FOOD MANUFACTURING GAINING GROUND IN SAUDI

Saudi Arabia’s food and beverage manufacturing sector has received a fresh boost, as the government emphasised its commitment to ensuring food security and reducing imports of staple commodities.

Demand for meat and vegetable oils, seafood, dairy, beverages, fruits, nuts and vegetables, confectionary, starch products and poultry, is expected to rise at a compounded annual growth rate of 6% until 2023, according to Invest Saudi.

The country’s population is expected to grow from 34 million to 39.5 million by 2030, making it an attractive consumption market. High disposable income of around USD 15,600 per capita, plus inbound tourism of 30 million tourists by 2030 have also contributed to Saudi’s appeal as an investment magnet.

During 2018, the food industry contributed 10% to Saudi’s GDP, with an average household spending of about 18% of its total expenditure on F&B products. Saudi Arabia also recorded the highest per capita food consumption in the GCC region at 988.7 kilograms.

According to the Saudi Arabia General Investment Authority, the nation is expected to witness investments worth USD 59 billion by 2021.

“The rapid growth in the food processing sector has prompted several international companies to invest and engage in joint ventures with Saudi companies, enter into licensing agreements with local manufacturers, or take over existing Saudi food processing companies,” according to the United States Foreign Agricultural Service.

Recent examples of companies entering or expanding their operations in the country include Mars Inc., Mondelez International, Cargill, Delmonte, Frito-Lay, Heinz, Danone Ltd., Arla Foods Amba, Fonterra’s, United Biscuits (UK) Limited, Coro Foods, and the Lactalis Group.

“The ongoing rapid expansion of modern food retail outlets, mainly hypermarkets and supermarkets, throughout the kingdom, will provide good opportunities for wider distribution of processed food products, enhance their popularity, boost overall demand and increase consumption,” according to the USDA.

“Due to changing lifestyles, consumers are spending less time preparing meals. This has created an excellent opportunity for many local food processors to offer ready-to-cook microwavable meals.”

There is also a burgeoning food and beverage industry in the kingdom. Latest available data from the General Authority for Statistics shows there are just over 792 food production facilities in Saudi Arabia employing more than 161,000 workers. The country is also home to 173 beverage facilities employing 43,000 people.

Almarai Co., one of the kingdom’s biggest food, dairy and beverage companies, said its food services continued to grow year on year. The company reported rising growth in poultry, bakery and infant nutrition, leading to 6% gain in revenues in its Saudi operations last year. Poultry unit profit rose 103%, while bakery saw an 80.4% jump, the company said.

Saudia Dairy and Foodstuff Company, or SADAFCO, also saw a 12% increase in net sales last year, despite volatile global conditions. Last year, SADAFCO commissioned a new state-of-the-art Jeddah Central Warehouse, part of the Jeddah Factory for its raw, packaging and finished goods materials and will house cone and biscuits bakery facilities for its ice cream business, delivering both significant operational efficiencies and cost savings.

“It completes a string of projects, initiated several years ago, which give us both capacity headroom for future growth and also unlock productivity savings to drive profit improvement across our value chain,” the company said in its annual report.

Saudi Arabia can also make huge inroads in developing a halal market that can export to the wider Muslim world. With the Muslim population expected to reach 2.2 billion by 2030, food and beverage spending by Muslims is expected to grow at 11.9% to reach USD 2.5 trillion, according to Invest Saudi.

Meanwhile, halal foods are also expected to grow from USD 1.24 trillion in 2016 to USD 1.93 trillion by 2022. Rising global demand and Saudi Arabia’s unique place as the birthplace of Islam, gives the kingdom a unique opportunity to create a world-class halal food industry.

“The perceived credibility of Saudi manufacturers of Halal food, especially for meat, dairy and their products has helped the expansion of food processing facilities in the kingdom,” according to the USDA.

Most Saudi consumers tend to believe that locally produced meat and dairy products meet higher halal standards than imported products from non-Muslim countries.

“This has been also a factor in the increased popularity of Saudi food products in Muslim countries and large Muslim communities in Europe and Americas.”