Food and beverage manufacturers must keep on top of the Gulf’s fast-changing tastes, workforce trends and government zeal for healthy diets.
That’s according to a segment analysis by Strategy&, which says understanding these trends can help unlock growth.
With overall spending in the region’s food sector levelling off, consumers have been moving away from grocery staples towards more value-added products, said Gabriel Chahine, who leads the strategy consultant’s consumer and retail practice in the Middle East.
“These shifts happen in part because consumers are becoming more health-conscious and are willing to spend more for higher-quality, fresh products.
“The retail landscape is developing because of this trend. As economies advance, there is greater penetration of modern retail trade outlets, such as supermarkets and convenience stores, which can carry a wider range of refrigerated products so that customers have healthier options to choose from,” Chahine added.
Companies seeking to enter Gulf markets can build their offerings organically, though this can be time-consuming and costly.
Or they can establish joint-ventures with international players to localise their innovations and get them more easily onto store shelves—an approach Strategy& advocates. They can also invest in successful startups abroad, and then help these firms expand in the GCC.
“Regional players are seeking mergers and acquisitions opportunities to expand their portfolios and sustain growth, but there is a lack of viable targets. Now it is possible for companies in the sector to grow by tapping into changes in the way people spend money on food,” said Ahmad Bakri, a principal at Strategy&.
For example, Al Safi, a leading Saudi dairy, partnered with Danone in 2001 to form Al Safi Danone. Today it Danone has a leading position in the value-added segment in dairy and is the market maker in a number of sub-categories, including drinking yogurt, ready-to-eat desserts, and beverages that combine fruit juice and milk.
“The food and beverage industry in the GCC is at an inflection point. By looking at markets that are further along in their economic development and studying successful product launches in those markets, it is possible to identify the most promising growth opportunities for the region over the next five to 15 years,” said Karl Nader, a Strategy& partner.
“Those that want to target these categories need to understand consumer preferences in the region, quickly build up the necessary innovation capabilities, and potentially partner with established players in other markets to leverage their expertise.”