Dubai: “Even if you aren’t coming down to shop, you might still try out the food ...” - that seems to be the clear message UAE’s malls and other retail-dominated destinations are sending out to consumers. And by the looks of it, they are being heard loud and clear.
Indications are that the F&B category has had a fairly healthy run in the first six months, and probably one of a handful to do so as consumers drastically cut back on their discretionary spending. And the gains for F&B have been across the board — in terms of outlet openings, new concepts coming into being, and even in the business volumes being generated.
In between new malls opening with their food courts, F&B brands are finding a home in communities. In fact, when it comes to locations, they are spoilt for choice.
And F&B operators are clearly thinking outside of the book as well, taking their wares wherever people are likely to congregate in sizeable numbers or just passing through. So, there was the master-developer Meraas airing its “Last Exit” food trucks at strategic locations in Dubai, and with more on the way. There is McDonald’s expanding its already considerable reach by way of drive-ins, a tactic that Starbucks is also deploying to telling effect.
And for every McDonald’s or Starbucks going for more locations, there are tens of new concepts wanting to make a good first impression. “This proliferation of F&B across income segments has accelerated,” said Raafat Hodroj, General Manager — F&B at the GCP Group, which operates the “Big Ben” cafe and juice bars. “There was a skewing toward the upper end of the market, and where the risks have been increasing for the sector.
“There has been a steady increase in the introduction of concepts, both franchised as well as home grown. There are a number of reasons for this: the growing availability of high-street space, the tourism explosion and a growing awareness of distinct food brands as well as a preference for outdoor dining.”
In the first-half of the year, e-commerce may have garnered all of the attention as the most happening retail category in the UAE, be it the major corporate acquisitions or the growing base of shoppers who now prefer to pick things up straights off the portals.
But F&B has managed to do quite well, though without the attendant high-profile e-commerce attracts. It has “shown an upward trajectory as consumer spending on socialising and eating out continues to grow with UAE nationals and expatriates alike,” notes a recent report issued by CBRE, the real estate consultancy. (It picks the food truck business as the one to watch out for, saying it offers “restaurateurs a cost-effective platform not limited by location. They also deliver a new low-risk entry to market for upcoming F&B brands”.)
But where possible — and more so if its meets their budgets — F&B operators still want to make it in malls. Bikanervala, the ethnic Indian fast food chain, will shortly introduce the first of its “Courtyard” casual dining concepts at the Pointe on the Palm, and at Marsa Al Seef, the retail and hospitality themed destination right on the Dubai Creek (opposite the UK consulate).
“Between these two locations, we have taken about 7,000 square feet (including for outdoor dining) because we feel the time is right to offer variations of the Indian street/fast food choices,” said Pankaj Agarwal, Director at Bikanerwala. “There is no reason why Indian fast food operator cannot have the same network reach of a major American brand.
“The Courtyard openings do not mean our menu changes drastically — it’s more of a value-addition on the same concepts.” (The two locations each entail a 15-20 per cent higher cost to set up than one of the standard fast food outlets the chain operates. Typically, Bikanerwala looks to a two-year time frame for an outlet to attain break even.)
Industry sources suggest even with the flood of new concepts opening up — be it in malls, retail strips, street-side or trucks — there will be more to come. But in a reflection of the times, the majority of potential entrants will aim for mid-tier and even lower.
“Typically, during periods of tough macro-economic conditions, mid-tier and value offerings stand to gain share as consumers rationalise their discretionary spend,” said Mazen Omair of Momair Trading, the master-franchisee for Fuzziwig’s Candy Factory’s. “And because of the reduction in discretionary spending, consumers will thoroughly scrutinise the brand’s value proposition. During such periods, mid-tier brands need to redouble their focus on quality, value, and service to weather the storm.”
To date, Momair — which also runs Subway outlets — has favoured in-mall locations for Fuzziwig’s. But it is also working on “some design variations” that would “enable growth in non-traditional locations”, Omair added.
“While the local F&B landscape is certainly cluttered — some categories more than others — we believe that our position in retail confectionery will only grow stronger. We have universal appeal ... no matter the demographic.
“We have targeted achieving break-even/profitability within the first 12 months of operations. Of course, one always hopes for the best but plans for the worst.”
That’s a thought Noor Mukaty, owner of the Aeon Group and operator of a Subway franchise, shares. “As long as the UAE consumer continues to work up an appetite, this is one business that will keep throwing up fresh concepts, be it franchise or home-grown.”
Clearly, businesses sure love the taste of it.