With gigantic malls opening around Gulf cities, the retail food industry has morphed considerably in the past ten years and supermarkets, critical elements in the food distribution network, are playing a more important role in the retail chain by providing a greater variety of food at lower cost.
Saudi Arabia and the UAE markets are the heavyweights of the GCC food retail industry. “UAE hypermarkets have witnessed a 105% growth in the last four years while supermarkets progressed by 77%,” said Himanshu Vashishtha, managing director at The Nielsen Company UAE, the privately-owned global information, research and media company. “In KSA, hypermarkets have grown by 45% and supermarkets by 21%,” he added.
According to ShopperTrends 2007, an annual study recently released by Nielsen, Saudi households spend an average of $400 (1,500 Riyals) per month on household shopping — a figure closely matched by UAE consumers — 40% of which goes towards fresh food such as meats, fruits and vegetables.
Large players dominate the GCC retail food market: Panda and El Watni are positioned atop the KSA food chain while Carrefour, Spinney’s and Lulu’s — a company targeting Indian expatriates — are the main market breakers in the UAE. The Emirates market also includes large cooperatives in Sharjah and Abu Dhabi which operate in collaboration with the government. “These outlets are impressive in terms of size and turnover and offer a varied assortment of products, but they need to improve the quality of service rendered. Such structures appeal to locals and feature bargain offers all year-round, without being necessarily cheaper than other chains,” said Vashishtha.
Targeting a diverse population
The UAE market is extremely diverse: Gulf nationals amount to 20% of the overall population of Arabs, Indians and Westerners. “Market diversity affects significantly products lines carried by hyper and supermarkets alike, with distributors trying to cater to different market segments by featuring special ethnic food sections,” underscored Vashishtha. Supermarkets have also learned as well to adapt to growing population of singles — mainly caused by high costs of living as males send their spouse and families back to their home country- thus dedicating special sections for prepared meals.
Furthermore, supermarkets target various categories of consumers: Lulu’s is mostly sought after by the Indian community while Spinney’s is favored by Westerners. Most UAE consumers perceive shopping as a matter of convenience. They have also recently adopted the concept of shoppertainment, a blending of shopping and entertainment. “With most supermarkets located in malls, consumers tend to identify grocery shopping as an outing for the entire family. For instance, a typical family will buy groceries, shop for clothes, enjoy a meal and watch a movie,” explains Vashishtha. The trend also seems to exist in Saudi Arabia where only few entertainment choices are available. In the KSA, two other factors shape consumer behavior: the prohibition against women driving implies that females often rely on husbands, sons, or brothers for their grocery shopping. The other factor is that grocery stores do not offer delivery services due to restricted access to residential areas.
The operation manager observed that GCC consumers are generally loyal to brands; they seek good bargains but are rarely aware of how much money they have actually saved on their purchases. “A supermarket can increase its footfall by having frequent promotional offers. This tool is more effective when it comes to Indians and westerners who are usually more price conscious than Arabs,” he said.
Catering to Islamic culture
The Islamic culture widespread in the GCC countries has also reflected on product mixes as well as design of points of sales. “Hyper-and supermarkets will feature isolated special sections dedicated to the sale of pork products, a model that is rarely duplicated by groceries because of constraints such as the limited space available,” says Vashishtha. On average, the overall design of GCC outlets meets western standards, but contrarily to Europe, stand alone supermarkets are not common phenomena and are mostly located within shopping malls. Grocery stores, which seek a different mix of fast stock keeping units (SKUs), can also be found either around or attached to residential areas.
Most super- and hypermarkets in the GCC region such as Carrefour — owned by the Al Futhaim group — are franchised and monitored by a global partner. On the other hand, some chains like Spinney’s are directly owned by a mother company. As Vashishtha concluded, “The nationality of the chain has little or no impact on consumer behavior.”
KSA main players
Azizia Panda
Azizia Panda Hyper
Al Othaim
Giant
Bin Dawood/Al Danoub
Al Raya
Carrefour
UAE main players
Carrefour
Abu Dhabi Co-op
Spinney’s
Lulu/EMKE
Al Safeer
Sharjah Coop
Source: The Nielsen Company
Shopping Modality
The Nielsen Company — which also owns marketing information brands (ACNielsen), media information (Nielsen Media Research), business publications (Billboard, The Hollywood Reporter, Adweek), trade shows and the newspaper sector (Scarborough Research) — has released this month a study on Shopping Modality highlighting consumers’ four shopping modes. Depending on the type of items purchased, shoppers can be in auto-pilot mode (grab and go), variety mode, (seeking new tastes and formats), susceptible to “buzz” mode, thus open to engaging advertising or are simply on the hunt for a bargain (on the lookout for price discounts and promotions). “The study was led all over the world as well as in the KSA and the UAE, which are the most relevant markets in the region in terms of size,” says Vashishta.
According to the study, shoppers don’t waste energy on everyday decisions. To simplify their lives, they often shop in grab-and-go mode, reaching for the brands they usually buy without checking label or price. In these moments shoppers are not willing to try anything new, and marketers need to tailor their strategies to such behavior for a more effective reach. Items such as coffee, cereal, cheese, margarine and mayonnaise fall within a shoppers’ “auto-pilot” mode. For this particular category, the implication for marketers is that they need to avoid radical repositioning or pack changes if they are leaders, not to be negatively perceived by consumers.
However, the same rules don’t apply to buzz-activated categories such as chocolate, energy, sports and yogurt drinks. “Customers radar is fully turned on as they actively explore alternatives. Marketers of ‘buzz’ categories need to generate ‘buzz’ through exciting advertising, new introductions and innovative packaging that leaps off the shelves to grab the consumers’ interest and attention,” said the study.
With variety-activated categories, auto-pilot mode is also often switched off when shoppers cruise frozen foods and cold cereal aisles. Consumers get bored with the same choices, and are on the lookout for a “household chef” who can deliver variety and surprise. “In this context, exciting and informative packaging plays a major role in purchase decision as consumers are browsing actively and are on the lookout for interesting and new product innovations. Biscuits, chewing gum and salad dressings also fall into the variety seeking shopper mode,” underlined the report.
Finally, bargain-hunting activated categories are driven by price comparison and promotions. This category includes canned tuna and tomatoes, cheese, canned fruit and pasta sauce.
According to the report, “It all comes down to marketers knowing what ‘mode’ shoppers are in when they shop for specific products or categories.”
