JEDDAH – GCC spending in the food retail sector is estimated to reach $106 billion in the next five years, global management consultancy company AT Kearney said in a report. Out of the total consumer spend of $300 billion, food is the largest segment of consumer expenditure in the region and stood at $83 billion year-end 2012, 28 percent of the total spend, said the report. Saudi Arabia and the UAE together account for around 75 percent of the region's total food retail market, it added. Currently, Saudi Arabia and the UAE combined make up about 75 percent of the total food retail market in the GCC. The report pointed out that “while an exciting opportunity of $23 billion exists, there are many changing dynamics in the grocery retail sector. Regional retail has experienced hyper speed evolution in past years growing very rapidly when compared to retailing in many mature economies such as the US and Europe.” Encouraged by the rising demand, major retailers like Panda and Lulu have responded swiftly to the market and opened 100 stores in one-third of the time as compared to in Western chains, like Morrisons, Waitrose and Sainsburys. At the same time, there has been a remarkable change in consumer shopping trends. While all food retail formats have grown steadily, larger-sized hypermarkets are poised to dominate GCC market share over the next five years. Shoppers are increasingly getting used to the convenience, ambience and wider variety offered by these hypermarkets. The report noted that the use of private labels also offers the GCC retailers a tremendous opportunity for growth in the coming years. Currently, private labels in the GCC account for a mere three percent of total sales. In other developed markets, private labels are central to a retailer's value proposition and comprise 15-20 percent of sales. To ensure sustainability of market share and profitability, the GCC retailers need to adopt a differentiated strategy and implement global best practices to achieve greater competitiveness. Addressing a conference at Gulfood in Dubai, Sheikh Lubna Al Qasimi, UAE's foreign trade minister, said that the UAE's food industry is growing rapidly and has an enormous potential for investment. The food industry is vital for the country since the population in the region is growing rapidly, she said. The value of food consumption in the UAE is expected to have reached AED28.2 billion in 2012, and is forecast to hit AED.6 billion in 2013, according to Hamad Buamim, director general, Dubai Chamber of Commerce and Industry (DCCI). “UAE food consumption has risen considerably in recent years and is projected to grow in line with rising populations and affluence,” he said in a statement. The GCC as a whole sees rising demand amid population growth, higher per capita income, and increasing tourism numbers, which will raise the food imports to the region by as much as 100 percent to AED194 billion by 2020, said Gulfood organizer. However, as growth accelerates, food retailers in the region are now facing increased competition, forcing them to rethink strategies, said AT Kearney. “Also with growth having been focused on expansion in the past, the maturity levels of regional players is low, requiring sophistication of retail capabilities in the near term to remain competitive,” it added. Dr. Martin Fabel, partner AT Kearney, said: “GCC food retailing is set for growth and offers a $23 billion opportunity for the regional retail industry to leverage, but it will require players to move first, move fast and make the right move.” “Adopting a clear, differentiated strategy and implementing global best-practices to achieve sustainable competitiveness and growth is critical to overcome impending threats in the market, and capture a share of growth without losing market share and profitability,” he added. — SG
