A fast growing population and ease of distribution make Qatar a strong market for FMCG producers and retailers.
With fewer than one million people and a landmass of just less than 12,000 sq km, Qatar is easy for FMCG professionals to overlook. But despite its size, the country is proving to be a lucrative market with a rapidly developing modern trade and strong population growth.
Mohammed Althaf, regional director for Emke LuLu in Qatar said the company has experienced growth of almost 100% between 2001 - when it entered the market - and 2006. Emke has two stores in the country, a hypermarket and a non-foods store. Sales of grocery products have been growing by about 30% for the past two years and non-food items such as electronics and clothes have also been experiencing strong growth. This pace of growth has continued through the first quarter of 2007, and Althaf thinks it will continue until 2010.
The retail sector is also changing rapidly in Qatar, with the modern trade forming an increasingly big slice of the sector. The country's demographics and economy have also changed, which has encouraged the modern trade to invest. "In the last five years there was an influx of people into the country and then it has to do with a lot of new retail development, in oil and gas. It is a very unique economic model. Suddenly you have a lot of people coming in and a lot of projects happening.
"With that there was also a weakening of the traditional trade," Althaf said. "If you look at all of the souks, some of them demolished, co-operatives have not changed much. People want one-stop convenience. That is one of the trends," he added.
Emke has ambitious plans to tap this growth, and intends to open one store every year for the foreseeable future. The company has two Lulu stores in Qatar, and work has already started on three more projects, which are at various stages of completion. Its flagship store is a 22,000 sqare metre outlet with two levels.
Emke's next store in Qatar is due to open in the first quarter of 2008 in an area of the capital city, Doha. Emke is also looking at other parts of Qatar, such as Al Khor, which has a rising population of about 250,000 involved in the petro-chemical business area. Emke plans to open a mall in this area. "It's [Al Khor's population] growing by about 30% a year," Althaf said.
"The trend in Qatar over the past couple of years is definitely in favour of organised retail. It is estimated that by 2010 over 80% of the trade will be with modern hypermarkets," he added.
Furthermore, Althaf thinks that people in Qatar underestimated the potential of the market. "Even when we came in we could have started four or five hypermarkets. The market has grown so much and nobody actually expected it."
But this growth has also brought some challenges. Althaf points to road traffic congestion as one problem. He added that some supplier companies have also failed to adopt new technology in line with market demands. "The market, especially perishable is import dependant," he said. "Dubai is the major regional source so any problems like delays at port or roads and raising transport cost can upset the supply chain."
Rod Maxfield, managing director, Unilever Gulf FZE, agreed that Qatar's FMCG sector has experienced significant growth. "In the last two years, excluding this year, we've seen pretty strong growth and it's been one of the fastest growing markets for us in the Arabian Gulf, with the exception of Yemen," he said.
The country's market growth has been in the high teens across most categories, and Maxfield attributes this to population growth, a buoyant economy and the development of the modern trade. And one of the most significant changes in the retail sector in the past few years has been the consolidation of Qatar's co-op stores. All the co-ops in Qatar, which had been independent stores, consolidated under the name Almeera. This gave producers and distributors a large single customer in addition to newcomers such as Carrefour and LuLu.
Maxfield added that while Qatar is relatively easy to operate in because of its small geographic area and strong economy, there are some challenges. Indeed, despite its wealth, purchasing power among expatriates has fallen recently owing to rapidly increasing rent prices. Another hurdle is that the country has only one port, which can become congested and slow the progress of products to market.
But aside from these problems, the past year has been one of buoyant growth, with increasing competition between modern retailers also helping give impetus to FMCG sales. "There is a lot of competition between the retailers, most of them are sending out weekly flyers which seems to be an increasing trend," Maxfield said.
He added that most top end retailers have annual promotions and events, often with prizes such as a 4 by 4 vehicle being given away as a prize.
In terms of the type of products that have been selling well in Qatar, Maxfield said there is good growth potential for health and beauty products. Brands such as Dove are performing very well, as are Knorr products. This is partly because consumers in Qatar are responding well to new product innovations.
In 2006, Qatar had 14 hypermarkets, according to research from Planet Retail, a specialist retail web-based publication. Carrefour had two hypermarkets, The Dasman Centre had three hypermarkets and superstores, Giant had five hypermarkets, and Emke had one hypermarket and one non-food store. In Qatars smaller grocery stores are all independent, with no chains, according to Althaf.
"The wholesale market is relatively small and has been declining and it's been declining with the corresponding growth of the top-end trade," he said. "I think the retailers view it as a still very buoyant...there is a Marks & Spencer there now and also some new openings are expected from Carrefour, LuLu and Family Food Centre."