Packaged Food in the United Arab Emirates

Packaged Food in the United Arab Emirates - Industry Overview

EXECUTIVE SUMMARY

Fallout from the economic downturn influences growth

Health and wellness trends influence purchasing decisions

Private label products rise to the mainstream

Supermarkets/hypermarkets tightens its grip

With an economy on the verge of recovery, packaged food is set to grow

MARKET DATA

FOODSERVICE – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• The United Arab Emirates economy remained mired in recession in 2010, and this impacted foodservice. The latter was broadly impacted by the lower arrival of tourists and new resident expatriates as well as the lower consumer spending by the incumbent population. First, following the outbreak of the crisis back in 2008, thousands of expatriates fled the United Arab Emirates back to their home countries amid a mass of redundancies and a growing feel of job insecurity. This decline definitely took its toll on foodservice, which was further exacerbated by the lower tourist arrivals. In 2010, although inbound tourism flows improved, they still fell short of the pre-crisis levels of approximately eight million tourists per year. Second, although the global financial crisis had hit the United Arab Emirates economy in the third quarter of 2008, its repercussions were still being felt at the end of the review period in the economy, especially in an area such as foodservice where consumer spending on dining out was negatively impacted. Foodservice outlets responded with a spate of price cuts and promotional offers in an effort to revive the industry; however, these efforts failed to reinstate pre-crisis growth levels.

Competitive Landscape

• Leader Federal Foods LLC extended its lead over foodservice as it continued diversifying its distribution capabilities. Product diversification has always been pivotal to the company’s positioning, and in 2010 it added new products to its portfolio such as Mani & Co – a leading regional producer of nuts and fruit snacks. With around 20 years in the foodservice business, Federal Foods LLC is widely regarded as the top player in the country’s foodservice industry, due to its strong ties with hotels as well as a product portfolio encompassing household brands such as Sadia, Emborg and Farm Frites.

Prospects

• The United Arab Emirates economy is expected to post signs of recovery by 2011, a recovery that is conservatively expected to last until 2013. During this first half of the forecast period, the expected economic recovery will reflect positively on consumer purchasing power and foodservice volume sales. As consumer confidence hit record lows in 2009, it will however take some time for confidence to be fully restored. The crisis has resulted in consumers being more cost-conscious, and they are anticipated to monitor their spending as a precaution against any unexpected downfall similar to that of the global financial crisis.

Category Data

IMPULSE AND INDULGENCE PRODUCTS – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• In the wake of the financial crisis and economic downturn, consumers turned to impulse and indulgence products for some respite from belt-tightening. Chocolate confectionery in particular drove this trend, due to its position as an affordable treat. Although these conditions secured demand for chocolate confectionery, consuming the right type of chocolate was shaped by other trends such as trading down, premiumisation and healthy eating. First, the post-crisis low consumer confidence spurred trading down to cheaper brands namely among middle-income earners, which was supported by new launches such as Big Break by Seville Foods Ltd (IFFCO Group Company), a cheaper alternative to Nestlé’s KitKat. Second, upmarket chocolatiers continued their foray into United Arab Emirates packaged food as premiumisation remained in place. Third, the rising health awareness in the United Arab Emirates spurred demand for dark chocolate, sugar-free products and natural ingredients, with manufacturers capitalising on this opportunity with ranges of dark chocolate.

Competitive Landscape

• Mars GCC maintained its lead over impulse and indulgence products with a retail value share of 16% in 2009, followed by artisanal with a retail value share of 13%. The company’s leadership came on the back of brand loyalty, new product developments and marketing spending. By the same token, Nestlé Middle East FZE was ranked third with a retail value share of 11%.

Prospects

• The healthy eating trend is anticipated to strongly make its way through the forecast period, as more and more consumers will acknowledge its importance. Demand for low fat and low sugar products will continue to increase and more value-added products will enter impulse and indulgence; snack bars with added calcium, vitamins and iron, or biscuits with added fibre and dark chocolate with higher levels of antioxidants.

Category Data

NUTRITION/STAPLES – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• The two key 2010 trends have been trading down to cheaper brands and the rising health awareness. First, due to the tough economic conditions and the diminishing purchasing power of low- to middle- income earners, many consumers shifted to more affordable alternatives of nutrition/staples. These consumers opted to tighten their budgets, and shifted away from packaged rice and pasta to unpackaged alternatives. These unpackaged products were popular especially among low-income earners due to pricing.

Competitive Landscape

• Artisanal brands held on to their lead with a retail value share of 8% in 2009, benefiting from their domination in bread and the prevalence of traditional bakeries. Artisanal products saw their share increase irrespective of the rising health awareness that would have deterred demand for bread given its calorie content. Consumers also opted for wholegrain and multigrain breads which tend to retail at higher prices than white bread. Private label products also performed well in this category, accounting for 7% retail value share.

Prospects

• Over the forecast period, health and wellness trends are expected to play a much more important role in influencing purchasing decisions and driving sales of nutrition/staples. Products with a healthy positioning such as fortified dairy products with added vitamins and calcium or vegetable oil with added omega-3, or gluten-free pasta or brown rice will increasingly be perceived as healthier alternatives. This health and wellness trend is expected to extend into the forecast period subject to affordability of value-added products, which is likely to be the case until 2013/2014. This trend also hinges upon manufacturers’ and retailers’ activities to increase awareness of ‘healthy’ variants, of course in addition to efforts by the Ministry of Health advocating a healthy diet and working to combat obesity problems.

Category Data

MEAL SOLUTIONS – KEY TRENDS AND DEVELOPMENTS

Headlines

Trends

• 2010 saw demand for meal solutions improving on account of its convenience and pricing. First, the fallout from the economic crisis resulted in tougher working conditions and increasingly hectic lifestyles, which left less time for expatriates to cook. Expatriates are a strong contributing factor as they account for around 85% of the local population and the minimal impact of the aforementioned conditions on local nationals. The rising feeling of job insecurity following a spate of redundancies in 2009 encouraged consumers to stretch their working hours in an effort to hold on to their jobs. Within this context, employees opted for meal solutions such as canned, frozen and chilled foods to avoid shopping regularly for fresh options, and also for sauces, dressings and condiments to save time on the cooking process.

Competitive Landscape

• Gulf Food Industries – the NBO of regional packaged food giant Kuwait Food Company (Americana) – was ranked second in 2009 with 19% retail value share, as it continued to benefit from its range of meal solutions including canned/preserved food, which are sold under the brands Americana and California Garden. Nestlé Middle East FZE followed with a retail value share of 13% in 2009. The NBO of Swiss food giant Nestlé was highly successful in categories like soup with its Maggi brand, canned/preserved food with its Libby’s brand, and sauces, dressings and condiments with its Maggi stock cubes. Customer loyalty as well as new product developments helped Nestlé hold on to its leadership. These new product developments included Maggi Excellence, a premium offering of its dehydrated soup.

Prospects

• Meal solutions with a lower fat content are expected to enjoy greater popularity over the forecast period as consumers become more health-conscious about their eating habits. Manufacturers should consider launching such variants to drive growth. Sodium levels in canned/preserved food, soup and ready meals are also becoming of interest to consumers as they grow more aware of the detrimental impacts of high sodium levels in food. Thus, low-sodium and low fat alternatives for soups and ready meals are likely to capture consumer attention over the forecast period.

Category Data

DEFINITIONS

• Summary 1 Research Sources

Packaged Food in the United Arab Emirates - Company Profiles

Federal Foods LLC - Packaged Food - United Arab Emirates

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

• Summary 4 Federal Foods LLC: Production Statistics 2009

COMPETITIVE POSITIONING

• Summary 5 Federal Foods LLC: Competitive Position 2009

Foodco Holdings PJSC - Packaged Food - United Arab Emirates

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 8 Foodco Holdings PJSC: Competitive Position 2009

Gulf Food Industries - Packaged Food - United Arab Emirates

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

• Summary 11 Gulf Food Industries: Production Statistics 2009

COMPETITIVE POSITIONING

• Summary 12 Gulf Food Industries: Competitive Position 2009

Horeca First for Food Service - Packaged Food - United Arab Emirates

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

United Kaipara Dairies Co (PSC) - Packaged Food - United Arab Emirates

STRATEGIC DIRECTION

KEY FACTS

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

• Summary 16 United Kaipara Dairies Co (PSC): Competitive Position 2009

Baby Food in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• There continued to be strong volume growth across baby food in 2010, particularly within prepared baby food. This was due to an increasingly industrialised society and changing work patterns, with a growing number of working women. Increasingly fast-paced lifestyles also boosted demand for convenient alternatives such as prepared baby food. Consumers’ growing focus on health and wellness also resulted in many being willing to pay more for packaged baby food, which they regard as offering superior levels of nutrition.

COMPETITIVE LANDSCAPE

• Nestlé Middle East FZE was the clear leader in baby food in 2009 with a value share of 43%. This company was followed by Wyeth and Abbott Laboratories Inc with 15% value share each. Baby food is mainly purchased by mid- and high-income consumers, particularly European expatriates, with these consumers generally placing a stronger trust in multinational brands than in domestic products. Consequently, all significant players in baby food in 2009 were multinationals.

PROSPECTS

• New entrants are expected in prepared baby food during the forecast period. Danone is considering introducing jarred prepared baby food in UAE by 2011 under its Nutricia brand. Two UK companies are meanwhile planning to launch Halal-certified meat- and poultry-based baby food during the forecast period, due to a lack of these products in the region. Mumtaz launched Halal-certified baby food in the UK in 2010 and already uses labels for its baby food in French, Arabic and English. Gem Foods is meanwhile seeking distributors for the Middle East and also talked to buyers for Spinneys supermarkets in the UAE towards the end of the review period.

CATEGORY DATA

Baked Goods in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Controlling bread prices is the key story in 2010 as the government put its efforts to control and monitor prices amid the rising cost scenario. The Ministry of Economy’s Consumer Protection Department (CPD) has been at the forefront of these efforts, liaising with local municipalities to fix bread prices. Although the CPD introduced new bread price lists in the first half of 2009, they have not been strictly implemented. In the emirate of Ras Al Khaimah, for example, artisanal bakeries have ignored municipality orders to fix bread prices and raised their prices by around 10% in late 2009 on the ground of higher wheat prices. Bakeries have complained that fixing the price of bread resulted in losses.

COMPETITIVE LANDSCAPE

• Artisanal producers led sales within the highly fragmented baked goods environment in 2009 with a 44% retail value share. The large share held by artisanal producers is due primarily to low pricing, which appeals to low- and middle-income earners, in addition to its ability to provide a wide variety of baked goods.

PROSPECTS

• For most nationalities in the UAE bread will remain the typical breakfast staple and is expected to enjoy higher penetration amid consumers’ high price consciousness. In addition, the rising trend towards busier and healthier lifestyles will support demand for healthier baked goods. On the other hand sweetened baked goods such as cakes and pastries will slightly lose their appeal over the forecast period because of both cost and health factors. Low consumer confidence will shift products such as cakes and pastries to the non-essential category, and rising health awareness will prompt consumers to shy away from products with high sugar and calorie content.

CATEGORY DATA

Biscuits in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The key trend this year, and actually since the financial crisis struck the UAE, is the emergence of comfort eating. At times of economic slowdown when consumers dial back on luxuries and focus on necessities, food is the last thing on which they compromise. Accordingly, for many people who have compromised on dining out, they resort to products such as biscuits as a matter of indulgence. Biscuits are highly popular as a sweet treat among many consumers, especially those originating in the Indian subcontinent, where biscuits are usually taken as a snack or as a breakfast item with tea.

COMPETITIVE LANDSCAPE

• United Biscuits led the category in 2009 with a retail value share of approaching 8%. Following Kraft Foods’ acquisition of Danone Biscuits, GBO Kraft Foods would leapfrog United Biscuits with an 11% retail value share. Kraft Foods added a percentage point to its retail value share as its brand portfolio – including original brands Chips Ahoy, Oreo and Ritz, and acquired brands Tuc, LU and Prince – elicits strong customer loyalty in the UAE. Kraft Foods also benefited from launching extensions to Chips Ahoy such as White Fudge Chewy and Mini Chocolate Chip, smaller packages and promotional offers. United Biscuits banked on the popularity of McVitie’s Digestive, regular promotional offers and new product developments.

PROSPECTS

• New product developments with healthy offerings are expected to be the key forecast story. The growing health awareness will not be common only among high-income earners, but also among middle-income consumers as well, spurred by soaring obesity levels in the UAE. Within this context consumers will be more sophisticated in their demand, seeking products that combine indulgence with low calorie and fat content. Consumers will also be more attentive to labelling, or attracted by nutritional messages on the front of biscuits’ packaging. Rising product innovation will also increase competition and deter any jump in prices.

CATEGORY DATA

Breakfast Cereals in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The health and wellness trend is reshaping breakfast cereals by influencing consumers’ choice of cereal brand. The UAE’s high obesity rates and sedentary lifestyle have both fuelled demand for a healthier breakfasts, shifting consumer demand from calorie-laden options with bread and cheese and jam to healthier breakfast cereals. Within breakfast cereals consumers have started to shy away from high-sugar, high-fat cereals, and increasingly focus on multigrain products. Manufacturers Kellogg and Nestlé spearhead the supply of healthy products meeting consumer preferences.

COMPETITIVE LANDSCAPE

• Kellogg Middle East retained its lead of breakfast cereals in 2009 with a retail value share of 42%. In addition to its strong brand equity, the company’s Kellogg’s Special K line has been instrumental in strengthening Kellogg’s share, through its advertising campaigns, in-store promotions and new product developments. The Special K range is now available in the UAE in four variants: Plain, Red Berries, Bliss and Milk Chocolate, with the latter two launched in 2009.

PROSPECTS

• With one of the highest obesity rates in the world, government agencies are expected to increasingly promote healthier eating habits over the forecast period. This health awareness will reflect in growing focus on breakfast cereals’ nutritional value, calorie content and fat content. Manufacturers will capitalise on the success of healthier cereals such as Kellogg’s Special K and Nestlé Fitness, and will increasingly launch similar products.

CATEGORY DATA

Canned/Preserved Food in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Growth in canned/preserved food was largely retailer-led in 2010. Independent small grocers and supermarkets/hypermarkets notably broadened the range of canned/preserved food on offer, recognising consumers’ growing demand for convenience. In addition, the affordable price and easy storage required for these products attracted a growing number of consumers and retailers alike. With more women working and household sizes growing smaller, consumers are busier than ever and thus appreciate the widening availability of convenient meal components such as canned/preserved beans, canned/preserved fish/seafood, canned/preserved vegetables and canned/preserved fruit.

COMPETITIVE LANDSCAPE

• Gulf Food Industries is the strongest player in canned/preserved food, accounting for 36% value share. The company has the widest distribution and benefits from offering an extensive range, including canned/preserved beans, canned/preserved fish/seafood, canned/preserved fruit, canned/preserved meat and meat products and canned/preserved tomatoes. The company’s California Garden and Americana brands enjoy a high degree of customer trust and loyalty and also benefit from offering more affordable prices than multinationals’ brands.

PROSPECTS

• Canned/preserved food that blurs the distinction between meal components and ready meals is expected to prove particularly successful during the forecast period. Those consumers who would demur at the cost of ready meals are likely to be willing to trade up to more affordable products elsewhere in canned/preserved food, such as ratatouille or gratin dauphinoise in canned/preserved vegetables or foul medamas in canned/preserved beans. These products will appeal to low-income expatriate workers, offering an affordable light meal.

CATEGORY DATA

Cheese in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Cheese continued to see the government impose price controls in 2010. Supermarkets/hypermarkets notably pushed pricing downwards towards the end of the review period. This was encouraged by campaigns from the Ministry of Economy in collaboration with consumer protection authorities. The Ministry of Economy is encouraging supermarkets/hypermarkets to eliminate middlemen from their imports of cheese in order to control prices and to eliminate monopolies and cartels. As a result, unit price grew below the level of inflation in 2010, with overall constant value unit price decline of 2% in the year. However, inflationary milk prices began to inflate the price of cheese towards the end of 2010.

COMPETITIVE LANDSCAPE

• Almarai Co Ltd led sales of cheese in 2009, accounting for 28% value share. This is a strong regional player based in Saudi Arabia, with the company leading sales of popular local cheese products such as labneh and feta. Leading multinationals such as Kraft Food Dubai and Arla National Food Products Co LLC meanwhile dominate spreadable processed cheese with brands such as Kraft and Puck.

PROSPECTS

• There is expected to be stronger investment in cheese among regional players during the forecast period, as they seek to challenge the dominance of European multinationals. AL Ain Dairy is for example setting up a new camel milk dairy and increased its research and development budget for camel milk cheese in 2010. Mashreq Des Produits Laitiers is meanwhile a leading Egyptian dairy player specialising in premium cheese. In order to increase its share in the region, the company established a joint venture with Group Soparind Bongrain towards the end of the review period, seeking to couple French expertise in cheese manufacturing and local manufacturing capability and resources. The company is expected to relaunch its Milkana brand in UAE at the start of the forecast period and will introduce a wide range of new variants.

CATEGORY DATA

Chilled Processed Food in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• All chilled processed meat sold in UAE retail outlets must show Halal certification on their packaging or must be sold in a specific area for non-Muslim customers. However, many products sold that claim Halal certification on their packaging are not fully Halal. This led to an increasing number of customer complaints towards the end of the review period.

COMPETITIVE LANDSCAPE

• Gulf Food Industries is the leading player in chilled processed food, accounting for 30% value share in 2009. The company benefits from the strength of its umbrella brand Americana, which has a strong presence in many product areas across packaged food and benefits from the widest distribution network in chilled processed meat. However, Gulf Food Industries lost over a percentage point in value share in 2009 over the previous year, while second-ranked Halwani Bros Co lost almost a percentage point to drop to 23% share. This was due to increasing competition from affordably-priced private label products.

PROSPECTS

• A wider range of product areas are expected to become significant in chilled processed food during the forecast period. This trend will mainly be driven by supermarkets/hypermarkets, as these outlets expand in size and number and also expand their chilled storage and display facilities. Consequently, a wider range of chilled processed food will become available to consumers, notably via affordable private label ranges. Chilled processed ready meals, chilled processed fish/seafood, prepared salads and fresh cut fruits are expected to see the strongest growth, with these products seeing dynamic growth from a low base towards the end of the review period. These products are expected to benefit from offering a healthy image and considerable scope for new product development.

CATEGORY DATA

Chocolate Confectionery in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Towards the end of the review period three trends working in parallel were evident in shaping chocolate confectionery in the UAE: trading down, premiumisation and health.

COMPETITIVE LANDSCAPE

• Mars GCC retained its lead over chocolate confectionery with a retail value share of 40% in 2009. Mars’ strong lead in chocolate confectionery is due to its established portfolio, with brands such as Galaxy, Mars, Twix, Snickers and Maltesers eliciting strong customer loyalty in the UAE. In addition to these fundamentals, Mars re-launched Galaxy in new packaging and shape in mid-2009, continued adding new extensions to existing brands – such as Mars Dark, Mars Planets and Snickers Almond – and rolled out regular price promotions. Furthermore, Mars was the only major international manufacturer with a manufacturing unit in the UAE, which reflects in securing stock availability and product quality. However, this competitive edge will fade when Nestlé’s Dubai manufacturing facility becomes operative in October 2010.

PROSPECTS

• Dark chocolate is expected to be the highlight of the forecast period as health awareness mounts. Brands that promote their high cocoa content, such as Lindt & Sprüngli’s Excellence in tablets, are expected to put in a strong performance over the forecast period. Dark chocolate products are expected to gain share at the expense of milk and white chocolate, especially the latter, which will lose its allure over the forecast period. By the same token, Lindt & Sprüngli’s value share is expected to improve over the forecast period, with higher growth compared with other brands. Although the tough economic conditions might linger for a while, consumers are highly likely to pay a price premium for dark chocolate with a high cocoa content, believing that these products offer health benefits. Aside from growing demand for dark chocolate, the government is expected to press ahead with efforts to clamp down on obesity, especially in schools. This would reflect negatively on volume growth rates over the forecast period.

CATEGORY DATA

Dried Processed Food in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Rice saw a sharp growth in constant value unit price throughout the review period as a whole, notably rising by 8% in 2007 over the previous year and by 10% in 2008 over the previous year. Had price increases continued during the economic downturn, this could have resulted in a marked drop in sales. However, 2009 saw a sharp constant value unit price decline of 6% for rice, with a further 2% decline seen in 2010. More affordable prices consequently maintained volume growth for rice in these years, with this shaping the overall performance of dried processed food. Rice accounted for 92% of volume sales in dried processed food in 2010 and is thus largely shapes this product area’s overall performance.

COMPETITIVE LANDSCAPE

• BURVI Enterprises led fragmented sales of dried processed food with a value share of 9% in 2009. The company benefits from offering rice brand Al Sinnara. However, the company lost share in 2009 over the previous year, dropping by over a percentage point. This was due to stronger competition from leading basmati rice players such as Tilda International Ltd and United Kaipara Dairies Co (PSC). A decline in the number of low-income expatriate workers in the country and the discontinuation of many construction firms’ supply of free food to workers eroded sales of non-basmati rice in the year. The company’s value sales also suffered as a result of the government capping the price of basic rice.

PROSPECTS

• Rice is expected to see a further growth in constant value unit price during the forecast period, with an increase of over 7%. However, this is likely to be mainly linked to consumers trading up rather than driven by rising commodity prices. As the economy recovers, there is likely to be growing interest in premium basmati and jasmine rice, from consumers, producers, importers and retailers. The rising rice prices during the review period caused problems for importers and retailers, as did government price caps on basic rice.

CATEGORY DATA

Drinking Milk Products in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The UAE Ministry of Economy capped milk prices in January 2009 in response to sharply rising prices in 2008. Price caps were put in place at this time in line with the almost 50% reduction in international milk prices and in response to the economic downturn and plummeting consumer confidence. The government forged price reduction agreements at this time with leading milk suppliers, starting with Nestlé in powder milk but eventually including players from across milk. These caps remained in place in 2010 and supported strong volume growth despite the economic downturn. Powder milk, fresh/pasteurised and long-life/UHT milk thus all achieved around 9% growth in volume terms in the year, with low prices continuing to attract consumers.

COMPETITIVE LANDSCAPE

• Nestlé Middle East FZE is the leader in drinking milk products, accounting for 23% value share in 2009. Nestlé’s leading position is due to its dominance in powder milk, where the company’s brands Nido and Klim accounted for 78% value share in the year. These brands are well-trusted due to their longstanding presence in the region and also benefit from having the widest distribution networks in powder milk. In 2009, they also gained share thanks to being one of the first brands in drinking milk products to introduce price reductions, with the company cutting prices by 15% in January of the year.

PROSPECTS

• The price caps introduced for many product areas in drinking milk products towards the end of the review period are expected to be relaxed during the forecast period. Global raw milk prices are expected to rise once more, with the government thus permitting increased unit prices for fresh/pasteurised milk. Fresh/pasteurised is thus set to see a constant value CAGR of 3% in terms of unit price during the forecast period. The government is however likely to maintain price caps on powder milk during the forecast period, with many low-income consumers being reliant on the consumption of powder milk.

CATEGORY DATA

Frozen Processed Food in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Prior to the review period, consumers were concerned about the freshness and nutritional value of frozen processed food. However, during the review period supermarkets/hypermarkets greatly improved their cold chain distribution and storage facilities and also greatly expanded their ranges of frozen processed food. With improved access to correctly stored frozen processed food offering an attractive flavour and texture, consumers gained enthusiasm for this convenient product area. In addition, there was a growing understanding during the review period that the freezing process can preserve nutrients, with frozen processed food thus increasingly regarded as healthy.

COMPETITIVE LANDSCAPE

• Global Food Industries UAE continued to lead frozen processed food in 2009 with a value share of 17% for its Al Areesh brand. The company benefits from its well-established presence in frozen processed fish/seafood, frozen processed red meat and frozen processed poultry. It also benefits from a strong degree of consumer trust, due to its close attention to quality and maintaining the cold chain throughout its production, packaging and distribution process. However, the company saw steady share erosion towards the end of the review period due to stronger competition in frozen processed food, particularly from private label.

PROSPECTS

• The leading players in supermarkets/hypermarkets are expected to drive growth for frozen processed food during the forecast period, such as Carrefour, Lulu and Co-Op Islami. These retailers offer a well-controlled cold chain in terms of distribution and display and thus ensure the high quality of their products. Consequently, consumers are expected to become increasingly confident in the quality and nutritional value of frozen processed food. These retailers are also expected to continue to expand their range of private label frozen processed food during the forecast period, thus offering consumers a widening range of affordable products. As a result of improved quality, a wider range and affordable prices, many consumers may be encouraged to trade up from canned/preserved food to frozen processed food.

CATEGORY DATA

Gum in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The key 2010 trend is the rising popularity and penetration of functional gum. The trend emerges as consumers become aware of the benefits of xylitol – an ingredient in functional gum that prevents tooth decay – while preventable tooth decay is alarmingly affecting around 80% of the UAE population. The health benefits of functional gum have lured more consumers into the category, even those who were not used to consuming gum.

COMPETITIVE LANDSCAPE

• Wrigley remained the leading player in gum in 2009 with a retail value share of 36%. However, due to rising competition from Perfetti Van Melle, Wrigley shed half a percentage point in value share on the previous year. However, the company benefited from new product developments such as Wrigley’s Extra Aqua and extensive advertising campaigns to maintain its lead. The company’s sugar-free and functional lines outperformed their sugarised counterparts – Wrigley’s Spearmint and Wrigley’s Doublemint – amid the incumbent demand for those healthier versions.

PROSPECTS

• The key story over the forecast period is expected to be the continuous product innovation in functional gum. In addition to growing demand and appreciation for functional gum, the spread of preventable tooth decay in the UAE will spur demand for functional gum. Based on the latest figures from Abu Dhabi Health Services Company (Seha) in February 2010, tooth decay affects around 80% of the UAE’s population. Seha has already partnered with Ambulatory Healthcare Services (AHS) to test oral hygiene among school children, and their findings highlighted the need to launch an awareness campaign of dental “must-dos”, among others, which might include using functional gum.

CATEGORY DATA

Ice Cream in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• There was a growing focus on improving retail visibility for brands during the review period, which resulted in expansion in the number of branded freezer display units. Sources at International Foodstuffs Co, which produces Igloo ice cream, confirmed that branded freezers are regarded as key to success in ice cream. Distribution availability also increased during the review period, with the leading players extending their cold chain networks. Unilever and Nestlé notably developed their networks during the review period, while remaining fairly insignificant. However, these multinationals set new standards in terms of supply chain, which encouraged their competitors to follow. These multinationals also increased consumer awareness of ice cream due tor their advertising.

COMPETITIVE LANDSCAPE

• International Foodstuffs Co was the clear leader in ice cream in 2009 with a value share of 25%. This company offers the Igloo, London Dairy and Quanta brands and benefits from its extensive distribution and affordable prices. However, the company suffered due to the premiumisation trend towards the end of the review period and lost almost two percentage points in value share.

PROSPECTS

• The leading players will continue to boost brand awareness and to drive growth for their brands by opening new ice cream parlours during the forecast period. The leading brands such as London Dairy and Baskin-Robbins are expected to continue to focus on shopping mall locations, enabling them to target young adults out for a days’ shopping. In addition to branded ice cream parlours, branded freezers are also expected to be distributed to a widening range of the country’s retailers, with branded freezers enabling players to both promote brand names and also to ensure improved cold storage facilities.

CATEGORY DATA

Meal Replacement in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Meal replacement products were generally introduced during the review period, but consumers mostly prefer traditional slimming options. However, busy and hectic lifestyles in the UAE are leading to the development of meal replacement products, in addition to other factors such as the alarming obesity rate and rising health awareness.

COMPETITIVE LANDSCAPE

• Unilever Middle East retained its lead over meal replacement products in 2009 with a retail value share of 55% – a remarkable drop from its earlier share as Atkins Nutritionals gradually builds share following its arrival in 2008. Unilever’s lead is due to the popularity of its Slim Fast brand.

PROSPECTS

• With only meal replacement slimming products currently recording significant sales, only limited activity is expected within the category over the forecast period. However, increasing obesity and consumer health awareness mean that the category has future potential.

CATEGORY DATA

Noodles in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Cup/bowl instant noodles are proving popular among children, thanks to their pricing, convenience, and flavours. Pricing has become of the utmost importance in 2010, both to consumers and manufacturers, especially as consumers are increasingly on the lookout for value-for-money products. Although there is an incumbent brand loyalty to major brands Indomie and Maggi, mid-income earners can easily switch to cheaper brands as the low consumer confidence takes its toll.

COMPETITIVE LANDSCAPE

• Transworld Distribution retained its lead in noodles with a retail value share of 39% in 2009, slightly higher than Nestlé Middle East FZE. Transworld banks on the popularity of its flagship brand Indomie, which has been supported by regular advertising and marketing activity in 2009/2010. Nestlé Middle East FZE came second with a retail value share of 36% in 2009, thanks to the Maggi brand.

PROSPECTS

• Amid the growing health awareness in the country and increasingly busy lifestyles, consumers are keen on healthy snacks during the long working day and noodles are becoming a perfect fit. With such factors spurring demand, particularly for instant noodles, convenience stores and forecourt retailers are expected to stock a wider variety of instant noodles during the forecast period.

CATEGORY DATA

Oils and Fats in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• There was a sharp rise in unit price for oils and fats in 2010 over the previous year at 8% in current value terms and 5% in constant value terms. This was due to the rising cost of palm oil, which pushed up the constant value unit price of vegetable and seed oil by 8% in 2010. Global palm oil prices were pushed up by lower production levels and rising demand, particularly as a biofuel.

COMPETITIVE LANDSCAPE

• Sales of oils and fats are led by Saudi company Savola Group, which accounted for 35% value share in 2009. Domestic and regional companies lead sales of oils and fats, benefiting from offering lower-priced products in comparison to multinationals. Savola also benefits from its wide range of vegetable and seed oil.

PROSPECTS

• Domestic players are expected to expand in oils and fats during the forecast period. ERCO is expecting its total vegetable and seed oil refining capacity to expand from 700,000 tonnes in 2010 to four million tonnes annually by the end of the forecast period. The company also plans to launch a new organic range of packaged food by the end of 2010, with this including organic vegetable and seed oil. These products will be priced at 15-25% higher than its conventional products.

CATEGORY DATA

Other Dairy in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The increasing price of imported raw milk during the review period and reduced profit margins for powder milk and fresh/pasteurised milk as a result of government price controls encouraged many manufacturers to focus on “other” dairy products. Players particularly focused on value-added products that contain less raw milk in order to boost profit margins. Custard and chocolate mousse based desserts are thus particularly interesting to local and regional firms such as Al Ain Dairy and Almarai Co Ltd, due to a lack of competition in these areas.

COMPETITIVE LANDSCAPE

• Almarai Co Ltd was the leading player in “other” dairy products in 2009 with a value share of 20%. The company benefits from its wide range and affordable prices in chilled and shelf stable desserts and cream, ranking second and first respectively in these product areas with strong shares of 38% and 43%. The company further gained half a percentage point in value share in 2009 over the previous year, with the economic downturn making its lower-priced products more attractive to many consumers.

PROSPECTS

• New entrants will struggle to compete with the well-established players present in “other” dairy products and across dairy products such as Almarai Co Ltd. Domestic dairy products players such as Almarai and Al Ain are expected to increasingly invest in value-added chilled and shelf stable desserts during the forecast period, however. These players will seek to improve their profit margins and to compensate for price controls in more basic dairy products such as milk and cheese. Leading multinationals such as Danone and Arla are meanwhile expected to develop a stronger competitive advantage by investing heavily in regional manufacturing plants during the forecast period.

CATEGORY DATA

Pasta in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The reigning economic downturn has revived pasta sales, as middle-income Asian expatriates raise their consumption of carbohydrates at the expense of expensive proteins. This is occurring as Asian expatriates constituted 75% of the United Arab Emirates’ population at the end of 2009, according to government statistics. Although rice remains the main staple in the Asian diet, increasing awareness of international cuisines coupled with higher consumption of carbohydrates is driving Asian consumers towards trying pasta, thus reviving pasta sales in the United Arab Emirates. In addition, ease of preparation, coupled with increasingly hectic lifestyles, is supporting the increased consumption of pasta.

COMPETITIVE LANDSCAPE

• Pastalini Food Processing Industries (LLC) led pasta in 2009 with a retail value share of 33%, as its flagship brand Al Khaleejia elicits strong customer loyalty in the United Arab Emirates. With some consumers trading down to cheaper brands amid the low consumer confidence, private label has emerged as a direct rival to Al Khaleejia and other standard/economy brands. Pastalini’s other brand – Rossini – enjoys a lower reputation.

PROSPECTS

• In addition to being a consumer staple in the Middle Eastern diet, pasta will gradually penetrate the Asian expatriate population amid the adoption of cosmopolitan eating habits. In addition, better-for-you pasta varieties are expected to gain ground over the forecast period, namely wholewheat pasta, in light of growing health awareness in the country. Healthy pasta remained a niche product over the review period given its high unit pricing; however, this will not be the case over the forecast period as domestic manufacturers are expected to pounce on the incumbent demand for this category. Emirates Macaroni Factory has already ventured into better-for-you pasta and other domestic manufacturers are expected to follow suit.

CATEGORY DATA

Ready Meals in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• The traditional image of frozen pizza and frozen ready meals changed in 2010, with a growing number of manufacturers such as Al Kabeer Group of Companies and Gulf Food Industries focusing on offering premium frozen produce that promises fresh flavour and nutrition as well as convenience. Whereas ready meals once had a reputation for being tasteless and unhealthy, millions of consumers began to rely on microwaveable meals during the review period in order to save time and effort. A growing number were attracted by manufacturers expanding their healthy-eating ranges and emphasising the use of natural ingredients. This strategy proved particularly powerful in the UAE where the majority of food is imported and thus more likely to suffer from a lack of freshness. This growing consumer appreciation of the benefits of frozen food thus offers strong opportunities for frozen ready meals and frozen pizza.

COMPETITIVE LANDSCAPE

• Gulf Food Industries is the leading player in ready meals, accounting for 34% value share in 2009, with the only other significant player being Al Kabeer Group of Companies with 27% value share. These players benefit from offering strong and well-established brands, such as Gulf Food Industries’ California Garden and Americana and Al Kabeer’s eponymous Al Kabeer range. These brands benefit from effective distribution via supermarkets/hypermarkets and from strong marketing support in the form of TV advertising and in-store promotions. Al Kabeer also benefits from its focus on Asian cuisine, which appeals to UAE’s large Asian expatriate population. These domestic firms also jointly dominate thanks to their products’ affordable prices.

PROSPECTS

• The volume of ready meals produced within the UAE is expected to increase during the forecast period. Gulf Foods manufactured its products in Saudi Arabia and Egypt during the review period but plans to open a frozen processed food factory in Dubai during the forecast period. Singapore Food Industries meanwhile also plans to boost its presence in the Middle East by building a ready meals factory in UAE. Localised production is expected to result in the development of products that aim to cater to local consumers’ demands and could also result in costs and thus unit prices being lowered by players.

CATEGORY DATA

Sauces, Dressings and Condiments in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Convenience, health and pricing are the main stories shaping sauces, dressings and condiments in 2010. First in terms of convenience, busier lifestyles are fuelling demand for products that can reduce meal preparation times and make the cooking process easier. The influence of the United Arab Emirates’ cosmopolitan population is helping consumers try different cuisines not just in restaurants but at home as well, where the most popular products now include Indian, Chinese, Thai and Italian. Second, rising health awareness in the country supports the growth of better-for-you sauces, dressings and condiments, mainly reduced-fat and organic products. Such a trend has thus far become common among high-income earners due to high pricing, with a few middle-income earners opting for domestically manufactured variants like low fat mayonnaise.

COMPETITIVE LANDSCAPE

• Nestlé Middle East FZE retained its lead in sauces, dressings and condiments in 2009 with an 11% retail value share, as the Maggi brand elicits strong customer loyalty in the United Arab Emirates and is the bestselling brand of stock cubes. In spite of Maggi’s presence in many categories within sauces, dressings and condiments, rising competition led the company to lose share in 2009. At the same time, sales growth was supported by earlier launches that reaped fruit in 2009 like Maggi Stock Chicken Less Salt, Maggi Stock Mutton and Maggi White Rice Seasoning. Basamh Trading Co, which offers the top ranked Al Alali brand, claimed second place behind Nestlé in 2009 with a retail value share of 10%. Unilever Middle East finished third with a value share of 7% thanks to its popular Knorr brand.

PROSPECTS

• Demand for low-fat sauces, dressings and condiments is expected to increase over the forecast period in line with the healthy eating trend. This should lead manufacturers to step up investments in new launches and advertising support for low-fat variants. At the same time, some manufacturers are expected to lower prices for low-fat and other health and wellness variants in order to encourage trial purchases.

CATEGORY DATA

Snack Bars in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Consumption of snack bars remains limited to high income earners – a situation exacerbated by the current economic slowdown, somehow halting trial purchases by middle-income consumers. In addition, the general consumer perception of snack bars is that they are only energy bars. As far as high income consumers are concerned, although some might perceive snack bars as sugar- and calorie-laden, the popularity of snack bars remains supported by busy lifestyles.

COMPETITIVE LANDSCAPE

• Kellogg Middle East retained the lead in snack bars and saw a one percentage point growth in its retail value share from 2008 to account for 39% in 2009. Kellogg Middle East benefited from the strength of its Nutri-Grain brand and, more importantly, the strong brand loyalty to Special K in breakfast cereals cascaded into its snack bar extensions Special K and the newly launched Special K Bliss. Special K has become more of a regular diet among many female consumers, who consume the brand’s cereals for breakfast and snack bars as snacks. In addition, Rice Krispies is also a favourite among nationals and Middle Eastern expatiates.

PROSPECTS

• The snack bars category will be shaped by growing interest in health and wellness, which will reflect upon new product developments over the forecast period. Consumers are increasingly seeking more nutritional benefits, and it is highly likely that snack bars made using natural ingredients and fortified with value-added nutrients will post the better performances over the forecast period. Furthermore, the convenience of a snack bar as an on-the-go boost will also benefit sales, as they are a good addition to packed lunches or for those who do not have time for breakfast.

CATEGORY DATA

Soup in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Busier lifestyles, coupled with growing demand for healthier snacks and for convenience, have supported the rise of instant soup to the mainstream. Many consumers are shying away from carbohydrate- and fat-rich snacks in favour of other foodstuffs like fruit, vegetable, nuts and soup. Instant soup is attractive to these consumers, given its affordability, widespread availability and convenience.

COMPETITIVE LANDSCAPE

• Soup in the United Arab Emirates is mostly a duopoly of two brands, Maggi and Knorr, which collectively held a retail value share of 84% in 2009. Nestlé Middle East FZE – NBO of the Maggi brand – retained its lead in soup in 2009 with a retail value share of 48%, adding half a percentage point over 2008. Nestlé’s Maggi brand elicits strong brand loyalty in the United Arab Emirates, and is usually supported by marketing activity and new product developments. First, in addition to regular advertising during the year, Nestlé launched a special promotion for Ramadan in 2009, whereby it offered five packs of regular 49g Maggi dehydrated soup for the price of four, whilst archrival Knorr launched a similar offer during the same time. Second, in the last quarter of 2009, Nestlé launched a new line of dehydrated soup known as Maggi Excellence, a more premium dehydrated soup that is 100% free of preservatives and three times thicker than regular soup.

PROSPECTS

• Soup is an essential part of the regional diet, and a few developments are expected to take place over the forecast period. First, dehydrated soup will continue holding the lion’s share of soup. Second, competition will intensify between leading brands Maggi and Knorr, culminating in continuous product innovation as new flavours are expected to be added to promote brand loyalty and sales growth.

CATEGORY DATA

Spreads in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Spreads is a traditional breakfast item among most nationalities in the UAE, and the ongoing shift from a high calorie-laden to a healthier breakfast is fuelling demand. Furthermore, consumers are switching to even lighter products within spreads, such as jams and preserves with less sugar, and nut-based spreads with less fat. This trend has fuelled demand for less calorie-laden brands such as Weight Watchers.

COMPETITIVE LANDSCAPE

• Oetker-Gruppe retained its lead in 2009 with a retail value share of approaching 21%, due to the large popularity of its Langnese honey brand. In addition to the regular variants and packages available, the introduction of the Bee Easy snap-and-squeeze honey format has been instrumental in the brand’s market position. Bee Easy was first launched in 2005 through Wildflower Honey and extended in 2009/2010 to include other variants, such as acacia honey and black forest honey. Sunbulah Food & Fine Pastries Manufacturing Co Ltd ranked second with a share of 16%, achieved through its Al Shifa brand.

PROSPECTS

• Product and packaging innovations are expected to be the key stories over the forecast period. First, it is expected that more and more manufacturers will ride the health bandwagon and cater to growing consumer demand for healthier spreads, through launching products with less sugar and fat, as well as products fortified with certain nutrients. Second, packaging innovation has been a success story especially within honey, as it fuelled growth of certain brands such as Langnese, Nectaflor and Sue Bee, and it is highly expected that other honey manufacturers will follow suit, and the trend may also trickle down to other spreads categories.

CATEGORY DATA

Sugar Confectionery in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Rising health awareness is the key 2010 trend, spurring supply and demand of sugar-free products in addition to other vitamin-fortified products. The health trend reaped the fruit of concerted efforts by the Ministry of Health and Ministry of Education, which embarked on a school health campaign to ban the sale of certain foodstuffs such as sugar confectionery in school canteens. The government initiative responds to the relatively high obesity rates among children in the UAE.

COMPETITIVE LANDSCAPE

• Perfetti Van Melle led sugar confectionery with a retail value share of just over 32%, thanks to its well established portfolio of brands such as Chupa Chups and Mentos, which posted robust growth in 2009. Chupa Chups (Grupo) SA followed with a retail value share of 29% in 2009 and credit owed to Smint. The brand’s new product developments, such as Smint Freshness+, Smint Dental and Smint White, coupled with consumers’ appreciation for value added benefits such as Xylicare, all helped boost Smint’s retail value share.

PROSPECTS

• The rise of functional sugar confectionery will be the key trend over the forecast period, as sugar-free products and those containing xylitol will rise to the mainstream. Consumers highly appreciate the convenience of dental care in a sugar-free sugar confectionery product.

CATEGORY DATA

Sweet and Savoury Snacks in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Rising health awareness is having a knock-on effect on sweet and savoury snacks in various forms. First, with children being the main consumer group, demand has been impacted by the joint efforts of the Ministries of Education and Health to monitor the quality of foods offered to school children through canteens. Spurred by high obesity rates among school children, a governmental campaign has been launched that aims to ban the sale of carbohydrate- and fat-laden confectionery and snacks in school canteens. Second, demand from adults has also waned as consumers aim to replace carbohydrate- and fat-rich sweet and savoury snacks with healthier versions. Pouncing on the opportunity, manufacturers are launching lighter sweet and savoury snacks and emphasising the use of healthy ingredients on pack labelling.

COMPETITIVE LANDSCAPE

• Procter & Gamble Gulf FZE retained its lead within sweet and savoury snacks with a retail value share of 14% in 2010, banking on the strong popularity of Pringles. Pringles sustained demand in 2009 as it reaped the fruit of former launches Pringles Light Aromas and Pringles Rice Infusions, which cater to health-conscious consumers and Asian expatriates respectively. Procter & Gamble Gulf FZE also rolled out regular promotional offers during the year, as consumers remained on the lookout for value-for-money products and special promotions.

PROSPECTS

• Rising health awareness will drive demand and the supply of sweet and savoury snacks over the forecast period. On the one hand, sweet and savoury snacks with less carbohydrate, fat and sugar content will become increasingly popular over the forecast period. These healthier variants will appeal to parents buying sweet and savoury snacks for their children, or even for themselves. On the other hand, manufacturers are expected to launch healthier new products, mostly healthier extensions to their incumbent successful brands. Manufacturers will also focus on packaging, making sure that pack fronts include nutritional details and value additions included in products.

CATEGORY DATA

Yoghurt in the United Arab Emirates - Category Analysis

HEADLINES

TRENDS

• Pro/pre biotic drinking yoghurt continued to benefit from the health and wellness trend towards the end of the review period, with volume sales growth of 12% in 2010 over the previous year. This was due to rising awareness and also due to sales growing from an extremely low base. In 2010, pro/pre biotic drinking yoghurt accounted for less than 1% of volume sales in overall drinking yoghurt.

COMPETITIVE LANDSCAPE

• National Food Industries Co Ltd was the leading player in yoghurt in 2009, accounting for 23% value share. The company benefits from strong consumer awareness of its Milco brand. This brand also benefits from its wide product portfolio, being present in plain spoonable yoghurt, flavoured spoonable yoghurt, sour milk drinks and regular drinking yoghurt. The brand also benefits from having the widest distribution network in yoghurt and from its strong advertising support.

PROSPECTS

• Private label could well gain a significant position in yoghurt during the forecast period. These products remained insignificant during the review period but are expected to benefit from retailers such as Carrefour and Spinneys expanding their ranges during the forecast period. These players are expected to introduce not merely basic yoghurt products but also value-added pro/pre biotic yoghurt, with lower prices attracting a wider range of consumers into this product area.

CATEGORY DATA