Revenue in the UAE from sales of fast-moving consumer goods such as milk, rice and shampoo rose 11 per cent in the first eight months of the year, less than half the rate for the period last year, data from the research company Nielsen show.
Sales turnover in 102 products - including food, home care and personal care - between January and August this year totalled Dh8.92 billion (US$2.42bn), compared with Dh8bn in the same period last year.
Food products make up about 70 per cent of this figure; personal-care items such as skin cleansers make up 20 per cent; and home-care products the remaining 10 per cent.
Roughly 50 per cent of the sales growth came from daily necessities such as rice, cooking oil, salty snacks and milk, said Sohail Ali, Nielsen's UAE research manager for retail measurement services.
"People will not compromise on the consumption of these categories," Mr Ali said. "Did you reduce your milk consumption because of the recession? No. Same is the case for laundry detergents, shampoos, the categories which are day to day."
The top 10 items driving sales growth, in descending order, were rice, salty snacks, sports drinks, fresh milk and laban, cooking oil, skin cleansers, chocolates, detergents, ice creams and soft drinks, Nielsen's data show.
But the growth was mainly driven by price increases and inflation, Mr Ali said. Sales volumes either declined or stayed stable during the first half of the year, Nielsen found.
That prices are rising seems counter-intuitive, as inflation in the Emirates, as reported by the Minister of Economy, has slowed from 10.8 per cent last year to an estimated 2.5 per cent in the first eight months of this year.
But fast-moving consumer goods tend to be resistant to fluctuations in inflation, said David Edwards, the managing director of IMES Consulting Group, a market research and consulting firm based in Dubai.
While producers of expensive goods such as refrigerators and cars would have to cut prices to boost sales, products such as toothpaste do not have to be priced to move, Mr Edwards said.
"Consumer goods companies don't have to do a lot of promotion, because people have to eat and drink anyway," he said. "And a lot of consumer goods companies have been under price pressures, in terms of rising costs throughout 2008. Transport costs, labour costs, rent here; all were rising through 2008."
But early figures show sales volumes for fast-moving consumer goods in are improving, said Sevil Ermin, Nielsen's UAE director of retailer services.
"We started seeing some volume recovery in some of the categories in the last couple of months," Ms Ermin said. "This is very much in line with our consumer confidence survey findings, where we do see a very positive [increasing] score in consumers' confidence in UAE."
Although sales of fast-moving consumer goods continue to grow, the growth is at less than half the rate of last year, Nielsen says.
Sales growth of home-care items slowed to 15 per cent in the first eight months of the year, compared with 26 per cent growth during the same period last year.
Personal care products' sales growth slowed from 23 per cent last year to just 8 per cent.
Food took the biggest hit, slowing from 30 per cent growth to 11 per cent growth in the year to August.
Mr Ali said that while the global downturn obviously contributed to the stalled growth, it was difficult to know exactly what role it played.
"We don't know for sure in the UAE because we don't know how many people have left the country," he said.
"So the people who are left in the country may be consuming the items in these categories in the same patterns they were before. But because of the population flux, the growth may have slowed down."
@Email:aligaya@thenational.ae
Analysis
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Anxiety and work stress major factors
Anxiety, work stress and social isolation are all factors in the recogised rise in mental health problems.
A study UAE Ministry of Health researchers published in the summer also cited struggles with weight and illnesses as major contributors.
Its authors analysed a dozen separate UAE studies between 2007 and 2017. Prevalence was often higher in university students, women and in people on low incomes.
One showed 28 per cent of female students at a Dubai university reported symptoms linked to depression. Another in Al Ain found 22.2 per cent of students had depressive symptoms - five times the global average.
It said the country has made strides to address mental health problems but said: “Our review highlights the overall prevalence of depressive symptoms and depression, which may long have been overlooked."
Prof Samir Al Adawi, of the department of behavioural medicine at Sultan Qaboos University in Oman, who was not involved in the study but is a recognised expert in the Gulf, said how mental health is discussed varies significantly between cultures and nationalities.
“The problem we have in the Gulf is the cross-cultural differences and how people articulate emotional distress," said Prof Al Adawi.
“Someone will say that I have physical complaints rather than emotional complaints. This is the major problem with any discussion around depression."
Daniel Bardsley
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
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BUNDESLIGA FIXTURES
Friday (UAE kick-off times)
Cologne v Hoffenheim (11.30pm)
Saturday
Hertha Berlin v RB Leipzig (6.30pm)
Schalke v Fortuna Dusseldof (6.30pm)
Mainz v Union Berlin (6.30pm)
Paderborn v Augsburg (6.30pm)
Bayern Munich v Borussia Dortmund (9.30pm)
Sunday
Borussia Monchengladbach v Werder Bremen (4.30pm)
Wolfsburg v Bayer Leverkusen (6.30pm)
SC Freiburg v Eintracht Frankfurt (9on)
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million