Saudi food consumption habits are changing, compelling the country’s
major food and dairy producers and grocers to alter their product line-up.
This trend has also offered opportunities for new players to grab a slice
of the market. Retail was among the sectors the Saudi government has deemed
eligible for 100% foreign ownership, which will likely impact sector’s
investment landscape According to Market Research, the kingdom accounts for 50% of the
entire food and beverage sector in the Gulf, making up USD 18.2 billion
in value in 2018. Revenue for the online food delivery segment reached USD 878 million
in 2018 and is expected to grow at CAGR of 19.4% to reach USD 1.7
billion by 2022, with 70% of the total orders made by teenagers. “The F&B market trends in Saudi Arabia is predicted to boom for health
foods, online food delivery, food packaging and revolution, rise of
e-commerce and increase in promotion pressure,” Market Research said
in a report. “The country’s F&B market is booming for healthy foods with
rising monthly healthy meals subscriptions and special healthy shops,
including the increase of organic foods, gluten-free and high-protein
foods’ popularity. COMPANIES BUCK THE TREND The rising food and dairy consumption was evident in the results of key
corporations. Savola Group, one of the country’s largest food
companies, said its first quarter sales grew 5% year on year. “Implementation of turnaround initiatives and overall improvement in
consumer confidence improved retail business performance
significantly in Q12019,” Savola said. First-quarter revenues clocked in at SAR 2.7 billion, witnessing
year-on-year growth of 12.3% driven primarily by double-digit growth in
like-for-like revenues, and high single-digit growth in customer count and
basket size. Savola also issued a SAR 1 billion sukuk successfully in July, which was
oversubscribed 1.6 times, the company said in a statement to Tadawul Abdullah Al-Othaim Markets, which remains the leading supermarket
with an expanding network, opened 30 branches, taking the number of
outlets across the kingdom to 214 at the end of last year. “Some existing branches have been expanded and the development in
order to provide better service to its customers. The company is
planning to increase the number of branches in 2019, by opening 28 new
branches, which is expected to contribute in increasing the company sales and market share and promote the introduction of new and
advanced technologies in the retail trade,” the company said in its annual
filing. Another key growth area is the surging popularity of speciality foods,
such as vegan diets, juices, superfoods and organic foods and
vegetables. “With demand for niche products developing, new players opening
supermarkets aimed to sell organic and healthy foods,” according toEuromonitor. “Natureland, Qaf Store, Nutrition Corner, Organica,
Abazeer and Watania Agri are some of the major supermarkets targeting
niche segments. Customers often search for health and nutrition bars,
chia seeds, and organic apple cider vinegar in these stores. Most of the
items sold are imported but growing demand has led to the
development of private label by several local players such as Abazeer
and Watania Agri.” RESTAURANT BUSINESS A key area of growth is the restaurant business, especially as Saudi
Arabia unveils its Vision 2030 programme, which centres around
upgrading Saudi lifestyles, improving fitness levels, and creating
entertainment and leisure venues. A key component of these offerings will be new restaurants and food
outlets, which already are forecast to reach USD 31.6 billion by 2024,
growing at a CAGR of 5.9% during its 2019-2024 forecast business,
according to Mordor Intelligence. “Growing demand for home delivery and foodservice providers is
expected to drive the market. Increasing health consciousness and
growing rate of obesity among the Saudi Arabian population is
challenging the market,” Mordor Intelligence wrote in its report.
“Companies are coming with new and innovative healthy food with
organic and natural ingredients in an attempt to overcome the
challenges faced by the players in the industry.” The industry is seeing an influx of fast foods and casual dining outlets,
as well as chained consumer food with international brands such as
Applebee’s, Outback Steak House, Chili’s, and TGI Fridays, but there are
opportunities for home-grown chains as well. “A new investor still has vast potential to enter this space as it is
positively influenced by three major factors, namely higher disposable
income, global exposure and limited sources of entertainment, together
with the ever-increasing number of malls in the country,” the intelligence
firm said. |