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RECORD CONSUMER SPENDING DRIVES SAUDI’S GROWTH MODE

Saudi Arabia’s retail spending is soaring. Point-of-sales (POS) transactions rose to a five year record of SAR 559.1 billion in 2022, compared to SAR 473.3 billion the year before, according to official data.

Since then, spending has continued to surge to SAR 148.5 billion in the first quarter of 2023, hitting a record SAR 55.4 billion in March, before easing to a still elevated SAR 51.5 billion in April, and SAR 49.7 billion in May, according to the latest available data.

Transactions via mobile, cards, and e-commerce were at or near nine-quarter highs. Mobile sales hit more than 904.7 million, while transactions using cards have exceeded 1 billion for the past three quarters.

E-commerce spending reached SAR 36.5 billion in the first quarter across 193.4 million. Valued at SAR 19.3 billion, the kingdom’s ecommerce market represents 6% of the overall SAR 347.2 billion retail market and this is expected to grow 7.5% to reach SAR 34.7 billion by 2026, according to AT Kearney and Mukatafa, a KSA organisation.

Discretionary spending in the kingdom remains at elevated levels. Spending in hotels hit a three-year record SAR 3.9 billion in the first quarter of 2023, while restaurants and café spending was SAR 21 billion during the period. Beverage and food consumption reached SAR 23.7 billion during the first quarter — the highest spending level in at least nine quarters.

                  
FOOD SECTOR

The Ministry of Industry and Mineral Resources is eyeing investments of USD 20 billion in the food industry sector by 2035, focusing on dairy, bakery, sweets, and beverages.

The ministry also plans to maximise the value of a number of agricultural crops in which the kingdom has comparative advantages, with the value of exports from USD 3.7 billion in 2022 to USD 10.9 billion in 2035. The ministry is currently working on several projects, including a USD 1.2 billion expansion project by Almarai Company to increase its poultry production capacity; a USD 120 million poultry products factory by Arab Seara Food Industries, a subsidiary of Brazilian GBS group in the Middle East and North Africa; and a USD 133 million canned tuna project, which is the first of its kind in Saudi Arabia.

As the country boosts its food security, it will focus on building self-su- ciency in key food groups beyond the production of beans (116%), dates (111%), figs (104%), cucumbers (99%), watermelons (98%), potatoes (88%), and tomatoes (73%). The country is also expanding its fresh meat production sector, which is expected to reach up to 85% self-su- ciency for poultry by 2030.

“The market for poultry equated to 1.458m tonnes in 2022, having grown at over 4% per year over the five years up to 2022. Going forwards, it is forecast to grow a bit more slowly at just over 3.5% per year,” according to a European Union forecast focused on the kingdom’s food and beverage sector. “Mutton is a distant second, with 156,200 tonnes, making it a market of almost a tenth the size of poultry. Historical growth was 1.8% per year, but going forwards it is forecast to remain flat over the period to 2027

“It is closely followed by beef with a market of 153,100 tonnes in 2022. Historical growth over the period 2017 to 2022 was over 3.5% per year; in the coming five years up to 2027, it is forecast to be slower at a little over 2% per year,” according to an EU estimate

Meanwhile, the dairy market in Saudi Arabia was worth about EUR 4.6 billion in 2022, with drinking milk products the biggest category, worth about EUR 1.3 billion, followed by cheese products with a value of around EUR 1 billion, and yoghurt and sour milk products with EUR 574 million.

“In recent years, between 2017 and 2022, the butter and spreads sector grew at the highest CAGR of around 4.4%, followed by yoghurt and sour milk products with 3.5%. The market size of all other categories grew,” according to an EU forecast. “The drinking milk category is forecast to be the fastest-growing dairy product between 2022 and 2027 with a forecasted CAGR of 3.1%. All other categories are also forecast to grow at around a CAGR each of between 3% and 3.4% over the same period.