Meed | UAE food producers struggle with global challenges

UAE food producers struggle with global challenges

29 November 2022

Local food and beverage (F&B) producers in the UAE say the sector is being severely constrained by rising input costs and unprecedented challenges caused by the Russia-Ukraine conflict.

The impact of the war, which began in February this year, has reverberated across the globe, creating uncertainty and insecurity in global food supply chains.

The food industry is among the vital focus industrial sectors of the UAE’s Ministry of Industry & Advanced Technology’s (MoIAT) Operation 300bn plan, not only to enhance its contribution to GDP but also to support long-term food security and self-sufficiency by facilitating local production.

Food security strategy

For industry stakeholders gathered at the MEED-Mashreq Manufacturing Business Leaders Forum, the Covid-19 crisis and conflict in Ukraine have only further underlined the importance of pursuing a food security strategy.

“The UAE F&B industry has more than 550 manufacturing units and employs more than 80,000 workers with a value of production of over AED35bn and exports of more than AED15bn,” said Ahmed Bayoumi, CEO of Global Food Industries (GFI) and board member of the UAE Food & Beverage Manufacturers Group.

“The Ministry of Climate Change and the Ministry of Industry are jointly spearheading efforts to increase the domestic supply of food products and to make the UAE one of the most food-secure countries in the world,” explained Bayoumi.

“The two strategies, food security and Operation 300bn, both have many programmes to support the industry. We also really appreciate the new free trade agreements and the building of new trade routes with India, Indonesia and Israel.”

Import dependence

The UAE and other Gulf nations – considered food-secure due to their economic and political stability – have not faced food shortages since the pandemic outbreak. But food security and limiting vulnerability to import disruptions remains a key strategic long-term goal for the UAE government, as it lacks control over its sources.

GCC countries, including the UAE, typically import nearly 85 per cent of their food.

Compounding the situation is the harsh climate, with the expansion of local food production limited due to the scarcity of natural resources such as water and arable land.

According to the World Resources Institute, the Middle East and North Africa is the most water-stressed region globally, with the World Bank forecasting that the region will experience the highest economic losses from climate-related water scarcity compared with other global regions, at about six to 14 per cent of their GDP by 2050.

Conflict stress

Closed-off access to the lower-priced Black Sea grain since the outbreak of the war has induced commodity shortages and exacerbated inflationary pressures for purchasers already struggling with still fragile pandemic-disrupted supply chains, high import costs and spikes in energy costs.

“Because of the Ukraine war, sunflower oil and flour prices are up by almost 60 per cent,” a local food manufacturer said during the forum.

“Additionally, the Indian government has banned wheat exports from India. This has created an increase in commodity prices in the local market. It directly impacts me because almost all my products use wheat. Wheat flour is 60 per cent of my raw material.”

The challenge, he said, is further compounded because commodity suppliers have been demanding advance payments as they capitalise on the shortages.

But in the credit-driven UAE market, manufacturers are still bound by 90 to 120-day payment cycles.

“At the same time, I am restricted from increasing my prices,” the manufacturer said. “It is not healthy for the industry. There must be some intervention from the ministry to address this.”

Almost 99 per cent of food products in the UAE are no longer regulated in terms of pricing. This is due to the dialogue between the Ministry of Economy and the industry – credit where credit is due

Ahmed Bayoumi, Global Food Industries

Countering inflation

Inflation has risen to historic levels in many markets worldwide, significantly impacting consumers and businesses.

In the UAE, the IMF forecasted that inflation will be at 5.2 per cent this year.

One local manufacturer at the forum said businesses have “no other way” to protect their finances and margins than to raise the prices of their goods.

“The government does not like to disturb consumers with price increases, but this is a very big challenge for manufacturers,” he said. “If manufacturers don’t increase prices, they will lose money.”

A 2022 Grant Thornton survey of 5,000 mid-market businesses across 28 countries, including the UAE, revealed that 87 per cent of businesses in the UAE have opted to pass the cost of surging inflation to consumers in a bid to protect their margins by increasing their prices, “at the same level or above our cost increases”.

According to the study, businesses have seen increases of 18 per cent in their energy and utility bills, 17 per cent in raw materials costs and 14 per cent in salaries or staff compensation. Businesses also saw a 16 per cent increase in outgoings related to equipment, as well as bank, interest and taxes.

The UAE government typically caps prices of staple food items to keep inflation in check and ensure shopping remains affordable for families. In April 2022, however, the Ministry of Economy said it was monitoring 300 frequently bought essential food items to identify products whose prices could be raised in line with rising import costs, subject to approvals.

“Almost 99 per cent of food products in the UAE are no longer regulated in terms of pricing,” said GFI’s Bayoumi. “This is due to the dialogue between the Ministry of Economy and the industry – credit where credit is due.

“There are only some basic staples that are regulated, and this was a major breakthrough after almost 20 years of everything being regulated.”

Achieving self-sufficiency

The long-term vision of the UAE’s food security strategy is to achieve self-sufficiency, creating an optimum balance between domestic production and securing food production channels overseas.

Ongoing challenges, however, are impacting the speed with which this vision can be achieved.

“Producers who perhaps enjoy more subsidies or, due to currency fluctuations, can access the UAE market at low cost. This tends to come at the cost of demand for local manufacturers,” said Bayoumi.

The strong dollar, meanwhile, has been a “double-edged sword”.

“On the one side, it helps you with your imports from everywhere in the world. So, imports are cheaper in terms of raw materials or equipment. But, on the other hand, in terms of exports, nations using the Euro, for example, are screaming that they can’t buy our product anymore because they have appreciated by 20 per cent.”

“I think the UAE has to think to have some kind of ownership of lands abroad,” a manufacturer at the forum said. “This might open a big door for the UAE. That will secure our raw materials in terms of availability and prices.”

The UAE is already taking steps in this area, with efforts spearheaded by its investment vehicles.

In 2020, Abu Dhabi’s International Holdings Company (IHC) said it would invest over $225m to develop and cultivate over 100,000 acres of farmland in Sudan to help secure high-quality agricultural output.

Earlier this year, Abu Dhabi holding company ADQ bought a majority stake in Cyprus-headquartered agriculture company Unifrutti. The firm produces, trades and distributes more than 100 varieties of fresh produce, and sells 560,000 tonnes of fresh fruit a year. It has 14,000 hectares of farms across four continents and customers in 50 countries.

ADQ previously acquired a 45 per cent stake in French firm Louis Dreyfus, and has stakes in local companies, including fresh produce and agri-tech group Silal; forage and agribusiness group Al-Dhahra Holding; and food and beverage group Agthia.

Equal opportunities

Bayoumi noted that overall, demand within the UAE is recovering “very strongly” after the pandemic.

“Especially with visitor numbers growing, we see market demand growing, and we anticipate that this growth will continue going forward,” he said.

“But also, competition is intensifying. More players are seeing the Gulf as one of the most attractive markets globally over the next three to five years, more players are coming into the market, and more players are vying for a piece of the cake.”

Medium-sized enterprises are at a further disadvantage when compared to regional giants.

“One of the things being discussed and under study is how medium-sized enterprises can be provided with access to centres of excellence that would pool resources in areas such as research and technology, which an individual entity might not be able to afford otherwise. That would make them more competitive over the long term versus the big players,” he said.

“The concentration of retail power also needs to be addressed. In the past, there were thousands of places to sell your product and hardly pay anything. Now two or three major retailers have 50 to 60 per cent of the market. They impose demands and if you do not comply, you could end up delisted or chucked off shelves.”

By Megha Merani

https://image.digitalinsightresearch.in/uploads/NewsArticle/10391937/main.gif

MEED Editorial

Exclusive from Meed

Saudi Arabia raises electricity tariffs
26 October 2026
Dubai Municipality confirms AED3bn Tasreef drainage awards
26 October 2026
Nakheel awards $259m Dubai Islands buildings contract
26 October 2026
Morocco plans second high-speed rail phase to Agadir
26 October 2026
Riyadh tenders King Salman Stadium works
26 October 2026

Saudi Arabia raises electricity tariffs
26 October 2026

Saudi Energy, formerly Saudi Electricity Company, has announced revised electricity tariffs, which will take effect on 1 January 2027.

The revised tariff schedule, published on the company’s official website, covers residential, commercial, industrial, agricultural, charitable and government customers.

The largest percentage increase in consumption rates is 16.7%, for residential customers using up to 6,000 kilowatt-hours (kWh) a month. Residential customers will pay 21 halalas/kWh for monthly consumption of up to 6,000kWh, up from 18 halalas. For consumption above 6,000kWh, the rate will rise from 30 to 33 halalas/kWh, a 10% increase.

The industrial tariff will increase by 15%, from 20 to 23 halalas/kWh. Commercial customers, private healthcare facilities and private educational facilities will pay 25 halalas/kWh, up from 22 halalas, for consumption up to 6,000kWh a month, and 35 halalas/kWh above that level, up from 32 halalas.

Tariffs for charities and government customers will also increase. In addition to consumption-based charges, customers will pay a fixed monthly fee based on the capacity of their electricity meter. This replaces the previous separate charge for meter reading, maintenance and billing, with VAT applied to the revised tariffs.

Electricity investment

The new tariffs coincide with changes to water consumption tariffs announced by the National Water Company, also effective from 1 January 2027.

King Salman Bin Abdulaziz Al-Saud directed support measures following a proposal presented by Crown Prince and Prime Minister Mohammed Bin Salman Bin Abdulaziz Al-Saud.

This includes raising the minimum wage required for Saudi nationals to count as full employees towards private sector localisation quotas under the Nitaqat programme.

The tariff changes come as Saudi Arabia plans substantial investment in its electricity infrastructure. In September 2025, Saudi Energy announced plans to invest SR220bn ($58.7bn) in power infrastructure projects between 2025 and 2030.

A June 2025 report by Fitch Ratings forecast negative free cash flow of about SR16bn a year over the period and rising leverage, reflecting the financial demands of the programme.

https://image.digitalinsightresearch.in/uploads/NewsArticle/20924301/main.jpg

Mark Dowdall
Dubai Municipality confirms AED3bn Tasreef drainage awards
26 October 2026

Dubai Municipality has confirmed it has awarded four contracts worth AED3bn ($817m) to expand the emirate’s stormwater drainage network by about 100 square kilometres under phase three of the Tasreef programme.

The projects will cover Jumeirah, Umm Suqeim, Al-Quoz, Al-Barsha, Al-Wasl and Al-Marmoom. The works include constructing and extending main stormwater drainage lines with diameters of up to three metres.

The four packages are part of Dubai’s AED30bn Tasreef programme, which aims to increase the emirate’s stormwater drainage capacity by 700% and reduce costs associated with pumping stations, network operations and maintenance by 20%.

The contracts have been awarded to China State Construction Engineering Corporation (CSCEC) and three local firms: Arifco Group, Nael Construction & Contracting (NCC) and Detech Contracting. Dubai Municipality did not state which projects the awards relate to.

According to sources, the contract awards include packages TF-15-C1, TF-15-C2 and TF-13-C1.

The first package, TF-15-C1, involves the construction of 21 kilometres of main and secondary drainage lines along Al-Wasl Road and in surrounding areas. It will cover Za’abeel 2, Al-Wasl, Jumeirah 1 and 2, Al-Bada’a, Al-Satwa and Dubai World Trade Centre. The estimated $100m contract was awarded to Detech in July, as exclusively reported by MEED.

The second package, TF-15-C2, covers the corridor between Sheikh Zayed Road and Al-Khail Road. It includes about 14km of main drainage lines serving Al-Quoz Industrial Areas 1, 3 and 4, and Al-Barsha 1. In July, MEED reported that CSCEC had won the engineering, procurement and construction contract for this project.

The third package, TF-13-C1, covers Al-Marmoom, where 23km of drainage infrastructure will be developed. According to a source, Arifco has been awarded this contract.

The final package covers Jumeirah and Umm Suqeim, where about 42km of main drainage lines will serve Umm Suqeim 1, 2 and 3; Umm Al-Sheif; Jumeirah 3; Al-Safa 1 and 2; and Al-Manara.

In May, MEED reported that NCC had been awarded a contract to build a sewage and stormwater drainage system, DS-204. However, it is unconfirmed whether this relates to the same project.

Earlier, in February, the municipality confirmed it had awarded contracts for five new projects under phase two of the programme to expand and strengthen Dubai’s stormwater drainage network.

These included two contracts awarded to Detech and one to CSCEC for stormwater drainage infrastructure. In addition, two consultancy contracts were awarded for the study and design of drainage systems in selected areas across the emirate.

Cumulatively valued at AED2.5bn, the new projects will serve 30 vital areas, spanning approximately 430 million square metres and supporting an estimated population of three million residents by 2040.

Previously, in April 2025, an earlier package of awards was announced under phase one of the Tasreef programme. The overall masterplan aims to expand Dubai’s rainwater drainage capacity by 700% by 2033.

https://image.digitalinsightresearch.in/uploads/NewsArticle/20923924/main4827.jpg

Mark Dowdall
Nakheel awards $259m Dubai Islands buildings contract
26 October 2026

Dubai-based master developer Nakheel, part of Dubai Holding Real Estate, has awarded local firm Parkway International Contracting a construction contract valued at about AED950m ($259m) for phases two and four of Bay Grove Residences on Dubai Islands.

The package covers 617 residential units across eight buildings, ranging from one to four bedrooms, together with basement structures, infrastructure and community amenities including swimming pools, sports courts and fitness centres.

Phase two comprises 360 homes across four buildings, with main construction scheduled for completion in late 2028.

Phase four includes 257 homes across four buildings, with completion targeted for the second quarter of 2029.

The award follows an earlier contract valued at about AED800m ($218m) awarded to local contractor Metac General Contracting Company for phases one and three, covering 537 homes across seven buildings.

Together, the two contracts total more than AED1.75bn ($476m) and account for all 1,154 planned homes across the 15 buildings of Bay Grove Residences.

Project activity on Dubai Islands has gathered pace in recent months. Earlier this month, Nakheel awarded local firm Mar Marine & Building Contracting a contract for marine and coastal works on Island B. The scope includes constructing breakwaters, removing existing rock revetments and creating a new 320-metre beach near the Bay Villas development, as well as remedial and refurbishment works along approximately 3 kilometres of the island’s western shoreline.

In August 2025, Nakheel awarded Fibrex Contracting a AED2.6bn ($708m) construction contract for the Bay Villas residential project. That followed a AED527m ($143m) contract awarded to Al-Nasr Contracting Company in April 2026 for primary infrastructure and utilities on Island B.

https://image.digitalinsightresearch.in/uploads/NewsArticle/20923389/main.jpg

Yasir Iqbal
Morocco plans second high-speed rail phase to Agadir
26 October 2026

Morocco has outlined a second rail investment cycle for 2030-35, which includes beginning construction of a high-speed rail extension from Marrakech to Agadir and connecting Essaouira to the national rail network.

The pipeline forms part of the government’s 2026-31 programme, presented to parliament last week.

The Marrakech-Agadir link is estimated to cost close to MD55bn ($5.5bn) and will cover a 240-kilometre (km) route through the High Atlas Mountains via Chichaoua. Civil engineering structures, including tunnels and viaducts, are expected to account for nearly 70% of the alignment.

In September, the government issued a decree declaring the Marrakech-Agadir and Chichaoua-Essaouira rail corridors to be of public utility, paving the way for land acquisition and expropriation procedures.

Under the long-term masterplan Plan Rail Maroc 2040, Essaouira is expected to connect to the network via a separate line branching off at Chichaoua, designed for operating speeds of up to 200km an hour. The mainline to Agadir is designed for speeds of up to 320km/h.

The 2030-35 cycle also includes rehabilitating the Casablanca-Khouribga-Oued Zem line; constructing a new line between Oued Zem and Beni Mellal via Bejaad, with a branch to Fquih Ben Salah; doubling and upgrading the 140km Benguerir-Safi line; expanding capacity on the Fez-Oujda corridor; and building new-generation passenger stations.

The plans follow Morocco’s ongoing MD134bn ($13.4bn) 2024-30 rail investment programme, which focuses on completing the Kenitra-Marrakech high-speed line ahead of the 2030 Fifa World Cup.

The programme also includes developing regional express network services across five regions, electrifying the Fez-Oujda line and completing a freight rail link to the Nador West Med port.

Work on the Kenitra-Marrakech line had reached about 30% by May 2026, with commercial services targeted to begin in September 2029.

https://image.digitalinsightresearch.in/uploads/NewsArticle/20920349/main.jpg

Yasir Iqbal

Riyadh tenders King Salman Stadium works

26 October 2026

Register for MEED’s 14-day trial access

Saudi Arabia’s Sports Ministry has tendered a contract covering early works at King Salman International Stadium in Riyadh.

The scope includes enabling works, site preparation and initial construction activities.

The tender was issued on 11 October, with a submission deadline of 19 November.

The stadium will cover about 660,000 square metres (sq m) and seat 92,000. Facilities will include a 150-seat royal suite, 120 hospitality suites, 300 VIP seats and 2,200 dignitary seats.

The wider development will include sports facilities covering more than 360,000 sq m, including two training fields and fan zones; a closed sports hall; an Olympic-sized swimming pool; an athletics track; and outdoor courts for volleyball, basketball and padel.

The stadium is set to host the final of the 2034 Fifa World Cup and will serve as the Saudi national football team’s main base.

US-based architectural firm Populous is the lead architect for the stadium.

Construction of the stadium is expected to be completed by 2029.

The stadium will be located next to King Abdulaziz Park.

Firms submitted prequalification statements for the main design-and-build contract in February.

Saudi stadium plans

In August 2024, MEED reported that Saudi Arabia planned to build 11 new stadiums and refurbish four facilities for the 2034 Fifa World Cup.

Eight stadiums will be located in Riyadh, four in Jeddah and one each in Al-Khobar, Abha and Neom.

A further 10 cities will host training bases: Al-Baha, Jazan, Taif, Medina, Alula, Umluj, Tabuk, Hail, Al-Ahsa and Buraidah.

There are expected to be 134 training sites in the kingdom, including 61 existing facilities and 73 new venues.

Saudi Arabia was officially selected to host the 2034 Fifa World Cup during an online convention of Fifa member associations at the Fifa Congress on 11 December 2024.

READ THE OCTOBER 2026 MEED BUSINESS REVIEW – click here to view PDF