The Gulf has one of the most well-developed food retail infrastructures in the world, with a good mix of modern and traditional retail formats. Rapid urbanisation, high population growth, booming tourism and rising incomes are some of the factors that have contributed to higher consumption volumes as well as increased per capita consumption of foodstuffs in the region.

As per AT Kearney, despite the global recession, food retail in GCC grew at a rate of 7 per cent annually between 2007 and 2012; and sales were valued at $83 billion (Dh304.85 billion) in 2012. Of this, Saudi Arabia was the largest contributor at 51 per cent, followed by UAE at 24 per cent.

With consumers in the region become increasingly connected with global trends, it is leading to a gradual evolution in food consumption patterns — this is also being aided by the profusion of new casual and fine dining experiences. Some trends that are likely to impact the food retail industry over the coming years are as follows:

Internationalisation of the food platter

Due to the influence of expats, the impact of TV and social media, GCC consumer tastes are increasingly becoming internationalised. From the traditional rice and meat dishes, the platter is getting varied to include pastas, pizzas, burgers and desserts prepared at home.

The palate is also evolving, with hybrid flavours and innovative formats finding acceptance. For example, the mix of sweet and chilly flavouring snacks, frozen yoghurts, ice cream-cola floats, etc.

Increasing health consciousness

Growth in lifestyle-related ailments is leading to an increase in consumption of healthier alternatives. Consumers are looking out for natural, preservative-free and non-fattening foods. At the same time, it must be noted that the consumers in the region still expect taste and nutrition as basic values from food, so the need is more for ‘natural and healthy’ rather than ‘fat-free’.

In this context, organic food, a category that was worth at $300 million in 2009 is expected to grow exponentially to $1.5 billion by 2018.

Fresh preferred over preserved

The Gulf’s consumers have historically been used to consuming preserved/long-life foods, which was a function of inconsistent electricity supply and lack of refrigeration facilities in the earlier days. But with improvement in distribution infrastructure and refrigeration facilities both in-store and at home, consumer preference is moving towards fresh products over preserved.

In categories like milk, juices, cheese, etc, this has also resulted in changes in pack formats and a move from ambient to chilled displays, to heighten fresh/ natural cues.

Private labels to grow

Many of the large retailers in the region have launched their private label products in a few categories. However, private labels in GCC currently contribute to less than 5 per cent of the total value as compared to around 30 per cent in developed markets — hence, this is an area with significant growth potential.

Consumers in the region do have strong bonds with retailers like Lulu, Carrefour, Spinneys, Hyper Panda, etc and this relationship could be leveraged by introducing private label products that offer acceptable quality at a reasonable price.

Convenience to drive innovation in offer and channels

With busy urban lifestyles, consumers are increasingly looking for convenience. This has an impact in the preference for channel, with convenience stores gaining in popularity. The preference for fresh products also results into more frequent, but smaller value shopping trips, which again suits the convenience store format.

However, there is still substantial scope for retailers to drive convenience by improving online ordering and home delivery capabilities. Another outcome of innovation driven by the convenience trend would be the emergence of ready-to-cook product ranges. Recently launched gourmet brand Ta’moosh in UAE is an example of this trend.

The food retail sector is expected to grow to $106 billion by 2017, which represents a 5 per cent compound annual growth rate over the five-year period. Understanding and leveraging evolving consumer trends could lead to unlocking of significant opportunity across the entire value chain, right from production, to distribution, and, finally to retail.

 

— The writer is CEO of AMRB, a Kantar Group research agency.