SAUDI RETAIL POISED FOR GROWTH AS ECOMMERCE THRIVES

Investors sent a clear signal in October about their confidence in the kingdom’s retail sector when grocery chain BinDawood Holding listed its stock on the Tadawul at the top of the company’s initial price range.

The company floated 20% of its share capital, giving it a market cap of USD 2.93 billion at the time of listing, with oversubscriptions exceeding 50 times, to SAR 110 billion.

“Listing on the Tadawul serves as a powerful message to our customers, to our investors and to the sector,” the company’s chief executive officer Ahmad Abdulrazzaq BinDawood, said in a statement. “We raised a substantial amount of money, we have attracted a strong set of investors who believe in us, and in our long-term strategy of becoming the dominant grocery retailer in KSA.”

The company boasts two leading grocery retail brands in Saudi Arabia: BinDawood and Danube, with 73 stores and 140,000 products. The company aims to expand its stores to 80 by the end of 2021.

BinDawood estimates that the domestic and global retail sector has seen a major increase during the past year with the direct-to-consumer model driving meaningful sales and growth.

“Saudi Arabia’s retail grocery market was valued at SAR 57 billion in 2019 and is set to grow at 5% per year through to 2024. We are well positioned to capitalise on positive market trends going into 2021 and beyond,” BinDawood said.

“We have several growth levers we are looking at to drive this growth, which include: in-store shopping experience, developing further our online sales through our two e-commerce platforms and maintaining our disciplined approach to cost management, using new technology, innovations and digital tools.”

The BinDawood IPO comes at a time of rapid growth in the country’s retail sector, despite the short-term impact of COVID-19.

Saudia Dairy & Foodstuff Company said in its second quarter (which ended in September) results that it signed a non-binding memorandum of understanding to purchase and expand its controlling stake in Horizon Food Company Ltd, Al Khobar, from Tabuk Agriculture Development Company after due diligence.

SADAFCO’s sales grew 2.7% in the quarter to SAR 535 million, compared to the same period last year, while net profit surged 7.9% year on year.

The company commands a 62.7% market share in UHT milk, 50.3% in tomato paste and just over a quarter in ice cream.

Among other retail and food companies, Savola Group also announced a 27.9% jump in net profit during the past quarter, compared to the same period last year.

“Revenues of SAR 9.1 billion in year-to-date September 2020, showing YoY growth of 12%,” the company said in an earnings presentation. “The growth is mainly driven by higher like-for-like grocery demand during the first half of the year due to the shift in consumer behaviour for dine-in and pantry loading.”

While Saudi domestic retail players are expanding their presence in the kingdom and across the region, sovereign wealth fund Public Investment Fund is also eyeing global opportunities in the retail sector.

In November, PIF announced that it would buy a 2.04% stake in India’s Reliance Retail Ventures Ltd (RRVL).

RRVL is one of the leading players in India’s physical retail market and boasts 12,000 stores across the country. It is revolutionising the South Asian country’s retail sector with a transformational ‘New Commerce’ strategy.

"This investment further demonstrates PIF’s commitment to generating returns for the Saudi people and driving the economic diversification of Saudi Arabia,” said Yasir Al-Rumayyan, Governor of PIF.

India’s retail sector is one of the world’s largest and accounts for over 10% of its gross domestic product (GDP), which presents meaningful growth potential.

"We at Reliance have a long-standing relationship with the Kingdom of Saudi Arabia. PIF is at the forefront of the economic transformation of the Kingdom of Saudi Arabia,” said Mukesh Ambani, chairman and managing director of Reliance Industries. “I welcome PIF as a valued partner in Reliance Retail and look forward to their sustained support and guidance as we continue our ambitious journey to transform India’s retail sector for enriching the lives of 1.3 billion Indians and millions of small merchants."

The investment in RRVL follows an earlier acquisition of a 2.32% stake in Jio Platforms, the digital services subsidiary of Reliance Industries, strengthening PIF’s presence in one of the world’s most promising emerging economies.