28 C
Saturday, December 9, 2023

Encouraging signs for UAE’s vibrant FMCG sector as volumes grow in Q1


While GDP growth in the United Arab Emirates (UAE) slowed due to lower oil production, the performance of non-oil sectors, including FMCG, remained strong. The economy is expected to grow by 2.4% in 2023, slower than previously expected but still a positive sign.

Inflation in Dubai fell from 6.2% in the third quarter of 2022 to an average of 4.6% in the first quarter of 2023. However, policy easing in Dubai and the UAE has been slower than in other parts of the world, including the US and the euro zone.

Price increases have become more restrained in most FMCG segments, except beverages. This makes monitoring pricing trends across product categories critical for creating brand-specific strategies.

UAE FMCG Pattern Q1 Figure 1

The relatively modest price increases were linked to a modest 1.3 percent increase in volumes in the first quarter, as buyers rationalized their purchases to a lesser extent. While pricing pressures have been widening the gap between FMCG volume and value, a strong increase in purchases during Ramadan in 2023 is a positive development for brands and retailers.

The growth rate of FMCG spending is slowing as inflation begins to level off.

Shoppers Take Action to Control Spending

In the short term, the main response to financial stress for UAE consumers is to shop less frequently. They are also continuing to reduce quantities and buy fewer packages per trip in certain categories. Recent trends also show that shoppers are purchasing larger packages of food, beverage and personal care items.

UAE FMCG Pattern Q1 Figure 2
With decreasing penetration in most market segments, brands need to become more competitive in order to increase sales and market share. They should capitalize on opportunities in market segments that are experiencing penetration growth and revisit portfolio management to align with related trends in bulk sourcing.

Hypermarket and online opportunities

A shift in consumer behavior to explore alternative shopping options, such as hypermarkets, presents both challenges and opportunities for brands. While this increases their access to a wider range of customers and enables them to negotiate better partner deals due to larger purchase volumes, competition within hypermarkets is heating up. This makes differentiation challenging. Brands need to adapt their marketing and product ranges to the preferences and behavior of hypermarket shoppers.

Only about 11% of the top 600 FMCG brands in the UAE do not sell online. Online shopping is still growing mainly due to its convenience and increased use of e-commerce by households in the region.

UAE FMCG Pattern Q1 Figure 3

The size of online package purchases is dwindling—but shoppers pay higher average prices for about 67% of categories. Half of the FMCG brands are sold at premium prices online, and the other half are sold at cheaper prices than offline. This suggests opportunities for both premium and discount strategies in the e-commerce space.

Expat Arabs are still at the forefront of online shopping. The growing participation of other nationalities, especially higher socioeconomic groups and Emiratis, will drive further adoption of the channel.

Brands and retailers should adapt their strategies to the rise of online shopping, including updating channel mixes and product packaging sizes to better accommodate in-store shopping.

The pandemic has brought permanent changes to consumer behavior in the UAE. Overall, the FMCG market remains positive as the region enters the post-pandemic world. However, it is clear that seasonal factors as well as increases in basket prices drive volatility in consumer buying behavior. Brands and retailers must remain flexible and keep an eye on trends in order to develop and execute adaptive marketing strategies.

For more insights, contact our experts.


Source link

Related Articles

Unveiling Elegance in Verse: Syed Salahuddin Presents Mushairah & Kavi Sammelan 2024, Another Extravaganza of Poetic Brilliance

In a splendid celebration of the rich tapestry of Urdu poetry and literature, Mr. Syed Salahuddin is gearing up to host the grand 22nd...

Tahbib: Navigating a Global Literary Odyssey with Leading Edge Events

In the luminous realm where art, language, and culture converge, Mr. Tariq Faizi's Leading Edge organization orchestrated a three-day symposium presided over by the...

Prize Alert: Key Highlights for Dubai Shopping Festival – Don’t Miss the Dh1 Million Prize and Free Home Makeover!

Prize The Dubai Lights show promises a visual treat with enchanting displays at various venues, featuring larger-than-life characters, neon-lit abras, and life-size Amazon forest...

“Sanjay Shah’s Journey: From Opulent Living to Extradition from the UAE”-1

Sanjay Shah Once the poster boy for opulence in Dubai, Sanjay Shah's extravagant lifestyle was a symbol of luxury. His mansion, fleet of yachts,...

“Dubai’s Spectacular 3D Tale: 500 Drones Transfigure Into Iconic Landmarks for an Astonishing Display”

500 Drones In the heart of Dubai's Bluewaters Island, a purpose-built platform gears up for the Dubai Shopping Festival (DSF) Drones Show. Exclusive access...

Latest Articles