Government regulations to raise the standards of traditional groceries are providing an opportunity for international established grocery chains to enter the UAE market, analysts say.
The UAE’s grocery market reached $9.5 billion in 2012, with traditional or independent groceries making up 8,454 out of the 9,397 grocery outlets in the country, according to data by Euromonitor International. Only 943 are modern grocery outlets.
Many local groceries are unable to afford the changes required by Abu Dhabi’s regulations that aim to improve their appearance and standards — which is proving to be an opportunity for international established chains to step into the market.
Modern grocery retailers saw about seven per cent growth in the number of outlets last year, while traditional grocery outlets declined by almost one per cent, according to research by Euromonitor International .
Circle K, the Canadian-owned convenience store chain with 13,000 stores globally, is planning to invest Dh200 million to open around 500 stores in UAE and Saudi Arabia over the next four years in efforts to “modernise” the traditional grocery store market, said Fahmi Al Shawa, managing director of Circle K. Of the 1,300 groceries in Abu Dhabi, many will be unable to invest in the required upgrades and “sooner or later, will go out of business,” he said.
Circle K is planning to spend about Dh8 million to open at least 10 new stores in Abu Dhabi alone, he said. “We can go up to 50 stores if we get the locations. It is easy to go to Abu Dhabi and put a premium, but to maintain competitive prices the biggest barrier is operational costs like rent.”
The international chain recognises that it must cater to customers from all social and economic demographics. “We can’t come in and say I’m a premium grocery. We’ve got to compete with traditional groceries. We sell everything from the two-dirham samosas to the 30-dirham organic sandwich,” he said.
