Food and beverage operators in the UAE have responded to headwinds facing the industry by enhancing operations and rationalising costs to maintain margins, while opting to exit loss-making outlets and struggling brands, according to new research.
KPMG’s 2018 F&B Report said the UAE continues to lead the market in the Middle East region, stimulated by a growing number of tourists. The sector’s growth is further supported by the entry of new international and regional brands.
It added that the restaurant footprint – the number of restaurants per million residents – in Dubai remains high, second only to Paris.
According to the report, among all formats in the UAE, quick-service restaurants were more popular in 2018 due to value-seeking customers.
For premium dining outlets, relatively steady patronage for certain popular brands and concepts continued, with hotel-based premium licensed offerings facing increased competition from licensed non-hotel outlets.
The report also found that the delivery segment witnessed year-on-year growth and use of rental kitchens is a trend that is picking up in the UAE. As many as 32 percent of operators (versus 21 percent last year) attribute more than a quarter of their revenue to the delivery channel.
Anurag Bajpai, partner and head of retail, KPMG Lower Gulf, said: “2018 was a challenging year for the F&B industry, in the face of increased competition, higher operating costs and comparatively tepid consumer sentiment. Despite this, the sector has demonstrated resilience as owners and operators have responded with measures to drive operational efficiencies, and take difficult but essential decisions.
“We step into 2019 with a cautiously optimistic medium-term outlook for the sector, bolstered by trends such as delivery-led revolution and expectations around Expo 2020 – over 4 out of 5 operators we surveyed expect growth in the medium-term.”
As opposed to 2017, when operators’ attention was focused on expansion into new markets and geographies, the broader theme for 2018 was to put the house in order.
At the same time, with the introduction of value added tax in the UAE, most F&B operators continued to focus their attention on pricing strategy, the report noted.
Vikrant Rohatgi, director in the advisory practice, KPMG Lower Gulf, added: “Looking ahead, operators are optimistic about the impact Expo 2020 Dubai will have on the industry. More than half of operators believe Expo 2020 will have a favorable impact and the event has the potential to provide a much-needed fillip to the industry. Further, more than one third of operators currently plan to directly participate by establishing a presence at the site.”
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