Paris-style fresh food market to come to Dubai

Dubai: Dubai is to have a sprawling privately-owned fresh food marketplace quite similar in scope to the famed 232-acre Rungis in metropolitan Paris. The site of the Dubai venture is yet to be identified, according to the promoters.

“As the local partner, we have scouted the UAE market for sites and shortlisted a few key locations,” said Dr Nikolas Meitanis, Director of Strategy at Azdan Investment, which has aligned with France’s Rungis International Market to bring the concept here. “We are currently in advanced discussions, where negotiations are ongoing with high officials in various entities as it is essential for the locations to have certain characteristics — connectivity through major highways and ports, needs to be a large portion of land, although it can be in the middle of an existing built-up area.”

Rungis will lead the development of the supply chain and infrastructure while Azdan will handle regional tie-ups and manage the project for Rungis. Sidra Capital is arranging the deal.

The Paris site is reckoned to be the world’s largest fresh food wholesale market and serves close to 12 million people.

The plan is to create a mall-style hub and for wholesalers to take up tenancy there. Dubai itself is moving to consolidate a lot of the scattered business activities in the city through initiatives such as Dubai Wholesale City and Dubai Industrial Park.

Top-line growth

“It will consolidate the unorganised pockets of the food wholesale sector under one roof,” said Meitanis. “Tenants will come to this development because we convince them that it will do well and it will add value to their business, either in terms of top-line growth or bottom-line savings.

“We will prove to them that the location in which they are now has disadvantages as compared to our development. Our project will be large, modern and optimised for logistics for this industry, designed by experts who have studied wholesale markets around the world for decades, and be more affordable for them in the long run.

“We don’t think we will need to partner with them — they will receive a compelling set of services. They will want to be there.”

According to Stéphane Layani, President and CEO of Rungis International Market, “To give you an analogy, if you are in Paris and you have the chance to set up a shop on Champs Elysees or another street that no one visits, you will obviously choose the former. We are building Champs Elysees for the food wholesale market in the UAE.”

GDP contribution

The promoters are convinced the numbers are there to support an operation of the scale they are planning. The food sector in Dubai contributes around 5 per cent — valued at around Dh20 billion — to GDP, while the UAE’s food consumption as a whole is estimated in the region of $8 billion to $10 billion (Dh29.3 billion to Dh36.7 billion). “At full scale, this development has the potential to boost the GDP contribution by a few percentage points, when spillover effects are factored in,” said Meitanis.

“The majority of food consumed in the GCC is imported — $55 billion to $60 billion annual import value expected by 2020. This is why efficient operations and a large-scale market are so important.

“Another crucial value added is the concentration of all fresh food as well as plants and flowers under one roof, creating a one-stop-shop. The efficiency created from this will benefit all players, especially small to medium size ones who don’t have the capacity to source all they need without considerable effort, cost and the risk of stock-outs.”

Competition

But Dubai has centralised locations where fresh produce are transacted on wholesale basis. Rungis’ entry could then be in direct competition to them.

“Consumers have different needs, many of which come from all over the world and a small portion comes from the local markets,” said Layani. “Rungis’ wholesale market in Dubai aims to become a consolidated hub for different suppliers of food and other fresh produce, to operate from under one roof.

“Our business model is being adapted slightly to enhance the operations for different traders that operate independently. It helps them save cost, carry out their operations in a more sustainable manner and benefit from economies of scale.

“With the upcoming Expo 2020 Dubai is looking to build infrastructure and distribution capacity locally, to support a growing population. We feel like there is a timely need for a wholesale market in the region.”

Factbox: A mall-style environment only for food

* The Rungis market in Paris, which opened in 1969, sits on a 232-acre site next to Orly airport. It presides over an annual trade of 8 billion euros and is a base to more than 1,200 companies and 20,000 buyers. Rungis has advised and delivered similar projects on four continents.

* The project in Dubai represents a joint venture between Rungis and Azdan Investment. They are in talks to finalise the initial agreements with infrastructure investors and sovereign funds and have evaluated different sites for the location.

* According to Dr Nikolas Meitanis, Director of Strategy at Azdan Investment, “At this point, related entities in the (Dubai) food wholesale sector are currently working in isolated pockets. At this large-scale development, we will be offering approximately 50 per cent significant reduction in rents — current offerings are limited and wholesalers are being overcharged.

* The tie-ups with potential tenants will start when the Dubai project enters the construction phase. “Once we assess the local requirements and develop our logistics and allied services, we will identify the tenants we will look to bring to the market,” said Ajay Arora, CEO of Sidra Capital.