Macro-Economic Perspective
Employment prospects for lower-socio economic groups have been shattered with around 250,000 expats of Indian origin having registered with their embassy to leave the UAE. Expats from the Philippines, Pakistan, Sri Lanka and other countries are in the same boat.
Income and jobs in the higher social-economic groups are affected. For example, globally recognised companies such as Emirates Airlines are cutting executive salaries by up to 50% and with reports that worldwide staff lay-offs could be as much as 30,000 people.
Supply Chain Perspective
We also expected supply chain costs to increase, however, perhaps not as significantly as they did. While airfreight is operating smoothly compared to other options, rates are double of what they were at the end of 2019 and before the Coronavirus pandemic. Seafreight is also operating; however, we’ve received information that rates are 30-50% higher while transit times are taking two to three weeks longer due to delays in Singapore and Malaysia. This is in turn, causing delays on getting products on the shelf locally.
Containers are being processed at Dubai Ports without the congestion seen in many other countries, and food products have been prioritised based on the following:
- Arabic labelling is not required
- Coding of production date has been waived
- Longer shelf-life than typically permissible is accepted
- Documentation requirements have been relaxed
- Customs duties have been reduced by 20%.
Unlike in Australia where we saw panic buying for weeks, our sources tell us that in the UAE, stockpiling is happening, however not at the same panic buying levels. Stockpiling is expected to slow down over the next few months; however, the figures are interesting. Pre-COVID-19, Carrefour carried three weeks’ worth of pasta – they now carry four months’ worth. Pre-COVID-19, individual outlets stored two to three days’ worth of stock in their storerooms, relying on regular deliveries. They are now carrying two to three weeks’ worth to get them through delivery delays.
Channel Perspective
It is interesting to note that E-commerce has really picked up, as have sales at supermarkets and hypermarkets, with the latter having their best two months of sales in history as a result of the collapse in the foodservice channel. Businesses like Carrefour have increased their online sales six-fold and have had a 59% increase in new customers, Kibsons has had a ten-fold increase in online sales, while Lulu’s e-commerce platform couldn’t keep up with demand so had to be shut down before re-opening.
The other side to the above channels doing well is that other businesses aren’t doing so well. Convenience stores, which were rapidly growing pre-COVID, are suffering due to social distancing laws as well as facing MNCs not showing a willingness to extend credit to smaller stores. Petro-convenience suffered as people stayed home, and the general consumption of fuel dropped.
Foodservice in the UAE was already fiercely competitive pre-pandemic, and sources tell us that only those distributors with strong financial backing and/or supply retailers are likely to survive. It is looking likely that over 200 specialty food service distributors already have or will close, while over half the restaurants will not open again.
Consumer and Consumption Perspective
While much focus is on changes to the supply chain, there have been some fairly significant changes to how the consumer is shopping and what they are purchasing. Our contacts have told us that a majority of people are making fewer trips to the supermarket and buying more while they are there. Pre-COVID-19, the average household would eat out, on average, twice a week.
The products consumers have buying have also shifted, almost in a completely opposite direction. There have been fewer visits to fresh markets, and more visits to supermarkets, with people buying long-life products such as pasta, canned foods, UHT milk and frozen foods.
The big change with this shift to more packaged foods is that the bigger brands currently have no need to promote goods and offer sales as they are confident that their products will sell without promotions and sales.
Opportunities
What this leaves us with are opportunities, with the clear winners being:
- Products suitable for online delivery
- Products demonstrating strong supply chain integrity
- Natural and organic foods and beverages
- Food products suitable for in-home dining
- Functional and immune-boosting foods
- Products manufactured in the UAE to minimise supply chain risks
The UAE is a growing and changing market. With opportunities presenting themselves post-COVID-19, it is worth exploring options available.
We hope you’ve found this update on the UAE food and agri-business market during current times helpful. As always, if you’ve got any questions or want to discuss export opportunities for your company, feel free to drop us a line at Export Connect – we’d love to hear from you.
