GCC F&B firms 'must track consumer trends’
UAE, January 3, 2017
One of the key challenges for GCC companies in the food and beverage (F&B) industry is to understand consumer expectations and address their needs, and continuous tracking of consumer trends is imperative to validate and realign the companies’ strategy and vision, according to a report.
Backing on its rich and numerous engagements and advisories for many F&B clients in the region, Frost & Sullivan, creators of the report, identified two set of factors influencing the consumer and further shaping up the F&B industry.
Firstly, redefined consumer segments and secondly, influence of mega trends made up of urbanisation, disposable income, ‘she’conomy and global exposure, said the report.
There has been a significant change in consumer behaviour in the past five years with increasing importance of a specific consumer segment. Their expectations, purchase behaviour, and influence on the rest of the consumers are becoming increasingly crucial for companies’ success, it said.
Consumer split by age group in the GCC is changing; the share of ageing population is increasing. In addition to this, influence of younger population on the purchase behaviour of the ageing population is growing, it added.
The overall scenario is changing consumer dynamics as the younger generation are becoming the representation of majority of the consumers. By statistics, for example, Generation X, typically born before the 80s (> 35 years) was 30 per cent in 2005, increased to 38 per cent in 2015 and is expected to reach 42 per cent by 2020.
Share of generation Y, typically born in the 80s and 90s and generation Z, born after 2000 (overall <35 years age) was 70 per cent in year 2005. In a span of 10 years, it dropped to 61 per cent in 2015 and is expected to drop further to 58 per cent by 2020.
Generation Y and Z are unique from Generation X in life styles and characteristics, leading to a new set of consumer expectations. In addition to this, Generation X purchases are highly influenced by Generation Y and Z. With the largest share of population, growing influence of social media and technology driven lifestyles of Generation Y and Z, it is imperative that companies acknowledge this development and prepare for the next wave of opportunities.
In the GCC, 85 per cent of the population lived in urban areas in 2015, a number expected to reach 87 per cent by 2020. Urbanisation in the GCC is more or less at par with developed countries like the US and the UK, stated the report.
Urbanisation is an outcome of the increasing economic migration to clusters. Hectic lifestyles, economic independence, living in clusters will lead to preference for convenient options for food. It can be in the range of ready-to-cook, ready-to-eat or any category, which minimises the effort and saves time, it said.
Growing lifestyle, health challenges and increasing importance of health will drive the convenience factor towards optimum nutrition. Time has become the most important factor for the consumer.
With increasingly hectic lifestyles, preference to purchase at modern retail outlets will remain high, as it is a single platform to get a wide range of products of choice. However, the growing importance of mega cities will position the growth of small-sized modern retail stores, which are easier to access than large-sized hypermarkets.
Gross domestic product (PPP) per capita in the GCC was around $60,000 in 2015, which is expected to reach $69,000 by 2020, this is equivalent to the US and more than the UK and Japan. High GDP per capita is a direct indication of disposable incomes. Broadly, this is expected to bring a new dimension into consumer behaviour, the ‘Hedonic Consumer’. This consumer is going to look for pleasure in purchasing and experiencing the products with a keen preference for taste, functional benefits, consumption experience, and packaging revealed the report.
Increasing participation of women at work is an emerging trend in the region. This is one of the key factors with varied degrees of implication on consumer trends: it will create new opportunities and increase product penetration.
Women account for 39 per cent of the GCC’s population but only 17 per cent of the work force. Tertiary school enrolment for females is 40 per cent, which is higher than the male enrolment rate of 23 per cent, which means, more female graduates and highly untapped female talent.
Increasing women’s participation at work is expected to favour the market at two levels – active lifestyles leading to less time to cook and economic freedom leading to higher spending. Both factors together will drive the demand for convenience and premium products.
The GCC accommodates over 100 nationalities creating a multi-cultural environment and offers scope to adopt new food habits/cuisines. The expat community accounts for 49 per cent of the total GCC population, which is significant in size. Additionally, tourism is one of the key industries in the GCC.
The UAE and the Saudi Arabia attracted nearly 27 million inbound tourists in 2014, which is expected to reach 52 million by 2020. Increasing number of tourists with varied cultural and economic backgrounds will also introduce new food habits.
However, prevalence of lifestyle diseases in the region attracted the local consumer to adopt more healthy food habits. Demand for organic, gluten free, freedom foods like fat free, and sugar free products along with preference for functional products like probiotics and functional beverages is slowly increasing. The penetration of such functional foods is expected to increase in the next few years, it stated. – TradeArabia News Service