Dubai: Shifts in consumer spending in the food and beverage sector are expected to create new investment opportunities for food companies in the region as more consumers opt for healthier diets.
According to the latest research by Strategy& (the consulting company formerly known as Booz & Company), a shift by consumers towards healthier food is creating demand in new categories of the food and beverage market.
The four promising categories in the GCC (Gulf Cooperation Council) over the next 10-15 years include: snacks, spreads, prepared meals and ready-to-drink beverages. And in all four categories, the main common theme is healthier food, as per the research firm’s estimates.
Karl Nader, partner at Strategy&, described the food and beverage market in the GCC as being at an inflection point. “By looking at markets that are further along in their economic development, and studying successful product launches in those markets, it is possible to identify the most promising growth opportunities for the region over the next 5-15 years,” Nader said in a statement.
He added: “Those that want to target these categories need to understand consumer preferences in the region, quickly build up the necessary innovation capabilities, and potentially partner with established players in other markets to leverage their expertise.”
In its report, Strategy& said that companies seeking to carve themselves a place in new categories can either build their offerings organically or establish joint ventures with existing players.
In 2001, for example, Al Safi, a Saudi Arabian dairy company, partnered with Danone to form Al Safi Danone. The new venture offers a range of dairy and juice products, and currently has a leading position in the market for many products including ready-to-eat desserts, drinking yoghurt and other beverages.
“Regional players are seeking merger and acquisition [M&A] opportunities to expand their portfolios and sustain growth, but there is a lack of viable targets. Now it is possible for companies in the sector to grow by tapping into changes in the way people spend money on food,” said Ahmad Bakri, principal at Strategy&.
The company also suggested investing in successful start-ups abroad and helping these firms expand in the GCC as a way of gaining market share in growing food categories.
According to Strategy&’s research, overall per capita spending in the GCC’s food sector is levelling off, but consumers are opting for different products. Consumers are also willing to spend more for higher-quality, fresh products.
As economies advance, there is greater penetration of modern retail outlets, which offer customers a wider variety of healthy options to choose from.
Additionally, governments in the region are pushing for healthier lifestyles. Some governments have even launched awareness campaigns to combat obesity and diabetes. Implementing taxes on sugary fizzy drinks and energy drinks in the GCC is another measure to push for healthier lifestyles.