Quick service and fast casual grow as GCC Food and Beverage sector battles coronavirus headwinds: KPMG report

Quick service and fast casual grow as GCC Food and Beverage sector battles coronavirus headwinds: KPMG report

Dubai, UAE, 11 November, 2020: The Covid-19 pandemic has presented several challenges for the regional food & beverage (F&B) industry. KPMG’s latest publication 2019-2020 GCC Food & Beverage report – Recipe for resilience examines the current state of the sector, highlighting opportunities, trends and emerging growth areas. The fifth edition of KPMG’s annual Food and Beverage report was expanded this year to include Saudi Arabia, Kuwait, and Oman, in addition to the UAE. Results of an initial poll in 2019 and a second poll conducted in summer 2020 were analyzed to gauge consumer sentiment and operator response – before and during the Covid-19 pandemic.

The report notes that the GCC’s food and beverage market today represents a mix of opportunities and headwinds. According to operators, the value-seeking behavior of consumers and rapid growth of delivery during the pandemic bolstered the quick service restaurants (QSR) and fast casual segments. While the premium and casual dining segments were impacted by the shift toward QSRs, some operators managed to grow in 2019 by offering a better value proposition. There have been some concerns that these segments were reaching a point of saturation prior to Covid-19.

Deals and promotions continue to influence consumers, even as more than a quarter of operators surveyed have boldly decided to move away from such offers. Loyalty programs could be an alternative, although they remain underutilized by operators. KPMG’s conversations with GCC operators revealed that three out of four had a loyalty program in place by the end of 2019 or intended to launch one. However, these remain underutilized. Over 65% of the consumers across the GCC region did not subscribe to an food and beverage loyalty program, while even those who did may not have necessarily used them.

Anurag Bajpai, Partner, Head of Consumer & Retail at KPMG Lower Gulf, commented: “While analyzing financial and operational benchmarks for various segments within the food and beverage sector, KPMG’s GCC Food & Beverage report also highlights various socio-economic factors influencing the sector today. Customer-facing businesses are addressing challenges amid prolonged uncertainty. Though the regional food and beverage industry has remained resilient and we have seen a strong rebound in consumer demand in the last few months, given all the challenges, in the short term its future will likely depend on how soon the virus is contained.”

Food and beverage operators have been severely hit during the crisis, particularly the lockdown period, resulting in what is likely to be the worst year for the sector in recent times. Several GCC operators appear to be bracing for a difficult period, with most expecting declining sales through mid-2021. Nine out of 10 operators today expect sales to decline by more than 20% this year. Of these, one-third of the operators are expecting more than 40% decline in sales. However, some operators believe that the Expo 2020’s postponement to 2021 could help businesses, as consumer demand normalizes.

Vikrant Rohatgi, Director, Deal Advisory, Global Strategy Group at KPMG Lower Gulf concluded: “For operators who can retain customer loyalty, especially through deliveries, we expect recovery to be smoother in 2021. However, the required health and safety measures deployed to build consumer confidence will add to compliance costs for operators. It should be noted that previous regional slowdowns have shown that operators who can hone their strategy, test their methods, and remain resilient, will enter the recovery poised for expansion.”

For more information, visit: https://home.kpmg/ae/en/home/insights/2020/11/gcg-food-and-beverage-report-2019-2020.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s