Bhatia: consumption to grow

Bhatia: consumption to grow

GCC food sector to see moderate growth: report

01 October 2021

Demand for food in the GCC has remained relatively conservative, growing at a slower pace amid economic and geo-political concerns in recent years, according to a latest report on the GCC food industry.

“While demand has been supported by growing population and evolving consumer preferences, the fall in per capita income since the slowdown in oil prices in mid-2014 has led to the growth of food consumption to remain flat between 2014 and 2019,” stated the report by the UAE-based investment banking advisory firm, Alpen Capital.

Nevertheless, the continuous collaboration between the public and private sector and the ongoing efforts of the governments to increase food security has helped the GCC nations build a strong food ecosystem, which could withstand the Covid-19 pandemic, the report added.

According to Alpen Capital, consumption of food is anticipated to grow at 2.3 per cent to reach 52.4 million metric tonnes (mt) by 2025, with emphasis falling on domestic production. In 2020, the GCC consumed 46.8 million mt of food, with Saudi Arabia and the UAE consuming a combined 77.9 per cent due to greater population. Outside the two most populous nations in the region, Oman, Kuwait and Bahrain are forecast to grow at 4.2 per cent and 4.1 per cent taking higher growth rates in the region.

Cereals will remain the staple food of the region, the report predicts, albeit with much slower growth as most food categories experience minimal change in share through to 2025. However, the ‘others’ food category comprising of eggs, fish, pulses, oils & fats, potato and honey is expected to witness the highest growth rate of 3.7 per cent driven by pandemic-led changes.

“Food consumption in the GCC is expected to grow at a moderate pace on the back of growing population, economic recovery and reopening of the hospitality and tourism sectors. We expect to witness increase in demand for convenience food accompanied with growing preference for private labels,” said Sameena Ahmad, MD, Alpen Capital. 

Overall sector growth will be driven by population expansion as governments enhance economic infrastructure .

 “Over the past few years there has been a greater focus on enhancing agricultural capability by implementing technologies like vertical farming, aquaponics, hydroponics, etc. to improve self-sufficiency. Many deals concluded as part of the region’s strategic plan to improve food security and reduce dependence on imports. Companies pursued the path of inorganic growth to focus on the growing food demand in the region and thus expanding their offerings. Going forward, food aggregators are expected to transform the industry dynamics, and are likely to see traction as consolidation is imminent in the backdrop of Covid-19 to ensure survival,” said Sanjay Bhatia, MD, Alpen Capital.

The pandemic exposed vulnerability in the region to global supply chain disruptions, giving rise to fears of food shortages. GCC governments took steps to enhance food security through supply chain diversification and is working to increase domestic production with incentives for technology and investment within the sector.  

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