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(Last updated: 6 June 2008)
Trends and opportunities
The market
Due to limited agriculture and industrial sectors, the United Arab Emirates (UAE) imports over 80 per cent of its food products. A high percentage of imported products (approximately 50 per cent) are then re-exported to Gulf Cooperative Council (GCC) countries, former Soviet states, the Indian subcontinent and Eastern Africa. The rapidly growing population and affluence of the UAE has spiralled the demand for high quality and specialised foods, thus creating opportunities for Australian suppliers in a wide range of food and beverage areas.
There are well-established trade and distribution channels between countries and Dubai, with UAE being the main trading hub for the region. In 2007, Australia exports about A$259 million worth of food products to the UAE including A$66 million of non-bovine meat, fruits, vegetables, dairy, wheat and barley, supermarket goods, and alcoholic beverages.
Due to the large expatriate population, a diverse range of food is available. In recent years, there has been a shift in food habits from traditional to Western-style convenience foods.
Recent forecasts indicate retail spending in the region of US$35 billion. The retail sector in the UAE continues to grow and develop at a rapid rate, a process that began in earnest nearly 10 years ago. Annually, many new state-of-the-art stores are added to the country’s retail map, creating continuous competition among the major retailers. In the period 1998-2004, retail outlets in the UAE grew by 47 per cent. Store sales by independent retailers account for 21 per cent, small shops/convenience stores 28 per cent and wholesalers around one per cent. It is estimated that 50 per cent of retail sales takes place within hypermarkets, superstores and supermarkets. Retail chains such as Carrefour, Spinneys and Lulu dominate the big format supermarket trade with 50 per cent market share.
UAE grocery retailing is growing at 5-10 per cent per annum. Foods sold in retail outlets consist of 75-80 per cent imported consumer-ready products, and 20-25 per cent locally processed foods. With the exception of fresh tomatoes used in the production of tomato paste and ketchup and a small quantity of fresh vegetables used in the production of frozen vegetables, almost every ingredient used in locally produced food is imported.
Local date processing is a rapidly expanding industry. Certain categories of snack food, juices and some confectionery items are locally produced.
Almost over 80 per cent of the food items are imported. Only 15 per cent are locally produced consisting mainly of:
- dairy products
- poultry and eggs
- seafood
- snack foods
- fresh tomatoes
- some vegetables
- a limited number of supermarket items
The UAE Government has a keen interest in fostering the development of the food processing industry having invested some US$1.4 billion since 1994 to develop a value-added food-manufacturing sector to target local and re-export markets. The result is that there are around 150 food processing plants in the country representing a large chunk of the region’s food manufacturing capability. Major food processing plants include vegetable oils, soft drinks and juices, snack foods, pasta, confectionary and dairy products.
Opportunities
For Australian exporters trade opportunities in the UAE exist in most food categories. However, the market is highly competitive given the UAE’s open trade policies. In some instances, opportunities for consolidators exist as import requirements are for mixed consignments because of small consumption levels.
The food service sector is also a particular growth area given the significant expansion of the tourism sector and the large number of new hotels and resorts being opened in the UAE.
The Government of Dubai has been implementing an ambitious plan including the construction of a number of luxury hotels, resorts, restaurants and furnished apartments.
Currently, Dubai has approximately 305 hotels (ranging from one to five stars), with 38,300 beds and 111 hotel apartment buildings with 8618 apartments. By 2010, an additional 15,400 serviced apartment rooms are due to enter the market. Nakheel, the developer of the Palm and Waterfront projects, will add some 200 hotels and resorts in Dubai over the coming years.
Dubai is set to add 45,000 rooms by 2012, while Abu Dhabi will add 10,000 rooms. Elsewhere in UAE, Abu Dhabi has 25 new hotels and Fujairah has confirmed six new developments of four to five stars hotels by 2010.
Competitive environment
Food suppliers from all over the world vigorously compete for market share. European Union, US and Asian products pose the greatest competition to Australian products as lower freight rates work in favour of these suppliers. It is acknowledged that Australia can compete on quality but higher freight costs can add to the price making products less competitive.
The major supermarket chains import some of their products direct from overseas suppliers. Most items are sourced locally from exclusive agents. The major sources of supply are from the Asian subcontinent and European markets that enjoy comparatively low freight rates.
The US dominates the high quality snack market enjoying a 15 per cent market share of an estimated $30 million a year export business in 1997. European companies, under license from American manufacturers, dominate the cereals market.
Australia is one of the major supplier of beef and lamb with strong competition from US, Holland and the India subcontinent. France, Australia, the UK and Holland dominate the market for cheese.
There are significant imports of juices and non-alcoholic beverages despite the availability of locally manufactured product.
The US leads the market for almonds but other nuts are imported from India and Iran.
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