Consumers in the Middle East have no difficulty finding a suitable restaurant no matter what their taste or budget. Indeed, the variety of restaurants and cuisine types on offer compares very favourably with most western markets which often comes as a surprise to new visitors to the region. Fancy a burger from McDonald’s or a coffee in Starbucks? No matter – it’s all available, whether you’re in Kuwait or Jeddah, Abu Dhabi or Doha.
According to market research company IMES, there has been huge growth in the number of quick service and casual dining restaurants in the countries comprising the Gulf Cooperation Council (Saudi Arabia, United Arab Emirates, Kuwait, Bahrain, Qatar and Oman). The 10 largest restaurant chains alone operate more than 1900 restaurants across the GCC, and the sector is increasingly organised on a pan-regional basis.
Over the past two decades there has been huge growth in the number of quick service and casual dining restaurants in the GCC.
Restaurants vary enormously on a number of levels. Fine dining restaurants serve high quality food in a formal setting with a high service level and high prices.
Casual dining restaurants serve moderately priced food in a casual atmosphere, and quick service restaurants emphasise speed of service and low cost.
While fine dining restaurants tend, in the main, to be stand-alone or one off in nature, quick service and casual dining restaurants lend themselves to replication-once a successful format has been developed it can be quickly replicated in other areas and countries.
One reason for the strong recent growth in restaurant numbers is the phenomenon of ‘westernisation of dietary preference, whereby as the economy of a country develops, a ‘westernisation’ of its inhabitants’ eating patterns tends to occur. As nations become wealthier, their inhabitants “progress” from a so-called “poor man’s diet” with high levels of grain, fruit, and vegetables, to a diet with more fat and sugar.
The lifestyle changes that accompany economic development also herald a more frenetic pace of life which leads to an increased demand for convenience including eating out more.
As the grocery retail sector consolidates towards fewer larger retailers and fewer but larger stores, quick service and casual dining operators have more and more opportunities to open new outlets in the food courts of the new shopping malls. These malls provide new quick service and casual dining operators and expanding chains a low cost opportunity to test concepts or to extend their reach.
For example, Riyadh’s Granada Centre, which opened in 2005 (with Carrefour as an anchor tenant), is home to some 33 restaurants in an extensive food court. Carrefour alone has established 20 hypermarkets in the GCC since 1995.
Other important drivers of demand for the industry include strong population growth (averaging 3.3% across the region), strong economic growth and rising personal incomes.
IMES estimates the GCC market for quick service and casual dining to be worth some US $2.1 billion in 2007 at consumer prices, or $56.30 per capita. This compares with an estimated $203 billion market for quick service alone (i.e. excluding casual dining) in the United States, the world’s most developed fast food market, or $671 per capital.
Difference in per capita income levels compared to Western markets partly explains the relatively low level of development of the sector. While per capita GDP in countries such as Qatar and the UAE are comparable to the wealthiest Western countries, those of the region as a whole at $21,166 still compare unfavourably, despite the rapid growth in GDP recent years. Other reasons for the relatively low development of the quick service and casual dining sector include:
• Low development of tourism (except for UAE)
• The importance, although declining, of traditional family meals at home
• Women being unable to drive (Saudi Arabia only)
• Limited sales of alcohol Constraints on social mixing
• A concentration on evening dining
Restaurant chains focussing primarily on chicken products (such as Al Tazaj, KFC and Al Baik) are the most popular in the region accounting for some 27% of the market by value. Snack concepts (i.e. chains selling coffee, donuts and ice cream) are the next most important, accounting for 21% of spend, followed by pizza and burger chains.
In order of importance, the main categories of fast food and casual dining restaurants present in the region are as follows:
• Chicken outlets
• Snack concepts (i.e. chains selling coffee, donuts and ice cream)
• Pizza outlets
• Burger outlets
• Sandwiches/Arabic food outlets
• Casual dining outlets
• Asian
A market breakdown is shown in Chart 1 (overleaf). Saudi Arabia and the UAE are the most important national markets, together accounting for 74% of total consumption. The relative size of national markets is determined mainly by population and income.
Thus, for example, the UAE, with a population of some 5.4 million, is the second largest country in the GCC after Saudi Arabia. However, it is considerably wealthier, with a GDP per capita of $34,283 compared to just $14,616 in Saudi Arabia. The quick service and casual dining industry in the UAE is therefore considerably more developed, with one chain outlet per 8372 people, compared to just one per 10,621 in Saudi Arabia. A breakdown of market value by country is shown in Chart 2 (overleaf).
On a pan-GCC basis, KFC is the leading restaurant chain accounting for 11% of the market as defined, followed by McDonald’s and Pizza Hut with 10% and 9% respectively. IMES estimate of the percentage share of the GCC market by value, held by the leading QSR chains is presented in Chart 3.
Somewhat surprisingly, because of its very high sales per outlet, Al Baik is the leading quick service chain from the region although it has never expanded outside the Western Region of Saudi Arabia.
Rising income levels, strong population growth, a trend towards urban living, a growing interest in convenience and a general trend towards international dining habits provide an ideal backdrop for the quick service and casual dining industry in the GCC.
Across the region, the industry has grown by an average of 12% per annum each year for the past five years and continued strong growth is anticipated over the next five years.
Although the market is highly competitive, huge opportunities still exist for well thought out foodservice concepts that deliver consistently on service and quality in this demanding marketplace. We can also expect a significant increase in competition in the coming years as markets open up further and new market entrants seek a share of the attractive opportunities available.
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