Author: Manhal Nasser, CEO of AWJ Investments
The food and beverage industry in the UAE is by far the most flourishing industry in the region with an estimated growth forecast of 6.8% CAGR predicted during the period of 2022-2027 (Mordor Intelligence). There are several factors that play a role in enabling the rapid growth, these include an increasing number of expats settling into the region, high disposable earnings, an increasing influx of tourists, urban lifestyles, foreign investment opportunities and the ever-changing tastes in customers’ food habits. The UAE is one of the very few countries to have successfully handled the crisis of the COVID-19 pandemic, which helped in the rapid recovery of the UAE economy.
Impact of COVID-19
The year 2020 marked a crucial and radical change in the food service market globally, and the UAE was no exception. An important factor that affected all businesses was the national lockdown restrictions, which meant that dine-in wasn’t an option that customers could seek for the next few months. Most affected were independent F&B entities that didn’t have proper support systems or supply chain partners that could mitigate the crisis as opposed to their multinational food service competitors. Additionally, it was highly difficult for those who didn’t have an online business model incorporated into their current businesses.
Global shutdowns caused stagnation and worldwide negative impacts on F&B supply chains everywhere, which forced many food service operators to make a transformational change in their business models to stay afloat.
Quick commerce (Q-commerce), the latest and most swift trend in e-commerce has gained immense significance post the COVID-19 pandemic. Globally, the Q-Commerce trade, which was valued at roughly $25 billion in 2021, is predicted to expand to $72 billion by 2025. Furthermore, there is no denying that the pandemic gave rise to accelerated digital transformation across the economy, which would otherwise have taken several years, and has also caused a major shift in customer preferences.
The major rise in Q-commerce, born to cope with unprecedented times, seems to have become a lifestyle choice where convenience has become paramount. Additionally, ordering food deliveries is much quicker and easier with varied choices and options to track orders in real time, which gives sufficient transparency to customers, from placement of the order to the exact time of delivery.
According to recent reports by Statista, UAE is the second-largest F&B market for online food delivery in the MENA region with an annual market size of $834 million. F&B businesses in the UAE have started using a combination of cloud kitchens, franchising, mergers and acquisitions, virtual branding, and partnerships with aggregator platforms and third-party delivery operators as adaptive business strategies to cater to market demand and gain a competitive edge.
As a result of the pandemic, POS revenue for dine-in was undoubtedly lower by 70% during the first half of 2020, but due to the UAE’s efforts in reinvigorating the economy by implementing a free vaccination drive and ease of lockdown restrictions with careful monitoring of regulations, customer dine-in options began to pick up slowly during the second half of the year. According to the Dubai Chamber of Commerce and Industry’s latest report, online F&B sales grew by 255% in 2020 to hit $412 million with an 8.5% CAGR, which is forecasted to reach $619 million by the year 2025.
As convenience and personal safety have taken predominance during these times, an increasing trend is observed in online F&B orders with the promise of delivery within 45 minutes or less. This would mean many more business entities and competitors will be entering the Q-commerce network. Certainly, there will be various challenges and pressure points to navigate in order to attract customers and achieve a competitive edge.
A couple of notable factors such as the UAE’s tremendous and expert handling of the COVID-19 crisis, Expo 2020, surge in tourism, and a steady recovery of the economy as a whole, has enabled UAE’s F&B industry to bounce back successfully.
All in all, dine-in is returning to normal in the UAE post-pandemic, however, businesses must continue to introduce unique and authentic experiences to their clientele in order to maintain customer loyalty. In terms of delivery options, innovative solutions are surely here to stay and will most definitely witness an upward growth trajectory in the long-term; owing to rapid technological transformation, widespread internet penetration and the permanent shift in consumer behaviours such as convenience, ease, and safety.