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The F&B sector of the UAE and the rest of the GCC countries have been rated at “Medium Risk” by trade credit insurance provider Euler Hermes GCC which said the long-term outlook remains stable.
The sector suffered setbacks as the lockdowns necessitated by the pandemic COVID-19 put pressure on agrifood supply chains.
Jean Claus, CEO, Euler Hermes GCC, said: “By nature the agrifood sector is a non-discretionary industry and therefore demand and growth is uncorrelated to the economic cycles of the region.”
He said despite the disruptive developments for travel, tourism, and food supply chains amid the pandemic, the UAE and the GCC overall have fared well in relation to food supply as they had put in place food security measures well before the crisis.
The sector saw high to stable growth across all segments, the exceptions being entities which were exposed to hotels, restaurants, catering (HORECA) sector and were unable to offset business loss in H1 2020. Overall, the sector outlook is stable in this regional hub, and recovery in sub-segments like HORECA will be driven mainly by COVIDdevelopments and tourism dynamics, the report noted.
For UAE, which imports 90 percent of its F&B needs, the key challenges are limited pricing power, surge in transport costs, and intense competition within the local supply chain segments.
“Given the nature of the sector and the stable outlook, mid-large players enjoy sufficient support from banks and investors supported by good cash position and robust cash cycle,” said Claus.
(Writing by Brinda Darasha; editing by Daniel Luiz)
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