Gulfood 2021: Time for further resets for UAE's F&B businesses
As the UAE and the region move past the difficult period of the pandemic, it is clear things will never be the same. Even with the extremely organized and effective response to the pandemic, it will take time until a full bounce back, largely as a result of the lagging recovery of the tourism sector, weak growth in commercial investments, and an overall slowing of global trade.
The UAE’s F&B sector – particularly vital in Dubai – has not been spared. The months of the pandemic have been a uniquely challenging time for operators, and unfortunately not all of the many vibrant concepts survived.
That said, the F&B sector is sure to bounce back – but it will be markedly different than that which existed pre-pandemic. This period has transformed the entire ecosystem in ways that will continue to influence it for years.
These changes will be very much on the mind of the local and international F&B leaders attending Gulfood – live, in person. More than 500 suppliers from 198 countries are expected for the most important F&B focused event in the MENA region.
Delivery nets winners
One important trend that was starkly highlighted by the pandemic is that aggregators – such as Talabat, Zomato and Careem – gained immense popularity in an environment in which deliveries grew as a result of health and safety precautions. This is particularly true in the UAE, which, on account of its diverse and demographics, already has the highest frequency of eating out and ordering in.
Some aggregators also experienced significant changes of their own. After traditionally charging 25-35 per cent commission on delivery order values, they came under intense scrutiny for these fees cutting into the margins of operators who faced immense challenges due to reduced – or in worse case scenarios, zero footfall.
Switch to subscription
Careem, for one, was able to demonstrate how to come to balance between the needs of operators and aggregators by introducing a commission-free model to relieve some of the adverse impact of the pandemic. The model allows for operators to subscribe to a monthly subscription fee, and stands in stark contrast to the prevailing system. The future may well see more of these sorts of adjustments.
This new reality allowed for the speeding up and ramping up of trends which were already coming into existence – partially because of consumer cautiousness and a focus on health and safety concerns. Casual and premium dining saw significant challenges as many concepts fell by the wayside in the midst of these market conditions.
Those that survived are the ones willing and able to adjust how their businesses operated – by negotiating leases, adjusting salaries and increasingly focusing on more efficient usage of existing resources. For many concepts across the country, the focus was on leveraging costs already incurred and optimizing assets already in place.
Share the source
These changes are bound to accelerate in the near future, particularly after many F&B operators have seen the benefit of shared cloud kitchens versus physical, on-site ones, and are perhaps now looking towards managed kitchens. Facilities in which both cooking, and delivery are both fully outsourced will allow businesses to focus more on brand, concept, and consumer demands while eliminating the need to spend significant sums on allocation decisions.
Digitization and social media became increasingly important tools in the F&B operator’s arsenal during the pandemics. Successful operators quickly understood the importance of becoming more agile and innovative to conduct the necessary, rapid face-lifts to business operations.
Mind the differences
While there may be overlapping similarities, each market within the GCC carries slight differences, in terms of tastes and preferences. Mindful and meaningful digital approaches will gain traction to capture and analyze information, patterns and trends, so they may adjust accordingly.
While industry insiders are cautiously optimistic about the recovery of the tourism and hospitality sector, these lessons will not be soon forgotten, even for restaurants that continue to focus on patrons that dine-out, a demand they strongly believe will never fully disappear.
Add to those options
The pandemic served as a reminder – unlike any that has befallen the F&B industry in the past – that restaurants and operators need to keep contingency planning in mind. There needs to be a Plan A, Plan B and Plan C, while at the same time being cautious and mindful with capital allocation and existing assets. Nimble, omni-channel businesses are the ones that will survive this and future disruptions.
Gulfood 2021 will also be an opportunity to explore the financial challenges facing the sector, notably with respect to investments needed to accelerate recovery and to achieve growth. The importance of a robust and reliable supply chain is key to surviving the economic impact of 2020’s tumultuous events.
We expect many businesses will be working on strengthening greater control of their supply chains going forward. How this expansion will be secured to adequate funding is likely to be a topic of many conversations.
- Peter Maerevoet is global CFO and regional CEO for Asia at Tradewind Finance.