With a hot climate, a young and affluent population and modern retail infrastructure, the Middle-East is an ideal market for an impulse category like ice cream. With a population of 9.5 million and one of the highest per capita incomes in the world, the country leads all retail activity in the Middle-East.
The UAE food market is estimated to be worth US$5.9 billion and has grown at a CAGR of 4.5% from 2009-14. Of the total of 1.3 billion kg of food products retailed in the UAE in 2014, ice creams are estimated to contribute only 0.7% – this indicates significant head room for the category to expand. In volume terms as well, the per capita consumption of ice cream in the UAE is 1.7 litre, much lower than that in the US (18 ltr), Australia (10 ltr) and even South Korea (8.4 ltr) – thus, with the category being far from saturated, it does represent a significant opportunity for marketers.
The total volume of the ice cream category in the UAE was estimated to be 16 million litre in 2014, which equates to 10 litre kg by weight and a market value of AED506 litre. Of this, the largest volume contribution is of Take Home Bulk ice cream (42%), followed by Artisanal ice cream (34%) and Impulse Single Serve ice creams (24%). However, in value terms, Artisanal ice creams are the largest at AED210 litre, followed by Single Serves at AED190 mn and Bulk ice cream at AED106 litre. As would be expected, Bulk ice creams contributed to 65% of Off-Trade consumption, while Artisanal ice cream contributed to 75% on On-Trade consumption.
The UAE has a very well developed modern trade infrastructure, with hypermarkets and supermarkets accounting for 50% of all food retail. This is followed by small neighborhood stores, convenience stores and forecourt retailers. The major grocery retailers are Emke Group (Lulu), Spinneys, Carrefour, Union Co-op, Choithram, Al Maya and Al Safeer Groups. Ice cream sales in the UAE are split as – 33% Specialist Retailers, 30% Hypermarkets/ Supermarkets, 19% Convenience stores, 13% Independent retailers and 5% Forecourt retail. From the period 2011, Hypermarkets/ Supermarkets was the fastest growing distribution channel for ice creams, with a CAGR of 7%.
The Artisanal segment is also quite vibrant with brands such as Baskin Robbins, Cold Stone Creamery, Haagen-Dazs having strong presence in key retail hotspots. In recent times, there has also been an influx of specialised brands of Italian Gelato (e.g. Morelli’s, Vasa Vasa), frozen desserts (e.g. Pinkberry) as well as innovative retail concepts like Minimelts Kiosks. Funky Korean brand, Milkcow is slated to open its first store in the upmarket JBR district of Dubai in early 2016.
Given this context, some of the opportunities and challenges for a new brand entering the category in the UAE would be as below:
1.Demographics & climate – as mentioned above the demographic and economic profile of the country, coupled with the hot climate, creates an opportunity for ice creams. While there is still a lot of scope to increase per capita consumption, which is much lower than other developed markets, it is also important to take note of emerging trends around health-consciousness – hence, apart from regular ice cream, there could an opportunity for low fat products and frozen desserts as well.
2.Ease of doing business and modern infrastructure – the UAE has relatively simple regulations with regard to new business setup and multiple Free Zones also provide the option of 100% foreign ownership – attractive propositions for new entrants. Further, the infrastructure from production to distribution and retail is also very well established, which could be leveraged by a new entrant.
3.Seasonality – while the climate is hot for most of the year, the UAE does experience a mild winter from November to February, where ice cream sales tend to taper off a bit. Further, there is also a dip in volumes during Ramadan, the Muslim month of fasting. However, there is potential to convert these dips into growth opportunities, via innovative product offerings e.g. heated ice cream products in winter (e.g. Sizzling Brownie with ice cream). Further, with the Ramadan cycle now being in the warmer part of the year for the next five years, ice cream-based products could be positioned as part of Iftaar during Ramadan.
4.Experience Seeking and Premiumisation – as seen by the Artisanal segment being the largest value contributor, there is significant potential among consumers to pay a premium for products where they perceive high value for their money (e.g. Scoopi Café sprinkles edible 23 carat gold on their Black Diamond ice cream and 1 scoop is priced at AED2,999). Further, consumers in the UAE are increasingly seeking varied and enriching experiences, rather than just consumption – this creates an opportunity for innovative products and formats e.g. outlets selling Turkish ice creams have sprouted in malls – the allure here is not just the product, but the entire ambience and experience of how it is served.
5.Multi-culturalism – the UAE is a melting pot of cultures with close to 200 nationalities living in the country. Further, it is also popular as a tourist destination, especially with visitors from the Arab World, Eastern Europe, Indian sub-continent and China/ Far East. With this multi-cultural mix, there are opportunities to tap into ethnic tastes e.g. Kulfi Falooda, which is a popular ice cream format in India; or Camelait, a camel milk-based ice cream. While these may not become large volume drivers, they would definitely add to a company’s ‘innovative’ image.
6.Snacks as meal replacement – with consumer lives getting increasingly fast-paced, there is a tendency to replace meals with snacks, which has led to the growth of categories like cereal bars. The ice cream category could also be positioned as a quick on-the-go snack, something that products like Mars and Galaxy Bars are trying to do.
The UAE ice cream category is projected to grow at a CAGR of 5.1% over 2014-19, to reach a sales value of AED650 million – currently, the market is dominated by IFFCO Group (Igloo and London Dairy brands) followed by United Kaipara Dairies Company (Royal Treat and Unikai brands), along with a host of specialist retailers like Baskin Robbins and Haagen-Dazs. It remains to be seen if the new concepts coming into the market will be able to take a share of the pie from these major players.
(The author is CEO of AMRB, Kantar Group Research Agency, Dubai. He can be contacted at Gagan.Bhalla@amrb-mena.com)
