Almost two-thirds of food & beverage (F&B) operators in the UAE suffered a drop in sales this year amid challenging market conditions, according to new research.
“The UAE’s growing reputation as a dominant F&B destination in the Middle East has encouraged a growing number of local and international food chains to set up their operations here. If overnight visitors are considered, Dubai outstrips New York in terms of the number of outlets per million,” KPMG’s report said.
The majority (65 per cent) of F&B operators surveyed by the consultancy KPMG said like-for-like sales declined throughout 2017 compared with the same period last year, as the local F&B sector becomes increasingly saturated.
“This, along with rising costs, has led to an oversupply which has given rise to stiff competition among operators," the consultancy said. “Many have had to re-examine their business models, brand strategies and cost structures to remain competitive.”
KPMG forecasts “muted” growth in the F&B sector for 2018, as consumers adjust to the introduction of value-added tax (VAT) in the GCC from January, which will lead to rising costs that may impact consumer spending, the report said.
However, the market is forecast to pick up from 2019 in the run up to Expo 2020 Dubai that will boost growth.
Consumer spends on F&B remained high in 2017, with 81 per cent of customers surveyed eating out “as much as” or “more than” in 2016.
Quick Service Restaurants (QSRs) and casual dining formats remain the most popular choice for customers. However, delivery services are a catalyst for future growth, KPMG claimed, adding that 43 per cent of operators surveyed reporting that food delivery orders comprised almost a third of their business on average.
Meanwhile, F&B operators are increasingly looking at Saudi Arabia for expansion, as the kingdom opens up to foreign investment as part of its Vision 2030 economic diversification plan and invests in new industries such as leisure and entertainment. Riyadh was the top choice for expansion for 52 per cent of operators, KPMG said.
“Despite certain prevailing challenges on the operators’ side, the market is becoming more sophisticated,” said Anurag Bajpai, head of retail at KPMG.
“Everyone is preparing to benefit from improved market conditions stemming from Expo 2020 and Dubai’s growing popularity as an international tourist destination.”
KPMG said it surveyed 800 consumers from the UAE, as well as 350 from elsewhere in the GCC, as well as “a number of” F&B operators in the country – although it declined to reveal the amount.