CHANGING FOOD HABITS SHAKES UP SAUDI’S F&B MARKET

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.

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.”

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.