Dubai The Pressures of Growth

Transcription

1 Mike Knowles Editor, Eurofruit Magazine Eurofruit Middle East Congress Dubai, UAE 18 November 2008

2 Dubai Buyers Survey 39 leading players in Dubai fresh produce market» Retail buyers, importers, overseas suppliers» Survey designed to assess current situation with regard to imports of fresh fruit and vegetables in the Dubai market» Questions relating to market for imported fresh produce, opportunities to boost sales, perceived obstacles to growth, impact of various external factors and potential for future development as a regional hub

3 Dubai Buyers Survey External factors» The economy» Availability» Market access» Product quality» Distribution sector» Transport & logistics» Consumer demand» Packaging & technology» Pricing» Marketing

4 Dubai Buyers Survey Buyers and importers asked to assess supply countries» Australia» India» Chile» Italy» China» Pakistan» Egypt» South Africa» France» United States

5 1 Market 2 Import 3 Conclusions

6 1 Market Analysis Dubai is the region s busiest fresh produce hub Dubai will continue to be the leading market among the Red Sea and Gulf states for fruit and other foodstuffs Dubai is a very open, free market, with lots of storage and logistics facilities Dubai is very active, especially as a lot of countries around it are buying mixed loads here

7 1 Market Analysis Dubai is a big deal for overseas suppliers Dubai is our main point of entry into the Middle East I would say Dubai is the place that is most open to product innovation in the Middle East Dubai is where we ship our largest volume of fruit in terms of export sales Most of the big companies are now based here This will result in more opportunities for the fresh produce trade

8 1 Market Analysis Strengths» Very active market» Central position» Unrestricted market access» Established import network» Well equipped - transport, communications» Open to new products» Expanding modern retail

9 1 Market Analysis Opportunities Products» Convenience / fresh-cut products Meeting this demand requires products that are convenient to consume, such as apples, bananas, mandarins, pears and grapes» New product lines gaining ground in Dubai this year French organic apples Japanese watermelons Brazilian limes Australian custard apples and blueberries possibly Malaysian yellow-skinned papaya?

10 1 Market Analysis Opportunities Retail The Middle East is moving from wholesale to retail» Growth in modern retail driven by expansion of Carrefour (France) and Emke Group (Abu Dhabi), plus entry of Casino (France)» Major deal between Waitrose (UK) and Spinneys (UAE) set to open up to 20 Waitrose stores across the UAE» Aswaaq (UAE) new public joint stock company formed by the government to become largest supermarket chain in the UAE Source: Planet Retail

11 1 Market Analysis Challenges» Logistics headaches» Global economic downturn» Competing markets» Risk of oversupply» Population growth below likes of Iran, Saudi Arabia» Ongoing uncertainty about the peace process across region

12 1 Market Analysis Challenges Logistics» Development of Port Rashid for urban real estate and cruise liner industry has made Dubai even busier» DP World transferred cargo operations to Jebel Ali» Congestion at high level» Ships waiting to berth as much as five or six days If the situation is not addressed properly, we could see suppliers moving their products via other points of entry

13 1 Market Analysis Challenges Logistics Transport routes are regularly delayed and ports are congested, creating uncertainty The government is looking ahead and trying to keep up with Dubai s rapid growth. I expect that, before the middle of next year, all logistical problems will be a thing of the past

14 1 Market Analysis Challenges Logistics» Plenty of improvements on-going» DP World tender for Jebel Ali expansion» Dubai Logistics City taking shape» New logistics companies coming in Kuehne & Nagel making DLC its primary regional hub» Emirates continued expansion Transfer to new Mega Cargo Terminal hub New services e-freight air cargo initiative

15 1 Market Analysis Challenges The Economy» Some concern among analysts about the Dubai bubble» Price of oil falling by more than half from record highs» Stock markets dragged down by rest of world» Losses in overseas portfolios» Morgan Stanley report - property prices set to fall 10% by 2010 But» GCC GDP has tripled in last five years to US$1.5 trillion» Some US$2 trillion worth of mainly publicly-funded projects» Dubai s leaders have dismissed talk of being too far in debt» Demand for real estate said to be still outstripping supply

16 1 Market Analysis Challenges The Economy We must remember that the Middle East is not immune to the world s financial problems At the moment things are positive, but we have to be careful, as a big crash could affect the area. There s probably too much speculation on construction and this looks like a very big risk

17 1 Market Analysis Challenges Competing Markets & Suppliers Iran and other areas of production closeby are likely to make it more difficult for imports from further afield Demand from Saudi Arabia was much higher this year More of the country s small players are buying from Dubai We notice remarkable growth in small markets like Lebanon and Syria

18 1 Market Analysis Challenges Competing Markets & Suppliers Companies in countries adjacent to the United Arab Emirates have started to import directly. These companies are growing quickly in their local markets and have lower purchasing costs

19 1 Market Analysis Challenges Potential Oversupply The market is sometimes too speculative, which means we face periods where the market is selling below cost The market is reasonable but price-conscious Dubai takes a big volume, but pays a small price Entry barriers are low, but this results in fierce competition, which puts pressure on profits

20 1 Market Analysis Challenges Demographics Demand continues to outstrip supply in Dubai Even if it is increasing, Dubai s population is limited and it will never have as many people as other countries around it, for example Saudia Arabia, Iran, Iraq

21 2 Import Analysis Key Indicators Population growth rate (2006) Population (2008 est) Per Capita GDP (2007) UAE 2.85 Iran ,621,399 people 65,875,224 people US$37,000 US$11,700 Saudi Arabia 2.24 Iraq ,146,656 people 28,221,180 people US$19,800 US$3,700 Source: United Nations; CIA World Factbook

22 1 Market 2 Imports 3 Conclusions

23 2 Import Analysis Major overseas suppliers to Dubai Australia Citrus, Grapes, Mangoes, Onions, Vegetables Chile Apples, Grapes, Kiwifruit, Pears, Stonefruit China Apples, Garlic, Ginger, Pears, Vegetables

24 2 Import Analysis Major overseas suppliers to Dubai Egypt Citrus, Grapes* France Apples, Kiwifruit India Grapes, Mangoes, Onions, Pomegranates

25 2 Import Analysis Major overseas suppliers to Dubai Italy Apples, Kiwifruit, Stonefruit Pakistan Mangoes, Kinnows, Onions, Stonefruit Philippines Bananas

26 2 Import Analysis Major overseas suppliers to Dubai South Africa Citrus, Grapes, Pears, Stonefruit United States Apples, Grapes, Onions, Pears, Vegetables

27 2 Import Analysis Australia» Strong in citrus, grapes, mangoes, onions, vegetables» Some potential for stonefruit, such as cherries» Trade links expanding beyond Dubai Increasing number of options in other Middle East markets» FTA with GCC currently being negotiated» Improving exchange rate 17 November 2007 US$ 1.00 : AU$ November 2008 US$ 1.00 : AU$ 1.54 Australia has begun to look at other markets in the region

28 Australia Opportunities Our Middle East trade has extended to many other Gulf States as they seek to do direct imports rather than rely on Dubai for their supplies I think the Dubai market will remain stable and there will always be regular demand for Australian summer fruits

29 Australia Challenges» Competition from South Africa on key products» Price competition» High overheads» Logistics concerns» Economy - exchange rates could shift again» Water shortages

30 Australia Challenges Most fruit has to be airfreighted, so there are still fairly high margins needed to make it worthwhile Markets are serviced by individual growers the challenge is to link growers from different regions to achieve continuity of supply for a larger part of our season

31 2 Import Analysis Chile» Primary focus on North America, Europe» but serious player in the market, looking to grow» Increasing potential for apples, pears, kiwifruit» Can also supply grapes and stonefruit Chile offers the Middle East an excellent source of quality fruit, but because of the competition it faces from elsewhere, its prices tend to be comparatively low

32 2 Import Analysis China» Key supplier of apples, garlic, onions, vegetables, citrus» Increasing production costs» Exports could be limited by domestic growth» Starting to compete with other suppliers on price During the last year, we were able to source cheaper products from China with excellent quality for products like citrus, apples and onions China is one of the most important sources for certain products, supplying excellent quality

33 China Challenges You have to be careful about who you deal with in China choosing the right export partner is essential The key problem we face at the present stage is payment terms. Some importers request payment upon shipment on board, which we think is unacceptable

34 2 Import Analysis Egypt» Leading supplier of citrus» Grapes traditionally targeted at Europe» but some potential for grapes to Dubai Having already been a major supplier of citrus to the market for some time, Egypt has begun to sell more grapes here as well

35 2 Import Analysis France» Reliable source of high-quality products» Facing strong competition from other sources» High cost producer» Potential for new varieties Falling subsidies, high labour costs and improved storage in the Southern Hemisphere means our development in the Middle East has slowed down France is still active in apples for Royal Gala and Top Red, but has lost ground to Iran on Golden

36 2 Import Analysis India» Strong in grapes, mangoes, other exotics» Banana export deal lacks investment» Could utilise its cold chain better to supply more For the products it supplies, India is an important and reliable player in the Dubai market Trial shipments of bananas have not really taken off

37 2 Import Analysis Italy» Important European supplier, excellent quality» Major emphasis on marketing to emerging markets» New markets opening elsewhere eg China» Major challenge is keeping costs low Italy produces quality products but its prices are sometimes too high for the Dubai market Dubai is one of our most important markets because it appreciates the high quality of our fruit

38 2 Import Analysis Pakistan» Around half its kinnow exports are to the Gulf» Looking to expand in Russia, Europe, North America» Exporters see further promise in Dubai market» Must meet tough protocols to access retail / foodservice Pakistan has carved a niche for itself on certain key products such as kinnows and mangoes Kinnow volumes depend to a certain extent on continued access to the Iranian market

39 2 Import Analysis The Philippines» Banana exports booming» up 7m boxes year-on-year in July 2008» Lower supply from Ecuador» Sending less to Japan and Korea this year» Other countries competing for supply - eg Saudi Arabia» But overheads are increasing» Black Sigatoka still an issue» Some talk of expanding production overseas

40 The Philippines Opportunities We re seeing increasing demand from Iran, plus Iraq is also a potential market The Russian market is providing another important outlet

41 The Philippines Challenges The main challenge is how to increase productivity to off-set cost increases like labour, fertilisers and seafreight We must develop a new and effective protective fungicide to control Black Sigatoka disease

42 2 Import Analysis South Africa» Major supplier, proximity to market» Great returns in 2008 for citrus, record prices» Some concerns over quality and competition The South Africans are pursuing a dangerous policy. They are nearer and earlier, but neglected quality while asking for high prices, especially at the start of the season. This encourages other Southern Hemisphere suppliers to invade the market with excellent fruit at reasonable prices

43 South Africa Opportunities South Africa remains the best positioned supplier to this region because it is relatively close to the market compared with its competitors Due to the long storage life of its products, South Africa competes strongly with other Southern Hemisphere and Northern Hemisphere suppliers

44 South Africa Challenges This is an anchor market for South African citrus and we need to look after it Although the berries of Indian grapes are smaller than South African ones, the product is delivered over a shorter distance and the taste is excellent

45 2 Import Analysis United States» Key supplier of topfruit - apples and pears» Appeal to large ex-pat American population» Could be looking at more direct supply in future» Excellent promotional / marketing programmes Washington apples do really well here in the Dubai market Significant market share for Washington apples and north-west pears

46 1 Market 2 Imports 3 Conclusions

47 2 Conclusions Dubai s position as a hub for fresh fruit and vegetable shipments to and from the Middle East remains strong However, rising production and transportation costs for certain exporters, eg Australia, US, are making direct supply to other GCC countries a more viable option

48 2 Conclusions Modern retail expansion in the Gulf region will make Dubai an even more attractive yet challenging prospect for suppliers Opportunities to supply will be greater, but the quality demands are going to be even more exacting

49 2 Conclusions Dubai needs to make sure its logistics headaches don t become dehabilitating Suppliers will only put up with transport problems for so long, and competing hubs in other parts of the Gulf may emerge

50 2 Conclusions Dubai is not immune from the effects of a global financial slowdown Suppliers have always been wary of the Dubai bubble bursting. As markets elsewhere slip into recession next year, growth in this market will almost certainly be at a slower rate

51 2 Conclusions If growth rates slow here as demand in other major world markets stalls, the potential danger of oversupply could increase If suppliers can t sell as much in recession-hit Europe, will they start sending more to the Gulf? Will other suppliers eg New Zealand, Spain, Brazil, Turkey start sending more to the region?

52 Mike Knowles Editor, Eurofruit Magazine Tel