DOHA: Qatar food services market stood at $1.3bn in 2014 whereas the GCC market was valued at $18.8bn. In a report released yesterday Al Masah Capital, predicted a growth rate, for GCC food services market, at Compound Annual Growth Rate (CAGR) of 6.8 percent to reach $24.5bn in 2018.
The firm said food services sector continues to expand rapidly on the back of flourishing economy, favourable demographics and steady rise in per capita income.
Saudi Arabia led the region, with total food service sales of $8.9bn, accounting for nearly half of the GCC market. The UAE was the second largest contributor, with total sales of $5.3bn generating 28 percent share in the region, followed by Kuwait ($1.9bn), Qatar ($1.3bn), Oman ($1.1bn) and Bahrain ($0.4bn). Within the food services sector, fast food segment or Quick Service Restaurants (QSR) has emerged as the largest, accounting for 58.2 percent ($10.9bn) of the GCC food services market in 2014, followed by Full Service Restaurant (FSR) at 31.5 percent ($5.9bn) and Café and Bakery segment at 10.3 percent ($1.9bn).
The Full Service Restaurant market (which includes fine and casual dining) is estimated at around $5.9bn in 2014, nearly half of the QSR market. While the concept of fine dining is still confined to affluent class and has not grown drastically in the last few years, the casual dining segment observed growth with the entry of new brands almost every year. Whereas, chained and specialist coffee shops are growing in popularity. In 2014, the Café and Bakery segment registered an annual billing of $1.9bn, exhibiting strong growth during 2012-14, growing at CAGR of 3.3 percent.
Shailesh Dash, CEO Al Masah Capital said; "Rising population is one of the key drivers of food consumption. The rising flow of tourists to GCC has helped drive demand. As most major food services outlets are concentrated in the Tier I and II cities of the GCC countries, the rapid growth in urbanised population is expected to act as a stimulus to the growth in the food service sector. Additionally we have annual food festivals, exhibitions and shopping festivals held in the region that provide a boost for growth".
"However, given the high dependence on imports, securing a steady supply of food remains a key challenge for the GCC governments. Several steps undertaken by regional governments to improve the food supply are still at a nascent stage and are likely to improve the situation in the long term." he said.
Al Masah also reviewed factors affecting accelerated growth within the sector and stated an increase in competition, weak supply chain infrastructure, high rentals in prime commercial properties and shortage of skilled human capital as major issues. Whereas key emerging trends observed were changing consumer palates, influx of global F&B brands and growing demand for takeaway by way of mobile applications and online ordering. Investments and acquisitions were also indicative of a robust growth structure for this industry.
Highlighting Private Equity (PE) deals and acquisitions by companies in the GCC, the report revealed that PE activities in the food services industry gained momentum in the recent years. In January 2015, Saudi Arabia based Bateel International announced a partnership with L Capital Asia, an Asian private equity fund sponsored by LVMH Moet Hennessy. Bateel is a homegrown brand in Saudi Arabia, known for its gourmet quality dates with market presence in 16 countries across Africa, Europe, Asia and the Middle East.
In June 2015, Diamond Lifestyle, the F&B PE fund of Al Masah Capital announced the acquisition of the UAE-based Al Faris Restaurant. Al Faris Restaurant operates the franchise of California-brand Johnny Rockets in the UAE, and holds the development rights in Oman.
Again in June 2015, Audacia Capital, a newly established investment bank licensed and regulated by the Dubai Financial Services Authority (DFSA), acquired a 30 percent stake in Al Safadi, a chain of casual dining restaurants specialising in traditional Lebanese food, with plans for further expansion in the UAE and the GCC. Whereas in April 2015, the Abraaj Group, a leading investor operating in global growth markets, and TPG, a leading global private investment firm, announced the completion of an investment into Kudu, a Saudi Arabian restaurant group via a portfolio of five brands to span over 290 outlets.