Modern retail trade enters new frontier

Yemen continues to surprise multinational FMCG producers, which are becoming increasingly optimistic as sales grow and the first signs of a developing modern retail trade appear.

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By  Roger Field Published  December 11, 2006

|~|Yemen-200-web.jpg|~|Maxfield: “We see regular, very strong growth in Yemen, and we have done over the past five years.” |~|At first glance, the prospects for a modern FMCG sector appear poor in Yemen. The country, which had a GDP of more than US $19 billion in 2005, has experienced lower economic growth – just 2.8% in 2005 – than most other Gulf countries. Despite this, Yemen continues to surprise multinational FMCG producers, which are becoming increasingly optimistic as sales grow and the first signs of a developing modern retail trade appear. UAE-based retailer Emke Group, which opened the first hypermarket in Yemen just a few months ago, led many in the FMCG sector to take a second look at the country. Unilever is just one company that is keeping a close eye on the country, having experienced sales increases of between 20% and 50% during the past couple of years. “We see regular, very strong growth in Yemen, and we have done over the past five years,” said Rod Maxfield, business unit director at Unilever Gulf. “Although it’s been from a small base, we are getting very healthy growth and we are very happy with it.” Yemen’s retail sector is mainly made up from traditional outlets, and the modern trade is in its infancy. “We estimate that the total universe of stores is about 26,000 to 27,000, and these are mainly small baquala type stores,” Maxfield said. “Within the modern trade there are only about eight stores that we would classify as modern trade. These are supermarkets, although there is one LuLu hypermarket in Aden. These bigger supermarkets are all in the main cities.” Yemen’s capital city, Sana’a has four main supermarkets; Shomailh, City Mart, Al- Huda and Happy Land. There are three supermarkets in Aden: Dhmran, Alrashed, and Hi Market. The only hypermarket is Emke’s LuLu store, a 60,000 sq ft outlet, which opened in Aden Mall in September. Maxfield said some of the independent retailer are trying hard to develop their businesses and that some of the stores are of a high standard. V. Nandakumar, Emke’s marketing director, said that while Yemen is behind other countries in the region in terms of an organised retail sector, it is showing significant potential. “It’s not something you can compare with Dubai or other developed countries,” he added. “In that way it is slightly behind but we think it will be fast catching up and we see big potential there.” He added that Emke is looking to open two more stores in Yemen, and that one of these stores will be in the country’s capital city, Sana’a. Two other supermarket groups are rumoured to be looking at Yemen, according to Maxfield, although he does not know whether they are larger or smaller groups. But this nascent modern trade is just one factor behind Yemen’s burgeoning FMCG trade. For example, Maxfield points out that while the country has a high population and a relatively low GDP, there is a small wealthy segment within the population that is keen to buy branded, luxury items. The country also has a high proportion of young people, which is likely to create a strong demand in the next few years. There is also a chance that Yemen will be accepted into the GCC, which could also give the economy a boost. In terms of the type of products that are selling well in Yemen, Maxfield said that top-end products such as Dove soap and shampoos are performing well, as are the company’s main core products such as Lux soap and shampoos, Sunsilk shampoos and some of the skin products. Unilever has an exclusive distributor, Hayel Saeed, for the Yemen market, which has good coverage of the country’s traditional retail outlets, even in more remote areas, according to Maxfield. And while some people still perceive Yemen, particularly areas outside the main cities, as being dangerous, Maxfield said that in his experience, the country is relatively safe and is a good place to do business. “In terms of our operation there, we have coverage across all of the country. My personal experience of Yemen has been fantastic. I found the local Yemenis very friendly and very keen to develop their businesses. It’s also one of the most beautiful countries in the Middle East. “We’ve not had any incidents regarding the security. The government seems to be pretty well on top of it. There are a few isolated incidents but there are isolated incidents everywhere else in the world.” But Maxfield admits that Yemen does present Unilever – and other FMCG producers – with some challenges such as grey products and counterfeits, which are found mainly in the souks and traditional trade, rather than supermarkets. Yemen’s government is also confronting the problem, according to Maxfield. “We have close contacts with the government, which has been very supportive in actually reigning in and confiscating counterfeit products.” Kraft Foods, one of the world’s largest food producers, also views Yemen is an important market in the GCC, mainly because of the sheer size of its population. Patrick Satamian, managing director of Kraft Foods Gulf, said: “I think there are more than 20 million people in Yemen and so from the population point of view, it is one of the largest markets that we have in this part of the world.” He added that the difference between Yemen and the rest of the GCC is that the purchasing power is lower so in Yemen, making it more difficult for premium products such as Kraft’s to sell. Despite this, Yemen is becoming one of the top markets in Kraft’s portfolio, according to Satamian. “I see this only as the beginning because of the potential of the market…I suspect that over time if the trade continues to develop the way it is, with key accounts coming in, more sophistication in the trade and purchasing income improving, our position will be further strengthened by this.” Satamian also thinks Yemen will become an increasingly important market as the modern trade develops. “The GCC has a well developed modern trade that accounts for more than 50% of business in some areas for multinational businesses. That trend is very important in Europe now, where the modern trade represents about 85% of business. “So we can see that trend starting in Yemen. Some supermarket chains, international and regional, are looking at opening up outlets in Yemen. I suspect that will be within two or three years, Yemen moving in the same direction of the rest of the GCC but probably at a different level,” he added. "This is something we’re seeing across the GCC, companies are opening more and more outlets and that’s a trend.” ||**||

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