The UAE F&B Market: Opportunities for Businesses

The UAE F&B market, the Gulf’s second-largest after Saudi Arabia, thrives on consumption driven by an affluent local population, large expat presence, and the country’s role as a regional commercial hub attracting millions of global visitors yearly.

By Arendse Huld

The UAE’s food and beverage (F&B) market, the second largest in the Gulf region after Saudi Arabia, presents an exciting landscape characterized by growth, evolving consumer trends, and unique challenges. As high demand driven by a diverse and wealthy population and millions of international visitors is met mostly by food imports, the UAE is now increasingly seeking sustainability and self-sufficiency.

This article delves into key aspects of the UAE’s F&B market, exploring its current state, growth projections, and the various opportunities and challenges that define this dynamic sector.

Overview of UAE’s F&B market

Revenue in the UAE’s food market is expected to reach US$40.07 billion in 2024 and grow at a compound annual growth rate (CAGR) of 4.89 percent between 2024 and 2028.

While F&B is expected to see strong growth in the wider Gulf region, specifically the countries of the Gulf Cooperation Council (GCC) (Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman, in addition to the UAE), F&B consumption in the UAE has declined in recent years. That’s according to the GCC Food Industry Report 2023 from Dubai-based financial firm Alpen Capital, which found that overall food consumption in the UAE has fallen at a CAGR of 1.6 percent in the years between 2016 and 2021. The report cites slow population growth as the main cause of the decline, as well as drops in the consumption of key food products, such as milk and dairy products, fish, pulses, and fruits, which all fell during this period.

However, the report also notes that the country’s share of consumption among the countries of the GCC is expected to increase slightly. Saudi Arabia consumes the largest share of food in the region – due to having by far the largest population – but its share is expected to shrink from 57.1 percent in 2022 to 55.5 percent in 2027. Meanwhile, the UAE’s share will grow from 18 percent to 18.5 percent over the same period.

Nonetheless, several segments of the F&B industry are flourishing as demand for certain F&B products continues to rise, which we will discuss below.

The UAE remains highly reliant on imports to meet its food demand. According to the UAE Ministry of Climate Change and Environment (MOCC), the UAE imports 90 percent of its food.

The UAE’s domestic production of food has increased in recent years, helping to ease the gap between supply and demand. In its report, Alpen Capital found that domestic production of food in the UAE grew at a CAGR of 3.3 percent between 2016 and 2021. The main domestically produced products are fruits, vegetables, dairy products, and meat.

While demand still far outstrips domestic production, the UAE’s self-sufficiency ratio has also risen from 12.8 percent in 2016 to 16.4 percent in 2021, per the Alpen Capital report.

Milk and dairy had the highest self-sufficiency ratio, at 35.5 percent, followed by fruit (28 percent) and vegetables (24.2 percent).

Despite accounting for 37.4 percent of food consumed in 2021, cereals had one of the lowest self-sufficiency ratios, at just 0.8 percent in 2021. However, its production was the highest among all GCC countries and grew at the fastest rate of any food product between 2016 and 2021, reaching a CAGR of 3.2 percent.

Key F&B market segments in the UAE

Restaurants and catering

The UAE is home to a thriving restaurant and catering industry. Thanks to its diverse population, wealthy consumer base, and a huge number of overseas visitors, the UAE has become the second-largest food service market in the GCC after Saudi Arabia, according to research from the US Department of Agriculture (USDA).

Moreover, according to the USDA, citing data from Euromonitor, the UAE was home to around 12,302 restaurants and cafes in 2021. The combined value of the hotel, restaurant, and institutional sectors that year reached a total value of US$12.3 billion, up 17 percent from 2020.

Meanwhile, Mordor Intelligence’s United Arab Emirates Foodservice Market (2017 – 2029) report anticipates that the number of cafe and bar outlets in the UAE will grow by 6.72 percent between 2023 and 2029, driven by population growth and tourism.

The cafe market is seeing increasing segmentation as consumers get a taste for more specialty products – such as niche types of coffee, customized services, and healthier product options.

Cloud kitchens are also expected to take off in the country as take-out becomes increasingly popular. According to Mordor Intelligence, cloud kitchens accounted for only 1.05 percent of food service outlets in the UAE in 2022. However, the industry is expected to grow at a CAGR of 5.82 percent between 2023 and 2029.

Data indicates that restaurants and cafes remain highly dependent on imports for food supplies, reflecting the country’s overall reliance on food imports. For instance, the USDA report found that consumer-oriented products accounted for 59 percent of the UAE’s total agricultural imports. In addition, F&B consisted of nine of the top 10 consumer-oriented products in the UAE in 2022, with the single outlier being tobacco.

F&B manufacturing

According to a new report from the UAE Food & Beverage Business Group (F&B Group), the country’s F&B market accounted for 25 percent of the country’s total manufacturing GDP – the largest sector after oil.

The UAE is home to over 2,000 F&B manufacturing companies generating US$7.63 billion in annual revenue. It is projected that the F&B manufacturing industry will reach a total value of US$23.2 billion by 2025.

The F&B Group report sorts its findings into seven F&B categories; of these, ambient food (food kept at room temperature), snacking, and bakery products lead the overall market growth. The bakery category, in particular, stands out with over 50 percent growth, while chocolate production leads the snacking category with a 20 percent growth rate.

Despite a 134 percent increase in soft drink prices, the beverage segment, especially sports drinks, experienced remarkable growth, highlighting the success of small players in this category.

The report also identifies post-pandemic recovery in the ambient food category, emphasizing growth in sub-segments, such as eggs, cooking oil, and desserts. The dairy segment grew at 16 percent, driven by increasing awareness of balance and a healthy diet.

The frozen food category, meanwhile, experienced slower growth, although frozen meat increased by 18 percent, driven by price upgrades.

However, the baby food industry experienced a paradox with increased prices and declining consumption due to a preference for breastfeeding and homemade alternatives, as well as slowing birth rates.

Sustainability and agri-tech

In a concerted effort to enhance sustainability in food production, the UAE government has initiated various projects leveraging innovative farming methods, such as hydroponics, aeroponics, and aquaponics. According to Alpen Capital, these practices aim to maximize yield while minimizing resource usage, aligning to increase domestic production, and ensuring self-sufficiency in specific food items.

To address the challenge of limited arable land and bolster domestic food security, the UAE has introduced the “National Food Strategy 2051”. According to A Guide to Food Security in the UAE 2023 (the “guide”) from the MOCC, this initiative focuses on sustainable food production through modern technologies, with a specific emphasis on promoting organic farming. The Alpen Capital report indicates that the strategy aims to meet the rising demand for nutritious food, an increasingly important objective in the face of increasing incidence rates of diseases like diabetes and obesity.

Climate change poses additional challenges to the UAE’s agriculture, exacerbating issues of water scarcity and limited arable land. To counter these challenges, the MOCC states that it is proactively investing in state-of-the-art technologies and innovative cultivation methods, including vertical farming, hydroponics, organic farming, and controlled-environment agriculture. These efforts are aimed at not only boosting local agricultural production but also enhancing the quality and variety of domestically grown produce, as highlighted in the MOCC’s guide.

The UAE is also heavily investing in agricultural R&D. This involves establishing a network of research centers, enhancing laboratory capacities, and fostering collaborations between the public and private sectors, as well as international academic and research institutions. The MOCC outlines various research areas, including genetic resources, climate change impact, crop varieties adapted to local conditions, organic production techniques, and the use of advanced technologies like algae cultivation and sustainable agricultural systems.

The UAE’s turn to sustainable farming technologies presents a host of opportunities for companies operating in the space. Opportunities range from the design, construction, and management of sustainable agricultural systems, such as greenhouses and hydroponics, which have a growing market, as well as sustainable farming techniques that help optimize resource use, minimize environmental impact, and enhance agricultural efficiency.

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