A new report by AT Kearney, the global management consultancy, has revealed that consumer spending in the GCC food retail sector will climb to an estimated USD 106 billion in the next five years.
Out of the total consumer spend of USD 300 billion, food accounted for 28 percent of the total expenditure. Worth approximately USD 83 billion by year-end 2012 of the total $300bn, the consumer spend on food in retail sector will grow steadily in the coming years. Currently, Saudi Arabia and the UAE combined make up about 75 percent of the total food retail market in the GCC.
The report points out that “while an exciting opportunity of $23bn exists, there are many changing dynamics in the grocery retail sector. Regional retail has experienced Hyper Speed evolution in past years growing very rapidly when compared to retailing in many mature economies such as the US and Europe.” Encouraged by the rising demand, major retailers like Panda and Lulu have responded swiftly to the market and opened 100 stores in one-third of the time as compared to in Western chains, like Morrisons, Waitrose and Sainsburys.
At the same time, there has been a remarkable change in consumer shopping trends. While all food retail formats have grown steadily, larger-sized hypermarkets are poised to dominate GCC market share over the next five years. Shoppers are increasingly getting used to the convenience, ambience and wider variety offered by these hypermarkets.
According to the report, the use of private labels also offers the GCC retailers a tremendous opportunity for growth in the coming years. Currently, private labels in the GCC account for a mere three percent of total sales. In other developed markets, private labels are central to a retailer’s value proposition and comprise of 15-20 percent of sales. To ensure sustainability of market share and profitability, the GCC retailers need to adopt a differentiated strategy and implement global best-practices to achieve greater competitiveness.