From a manufacturing stand-point, what are the advantages of being based in the UAE? How would you rate infrastructure in the UAE?
FAHMY: Gulf Food Industries has been established in the UAE for over 20 years. I think choosing this location was a perfect choice. It is a unique location especially that we’re focusing on the Middle East and North Africa. The standard of government services are perfect, especially compared to the region. Here you don’t have any complications with regards to visas, contracts, building expansion, especially as we’re in a free-zone. We’ve never faced any problems here. Although the costs might be relatively high, compared to the standard of service, I think it’s fair. Having said this, we do face some problems compared to manufacturing, for instance, in Saudi Arabia. However, this is only in the utilities and other services. For example, we use diesel here as fuel for the machines. Diesel costs twelve times as much in the UAE as in Saudi Arabia, where it’s subsidized. In general though, I think it was a perfect choice. Talking about the infrastructure in the UAE, when we came here 20 years ago, at that time the infrastructure was not completed. But it has developed dramatically at a very fast rate. During the last few years, during the boom in the UAE and the area, there was some fine tuning regarding the infrastructure. Now, I think it’s well established. I can see that the infrastructure in the UAE is good enough for the next 30 years. Some people say they might have invested too much in infrastructure. Maybe the payback period for this infrastructure will be longer than expected. But I think, now, they are in a very good shape when it comes to infrastructure.
Are there any plans for further investment and expansion in the region?
FAHMY: As everyone knows, we got hit by the financial crisis in 2008. After the financial crisis, we were planning to do some expansion or investments in the area. Currently, because of the non-stability of the political situation of the whole region, we will defer these expansions unless we see some really good opportunities. In the Short-term, this goes for everybody. I think everybody is trying to keep all the projects on hold till we have a clear vision for the future. When we talk about investments, you’re thinking about 20 or 30 years ahead. Long-term investments for now, I don’t think it’s very justified to have something long-term. But we’re trying to do some short-term things that will enable us to do some other big projects in the future. We have some things in mind and they will happen when the time comes.
What are the major differences in food retail and distribution between the UAE and other countries in the region?
FAHMY: Looking at the whole region, the retail business is growing significantly and the structure of the market has been changing from wholesale to retail. In the UAE, this is moving faster than in all the other countries in the region. You can see here in the UAE that the market is very structured and retail is very organized. The share of retail is more than 2/3 of the market, which is substantial. Compared to the other GCC countries or even the entire Middle East, I would say that the UAE is one of the top 3 when it comes to how structured the retail business is. It’s very organized. Of course, it’s also very costly now to be in the retail business. But I think retail is very important and it’s the future. In 10 or 15 years, retail should be 70-80% of the market here. The geographic area of the UAE is smaller and distribution is much easier compared to Saudi Arabia or other Middle Eastern markets like Egypt or Iraq. The good infrastructure in the UAE helps the distribution network to be stronger and more stable. This encourages all the business owners to focus on retail because retailers are easy to reach. This covers all the regions of the UAE. If you compare the 7 emirates of the UAE, they’re all covered. You cannot say that its’ only focused in Dubai or Abu Dhabi, actually they’re all covered and that helps to grow the retail business in the UAE.
How are consumer tastes and consumer behavior changing?
FAHMY: We can see that, during the last few years, consumer behavior has changed. Now, more people go for the easy meals, the ready-to-eat meals. Many wives are now going to work and don’t have enough time to do all the cooking. So everybody is trying to find the quick meals, the microwave meals. In our business we have kept this in mind and even for the standard common meal for the Arabs, foul medames, we have created a new segment, which is a value added meal. Easy to eat, just heat and eat. This goes for all the producers now. You can see the portion of the shelf covered by the ready-meals is growing significantly throughout the region, not just the UAE. And it’s a growing trend. We try to pamper the consumer more and try to make everything easy. The time factor has become more important for everyone. This goes for the whole family: wife, husband, and even the kids. So this segment is growing significantly.
How successful have retailers and producers been at keeping up with the changes?
FAHMY: Everybody now, all the producers, are trying to come up with new innovation. This can be in terms of the ingredients of the meal or how to serve the food to the consumers, for example easy-open packaging, easy-to-handle packaging, different covers, stuff like this. We’re all trying to put everything together and make it ready to save time. Companies are spending tons of money to grow this segment and to come up with a new innovation and to be more creative. This is one of the major factors that can make you different from your competitor, being innovative and taking a step ahead before the others. Especially here in the region, we are a very emotional people. Whoever is the producer that started the product first, the people become very loyal to them. Producers are keeping this in mind and I think they’re all doing a great job regarding this.
Looking at the whole region, the retail business is growing significantly and the structure of the market has been changing from wholesale to retail. In the UAE, this is moving faster than in all the other countries in the region. You can see here in the UAE that the market is very structured and retail is very organized. The share of retail is more than 2/3 of the market, which is substantial.
How important is having first-mover advantage in retail in the Middle East?
FAHMY: In the Middle East, being the first in the market makes a great difference. If we think about it, Nido started the milk powder, Kleenex started the tissues, Lipton started the tea bags, and everyone became very loyal to those brands. Any new competitor that comes into the market, even if the product quality is better, will have a hard time. People are very loyal to their old brands. For our business, we serve ready-to-eat meals for fava beans, called foul medames, the common meal for most of the Arabs. Now we are brand leaders in all markets and one of the main reasons is because we were first on the market. Being first in the market makes a huge difference in the Middle East.
How are regional brands positioned and perceived in the market versus international brands? How has this evolved over time?
FAHMY: You can tell that, recently, local brands or regional brands have started to grow and have started to become market leaders in some products. We are a national brand and we are brands leaders in all our markets, especially when it comes to the beans businesses. There are also some local competitors who are doing a great job and who have become brand leaders. All the international brands are available but people sometimes prefer the local brands in some products, for instance, if we look at the foul medames, which is a purely Arab meal. So if Heinz or Kellogg were to make the foul madames, emotionally people would feel that it is not convenient for them. Even for the other products, like tuna, local brands are still market leaders and I think they’re growing significantly.