FOOD SECURITY

VERTICAL FARMING ATTEMPTS TO TAKE ROOT IN SAUDI

Indoor vertical farms are coming to Saudi Arabia.

Seen as a way to get around the region’s arid climate, indoor food producing facilities are seen as a way for the kingdom to achieve food self-sufficiency.

In February, Saudi’s sovereign wealth fund The Public Investment Fund (PIF) signed a joint venture deal with US-based AeroFarms, to build and operate indoor vertical farms in Saudi Arabia and the wider Middle East and North Africa (MENA) region in the next few years.

The agreement will optimise the utilisation of natural resources, including water and agricultural lands, through the implementation of indoor vertical farming, with no need for arable land, resulting in significantly higher yields and using up to 95% less water versus traditional field farming, the companies said.

“The partnership is expected to enable sustainable, local sourcing of high-quality crops all year round, grown using AeroFarms’ proprietary smart agriculture technology (‘AgTech’) platform, which helps solve broader supply chain needs in the industry,” according to the companies.

The joint venture’s first farm will be based in Saudi Arabia, with an annual production capacity of up to 1.1 million kilograms of agricultural crops.

The agreement is part of a strategy to beef up strategic sectors such as food and agriculture, which helps improve the kingdom’s trade balance, deepen and boost domestic industries, and diversify the Saudi economy.

PIF is investing to localise new agricultural technologies that can benefit the domestic private sector, and expand its market.

“The agreement with AeroFarms will lead to the establishment of indoor vertical farms in Saudi Arabia and the wider MENA region, increasing regional reliance on locally produced, high-quality crops grown in a sustainable way using the latest technologies,” according to Majed AlAssaf, head of consumer goods and retail, MENA Investments Division at PIF.

                  

Other international companies are also eyeing the kingdom’s burgeoning food and retail sector.

Nestlé said recently it will invest USD 1.86 billion in Saudi Arabia over the next 10 years. The world’s largest food and beverages manufacturer, known for a range of consumer staples such as Nescafé, Cheerios,Maggi, Nature’s Bounty, and Gerber, will put in an initial investment of SAR 375 million to launch a manufacturing plant set to open in 2025. This will be followed by a regional centre with a research and development programme, and its first business incubator for small and medium-sized companies and start-ups, according to a company statement.

Saudi Arabia is seeking major investments in the sector as it aims to raise food processing localisation target to 85% by 2030. Authorities expect the country’s USD 42 billion food and beverages (F&B) market to grow 3% annually over the next five years, according to Invest Saudi.

The kingdom’s F&B market is spurred by an affluent growing population, a surge in the number of Hajj and Umrah pilgrims, and a growing focus on national resilience and food security.

“The average household is reported to spend 18% of total expenditure on F&B, which is a domestic demand that amounts to 60% of the total consumption in the GCC,” according to Invest Saudi, which notes that high food imports has compelled Saudi-based F&B producers to serve the untapped local demand for dairy, meat and fruit products.

 

Another area of investment and trade growth is the country’s fishing sector.

Seas around Saudi Arabia are endowed with a fish capacity of 5 million tonnes. Given that the kingdom is an approved supplier of seafood to the European Union, there are opportunities to build and expand capacities and capitalise on the export market's insatiable demand, especially for shrimps, mackerels, and crabs.

“Domestic consumption of fish is expected to grow by 5% per annum until 2030, which translates to a significant increase from 310 tonnes to 865 tonnes. This is driven by rapid growth of the kingdom’s population per capita consumption,” Invest Saudi noted. “Ambitious aquaculture targets have been set to increase the production of fish to 530,000 tonnes by 2030.”

The kingdom’s food and retail sector is also growing in another area: digital sales of grocery, restaurants and retail outlets. A report by Ken Research suggests “quick commerce” market in the kingdom will reach 4 billion orders annually as new start-ups, increased digitisation and work-from-home trends take root.

“High Internet penetration rate, quick access to smartphones, are some of the prime factors responsible for growth of quick commerce market,” according to Ken Research. “COVID-19 has accelerated the growth of non-cash payments, especially in the consumer retail space.