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AN EXPLORATORY STUDY OF THE VIABILITY OF
OPERATING A GENERIC GROCERY BUSINESS IN UAE
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Abstract
Generic products are becoming popular in most of the Western world countries. However, in
other economies the concept of generic products is new and needs more awareness about the
usage and importance of these products. Considering the need of introducing more of generic
products, a detailed business plan has been presented to analyse the feasibility of introducing
generic grocery products in the markets of United Arab Emirates. In order to design the
business plan a detailed research study in the markets of UAE has been undertaken by
focusing on information related with industrial situation, analysis of competitors, consumer
behaviour, lifestyle, demographics and eating habits and patterns of consumption. The data
has been collected through secondary sources of study like magazine articles, market reports
and Internet sources to conduct an exploratory study. The results of the study has been
successful in achieving the objectives of the study and establishing the feasibility and
viability of generic grocery products business in the markets of UAE under present social,
economic and political situation of the region.
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Table of Contents1. INTRODUCTION.................................................................................................................................5
1.1 Background to the research.......................................................................................................5
1.2 Research question and Research Objectives..............................................................................6
1.3 Justification for the research......................................................................................................6
1.4 Methodology.............................................................................................................................7
1.5 Outline of the chapters..............................................................................................................7
1.6 Definitions..................................................................................................................................9
1.7 Summary....................................................................................................................................9
CHAPTER 2: LITERATURE REVIEW........................................................................................................10
2.1 Introduction...............................................................................................................................10
2.2 Academic Theories relevant to research objectives related with market analysis and marketing strategies for generic grocery business in UAE................................................................................11
2.3 UAE’s business environment relevant to research objective of examining legal structure, funding and exit strategy suitable for UAE market..........................................................................18
2.4 Status and prospects of food retail industry in UAE associated with research objective of exploring management of product development, supply and customer service.............................19
2.5 Summary....................................................................................................................................21
Chapter 3 Methodology.....................................................................................................................22
3.1 Introduction.............................................................................................................................22
3.2 Philosophy of study and data required for analysis.................................................................23
3.3 Research Strategy to analyse collected data............................................................................24
3.4 Research design.......................................................................................................................28
3.5 Research procedures...............................................................................................................29
3.6 Ethical considerations..............................................................................................................30
3.7 Summary..................................................................................................................................31
Chapter 4: Findings..............................................................................................................................32
4.1 Global trade Position.................................................................................................................32
4.2 Food and Beverage Landscape in UAE.......................................................................................33
4.3 Demographics............................................................................................................................34
4.4 Supermarkets or hypermarkets retail markets of UAE..............................................................35
4.5 Supermarket/hypermarket retail sales......................................................................................36
4.6 Challenges in UAE’s Food and Beverage sector.........................................................................36
4.7 PEST Analysis.............................................................................................................................37
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4.8 Porter’s Five Force Model for retail specifically the supermarkets of UAE................................40
4.9 Patterns of consumption and expenditure in UAE.....................................................................41
4.10 Food and Beverage (Eating Habits) in UAE..............................................................................42
4.11 Major characteristics of food and beverage industry of UAE..................................................45
4.12 Key drivers of industry.............................................................................................................46
Chapter 5: Analysis & Conclusions.......................................................................................................48
5.1 Introduction.............................................................................................................................48
5.2 Analysis/conclusions about each research objective (aim)......................................................48
5.3 Analysis/conclusions about the research question..................................................................51
5.4 Overall conclusions..............................................................................................................52
References...........................................................................................................................................53
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1. INTRODUCTION1.1 Background to the research
The products that are packed plainly and are economy oriented in nature are known as
generic brand grocery products. These products were considered as low in level of quality in
comparison to their branded counterparts (Prendergast and Marr, 1997). As discussed by
Ober (2009) these generic products does not have any traditional brand names and the labels
of the products provides information about the packaging and ingredients of the products
(Findlay and Sparks, 2008). The primary salient appeal of generic brand grocery products has
remained the low price at which they are sold.
It was during recession when a significant degree of popularity was gained by the generic
grocery products because of offering high quality of low price in comparison to branded
products offered at high price (Boone and Kutz, 2013). However, the attraction of customers
have remained mainly due to high quality of these products even at a lower price. Retailers in
present day situations are making sincere efforts to improve the labelling and packaging of
generic products to improve the customer base and ensure long term loyalty by establishing a
strong brand image (Ober, 2009). As per the view of Lamb and Hair (2012) these activities
has assisted in generating a loyal customer base towards generic substitutes of grocery items
even when a key position has been acquired by labelled and branded products in developed as
well as developed countries.
In the Gulf region, UAE holds the position of having a mass sector of grocery retail which is
expected to rise to AED 27.7 billion by the year 2015. One these figures are attained the
region will comprise of 74% of overall food and drink market of Gulf (Government of Dubai,
2013). In largest emirates of Dubai there are most of the modern retail stores established as a
large number of population of the region is found in this emirate of UAE.
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1.2 Research question and Research Objectives
The present study has been conducted to find answer to the following research question:
Is it strategically viable to start a generic grocery business in the present state of economic,
legal and social market conditions of UAE?
Objectives of the investigation
The present study was conducted to achieve the following research objectives:
To conduct the industry and market analysis for generic grocery business in UAE
To explore potential of success of generic grocery business in UAE
To explore expected consumer demand and scope pf accepting generic grocery
products in UAE’s markets.
To examine the sales and marketing strategies to be adopted for target market
To identify the legal structure, funding and exit strategy suitable to target market
1.3 Justification for the research
As discussed by Clifton (2010) the products of generic nature can be easily found on every
shelf of American supermarkets and other stores. A minimum degree of attractiveness can be
found in packaging of these products as these are sold with descriptive names. As reported by
Shippey (2011) the response from consumers has remained favourable, particularly for
products where the price differential is substantial and the product quality is comparable or
less important. The popularity of generic products in grocery section in markets of USA
makes it a viable option to study the business prospects of such products in a market like
UAE. The market offers huge population and a significant level of dependency on imports
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from U.S. for food products. Further the study is justified in light of the current state of
grocery industry and its future prospects in UAE.
1.4 Methodology
The present study followed the philosophy of positivism for collecting data that is reliable
helping to attain objectives of the study through analysing the collected information focused
on getting clarity over real world scenario and understanding the business prospects in
generic grocery business in UAE markets.
Further, qualitative information was obtained through secondary sources of information. The
information collected was associated with the condition of market and industry as well as
behaviour and attitude of consumers towards grocery products. The information also relate to
the lifestyle and food demand among people of UAE and what different categories of food
products are in high demand in the region. This data can be best analysed with the help of
deductive approach to data analysis and therefore this particular approach has been used to
conduct the research work and achieve the objectives of the research study.
In order to analyse the collected information and get answer to research question the models
of PEST analysis and Porter’s five force have been used under the study. These methods have
helped in getting an insight into the industrial situation as well as general business
environment of UAE. The methodology under this particular research work followed the
route of secondary method of study where the data about current situation of UAE’s grocery
industry and macro environmental factors has been collected though government reports,
company reports, competitors reports, magazine articles, journal articles and latest news
articles along with Internet sources. However, relying only on secondary data may not prove
to be appropriate at postgraduate level and therefore, various frameworks have been used in a
unique way to analyse the available information about UAE’s market.
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1.5 Outline of the chapters
The research report will be divided into following five chapters:
Chapter 1: Introduction
This chapter will provide a background to the research along with providing a justification for
the study, providing the research question and a brief about methodology of the study.
Chapter 2: Literature Review
This is the second chapter of research study where various theories associated with research
objectives will be discussed.
Chapter 3: Methodology
In this third chapter the details about data to be collected for analysing the market situation in
UAE, industrial condition in grocery industry of UAE, information required about consumer
behaviour and attitude, demographics and lifestyle of people in UAE and political, legal,
social and economic conditions of the region will be provided. The details about the way of
collecting required data and models used to analyse the collected information will also be
provided.
Chapter 4: Findings
This chapter provides secondary data collected through various sources of information.
Chapter 5: Analysis and Conclusion
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This is the final chapter that presents a detailed analysis of secondary data on the basis of
literature review presented in second chapter of the study. The focus will be on providing
conclusions in relation to each research objective and that with research question.
1.6 Definitions
Generic Brand: It is a product lacking widely recognised name as it is not advertised and sold
at a comparatively lesser price as to branded products.
Viability: It refers to the capacity of operating or being sustained.
Grocery: Non-perishable food stuff sold by retail stores
UAE: United Arab Emirates (UAE) is a country that is the federation of seven emirates and is
located in the southeast end of the Arabian peninsula on the Persian Gulf.
1.7 Summary
The report presents the detailed study conducted to understand various strategic, managerial,
and legal, market related and economic factors that can affect the viability of a generic
grocery business in UAE. A method of secondary study has been followed to collect the
required data and results have been analysed by benchmarking with the detailed literature
review provided in relation to overall objectives of the study.
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CHAPTER 2: LITERATURE REVIEW2.1 Introduction
There are several ways to classify brands and can be categorised as private, manufacturers or
national, family and individual (Clifton, 2010). Whiel taking any decision associated with
brands and branding there is a need for the firms to understand the merits and demerits
associated with each brand (Lamb and Hair, 2012). However, some companies are selling
their products without putting much effort on branding and these products are known as
generic products. Key categories of generic grocery include food and household staples.
These products were introduced originally in Europe and were priced as much as 30 per cent
less in comparison to the branded products in same category. Originally the strategy of these
products was introduced in the United States around 3 decades back and there has been a
considerable rise in market share of these products even after improvements in economy. As
argued by Clifton (2010) there is a wide range and variety of consumers demanding for
generic products and prefer these in comparison to branded substitutes whenever available.
As discussed by Martha and Hawes (1984) the high rate of inflation during 1970s in USA
posed new challenges that made manufacturers to think of new opportunities. These
opportunities and challenges resulted in a major development on strategic level where the
generic products were developed and introduced in markets of USA. These products were
terms as being no frills consumer products. Several practitioners and scholars can be found
debating on long term success of these products in a market. However, there are success
reports from American markets where the one-third of supermarkets can be found offering
these products since the inception of the products in 1979. The distribution of generics
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continued to expand, and, by 1980, 51 percent of the supermarkets of the United States were
selling generic groceries (Denis, 1984).
In modern grocery retailing, private labels are playing a key role and includes the products
developed and marketed by retailers running various retail formats (Findlay and Sparks,
2008). There are certain specific occasions when these products are sold as premium products
but the modern grocery have started leveraging on these private labels for generating huge
revenues as these products can offer better margins to the retailers (Boone and Kutz, 2013).
The Modern Grocery Retailing market of USA reported that the demand for convenience
foods is growing in the category of generic products (PR Newswire, 2014). Foods that can be
prepared easily or are ready to eat in nature are considered as convenience foods. As pointed
out by Ober (2009) with people’s life becoming busier and they require ample time for
leisure there is a growing demand for food that is conveniently available and healthy in
nature. Apart from such a need the requirement of keeping a control over budget of
household and with more women coming in working sphere along with changing nature and
demographics of the countries, the demand for generic products is bound to rise (PR
Newswire, 2014).
2.2 Academic Theories relevant to research objectives related with market analysis and marketing strategies for generic grocery business in UAE
Some important academic theories associated with the aims and objectives of the present
study can be considered here. These theories have relevance to the research objective where
the industry and market analysis of generic grocery business of UAE has to be conducted.
These theories are also relevant to third research objective where the sales and marketing
strategies to be adopted for target market are required to be examined.
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The theory of product differentiation applies to the generic category of products as retailers
can achieve a competitive advantage through providing products that are new and unique but
available at low price in comparison to branded products and also act as a major source of
fighting the competition posed by foreign food products.
2.2.1 Product Differentiation
Product differentiation is represented in a number of different ways. In particular, economic
models distinguish between vertical product differentiation and horizontal product
differentiation. With vertical differentiation, all consumers have the same preferences and
thus agree that some products are better than others and this can be referred to as product
quality. With horizontal differentiation, consumers can have differing preferences and thus
some may like one product while others prefer another and this can be called as product
variety. The generic products lies in this category of vertical as well as horizontal
differentiation where consumers get a choice of selecting between branded and generic
products that are being offered at a price lower but having high quality characteristics than
the branded products.
Through product differentiation, market power is gained by firms enabling them to transcend
the Bertrand Paradox for pricing of homogenous products whereby some identical products
are sold by two or more firms and these products are perfect substitutes of each other
(Bazdresch, 2011). Therefore, it is not possible for one product to carry a premium price and
retain positive sales. Here it is assumed that marginal costs of both products are common and
are kept constant while market demand has a finite price intercept. This paradox is naturally
resolved by product differentiation. Here products become imperfect substitutes and firms
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have some market power because of special features of the products and are able to set prices
without a completely elastic response by consumers (Tirole, 2012).
However there are some models of product differentiation where choice if not treated
explicitly and is assumed as a framework generating a demand system (Tirole, 2012). One
such model is discrete choice model where structure of product differentiation is considered
critical for predicting results. As per this particular model the idea that product differentiation
softens price competition fits well with the observation that firms often search for market
niches when positioning their products (Dirisu, Iyiola and Ibidunni, 2013). However, there
are limits to differentiation. Fixed prices, discrete concentration of demand in the product
space, and cost of demand gains from the agglomeration of firms all may foster product
homogeneity. It is also important to understand that actual differentiation is multidimensional
and not limited to any single dimension, i.e. vertical or horizontal. There is a limited research
available explaining the issue of demand complementarity and substitutability of various
product characteristics and of the optimal strategic mix of these characteristics (Tirole, 2012).
This multidimensional nature of product differentiation is clearly visible in case of generic
grocery products that are produced ensuing high quality but sold at relatively lesser price by
avoiding the cost of advertising these products in general market.
This differentiation theory is linked to the business plan as the focus is on identifying the
scope of introducing a generic category of food products through large retail chains in a new
market of UAE. The business plan is directed to introduce generic grocery products that are
new for market of UAE and are required to be sold at a price lesser than the branded products
of same category.
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2.2.2 Theory of Comparative Advantage
The theory of comparative advantage is also a key theoretical foundation that can be applied
to a situation where the opportunity lies in ability of a party to offer particular product or
service at a lower marginal and opportunity cost over another (Tayeb, 2009).
Theory of comparative advantage focused on the major foundation of trade that is found in
differences in comparative cost. The theory of comparative cost suggest that one party or
country may be more efficient than another, as measured by factor inputs required to produce
one unit of each commodity (Mukherjee, 2011). But so long as it is not equally more efficient
in the production each there will always exist a basis of trade between them from the supply
side. It will pay the country of the produce to produce more of those goods in which it is
relatively more efficient and export those in return for goods in which it is relatively
inefficient Comparative cost advantage refers to differences in relative efficiency between
two countries in the production of two commodities (Warf and Harrington, 2010).
2.2.3 Theory of Competitive Advantage
The concept of competitive advantage was provided by Michael E. Porter through his five
force model and generic competitive strategies. Porter has argued that in present business
environment, it is possible to gain a competitive advantage through the use of different
models and methods.
The three approaches to competitive advantage has been defined by Porter (1998) comprising
of cost leadership product differentiation and focus. He has also advocated the application of
both the strategies in a simultaneous manner so as to attain a competitive advantage in a short
duration of time. There are some key approaches to achieve competitive advantage that are
discussed as follows:
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2.2.4 Porter’s five force model
Under this particular model, Porter focused on five major forces operating in every market.
These forces include bargaining power of suppliers, bargaining power of consumers, threat of
new entrants, threat of substitutes and the rivalry among existing competitors (Mukherjee,
2011). A focus on these market conditions help in making decisions in relation to viability of
a business opportunity in a particular market as under each heading of the model it is possible
to develop complex analysis of competitive position for creation of strategy, designing plans
or making investment decisions (Figure 1).
Figure 1: Porter’s five force model
Porter’s generic strategies
The second most important determinant is the position of any firm within industry. Even is
the industry is operating at a low profit, a firm can create superior returns is it is well
positioned in the market. It has been argued by Porter (1998) that the strength of any
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organization depends upon its cost advantage and differentiation. With the help of these
strengths the firm can follow three generic strategies namely cost leadership, differentiation
and focus. These strategies can be applied at business unit level and are known as generic as
they are not dependent on any industry.
Unlike Porter’s five forces model, which is often used for situational analysis, his Generic
Competitive Matrix, which consists of three strategies, is mainly used for describing that the
business can achieve and maintain competitive advantage, based on its market scope and
competency (Figure 2).
Figure 2: Porter’s Competitive Strategy Matrix
The three different kinds of generic strategies are:
Segmentation Strategy (when the market scope of narrow)
Differentiation Strategy (when the market scope is broad and the company is able to
produce unique products); and
Cost leadership Strategy (when the market scope is broad, and the company is good at
low-cost or production).
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While these strategies are not mutually exclusive, it is not common to see successful
companies utilizing these strategies in a combined manner within a specific timeframe.
Ansoff product matrix
A major marketing tool as developed by Igor Ansoff is the product or market matrix offering
strategic choices for achieving the goals and objectives. There are four major categories of
selection namely market penetration, market development, product development and
diversification.
Diamond Model of Porter
Michael E. Porter provided a Diamond Model that explains the advantage offered by nation
helping us to understand the comparative position of a nation in global competition (Tihanyi
and Pedersen, 2012). Porter argued that the competitive environment of a country determines
the success of any industry in the country. Therefore the focus should be on studying the
general business environment and general environment of the nation. This is determined by
some key factors that take the form of condition of factors, industries supporting and related
with each other, demand conditions, and firm strategy, structure and rivalry. Additionally,
there are some key factors that shape the nation’s competitive environment and there are two
factors as emphasized by Porter (Reinert and Davis, 2011). The first factors refers to the role
played by chance events such as an invention, shortage of key inputs, a sudden rise in the
costs of inputs, or the political decision of government. The second is government policy’s
role having the power of influencing the organizations of any industry in a positive or
negative manner. The extent to which government intervention has contributed to the
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emergence of a national competitive advantage in particular countries is hotly debated
(Reinert and Davis, 2011).
An important aspect of the phenomenon of national competitive advantage is that it is an
evolving process, in which all the factors interact, with each determinant influencing the
others (Pitts and Traill, 1998). This process of interaction is as important as the presence or
absence of each of the factors viewed separately.
This model provided by Porter is also associated with the need of sustaining a competitive
advantage. The firms operating in international destination are required to gain a competitive
advantage, but also needs to sustain such an advantage through processing of widening and
upgrading. As discussed by Tallman (2010) factors giving rise to competitive advantage are
necessary for ensuring sustainability too. Such factors comprise of investing in institutions
undertaking the work of research and generating ideas, the composition of demand and the
intensity of domestic rivalry, and the extent to which the different factors in the diamond
interact (Pitts and Traill, 1998).
This particular model will help in studying the international business scenario to identify the
reasons of attractiveness of UAE on a global level in comparison to other foreign
destinations.
2.3 UAE’s business environment relevant to research objective of examining legal structure, funding and exit strategy suitable for UAE market
A healthy environment for foreign business is provided in UAE through its friendly political,
economic and technological environment. As discussed by Geeta (2012) in UAE there is an
easy accessibility to markets, ownership and a strong legal framework influencing the
dealings in a free and protected manner. In UAE the strategy of economics says that financial
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resources and legislative powers are deployed in a manner that it creates first world
infrastructures, thoughtful legal, thoughtful legal underpinnings, and living conditions to
attract business flow. This has resulted in a strong position within the region as well as on
global level in various industries including the retail and mass grocery industry of UAE
(Geeta, 2012). Similarly a conducive environment is available for small and medium business
sectors as well as least restrictions to market accessibility for foreign players in the region.
The rising interest in UAE as a business destination is justified by the stable political and
positive economic outlook of the region. Also, the early recovery of the region from global
recession is a major factor attracting foreign investors in the region. It has been reported that
the region will grow at a rate of approximately 4 per cent every year. The initiatives and
support provided by the government of the region attract strong investments in UAE acting as
a regular source of diversification of the economy that will be continued over a long duration
in future (Davidov, 2013).
2.4 Status and prospects of food retail industry in UAE associated with research objective of exploring management of product development, supply and customer service
The retail sector of the region is on rise and a continuous growth is reported by the sector
supported by the regular up-gradation of retail stores and the state of the art mega stores
upcoming in the region. A diverse base of consumers is found in UAE and a majority of
consumers coming from high income group (Aruvian’s Research, 2013). An aggressive
growth is being reported by the food retail sector of the region where more of large scale
stores are being introduced for and several local and multinational operators like Carrefour
have entered the retail industry with a focus on food products at several locations across the
UAE (ibid.). The consumer ready products are generally imported in UAE and the major
source of U.S. food and agriculture industry. The high quality image of these products from
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U.S. is a major source of popularity of the food products and the inability of UAE to fulfil its
food demand due to unfriendly weather conditions have resulted in dependency over
imported goods for food (Kamle, 2013).
A touch competition is still being faced by the foreign brands as the government of UAE
promotes local retail sector and they are into an expansion mode presently. The supermarkets
and hypermarkets of the region are motivated to fulfil the changing demands of a diverse
population of the region by making an effort to fill particular market niche of premium food
products.
Despite of the economic downturn of 2008-2009, the economy of UAE has reported a strong
performance in recent years (Food Export Association, 2013). The increasing disposable
income of people in the region is another attraction to start a grocery business in the region as
this will have an impact on demand side of grocery products in UAE.
The reason for these characteristics lies in the rising population of the region demanding
more of grocery products. The fulfilment of this growing demand is dependent upon imports
resulting in high priced grocery products being offered to general public of UAE. The
government of the region along with local manufacturers is making sincere efforts to improve
the ability of local markets to fulfil the growing demand (Food Export Association, 2013).
Such conditions presents an opportunity for UAE markets to introduce products in the
generic grocery section that have the ability of meeting the demand locally through high
quality low priced products.
2.5 Summary
The above literature review suggests that UAE markets presents an attractive opportunity for
marketing of generic grocery products in through supermarkets. Generic products may have
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east acceptability in UAE’s markets because of the low price and high quality of generic food
products to be sold through super markets. The food products to be offered through
supermarkets will prove to a good source of income as the markets of UAE are presenting
strong business opportunities through positive economic prospects and rising income of
middle class of the region. There are several different theories that can help in analysing the
current industry and market situations and explore marketing and sales strategies to ensure
success in the target market among various groups of consumers.
Chapter 3 Methodology3.1 Introduction
Before going into an in-depth discussion over research methods and methodology there is a
need to understand the difference between the two terms. Research methods refers to various
methods or techniques used in order to conduct the research. In other words, it refers to
methods used by the researcher used during the course of studying his research problem
(Bjerke, 2010).
On the other hand, methodology of a research work represents the systematic way through
which the issue under study can be solved. As per Bjerke (2010) we can understand
methodology of research as a science to study the way research is conducted in a scientific
manner. Here the focus of study is on all steps required to conduct the study and understand
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the issues under study. As per the view of Bjerke (2010) the researcher is required to
understand the way of developing the methods or techniques to be adopted for study and also
the methodology to be followed for answering the research question.
It is also necessary to understand that research methodology is somewhat different from
preparing a business plan. The present study has followed a business plan method to collect
the information related with present situation of grocery industry of UAE, the state of
competition in the industry and policies of government that can have an impact on business
of the firm. Further the information related with attitude of consumers towards grocery
products, the present and expected demand for these product in future and expected consumer
behaviour towards generic grocery products has been collected and analysed under the
research methodology of the study.
Saunders. Lewis and Thornhill (2009) has provided a research model termed as research
‘onion’ that helps in explaining the methodology of the research study. The model comprise o
six different layers explaining the major philosophies of the study explained under layer one.
The second layer explains the research approaches and third layer talks about the research
strategy. Further there is fourth layer that discuss the methods and choice of methods
followed by the next layer explaining time horizons. Then the final layer represents the
techniques and procedures (figure 3).
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Figure 3: The research Onion
3.2 Philosophy of study and data required for analysis
In the present research study the research has followed the philosophy of positivism for
collecting the data that is reliable in nature and achieve the objectives of research based on
data analysis so as to have an understanding about real world experiences about prospects of
business in UAE especially in the area of generic grocery products.
The objective of applying the positivism approach has been to discover the external reality
and not limiting only to creation of the object of study. The approach of interpretivism was
rejected here as we need a rational and consistent approach to reach the objectives (Gilmore
and Carson, 2010). Additionally, the research under this study was required to take the
position of an external observer to understand the viability of a new business in a new
location while in case of interpretivism there is a need of full involvement of the researcher to
24
experience what is being studied (Gilmore and Carson, 2010). Additionally, the route of
positivism has helped in maintaining a clear distinction between facts and value judgements.
The data to be collected for analysis of UAE’s grocery sector and understand the feasibility
of generic grocery products in the region, will take the form of economic, political, legal and
technological conditions in the region. Further, the details about social classes, lifestyle of
people, income patterns consumption and expenditure patterns and attitudes and consumer
behaviour towards food and beverages and various brands available in this product category
in UAE.
Further the information about demographics of the region along with changing lifestyle of
people and expected change in consumption and eating patterns of food products has also
been collected for analysis.
3.3 Research Strategy to analyse collected data
The present study has followed the route of secondary method of study and no data has been
collected through primary methods of interviews, and questionnaires. Here the data about
current situation of UAE’s grocery industry and macro environmental factors has been
collected though government reports, company reports, competitors’ reports, magazine
articles, journal articles and latest news articles along with Internet sources. A wide variety of
sources chosen to collect the required data helped in considering various factors from
different perspectives before moving on to the analysis part of the research work. This
ensured validity of results obtained from the study at the final stage of the research work.
Therefore, the focus of the present study has remained on collection of details about
marketing, political, economic, social, technological, legal, sales, operations customer service
25
and quality standards in relation to grocery markets of UAE and the qualitative data has been
collected through secondary mode of data collection.
In order to conduct the analysis of the food and beverage sector if UAE a detailed analysis of
the industry and markets of the region will be undertaken. Such an analysis will be conducted
through Porter’s fiver force model and PEST analysis. The study of PEST analysis will help
in analysing the political situation, economic factors, social conditions and technological
developments in the region. Further Porter’s five force model will help in identifying the
current situation of industry in terms of threat of new entrants, rivalry among competitors,
bargaining power of suppliers and that of buyers along with threat of substitutes available in
the industry.
3.3.1 Justification for the selected paradigm and methodology
The present study has selected the secondary method of research due to three major reasons.
First, it is practically not possible to collect the primary data from customers in UAE about
the concept of generic groceries as the product is very new for the markets. People may not
have reached the maturity of using the generic grocery products and thus may be unable to
provide a real picture of the scenarios in relation to these products. Secondly, it is practically
not possible to gain information about market and industrial situation, government policies
and legal formalities from primary sources like government officials, big industrial house
owners and existing generic grocery products manufacturers in UAE markets.
Secondly, secondary research allows the researcher to explore existing data using a different
form of analysis than previously conducted. Third, as a youth practitioner it is not possible to
engage in a study to cover a big region like UAE through primary mode of study which calls
26
for great amount of money and time. Furthermore, the secondary research will contribute to
the research process as it will help in illustrating the context for primary research, providing a
description of the people, places, events or trends that can further be explored through
primary research in future studies (Punch, 2010). It can also help in justifying primary
research and makes comparisons possible.
Further, the present research has selected and followed the operative paradigm focusing on
qualitative study which is based on the philosophy of interpretive paradigm supporting the
view that there are several truths and multiple realities (Trainor and Grauge, 2011). The focus
of such a paradigm is on following a holistic approach about the issue or the environment
(Trainor an Grauge, 2011) and suits the present research work as it allows us to consider a
holistic view of whole grocery industry as well as the region of UAE before making a
decision to avail a business opportunity.
It is to be noted that the present study is entrepreneurial in nature where qualitative paradigm
is appropriate for its framework that can be used to discover new unknown dimensions
associated with the entrepreneurial world (Johnson, 2009). The study of success factors in
entrepreneurial world is new to the field of scientific study, and therefore has much potential
of latest discoveries and opportunities making qualitative phenomenology appropriate
(Punch, 2010). Thus, this particular approach or paradigm will prove to be more productive
as compared to quantitative or triangulation paradigm to research work.
3.3.2 Rejected methods
The method of primary research has been rejected under the present research because it was
not practically possible to collect the data required to study government policies, market
27
conditions, industrial attractiveness, consumers’ perception and economic and legal factors
present in UAE’s markets through primary sources of information. As large volumes of
information with several different perspectives and areas was required to analyse the market
opportunity for generic grocery business in UAE, it was decided to reject the primary mode
of research work.
Further, the method of descriptive research has been selected and exploratory research was
rejected as the present study is concerned with questions of ‘who’ and ‘how’. The present
research does not have a focus on exploring new issues or explaining why something
happened. However, the focus is on identifying what is the situation in UAE’s markets, how
people may react to new generic grocery products and who should be the target of these food
items. Therefore, no exploration of new methods or issues was required and thus the method
was rejected under the study.
As we need to discuss the present market situation and identify the business opportunity for
generic grocery products in UAE’s markets in detail, it was required to study and analyse the
qualitative form of information related with research objectives. It was not possible to study
these situations through figures and numbers and thus the quantitative form of study was
altogether rejected under the study. Rejecting the quantitative method of study and focusing
only on qualitative method rejects the triangulation method automatically.
3.4 Research design
The research has been designed by following the qualitative route to study where descriptive
data has been collected to conduct an analysis of available information in relation to generic
grocery business opportunity in UAE. The qualitative design of research work is based on
detailed information and lacks a focus on figures and statistics. The design provides the
28
benefits of credibility, transferability, conformability and dependability along with the
features of validity, reliability, objectivity and generalizability.
The research follows a descriptive design of study where the major purpose is to paint a
picture using words and to present a profile, a classification of types or an outline of steps to
answer questions as who, when, where and how (Punch, 2010). Such a research work
presents a picture of the specific details of a situation, social setting, or relationship (Johnson,
2009).
3.4.1 Design of Instrument(s)
Documentary data is the major research instrument used to collect the required data under the
present study. Documentary data both historical and contemporary is a rich source of
information for social and entrepreneurial research (Karami and Rowley, 2006). Indeed, a
distinguishing feature of market and society may well be the vast array of documentary
evidence that is compiled routinely and retained for further research work (Karami and
Rowley, 2006). Further the other sources of information available in the form of company
reports, government records and other internet sources along with previously conducted
research work on similar topics have been considered as the instruments to collect the
required data under present study.
3.5 Research procedures
Saunders et al. (2009) has provided inductive and deductive method of research approach.
The deductive approach is based on the data collection along with the theoretical foundations
as theory helps in data collection and a new theory is developed by the researcher after
consideration of collected theories. This approach to research work generally suits the
quantitative form of research (Saunders et al. 2009).
29
On the other hand, the approach of inductive method focus on qualitative method of study as
data here is collected and analysed much before finding theories. Here the results may be
similar or different in relation to theories that are considered for study and analysis after the
data has been collected (Saunders et al., 2009).
The present study followed the route of secondary method to focus on industrial and market
situation in UAE for understanding the feasibility of introducing generic grocery products in
the region. A descriptive nature of data has been collected associated with situation in market,
prospects of growth in the region, acceptability of generic grocery products in the region to
decide upon the appropriate sales and marketing strategy for tapping the markets of UAE.
The study follows this approach as information required was of descriptive nature and
depends upon current industrial conditions in UAE acting as a basis of determining future
trends in demand for grocery products.
The inductive method of analysing data has been implemented for getting results and
reaching research objectives. This is so as inductive approach is considered the best suited
method for analysing qualitative data.
3.6 Ethical considerations
Most discussions of ethical principles focus upon primary data collection involving human
participants (Gilmore and Carson, 2010). There has been far less discussion about the ethical
use of documents and secondary data. However, that does not mean there are no ethical
issues arising from conducting secondary research (Bryman and Bell, 2007). As secondary
sources may include data that may have been collected by someone else or data not
specifically generated for research purposes, we may want to be reassured that we are re-
analysing data that have been collected ethically and that participants have consented to
others viewing and analysing the responses (Gimore and Carson, 2010).
30
The present research has considered the ethics of the study so as ensure ethical conduct and
avoidance of any ethical issues while conducting the research. The focus of current business
plan has been in using secondary sources of information, care has been taken to ensure no
changes are made to the original data collected for avoiding any bias in the information
provided under the research work. Additionally, the no source of study has been used without
prior permission wherever required and proper credit has been given to original authors of the
source.
Proper acceptance of terms and conditions of various sources used was done to ensure ethical
conduct of the study. The researcher has also taken care not to be critical about facts
presented in any of the source targeted to collect the required information. Further any data
related with key players of grocery industry of UAE has been presented without revealing
any confidential information about the company and without naming the views of any
executives or managers as available from company reports. These steps helped in ensuing an
ethical conduct while the study is being undertaken in the present research work.
3.7 Summary
The present research has been conducted through qualitative research design where the
descriptive method to of research has been followed. The data has been collected through
secondary sources of information like journal articles, government reports, company reports,
articles, magazines and internet sources. As the qualitative design of research has been
followed, the collected data has been analysed through inductive method of analysis and
followed the operative paradigm while conducting the research work. The reasons of
selecting specific methods and rejecting others has been discussed in detail and have ensured
the validity and reliability of results of the research work. It was also important to follow the
ethical principles while conducting the present qualitative research and therefore proper care
31
has been taken to avoid any major ethical concerns while presenting the data or results of the
study.
Chapter 4: Findings The focus of this chapter is on presenting the consumer behaviour, attitudes and perception of
consumers towards food products in the United Arab Emirates (UAE). A study of the
attitudes of people and their behaviour towards various categories of food products will
present a picture about feasibility of selling generic grocery products in the region and scope
of their popularity and acceptance in the markets of UAE. The analysis will present details
about global trade position, demographics, health and lifestyle, consumption and expenditure
and trends in relation to consumer behaviour towards food products in UAE.
4.1 Global trade Position
In order to foster its continued expansion, UAE is dependent on international trade. The
growth in imports of food products in response to the growing demand of the economy is
depicted in Figure 4. The graph also shows the growth in exports due to initiatives of the
government to diversify the products. The demand presents a continues opportunity for
32
exporters as well an opportunity to introduce more products that are differentiated in the
manner that the growing demand for food products is fulfilled through high quality less
priced food products (Datamonitor, 2010).
Figure 4: UAE Import and Export of Food Items from World 1970-2009
Source: Datamonitor, 2010
4.2 Food and Beverage Landscape in UAE
The Food and beverage industry of UAE comprise of two major players including the
National Industries and the MNCs.
National Industries: These are the local players where the company has been established
through local investments made in the region of UAE and includes the companies established
within or outside the free zone. These players have been in place since 1980s in the region
but have not reported any significant level of growth during the last decade. Additionally,
33
new companies in this context have remained significantly low in the last few years (Dubai
SME, 2011).
These local players generally serve local markets especially in Dubai and have a limited
impetus on exports. The established players in this sector are Oasis, Al Islami, Emirates
Macaroni, Dubai Refreshments, etc. The industry of manufacturing is considered as
characterised with high level of employment (Dubai SME, 2011). However, in Emirates the
participation in industry is limited to owners, partners and export managers and HR roles.
MNCs: The Food and beverage industry of UAE has reported growth mainly through
international players in the industry that have set-up in the Free Zones and cater to the needs
of local markets as well as export markets of Africa and Europe. The free zones have been
used by large foreign players to leverage in the systems of transportation and storage and
avail the benefits of a conducive business and legal environment (Dubai, 2011).
Additionally, there are indigenously manufacturers in the region due to availability of
advanced Wholesale and Retail trade network that is supported by a strong system of
transportation and storage that is highly efficient in nature. The region imports most of the
products for F&B requirements from across the world and therefore the prices of grocery
products is on a higher side in UAE (Datamonitor, 2010).
4.3 Demographics
In order to understand the feasibility of introducing generic grocery products in the UAE, it is
necessary to understand the demographics of the region. This is so as the demographics will
help in presenting a clear picture about expected consumer behaviour and perception towards
a new category of food products that are rarely available in the region at present.
34
Population
The population of UAE is expected to grow at a CAGR of 3.0% between 2010 and 2015. The
60% of total population of the region is concentrated in major cities of Dubai and Abu Dhabi
while expatriates account for 80% of the country’s population in UAE (Alpen Capital, 2011).
UAE is among the most populated countries of GCC. A majority of people in the region’s
population are under 25 years of age and a young population is expected to account for a
large portion of the population of region in future (Euromonitor, 2014). The demand for food
products that are unique and differentiated is expected to rise among largely urbanized
consumer class with a profile of young age group (Alpen Capital, 2011).
Further a large population of expatriates from around the world are residing in UAE. In GCC
there are more than 16 million expatriates of which 14.4 million are residing in Saudi Arabia
and the UAE. The factors of strong economic growth and dearth of skilled manpower has
resulted in a large number of expatriates than natives in the workforce of the region
(Euromonitor, 2014).
4.4 Supermarkets or hypermarkets retail markets of UAE
A major chunk of organized grocery retail is represented by the supermarkets and
hypermarkets in UAE. There is a substantial expansion in these sectors in last few years in
the region with the entering of international retail chains and changing preferences and
lifestyles of consumers (Alpen Capital, 2011). The organized retail is presented to consumers
in large forms through these stores and therefore have remained successful in attracting a
large number of people due to availability of a wide range of products available under various
different brands and labels (Datamonitor, 2009).
35
A significant portion of overall sales in supermarkets is reported by grocery products. Despite
of a gradual rise of the market share of these modern retail segments in the UAE, the market
still remains under-penetrated with modern grocery sales penetration exceeding only 50% in
the UAE (Alpen Capital, 2011).
4.5 Supermarket/hypermarket retail sales
The retail sales in supermarkets and hypermarkets of the UAE are estimated to expand at a
CAGR of 10.7% between 2010 and 2015 which will reach to US$ 51.2 billion by the end of
the forecast period (United Arab Emirates, 2010). This segment is expected to perform better
than other sectors in the region (Figure 5).
Saudi Arabia UAE Qatar Kuwait Oman Bahrain0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
11.70%
10.40%9.60%
9.20%
7.90%
5.60%
Country wise supermarket sales growth
Figure 5: Country wise Supermarket Sales Growth
Source: Alpen Capital
36
4.6 Challenges in UAE’s Food and Beverage sector
Increasing competition
A large number of foreign supermarkets and hypermarkets offering a wide range of food
products is a major challenge in the markets of UAE. Further the concept of generic grocery
is new to the people in UAE and it will be a challenge to position the new differentiated
product among the wide variety offered by foreign competitors (Dubai SME, 2011). The
competition among players has been intensified due to increasing number of supermarkets
across the region. The markets of UAE are highly fragmented in nature and the presence of
highly competitive players poses the challenge of maintaining market share and keeping
customers attracted towards generic brands (Alpen Capital, 2011).
Concerns over food security
As discussed UAE is highly dependent on imported food products to meet the demand of the
region. Such a high dependency is expected to continue in future and poses a major issue or
concern of food security critical for the region. The high dependence on food imports makes
the region vulnerable to international supply and price dynamics. The region has remained
unable to be self-sufficient in production of food due to unfavourable climatic conditions and
topography. These conditions has resulted in increase in prices of food in past grew years
putting an increased pressure of inflation on the economy of the region with consumer prices
reaching double digits during 2008-2009 (Datamonitor, 2010). Government has taken steps to
regulate prices of end-products during high inflation period posing a challenge for different
players in the value chain. The shortage of food products may affect operations of
supermarkets affecting their margins due to rise in international food prices (Datamonitor,
2009).
37
4.7 PEST Analysis
A detailed analysis of political factors, economic conditions, social factors and technological
situation
of UAE have been presented through following sub headings:
Political factors
The Unites Arab Emirates has a long history of being a major economic hub in the Middle
East. The political system of the region is stable in nature where the Supreme Council is the
highest federal authority possessing the power of electing the President, Vice President and
the Council of Ministers (Alpen Capital, 2011). The Government of the region is dedicated to
improve the position of food and beverage industry of the region by promoting more of local
brands so as to reduce the dependency on highly priced foreign products.
Economic factors
As per the report of CIA (2009) the UAE holds the position of important oil and gas producer
ranking 7th in the world for proven oil as well as proven natural gas reserves (Agriculture and
Agri-Food Canada, 2010). A significant level of development has been allowed in the region
through revenues generated by gas reserves and various areas of housing, education
transportation, housing and health have been financed well by the government of the region.
A series of ‘free zones’ established in the region along with various other economic
incentives in the form of exemptions from corporate taxes act as a major motivation of
commercial development and investments in the region. These developments have improved
the purchasing power of people in the region with per capita Gross Domestic Product (GDP)
of US$38,900 in the year 2010 (Agriculture and Agri-Food Canada, 2010). The second
highest GDP of GCC is reported in UAE and it is expected to gain momentum in future.
38
Social factors
People in UAE have high disposable income due to absence of federal income tax. The
country has the highest private per head consumption in the GCC region. A majority of
expatriates from various countries along with a large local population, the region holds a
mixed culture and therefore demands a mix of products in food and beverages category
(Alpen Capital, 2011). A diverse population has created an environment focused on
entertainment which also includes eating out. However, the significant level of investment
made by government towards the development of health care sector has resulted in progress
in several health care areas in the region (Datamonitor, 2010). People have become more
health cautious and therefore the demand for grocery products in rising with the rise in trend
of homemade food among professionals an expatriates along with the local population.
Technological Factors
In UAE, online shopping is gaining momentum and a large number of customers can be seen
taking advantage of online shopping (ALpen Capital, 2011). However there is still a lack of
proper options of payments and lesser number of online retailers in the region. There are also
other factors such as unreliable delivery and poor designing of websites that is affecting the
growth of online retail in the region. There are around 6% of the Internet users regularly
using online shopping to buy products (Dubai SME, 2011). Mobile phones are also
increasingly becoming popular to make purchases after finding the best prices available for
various products including the food products in UAE’s markets. Consumers prefer making
use of mobile phones for purchasing retail products because of availability of better deals and
a wide range of products that can be compared for price before making actual purchase.
39
Further, social media platforms are also being used as a key medium of attracting new
customers and strengthening relationship with existing customers. Social media is growing in
the region at a robust pace with most of the companies using the platform to promote their
product offerings even in food products category (Agriculture and Agri-Food Canada, 2010).
4.8 Porter’s Five Force Model for retail specifically the supermarkets of UAE
The retail industry of the region has been analysed by applying Porter’s fiver force model.
Threat of New Entrants
There lies a high threat of new entrants in the supermarket or hypermarket sub-category of
retail sector in UAE. This is so as government holds lenient policies and entrants require a
low capital and low product differentiation to enter the markets. There is limited brand
identity with easy accessibility to capital as a well-established and structured banking sector
is available to offer finance at competitive rates.
Bargaining power of suppliers
Supplies in the food industry have moderate bargaining power as there is low supplier
concentration in the market. There is a less degree of threat of forward integration by
suppliers and low cost of switching suppliers.
Threat of Substitutes
There is a high degree of threat of substitutes in grocery section of supermarkets category.
This is so as consumers have a low cost of switching between brands, high price elasticity
and diversified products offered by various competitors in the market (Alpen Capital, 2011).
40
This is so as every competitor is offering imported food products and therefore are able to
offer differentiated products with price elasticity.
Bargaining power of buyers
Buyers have a high power of bargaining in the market as they have a low switching cost and
there exist a low product differentiation. People are highly sensitive to price as prices are very
high in food products category due to dependency on foreign products and there exists a large
number of incumbents within each price segment.
Rivalry between competitors
There exists a moderate degree of rivalry among competitors in the industry as there are low
exit barriers. There is a limited diversity of competitors with ample scope for expansion and
robust market growth in the region.
4.9 Patterns of consumption and expenditure in UAE
Demand for consumer goods and services is a key source of economic growth in the UAE
(UAE National Bureau of Statistics, 2010). The pace of spending was slowed down by the
global economic crisis but there has been a steady rise in population ensuring its continued
growth in the region and the demand for consumer goods and services is expected to rise by
58% by the year 2015 (Euromonitor, 2014). This overall increase will be contributed mostly
by the rise in spending made on food and non-alcoholic beverages. It is expected that the
growth in expenditure made on food and non-alcoholic beverages will go to 9.9 per cent
during the period 2010-2015 (Euromonitor, 2014).
The presence of a diverse population reflects a mix in employment, nationalities and cultures
among people in UAE. Workers that are less affluent are required to support their families at
41
home and therefore the focus is on minimizing the living expenditures as much as possible.
They may choose to live with fellow workers and spend as less as possible on food products
acting as a major target for generic grocery products in the region (Datamonitor, 2010).
Further, expatriates that are professionally oriented are more affluent and have a high level of
purchasing power. This section can divert the savings made from purchase of generic grocery
products towards shopping of other luxury products that are U.S. and European based. The
families of such expatriates are generally living with them and therefore the demand is more
for recreation and education and upscale housing, lifestyle products, clothing and restaurants
(United Arab Emirates, 2010). These demands can be fulfilled by using high quality lowly
priced generic grocery products and making significant savings on food products.
4.10 Food and Beverage (Eating Habits) in UAE
During last few years there has been a significant change in lifestyle and eating habits of
people in the region. The growing purchasing power and wealth have changed the eating
patterns of people and the expenditure of households on food and beverages is steadily
increasing every year. The following table shows the historic and forecasted per capital
consumer expenditure on food in UAE. The changing patterns and expected patterns clarifies
a considerable rise in demand for food products especially that of bread and cereals, milk,
cheese and eggs and oils and fats (Figure 6).
Figure 6: U.A.E. Historic and Forecasted Per Capita Consumer
Expenditure on Food
Categories 1995 2000 2005 2010 2015 2020
Bread and Cereals 129.6 120. 187.4 243.7 284.8 333.8
42
6
Meat 214.2 205 312 391.9 449.2 516.1
Fish and Seafood 76.9 80.2 113.9 123.5 125.4 128.7
Milk, Cheese and Eggs 136.1 132.
4
204.8 260.1 298.5 344.6
Oils and Fats 34.9 28.6 50.3 67.1 80.2 97.4
Fruit 87.9 85.0 134.8 166.0 186.2 211.2
Vegetables 114.3 103.
1
162.8 202.1 224.4 252.4
Sugar and Confectionery 58.5 50.5 73.6 87.9 93.8 100.7
Other Food 140 146.
4
218.7 263.5 288.5 318.2
Total Food 992.3 951.
8
1458.3 1805.9 2031 2303.2
Coffee, Tea and Cocoa 22.5 23.8 37.1 48.1 55.1 64.4
Mineral Waters, Soft Drinks, Juices 64.2 55.7 81.4 97 105.4 115
Total Non-Alcoholic Beverages 86.6 79.5 118.4 145 160.5 179.4
Spirits 0.6 0.7 3.2 7.5 11.8 16.8
Wine 0.2 0.4 2.7 6.3 9.8 13.9
Beer 1 1.4 4.6 9.1 13.5 18.8
Total Alcoholic Drinks 1.8 2.5 10.5 23 35.1 49.5
43
Source: Euromonitor 2014
The recent reports have confirmed that in terms of shopping for grocery products the
attributes such as quality and freshness, location of store and service for customers determine
the preference of customers. The increasing attention towards healthy lifestyle has made
freshness a key deciding factor to make a choice among various imported food products
offered by retailers.
The presence of a diverse population represents the need of an offering a diverse range of
food products in the markets of UAE. A large number of food products are demanded based
on different taste, choice and culture of various ethnic groups present in the country. A
number of food categories and projected growth at retail in most areas are depicted in the
following table. The highest rise in demand is expected in bakery and cereal products,
savoury, snacks and pasta/noodles and chilled foods (Figure 7).
Figure 7: U.A.E. Market Value Forecast ($US millions)
Category 2008
(US millions)
2013 Projections
(US milllions)
CAGR (%)
Baby Food 7.7 10.4 6.1
Bakery/Cereal 1027.6 1544 8.5
Canned 13.6 16 3.2
44
Chilled 111.5 171.4 9
Dairy 546.9 709.6 5.3
Dried 143.6 180.7 4.7
Frozen 183.5 237.8 5.3
Hot Drinks 225.6 259.3 2.8
Ice Cream 48.4 61 4.7
Meat, Fish and
Poultry
251.1 351.4 6.9
Oils and Fats 39.9 45.3 2.5
Pasta/Noodles 59.6 83.8 7
Savoury Snacks 85.4 124.4 7.8
Source: Datamonitor Market Forecast Reports, 2010
4.11 Major characteristics of food and beverage industry of UAE
In the food and beverage industry of UAE, there is a lack of research and development efforts
due to lack of funds and dedicated resources for R&D firms. Further national organizations
are concerned with utilization of capacity rather than having a focus on research and
development. Also the focus is on product renovation and not on product innovation (Alpen
Capital, 2011).
45
Another characteristic of this industry of UAE is the lack of productization and branding
capabilities in national products (Dubai SME, 2011). This is so as a majority of SMEs lack
orientation towards exports due to lacking research and perception of increased competition
from KSA.
Then there is a lack of industry-level interactions specifically for Local standards of quality
and certifications as these standards are not marketed and there is a lack of awareness among
players of the industry (Alpen Capital, 2011).
Finally, the players in food and beverage industry of UAE compete on cost instead on
product differentiation and innovation. This is due to the relative smaller size of domestic
market and high dependence on imports responsible for limited opportunities for producers of
value-added products (Alpen Capital, 2011).
4.12 Key drivers of industry
The demand for F&B products depends highly on the popularity and lifestyle of people in the
region. A population that is highly demanding in nature act as a major incentive to introduce
innovative products. In UAE the key drivers for F&B manufacturing are discussed as
follows:
Favourable demographics of the region were a high percentage of children and youth
are available
High growth of GDP in UAE
High rate of per capita GDP in UAE
Growth of population at the rate of 3% every year
Large expatriate base where more than 70% of UAE’s population comprise of
expatriates
46
Increased flow of tourists
Increased growth in industries such as retail and hospitality
Increased demand for health, lifestyle and F&B products
High competition in local markets calling for a diversification in regional markets.
These drivers clarifies the immediate need of making the food industry much more efficient
in nature for sustaining and innovating to grow. The Food and beverage sector of the region
in terms of brands is relatively over crowded where a large number of imported products or
brands are available in the grocery stores. Retail outlets sell food products consisting of
around 80% of imported consumer ready products and 20% of food products that are locally
processed.
This situation presents the potential of markets of UAE for increasing the share of locally
made generic grocery products. There are entrepreneurial opportunities available in Emirates
while working with a theme of domestic production.
The region of UAE lacks a strong primary sector and therefore the reliance is on imports for
almost 90% of the raw materials required to manufacture processed food (Dubai SME, 2011).
This highlights the need of secure, readily accessible supply of food products in a region
where commodity prices are soaring and global stocks are reducing with the increasing cost
of agricultural inputs. These factors widely affect the UAE region and therefore needs a focus
on domestic food products that are sold through grocery stores, offered at low prices that the
imported products as these are generic in nature and thus are able to offer high standards of
quality even at a reasonable price (Dubai SME, 2011).
The development of this particular industry has become a major aim of the recent strategic
development play of the Emirate. From the perspective of economics as well as strategy the
47
manufacturing of food and beverages contributed towards security of food as well as
diversification of the activity of manufacturing. The availability of free zones and conducive
government policies are attractive enough to make UAE an attractive destination for
development of food and beverage sector of the region.
Chapter 5: Analysis & Conclusions5.1 Introduction
This chapter presents a detailed analysis of the results discussed in last chapter. The focus is
on linking the results with the objectives of the plan so as to identify whether the study has
been successful in achieving all the objectives of study and whether the research question has
been answered appropriately and in a justified manner.
5.2 Analysis/conclusions about each research objective (aim)
The results of the study presents details about situation of food and beverage industry by
explaining the high dependency of market on imported food products. There are large number
of foreign players posing competition in the industry. However the lack of differentiated
products and innovative offerings in grocery products offers an opportunity for generic
grocery business in the region. There is a lack of transparency and high cost structure for
product listing in supermarkets. However, competitors compete on the basis of cost and not
on product differentiation presenting an opportunity for generic grocery products to become
innovative products offered at a low price offering high quality.
48
The analysis of present conditions of UAE’s markets clarifies that there is high potential of
increasing demand for grocery products that are low in cost but high on quality. This is so as
the region holds a large population with large number of expatriates looking for a variety of
low cost high quality grocery products. The increasing disposable income of people is also a
major attractive factor in markets of UAE. Further, the increasing rate of life expectancy due
to better health conditions, government initiatives to promote grocery products and youth
driven society of UAE makes the region an attractive destination for generic grocery
business.
Therefore the first objective of the study has been achieved by getting a clear picture of
industrial conditions as well as market conditions explaining the level of success that can be
expected from a generic grocery business in UAE. The awareness of people about usage of
social networking and mobile applications for exploring price of products and making online
shopping presents a strong technological structure of the region. This along with a strong
economy with a well-structured banking system offering funding at low rate of interest will
act as major force driving business in the region.
The results presented in last chapter clarifies that that there are some key opportunities as
well as some major challenges posed by the grocery industry of UAE. The information
collected clarifies that the market of UAE is relatively sophisticated in nature with the high
demand for chilled products, health and diet food products, and ready-to-eat products. The
health cautious population of the region is demanding more of packaged grocery products
acting as a major opportunity to offer differentiated products in the form of generic grocery
products in the region. Further, the diverse population of UAE is a major source of various
different types of grocery products coming from expatriates that are affluent as well as those
that are less-affluent. The demand for confectionery, chocolate and other youth driven
49
products also offers a key opportunity to introduce generic brands of various grocery
products in UAE’s supermarkets. The locally manufactured products of the region lack
appropriate labelling and branding making them less attractive for consumers. Further,
foreign brands are offered at high prices due to increasing price of food and food products in
foreign markets.
These factors presents the opportunity of a successful generic grocery business in UAE and
therefore has achieved the second objective of the present research study or business plan.
Here the third objective of the present study is also achieved as the statistics presented in last
chapter clarifies the expectancy of a growing population and growing demand for food
products in UAE.
It has also been discussed that a majority of low-affluent as well as affluent expatriates will
be attracted towards low cost generic grocery products as they can save on expenditure
incurred on daily needs and use the saved money on luxury products. This establishes the
scope of accepting generic grocery products in markets of UAE if the quality of products is
maintained and the prices are kept competitive in comparison to foreign brands available in
the supermarkets.
Further the present study aimed to examine the sales and marketing strategies to be adopted
for target market. The results of secondary study reveals that major brands pay huge amounts
to secure place in supermarkets or hypermarkets. The behaviour and attitudes of customers
towards grocery products also indicates that people will surely buy products where a
differentiation is available along with low price. The results also indicate that even with a low
level of differentiation in actual product, it will still be attractive for consumers looking for
high quality at competitive prices. Therefore, it is required that generic products are marketed
50
on the basis of attractive brand packaging and making it more attractive along with having an
emphasis on the quality of brand in indoor advertising.
There is not much need of focusing on outdoor advertising of generic grocery products.
However, the sales and marketing strategies should be focused on attractive indoor
advertising and developing a strong image of the generic brand among customers through
promoting the essential differences among generic and foreign brands.
Finally, the study was focusing on an objective of identifying legal issues an exit strategies to
be followed while conducting generic grocery business in UAE. To this objective the results
of the secondary study revealed that it is difficult to exit from the retail sector of UAE due to
several barriers in the industry. However, generic products can easily exit as they will be
launched in collaboration with a local manufacturer who will be functioning in the markets
even if the generic brand exists. Therefore, the markets should be entered through the route of
a joint venture with a leading local manufacturer and the venture can come to an end when
there is a need arise to exit the market. The government of UAE has lenient policies of
entering the industry and has a well-structured and well-defined legal structure to guide the
foreign business ventures in the region.
5.3 Analysis/conclusions about the research question
Considering the present state of demand and expected growth in demand for grocery products
in UAE, it can be said that the region can prove to be an attractive source of generic grocery
business. The industrial structure of the food and beverage sector and the high price of
imported food products of the region also highlights this attractiveness of the region. The
high dependency of the region on imported food products since long and the inability of UAE
to improve its food growing capacity is another factor making generic grocery products
attractive for the consumers in local markets of the region.
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Further, the opportunities presented by current industrial factors, the rivalry among firms
based on cost and the need of differentiated and innovated products clarifies that it is viable
to consider a generic grocery business in UAE.
The research question has been answered by establishing the fact that the economic, legal as
well as social market conditions of UAE and the expected growth in demand for food
products that are of high quality but competitive in price makes it strategically viable to start
generic grocery business in the region.
5.4 Overall conclusions
From the above analysis and discussion it can be concluded that UAE is an attractive
destination to enter with generic grocery products that will be easily accepted by the diverse
population of the region. However, there is a need to consider the threats or challenges posed
by the markets of UAE as well as the opportunities present in the region. Such a
consideration is necessary to conduct a cost benefit analysis before actually entering the
market and design appropriate sales and marketing strategies for developing and maintaining
a strong brand image for the generic grocery business. The generic grocery products will be a
new and innovative for the population of UAE as there is a strong presence of foreign brands
in category of grocery food products in the region. The findings of the study demonstrated
that marketers of generic brands should segment the generic brand customers in a
differentiated manner. Such differentiation along with a focus on appropriate marketing
strategies focused on strong indoor advertising and attractive packaging will help in
achieving success over a long period of time ensuring stability of the business in markets of
UAE.
52
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