Consumer spending on F&B continues to show encouraging trends, despite some challenging conditions in the region, according to a new report by KPMG.
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 – with the report indicating that, if overnight visitors are considered, Dubai outstrips New York in terms of the number of outlets per million.
This, along with rising costs, has led to an oversupply which has given rise to stiff competition among operators – with 65 per cent expressing a sales decline in 2017 compared with the same period last year. Many have had to re-examine their business models, brand strategies and cost structures to remain competitive.
Despite these setbacks, operators remain confident of their growth prospects: 82% expect growth in the medium term, with Expo 2020 set to act as a major catalyst.
Anurag Bajpai, head of retail, KPMG said: “The 2017 edition of the KPMG UAE F&B report has uncovered some very interesting findings. Our overall takeaway is that despite certain prevailing challenges on the operators’ side, the market is becoming more sophisticated.
“We are seeing an underlying and definite sense of optimism among operators. Everyone is preparing to benefit from improved market conditions stemming from Expo 2020 and Dubai’s growing popularity as an international tourist destination.”
The report also analysed GCC trends for the first time and found that the F&B sector in the UAE is more vibrant than in neighboring GCC countries. Against this backdrop, UAE operators are unlocking growth opportunities for further growth in the GCC, with Saudi Arabia emerging as the most favorable destination, Riyadh being the top choice for expansion.
In terms of restaurant formats, Quick Service Restaurants (QSRs) and casual dining formats remain the most popular – especially those in shopping malls. Nearly three out of four consumers indicated that they eat out at establishments within malls at least once a month.
The boom in F&B is also being increasingly driven by convenience – which explains why the popularity of deliveries continues to soar – 43 per cent of operators indicate that food delivery orders comprised almost a third of their business, on average.
As more customers choose to order in, restaurants are looking to leverage technology to improve operational efficiency, and enhance customer experience and engagement.
They aim to achieve this by using data and analytics, digital kiosks, and by incorporating virtual-reality elements, among others. Consumers also play an active part in the online food revolution, with 60 per cent indicating they use a food app on their smartphones.
Looking ahead, rising costs, including from impending regulations like VAT – are likely to impact consumer spending. Deal-seeking behaviour is set to become more common, with over 81 per cent of respondents already saying that deals influenced their choice of restaurant.