meed-logo

line1 line2 line3
SIGN IN / REGISTER

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

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Dewa raises Empower stake in $1.41bn deal

    12 February 2026

    Dubai Electricity & Water Authority (Dewa) has announced it has increased its stake in Emirates Central Cooling Systems Corporation (Empower) from 56% to 80%.

    The transaction was completed through the purchase of 2.4 billion shares and the transfer of the entire ownership of Emirates Power Investment (EPI), which is wholly owned by Dubai Holding.

    The total value of the deal is AED5.184bn ($1.41bn).

    Empower currently holds over 80% of Dubai’s district cooling market and operates 88 district cooling plants across the emirate.

    According to MEED Projects, the UAE’s district cooling sector currently has nine projects worth $1.29bn in the pre-execution phase.

    Empower has ownership in four of these projects, which have a combined value of $472m.

    This includes a $200 million district cooling plant at Dubai Science Park, with a total capacity of 47,000 refrigeration tonnes serving 80 buildings.

    Empower signed a contract to design the plant last August, with construction scheduled to begin by the end of the first quarter of 2026.

    The utility is also building a district cooling plant at Dubai Internet City.

    UAE-based TMF Euro Foundations was recently appointed as the enabling and piling subcontractor for the project.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15635949/main.jpg
    Mark Dowdall
  • Saudi cabinet approves Qatar high-speed rail link

    12 February 2026

    Saudi Arabia has approved the establishment of a proposed high-speed rail line connecting Riyadh and Doha.

    The approval was granted during a cabinet session chaired by King Salman Bin Abdulaziz Al-Saud in Riyadh on 10 February.

    The high-speed railway line will cover 785 kilometres (km) and will pass through Hofuf and Dammam, while also linking King Salman International airport and Hamad International airport.

    Saudi Arabia and Qatar signed an agreement in December last year to build a high-speed rail line.

    The agreement was inked by Saudi Arabia’s Transport & Logistics Services Minister, Saleh Al-Jasser, and Qatar’s Transport Minister, Sheikh Mohammed Bin Abdulla Bin Mohammed Al-Thani.

    Trains will reach speeds exceeding 300 kilometres an hour, reducing the travel time between the two capitals to about two hours.

    The project is slated for completion in six years. It is expected to serve over 10 million passengers annually and create more than 30,000 direct and indirect jobs.

    Riyadh and Doha relaunched the proposed rail link between the two countries in 2022, after agreeing to set a date to begin studying the connection. 

    In July of that year, France’s Systra was selected to conduct a feasibility study on the proposed scheme, as MEED reported.

    A rail link connecting Saudi Arabia and Qatar was planned before the diplomatic dispute that froze relations between Riyadh and Doha from 2017 until the Al-Ula Declaration was signed in January 2021.

    In 2016, Qatar Railways Company (Qatar Rail) planned to tender a design-and-build contract for the construction of regional railways in Qatar, including a link to the Saudi border.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15635582/main.jpg
    Yasir Iqbal
  • Bidders line up for Saudi sewage treatment contract

    12 February 2026

     

    Six bidders are competing in the next phase of Saudi Arabia’s long-term operations and maintenance (LTOM) sewage treatment programme, as National Water Company (NWC) moves closer to awarding a contract.

    The contract covers the North Western A Cluster Sewage Treatment Plants Package 11 (LTOM11) and has an estimated value of about $211m.

    The project involves the construction and upgrade of two sewage treatment plants with a combined capacity of about 440,000 cubic metres a day (cm/d).

    As MEED understands, the companies that have submitted proposals include:

    • Alkhorayef Water & Power Technologies (Saudi Arabia)
    • Civil Works Company (Saudi Arabia)
    • United Water (China)
    • Kuzu Group (Turkey)
    • VA Tech Wabag (India)
    • Aguas de Valencia (Spain)

    LTOM11, also known as the North Western A Cluster, forms part of the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    The scheme is being procured on an engineering, procurement and construction (EPC) basis with a long-term operations component.

    The scope also includes a pumping station, surplus discharge lines, SCADA installation and associated infrastructure.

    The main contract was tendered last year, with an award initially expected by the end of 2025.

    It is now understood that NWC is preparing to offer the main contract in this quarter.

    LTOM programme

    LTOM11 follows a series of earlier awards under the programme.

    In January, a consortium of United Water (China), Prosus Energy (UAE) and Armada Holding (Saudi Arabia) won the main contract for the Northern Cluster Sewage Treatment Plants Package 10 (LTOM10).

    This has an estimated value of about SR203m ($54.1m).

    NWC previously awarded $2.7bn-worth of contracts for the first phase of its LTOM programme. This comprises nine packages covering the treatment of 4.6 million cm/d of sewage water for the next 15 years.

    As MEED reported, local contracting firm Alkhorayef Water & Power Technologies won three contracts with a combined capacity of 2.04 million cm/d, nearly half of the awarded total. These three contracts are worth more than SR5.53bn ($1.47bn).

    A consortium of France’s Suez and the local Al-Awael Modern Contracting Group, with its affiliate Civil Works Company (CWC), won two packages worth a combined SR1.84bn.

    A consortium comprising France’s Veolia and Awael-CWC won a single package worth SR1.26bn, and local utility developer Miahona won one package worth SR392m.

    In 2024, a joint venture of CWC and Al-Awael Modern Contracting was awarded a $211m contract for LTOM9.

    As part of the second phase, the main contract bids for LTOM12 (North Western B Cluster) have also been submitted.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15635292/main.jpg
    Mark Dowdall
  • Indian firm wins Dubai Latifa Bint Hamdan road project

    12 February 2026

    Indian contractor Larsen & Toubro (L&T) has won a contract to construct the first phase of the Latifa Bint Hamdan Street development project in Dubai.

    The contract value is between $110m and $275m, according to L&T’s contract classification.

    This project covers 12.2 kilometres of road network from its intersection with Al-Khail Road to Emirates Road.

    The project also includes 8.1km of bridges and will add capacity for about 16,000 vehicles an hour in both directions.

    The scope also involves widening the two-lane dual carriageway to four lanes in each direction.

    The project is scheduled for completion within 36 months.

    The contract was awarded by Dubai’s Roads & Transport Authority (RTA).

    The project is part of the RTA’s estimated AED16bn ($4.3bn) 2024-27 Main Roads Development Plan, which includes 22 projects across Dubai’s road network, as announced in November 2024.

    The development plan includes the construction of new roads and bridges to alleviate traffic congestion at several key locations across Dubai.

    Planning for growth

    The Dubai 2040 Urban Master Plan was launched in March 2021. Its launch referenced studies indicating that the emirate’s population will reach 5.8 million by 2040, up from 3.3 million in 2020. The daytime population is set to increase from 4.5 million in 2020 to 7.8 million in 2040.

    In December 2022, Sheikh Mohammed Bin Rashid Al-Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, approved the 20-Minute City Policy as part of the second phase of the Dubai 2040 Urban Master Plan. 

    In addition to the road projects, the RTA’s Dubai Metro Blue Line extension also forms part of Dubai’s plans to improve residents’ quality of life by cutting journey times, as outlined in the policy.

    The policy aims to ensure that residents can meet 80% of their daily needs within a 20-minute walk or bike ride. This goal will be achieved by developing integrated service centres with the necessary facilities and by increasing population density around mass transit stations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15635237/main.gif
    Yasir Iqbal
  • SAR tenders Riyadh section of Saudi Landbridge

    12 February 2026

     

    Saudi Arabia Railways (SAR) has tendered a design-and-build contract for the construction of a new railway line, the Riyadh Rail Link, which will run from north to south Riyadh.

    The tender was issued on 29 January, with a bid submission deadline of 29 March.

    The scope of work includes constructing a 35-kilometre-long double-track railway line connecting SAR’s North-South Railway to the Eastern Railway network.

    The contract also covers the procurement, construction and installation of associated infrastructure such as viaducts, civil works, utility installations, signalling systems and other related works.

    The project is expected to form a key component of the Saudi Landbridge railway.

    Last month, SAR said it would deliver the Saudi Landbridge project through a “new mechanism” by 2034, after failing to reach an agreement with a Chinese consortium for the construction of the project, as MEED reported.

    In an interview with local media, SAR CEO Bashar Bin Khalid Al-Malik said the consortium failed to meet local content requirements and that the project will now be delivered in several phases under a different procurement model.

    The project has been under negotiation between Saudi Arabia and China-backed investors keen to develop it through a public-private partnership.

    Al-Malik said that the project cost is about SR100bn ($26.6bn).

    It comprises more than 1,500 kilometres (km) of new track. The core component is a 900km new railway between Riyadh and Jeddah, which will provide direct freight access to the capital from King Abdullah Port on the Red Sea.

    Other key sections include upgrading the existing Riyadh-Dammam line, a bypass around the capital called the Riyadh Link, and a link between King Abdullah Port and Yanbu.

    The Saudi Landbridge is one of the kingdom’s most anticipated project programmes. Plans to develop it were first announced in 2004, but put on hold in 2010 before being revived a year later. Key stumbling blocks were rights-of-way issues, route alignment and its high cost.

    In April last year, MEED exclusively reported that SAR had issued a tender for the lead design consultancy services contract on the Saudi Landbridge railway network.

    MEED understands that the scope covered the concept design and options for the preliminary and issued-for-construction design stages on the network.

    MEED reported that the launch of a design tender directly by SAR suggested that Riyadh was looking at other options to develop it alongside the Chinese proposal.

    In December 2023, MEED reported that a team of US-based Hill International, Italy’s Italferr and Spain’s Sener had been awarded the contract to provide project management services for the programme.

    If it proceeds, the Saudi Landbridge will be one of the largest railway projects ever undertaken in the Middle East and one of the biggest globally. Based on typical design timeframes, tenders for construction are likely to be ready by mid-2026, although the question of how it will be financed will need to be answered before it can proceed to the next step.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15635220/main.jpg
    Yasir Iqbal