The busy food and beverage industry in Kuwait is set for further growth, as domestic demand fuelled by rising incomes, combined with forecasts of higher turnover due to expansion in the tourism sector, pushes up trade volumes and attracts new suppliers in the retail and hospitality chains.
Food and beverage chains are continuing to enter the Kuwaiti market, with both retailers and restaurant brands keen to cash in on the ongoing consumer boom. Forecasts by the Central Bank of Kuwait put GDP growth at 3-3.5% this year, though some analysts estimate the economy could expand by as much as 5%. Whatever the exact figure, spending power, and thus outlay on food and beverages, is expected to rise.
Kuwait’s per capita income has been rising steadily since the 2008-09 global financial crisis and is now edging towards $60,000, according to World Bank data. Greater spending power will feed into the sector and help sustain the expansion trend in both the retail and hospitality segments.
According to Abdul Ghani Al Ghunaim, chairman and CEO of Al Ghunaim Trading Company, which has extensive holdings in the hospitality sector, opportunities for expansion remain throughout the industry. “There is great growth potential in the service industry, especially in the food and beverage and hospitality sectors,” he told OBG. “Kuwait will continue to be a platform for international franchises in restaurants, retail and hotel chains.”
That platform is becoming increasingly crowded. In April, US-based chain MOOYAH Burgers, Fries & Shakes opened its first outlet in Kuwait, and in the same month Canadian pancake chain Crepe Delicious launched the first of what is planned to be at least eight eateries in the country, the company’s first foray into the Middle East.
Multinational suppliers too see the potential in the Gulf, focusing on the region as sales flatline in some of their traditional markets in Europe and North America. Swiss-based giant Nestlé, for example, recently forecast its sales in Kuwait and the rest of the region to almost treble from $2.4bn in 2013 to $6bn or more by 2020.
In addition to rising domestic demand, increased investments in tourism will also fuel growth in the food and beverage sector in the medium term. Kuwait has targeted hosting 1m tourists a year by 2015, which would represent a three-fold rise in arrival numbers from the time the medium-term plan was announced in 2010.
As many as 10,000 additional hotel rooms will be added to the existing accommodation stock, around 30% up on present numbers. With the blueprint calling for greater focus on upper-end and business tourism, including the meetings, incentives, conferences and exhibitions segment, demand for quality eateries is likely to rise.
One issue that could cause price spikes in the food and beverage industry is disruptions to supply. Kuwait is moving to strengthen its food security – and thus the supply chain for F&B firms – through efforts to boost local farming output and commodities processing. The country is using a mix of incentives and subsidies to lift private sector investment in agriculture and is opening up more land for food production.
Even with these efforts, Kuwait remains one of the biggest importers of food in the region, relying on overseas products and materials for 91% of its requirements according to local media, a situation that will likely be relieved to only a modest degree by any programme to increase domestic production. This means that processors, retailers and those in the hospitality sector will remain exposed to external shocks to supplies and price fluctuations.
It is not just the suppliers of materials to the sector who are seeing the potential for higher turnover, with those who serve the equipment needs of the market also forecasting continued growth. Bashar Al Qattan, the founder of Green Flame Gas, which provides equipment to the restaurant and catering industry, as well as household and industrial products that utilise gas, says demand will remain strong.
“The main consumption of gas outside the energy sector in Kuwait comes from restaurants, and with the continuous popularity of restaurant development, especially in malls, this will continue to be true,” Al Qattan said.
The strong projected growth in the tourism sector over the next few years will underpin expansion for equipment and materials suppliers, as new retail outlets and eateries fit out ahead of opening, and existing food and beverage purveyors seek to upgrade to keep pace with the increasing competition in the market.
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