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Confectionery in the United Arab Emirates

Euromonitor International 06 May 2011

Confectionery retail value sales in the United Arab Emirates rose by 11% in 2010 to total US$268 million. While economic recovery, fuelled by stronger exports, is having a positive impact on demand for these products, increasing health concerns are hampering the growth of categories targeting children, particularly sugar confectionery

Economic environment
Real GDP growth stood at 2.4% in 2010, reversing the 3% decline registered the previous year, according to Euromonitor International's Countries & Consumers database. This growth was underpinned, among other factors, by an increase in energy prices. In 2010, international oil prices increased by around 20%, according to IMF statistics. Interestingly, oil accounted for around 50% of the United Arab Emirates' exports in 2008, when global oil prices reached a peak.

Trading environment
Statistical data recently released by the FCA (United Arab Emirates Federal Customs Authority) confirmed that the total volume of non-oil foreign trade for the same period jumped to AED540.5 billion (around US$150 billion) from AED486.4 billion (around US$135 billion) the previous year. Preliminary statistical data for September 2010 reflected a 5% increase in imports during the first nine months of 2010, when they reached AED350.6 billion (around US$97.3 billion) in September 2010. Non-energy exports (excluding re-exported goods) saw a remarkable leap of 39% to reach AED61.8 billion (around US$17 billion) for the first 9-month period of 2010.

Demographic environment
One key factor behind the sustained expansion of confectionery sales in the United Arab Emirates is the country's relatively high birth rate. According to Euromonitor International's Countries & Consumers database, the birth rate stood at 14.6 per 1,000 inhabitants in 2010, compared with an average of 11.5 in Western Europe and 13.3 in North America. Despite this high birth rate, current government efforts are resulting in a moderate reversal of the perception of sugar confectionery, which is increasingly regarded as a factor contributing to childhood obesity.

Market performance
Chocolate confectionery sales grew by 12% in current value terms in 2010 to reach US$222 million. In volume terms, sales grew by 9%, compared with the 8% increase recorded the previous year. This moderate slowdown in growth stems from increasing concerns about obesity among middle-class consumers in urban areas, who are turning their attention in larger numbers towards less calorific snacks. Sugar confectionery sales grew by 7% in current value terms in 2010 a marginal improvement on 2009's performance with sales reaching US$36 million. Demand for sugar confectionery products benefited from the fact that around 50% of the population in the United Arab Emirates are under 25 years of age. Furthermore, its relatively low unit price makes sugar confectionery the ideal treat for lower-income consumers who can rarely afford more expensive chocolate snacks. Conversely, concerns about oral health among middle-class consumers and a decline in the number of expatriates hampered stronger growth of both value and volume sales in 2010. Retail value sales of gum reached US$9 million in 2010, 6% up on the previous year. Per capita expenditure continues to be relatively low at US$2 per person, according to Euromonitor International's estimates. Interestingly, demand for functional gum is growing rapidly thanks to rising awareness of its oral health properties among middle-class consumers. Retail value sales of functional gum rose by 19% in 2010, compared with the 20% registered the previous year. Sugarised gum, however, continued to be the most important category within gum, accounting for 65% of retail value sales in 2010. Sugarised gum is particularly popular among lower-income consumers. The latter are less aware of the health benefits of functional formats and generally opt for the cheapest types of indulgence products.

For more insight, please contact Francisco Redruello, Euromonitor International's Senior Foods Analyst, on francisco.redruello@euromonitor.com