The low purchasing power has made pricing difficult for the local farming businesses to ensure both consumer accessibility and profitability for sustainable growth. Moreover, due to UAE climate conditions, growing agricultural products locally is costly and technology-demanding. This causes the country to be highly dependent on imports. For this reason, the consumers generally perceive imported products to be superior to domestic ones, making it all the more difficult for local businesses to position themselves price-wise.
The call: Provide financial assistance and supply-side policies to local farming businesses
Many SMEs in the agriculture sector are forced to set non-premium pricing to compete with large organizations and increase accessibility to the end buyers. To ensure their ability to survive in these difficult times, the government could provide SMEs financial assistance, such as subsidies and low-interest rate loans. This would promote their growth while reducing the country’s reliance on imports.
In addition, the government should focus on building the agricultural ecosystem to establish a sustainable domestic agricultural community. To achieve this, non-financial supply-side policies are essential; easing regulations to decrease barriers of entry and sourcing talents from overseas. It could also promote agricultural research to find the best practices tailored to diverse UAE environments.
Changing consumer behaviors are making demand forecasts challenging
Different agricultural products have different life cycles and all take at least 30 days to grow. Consequently, demand forecasting has always been challenging in the agricultural sector. On top of that, the pandemic has also made irrevocable changes in consumer behaviors.
73% of UAE consumers shop online more since the onset of the pandemic and purchased more groceries online according to the study by Mastercard (5). Other trends such as the increase in health consciousness are also changing buying behaviors. Therefore, agricultural businesses will need to be more agile in adapting their supply methods by using different tools to better forecast demand.
In the business-to-business channels, there is a general shift in the demand structure, as less demand is coming from open markets and hospitality sectors. In addition, local farming businesses are seeing an increase in demand as their vendors want to ensure that their supply is consistent in terms of quality and pricing. These changes may pose further difficulties to demand forecasting in this new and growing sector.
The call: Impose regulations to control purchasing behaviours and reduce wastage
Inaccurate demand forecasts can lead to either food shortages or food waste. To prevent this, policymakers could promote the signing of off-take agreements, where the demand is pre-determined by both suppliers and buyers. By signing these agreements, the agricultural companies could grow a set amount of plants and ensure they would be sold to certain buyers.
On the other hand, the government should also react responsively to food-related crises. It should impose rules to ensure regular buying behaviours and reduce unnecessary hoardings. In this aspect, the UAE government has been showing great awareness and leadership, according to local business Oasis Green.
In-person marketing is impacted by lockdown restrictions
For small businesses, marketing is very important to enter the market and capture customers, especially in the early stages. However, during the pandemic, various levels of lockdown restrictions are imposed globally, making in-person marketing such as launch events difficult. The global marketing spending in 2020 was projected to be $712 billion in 2019 and turned out to be $691 billion (6), demonstrating the impact of the coronavirus outbreak.
For this reason, it is now more challenging for businesses to build a personal connection with customers. Many businesses have turned to digital means such as online advertisements and social media. The CMO survey’s results showed that social media spending has increased from 13.3% of the total marketing budgets in February 2020 to 23.2% in June 2020 (7), a dramatic 74% lift.
However, with the limited budget and size of small agricultural businesses, they will still need support from the government to truly create brand equity and continue to grow.
The call: Promote local farming through public channels
Besides financial assistance in marketing, the government could also focus on promoting local farming businesses through public channels such as Twitter, Instagram, and even through the news on national TV channels.
In addition, as previously mentioned, there is a low customer awareness in the UAE of locally produced food and consumers tend to prefer imported goods. To raise awareness of the benefits of local products, the government could try to host public events and exhibitions on local goods. Finally, it could also develop specific programs to increase customer awareness and promote local farming. For example, the City of Seattle has developed a Food Action Plan (8) which puts a strong emphasis on growing local food and strengthens the regional food economy.
The road to complete recovery from the COVID-19 pandemic is still long, and the agricultural sector will remain important, especially for countries like the UAE. Nevertheless, with governmental help, this booming sector will grow even faster and continue to create both social and economic societal values.
Written by Yat Wan Yvone Wo, a volunteer researcher at the Think Tank AlterContacts
Edited by Konstantinos Valtetsiotis