By Daniel Shane
Since launching in Abu Dhabi in 2008, the Gulf portion of Jones the Grocer’s business now makes up as much as 40 percent of the Australian firm’s revenue. Company director John Manos details the next steps for the gourmet food retailer
Such was the buzz surrounding the opening of Jones the Grocer’s first outlet in Dubai last year, eyewitnesses reported that one of the first customers was HH Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai, who was spotted with his entourage tucking into a selection of the healthy eating delights served up by the eatery.
The Australia-based concept, which targets high-brow foodies with a blend of restaurant and organic produce retail in a single outlet, is now plotting further expansion in the region to complement its five sites in Abu Dhabi and one apiece in Dubai and Doha.
“We’re just finalising a second site in Dubai,” says John Manos, director of Jones the Grocer, adding that it will be in the city’s Downtown district. “We’re looking at a second site in Doha and one in Kuwait, and we’ve also done some work in Saudi Arabia in terms of assessing the market.”
“[Kuwait] will probably be in the next eight months. We’re talking to various people at the moment and we’re hoping to progress our discussions to the next level in three or four weeks,” Manos adds.
The expansion drive in the region has been fuelled by a recent investment by Singapore-based private equity fund L Capital Asia, which in August announced that it would be taking a stake in Jones the Grocer. According to Manos, L Capital Asia’s shareholding is “around 50 percent” of the business.
“[They’re providing two things:] one is capital and the other is strategic support in key markets, and that’s going to be us leveraging their relationships and the network that they have,” Manos explains.
Since opening its first outlet in Woollahra, a suburb of Sydney, in 1996, Jones the Grocer has broadened its reach to ten sites across Australia, New Zealand and Singapore, in addition to its presence in the Gulf.
The firm’s decision to go international was based on an observation Manos made on certain customers’ buying habits.
“One of the things we realised fairly early on was that we used to get a lot of Asian visitors that would come into [our store in Australia], buy AUD$1,000-AUD$2,000 ($1,027-$2,054) worth of groceries and then take them back to Singapore, or Hong Kong or China, because that produce wasn’t available [there],” he says. “So we started thinking about the overseas market.”
After the firm’s expansion into Singapore, Jones the Grocer initially intended to open in Dubai soon afterwards, which at the time was the peak of the emirate’s property boom in 2008.
“When we got here what we found was that the market was probably too hot for us [and] overhyped, so we decided to set up in Abu Dhabi first,” explains Manos. “It proved to be a very good decision, because the rents were much more reasonable, and as soon as we launched in Abu Dhabi, Dubai crashed and the rents came back down by half.”
The firm subsequently held off on opening in Dubai until last year.
Manos says that Jones the Grocer’s six outlets in the UAE, all of which are run by a single franchise partner, are currently “contributing 40 percent to 45 percent” of the company’s revenue. The group in total is turning over about AUD$40m ($40.81m) per year, he adds.
Due to foreign ownership regulations in the UAE, Manos says that the brand does not have full ownership of its outlets in the Gulf state, but instead takes an equity stake of up to 49 percent — the maximum permitted — in its partner’s business.
This will continue to be the case with the company’s new outlet in Dubai, which will be run by its existing franchise partner, Yunib Siddiqui.
Manos says that Jones the Grocer has strict guidelines when it comes to working with new partners. “The last franchising partner we had in the UAE, he had no food and beverage experience, and to an extent that can be a good thing,” he says. “We’ve been able to build a system that works and what we don’t want is a partner that, for example, has a McDonald’s franchise and wants to run a McDonald’s-type system for a Jones the Grocer-type brand.”
“What we look for in a partner is someone that is obviously capitalised... has the right understanding of importation regulations and employment regulations [and] has a passion for the type of business that we have,” Manos adds.
One area where the brand is inflexible is its outlet size of choice, which has to be a “full format” 400 sq m to 600 sq m premises. “It’s a large format... with generally 40 to 50 people working in the store,” he notes.
Manos says that while Jones the Grocer’s current focus was the Gulf, long term it would look to open further outlets elsewhere in the Middle East. “We’ve had a lot of interest out of places like Lebanon, Bahrain, Kuwait, Saudi Arabia, Egypt and Turkey but we’ll just take the Gulf to start with and go from there.” Territories outside the Gulf are on a “twelve-month to eighteen-month horizon,” he adds.
Manos believes there is a decent-sized addressable market for the variety of organic, healthy-eating fare that Jones the Grocer specialises in across the Gulf, with Western fast food being conspicuous in its abundance.
In contrast to the greasy, fried fare served up in many of the Middle East’s eateries, Jones the Grocer’s menu teems with specialty cheeses, lean cuts of halal meat and arguably the restaurant’s signature dish, its Wagyu beef burger.
“What you’ll tend to find is the McDonald’s, the Starbucks, the Burger Kings — they tend to educate the masses [in the Gulf] on Western food, and then brands like ours tend to take the top ten percent to fifteen percent of those customers [when] their palate evolves to the next level,” he claims.
“What we’ve seen in the UAE though is people are becoming increasingly health conscious. There’s a high instance of diabetes here and a high [level of] gluten intolerancy — people are becoming much more specific about what they’re eating,” Manos continues.
Manos believes that even those chains whose menus are best associated with ballooning waistlines and soaring cholesterol have begun cashing in on demand for healthier options.
“McDonald’s market share was flat, and even saw a slight decline, because people became more health conscious, so they had to revamp their formats and their offering to promote that aspect of their business,” he observes.
However, Manos believes that even within the healthy-eating market there is inconsistency on what the term actually means. “The problem with the healthy-eating market is that it’s susceptible to a lot of fads,” he reckons. “What’s important is that when you say ‘healthy’, it’s not just about calories — it’s about food being grown and processed in a particular way [and] delivered in a particular way.”
On this note, Manos says that Jones the Grocer employs a sophisticated sourcing network that includes both locally cultivated ingredients and premium meat cuts from further afield.
“There are two aspects of our business, which is the retail grocery business and the restaurant business,” he explains. “With the retail grocery business the products generally come from overseas: Australia, Europe, the US and a bit from Asia. Then the restaurant products are sourced locally. Now that being said, the local products generally we buy from local distributors, but our Wagyu meat will come from Australia or it could from the US.”
He adds that the company at one point toyed with building a hydroponic farm in the UAE to grow its own fruit and vegetables, although the idea never took off. Manos says that when sourcing produce from overseas, the firm deals directly with farmers and markets to save money that would otherwise go into the pockets of distributors. “It cuts one level of margin out and then we’re able to pass that on to the consumer,” Manos adds.
In the future, Manos says, Jones the Grocer will “definitely” move into online retailing of its ingredients, although there is currently no timeframe on this area of the business. One route he will not go down, however, is retailing via supermarkets or other third-party distributors.
“We’ve in the past in Australia sold our products into some high-end department stores, and we may do that, but we won’t sell our products in supermarkets. We never want to put ourselves in a position where we’re discounted or we’re subject to the sort of treatment you get in these high-volume places,” he asserts.
Outside of the immediate region, Manos has grand plans to eventually take the brand as far afield as the UK and US, although this is a longer-term project.
“I believe in the next two to three years, we’ll have a presence in the UK and then beyond that probably Northern Europe as well,” he says, adding the caveat that given the current economic climate in Europe, this is a “secondary part of [the firm’s] strategy”.
For now, Manos is content with fulfilling the potential of markets in the Middle East and South-East Asia, which he believes will continue to be the growth engine for Jones the Grocer. The company’s target, he says, is to more than treble global revenues within in a few short years.
“I see us probably having 50 to 60 stores in the next five years and probably being a AUD$150m ($152.8m) to AUS$200m ($203.7m) business in the next five to six years — so we’re looking for quite rapid growth and I think with the [L Capital Asia] partnership as well, we’ll be able to achieve that.”For all the latest retail 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.
Just to add another perspective: Fast food outlets are not the only sources of ballooning waistlines. The last time I ate in Jones the Grocer (in Abu Dhabi) I saw many waistlines that were straining against clothing and other body parts that were overhanging seats. To be fair, if Jones wants to be aligned with â€œhealthyâ€ then how about publishing the nutritional content of the items and let the public be aware of what they are eating. While the food is very good, I would argue that the health benefits of the ingredients, even if some are organic, do not represent healthy guidelines and neither do the gigantic portion sizes. Eating organic does not reduce waistlines or ensure health. Eating the appropriate amount of calories from all sources of food groups and participating in daily exercise to burn calories is still required. I wish Jones all the best in their future endeavors.