With a hot climate, a young and affluent population and modern retail infrastructure, the UAE is an ideal market for an impulse category like ice creams.

Per capita consumption of ice cream in UAE is 1.7 litres, much lower than that in the US (18 litres), Australia (10 litres) and even South Korea (8.4 litres) – thus, with the category being far from saturated, it does represent a significant opportunity for marketers.

The total volume of the category in the UAE was estimated to be 16 million litres in 2014. Of this, the largest volume contribution is of ‘take home bulk ice cream’ (42 per cent), followed by ‘artisanal’ ice cream (34 per cent) and ‘impulse single serve’ ice creams (24 per cent).

The artisanal segment is quite vibrant and also operates at higher margin levels as compared to the retail segment. Brands such as Baskin Robbins, Cold Stone Creamery, Haagen-Dazs have strong presence in key retail hotspots. In recent times, there has also been an influx of specialised brands of Italian Gelato (e.g., Morelli’s, Vasa Vasa), frozen desserts (e.g., Pinkberry) as well as innovative retail concepts like Minimelts Kiosks.

Funky Korean brand, Milkcow is slated to open its first store in the upmarket JBR district of Dubai in early 2016.

Given this context, some of the opportunities and challenges for a new brand entering the category in UAE would be as below:

* Demographics and climate: The demographic and economic profile of the country, coupled with the hot climate, creates an opportunity for ice creams. While there is still a lot of scope to increase per capita consumption, which is much lower than other developed markets, it is also important to take note of emerging trends around health consciousness.

Hence, apart from regular ice creams, there could an opportunity for low fat products and frozen desserts as well.

* Ease of doing business and modern infrastructure: The UAE has relatively simple regulations with regard to a new business setting up and multiple free zones also provide the option of 100 per cent foreign ownership – attractive propositions for new entrants. Further, the infrastructure from production to distribution and retail is also very well established, which could be leveraged by a new entrant.

* Seasonality: While the climate is hot for most of the year, the UAE does experience a mild winter from November to February, where ice cream sales tend to taper off a bit. Further, there is also a dip in volumes during Ramadan.

However, there is potential to convert these dips into growth opportunities, via innovative product offerings - heated ice cream products in winter such as a sizzling brownie with ice cream. Further, with the Ramadan cycle now being in the warmer part of the year for the next five years, ice creams based products could be positioned as part of Iftaar.

* Experience Seeking and “premiumization”: Consumers in the UAE are willing to pay a premium for products where they perceive high value for their money (e.g., Scoopi Cafe sprinkles edible 23-carat gold on their Black Diamond ice cream and one scoop is priced at Dh2,999!).

Further, they are increasingly seeking varied and enriching experiences, rather than just consumption – this creates an opportunity for innovative products and formats. Outlets selling Turkish ice creams have sprouted in malls – the allure here is not just the product, but the entire ambience and experience of how it is served.

* Multi-culturalism: The UAE is a melting pot of cultures with close to 200 nationalities living in the country. Further, it is also popular as a tourist destination, especially with visitors from the Arab world, Eastern Europe, Indian subcontinent and China/ Far East.

With this multi-cultural mix, there are opportunities to tap into ethnic tastes e.g. Kulfi-Falooda, which is a popular ice cream format in India. or Camelait, a camel milk based ice cream. While these may not become large volume drivers, they would definitely add to a company’s ‘innovative’ image.

* Snacks as meal replacement: With consumer lives getting increasingly fast paced, there is a tendency to replace meals with snacks, which has led to the growth of categories like cereal bars. The ice cream category could also be positions as a quick on-the-go snack, something that products like Mars and Galaxy Bars are trying to do.

The UAE ice cream category is projected to grow at a CAGR (compounded annual growth rate) of 5.1 per cent over 2014-19, to reach a sales value of Dh650 million. Currently, the market is dominated by Iffco Group (Igloo and London Dairy brands) followed by United Kaipara Dairies Company (Royal Treat and Unikai brands), along with a host of specialist retailers like Baskin Robbins and Haagen-Dazs.

It remains to be seen if the new concepts coming into the market will be able to take a share of the pie from these major players.

 

The writer is CEO of AMRB, a Kantar Group research agency.