Middle East Coffee Trends Attest to Strong Growth

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By Dan Bolton

Industry leaders are broadly positive about trading conditions in the Middle East, but operators must navigate a range of economic and political challenges across the region to ensure success, according to a new report by Allegra World Coffee Portal.

The report forecasts significant growth in branded coffee shops which now number 9,084 outlets in 12 countries* including major markets in Iran, Egypt, the United Arab Emirates, and Saudi Arabia.

Full-service coffee port

Coffee that once sailed past Dubai began offloading to a new warehouse and processing facility in November. The DMCC Coffee Center will initially process 20,000 metric tons of green coffee, valued at $100 million. Much of this coffee originates with China’s Yunnan State Farms Group following a 2016 deal negotiated with Hong Kong-based Mega Capital Halal. Yunnan State Farms produces 90% of the arabica coffee grown in China. The 7,500 m2 facility near the Port of Jebel Ali will store, process, warehouse, and deliver coffee globally, according to Ahmed bin Sulayem, executive chairman of DMCC (Dubai Multi Commodities Center). This is the first temperature-controlled coffee warehouse located in the Middle East. The center is already doing business but the official public opening will be in February during Gulfood 2019.

Dubai is the focal point for Middle Eastern café innovation, according to Allegra Group c.e.o. and founder, Jeffrey Young.

“The UAE has experienced huge growth in both domestic and foreign-invested specialty coffee shop chains,” according to Young.

“In Dubai, an influx of artisan food and beverage brands has capitalized on the consumer appetite for premium coffee shop experiences. A clear majority of UAE industry leaders surveyed told us there is still plenty of growth potential in the branded coffee shop market. But even amid the growing popularity of specialty coffee, industry leaders cite convenience as the number one factor behind coffee shop success – ahead of coffee quality and service,” he said.

Key growth markets

The liberalization of Saudi Arabia’s economy under the government’s ‘2030 Vision’ is expected to significantly boost the country’s food and beverage sector, according to Allegra. More than three-quarters of Saudi industry leaders surveyed believe like-for-like sales growth in the Saudi coffee shop sector will outperform national GDP in the next 12 months.

Industry leaders report a surge in third-wave café concepts in Kuwait, with well-traveled and highly educated consumers rapidly adopting artisan coffee products including single origin and cold brew. Allegra forecasts above regional average growth for branded coffee shops in 2018, with industry leaders surveyed unanimously agreeing that more Kuwaiti consumers are visiting coffee shops than 12 months ago.

Market challenges

An economic blockade against Qatar continues to frustrate industry leader confidence in Qatar’s coffee shop market. Meanwhile, both the UAE and Saudi Arabia introduced a value-added tax (VAT) for the first time in 2018, with the rest of the Gulf Cooperation Council due to follow in 2019 – a move which could dent consumer confidence.

Israel has a healthy but highly fragmented coffee shop market comprising more than 1,000 domestic chain outlets. International brands have, however, fared less well, with major chains like Starbucks and Dunkin’ so far unsuccessful in attempts to gain a foothold in the country. Nevertheless, Israeli consumers are highly receptive to new café concepts, with Allegra forecasting sustained branded coffee shop outlet growth over the next five years.

“We are delighted to present this new research to the global marketplace. The Middle East represents one of the world’s modern coffee culture hot spots, with high growth prospects for major chains across many markets and burgeoning opportunities on the horizon for the specialty coffee sector,” says Young. 

*Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, and UAE.