Go digital or go home: Why Middle East F&B firms must hasten tech transformation to compete for post-COVID-19 growth
The expert panel convened at the recent Future Food CEO virtual seminar on Digital Transformation in F&B Manufacturing in the Middle East, and comprised Dubai Industries and Exports Deputy CEO Mohammed Ali Al Kamali, GE Digital Manufacturing Digital Transformation Director Mounia Papadopoulos and Tetra Pak Business Driver - Automation and Digital Solutions Nikolay Andreychikov, Biz Driver – Automation and Digital Solutions, Tetra Pak.
Digitalisation has become an increasingly important topic in the region as of late, especially after Vice President, Prime Minister and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum recently announced ‘Operation 300bn’, a 10-year strategy to increase industrial contribution to the UAE’s GDP to AED300 billion by 2031.
The food and beverage sector has been recognised as a crucial part of this industrial plan given that the UAE F&B sector is estimated at a healthy US$20bn currently, and with this the government is also pushing for local F&B manufacturing firms to more rapidly adopt digitalisation in their operations.
“The local food and beverage industry is only expected to grow ever faster given our strong foundation and driving factors such as increasing populations and high disposable incomes, so the [F&B industry needs to evolve] to remain competitive,” Al Kamali told the floor.
“This is why digitalisation of the industry is so important as this will be crucial to remaining competitive moving forward – take traceability for example, [many consumers demand this] so traceability is needed to be competitive, and [for a business to prove itself] in terms of food safety and marketing – particularly when it comes to halal products.
“Apart from traceability, implementing digitalisation in product manufacturing is also important as it will increase efficiency and competitiveness.”
This was seconded by Papadopoulos, who stressed that digitalisation has become ever more important for food and beverage manufacturers given the new challenges that the COVID-19 pandemic has brought upon the industry.
“The post-COVID F&B industry now has many more new challenges that were not there before, such as the need to innovate under pressure, increase production, handle supply chain disruptions at multiple levels and labour disruptions, she said.
“This is not to mention firms having to react to their traditional distribution channels being disrupted with more and more consumers buying online so direct-to-consumer is now on the up, as well as having to react to the establishment of new regulations and food safety [concerns].
“Being digitally enabled is the best way to deal with all of these issues, and to even achieve growth out of this, and local manufacturers are realizing that.”
According to analysis by the Dubai Chamber of Commerce and Industry, online F&B sales took a major 255% leap in the UAE in 2020 to hit US$412mn. Continued growth is also expected to be seen from here on out, with online F&B sales expected to see a further 8.5% CAGR to reach US$619mn by 2025.
“The entire UAE food and beverage industry is coming together with producers, consumers, government and more to enable end-to-end value chain integration via the ‘UAE Food Platform’ which is being constructed now, further highlighting how important digitalisation is to local businesses,” said Papadopoulos.
“Other proven benefits of digital transformation have included higher production efficiency (up to 20%) and product quality (10%), as well as reduced energy consumption (12%) and product wastage (4x), not to mention revenue growth and increased operating margins.”
The UAE Food Platform is a digital database aiming to consolidate local food and beverage data and digitally connect local firms for value chain optimization.
Government support
When asked how the government is looking to support these changes, Al Kamali highlighted Sheikh Mohamed’s recent approval of a Dh30bn (US$8.17bn) financial package under the Emirates Development Bank Strategy to help local businesses and start-ups as part of Operation 300bn.
“The food and beverage industry is definitely a key priority for the government, as it is also one of the six main domains identified for prioritization under Dubai Industrial Strategy 2030 [based on future growth prospects, export potential and mid-term to long-term economic impact],” he said.
The Dubai Industrial Strategy 2030 focuses on increasing knowledge, sustainability and innovation in the identified industries, with digital technology as a core necessity.
In terms of sustainability, Andreychikov highlighted that using the right digital solution could also be a way for food firms to achieve goals in this area.
“Food is the second largest CO2 emitter accounting for 26% of world emissions [so many firms have targets to reduce these in place,” he said.
“Digitalisation is key here as it will make a manufacturing system much more efficient, and so reduce the firm’s CO2 emissions, as not being efficient involves higher usage of electricity, water, steam and so on.
“Producing the right amount of products on time will avoid any wastage and can reduce the carbon footprint and emissions resulting from production.”
Importantly, he also highlighted that it is okay for firms to take small steps in their digitalisation journey instead of making changes all at once.
“Basic automation can be implemented very quickly without production stoppage, and firms can start with small amounts of money not huge investment,” he said.
“It all really depends where are you are today in your digitalisation journey, where you want to be in future [and how competitive you wish to be then].”
