Day: August 16, 2023

One of the industries in the UAE that is expanding the quickest is the food and beverage (F&B) sector. The fact that Dubai is the melting pot of a people from all over the world with cosmopolitan tastes, high disposable income, luxury, and flashy lives in addition to a thriving tourism industry is driving this sector’s continued expansion. The COVID-19 epidemic caused a significant setback for the entire sector, but things have swiftly recovered. In certain areas, the rebuilding process has further accelerated thanks to people’s retaliation travel, dining, and shopping. A sector that has had significant growth also faces a number of difficulties that raise important concerns about how this business can keep up its momentum.

However, given how the UAE Government has dealt with these obstacles—in addition to encouraging the development of a number of industrial sectors and shipping firms (logistics will be crucial to maintaining the food supply chain)—it should come as no surprise that the F&B sector is well-positioned to overcome these difficulties.

The Obstacles That Raise Some Important Questions

The food and beverage (F&B) business is not only the most lucrative in the world, but it is also the most cutthroat. In the UAE, the same holds true. Newer trends and smart ideas to draw in more clients continue to develop in this area as a number of new companies enter the market at a quick rate, leaving firms with little time to unwind. In order for businesses in this sector to continue experiencing the unprecedent growth they are known for, a number of additional challenges to supply chain management, including rising costs, food safety, product traceability, secured supply chains, and a constant need to keep up with the evolving technology, must be skillfully addressed. Let’s take a closer look at these difficulties.

Cost increases: There has never been a time when it was more important than it is today to maximize productivity and cut costs throughout the supply chain. The grocery retail business is becoming increasingly consolidated, and labor costs are rising. Because fewer retailers are carrying the lion’s share of the burden in a concentrated retail sector, they have more control over cost. Additionally, consumers are growing more cost-conscious and favor larger stores that offer inexpensive goods. This scenario has the potential to completely eliminate smaller market players, placing total control of the supply chain in the hands of a select few major firms.

Secure Supply Chain: Food firms must comprehend and get to know everyone engaged in the manufacture and distribution of the products in order to identify the dangers in the supply chain. The informed consumer of today also wants to know where the food and other products are coming from. End-to-end transparency will improve the process’s transparency, trustworthiness, and efficiency while also reducing inventory.

Product traceability: The UAE government closely monitors the production, processing, and distribution of all food items. This is done to make sure that only the highest-quality items are delivered to clients and that there are very few opportunities for contamination or other wrongdoing. Food firms must have a plan in place that will allow them to track their orders and the entire supply chain of the food goods in order to ensure that all of this is recorded and handled. Implementing this is a tremendous task.

Food safety: It is challenging to produce and preserve food because of the climate and other geographical factors, such as the intense heat and small amount of fertile land. Most of the food that the UAE needs is imported, which makes the supply chain more difficult because food tends to spoil during cross-border shipping.

Measures To Address These Issues

Despite the numerous obstacles, the UAE government is making every effort to improve the F&B industry’s supply chain. Here are a few steps you may take to improve your supply chain management.

Use of the Logistics Sector Efficiently: The UAE must rely on its thriving and capable logistics sector, which has multiple operators deserving of being trusted with managing this intricate supply chain process. The supply chain issue for food goods can be effectively solved by logistics companies thanks to their extensive global networks, top-notch infrastructure, and knowledge.

Government Rules And Regulations: The UAE government has been proactive in assisting the food and beverage sector, particularly logistics firms to ensure that the supply chain is maintained and that there is a low amount of food waste. Making rules and regulations even more streamlined can guarantee that there are no gaps in the procedures.

Consumption and Supply: The F&B sector offers a wide variety of food options. Different locales and time zones have varying levels of demand for these goods. Due to the need to monitor demand and supply, this presents a huge problem for supply chain management. Companies utilize smart devices such as shelf sensors, smart bottles, smart labeling, and developing technologies to address this issue in order to deliver good outcomes.

Demand forecasting: is a strategy that has the potential to significantly address the problem of supply chain disruption. Numerous businesses in the United Arab Emirates are using sophisticated systems to forecast demand and supply as a result of the wide variety of products available on the market and their fluctuating demand in order to make sure that they can provide and supply the necessary products at the appropriate time to the appropriate customers.

UAE is not just one of the world’s most profitable marketplaces for the food sector, but it’s also one of the most cutthroat. The good news is that as the market becomes saturated, service providers are developing more complex ideas, new trends are emerging, and consumers have an abundance of options. The bad news is that the restaurant business in Dubai, Abu Dhabi, and the rest of the UAE is facing more difficulties than ever.

Regardless of your existing expertise, here is a list of the top hurdles you will encounter in the restaurant sector in the United Arab Emirates. We also go through how you might handle these challenges to open your restaurant. Here are some difficulties restaurants may encounter and solutions!

1. Higher Rents
   While expensive rent seems to be the rule elsewhere in the world, UAE, and particularly Dubai, suffer the most. Depending on the size and format, the typical cost to open a small, independent restaurant in Dubai ranges from AED 500,000 to AED 1.25 million. Even these numbers are based solely on restaurants with 500 square meters to 1,200 square meters of space. Furthermore, capital expenses, rent, and working capital account for 78% of the restaurant industry’s cash outflow. Therefore, the biggest and most immediate problem you will have in Dubai’s restaurant market is exorbitant rentals.How to Avoid Sky-High Rental Prices in the UAE
   As for the solutions, you must first realize that there is no getting around this problem, therefore your business might as well bear the entire brunt of it. What we’re trying to say is that while you might be tempted to shop on the cheaper side of the city because Dubai has so many little towns with diverse populations, doing so will only squander your money. Money invested with the right mindset and a clear plan can be recovered.

   Consider your target market, restaurant format, cost of obtaining raw ingredients, and menu prices while choosing your site. Look for areas that still meet your needs. Examine the NOC and additional legal documents thoroughly. High rents are unavoidable, therefore you must account for them in your spending plan. In addition, you can cut costs in other areas of running your restaurant, balancing your budget.

2. Too little business and too much competition
   With the “Diversification Pan” in place, Dubai Expo 2020 approaching, and the hospitality and restaurant business occupying the central role in the plan and the associated economic changes, two things have occurred:-

   There is now intense competition.
   The ratio of customers to restaurants has increased
   The basic conclusion of these two impacts is that cannibalization makes it difficult for eateries to compete in the market. Here, cannibalization is distinct from that of rivals. Cannibalization occurs when rivalry intensifies to the point where the entire sector begins to see a general decline in customer demand.

   Due to its special place in the country’s shifting economic landscape, the restaurant industry in the UAE has drawn both investors and businesspeople. The outcome was straightforward—too many service providers saturated the market—as there were few actual entry barriers and increased global trade.

   The second side of the same coin is that, despite a rise in visitors, the speed of new restaurants opening up shop could not keep up with it. In the end, this led to “The Problem Of Plenty”—a paradoxical scenario in which consumers had too many options since there were too many service providers, making it difficult for them to choose what to invest their money in. Due to increased rivalry, problems and difficulties in the foodservice industry keep becoming worse.

   How to Win in the UAE’s Toughest Market
   Let’s first simplify this problem and challenge for the restaurant industry. The phrase “The Problem of Plenty” simply refers to the fact that there are so many restaurants that, even while the number of customers generally is growing, the effect of this growth is being spread out throughout the various establishments, which reduces individual profitability.

   Now turn your attention to your customers. Customers are still making purchases; they are just doing them in various areas. As a result, the problem can be solved by concentrating on both acquiring new consumers and keeping existing ones. 20% of restaurant patrons account for 80% of business, and all are repeat patrons.

3. Absence of a USP
   The UAE restaurant markets are currently experiencing a distinct issue. Most people looking to enter the restaurant industry lack a USP because it is almost completely saturated. Consumers are bored of the sameness and low quality of the experiences and meals being offered, even when no one is overtly mimicking another. Everything has been done since the UAE is so far ahead in the restaurant business. As a result, it is challenging to develop a completely new offering, in part because of the fierce competition and in part because of the variety of customers, making it challenging to foresee what will succeed and what will fail. How To Be Different From The Competition In The UAE
   Conducting thorough market research, finding out what clients want, and tracking industry trends are all feasible solutions to this problem. When a market reaches a specific maturity level, it is struck by certain trends brought on by a shift in consumer habits. Because of this, no market is ever totally steady for an extended period of time, and no industry is ever truly saturated. You will be able to identify gaps in the ostensibly tight-knit market and seize the initiative there as long as you keep an eye on the trends propelling the hospitality sector.

Following the signing of investment agreements worth SR232 million ($61.8 million) by the Saudi Authority for Industrial Cities and Technology Zones, the production of chocolate, yogurt, and fish will rise in Saudi Arabia.

The company, also known as MODON, has won seven contracts totaling 99,400 square meters, mostly benefiting the food and beverage industry in the Kingdom.

During the inaugural iteration of the Saudi Food 2023 show, MODON also finalized two additional agreements to help streamline financing options while encouraging and enabling entrepreneurship.

In the words of Executive Vice President of Business Development at MODON Ali Al-Omeir, these agreements are in line with the goals of the National Industrial Strategies and Saudi Vision 2023, aimed at accomplishing food security for the Kingdom and luring investment projects worth $20 billion into the sector by 2035, as reported by the Saudi Press Agency.

One of the latest investment agreements is for the SR140 million manufacturing of milk and fresh yogurt on 27,400 square meters of industrial land in Jeddah’s Third Industrial City.

Additionally, a space of 25,027 square meters has been designated in Qassim’s Second Industrial City for an SR22 million investment in the production of cocoa, chocolate, and confectionery goods.

Another SR10 million contract was signed, allocating 11,051 square meters in Jeddah’s Third Industrial City for the localization of the fish preservation business and fish products. A separate SR11.8 million contract was signed, allocating 7,400 square meters for the drying, smoking, and salting of fish and fish products.

There was also a contract worth SR40 million to set aside 16,500 square meters at Sudair City for Industry and Business for the production of food boxes, medications, perfumes, and dishes, among other things.

In February of this year, MODON signed contracts and memorandums of understanding for localizing the food and beverage sector in Saudi Arabia with investments up to SR1 billion. This was done on the sidelines of the Gulfood Exhibition 2023 in Dubai, United Arab Emirates.

Additionally, it showed that by the end of 2022, there would be 1,171 food factories with a combined total size of almost 10 million square meters.