Italian food has rarely been as popular as today in the United Arab Emirates. The most recent data show exports to the region are rising double-digit, and the numerous high-end Italian restaurants in Dubai offer fresh produce for one thousand and one night dinners.
Italy is expected to be the largest participating country at Gulfood, announced as the world’s biggest annual food and hospitality show taking place on February 21-25 at the Dubai World Trade Center.
However, the UAE market remains largely untapped when it comes to finding Italian produce on the shelves of large supermarkets. This is particularly true for smaller brands who are now considering selling in the region as consumption at home remains weak after the recession.
“Italian food has a huge potential in terms of presence in the region, but this is not reflected in the volumes of imported products, especially in the large retail sector,” said Alberto Nencha, president of the Italian Business Council (IBCAD), an organization which since 2006 promotes trade and investments between Italy and the UAE.
The UAE is not as large as a market as for example the US – it has a population of around 10 million, New York City has little over 8 million, net of tourists – but it serves as a strategic hub for the Middle East and the Indian subcontinent. Also, it imports 90% of agro-food products due to its hot and dry weather.
Appetite for Italian food is confirmed by growing demand. Exports to UAE of Italian agro-food and beverage products in 2015 increased strongly from 2014, when they rose 5.3% to €252.5 million in value. In the first eight months of 2015, exports were up 38.4% at €198.2 million, according to ISTAT data elaborated by the Italian Trade Agency (ITA-ICE agency), which has an office in Dubai. This was the highest level since 2012, when exports grew 47.5%.
A research by Alpen Capital, which compiled the “Arab Agricultural Statistics Yearbook”, showed that cereal (44.5%), fruit and vegetables (26%), milk and derivatives (15%), and meat (7%) are among the most consumed products in the GCC area (the Cooperation Council for the Arab States of the Gulf includes UAE, Saudi Arabia, Bahrain, Oman, Qatar and Kuwait).
As a result of changing eating habits and higher flows of tourists and expats coming to the region, consumption of fruit and vegetables, meat and milk products is expected to increase respectively by 8%, 4% and 3% in the next three years.
From Gulfood to Expo 2020, windows of opportunity
The agro-food sector is also expected to receive a boost by Expo 2020, which is forecast to attract 25 million visitors, 71% of which from foreign countries – the highest percentage on record in the history of the world’s exhibition, which last year took place in Milan.
Helped by a weaker euro, more Italian companies are trying to position themselves in the region.
Last year, over 100 Italian companies participated in Gulfood, which attracted 4,800 companies from all over the world, the organizers said. This year Italy is expected to largely beat that number, sending the largest delegation in all sectors, hospitality equipment, food and drink, occupying a surface of 3,956.50 square meters.
The Specialty Food Festival Dubai is also a very popular event attended by Italian producers, which last year participated under the umbrella of ICE Agency.
But this window of opportunity is only the first step. Establishing a direct presence, opening local offices, and finding a good distributor are the following most important steps to work in a market where competition from foreign operators is fierce. Some Italian companies contacted by Italianfood said they have regularly attended the Dubai show and have a presence in the country.
Electrolux Professional, which offers food service and laundry solutions, said it has been participating in Gulfood for more than six years and has an office in UAE. World of Italy, which exports Italian food to more than 80 countries in all continents, said this will be its sixth year at Gulfood, and added it has “few customers” in the country. Gianni & Gelato, a supplier of gelato products and machineries for hotels, restaurants and catering, said they have been regularly at the show and they are present in the region with distribution, support and services.
A good product is not enough
If opportunities exist – total food imports by UAE are expected to increase to $5.5 billion in 2015, reaching $8.4 billion by 2020 according to estimates by the Economist Intelligence Unit cited by ITA – there are also many challenges for producers at their debut in the region. Having a good product is not enough, insiders say.
First, the population is varied. The Italian community is small compared to a dominant share of residents from southeast Asia, Iran and other Arab countries (only around 10% of residents are from UAE), according to estimates provided by the ICE agency. This means most customers are not familiar with Italian recipes, have probably never traveled to Italy and need to be educated to distinguish genuine quality.
Among the countries rivaling with Italy are the US for snacks and cookies, European companies with US licenses for cereal, Australia for meat, and France and the Netherlands for cheese, according to ICE.
The second important aspect is distribution. The wholesale channel is advanced and well organized, but is dominated by foreign supermarket and hypermarket groups such as France’s Carrefour and UK’s Waitrose, as well as regional giants the likes of Spinneys, Lulu and Union Coop.
The most popular Italian brands in the UAE are global players such as Barilla, Buitoni, De Cecco, Divella and Giovanni Rana for pasta; Bertolli for olive oil; Ponti, Saclà and Pomi’ for sauces and condiments; Lavazza, Illy Caffé and Segafredo for coffee; Bauli, Ferrero, Venchi, Matilde Vicenzi and Panmonviso for snacks and baked goods; Galbani for cheese; Veroni and Citterio for cured meat, and Rio Mare for tuna.
Buyers and distributors have a firm grip on the market. Finding a good distributor is key.
“A large majority are western distributors, and there are also many Italians, who are very experienced,” Nencha said.
Restaurants are the preferred distribution channel, since they need constant supplies of fresh produce, pasta, tomatoes, and other products (alcoholic drinks can only be served at restaurants in hotels). Niche producers have more chances to be on restaurant menus than on the shelves of supermarkets.
In the wholesale channel the situation is more challenging. Margins are lower than at restaurants and smaller companies cannot imagine to impose prices 5 times as higher as their larger competitors.
“Finding a compromise, shortening the supply chain, is necessary to offer a quality product at a cococompetivive price xompcompetitive price,” Nencha said.