
  • Modern Bakery LLC. was the leader in the category of baked goods, holding an 11% market share in 2015, followed by Almarai (8%).
  • Small artisanal bakeries, as a group, held 52.9% market share.
Forecasts for 2015-2020
  • The baked goods category as a whole is projected to see the value of goods sold increase by a compound annual growth rate of 4.2%.
  • Bread sales value is expected to increase at a compound annual growth rate of 3.6%; pastries, 4.8%; and cakes, 5.8%.
Volume Sales of Baked Goods by Sub-category in Thousand Tonnes: 2010-2015
Sub-category 2010 2011 2012 2013 2014 2015 % CAGR 2010-15
Source: Euromonitor International, 2016. Compound Annual Growth Rate (CAGR)
Bread 114.24 119.08 125.06 131.3 138.26 146.05 5.04
Pastries 18.89 19.7 21.56 22.55 23.74 24.89 5.67
Cakes 5.15 6.16 7.37 7.85 8.44 9.01 11.84
Desert Mixes 1.02 1.04 1.09 1.12 1.16 1.20 3.30
Frozen Baked Goods 1.33 1.37 1.40 1.45 1.50 1.55 3.11
Total 140.63 147.35 156.47 164.27 173.10 182.71 5.37

Rice/pasta/noodles

Retail value of this category was US$482 million in 2015, representing 188,320 tonnes. The Rice/pasta/noodles category had 48.9% value growth from 2010 to 2015, for a compound annual growth rate of 8.3%. Main Sub-Categories
  • Sales value of rice increased 10.5% from 2014 to 2015, reaching US$375 million. Volume increased by 4.9%, reaching 167,390 tonnes.
  • From 2010 to 2015, noodle sales value had the largest compound annual growth rate (8.5%).
  • Sales volume of pasta grew 5.1% and sales value increased by 5.4% from 2014 to 2015, reaching US$14 million.
Main Companies
  • Silver Swan Manufacturing Company is the leader in the rice/pasta/noodle category with an 11.4% market share in 2015, followed by Pinehill Arabia Food Ltd. (10.9%), and KRBL Ltd. (8.2%).
Forecasts for 2015-2020
  • The rice/pasta/noodles category is projected to grow by a compound annual growth rate of 5.7% in value terms from 2015 to 2020.
Volume Sales of Rice/Pasta/Noodles by Sub-category in Thousand Tonnes: 2010-2015
Sub-category 2010 2011 2012 2013 2014 2015 % CAGR 2010-15
Source: Euromonitor International, 2016. Compound Annual Growth Rate (CAGR)
Rice 132.17 137.44 143.59 151.55 159.59 167.39 4.84
Noodles 9.43 9.9 10.52 11.27 11.92 12.6 5.97
Pasta 6.29 6.67 7.09 7.52 7.93 8.33 5.78
Total 147.89 154.01 161.2 170.34 179.44 188.32 4.95

Health and Wellness in 2015

Health and wellness is a growing category within packaged food and it includes products that contain reduced carbohydrates, fat, or salt; products that are marketed as being “naturally heathy”, and organic products. The retail value of the health and wellness packaged food category increased by 12.2% from US$560.7 million in 2014 to US$628.9 million in 2015. Main Sub-Categories
  • Health and wellness dairy was the most important type of product within the health and wellness category in 2015, with a sales value of US$138.5 million, followed by the sweet and savoury snacks sub-category (US$92.9 million) and the baby food sub-category (US$92.1 million).
  • Health and wellness sweet and savoury snacks saw the most retail value growth between 2010 and 2015. Overall growth during this period was 122.9%, with a compound annual growth rate of 17.4%.
  • The five subcategories within health and wellness that saw the most growth from 2014 to 2015 were sweet and savoury snacks (19.5%), dairy (14.5%), oils and fats (12.8%), baked goods (12.6%), and ice cream and frozen desserts (11.1%)
Main Companies
  • In 2014, Danone led with a 9.7% share of the health and wellness market, followed by Nestle (9.3%) and Kellogg Co. (6.5%).
  • The top company for dairy in 2014 was Danone, with a 29.1% market share, followed by Al Rawabi Dairy Co.(20.8%), and Marmum Dairy Farm LLC. (8%).
  • The top three companies for health and wellness sweet and savoury snacks in 2014 were Bestfood Co. LLC. (42.9%), Gyma Food Industries LLC. (20.1%), and Crunchos Awafi Foodstuff Industries (11.5%).
  • The top company for health and wellness baby food in 2014 was Nestle SA with a 53.8% market share, followed by Danone (22.9%), and Abbott Laboratories Inc. (12.8%).
Forecasts for 2015-2020
  • The UAE is ranked fifth in the world in terms of the number of obese people due to the rich Arabic diet that has high sugar and fat content. Main concerns related to obesity are diabetes and heart disease.
  • Government initiatives to educate the population on healthier eating habits have increased the demand for packaged foods, such as functional foods, which are perceived to be healthier.
  • Demand is mainly driven by expatriate professionals from Western countries because of their more comfortable incomes.
  • The sales value of health and wellness products is expected to grow by 28% by the end of the forecast period, reaching US$1.43 billion.
Sales of Health and Wellness Packaged Food by Sub-Category, Year on Year Growth (%)
Sub-category 2010-11 2011-12 2012-13 2013-14 2014-15
Source: Euromonitor International, 2016.
Sweet and Savoury Snacks 6.4 36.8 12.1 14.4 19.5
Dairy 7.5 7.9 8.3 8.7 14.5
Oils and Fats 8.1 11.2 6.9 7.2 12.8
Baked Goods 11.0 5.0 7.4 9.6 12.6
Ice Cream and Frozen Desserts 8.1 50.9 11.7 10.0 11.1
Baby Food 10.0 8.9 6.6 8.9 10.8
Confectionery 11.7 9.9 10.0 9.1 10.2
Biscuits and Snack Bars 2.1 16.8 8.9 7.5 9.8
Spreads 3.4 13.2 14.4 11.7 9.5
Sauces, Dressings and Condiments 7.4 7.8 7.7 7.4 7.8
Rice/Pasta/Noodles 5.3 5.6 5.5 6.7 7.1
Breakfast Cereals 6.4 7.1 6.0 5.3 6.8
Soup -37.8 10.7 10.6 7.2 5.1
Shelf Stable Meat, Seafood, Fruit and Vegetables 6.0 7.0 6.4 6.3 5.0

Retail Outlets

With such a large portion of the population coming from foreign countries, retail outlets in the UAE have adapted their product selection, pricing and shopping experience offered to reflect the population’s diverse consumption habits and food preferences. The top grocery retailer in 2015 was Union Coop with a 20% market share, followed by Carrefour (19.3%), and Emke Group (14.2%). Although there are retail outlets that serve more general markets, many retailers have chosen to target niche markets based on the country of origin of expatriate groups living in the UAE. For example, Spinney’s and Waitrose cater mostly to affluent Western expatriates, offering premium products as well as a wide portfolio of organic products, whereas Indian and Pakistani expatriates are the target consumers for the retail chain Lulu, which offers bulk sales.

Packaged Food in Foodservice

Foodservice channels rely heavily on the expatriate population, who are often single and more likely to eat out than local families. Negative economic developments during the beginning of the forecast period could lead to a deceleration in the influx of expatiates, and consequently in the sales of packaged food to foodservice channels. The foodservice industry is also greatly influenced by tourism. Although the UAE is seen as being safe, the political instability in other Middle Eastern countries has contributed to a slower growth rate for tourism. However, this is expected to improve toward the end of the forecast period (2016-2020) when Dubai is set to host EXPO 2020. Foodservice channels will greatly benefit from the increase in infrastructure investments during the preparation period as well as from the event itself. The volume of foodservice sales for packaged foods grew by 30.9% in 2015, reaching 607,500 tonnes. This is expected to increase by 36.1% by 2020, with a compound annual growth rate of 6.4%. Key categories include bread, rice, milk, and vegetable seed oil. However, chilled processed red meat saw the strongest foodservice volume growth of 12% in 2015. Federal Foods is a leading supplier of packaged food to foodservice outlets, including: hotels; full-service restaurants; fast food outlets; caterers, bakeries and delicatessen counters.

Conclusion

Although the growth rate of packaged food sales is expected to stabilise for the next few years, it is anticipated that it will return to a more accelerated growth rate toward the end of the forecast period. As the government in the UAE develops initiatives to increase health awareness, there will be an opportunity for products that have perceived health benefits, particularly with regard to obesity, diabetes, and heart disease. Additionally, adding value to a product can be an effective strategy for avoiding the government imposed price caps on staple foods. There is also an opportunity for organic products, as retail outlets such as Spinney’s are seeking to increase their selection of organic products. Non-dairy milk alternatives saw the most volume growth within the dairy category with an increase of 70.3% from 2010 to 2015, indicating that there is a growing demand for this type of product. In terms of indulgence foods, cake products, including single portion cakes, are also expected to see continued growth. While rice is not produced in large quantities in Canada, it is the largest sub-category within rice/pasta/noodles and the UAE has expressed interest in Canadian wild rice in the past. Given the clear population segments defined by ethnicity and income, it is important for exporters to the UAE market to consider these groups when identifying a target market and appropriate retail outlets.

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