The Covid-19 pandemic has presented several challenges for the regional food & beverage (F&B) industry. KPMG’s latest publication 2019-2020 GCC Food & Beverage report – Recipe for resilience examines the current state of the sector, highlighting opportunities, trends and emerging growth areas. The fifth edition of KPMG’s annual Food and Beverage report was expanded this year to include Saudi Arabia, Kuwait, and Oman, in addition to the UAE. Results of an initial poll in 2019 and a second poll conducted in summer 2020 were analyzed to gauge consumer sentiment and operator response – before and during the Covid-19 pandemic.

The report notes that the GCC’s food and beverage market today represents a mix of opportunities and headwinds. According to operators, the value-seeking behavior of consumers and rapid growth of delivery during the pandemic bolstered the quick service restaurants (QSR) and fast casual segments. While the premium and casual dining segments were impacted by the shift toward QSRs, some operators managed to grow in 2019 by offering a better value proposition. There have been some concerns that these segments were reaching a point of saturation prior to Covid-19.

Deals and promotions continue to influence consumers, even as more than a quarter of operators surveyed have boldly decided to move away from such offers. Loyalty programs could be an alternative, although they remain underutilized by operators. KPMG’s conversations with GCC operators revealed that three out of four had a loyalty program in place by the end of 2019 or intended to launch one. However, these remain underutilized. Over 65% of the consumers across the GCC region did not subscribe to an food and beverage loyalty program, while even those who did may not have necessarily used them.

Anurag Bajpai, Partner, Head of Consumer & Retail at KPMG Lower Gulf, commented: “While analyzing financial and operational benchmarks for various segments within the food and beverage sector, KPMG’s GCC Food & Beverage report also highlights various socio-economic factors influencing the sector today. Customer-facing businesses are addressing challenges amid prolonged uncertainty. Though the regional food and beverage industry has remained resilient and we have seen a strong rebound in consumer demand in the last few months, given all the challenges, in the short term its future will likely depend on how soon the virus is contained.”

Food and beverage operators have been severely hit during the crisis, particularly the lockdown period, resulting in what is likely to be the worst year for the sector in recent times. Several GCC operators appear to be bracing for a difficult period, with most expecting declining sales through mid-2021. Nine out of 10 operators today expect sales to decline by more than 20% this year. Of these, one-third of the operators are expecting more than 40% decline in sales. However, some operators believe that the Expo 2020’s postponement to 2021 could help businesses, as consumer demand normalizes.
Vikrant Rohatgi, Director, Deal Advisory, Global Strategy Group at KPMG Lower Gulf concluded: “For operators who can retain customer loyalty, especially through deliveries, we expect recovery to be smoother in 2021. However, the required health and safety measures deployed to build consumer confidence will add to compliance costs for operators. It should be noted that previous regional slowdowns have shown that operators who can hone their strategy, test their methods, and remain resilient, will enter the recovery poised for expansion.”

For more information, visit: Recipe for resilience

About the KPMG 2019-2020 GCC Food & Beverage Report

This report reflects the viewpoint of over 3,000 respondents in selected GCC countries (the UAE, Saudi Arabia, Kuwait, and Oman). The initial online survey was concluded by the fourth quarter of 2019 (2,400 respondents), and the subsequent survey was conducted in the second quarter of 2020 during the pandemic (600 respondents).

KPMG also interviewed 35 industry stakeholders operating across the GCC which represented more than 170 brands and over 3,300 outlets.

Conversations with food and beverage stakeholders explored current developments in the market and future perspectives. Interviews were conducted during the third and fourth quarters of 2019 and included both qualitative and quantitative data collection. After the onset of Covid-19, KPMG re-surveyed a select set of operators to understand the implications of Covid-19 on performance and outlook. This included representation from all countries across all formats to ensure coverage.

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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Mara Carpencu