Event Review: Caterer Food & Business Conference
Hungry for more
KPMG’s Anurag Bajpai kicked off the Caterer Food and Business Conference with a UAE F&B overview. According to Bajpai, the UAE has about 16,234 food and beverage outlets and is expected to increase to 19,053 by 2020 with 1,600 F&B projected to open by 2019. The UAE’s F&B industry is one of the world’s leading markets, with market size measured by Euromonitor at AED 52.4 bn (US $14.27bn) in 2015.
The regional F&B sector is estimated to grow at an average of 4% annually over the next four years. Despite the market growing overall, 64% of operators surveyed indicated that same store sales over the last 12 months have either been stagnant or have declined.
Jumeirah Restaurant Group general manager Emma Banks said during a panel discussion: “Dubai’s F&B is very discount driven because of the number of outlets and restaurants and bars and it’s at its saturation point.”
Bajpai said: “There is no lack of eating out options across the UAE and the increase in supply, in some segments of the market, continues to exceed the increase in demand. While the outlook for the sector as a whole has probably never been better, for individual players, the market has become increasingly competitive and thus challenging.”
However, the news wasn’t all negative. Bajpai stated that sustainable growth is still possible adding: “Consumer demand and behaviour is positive in the region. Consumers continue to spend on eating out. Nine out of ten consumers are spending as much as or even more than what they were in 2015 and the average spend per head for consumers from 2015 to 2016 has gone up.”
The real deal
The opening panel discussion at the conference focussed on the theme of “Appetite for Growth — Keeping up with Rapid Urbanisation”. Topics such as location, licensing and redevelopment were discussed during the panel moderated by The Cutting Edge Agency founder and managing director Duncan Fraser-Smith however, the overlying theme was authenticity.
During the discussion, Economides who is the co-founder of restaurants Mythos Kouzina & Grill and Nola Eatery & Social House in JLT, suggested that F&B outlets can prolong their lifecycles by choosing a strong concept and staying true to it: “The F&B industry compared to other industries has a shorter lifecycle and there are different ways of implementing your concept. If you approach the investment and the restaurant setup in a way that you have a long product lifecycle, I think there are ways to drive it in that direction. That’s what we tried to do at Mythos and Nola. We feel that having a very solid concept with an authentic serving and consistency so that when people come back they know what they’re getting.”
Still, Economides underlined that outlets can’t be complacent and that he isn’t opposed to making small changes and adjustments within the concept that customers will appreciate.
F&B outlets are set to take the centre stage around a mall’s development according to McArthur + Company founder and managing director Phil McArthur.
“Department stores were considered necessary in malls, but now its F&B outlets that are the new anchor. Previously, every retailer we spoke to would ask, ‘who is the department store you signed up with in the mall?’ But they [department stores] have become much less prevalent today because they have lost market share rapidly in the last 30 years and they are being replaced by specialty stores such as Apple, H&M and Nike,” he said.
McArthur also said that mall developers want to attract restaurateurs and the resulting concepts. “Shopping centre developers love F&B because restaurateurs pay good rent, they add character to the mall and they probably do the nicest improvements to the fit out to make the shopping centre experience very attractive,” he said stating that food and beverage is now being identified by mall developers around the world as the next wave of making shopping centres stronger and how to grow its sales.
McArthur also shone the light on some data and indicated that the space reserved for F&B outlets in a mall is on the rise. “Dubai Mall has 3.7 million square feet of rentable area, 10% of that space is devoted to F&B and it will probably grow to 11% to 12%. Meanwhile, architects are mulling over a whole new F&B experience at the Mall of the Emirates, which is something to look out for. The Beach has 17% of its space dedicated to F&B and the first phase of City Walk had 24% of its space.”
McArthur also agreed that saturation is a problem with some emerging as winners and some not so lucky. “Saturation can be a problem and we are working all the time with new concepts and trying to come up with better differentiation with our F&B offering. Customers coming to malls, who end up dining there have been found to spend about half-an-hour longer and spend 20% more on their visits.”
Finally, McArthur suggested that the traditional food court needs an overhaul: “Instead of food courts, you can have dining terraces as is evident by what Westfields did in Australia. Food courts are boring, sterile, calculated; we need to break them apart and come up with new ideas without giving up on core fundamentals,” he said.
Peruvian chef Virgilio Martínez revealed at the conference that one of his next projects will be opening a food lab in Cusco, Peru, dedicated to ingredients and innovation.
He said: “Our next huge project is going to be a lab on top of the mountains in Cusco, which is going to see a lot of disciplines working together — researchers, scientists, designers, architects.”
The lab’s primary function will be to research and register ingredients and their place of origin.
Martínez explained: “I think the project is quite amazing because we live in a place where we know very little about how many ingredients we have in Peru — so we are working on registering ingredients in their place of origin, getting inspiration from them, and finding out if they are edible, if they have some (special) properties.”
The Michelin-starred chef added that this project would serve as a solid base for innovation, and help the culinary sector in Peru go back to its roots.
Martínez was also in Dubai to open his latest restaurant, Lima Dubai. The chef has two Lima outposts in London, one of which has won a Michelin star for five consecutive years. His restaurant in Peru, Central, is currently ranked fourth in the World’s 50 Best Restaurants list.
Good food education
Finding healthy ingredients in the UAE is “possible” but “with an effort” requiring “more research, more hard work” in “finding the right suppliers”, it was claimed during the conference’s ‘Trending Healthy’ panel discussion.
Panellists agreed that the ongoing healthy eating movement can no longer be regarded as a trend but is now a lifestyle choice. “It is here to stay,” declared Naim Maadad, Gates Hospitality CEO, who also moderated the panel discussion.
The panel, however, agreed that though proper education about healthy food choices is key, insufficient education is leading to knowledge gaps existing in the marketplace, even at the grassroots level, with consumer families and even schools making ill-advised food consumption decisions. This leads to giving undue importance to indicators such as calorie counting to guide their food choice purchases.
The Health Co. general manager Shyra Fanri mentioned that her company had initially removed calorie counts from food packaging but was forced to print calorie values again, due to overwhelming customer feedback.
Izu Ani, chef and YSeventy7 founder, decried the use of indicators such as calories in offering healthy food. He said: “The key to education is to do it in simple ways. Keep it simple — and make sure the food is really good.”
Marta’s Kitchen and Workshop founder Marta Yanci stressed the importance of learning from customers and providing their various health food requirements, such as the emerging demand for Paleo, lactose-free and gluten-free diets. “It’s ‘adapt or die’”, she said. But she also cautioned against overreacting to the latest food trends. “We tend to demonise everything or think it is the best in the world. I think balance is of the essence.”
Maadad agreed and added: “We need several support systems in place to make healthy eating a way of life — whether it’s from the source, the supplies, logistics, or the authorities.”
The price of quality
The topic of education gave way to a discussion about the fact that eating healthy in the UAE still carries a premium price point, driven by scarcity of local produce, resources and supply chain challenges.
Darren Velvick, The Croft chef patron, said that finding the right balance between offering comfort food and healthy food is “tricky”, and that “everyone in F&B should have a role in educating the customer. Chefs, definitely.” He added that the challenge in providing healthy food could sometimes lie with purchasing, departments stating: “They’re not necessarily looking for the best but the cheapest and not the healthiest.”
Agreeing that procurement at hotels pose complex a complex challenge with ever-present downward pressure on food costs, Kempinski Hotel Ajman executive assistant manager Anish Kuttan said: “When you say something is organic, this usually comes with a price tag. Are the guests willing to pay for this? When you put that in the context of a menu price, it becomes a bit complicated.”
He opined that creativity could be a solution, citing examples of how menus can be changed a few times a year to accommodate the availability of seasonal ingredients or how, at his hotel, a healthy menu is offered in collaboration with the hotel spa’s Ayurvdeic offering, highlighting holistic healthy benefits. He said: “It’s about how you package your offerings and the information you provide to the guests because awareness about healthy options always helps.”
When asked by an audience member, however, if eating healthy means that the customer has to shoulder a premium price tag, the panel conceded the “painful truth” that price gaps currently exist in the marketplace between regular food options and the healthy, organic, chemical-free, preservative-free choices.
“If you want your chicken to taste like chicken, then I’m sorry. In the UAE, that costs money,” Yanci declared.
In the UAE, food delivery is on the rise. In KPMG’s annual food and beverage report, three out of four survey respondents said that they order a take away or have food delivered at least once a week. The study also added that 82% of industry respondents said they are “already listed on all the food apps in the market” and found value in them.
In the UAE alone, food apps currently used by residents are Deliveroo, UberEats, Zomato, Talabat, to name a few.
Mckinsey reported in 2016 that “worldwide, the market for food delivery stands at US $102 billion, or 1% of the total food market and 4%of food sold through restaurants and fast-food chains”.
The delivery market has already matured in most countries, with an overall annual growth rate estimated at just 3.5% for the next five years.
“35% of business comes from food portals and delivery services and apps take the stress of delivery off your hands, allowing you to concentrate on core business, said Namir Hourani from MARJ Group at the panel discussion titled ‘Game changers in the F&B industry’.
Jumeirah Group’s Emma Banks said that 20% of Noodle House’s home delivery business comes from Deliveroo. “Noodle House has a fleet of 30 bicycles and we’re self-sufficient with bikes on the road but some of our customers were going to UberEats or Deliveroo; the market is changing and the trends are changing.”
“Given the growth of food apps and their impact on operators’ volumes and topline, they are seen as an important contributor to success,” said KPMG’s Anurag Bajpai at the conference.
The Caterer Food & Business Conference 2017 closed with a presentation by Grant Thornton tax & VAT leader GCC Gurdeep Singh Randhay. Randhay started by underlining that there is no time for companies to be complacent.
“There seems to be a huge amount of indifference when it comes to VAT which is going to be implemented in the GCC in January next year. The short of it is that on January 1 2018, five of the six GCC countries will be subject to VAT and the only country that will have a deferment of six months will be Bahrain.”
The standard rate of VAT is expected to be be set at 5% though special rates may be applicable for certain products and it is expected that 94 products that are deemed essential, such as food items, will be exempt. Certain businesses will also be exempt from VAT and those businesses will be primarily medical services, education and transport in order to minimise the impact on consumers.
The introduction of value added tax in the UAE next year, in tandem with the other GCC countries, will boost government revenue, which has taken a hit with falling oil prices. Randhay stated that, according to the UAE ministry of finance, “they will collect AED 12bn ($3.3bn) in 2018 and expect to collect an estimated AED 20bn ($5.4bn) in 2019.”
For now, small businesses are being exempt for mandatory registration as turnover has to be at least AED 3.75m ($1m) in order to be registerable. If a company’s turnover is less than that figure, they are not required to register for VAT on a mandatory basis. None of the six GCC countries have published VAT laws. GCC member states that are not ready to implement VAT by January 1 will have to introduce the levy from January 1, 2019, the UAE’s Ministry of Finance said.
The UAE is yet to finalise and publish its VAT law however, a Federal Tax Authority has been established. After a grace period (yet to be announced by the Ministry of Finance), the authority will perform tax audits in addition to collecting federal taxes and administering penalties in cases of non-compliance.