The consumer foodservice industry in the Middle East & Africa region is changing at a fast pace, witnessing a movement towards chained players from traditional independent ones, as well as increasingly adopting health and wellness trends. Moreover, delivery service expansion is also becoming more popular, with consumers looking for convenience as a growing workforce means there is less time for leisure.
Equally, dining, fast food restaurants and coffee shops are adapting their strategies to be more modern, combining a unique food experience with an interesting atmosphere.
Morocco: the fast evolution of the consumer foodservice landscape in 2015
In 2015 the consumer foodservice market in Morocco continued to expand. The country witnessed a rise in delivery services, especially within 100% home delivery/takeaway, at the expense of eat-in. Nowadays, especially in the metropolitan axis of Casablanca-Rabat, many are leading a hectic lifestyle and now lack the time to prepare their meals at home. Additionally, the family unit is becoming more fragmented with households of two to three people becoming more standard in the country. Marriage patterns have also changed, as there are fewer people getting married at an early age, which results in more looking for the convenience that fast food and delivery services offer. In addition, some foodservice companies, though not having their own delivery service, use external ones, such as Hellofood.ma, which delivers food from a wide range of consumer foodservice operators, for example, McDonalds’ and Burger King.
Morocco has been enjoying rapid economic growth and a stable political situation, making it a target for a large number of international groups that are seeking to expand their businesses in the North African region. However, the fact that real estate properties in the major cities are becoming scarce and extremely expensive has pushed several players to adopt unique expansion strategies. For example, in 2015, Groupe Best Financiere SA, which operates Burger King in Morocco, signed a partnership contract with Vivo Energy to open five new outlets in the latter’s forecourts. Additionally, entrants like Wok to Walk expanded the number of outlets at retail locations, following RAWAJ Vision 2020; a strategy that aims to open multiple modern shopping malls in key cities in the country. As a result, standalone locations continued to lose market share to retail and travel locations in 2015.
The year 2015 also witnessed the launch of healthy food menus, particularly in fast food, which is generally perceived as being less healthy. In this context, Smooy and Llaollao launched organic frozen yogurts and ice cream that are rich in fibre, as well as products that are gluten free. In chicken fast food, Al Tazaj, from Fawaz Alhokair Group, started serving salads and organic chicken brought directly from the slaughterhouse to the grill. This trend is expected to intensify over the next few years as people become more demanding and health conscious.
Israel: Health and wellness trend becoming popular
Major restaurants are increasingly offering a variety of health and wellness food targeting specific consumer audiences. Veganism and vegetarianism, previously considered eccentric, have become increasingly common, and are now seen as an acceptable lifestyle choice. Other health concerns, such as gluten intolerance and gluten- and sugar-free diets are also gaining traction amongst consumer foodservice offerings, with establishments addressing the rising demand for dishes that will suit these specific dietary restrictions. For example, Pizza Hut introduced a gluten-free pizza, while vegan menus were offered in cafés, as well as in full-service restaurants.
Consumers' decreasing purchasing power is driving them towards those foodservice channels deemed as offering more value for money, for example, cafés, and low-cost outlets such as Cofix, which offers its entire menu for a fixed price of NIS5, are becoming increasingly popular for the on-the-go consumer. As a result, many new restaurants offer low-cost menus in order to attract a wider audience. Even upscale restaurants are targeting consumers with mid-level income rather than the small percentage of consumers with a very high income. In addition, there is an increase in the number of restaurants that offer ethnic food, such as Moroccan or Yemenite food, which generally offer affordable menus.
Egypt: Consumer foodservice suffering from aftermath of revolution
The consumer foodservice market in Egypt suffered during the three years after the 2011 revolution as the country was going through a tough period of economic and political unrest. The dining-out culture was affected massively due to security problems that led to night curfews, the time when people go out to eat most. However, the situation is getting better and stability is improving all over the country, with the consumer foodservice market starting to breathe again, and healthy growth rates expected during the forecast period.
With that being said, the market is witnessing some interesting trends that are mainly originating from the West and the US. There is a strong trend towards casual dining. Consumers are starting to show a clear preference towards fast food served in a casual dining environment (fast casual), as well as quality food that is also served in a fast food environment. This trend is accompanying a higher awareness level for healthy/organic food, particularly within the middle- and upper-social segments.
Habits are changing slowly, though, and to deal with that, there is a trend towards more original ways of advertising. Even though the power of social media in a country like Egypt is big, businesses are only now just starting to make more use of it to attract customers. This is mainly appearing within the independent outlets, which are growing at a much faster rate than chained ones. The market has witnessed higher demand towards new/original desserts. Businesses are starting to create original desserts by mixing different basic ingredients. For example, the Majesty chain of restaurants in Egypt created a pie dessert that contains extra cherries, pineapple, peach, apple, kiwi, banana, chocolate, cream and raisins.
United Arab Emirates: Fast casual growing in importance
Fast casual is the key growth area observed in the consumer foodservice market. In 2015, the number of the fast casual restaurants in the United Arab Emirates boomed by 30% in comparison to the previous year, and ambience has become an important feature of every single opening in the country. Another trend is healthier items on the menu, for example, organic burgers, organic eggs or more grilled chicken instead of fried chicken. Recreational areas with foodservice establishments, especially in the major cities of the United Arab Emirates, are successfully developing. This includes, for example, the Corniche area in Abu Dhabi or City Walk in Dubai.
At the same time, cheap dining is booming, fuelled by the huge influx of low-income workers into the country. These workers are living in shared accommodation, with limited kitchen facilities. In areas with a high percentage of such low-income consumers, a large numbers of restaurants with competitive prices are available, making dining out a good option for this consumer segment. The chain, Karachi Darbar, is an example of a success story focused on this target audience.
Saudi Arabia: Young and wealthy population keeps consumer foodservice going
The foodservice industry continues to thrive, with strong current value growth of 7% in 2015. It is clear that the drop in oil prices has not had a negative impact on the foodservice industry, and there has been a rapid expansion in outlets, increasing traffic, and new brands that were launched throughout the year.
The growing, and generally young and wealthy population of Saudi Arabia likes to indulge in eating out. Streets that house lots of restaurants, like At-Tahlia St in Riyadh, are busy almost all day long, not to mention the hustle and bustle they see during weekends. The market is attracting a flurry of investment from international, well-known brands. Consumers’ familiarity with such brands through travel and media have assisted brand awareness. The opening of the first outlets of the long-awaited Shake Shack and Five Guys in 2015 was widely celebrated among burger enthusiasts to the extent that the crowds made it impossible for some to get in and be among the first to try the local version on opening day. In the short term it is expected that more such brands will enter the market. Although 2015 witnessed increasing sales in almost all areas of the market, two stood out for their spectacular performance: chained burger fast food and chained specialist coffee shops, both growing by more than 10% in current value terms in 2015 from the year before. Chained specialist coffee shop outlets sprang up within walking distance from each other. Tim Horton’s alone opened 15 outlets in 2015, ten of which were launched in December 2015. Traditionally, Saudis consume Arabic coffee, but now Starbuck’s is considered ‘classy’. This is mainly driven by Saudis and expatriates becoming more open to Western culture having been exposed through social media, demanding international names, as well as the social trend of teenagers purchasing a coffee and posting pictures on Instagram and snapchat. Furthermore, the growing employment rate amongst women and a desire for convenient coffee options are also fuelling demand.
This is also true for burger outlets. The new craze for this sandwich not only boosted sales of big names such as McDonald’s and Herfy (a well-known local burger fast food chain), but also fuelled the launch of several, local independent burger fast food players, Burgeronomy, Hamburgini, 12 Burger, and The Burger Box, being a few successful examples. The entrepreneurs behind those names are young and enthusiastic Saudis who managed to create brand names that won a share of consumers’ wallets with offerings that appeal to their taste buds. Those young trendsetters are starting to change the new generation’s idea of the perfect job: managing from behind the desk, as many of them have chosen to personally oversee and participate in the day-to-day business at these outlets.
Lastly, an in-depth knowledge of the intricacies of the local market led some business owners, such as G Burger and Lebanon Restaurant, to venture out and discover an untapped area of the market and come up with an interesting business model. Drawing on consumers’ thirst for change and new trends, they started offering a complete foodservice experience in the consumers’ home. This entails sending out cooks, ingredients and basic cooking equipment to the consumer’s home, where food is then prepared and served hot. The success of this model is due to its convenience and uniqueness: Saudis, especially women, enjoy social gatherings. And although eating out is a welcome option, ordering food to be prepared at home will spare them the need to abide by the formal Abaya dress code, and allow them the luxury of being served freshly prepared food; a treat that is not found in home delivery.
South Africa: Consumer foodservice players adapt their strategies to attract cash-strapped consumers
Tough economic environment and load shedding
The South African economy continued to experience slow growth in 2015, driven by inflation, labour riots and rising fuel and energy costs, as well as the falling value of the South African rand. As a result of these aforementioned factors, the financial position of many consumers continued to be affected. Data from Statistics South Africa indicate that the household debt to disposable income ratio remained high at approximately 80% in 2015. This trend is further worsened by the high unemployment rate in the country, with current figures exceeding 25%. Consumer confidence plunged to the lowest in more than 14 years during Q2 2015. Consequently, the results of many consumer foodservice players mirrored the economic climate in the country, with many experiencing slower value growth in 2015, when compared to the year before. Noteworthy is the impact of frequent power outages, commonly known as load shedding, which affected many parts of the country in 2015. While many restaurants and fast food outlet have invested in generators, turnover was affected when a shopping centre/mall or shopping precinct is not trading due to load-shedding.
Value for money continues to be the order of the day
Many restaurants and fast food outlets had to continuously offer discounts in an attempt to attract customers. As a result, value for money continues to be the order of the day. Thus, there has been a strong rise in the popularity of cheaper treats such as smaller menu items that retail at a lower price point and therefore offer consumers the opportunity to treat themselves without being significantly out of pocket. Chicken fast food player, KFC, introduced a new Ka-Ching menu that offer treats for under R10, R15 and R20, making the product more affordable to a wider range of consumers.
Roll out of new outlets, localised menus, modern and environmentally friendly refurbishments
The development of malls in outlying areas, such as rural places within South Africa, continued to accelerate and allow players with opportunities to extend the reach of their brands, especially in areas where they previously had no representation. Many of these new outlets also included the roll-out of smaller model outlets. In addition to new outlets, many players, such as KFC, Kauai, Nandos and McDonald’s, continued to develop new restaurant designs with colourful and contemporary local furniture and art to give their brands a fresh and modern look. McDonald’s has embarked on a project to roll-out sustainable restaurants that will make use of light gauge steel and energy efficient cladding and insulation systems. Localisation of menus was also a major trend in 2015, as players strived to differentiate their brands and launch menus with localised flavours to appeal to local tastes. Equally, McDonald’s introduced a range of spicy meals, which include a spicy chicken wrap and the McFeast Spicy, which are popular amongst Indian consumers.
Increasing usage of mobile and digital payment systems in consumer foodservice
South Africa is seeing growth in the usage of digital money apps. Although coming from a low base, some of these new technological payment systems are predominantly being used in the consumer foodservice industry. A good example is the Snapscan application, where consumers register on the app and link their credit cards, paying by scanning the QSR code with their phones, and confirming the payment with a PIN or fingerprint. The merchant receives confirmation of the payment on their nominated phone. Many coffee shops, restaurants and food markets, such as the Old Biscuit Mall Food Market in Cape Town, are making use of such payment methods.
International players increasing competition
South Africa continues to be a lucrative market for many international players, witnessing the increasing entry of global brands into the market. Leading international brands such as Krispy Kreme, Starbucks, and Dunkin’ Donuts are planning to open shops in the country. This follows the successful entry of players, such as Burger King, Domino’s and Pizza Hut. The entrance of these new players has intensified competition in the form of aggressive promotional campaigns, discounts, and the expansion of niche offerings. Looking at average spend per capita on fast food annually, South Africans spent just under US$54 (ZAR885) on fast food in 2015. This is well behind countries such as the US where the average person spent US$697.4 in fast food restaurants in 2015 alone. This demonstrates that there is still much room for growth in the overall consumer foodservice market over the forecast period.
During the forecast period, Middle East & African region is likely to see the common denominator between its markets growing in terms of consumer foodservice trends; this will particularly be the case with an increased penchant for health and wellness cuisine, sophisticated menus and trendy atmosphere. The pursuit of authentic and unique eating and drinking experiences will also be largely seen among MEA consumers, as they become more influenced by global trends. Consumer foodservice value in MEA is expected to reach US$70 billion by 2020, with growth rates hovering between 3% and 5% during the forecast period.