fsr gcc 2014

Al Masah Capital: GCC Foodservice Sector

April 2014

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GCC Foodservice Sector

INTRODUCTION

GCC is a fertile ground for foodservice companies, particularly due to the regions

flourishing economy; urbanization; growth of its multicultural, young population; and

steady rise in per capita income. Consequently, international fast food and casual dining

restaurants are successfully making inroads into the GCC region through franchise

agreements, the preferred method of doing business in the region.

The strategy is also suitable for local partners, who appreciate being able to acquire their

foreign partners technical knowledge and experience in operating foodservice

businesses. International foodservice partners offer this expertise as well as assist with

management and training, in addition to providing the brand name. Moreover, the GCC

population is extremely brand conscious.

There are no precise estimates of the amount of business done by foodservice

companies in GCC.

Our calculations indicate the annual revenues of foodservice companies1 in GCC

amounted to ~USD16.5 billion in 2012. Saudi Arabia led the region, registering total

foodservice sales of USD7.7 billion, followed by the UAE (USD4.6 billion), Kuwait (USD1.7

billion), Qatar (USD1.1 billion), Oman (USD1.0 billion), and Bahrain (USD370 million).

The fast food [quick service restaurant (QSR)] segment was found to be the largest,

worth USD9.5 billion as of 2012. It was followed by full service restaurants (USD5.3

billion) and the cafes, tea bars, and bakery cafes segment (USD1.8 billion).

Exhibit 1: GCC foodservice market size (2012)

Source: Al Masah Capital Research

Saudi Arabia, with annual billings of USD4.2 billion in 2012, was the regions largest fast

food market. American fast food chains such as McDonalds, KFC, Burger King, Hardees,

and Domino's Pizza dominate the Kingdoms fast food market. The UAE and Kuwait are

the other two large fast food markets, with annual revenues of USD2.9 billion and USD1

billion, respectively.

1 This calculation does not consider the institutional food service market (which primarily includes local catering companies that provide food services to the military, oil & petrochemical companies, hospitals, universities, and schools) and the lounges and bars market.

Saudi Arabia47%

UAE28%

Kuwait10%

Qatar7%

Oman6%

Bahrain2%

USD16.5 billion

Fast food57%

Full service

32%

Cafes, bakery

11%

USD16.5 billion

Foodservice market (by Country) Foodservice market (by Category)

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The full service restaurants (which includes fine and casual dining) market, estimated at

USD5.3 billion, was about 45% smaller than the QSR market. Brands in this segment

include Chilis, TGI Fridays, Carluccio's, La Petite Maison, BiCE, Nobu, and ZUMA.

Exhibit 2: GCC fast food and full service restaurant market (2012)


The cafes, tea bars, and bakery cafes segment was worth just USD1.8 billion; however,

the segment is exhibiting rapid growth.

4.2

2.7 2.9

1.3 1.0

0.5 0.7 0.3

0.6 0.3 0.2 0.1

-

1.0

2.0

3.0

4.0

5.0

Quick service restaurants Full service restaurants

Saudi Arabia

UAE

Kuwait

Qatar

Oman

Bahrain

Values in USD bn

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COMPONENTS OF THE FOODSERVICE SECTOR

The foodservice sector can broadly be categorized as comprising: (i) full service

restaurants (fine and casual dining); (ii) quick service restaurants (fast food); (iii) cafes,

tea bars, and bakery cafes; and (iv) lounges and bars.

Full service restaurants

Fine dining

These are full service restaurants offering premium food and service. Such restaurants

are usually located in luxury hotels in metropolitan cities. Fine dining locations pay

considerable attention to their decor and ambience, attempting to create an

atmosphere that provides exclusivity and personalized service. The waiting staff is

usually highly trained and often wears formal attire. Food and beverages are typically

paid for after their consumption. Some fine dining restaurants in GCC are Hakkasan, La

Petite Maison, BiCE, Nobu, ZUMA, Gordon Ramsay, At.mosphere, STAY, LEntrecote Cafe

de Paris, Spazio, and Il Terrazzo.

Casual dining

These restaurants serve moderately priced food in a casual atmosphere. The decor,

food, and service are usually less extravagant than those of a fine dining restaurant.

Certain restaurants also provide takeaway and home delivery services. Some casual

dining restaurants in GCC are Chilis, The Cheesecake Factory, TGI Fridays, Gazebo, Tao,

and McCoys.

Exhibit 3: GCC foodservice sector


Quick service restaurants (QSRs)

Quick service restaurants (often called fast food joints) offer low-cost food options,

focusing on speed of service. The minimal table service and emphasis on self service

distinguishes this group from traditional restaurants. Moreover, at QSRs, food and

Full Service Restaurants Quick Service Restaurants

Cafes, Tea Bars, and Bakery-Cafes

Lounges and Bars

Fine Dining Casual Dining


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beverages are paid for prior to consumption. Some quick service restaurants in GCC are

McDonalds, Dominos Pizza, Subway, Burger King, KFC, Papa Johns, and Wendys.

Cafes, tea bars, and bakery cafes

These outlets serve a mix of food and beverage products. However, they are more

focused on non-alcoholic beverages, including a range of coffees as well as other hot and

cold drinks. These outlets also offer quick bites such as pastries and sandwiches, apart

from breakfast items. In the GCC region, Cafe Bateel, Starbucks, PAUL, Tim Hortons, and

VOGUE Caf are amongst the most renowned brands in this category.

Lounges and bars

Lounges and bars are establishments that serve alcohol. They may also serve food;

however, they typically generate most of their revenue from the sale of alcoholic drinks.

Well-known brand names in this category in GCC include Cavalli, Hard Rock Caf,

Siddharta Lounge by Buddha Bar, Koubba, and Rivington Bar.

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GROWTH DRIVERS FOR GCCS FOODSERVICE SECTOR

Booming economy

GCCs economy is currently worth USD1.60 trillion vis--vis USD450 billion a decade ago.

Due to this robust growth, income levels in certain GCC countries have risen to levels

comparable with that in several developed countries. Moreover, the per capita income

of Qatar (a GCC member country) exceeded that of the US to become one of the highest

in the world. In 2013, GCCs per capita income was USD32,341 as compared with

US13,984 in 2003.

Exhibit 4: Per capita income (2013E)

Source: IMF, Al Masah Capital Research

By 2020, GCCs economy is estimated to be USD2.0 trillion, with Saudi Arabia

contributing USD900 billion, followed by the UAE (USD477 billion), Qatar (USD283

billion), Kuwait (USD189 billion), Oman (USD90 billion), and Bahrain (USD35 billion).

Exhibit 5: Gross domestic product, current prices from 201020 (USD trillion)

Source: The World Bank, IMF, Al Masah Capital Research

24

24

26

43

48

105

32

39

39

44

53

- 20 40 60 80 100 120

Bahrain

Saudi Arabia

Oman

UAE

Kuwait

Qatar

GCC

UK

Japan

Germany

US

in USD 000s

0.0

0.5

1.0

1.5

2.0

2.5

2010 2011 2012 2013E 2014E 2015E 2020E

Bahrain

Oman

Kuwait

Qatar

UAE

Saudi Arabia

1.14

1.451.58 1.60

1.661.71

2.0

0

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Multicultural, young, expanding population

GCCs population is incredibly diverse. Apart from the local residents, the region is home

to expatriates from over 200 countries. South Asians form the largest expatriate

community in GCC, followed by Europeans.

The population of the GCC region is quite young. Data from the World Bank suggests

nearly 41% of the regions population is aged between 15 and 34 years. Qatar, Oman,

and the UAE had the highest percentage of population in this age group.

Exhibit 6: GCC has a young population base

Source: The World Bank, Al Masah Capital Research

According to estimates from the World Bank, GCCs population is likely to grow from

43.5 million in 2010 to 52.8 million in 2020.

Favorable changing consumption habits

Due to the regions harsh climatic conditions, eating out and shopping are the two major

forms of entertainment in GCC. Consequently, foodservice outlets are becoming the

preferred destination for casual and business meetings in the region.

Influx of tourists

The rising flow of tourists to GCC has also helped drive demand for the foodservice

sector. Tourist inflows account for a large and growing portion of demand, particularly in

Saudi Arabia and the UAE. On average, these two countries annually receive more than

25 million tourists to perform Hajj and Umrah at the holy city of Mecca and for

leisure/business.

According to the World Travel & Tourism Council, in 2013, 32.8 million international

tourists arrived in GCC for various religious and business purposes. Tourist arrivals for

the region are expected to reach 34.5 million in 2014, up 5.4%.

0%

20%

40%

60%

80%

100%

120%

0-4 5-14 15-34 35-44 45-54 55-64 Over 65 All

10

41

17

94 2 100

17

Age in years

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Exhibit 7: International tourist arrivals in GCC (millions)

Source: World Travel & Tourism Council, Al Masah Capital Research

Going forward, the rise in international tourist arrivals would drive the growth of GCCs

restaurant industry.

Rapid urbanization

Urbanization in GCC has risen substantially from the 35% level in the 1960s. Currently,

84% of the regions 47 million residents live in urban areas. Rapid urbanization in GCC is a

result of rural-to-urban migration for better job prospects, better standards of living, and

various other factors.

Exhibit 8: Rural-urban population in GCC

Source: The World Bank, Al Masah Capital Research

The rise in urbanization can generally be associated with increased eating out by

bachelors, working men/women, and a decline in average size of households.

Dining festivals

Dubais government, in its endeavor to make the country an ultimate tourist destination,

is constantly seeking creative ways to increase the number of visitors. Following the

success of the Dubai Shopping Festival, the government has started hosting the Dubai

Food Festival (DFF) to celebrate and enhance the countrys position as the regions

gastronomy capital.

Saudi Arabia UAE Bahrain Oman Qatar Kuwait

0 5 10 15 20 25 30 35 40

32.8

34.5

2013

2014E

0%

20%

40%

60%

80%

100%

1960 1970 1980 1990 2000 2010 2011 2012

Rural

Urban

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DFF, which was held between February 21st

and March 15th

2014, with almost 700

restaurants participating, presented the general public with a wide range of food-related

activities, tastings, offers, and events that showcased the emirates diverse food

offerings.

Exhibit 9: Dubai Food Festival

Source: Department of Tourism & Commerce Marketing (Dubai)

DFF included several events, entertainment activities, and attractions, including Taste of

Dubai, Gulfood, and The Big Grill.

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EMERGING TRENDS IN THE FOODSERVICE SECTOR

Changing consumer preferences

GCC residents have become richer, trendier, and more brand conscious. This new league

of urban dwellers is keen on trying new brands and concepts (including the foodservice

industry), reflecting their social status. Consequently, the food consumption pattern of

GCC residents is shifting from traditional Arabic cuisine to more international flavors,

ranging from Japanese (sushi) to Indonesian, Italian, and Lebanese food.

The conventional trend of eating excessive meat/meat products and very little

salad/vegetables is turning healthier, owing to easier availability of food from Asia,

North America, and other parts of the world.

European foodservice brands gaining ground

According to a report by Horizons, European foodservice brands have recognized the

GCC populations gastronomical appetite. Horizons developed this conclusion citing the

changing brand mix at two Dubai malls owned by the same developer.

Mirdif City Centre Mall hosted 12 European foodservice brands in 2010 vis--vis just

three at Deira City Centre Mall in 1996. In terms of percentage share, European brands

constituted 16% of all foodservice outlets at Mirdif City Centre Mall as compared with

12% at Deira City Centre Mall.

Exhibit 10: Foodservice outlet share by country of origin

Source: Casual Dining in the UAE from Horizons, Foodservice Europe & Middle East

Dilution of fine dining concept

The fine dining concept in GCC is being diluted, according to more than 100 chefs and

F&B-related delegates at the Caterer Chefs and Ingredients Forum held at the Mina a

Salam, Madinat Jumeirah in October 2012.

The delegates agreed the concept of fine dining would never be completely phased out;

however, they accepted the market is incorporating the new polished dining concept,

which entails less investment in design and yet carries the full service offering. The

47%

37%

12%4%

Year1996

43%

37%

16%

4%

Year2010

US Gulf Europe Others

Deira City Centre Mall Mirdif City Centre Mall

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emergence of the new polished dining concept emanates from the demand side as

diners currently expect offerings with better quality without the rigidity of formal dining.

International brands expanding presence

International foodservice brands are rapidly expanding in GCC. Proof of this is growth

registered by Burger King and KFC, the first American quick service brands to enter the

region.

Burger King, which opened its first GCC outlet in 1992 in Saudi Arabia, has expanded to

almost 267 outlets across Saudi Arabia (95), the UAE (74), Kuwait (73), Qatar (13), and

Bahrain (12). Similarly, KFC, which opened its first store in the region in 1973, has

expanded to nearly 400 outlets.

Dunkin' Donuts has also achieved considerable success in the region. According to a

recent press release by Dunkin' Brands Group, the parent company, the chain has more

than 250 outlets in the Middle East. In February 2014, the SUBWAY restaurant chain

announced it reached the milestone of 500 locations in the Middle East & Africa region.

Exhibit 11: International brands with strong presence in GCC


During the last two years, several internationally acclaimed restaurant brands have

opened in GCC. These include La Porte des Indes, Fm, IHOP, PF Changs, Shake Shack,

Tim Hortons, The Cheesecake Factory, Texas Roadhouse, Tortuga, MOOYAH, Cielo Tapas

Bar & Sky Lounge, Clinton Street Baking Company, and GQ Bar.

Exhibit 12: A few new entrants in GCC


Interest in the foodservice business is so high that major franchise deals are being struck

with international brands almost every second week.

UAE residents lead region in dining out

According to a survey conducted by MasterCard in 2011, UAE diners spent an average of

USD229 per month on restaurant meals, followed by residents of Qatar (USD211),

Kuwait (USD196), and Oman (USD66).

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Transition from phone to online food ordering

The GCC population is transitioning from phone to online ordering. Several portals offer

online food delivery in the region, including Foodonclick.com, Otlob.com, talabat.com,

hellofood.com, and 24h.ae.

Otlob.com, which has a menu database of more than 400 restaurants and food chains,

stated the Saudi online food delivery market was worth USD4.8 million in 2012. This

market is likely to reach USD218 million by 2020, owing to the well-urbanized regions,

changing lifestyles, and emerging online culture of the young, tech-savvy population.

Growing acceptance of home/office delivery

According to a statement by Ahmed Marashde, CEO of Arabian Entertainment Co (which

holds the franchise rights to Applebees Grill and Restaurant in Saudi Arabia),

Consumers do not only want to enjoy casual dining food inside the restaurants but also

want to enjoy the same taste in their homes; hence, a lot of casual dining restaurants

have started home delivery services".

Several casual dining restaurants in GCC have begun offering home/office delivery

services. The strategy is a suitable match for restaurants, which are generally keen on

exploring new avenues to generate more business.

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CHALLENGES FOR GCCS FOODSERVICE SECTOR

High rentals

Rent/lease expense is a major cost for foodservice companies. This is since prime

commercial locations (which are usually in high demand and short supply) command a

premium over the general market rate. Owing to the advent of mall culture, several

foodservice companies currently engage in lease models that allow revenue sharing to

decrease costs. However, the growing need for mutually beneficial lease models

persists.

Staffing issues

Labor shortage, leading to high levels of attrition, is a significant problem for foodservice

companies. Due to the large number restaurants being opened, junior chefs that would

typically remain in a position such as commis one/two tend to leave their existing

employment to move up the career ladder.

GCC governments emphasis on nationalization of jobs (Emiratization and Saudization,

among others) is also impacting the foodservice sector, which largely employs

expatriates as the local population is uninterested in restaurant jobs.

Heavy dependence on imports

GCC heavily relies on food imports to meet its growing consumption requirements due

to the shortage of arable land and water. Data from the FAO suggests GCCs agricultural

imports totaled USD34.2 billion in 2011. In terms of value, Saudi Arabia was the leading

food importer (50.3%), followed by the UAE (32.2%), Oman (6.3%), Kuwait (4.6%),

Bahrain (3.3%), and Qatar (3.3%).

Exhibit 13: Value of agricultural imports in GCC (2011)

Source: FAO, Al Masah Capital Research

We estimate the regions food import bill to exceed USD50 billion in 2020, considering

population growth and changes in food prices as well as quantity of imports (refer to

AMCL MENA Food Security Report for further details).

1.1

1.1

1.6

2.2

11.0

17.2

0 4 8 12 16 20

Qatar

Bahrain

Kuwait

Oman

UAE

Saudi Arabia

Saudi Arabia

UAE

Oman

Kuwait

BahrainQatar

in USD bn

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Rising awareness on health issues

Over the past few years, lifestyle-related diseases, such as diabetes, cancer, and blood

pressure problems, have increased in GCC. The prevalence of Type 2 diabetes was found

to be unusually high in GCC vis--vis the rest of the world. According to the World Health

Organization (WHO), in the UAE, one in three adults is obese and one in five people has

diabetes.

Two years ago, certain GCC governments were contemplating higher taxes on beverages

(particularly carbonated ones) to control consumption, owing to the rise of lifestyle

diseases. Carbonated beverages were found to be a major contributor to the increasing

incidence of diabetes among children. Sugary and oily snacks, particularly those offered

by fast food restaurants, were also considered to be a cause of health problems.

Ban on alcoholic drinks due to Islamic traditions

Foodservice outlets in Saudi Arabia and Kuwait do not serve alcohol since Islamic

traditions prohibit the consumption of alcohol. In 2012, Pearl Qatar in Doha also placed

a complete ban on the sale/consumption of alcohol on the island.

The UAE and Bahrain, the two most liberal countries in GCC, allow foreign residents to

obtain permits and buy alcohol from designated liquor stores. In the UAE, alcohol is also

available in licensed hotels and pubs.

The ban would not benefit foodservice companies since restaurants that serve alcohol

are believed to earn a much higher profit margin than those that do not.

Socio-political unrest

During the Arab Spring of 201112, certain foodservice companies in GCC suffered

significant business losses. Bahrain, in particular, faced unrest in late 2011.

Consequently, there was a significant decline in the influx of tourists from other parts of

GCC (primarily Saudi Arabia), who would generally travel to Bahrain over the weekend.

According to an article by FT on February 2012, the manager of an Indian restaurant in

central Manama stated his restaurants business declined 60% since the previous year.

If such a wave of violence reappears in the region, foodservice companies may come

under pressure again.

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DEALS IN GCCS FOODSERVICE SECTOR

Private equity deals

A total of five private equity buys occurred in GCCs foodservice sector during 201013.

In April 2010, QInvest announced it had acquired 40.8% stake in Intercat Hospitality, a

UAE-based industrial catering and restaurant management firm. Intercat Hospitality

owns two brands: Mashawi (a restaurant that serves Lebanese cuisine) and Toast (which

serves fast food). The financial terms were not revealed.

In October 2010, GrowthGate Capital revealed it had acquired 22% stake in International

Foods Services, a Saudi Arabian company engaged in food processing, distribution of

consumables, and catering services. The company also owns Capo Grillo, a casual dining

restaurant with branches in Saudi Arabia and Syria, and Hot and Crispy, a franchise fast

food concept that serves a snack food range of crispy potatoes. The financial terms were

not revealed.

Exhibit 14: Private equity deals in GCCs foodservice sector (201013)

Year Company Country Fund Country Category

2010 Intercat Hospitality UAE QInvest Capital Qatar Fast Food and QSR

2010 International Food Services Saudi Arabia Growthgate Capital UAE Fast Food and CDR

2011 Alamar Foods Saudi Arabia The Carlyle Group MENA Fund UAE Fast Food and QSR

2013 Hungry Bunny Saudi Arabia International Investment Bank and

Tharawat Investment House Bahrain Fast Food

2013 Shakespeare and Co UAE NBK Capital Kuwait CDR

Source: Zawya, Thomson Banker, Al Masah Capital Research

In December 2011, the Carlyle Group MENA Fund acquired 42% stake in Saudi Arabia-

based Alamar Foods, the master franchise of Dominos Pizza and Wendys for the

MENAP region (except for Wendys in Saudi Arabia). Alamar owns/operates 200

restaurants across 11 countries. The financial terms were not revealed.

In February 2013, International Investment Bank, together with Tharawat Investment

House, announced the acquisition of 49% stake in Hungry Bunny, a well-known Saudi

Arabian fast food restaurant chain. Hungry Bunny owns/operates 40 outlets in Saudi

Arabia, Bahrain, Kuwait, and Oman. The financial terms were not revealed.

In November 2013, NBK Capital revealed it acquired 49% stake in Shakespeare and

Company, a popular casual dining restaurant chain based in the UAE. Shakespeare and

Company, established in 2001 by the Saad Family, has 17 company-owned and operated

establishments in the UAE and one establishment in the US. It also has franchise

locations in Jordan, Lebanon, Qatar, Oman, Bahrain, and the US. The financial terms

were not revealed.

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Mergers and acquisitions (M&A)

During 201013, seven M&A deals occurred in GCCs foodservice sector. Notably, five of

the seven deals in the period took place in 2013.

In April 2011, Belhasa Hospitality, a subsidiary of Belhasa International Co, purchased

majority stake in 800 Pizza, a Dubai-based Italian restaurant, and opened two new

outlets in Old Town and Motor City in the same year. 800 Pizza serves a range of Italian

fare including soups, appetizers, pasta, pizza, and desserts, among others.

In September 2012, Bahrains Jemball Holding Co acquired 18.6% stake in Amman-based

Model Restaurants Co from Global Investment House Jordan for USD1.9 million.

In March 2013, Galadari Brothers Group, the parent company of Galadari Ice Cream,

announced plans to form a joint venture with US-based Dunkin' Brands Group. Under

the agreement, Dunkin' Brands would maintain 20% stake in the new venture, with

Galadari being primarily responsible for the brands daily operations in Australia.

Exhibit 15: M&A activity in GCCs foodservice sector (201013)

Year Target company Target country Acquirer company Acquirer country

2011 800 Pizza UAE Belhasa Hospitality UAE

2012 Model Restaurants Co Jordan Jemball Holding Co Bahrain

2013 Galadari Brothers Group UAE Dunkin' Brands Group United States

2013 Marco Pierre White Grill Stake United Kingdom Rmal Hospitality UAE

2013 Little Chef United Kingdom Kout Food Group Kuwait

2013 South West Coffee United Kingdom Kout Food Group Kuwait

2013 Gourmet Gulf UAE MAF Ventures UAE

Source: Thomson Banker, Bloomberg, Al Masah Capital Research

In May 2013, Rmal Hospitality, a subsidiary of UAE-based Al Fahim Group, signed an

agreement to acquire UK-based Marco Pierre White Grill & Steakhouse from celebrity

chef Marco Pierre White. According to the terms of the deal, Rmal would acquire 100%

stake in the portfolio of Marco Pierre Whites brands outside the UK & Ireland, including

Frankies and Wheelers restaurants as well as the rights to develop those brands.

In August 2013, Kout Food Group Restaurants UK Limited, Kout Food Groups UK branch,

acquired Little Chef, a UK-based roadside restaurant chain, for USD23 million from

private equity firm RCapital, buying 81 of the chains 83 sites. During the same month,

Kout Food Group also announced the purchase of the entire share capital of the UK-

based South West Coffee Ltd for KWD1.4 million. This deal marked Kout Food Groups

entry into the UK coffee sector.

In August 2013, Majid Al Futtaim Ventures announced the acquisition of 50% stake in

Gourmet Gulf from Daud Investments. Consequently, Majid Al Futtaim Ventures

obtained sole ownership of Gourmet Gulf, which holds the development and franchise

rights in several Middle East markets to international foodservice brands such as

California Pizza Kitchen, Morellis Gelato, YO! Sushi, and Hummingbird Bakery.

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MAJOR PLAYERS IN GCCS FOODSERVICE BUSINESS

1. Kuwait Food Company

2. Kout Food Group

3. United Foodstuff Industries Group Company

4. Danah Al Safat Foodstuffs Company

5. Herfy Food Services Company

6. Bahrain Family Leisure Company

7. Others (privately held)

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KUWAIT FOOD COMPANY Key statistics Major Shareholders

Ownership Public Shares Outstanding (mn) 391.2

Country Kuwait Al Khair National 66.8%

Established 1964 Public 33.2%

Price (KWD) 2.50 M-Cap (KWD mn) 1,005.0

No. of Employees 55,000

Exhibit 16: Share price chart 1 year (in KWD)

Source: Zawya

Business description

Kuwait Food Company (Americana Group), established in 1964, operates restaurants as

well as manufactures and markets consumer foods. Americana Group has a network of

more than 1,300 outlets, making it one of the largest operators of restaurant chains in

the MENA region. The groups portfolio includes leading international brands such as

KFC, Pizza Hut (in the UAE, Egypt, Bahrain, Jordan, and Kazakhstan), Hardees, TGI

Fridays, Sbarro (in Kuwait), Costa Coffee (in Egypt, Jordan, Lebanon, and Kazakhstan),

Krispy Kreme, Baskin Robbins (in Kuwait, Egypt, and Lebanon), Signor Sassi, Red Lobster,

Olive Garden, and Longhorn Steakhouse.

Key financials

Exhibit 17: Income statement (in KWD mn)

2010 2011 2012 2013 CAGR (2010-13)

Total Revenue 680.7 720.8 809.6 866.9 8.4%

Gross Profit 120.2 126.0 142.8 162.1 10.5%

Gross profit margin 18% 17% 18% 19%

Operating Income 58.1 60.9 73.2 82.8 12.5%

Net Income Before Taxes 60.8 60.8 58.5 66.1 2.8%

Net Income 46.2 48.0 45.9 50.6 3.1%

Net profit margin 6.8% 6.7% 5.7% 5.8%

Source: Zawya

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14

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KOUT FOOD GROUP Key statistics Major Shareholders


Country Kuwait Fadwa Y. Al Humaidhi 22.4%

Established 1998 Ya'qoub Y. Al Humaidhi 17.6%

Price (KWD) 0.78 Saleh Y. Al Humaidhi 16.3% M-Cap (KWD mn) 57.1 AM Y. Al Humaidhi 10.2%

No. of Employees 4,672 Public 33.6%


Source: Zawya


Kout Food Group, established in 1998, is engaged in the hospitality services business,

including establishing, managing, and operating restaurants. The company also provides

catering services and import and export of food stuffs. Kout Food Group holds the

franchise rights in Kuwait to Burger King, Pizza Hut, Applebees, and Taco Bell. The

company also operates Kabab-ji, Burj Al-Hamam, Boost Juice Bar, and SevenSeas. In

August 2013, Kout Food Group acquired Little Chef and South West Coffee.

Kout Food Group has operations in Kuwait, Iraq, and the UK.

Key financials


2010 2011 2012 2013 CAGR (2010-13)

Total Revenue 68.8 68.4 73.2 87.3 8.3%

Gross Profit 13.7 13.8 14.9 20.2 13.7%




Net Income 5.0 4.1 4.4 5.4 2.3%

Net profit margin 7.3% 6.0% 6.0% 6.2%

Source: Zawya

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14

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UNITED FOODSTUFF INDUSTRIES GROUP COMPANY Key statistics Major Shareholders


Country Kuwait United Medical Services Co 49.8%

Established 1992 Sayyed Hassan Hashim 9.6%

Price (KWD) 0.295 Salman Sayyed Hashim 9.1% M-Cap (KWD mn) 9.83 Zein Al Abdeen Hashim 8.1%

No. of Employees 950 Public 23.5%


Source: Zawya


Kuwait-based United Foodstuff Industries Group, established in 1992, operates retail,

restaurants, and catering businesses. The company hosts famous brands such as Sable

Sweets, Roche Sweets, Planet Donuts, Pellini Cafe, and Home Style.

United Foodstuff Industries Group was previously known as Sable General Trading

Company.

Key financials


2010 2011 2012 9M 2013 CAGR (2010-12)

Total Revenue 8.9 10.1 9.3 8.8 2.3%

Gross Profit 2.9 3.4 3.1 3.2 4.5%


Operating Income (0.9) 0.2 0.2 - NM

Net Income Before Taxes (0.0) (0.0) 0.3 - NM

Net Income (0.0) (0.0) 0.3 0.2 NM

Net profit margin NM NM 2.7% 2.3%

Source: Zawya

0.20

0.22

0.24

0.26

0.28

0.30

0.32

0.34

Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14

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DANAH AL SAFAT FOODSTUFFS COMPANY Key statistics Major Shareholders


Country Kuwait Al Safwa Group Holding 37.3%


Price (KWD) 0.087 M-Cap (KWD mn) 24.3

No. of Employees 1,000


Source: Zawya


Danah Al Safat Foodstuff Company, established in 1972 as a subsidiary of Al Safwa

Group, is primarily engaged in the fishing and catering business. The company manages

and operates the fast food outlets Shrimy Restaurants, Black & White Restaurants, and

ShrimpyGrill Restaurants.

Danah Al Safat has 12 subsidiaries operating across the Middle East, Asia, and Africa.

Key financials

Exhibit 23: Income Statement (in KWD mn)

2010 2011 2012 9M 2013 CAGR (2010-12)

Total Revenue 11.6 23.6 27.8 23.0 54.9%

Gross Profit 5.4 5.8 7.1 6.2 15.2%


Operating Income (1.3) (2.1) (8.4) 0.8 NM

Net Income Before Taxes 2.4 (1.6) (7.8) 1.0 NM

Net Income 2.3 (1.6) (7.7) 1.0 NM

Net profit margin 20% NM NM 4.1%

Source: Zawya

0.00

0.04

0.08

0.12

0.16


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HERFY FOOD SERVICES COMPANY Key statistics Major Shareholders


Country Saudi Arabia Savola Group 47.6%

Established 1981 Ahmad H Al Saeed 20.3%

Price (SAR) 133.5 Public 32.1% M-Cap (SAR mn) 4,405.5

No. of Employees NA

Exhibit 24: Share price chart 1 year (in SAR)

Source: Zawya


Saudi Arabia-based Herfy Food Services Company, established in 1981, owns and

operates fast food restaurants under the brand name HERFY and also engages in

catering services and manufacturing and selling of meat and bakery products. In

addition, Herfy runs multiple bakery and chocolate showrooms. Furthermore, the

company owns and manages warehouses and refrigerators for food preservation.

Herfy has a network of more than 170 fast food restaurants across Saudi Arabia. The

company also has business interests in Bahrain, Kuwait, and the UAE.

Key financials

Exhibit 25: Income statement (in SAR mn)

2010 2011 2012 2013 CAGR (2010-13)

Total Revenue 579.9 708.6 842.0 848.7 13.5%

Gross Profit 192.9 226.2 266.4 273.2 12.3%




Net Income 124.3 146.7 181.2 191.4 15.5%

Net profit margin 21% 21% 22% 23%

Source: Zawya

80

90

100

110

120

130

140

150


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BAHRAIN FAMILY LEISURE COMPANY Key statistics Major Shareholders


Country Bahrain Gulf Hotels Group 25.2%


Price (BHD) 0.112 M-Cap (BHD mn) 4.48

No. of Employees 150

Exhibit 26: Share price chart 1 year (in BHD)

Source: Zawya


Bahrain Family Leisure Company, established in 1994, is involved in the hospitality

business. The company operates franchise restaurants under brands such as Ponderosa

Steakhouse, Bennigans, and Cucina Italiana as well as provides entertainment services

through investment in and development of amusement parks.

The company also supplies amusement-related equipment.

Key financials

Exhibit 27: Income statement (in BHD mn)

2010 2011 2012 2013 CAGR (2010-13)

Total Revenue 0.9 0.8 1.4 1.4 15.0%

Operating Income 0.1 (0.0) (0.0) 0.1 31.4%

Net Income Before Taxes 0.5 (0.1) 0.7 1.2 31.5%

Net Income 0.5 (0.1) 0.4 1.2 31.5%

Net profit margin 54% NM 29% 82%

Source: Zawya

0.06

0.07

0.08

0.09

0.10

0.11

0.12

Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

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OTHER PRIVATE PLAYERS

Ajit Khimji Group

Oman-based Ajit Khimji Group is a conglomerate with diverse business interests,

including retailing luxury watches, jewelry, and furniture; operating a chain of

bookstores; ownership of restaurants; travel and tours; and laundry services.

The group owns/operates restaurants under the brand names Mumtaz Mahal and

Woodlands as well as MORE Caf, through its subsidiary Asha Enterprises LLC.

Al Ghunaim Trading Company

Kuwait-based Al-Ghunaim Group, established in 1978, is engaged in trading, real estate,

hospitality, and security.

The group holds the franchise rights to Chilis restaurant, Johnny Carinos Italian Kitchen,

Cinnamonster, The Noodle House (in Kuwait), The Pizzeria, Saj Express, Big Al Steak

House, The Coffee Bean & Tea Leaf, and Le Baton Sale Patisserie.

Al Khaja Group

UAE-based Al Khaja Group, established in 1986, is engaged in the hospitality,

consultancy, information technology, real estate, and retail businesses. Al Khaja Group

owns and operates several fine dining restaurants, premium coffee outlets, fast food

lounges, and ice cream parlors, including AL-Safeer, Esfahan, Hatam, Al Baiq, and Dajen.

The group also holds the franchise rights to global brands such as Hediard Caf and

Gloria Jeans Coffees (in the UAE).

Alamar Foods

Saudi Arabia-based Alamar Foods is the master franchise of Dominos Pizza and Wendys

for the MENAP region (except for Wendys in Saudi Arabia). The company

owns/operates 200 restaurants across 11 countries. The Carlyle Group owns 42% stake

in Alamar Foods.

Al Baik

Al Baik, established in 1974, operates a chain of fast food restaurants in Saudi Arabia. Al

Baik has more than 50 branches in the KSA and is widely popular for its fried chicken.

Alshaya Group

Kuwait-based Alshaya Group, established in 1890, is a leading international retail

franchiser, operating more than 55 of the most recognized retail brands globally,

including Starbucks, The Cheesecake Factory, P.F. Changs, H&M, Mothercare,

Debenhams, American Eagle, Pottery Barn, Pottery Barn Kids, Office Depot, and Boots.

The company operates 2,200 stores across seven divisions: Fashion & Footwear, Health

& Beauty, Food Service, Optics, Pharmacy, Office Supplies, and Home Furnishings. In

addition to its retail operations, Alshaya Group is also active in real estate, automotive,

hotels, trading, and investments.

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Alshaya has operations in the MENA region, Russia, Turkey, and Europe. It has more than

28,000 employees.

Arabian Entertainment Company

Arabian Entertainment Company, established in 1996, is a wholly owned subsidiary of

SEDCO, one of the largest business conglomerates in Saudi Arabia. Arabian

Entertainment Company is the largest franchise of Applebees Grill and Restaurant in the

Middle East. Arabian Entertainment Company is also a franchise of Romanos Macaroni

Grill and China Gate restaurants.

BinHendi Enterprises

UAE-based BinHendi Enterprises, established in 1974, is engaged in fashion retailing,

watches and jewelry, furniture, hospitality, real estate, and construction.

BinHendis hospitality division has more than a dozen restaurants and coffee shops,

including Caf Havana, Mini Chinese Restaurant, China Times Restaurant, Japengo Caf,

Sammach, Bella Donna Restaurant, Inferno Grill, La Brioche Caf, Business Caf, Ruby

Tuesday, Burj Al Hamam, NOW Caf, and Duck King.

Caesars Group

Kuwait-based Caesars Group, established in 1973, has business interests in restaurants

and confectioneries; trading in foodstuff, industrial equipment, spares, tools, hardware,

and safety products; IT solutions; travelling and tourism; and manufacturing corrugated

cartons and paper products.

The companys restaurants and confectioneries are spread across Kuwait, Bahrain, and

the UAE.

Cravia Incorporation

UAE-based Cravia Incorporation, established in 2001, holds the franchise rights to

Cinnabon, Seattles Best Coffee, Zaatar w Zeit, Roadster Diner, and the companys own

signature brand The Steak Bar.

Cravia Incorporation was previously known as United Restaurant Development Group.

Emirates Fast Food Company

Emirates Fast Food Company, established in 1994, runs the McDonalds restaurants in

GCC.

Gourmet Gulf

UAE-based Gourmet Gulf, established in 2003, holds development and franchise rights in

several Middle East markets to international foodservice brands such as California Pizza

Kitchen, Morellis Gelato, YO! Sushi, and Hummingbird Bakery. It also partly owns

regional outlets of Hard Rock Caf, Trader Vics, and Pinkberry.

Gourmet Gulf is owned by Daud Investments and Majid Al Futtaim Ventures.

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Integral Food Services

Integral Food Services, established in 2004, is engaged in the retail food service, contract

catering, and support industries in Qatar and the UAE. Integral Food Services owns a

chain of concept restaurants, i.e., Royal Tandoor, Tandoor Express, Oriental Bowl, Janna,

Real Gelato, Pizza N Pasta, and FoodSmart. The company is also a strategic partner for

popular international food franchises such as Bombay Chowpatty, Puranmal, Mega

Wraps, Southern Fried Chicken, and 241 Pizza.

Jawad Business Group

Bahrains Jawad Business Group is a conglomerate with businesses interest in fashion,

restaurants, travel & tourism, supermarkets, money exchanges, automobile services,

and logistics. Jawad Business Group holds the franchise rights to foodservice brands such

as DQ Grill & Chill, Papa Johns Pizza, Burger King, Chilis, Romanos Macaroni Grill,

Maggianos, The Great Kabab Factory, Costa Coffee, Magic Wok, Delifrance, Aran, Thai

Express, Woodlands, Zen Express, Camilles Sidewalk Caf, Hakisushi, Fratelli la Bufala,

and Patisserie Valerie.

The group has more than 140 restaurants across Afghanistan, Bahrain, Oman, Qatar,

Saudi Arabia, Kuwait, India, and the UAE.

Jumeirah Restaurants

Jumeirah Restaurants is the branded restaurant division of the Dubai-based luxury

hotelier Jumeirah Group. The company has developed and licensed several successful

restaurant concepts globally.

The Noodle House, the groups flagship restaurant, operates across the UAE, Oman,

Qatar, Saudi Arabia, Kuwait, Cyprus, and Pakistan. Jumeirah Restaurants also owns

several other restaurants, including Sana Bonta, BYTES, AllFreshCo, Rice & Spice, and The

Flaming Revolution. The company holds the regional rights to distribute and develop

brands such as the Rivington Grill, THE IVY, Scotts, Annabels, Harrys Bar, Daphnes,

Bambou, and Le Caprice.

Just Falafel

UAE-based Just Falafel, established in 2007, runs a chain of vegetarian fast food joints

across nine countries. Earlier this year, Just Falafel signed five area franchise agreements

with different partners in New York City, New Jersey, Kentucky, and San Francisco in the

US and the Greater Toronto Area in Canada.

Falafel is a traditional Arabic food. It is a deep-fried patty made of ground chickpeas,

served in pita bread.

Kudu Corporation

Saudi Arabia-based Kudu, established in 1988, is a fast food chain that sells meals

including burgers, chicken & fries, and steak & eggs. Kudu has more than 200 outlets

across Saudi Arabia, Sudan, Jordan, and Yemen.

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Olayan Group

Saudi Arabia-based Olayan Group, established in 1947, is a private, multinational

enterprise with diverse commercial and industrial operations in the Middle East and an

actively managed portfolio of international investments. The group holds the franchise

rights to Burger King in Saudi Arabia and is the master franchise for the Arab Middle

East; it also holds the master franchise rights for Texas Chicken in Oman, Bahrain, and

Qatar and franchise rights in the UAE and Egypt. The Olayan Group owns/manages 300

Burger King outlets and 30 Texas Chicken restaurants.

The Olayan Group recently signed an agreement to open 22 Buffalo Wild Wings outlets

by 2018.

Saleh Bin Lahej Group

Saleh Bin Lahej Group is engaged in the business of real estate, construction, hospitality,

and publishing. The group owns and/or operates eight international casual dining

restaurants brands: Chilis, Romanos Macaroni Grill, El Chico, Cantina Laredo, Black

Canyon, The Pizza Company, Steak n Shake, and Silver Fox Steakhouse.

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Al Masah Capital Management Limited

Level 9, Suite 906 & 907 ETA Star - Liberty House Dubai International Financial Centre Dubai-UAE P.O. Box 506838 Tel: +971 4 4531500 Fax: +971 4 4534145 Email: [email protected] Website: www.almasahcapital.com Disclaimer: This report is prepared by Al Masah Capital Management Limited (AMCML). AMCML is a company incorporated under the DIFC Companies Law and is regulated by the Dubai Financial Services Authority (DFSA). The information contained in this report does not constitute an offer to sell securities or the solicitation of an offer to buy, or recommendation for investment in, any securities in any jurisdiction. The information in this report is not intended as financial advice and is only intended for professionals with appropriate investment knowledge and ones that AMCML is satisfied meet the regulatory criteria to be classified as a Professional Client as defined under the Rules & Regulations of the appropriate financial authority. Moreover, none of the report is intended as a prospectus within the meaning of the applicable laws of any jurisdiction and none of the report is directed to any person in any country in which the distribution of such report is unlawful. This report provides general information only. The information and opinions in the report constitute a judgment as at the date indicated and are subject to change without notice. The information may therefore not be accurate or current. The information and opinions contained in this report have been compiled or arrived at from sources believed to be reliable in good faith, but no representation or warranty, express, or implied, is made by AMCML, as to their accuracy, completeness or correctness and AMCML does also not warrant that the information is up to date. Moreover, you should be aware of the fact that investments in undertakings, securities or other financial instruments involve risks. Past results do not guarantee future performance. We accept no liability for any loss arising from the use of material presented in this report. This document has not been reviewed by, approved by or filed with the DFSA. This report or any portion hereof may not be reprinted, sold or redistributed without our prior written consent.

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http://www.almasahcapital.com/

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