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Bakery Industries in UAE countries- Current Scenario
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Friday, 26 February, 2016, 08 : 00 AM [IST]
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Dr Bindiya Sharma
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fiogf49gjkf0d Introduction
Bakery products are flour-based foods baked in an oven such as bread, cakes, pastries and pies.
Bakery is a traditional activity and occupies an important place in food processing industry. Bakery products are an item of mass consumption in view of low price and high nutrient value.
Bakery manufacturers in the UAE can be differentiated into broad segments of bread, biscuits, breakfast cereals and cake. With rapid growth and changing eating habits of people, bakery products have gained popularity among masses. As Emirati consumers become increasingly aware of health issues, health and wellness (HW) bakery products such as whole wheat, reduced sugar and gluten-free are expected to acquire greater importance and popularity.
In addition, on-the-go consumption of health and wellness bakery products is also expected to increase as a result of this consumer awareness. (Euromonitor International, 2014). There has been a continued shift from traditional to modern grocery retail within the UAE and it is seen as the most developed retail market in the region with the leading supermarket chains such as Carrefour, Lulu and Spinneys pursuing expansion strategies. The main players have extensive ranges of bakery products and most outlets have in-store baking operations. There are opportunities in specialty, gluten-free, organic and niche products which have natural and “clean” ingredients. This growing demand for healthy products and ingredients is due to the issues associated with obesity and diabetes. With many international hotel chains now offering gluten-free products estate-wide and retailers expanding their free-from ranges this is a rapidly growing segment of the market
Industry scenario in UAE countries
The baked goods subsector is the largest of the three subsectors within the bakery products category. It made up 66.4% of overall value sales in 2014 (Euromonitor International, 2014). The United Arab Emirates (UAE) is estimated as the 66th-ranked bakery products market worldwide, with an estimated US$682.9 million worth of retail value sales in 2014. Three of the top five international bakery companies in the world in 2014 sold products in the UAE. These three companies were the number one ranked Mondelez International Inc., the number three ranked Kellogg Co, and the number four ranked PepsiCo Inc. (Euromonitor International, 2014).
In the UAE, the distribution of bakery products is done mainly through grocery retailers, with 88.0% of total value sales coming from modern grocery retailers, followed by 60.5% from hypermarkets and 24.7% from supermarkets (Euromonitor International, 2014).
Overall, the UAE bakery industry saw value and volume sales growth from 2010 through 2014, rising to US$682.9 million and 200,100 tonne. For the forecasted period of 2015-19, bakery value and volume sales are both expected to increase slightly. In addition, as Emirati consumers have become more health-conscious over the years, health and wellness bakery saw a compound annual growth rate (CAGR) of 6.9% from 2010-14 and also contributed to just under 20% (US$132.6 million) of total bakery values sales in 2014 (Euromonitor International, 2014).
The UAE bakery products industry is led by one local company (Modern Bakeries LLC), who in 2014 was estimated to hold 7.2% of the available market share. However, the top five companies only account for 26.3% of the market combined which indicates that the UAE bakery sector is very fragmented.
The bakery category is growing consistently in the UAE at 7% per annum which is a much more buoyant rate than most European markets and is projected to growth to AED 3.1 billion (€791m) by 2018. Cakes are the most dynamic segment of the market, posting annual growth of 10.5%.
Table 1. Forecast Retail Volume in Percentage* (%) of Baked Goods Categories in the UAE
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Categories
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2014
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2015
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2016
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2017
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2018
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Bread
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95.0
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95.0
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95.0
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95.0
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95.0
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Cakes
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0.9
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0.9
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0.9
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0.9
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0.9
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Pastries
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4.2
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4.1
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4.1
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4.1
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4.1
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A number of key drivers are contributing to market growth. The UAE is a hub for tourism and business within the Middle-East and the food service market is growing strongly with a corresponding demand for international products. There is a steady upward growth of baked goods products used in casual dining concepts such as burger outlets and sandwich chains and with the QSR market projected to grow by 10% per annum to 2018 further growth in demand can be expected.
Table 2. Forecast Retail Volume in Tonne - Bakery Products Subsectors in UAE
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Subsectors
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2015
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2016
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2017
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2018
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2019
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2015-19
CAGR %
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Bakery
(Total)
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212.0
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224.1
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236.4
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248.5
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260.4
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5.3
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Baked
Goods
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180.4
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190.4
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200.5
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210.5
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220.3
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5.1
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Biscuits
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23.3
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25.2
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27.0
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28.8
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30.6
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7.0
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Breakfast
Cereals
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8.3
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8.6
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8.9
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9.2
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9.5
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3.5
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Industrial Analysis
The market for bakery and cereals in the UAE increased at a compound annual growth rate of 9.4% between 2004 and 2009. The bread and rolls category led the bakery and cereals market in the UAE, accounting for a share of 84.7%. - The leading player in the UAE bakery and cereals market is IFFCO Group.
Baked goods has seen consistent and steady growth from 2010 through 2014, reaching value sales of US$453.3 million or 66.4% of total bakery values sales by the end of 2014. The sector is forecasted to continue this steady growth, albeit at a slower rate with a compound annual growth rate of 4.2% through 2019 (Euromonitor International, 2014).
Bread
Bread is the dominate category within baked goods and looks to maintain this position through 2018. Although bread maintained its retail volume percentage, it did see a slight decrease in value growth in 2013, down to 6% from 7% the year before. This is an indication of the maturity of the category along with the increase in competition from the savoury biscuits and health and wellness varieties (Euromonitor International, 2014).
Artisanal varieties of baked goods held a value share of 53% in 2015, as the increasing offer of unpackaged bread in modern retail channels outpaced the decline in the importance of independent small grocers. Nevertheless, packaged baked goods were led by Modern Bakeries LLC in 2015 with a value share of 11%, strongly supported by its broad product portfolio and availability throughout the country.
Baked goods sector is led by domestic player Modern Bakeries LLC and their brand of Modern Bakery. Three of the top five baked goods companies are domestic players such as Modern Bakeries LLC, Golden Loaf Est, and Al Arz Automatic Bakery LLC, but only make up 13.3% of the market combined. The UAE baked goods market is highly fragmented which is also further indicated by the fact that the top five companies only account for 22.6% of the total market.
Baked goods is expected to record a value CAGR of 4% at constant 2015 prices over the forecast period, a weaker performance than the equivalent CAGR of 6% registered over the review period. The category is strongly led by bread, which is considered a staple among most residents of the UAE and is therefore growing towards maturity. However, growth in bread is strongly impacted by the country of origin of the expatriates coming to the country to work. While a strong influx of Arab expatriates can lead to increasing demand for bread, high numbers of expatriates from the Philippines are less likely to increase bread sales.
Biscuits
Of the three subsectors within bakery products, biscuits was the best performing and saw the highest CAGR from 2010-14 with 9.3%, reaching estimated value sales of US$150.9 million in 2014, albeit a relatively small category in comparison to other baked goods. In 2013, 89.2% of total biscuit value sales came from sweet biscuits which include cookies, filled and plain biscuits (Euromonitor International, 2014). The UAE biscuit sector is forecasted to continue to grow by a CAGR of 5.5% from 2015-19. Its percentage of total bakery market share will also increase from 21.0% in 2010 to 23.3% by 2019 (Euromonitor International, 2014).
The biscuit subsector comprises savoury biscuits and crackers and sweet biscuits. Over the last five years, sweet biscuits made up around 89% of the total retail volume, while savoury biscuits and crackers hovered around 10.5%. Euromonitor forecasts that this percentage split will hold through 2018.
Three of the top five UAE biscuit companies are international players; however, two are domestic players and combine to represent 21.4% of the market share. These companies are IFFCO Group with their brand of Tiffany's, and Strategic Food International Co LLC with their brand of Nutro Digestive (Euromonitor International, 2014). The top five biscuit companies represent 65.7% of the overall UAE biscuit market and are represented by international and local companies.
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Table
3. Forecast Retail Volume in Percentage* (%) of Biscuits
Categories in the UAE.
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Subsectors
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2014
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2015
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2016
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2017
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2018
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Savoury
Biscuits and Crackers
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11.3
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11.7
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12.1
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12.0
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12.3
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Sweet
Biscuits
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88.7
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88.3
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87.9
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87.6
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87.2
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Breakfast Cereals
Breakfast cereals are the smallest subsector within the bakery category in the UAE and have been increasing slightly each year since 2010. The subsector looks to continue this upwards motion through 2019, where sales are estimated to rise to US$97.4 million (Euromonitor International, 2014). This growth will be further perpetuated by Emirati consumers consuming more cereal as part of a healthier lifestyle (Euromonitor International, 2014).
The breakfast cereals subcategory is broken down into three main categories, children and family breakfast cereals, and hot cereals. Family breakfast cereals hold around 68% of retail volume within this category, followed by children's breakfast cereals at almost 27%, and hot cereal hovers just under 5%.
Breakfast cereals have not traditionally been a part of the daily routine in the typical Arab household; however, Western emigrants and foreign workers are driving the category and slowly encouraging daily consumption among locals (Euromonitor International, 2014). This subsector is dominated by large multinational companies like Kellogg Co. and Cereal Partners Worldwide SA, who hold a combined 65.9% of the total breakfast cereals market share (Euromonitor International, 2014).
References
Euromonitor International, 2014.
(The author is assistant professor, Assocom Institute of Bakery Technology and Management. She can be contacted at sharmabindiya54@gmail.com)
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