With a population of about 2.3 million and oil reserves of at least 94 billion barrels, Kuwait’s local population has no shortage of spending power. But despite a high per capita income, the country’s retail sector has lacked some of the dynamism of other Middle Eastern markets, such as the UAE, where a more modern trade, led by private retail groups, is growing rapidly.
In Kuwait, the FMCG retail scene is dominated largely by co-operative societies and traditional corner stores or baqalas. Combined, these account for about 90% of the grocery retail sector, according to Planet Retail, a UK-based research company. The modern trade accounts for only 10% of Kuwait’s FMCG retail scene.
However there are signs that this is changing. Ahmed Abdel Hay, regional manager at Gulf Food Industries, who handles products including Gulfa Water for Kuwait and the Levant area, said that in the past few years, change in the retail sector has been picking up pace. “The FMCG sector in Kuwait has been growing a lot during the last three years,” he said. “It used to be the commonwealth co-op system but there are now other chains setting up. It used to be only Sultan, but now there are three branches of City Centre,” he added. Until now, few foreign retailers have opened in Kuwait. One is UAE-based Emke Group, which has opened one department-style outlet in the country, but is also planning to open its first Lulu hypermarket in the next few months. Boots, a UK high street pharmacy, also recently opened a store in Kuwait.
French hypermarket group Carrefour is also expected to open a branch in the country in the next few months, according to Abdel Hay. Furthermore, Casino, another French retailer, is expected to open its first store in Kuwait in 2006 or 2007, according to Planet Retail. Part of the reason for this change is that the coops, which are owned by the government and shareholders, may be struggling to compete against the greater efficiency of private groups, Abdel Hay says.
“The quality of the service they are providing is not competitive compared with other private supermarkets,” he said. “Governments everywhere in the world are bad traders and are not capable of competing with private companies,” he added.
Small groceries have a tiny share of Kuwait’s FMCG retail sector, accounting for just 3% to 5%, according to Abdel Hay.
These stores tend to sell cheaper, locally produced products and brands, he added. Much of this change in the retail sector is in response to a greater demand, which in turn is being driven by a rise in the population. Abdel Hay estimates that some categories, such as frozen meat, are growing by more than 35% a year. Bottled water sales have risen by about 29% in the past year, while bean sales have grown by about 17% to 20%. Growth in these categories is also being driven by a change in people’s lifestyles, according to Tarek El Dakhakhny, marketing manager at Gulf Food Industries.
“On a macro level, there is a general trend towards a greater female working population and for a business like ours it’s important because the demand for convenience and canned foods grows,” he said.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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