In the world of convenience retail everyone is always talking about North America (and rightly so), looking at trends in the Nordics and Western Europe, predicting massive growth in China and across Asia … and quite often missing one important region on the map. This region is the Middle East.
While the Middle East is a very large region with extremely diverse areas and countries, a good geographical starting place is the area of the Gulf Cooperation Council (GCC). The GCC consists of 6 countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
The GCC is home to 51 million people and has a combined GDP of more than 3.5 trillion USD. And, perhaps contrary to some opinions, it’s a very diverse set of countries.
The proportion of immigrants in the total population varies from 30% (Saudi Arabia) all the way up to 90% (Qatar). Overall in the GCC approximately half of the residents are non-nationals (26 million locals, 25 million non-nationals). It is the case that the economies of these GCC countries are largely dependent on the immigrant workforce of all skills and origins. While South Asian immigrants prevail, one can find almost any nationality in the Gulf countries.
And, believe it or not, the GCC region is a very important part of the Global Convenience Map. Here is why.
The GCC is every roadside retailer’s paradise.
The car is king here. All the GCC countries have been investing in their road infrastructures, while public transport is at a very early stage in the region. There are Metro lines in Dubai, train connections in Saudi Arabia and the city of Doha is testing smart buses, but all these networks are built for the future.
Right now, everyone is driving a car. And the cars are big. Bigger engines to get air-con running faster, spacious cars for big families, off-road cars to go into sand dunes and cross “wadis”. Luxury SUVs and sportscars, because a lot of people can afford them. The Arabian Peninsula is the land of white Land Cruisers of every generation ever manufactured.
All those cars need a lot of petrol. Average fuel volume of petrol stations in the GCC are, at minimum, two times higher than in any central European country.
Also due to the extreme climate one needs to change oil, refill coolant and generally check-up the car much more often. So, a petrol station by default is a place to meet all of your car’s needs.
Moreover, while every retailer in Europe and Americas is trying to convince their customers that it’s safe to eat at a gas station and that the food is actually good – eating at a petrol station in the Middle East is a part of every day life.
Add to that the fact that Arabs love to travel in their cars, to visit family and friends, to go to the desert, to go to a beach, to just drive around.
A long journey is not a problem for people in the GCC. Omanis from Muscat would spend 4-5 hours on the road each way to go to Dubai for a day. And some of the Saudi residents working in the Eastern part of the country (Dammam or Al Khobar) would be staying in Bahrain and would cross the border twice a day as a commute to and from work.
Roadside retailers are always there for them: to refuel, change engine oil, wash and/or service the car, have a cup of tea or coffee, take something to eat and do many other things as well… you can find not only your classic food & beverage franchises on a gas station, but sometimes unexpected services like pharmacies, insurance companies, banks branches, barbershops… and even libraries! And of course, having a mosque, or at least prayer rooms is a very normal thing. Prayers happen 5 times a day.
An average GCC resident doesn’t perceive roadside retail as a last resort. It’s a planned and enjoyable stop on the journey.
The new black gold
While in the good old days oil was the ultimate source of wealth in the region, now there is a new black liquid that gains momentum in the Middle East – coffee.
The coffee tradition is historically strong in here. Every country has its own traditional way of preparing coffee. To sit down and have a coffee is an important social ritual. Modern Arabs don’t limit themselves to the traditional way of preparing coffee. They are embracing and experimenting with all types: barista coffee, brewed, French press, AeroPress, cold brew, Turkish coffee – any way you want!
Due to the climate conditions, ice-coffees are very important here. One of the most popular ice drinks is a sweet “Spanish” latte; not sure if Spain is aware! Fresh coffee culture has been developing for a while and the ready-to-drink coffee business is on the rise these days.
The strongest international brand in the region by far is Starbucks. But there are a few remarkable coffee brands present across the GCC countries to take a closer look at: Kuwait based Dose; Saudi based Jolt; widely popular Japanese brand Arabica.
International brands present in the region
Due to legislative peculiarities, most of the international players in any retail, Oil & Gas, F&B industries are present in the region through franchise partners or joint ventures.
When it comes to Oil & Gas obviously all the majors are present here (Exxon Mobil, BP, Shell, Total, Eni). But all of them are mostly involved in oil exploration activities and very rarely in the retail marketing business. The petrol station realm is in fact dominated by the local companies: ADNOC, ENOC, WOQOD, SASCO, Tas’Helat, Petromin, OOMCO, BAPCO, KNPC.
As for the food, international brands are loved and welcomed in the GCC both by locals and non-nationals living in the regions.
Just to name a few franchises available in the region: McDonalds, Burger King, KFC, Wendy’s, PizzaHut, Dominos, Papa Johns, Popeyes, Dunkin, Krispy Kreme, Starbucks, Costa Coffee, Café Nero, Tim Hortons, Caribou coffee, Baskin Robbins…
The presence of the big convenience names Circle K and 7 Eleven is limited to few city locations in the UAE.
Pretty much anything one can imagine one can find in the GCC. But most of the brands adapt their menus to the local taste: halal meals, sweet ice coffees, different types of bread. As the demand for locally sourced products grows in the region all these International players are trying to adapt themselves with a combination of an International experience and local offers.
Industry trends that appeared in the GCC way before COVID19
Due to regional peculiarities, a lot of the trends that appeared in other countries in 2020 because of the COVID19 and social distancing measures already existed in the Middle East for a while.
- Since everyone has a car here and it’s quite hot most part of the year the drive-thru concept has been actively developing in the region. There are drive-thru restaurants, coffee shops, ATMs, cinemas and so on.
- A form of drive-in and curb-side pick-up existed here as well. In many parts of the region one would park in front of a coffee shop or a convenience store, horn and expect someone to come out to get the order.
- The Arab world was developing so fast in the 20th century that it has skipped television. Nobody watches TV here. Everyone is extremely connected through social media and receiving all their news from Twitter and FB.
- Even though the region is very diverse ethnically, there is a strong sense of individual ethnical communities where the main connections and community activities are happening.
- Following the demand for strong, diverse and independent economies, a request for local production is growing. Numerous private brands are emerging across industries.
Why any Convenience & Retail professional should visit GCC: UAE
The moment your country opens the border, do book your ticket to Dubai. Not only because it’s a large hub for businesses, people, capital, cultures and ideas, but also as the EXPO 2020 will take place here (moved to October 2021 because of COVID19).
EXPO 2020 is the largest event in the Arab world attracting millions of people from around the Globe. It will be a parade of ideas and aspirations of what the future will look like. What’s important for our industry is that sustainability and mobility are two key sub themes for Expo 2020. As a part of the expo you will be able to see The service station of the future: Solar power, artificial intelligence and many… many…many digital screens.
There are several interesting companies to check out in the UAE:
- ENOC – a Dubai based retailer, and NACS Member who is fully embracing the idea of multi-mission retail stations by having multiple brands and partners on their premises. It’s also worth mentioning that ENOC were able to build a strong brand of convenience stores ‘ZOOM’ that are widely available not only in the petrol channel, but also as stand-alone locations in business and tourist areas, metro stations, universities. The service station of the future is their project, too.
- ADNOC Distribution is the Abu-Dhabi based publicly listed subsidiary of the ADNOC corporation. It’s one of the fastest growing and one of the most profitable fuel retailers in the world. Any innovations you’ve heard of in the industry ADNOC picked up and implemented. The latest concept being developed is modular structures used for the so called “On the go” stations. ADNOC has also recently upgraded their Oasis stores with a new format revolving around coffee.
- Emarat – another strong player in UAE. They have recently developed a new shop concept focused on better customer journey and food. Adding more drive-thru locations across the country.
- Talking about UAE it’s worth mentioning Majid Al Futtaim. It’s a large corporation who run shopping malls; is a developer, hotels, cinema & entertainment operator, fashion retailer, grocery retailer (operates over 320 Carrefour stores in 16 countries).
Why any Convenience & Retail professional should visit GCC: Kuwait
Kuwait is the retail heart of the Middle East. It has an exceptional entrepreneurial spirit despite being a small country.
Just take a look at these remarkable Kuwait based businesses that you might have never heard of:
- H. Alshaya Co. is a family owned international franchise operator for nearly 90 retail brands including Starbucks, H&M, Mothercare, Debenhams, American Eagle Outfitters, P.F. Chang’s, The Cheesecake Factory, The Body Shop, M.A.C, Victoria’s Secret, Boots, Pottery Barn and KidZania. Alshaya Group’s portfolio extends across MENA, Russia, Turkey and Europe, with thousands of stores, cafes, restaurants and leisure destinations.
- Americana Group – long lasting family business that operates brands like KFC, Hardees, Krispy Kreme, Baskin Robbins, Pizza Hut with 1,800 restaurants across the region as well as 25 food production sites across the UAE, KSA, Kuwait and Egypt.
- Alganim Industries – a multinational business present in 30 countries with activities in Automotive, Engineering, FMCG and F&B industries. Operates Costa Coffee and Wendy’s in the region.
- Trolley – is a truly leading Convenience Retail Operator in the Middle East. Only 10 years old, started as a small shop in a University is now present across Kuwait at petrol stations, malls and Universities. Exceptional Operational excellence, customer interaction, unusual assortment will guarantee this brand a success in their home Kuwait and who knows, maybe in the region too.
- Dose – is very successful regional coffee shop player. They have developed a barista centric experience coupled with high quality coffee and a number of unique drinks. The brand is gaining popularity across GCC and plans to step into other regions in Europe and Asia.
- Arabica – is a coffee shops chain with striking Architecture of every single one of their locations. It is NOT a Kuwaiti brand. It’s actually from Kyoto, Japan and have more than 60 locations across the Globe. But Kuwait is very important for Arabica. Kuwaiti franchisee was the first one to start bottling the Coffee to grab additional channels thru RTD packaging and was the first one to introduce a drive-thru store.
Why any Convenience & Retail professional should visit GCC: KSA
Believe it or not, but the Kingdom of Saudi Arabi, which has been a very closed country for years is now on track to become one of the hottest convenience retail markets in the world.
The new direction of the government since the last 3 years is to liberate the country, open it up and attract investments. It is the largest country in the region, home to more than 30 mln residents. And even before opening its’ borders, the country was receiving up to 3 million religious pilgrims every year heading to Makkah and Madina.
Saudi Arabia has a massive ambition to grow its economy and to challenge UAE as a financial center of the region. The government is investing in the infrastructure, tourism and other industries.
The convenience/fuels channel also presents a huge potential in the country. Saudi Arabia is in TOP 10 countries by daily motor gasoline consumption. However, the market is fragmented with a lot of regional smaller players, very few companies operating across the country. There are opportunities to consolidate the market and significantly improve the customer offer in the channel. The competition here will be fierce involving local and regional players.
Regional players from UAE (ENOC, ADNOC) and Oman (OOMCO) are already present in the market with ambitions to grow. Just before the end of 2020 ADNOC announced a $10 million USD acquisition in Saudi Arabia to grow its network there.
Among local players there is the relatively strong SASCO, Tas’Helat (JV of Total and Saudi Aramco), Petromin (with ‘Primo’ convenience stores brand) companies. The largest market value company in the world Saudi Aramco is also planning to start its own branded retail business in the Kingdom in the nearest future. There is no doubt that it will be a significant force in the fuel retail sector of the country.
Closing remark – a global centre of growth
The Gulf region will be one of the global centers for growth in the coming decades and the convenience channel will follow that. Not sure if you are following any of the Middle Eastern players, but they surely are following you. Many of the GCC based businesses have both potential and ambition to become the global industry leaders.
By Nikolay Vylegzhanin, Middle East based convenience expert.