Coffee is hot pick - if you can acquire stock

The UAE is one of the fastest growing markets by volume for coffee in the world, with sales expected to register an 80 per cent growth in the five years to 2014.

For the past few years, the UAE has been one of the world's fastest-growing markets by volume for coffee. iStockphoto
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The renowned Wall Street stock picker Peter Lynch once cautioned: "invest in what you know".

Well, everyone can understand a cup of coffee, and given the latest figures from the International Coffee Organization (ICO), the drink is rapidly gaining in popularity across the Arab world.

For the past few years, the UAE has been one of the world's fastest-growing markets by volume for coffee as Starbucks and Costa Coffee shops have cropped up all over.

Illustrating the point, there are three Starbucks coffee houses within a three-minute walk of each other in Jumeirah Beach Residence in Dubai, and between the three is a Tim Hortons.

Coffee sales volumes in the Emirates are expected to have risen 80 per cent in the five years to 2014 - an annual compound growth rate of more than 12 per cent.

And it is not just coffee, tea is also being sipped at a fast pace as consumption of both hot drinks in the Arab world has more than tripled over the past decade. But how do investors gain exposure to this piping hot trend? You could buy the underlying commodity of tea or coffee. Consumption is up worldwide, and on a global scale, about 1.4 billion cups of coffee are poured a day, according to the ICO.

But when buying the commodity, you are not focusing on the UAE or the Arab world and are subject to global weather conditions, which affect crops and prices, and you may not be an expert on agriculture. You could also buy stocks in global coffee chains.

Starbucks is listed on the Nasdaq in New York, and its share price has increased 16 per cent this year.

But again, there is no direct exposure to the Middle East because chains are mainly represented by franchises here. So perhaps your best bet is to take a stake in one of the UAE's three major privately owned home-grown coffee roasters, Coffee Planet, Orbis Foods or Raw, if the owners will let you.

If not, perhaps open a coffee shop.

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