By: Kim Thompson – Co-Owner & Managing Director at RAW Coffee Company
The coffee scene in the UAE is akin to a bustling metropolis teeming with opportunity and competition. However, beneath the surface of growth lies a landscape rife with challenges, from oversaturation to wavering quality standards. As we navigate these waters, it’s crucial to confront these issues head-on while spotlighting the potential for success when businesses prioritise quality and innovation.
Market Dynamics: Addressing Oversaturation
In the UAE, the coffee industry reflects global expansion trends, yet the sheer abundance of coffee businesses outpaces the size of the consumer base. From roasters to cafes and everything in between, the market is saturated with players vying for attention. However, unlike larger markets, the UAE contends with unique hurdles such as limited access to trade finance, escalating shipping costs, and fierce competition within a smaller demographic pool.
The evolution of our market is marked by distinct “waves,” signifying shifts in consumer behaviour and industry innovation. Yet, to ride these waves successfully requires more than mere trend-chasing—it necessitates sustainable business models and a steadfast commitment to quality across the supply chain.
Quality Concerns & Consumer Trends
Amidst the race to capitalise on coffee culture, some businesses need to improve on quality, jeopardising customer satisfaction and loyalty. Neglecting sustainable practices not only undermines the integrity of the supply chain but also endangers the livelihoods of coffee farmers. Consumers demand authenticity, sustainability, and a genuine connection to their products in a saturated market.
Furthermore, a burgeoning demographic of discerning consumers, particularly young professionals, prioritising health, ethical sourcing, and environmental sustainability. They seek more than just a good cup of coffee; they crave meaningful experiences and value-driven brands.
Navigating the Market: Strategies for Success
To thrive amidst saturation and quality challenges, coffee businesses must adopt strategic approaches rooted in adaptability, quality, and genuine connection.
- Embrace Local Adaptations: While global trends offer insights, success in the UAE market requires tailored approaches that align with local dynamics and preferences.
- Prioritise Quality over Profit: Investing in quality ingredients and craftsmanship fosters customer loyalty and sets businesses apart.
- Build Real Connections: Transparency, sustainability, and ethical practices resonate with socially conscious consumers, fostering trust and loyalty.
- Continuous Evolution: Stagnation is not an option in a rapidly evolving market. Businesses must stay ahead of trends, invest in staff training, and innovate to deliver unique experiences.
While challenges loom large, there are opportunities for businesses that prioritise sustainability, quality, and innovation. By embracing local adaptation, authenticity, and continuous evolution, coffee businesses can navigate the complexities of the market and emerge as industry leaders.
From Lee Safar – Map it Forward
“The coffee industry on a global level is experiencing what we at Map It Forward call a “Success Fallacy”. Essentially because so many cafes and roasteries exist, anyone considering entering the market assumes profitability must be high because “how could so many people be wrong”, right? Wrong. When you open a business in our industry without necessary industry awareness, you soon realise that you have added to this Success Fallacy. What I wish anyone thinking of entering the market knew ahead of time is that due to this saturation, cafes that are run well can expect somewhere in the range of 3-6% net profit, and roasters can expect 6-8% net profit. While gross profit runs between 60-70% of revenue, total OPEX typically runs at greater than 67% of revenue, with wages now over 40% and rent taking up 20-30% of revenue. This success fallacy, with the low entry barrier, an over-leveraged supply chain, and ongoing stress on consumers with the cost-of-living crisis, is making the current market situation untenable.”
Some numbers to demonstrate saturation in Dubai:
- Population: 3.6 Million
- Tourists: 17 million per year
F&B Businesses that Likely Serve Coffee in Dubai: 26,516
– Restaurants 13,009
– Coffee Shops 4,800
– Cafeteria’s 3,014
– Catering Services 2,533
– Permanent food Kiosk 1,744
– Food Kiosk 1,415
(Note this does not include hotels)
Data analysed by Map It Forward (original source: dubaipulse.gov.ae Dec 25 2023).
While the Dubai coffee sector grapples with oversaturation and quality concerns, it also holds promise for those who dare to innovate and uphold the highest standards. Coffee businesses can carve out their niche in this dynamic market by forging genuine connections, prioritising sustainability, and embracing continuous evolution.
