14 September 2018 | UAE

UAE – Coffee culture, trends and market dynamics

Coffee shop industry leaders report more room for growth as third-wave coffee enters the UAE mainstream – but competition is heating up among operators as the market grows. Here are some of the key market opportunities and challenges in one of the Middle East’s most vibrant coffee shop markets

Dubai has a thriving branded coffee shop sector 



The UAE practices a version of Arabic coffee culture found across the Middle East. ‘Qahwa’, the Arabic word for coffee, and ‘majlis’, translated as ‘a place of sitting’, form an important function welcoming guests and at public functions, administrative gatherings and religious ceremonies. The interplay between qahwa and majlis is so inextricable from regional culture that the practice has been protected on UNESCO’s Intangible Cultural Heritage register since 2015 – as it is across Saudi Arabia, Oman and Qatar. Coffee in the UAE is traditionally served in long spouted jug, or ‘dallah’, and can be served black or brewed with cardamom and saffron. Often accompanied with dates, dried fruit and nuts, it is polite to serve elders first by filling small, handless cups a quarter of the way to the top.

Today, the UAE is one of the most developed coffee shop markets in the Middle East, with Dubai a focal point for the region’s coffee innovation. The city’s status a global travel hub saw western chains gain a foothold in the country in the mid-1990s, with Dunkin’ Donuts making its debut in 1997, Costa Coffee arriving in 1999 and Starbucks opening in 2000. Today the branded coffee shop market is going from strength to strength as consumer appetite for aspirational western brands grows.

A survey of more than 200 industry leaders conducted by Allegra World Coffee Portal revealed 88% believe there is still plenty of growth potential in the UAE’s branded coffee shop market. Conversely, there is also evidence that the recent influx of specialty F&B brands is applying pressure on existing businesses as they compete for a slice of consumer spend. More than half of industry leaders surveyed by Allegra cite increased competition as the biggest challenge facing the UAE's coffee shop market in 2018.
 
Indeed, the UAE has experienced huge growth in both domestic and foreign-invested specialty coffee shop chains since the mid-2000s. 360-degree service and specialty coffee shop chain, Coffee Planet, was founded in 2005 and expanded to the UK in 2018. Established in 2006, specialty B2B roaster, Orbis Coffee, is today one of the region’s leading B2B roasters for the hospitality industry. Melbourne-inspired Tom and Serg, (part of the Bull & Roo family of F&B brands) is widely regarded as the UAE’s first third-wave coffee shop chain and has been in operation since 2013. But even in this increasingly crowded market of more than 1,000 branded coffee shops, Project Café Middle East 2019 forecasts significant sector growth over the next five years.
 

Nearly three-quarters of industry leaders state good location is the biggest factor behind coffee shop success in the UAE

 
Despite the boom in demand for premium beverages, such as single origin and iced coffee, convenience is still king in the UAE. Allegra research shows nearly three-quarters of industry leaders cite good location is the biggest factor behind coffee shop success – even ahead of coffee quality and service standards. With its fast-paced lifestyle and vibrant multi-cultural society, making coffee available whenever and wherever in Dubai is crucial.
 
Indicative of this trend, Costa Coffee opened its first drive-through site in the UAE in 2017, and even made headlines for trialling a drone delivery from its Jumeirah Beach Road store after 82% of their customers said they’d be happy to use the ‘Coffee-copter’ service. While we may be some way off regular coffee drops by drone, the initiative emphasises the willingness of Dubai’s consumers to engage with innovative convenience concepts.
 

UAE – Key independent coffee shops

The UAE retains a strong tradition of coffee preparation, but today's consumers are increasingly attracted to a growing independent specialty coffee shop sector. A large international expat population has cross-pollinated the UAE market with third to fifth-wave coffee shop concepts from the US, Europe and Australia. This is evident in a growing number of successful of western and antipodean-inspired coffee shop brands.
 
Founded in 2007, Raw Coffee Company provides a 360-degree coffee solution in Dubai, encompassing roasting, wholesale, training equipment and a single coffee retail website. Raw was a pioneer in the UAE’s specialty scene and one of the first to promote ethically traded single origin beans. Also offering the ‘crop to cup’ specialty narrative, Dubai’s Mokha 1450 is a roaster and coffee shop with a focus on direct trade and super-premium coffees, such as Jamaica Blue Mountain. For a truly fourth-wave coffee experience, Walter's Coffee Roastery has three sites across Istanbul, New York and Dubai. Their coffee ‘laboratories’ offer the very latest experimental brewing techniques, including dry-iced coffees and syphon brewing.
 
Dubai is also home to a number of independent coffee shops offering Arabic-style coffee. Located in the historic Meena Bazaar, Arabia Tea House Coffee features a ‘secret garden’ in which to enjoy cardamom and saffron infused coffee. Khan Murjan is a Syrian-style coffee house, often hosting live music performances.
 
 



Project Café Middle East 2019 is Allegra World Coffee Portal’s groundbreaking study on the Middle East’s emerging branded coffee shop market. Our research provides in-depth industry analysis of the sector’s business, social and economic contributions across 12 Middle East markets.


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