What you need to know about the FMCG Industry in the UAE

Finding a better way to define FMCG

What comes under FMCG and what does not can be a tricky question or at least it is difficult to be answered in a short sentence. Toothpaste can come with an expiry date of one year from the date/month of manufacturing and if you buy a bigger pack you may not purchase it again for quite some time. You may buy a tin of sweetened condensed milk, keep it in a working refrigerator, forget about it for a month, and open and still use it. But you cannot do the same with fruits or vegetables. Thus, the lifespan of a product or how frequently it is purchased are not good enough indicators to tell if it is an FMCG. It is what happens to a product that rather gives better clues.

In the case of FMCG products, we can say that there is a (significant) decrease in its quantity after every use or consumption. Say, with every single use of 2 grams, a 200-gram toothpaste loses 1% of its total quantity. It will last for 100 days. If we increase the number of users to four, the product will now last 25 days. The same principle applies to fruits and vegetables. Say, you buy 5 kilograms of a vegetable mix. After every use, there is a significant decrease in its quantity. Whether the product will be frequently purchased and used is not material (take bandages for example).

We use FMCG products for our daily or routine consumption. It includes food and beverages (like fruits and vegetables, milk, tea or coffee, packaged snacks, dairy products, and aerated drinks), hygiene products (like toothpaste, bathing soap, and toilet rolls), office supplies, personal care products, over-the-counter medicines (like antiseptic solutions, bandages), and so on. Readily available in the local mom and pop or departmental or eGrocery stores, these products can be easily purchased online or offline.

Here are a few points that stand out for the FMCG industry in the UAE.

Strategic locational advantage

The advantageous location of the UAE on the world map makes the country a connecting point between the East and the West. The active, massive and efficient logistics industry of the UAE is another big plus point from a trading and business perspective.

Favourable demographics and pro-business environment

With population growth, healthy income levels, and the spread of organized retail (via both physical and online channels), the FMCG industry in the UAE is on a northward trajectory. The interest of foreign companies and investors to step up their presence in the UAE has received a big boost with the easing up of the FDI restrictions in the country’s retail and wholesale sector. The plenty of Free Trade Zones across the country serves as an incentive for FMCG retailers from all over the world.

Presence of big brands and retail chains

In addition to a host of reputed domestic FMCG companies, the presence of international brands like Nestle, Coca Cola, Unilever, Henkel, Colgate-Palmolive, Kellogg’s, PepsiCo, and others strongly hints at the immense potential of the FMCG market in the UAE. The success of supermarket/hypermarket chains like Spinneys, Carrefour, Lulu, Waitrose, etc. further reiterates it.

Customers’ shift towards eCommerce

With a robust internet and smartphone penetration, the customers in the UAE are increasingly shifting towards online shopping of groceries. Such trends brighten up the commercial prospects of starting or expanding eGrocery business in a region. This explains the strong presence of online grocery brands like NRTC Fresh, Kibsons, Fruitful Day, Fish Box, and many others in the UAE. For further encouragement to online grocery shopping and tap market shares, it is common to see promotional campaigns and price discounts from various FMCG retailers and manufacturers.

Expensive real estate AND supermarket layout design

As retail space is expensive in the UAE, and especially in Dubai, SME retailers do not have much of a scope to deviate from efficient layout planning for their dark stores or supermarkets. And only a good supermarket layout strategy can lead to a good supermarket layout plan. Supermarket setup consultants can help businesses lacking the necessary experience not only in layout design but also in other areas like supermarket business plan and business model development.

Competition and Role of FMCG consultants

FMCG consulting companies have a pivotal role to play here in levelling up the game of CPG startups and SMEs. Competing with the big FMCG retail brands or chains in the UAE like Carrefour, Lulu Hypermarket, Baqer Mohebi and the likes of them is not easy for the new and inexperienced players. From market research to defining operations, the importance of grocery store consulting or CPG consulting services for both online and offline FMCG retailing in the UAE cannot be undermined.