Dubai: Dining is trending hot within the UAE’s F&B space, while demand for new ‘virtual’ food order and delivery brands is cooling off after two years of sure-fire growth.
Heading into the final stretch of the 2023 peak season, UAE F&B businesses are on track to deliver the biggest annual growth since Covid – and in with a chance to make 2023 their best one ever.
Even a quick glance at some of the happening fine dining places in Dubai and Abu Dhabi through the weekends – and most weekday evenings – will find them packed. (Advance bookings are a must to get anywhere near one on weekends and holidays. The question then becomes how early one should be doing the advance booking.)
The action is attracting some serious investors too, with Abu Dhabi ‘uber’-powerhouse Alpha Dhabi recently concluding back-to-back deals this month for high-end fine dining operators, the Lebanese brand Em Sherif as well as CE LA VI, the latter operating a mix of F&B, luxury, lifestyle and entertainment brands. (Both deals were done by ADMO Lifestyle, the alliance between Alpha Dhabi and Monterock International.)
“When someone like Alpha Dhabi sees potential in the restaurant and lifestyle space, every investor gets serious about having one in their portfolio,” said a senior executive with a Dubai-based investment house.
Dubai's campaign of 'eat local and savour global' holds significant value, encouraging customers to order directly from restaurants. This approach allows restaurants to retain a larger share of the revenue and build a more direct relationship with their customers
Mid-market F&B operators
Such has been the level of demand that the mid-market QSR (quick service restaurant), dining-in places, and cafes have managed to chisel out their own growth. Any vacancy at food halls within popular malls will have ‘deep’ waiting lists. That is if a vacancy comes up at all.
All this despite rentals continuing to rise in substantial terms, a trend that started in 2021 and showing no signs of slowing. In fact, at malls, the F&B locations will likely see higher rental growth than the merchandise ones.
“The F&B market in Dubai has seen a surge in supply - a considerable number of new restaurants and eateries are creating a situation where supply has outpaced demand,” said Simon Wosket, Head of Retail at Dubai-based Golden Fork.
“Also, the unusually intense heat this Summer had impacted footfall and dining-out preferences, which is reflected in industry-wide sales numbers. While it's been a challenging period, I believe it's important to remember the Dubai F&B industry has shown its resilience time and again.”
All the more reason why restaurants and F&B brands want to cash in as the weather gets cooler and the end-of-year mood takes over from mid-December. In-mall locations continue to be a major crowd-puller, even during the summer phase.
F&B businesses have managed costs through menu adjustments and staffing optimization. While costs may fluctuate, the industry's resilience and innovative spirit play a crucial role in navigating these complexities
Return to lower food prices
Plus, these businesses have also been seeing relief in their operating costs, more so in the prices they were paying to source their food staples. Inflationary pressure on food has eased considerably since the first quarter after many F&B operators had seen a 1-25 per cent rise in their sourcing costs.
And yet, while “inflationary headwinds from a food-cost perspective have started to ease, but other operating costs continue to put pressure on the industry,” is how Tapan Vaidya, CEO of PJP Investments Group and operator of Papa John’s pizzeria says it.
“Most landlords asked for rent increases in double-digits with a ‘take it or leave it’ attitude. Salaries had to be increased to help employees meet the rising cost of living.
“The first-half of 2023 turned out to be a reasonably satisfying period for UAE F&B sector - but not quite a bumper phase though.”
Now, that’s what should change in the next two months. October already provided glimpses of high-demand patterns, for dining in and takeaways alike.
‘Virtual’ F&B takes the slow route
But there have been some misses along the way, notably in the trend of businesses launching ‘virtual’ F&B concepts. Their existence was over online and digital channels for orders, and the meals would then be put together by any of the countless ‘cloud kitchens’ dotting the UAE. This worked during the pandemic and the immediate phase following Covid.
Now, with fine dining options returning to be a major draw with patrons, virtual F&B options are in a slide.
“A considerable portion of virtual F&B brands launched since 2020 have ceased operations within the last year,” said Ali El Alayet, Executive Chef of Prime Hospitality, which operates Russos Pizza. “Indeed, there has been a noticeable decrease in the launch of 'virtual' F&B businesses this year.
“This shift could be linked to UAE residents redirecting their focus to in-person dining experiences. From my perspective, virtual brands encounter more challenges than traditional dine-in establishments.
“The appeal of the dine-in experience is resurging, driven by the multi-faceted value it offers, which goes beyond the mere act of eating.”
By the looks of it, patrons at restaurants across the UAE are craving the experiences being served up. If that adds to the growth mix for UAE F&B businesses, then it's all they need for now.