Sample Economics Paper on Coffee in UAE Market

Coffee in UAE Market

Being one of the most consumed beverages around the globe, the market for coffee has immensely grown over the years. The demand for the products has especially increased in emerging markets, such as Asia and the Middle East. Most of the exporters have gradually increased their supply to the western countries, including the United Kingdom and the US where the demand for the product is higher in than other parts of the globe. Some of the famous coffee-producing countries in the world are Panama, China, United States, Senegal, and Kenya.  Essentially, the market has been divided into segments depending on the needs of the customers. Some of the divisions include Robusta Liberia and Arabia.  The sections control varying parts of the economy. Arabia controls 70% and Liberia and Robusta 3% and 27 % respectively (Tucker, 2017).  The production of this commodity in different countries around the world in the 2017-2018 financial year is approximated to be 158.78 million bags, which represents an average increase of 0.7% compared to the previous year (Tucker, 2017).

Over the last decade, coffee consumption trends have drastically changed. For example, some of the Asia-pacific nations, such as India and China, have increased their consumption, particularly due to the growing population of young professionals. As one of the emerging markets, UAE has a promising future that most of the producers consider viable to explore. 

Current Demand and Supply Trend and Situation of Coffee in UAE

  Coffee supply in UAE has been growing over the years and its current suppliers have been attracted by the stable economy of the country.  Most of the state’s coffee is imported from some of the major producers including Guatemala, Mexico, and India. The current total coffee importing cost amounts to $242.7 million and is expected to grow constantly at an annual rate of 6% from 2019. Considerably, the country imports a total of 83,000 metric tons to meet the rising demand of the commodity. According to the UAE ministry of foreign trade, an average resident in the country, consumes about 3.5 kg of coffee in a years. The firm has more than 600 outlets in the UAE, which has significantly contributed to the growing rate of consumption. Costa, one of the major players in the global coffee market, operates over 150 stores and plans to open additional 20 stores in the next two years.  As such, the average rate of consumption in the country is expected to grow at an average rate of 8.9% in the next five years (Godinho, 2018).

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Graph 1: Coffee in the UAE

Source: http://aaronallen.com/blog/coffee-in-the-middle-east

Graph 1 shows an overall increase in the rate of sales in most of the outlets that operate in UAE due to the growth in the rate of consumption.  The supply of the commodity has increased in the country as most residents  prefer coffee to tea. The country’s revenue has equally augmented due to the increased demand for the product (Aaronallen, 2018). The upsurge in the rate of sales can also be attributed to the establishment of some of the famous international institutions, such as Starbucks and Costa coffee. The current coffee demand in the country has largely been contributes to the growing population. Compared to the other Middle East countries, UAE has the highest growth rate of 3.0%. The increased demand has also attracted more investors in the country and companies such as Nestle and Starbucks are establishing more outlets to serve their clients. Other factors that have contributed to the increase include the growth of disposable income and the increase of expatriates in the country.

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Graph 2: Growth of UAE population

Source: http://www.textilepeoples.com/uae-food-industry/

Graph 2 shows a constant increase in the population of the UAE that equivalently increases the demand for some of the cultural products of the nation, including coffee. Moreover, the growth trend is expected to continue over the next four years and thus translate into constant revenue for the sellers. Some of the international firms have opened numerous stores in the country and increased their investment in the beverage industry to take advantage of the great business opportunity that coffee presents.

Price of Coffee in the UAE Market

 Although coffee prices around the world regularly change depending on the preferences of the customers, the demand and supply of the commodity also play an essential part in determining its average market price. The typical price for coffee in the UAE is about Dh 16.46. The product’s cost in the UAE is higher than that of other Middle East countries (Yousra Zaki, 2018).

Figure 1: Coffee Prices in UAE

Source: https://gulfnews.com/guides/going-out/food-2.4552/how-coffee-culture-has-evolved-in-the-uae-1.2050141

Factors Promoting Coffee Culture in UAE

Coffee consumption in the Middle East region has been a tradition. However, in some of the iconic cities, such as Dubai, the consumption of the product has been promoted by the increase in the number of cafes and the evolving technology. International firms, such as Starbucks and Costa, have increased their stores in the nation.  Additionally, the migration to digital sales platforms has enabled customers to access coffee outlets easily and even purchase for the commodity. The coffee franchises have taken advantage of digital platforms, such as social media, to advertise their products thus attract . Many clients consider these mechanisms as the best and fastest means of acquiring the commodity.  As such, coffee is the most valued beverage in the UAE compared to the others, such as tea. As at 2015, the market was valued at $774.5 million. However, it is expected to grow to approximately $1.01 billion (Admin, 2018). The growth trend will have a significant impact on the demand and supply of the commodity. Since the number of coffee produces in the world is limited, and consumers are continually increasing, the demand for the products will eventually outweigh the supply thus leading to the rise in prizes.

Conclusion

Coffee consumption trends in different parts of the globe are continually changing due to the fluctuating demand and supply of the commodity. As one of the emerging international markets, UAE has over the last decade recorded an increase in the demand and supply of coffee. The increase in the popularity of the beverage has largely been promoted by the constant growth in the population of the country, improved economy, and the introduction of many coffee outlets advanced technology in the industry.

References

Aaronallen. (2018). Coffee in the Middle East: A Growing Segment with Untapped Potential. Aaron Allen. Retrieved from http://aaronallen.com/blog/coffee-in-the-middle-east

Admin, V. (2018). UAE Food and Grocery Market.  Textile Peoples. Retrieved from http://www.textilepeoples.com/uae-food-industry/

Godinho, A. (2018). Fuelling the coffee and tea industry’s growth in the Middle East. Khaleej Times. Retrieved from https://www.khaleejtimes.com/supplements/fuelling-the-coffee-and-tea-industrys-growth-in-the-middle-east

Tucker, C. M. (2017). Coffee culture: local experiences, global connections. Taylor & Francis.

Yousra Zaki, D. (2018). How coffee culture has evolved in the UAE. Gulf News. Retrieved from https://gulfnews.com/guides/going-out/food-2.4552/how-coffee-culture-has-evolved-in-the-uae-1.2050141