Middle East countries like Iran, United Arab Emirates, Saudi Arabia and Egypt import a large majority of their food, from the most basic food groups to the most exotic ingredients. Iran solely imported food and agricultural products worth of approximately $13.2 billion in 2015. These are mainly imported from Europe among other continents. In this way, they are able to successfully deal with the increasing retail demands dictated by the current international food furor.
There is an influx of new and similar food trends all over the Middle Eastern regions. Many foreigners who move to work in these regions pave the way for more convenient food choices. Hence, possible growth in the food business is predicted for the Middle East.
Turning demand into opportunities
Middle East food customs can turn modern demands for extrinsic products into wide-scale opportunities. This demand mainly triggered by the growing tourist influx are resulting in numerous benefits for the Middle Eastern market:
- Hectic lifestyles demand ready-to-eat food products which necessitates the changing of consumption habits.
- The last decade opened Egypt’s economy to various hypermarkets that now cover the entire nation.
- Business within the food retail market - franchising and catering to hospitals, schools and aviation are predicted to skyrocket with the combination of Middle Eastern customs and recent international norms.
- More than 60% of Food and Beverage (F&B) concepts in Dubai (e.g. Max Hamburgare, O’Learys, Denny’s) are entering the market at a rapid pace in the form of franchises.
- The rise of tourism is inevitable. The licensing of alcoholic beverages in hotels (especially in Dubai) are sure to arouse the interest of tourists from all over the globe.
Middle Eastern food retail industry
The increasing number of tourists in the Middle East indicates the prosperity in the food retail industry. There are various types of food businesses that could quench the needs and curiosities of tourists, expatriates and locals:
- Supermarkets and hypermarkets are currently dominating the retail industry when it comes to providing food and products. Most of them are strategically located within shopping malls to easily attract buyers. The United Arab Emirates (UAE) have the leading shopping malls in the Middle East.
- Independent retailers are traditionally small grocery and convenience stores. These small industries prefer convenience so they settle in residential areas. Credit and free delivery are among the various services they provide. Iran still is a very traditional market in grocery retailing and the number of outlets is very high. It is estimated that there are around 300,000 grocery outlets in the country in 2015, among them independent small retailers are very important accounting for more than half the number. Each grocery outlet supports a small number of households in its neighbourhood and the culture of shopping via modern grocery channels is still in its initial stage. However in big cities people are more inclined to shop via chain retailers.
- Specialty stores such as Milk & Honey, Jones the Grocer and Organic Foods & Cafe sell products that cater mostly to health-conscious customers.
- Long distances between cities can be a hassle, so petrol stations provide convenient food and beverages to weary travellers and locals.
Challenges in setting up food enterprises
With potential income comes unavoidable challenges. Setting up a food enterprise is no easy feat in the Middle East. Careful planning and implementation is required in order to take customer service to noticeable heights without undermining the Middle Eastern customs. Apart from which there are many other possible challenge scenarios in this market:
- Support of exporters from different niches is extremely necessary. Finding product exports for Saudi Arabia is quite challenging.
- With the rise of opportunities, finding trustworthy business partners may prove exhausting for both expert businessmen and budding entrepreneurs in the UAE.
- The demand for equipment is high which could lead to low quality serving for Egypt.
- The climate of the entire region is an arduous challenge. It causes faster food spoilage compared to other tourist hubs in the world.
The Middle East is a souk of culture, heritage and relaxation without compromise on tradition and beliefs. The customs and food traditions of the people mixed with the needs of modern society seem to combine well to offer some of the best gastronomic experiences to compete for supremacy in the food retail scene.
With the current boom in urbanisation, conversion from traditional channels to modern outlets is inevitable in Iran. Following removal of sanctions in January 2016, after Iran and the West came to agreement over the nuclear issue, multinationals will have the opportunity to target this market. However, one of the key barriers will be the current traditional bazaar. Any improvement without a change to the bazaar’s structure is unlikely to happen. Although the Iranian government has implemented some reform programmes such as the reduction in number of independent outlets, this will not be practical with the current non-private nature of the country.
For a detailed insight into the Middle Eastern food retail industry, market research is an essential tool in initiating a new business venture.