Mass grocery retail sector to post strong sales

Dubai: Healthy growth in the UAE's food and beverages industry is mirrored in the mass grocery retail (MGR) sector, which is forecast to witness high sales growth for the next four years, according to London-based research consultancy, Business Monitor International (BMI).

With all formats predicted to contribute to this growth, BMI is forecasting sales growth of 94.2 per cent to 2011, although the hypermarket and the convenience stores are likely to be the main drivers of growth.

The hypermarket will continue to take the lead in terms of total value, which is forecast to double by the end of the same year, reaching value sales of $1.44 billion.

However, it is the convenience sector that will experience the highest growth rate, albeit from a lower starting point, being forecast to grow by 149.6 per cent to 2011.

The reason for such a high growth scenario in the MGR sector is not hard to find.

"UAE's oil wealth has, and is likely to continue to benefit the country's economy, leading to high levels of consumer confidence, which translate into high levels of food and drink spending," says the latest UAE Business Forecast Report published by BMI.

And it expects the country's MGR sector to benefit enormously from its wealth and from its status as the country to look to for future regional trends.

When compared to other Mideast markets, the report points out, UAE has more security. "The country has established a diverse economy, which is not solely dependent on oil trade. This benefits the MGR sector by promoting long-term consumer confidence among locals but also by safeguarding the presence of large number of expatriates. It is this expatriate wealth that has been the main driver of growth in the MGR sector to date."

UAE's MGR sector has witnessed booming growth in recent years with major expansion taking place. In 2006, there were four formats in the UAE's MGR sector: hypermarkets, supermarkets/cooperatives, convenience stores, and duty-free shops, concentrated mostly in Abu Dhabi, Dubai and Sharjah. However, BMI expects further development of retail chains in the northern emirate of Ajman in the coming years as the opportunities of expansion that exist come to fruition.

According to the Dubai-based Middle East Council of Shopping Centres, the country's shopping mall growth will increase by 190 per cent by 2010. The retail spending during this period is expected to reach 25 per cent of the UAE's GDP.

"This general retail boom can only help MGR sales growth, particularly when one considers that hypermarkets and supermarkets are usually located in shopping malls," the report states.