Caffeine high for the UAE - Emirates24|7

Caffeine high for the UAE


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The coffee and café culture is continuing to take a hold in the UAE – with international chains predicting significant growth and expansion in the coming months.

Industry experts told Emirates Business the country’s growing economy and diverse cultural makeup have been crucial in creating a secure market for one of the world’s most popular commodities. And as the culture takes hold, the UAE also has become a hub for the import and re-export of coffee – raw, roasted and ground.

Simon Holroyd, Costa’s general manager for the UAE and Pakistan, said the United Kingdom-based coffee chain had grown quickly since it opened its first shop in Dubai in 1999. “Costa was looking to expand its brand into overseas markets so the partnership was developed as a franchise arrangement. At that time we were Costa’s first overseas franchise partner. Now Costa International has franchise partners all over the world and exposure in 15 countries,” he said.

From one store, Costa has increased its portfolio to 46 shops with plans in place to double the size of its holdings across the Emirates within the next 24 months.

“We have every intention of stepping up our development programme. It is difficult to put a number to our expansion plans, but it is safe to say we are many years away from market saturation. Wherever there are opportunities for us to take our brand to the consumers in the UAE, we will do so providing it is commercially viable,” said Holroyd.

American brand Dunkin’ Donuts – which arrived in the UAE in 1997 – has 45 stores in the UAE. Like its competitors, it has positioned itself to appeal to coffee-lovers by offering a full menu of caffeinated choices.

David Rodgers, Dunkin’ Donuts’ general manager, said: “We plan to have an additional five stores by the middle of this year and another 10 before the year ends. We are opening more outlets in Kuwait, where we currently have 11 shops, and are starting operations in Oman within the year.”

Rodgers said the country had attracted major players in the coffee retail business, which has kept Dunkin’ Donuts competing to come up with drinks that will tempt customers. “One of the significant factors in this part of the world is the heat. We have tailored our product range to incorporate more cold beverages such as the Original Iced Blend coffee, which is ideal during summer,” he said.

Mohi-Din Binhendi, President and CEO of the Binhendi Group, which is the franchise-holder for Second Cup, believes another factor that has contributed to the success of the business is the fact that coffee has taken over the country’s social scene. “The UAE has very dynamic cities and every city has its chains of gourmet coffee shops where people socialise. It’s a culture that is growing by the day,” he said.

Second Cup, which began in Canada, has opened 11 stores since it launched in the Emirates in 2003. Binhendi said he was planning to set up around 30 more shops within the next four years.

“Our strategy involves expanding throughout the Middle East – to Saudi Arabia, Oman, Qatar, Bahrain, Egypt and Syria,” he said.

Meanwhile, Australia-based Döme’s success story has been slow but steady. It has added an average of one store per year to its chain.

“The coffee franchise and retail industry here was just starting to take off when we entered the market in 1998. Because of the region’s strong coffee culture, the market has grown on an annual basis,” said Stephen Walsh, assistant general manager of Döme.

Currently Döme has eight outlets in Dubai and two in Abu Dhabi. Walsh, however, said the market is ripe for expansion and the firm plans to open four shops this year.

“But depending on the availability of space, we could add another two coffee shops to our chain. We’re also looking at opening stores in other GCC countries, but Dubai will always be our main base,” he said.

Starbucks declined to provide information about its expansion plans when contacted by Emirates Business. The US chain began its UAE operations in 2000 and had 27 outlets in 2004. Current figures are unavailable.

Meanwhile, in a statistical report released by the International Coffee Organisation in July 2007, the UAE was named the largest re-exporter in the GCC of green (raw) coffee at 1.3 million kg, soluble (instant) coffee at 1.3m kg and roasted coffee at 619,800kg in 2005. The Emirates was also the region’s largest importer of roasted and soluble coffee beans at 13.1m kg.

Saudi Arabia led in the GCC with green coffee bean imports at 28.6m kg in 2005. The UAE had an average rate of 50 per cent re-exportation for roasted beans, but the local market retained almost 80 per cent of all imported green and soluble coffee.

Among the six Gulf states, Kuwait was ranked second with a re-exported volume of 2.2m kg of beans between 2001 and 2005 – about 18 per cent of the Emirates’ total. Bahrain’s coffee re-export industry remained virtually negligible with just over 60,000kg of coffee re-exported over five years, according to the ICO report.

However, the ICO said the region’s import and re-export of soluble coffee beans has been increasing since 2001 – particularly in the UAE – while the locally retained average ratio remained at 87 per cent in the past four years. But roasted coffee is the UAE’s largest re-export commodity with a 50 per cent average of retained roasted coffee, despite being the least imported.

The UAE ranked 15th on the ICO list of the largest re-exporting nations. The US is the world’s largest importer at 120m kg of beans per month (as much as the UAE imports in eight years) while Germany ranks as the number one re-exporter.

Despite the Emirates’ changing demographics, the coffee retail and franchise industry remains confident the beverage will continue to have a following. Holroyd said: “It is difficult to place a monetary value on the industry. However, coffee retailing is a growing market and with the evolution of coffee shops and the different ways of reaching out to customers, it is definitely expected to grow.”

Export trends

Production and export trends in the global coffee industry in the past three years, as recorded by the International Coffee Organisation (ICO), defy the inversely proportional supply-and-demand and price-and-demand laws of economics.

Robusta coffee – which comprises 100 per cent of Vietnam’s annual crop but only seven per cent of Brazil’s and none of Colombia’s – has seen a rapid price surge unlike any of Arabica’s or its own over the last 20 years. This was because the price per kilogram soared by 35 per cent in 2006 and then by a further approximately 30 per cent in 2007.

But despite Arabica price increases early in 2005 and the belated Robusta surge, the three largest coffee producers – Brazil, Vietnam and Colombia – have recorded increasing export rates since 2005.

Brazil produced more than 2.54 billion kg of coffee beans in 2006, easily making it the highest volume producer of coffee in the world.

In fact, this number was nearly triple that of the second placed producer, Vietnam.

Coffee through the ages

800s AD: Coffee can be traced to the ninth century, when the bean was first discovered in the highlands of Ethiopia, by a sheep herder named Kaldi, according to one legend

1400s: From eastern Africa, coffee spread to Egypt and Yemen before it reached the rest of the Middle East, Persia, Turkey, and northern Africa

1550s: By the middle of the 16th century, coffee had begun to spread outside the region. Thriving trade between Venice and North Africa and the Middle East brought coffee to Italy, and from there it was introduced to the rest of Europe. Coffee became more widely accepted after it was deemed a Christian beverage in 1600, despite appeals to ban the “Muslim drink”

1600s: When coffee reached North America, it was not as successful as it had been in Europe until the US War of Independence, when the demand for coffee increased

21st C: Americans are the number one coffee consumers in the world today. The US imports beans at an average rate of two million 60kg bags a month

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