BMI View: Growth in Kuwait's food and drink industry will be driven by the gradual formalisation of the retail sector and a rapidly growing population over our forecast period to 2019. That said, opportunities for substantial growth will remain limited by the small market size and already high per capita consumer spending on food and drink items.
Headline Industry Data
Total food consumption (local currency) y-o-y growth in 2015: +2.4%; compound annual growth rate (CAGR) 2014-2019: +2.6%
Per capita food consumption (local currency) y-o-y growth in 2015: -0.6 %; CAGR 2014-2019: +0.1%
Bottled water volume (litres) y-o-y sales growth in 2015: +4.0%; CAGR 2014-2019: +3.8%
Total mass grocery retail sales (local currency) y-o-y growth in 2015: +2.9%; CAGR 2014-2019: +3.0%
Key Industry Developments
Shawarmanji Plots International Expansion: In June 2015, Lebanese shawarma fast food joint Shawarmanji informed about plans to expand its footprint with new outlets in the UAE, Qatar, Kuwait and South Africa. The company currently has 12 outlets in Lebanon and six in the UAE, with new outlets already in the works at the Mall of the Emirates and Sahara Mall in the UAE. Shawarmanji claims to be the first multinational shawarma chain and the only shawarma concept in the world to have outlets at the airports, reports HotelierMiddleEast.com.
London Deli Company Expands To Middle East: In June 2015, UK-based The London Deli Company announced plans to open its first Middle East store in Kuwait and has hired a local sales representative in the country. CEO Craig Benton noted that the decision to start the new venture came on the back of his contacts in Kuwait and also high levels of consumer spending in the country, reports Food Navigator. Meanwhile, London Deli, which currently sells its products through Lulu supermarkets across the Gulf Corporation Council area, is also planning to expand its operations and distribution network with airlines and hotels in the Middle East to meet the growing demand.
Aujan Confirms Middle East Investment: Saudi Arabia-based Aujan Coca-Cola Beverages Company's decision to invest USD500mn across the Middle East and North Africa (MENA), announced in February 2015, will boost the company's position across the region. Aujan is a leading manufacturer of non-carbonated soft drinks in MENA, especially in the fruit juices category. The company revealed its plans to invest USD500mn across the region over the next three years, in order to increase its production capacities and develop new products and packaging formats.
BRF To Acquire Stake In Alyasra's Frozen Foods Distribution : In August 2014, Brazilian poultry meats exporter and dairy products processor BRF entered an agreement to acquire a 75% stake in Kuwait-based Alyasra Food's retail frozen foods distribution business for USD160mn. The move is part of the company's strategy to boost its brands and expand its distribution and product portfolio in the Middle East. After the acquisition, Alyasra will continue to operate as an independent entity and BRF will become the exclusive supplier to Alyasra for the products of its portfolio.
Kuwaiti Food Giant Americana For Sale : In April 2014, Reuters reported that the al-Kharafi family had instructed bankers to explore interest from potential buyers for the USD3.6bn-valued Americana. According to announcements in July 2014, at least six private-equity firms were exploring bids to buy a majority stake in the Kuwaiti food firm. Reports suggested KKR, TPG Capital, CVC Capital Partners and Advent International were among the six firms considering the acquisition from the al- Kharafi family, which owns a 66.8% stake via private investment company Mohammed Abdulmohsin al-Kharafi & Sons. The sale is expected to generate around USD5bn.
Key Risks To Outlook
Given the economy's heavy dependence on oil, lower global oil prices could further drag down headline GDP growth over the coming years. That said, Kuwait has the financial wherewithal to cope with any short-term volatility in oil prices, which effectively moderates the risks of a more substantial downturn.
Kuwait's five year development plan (2015-2020), which envisages spending of over USD100bn on infrastructure projects, hospitals, power stations and more than 100,000 residential housing units, is expected to boost economic activity in the country. This presents an upside risk to our forecast.