Saudi Arabia food industry expected to grow at 5.9% a year

Chocolate confectionary, frozen foods and snacks to fuel growth, according to Frost & Sullivan

 Almarai has recently increased the prices of various categories of its milk products by 5 to 9 per cent. Satish Kumar / The National

The food industry in Saudi Arabia, the largest economy in the Arab world, is expected to grow at a compound annual growth rate of 5.9 per cent from 2016 to 2020, driven by chocolate confectionery, frozen foods, chilled processed foods and snacks, according to the consultants Frost & Sullivan.

"With all major supermarkets and hypermarkets in expansion mode, the private label segment is poised to experience significant growth over the next four years. An increase from 5 per cent to 10 to 15 per cent is expected by 2020," said David Anil Kumar, visionary science consultant at Frost & Sullivan.

"Major hypermarkets such as Danube and Carrefour are starting to promote their own private label-branded products that carry a perception of quality, while still being affordable."

The consultancy sees a number of business opportunities in the food industry in Saudi Arabia that include targeting specific needs such as convenience and ease of preparation. There is also scope for businesses to make money in the field of product innovation and differentiation through new flavors, formats, healthy options and cooking processes, it said.

Frost & Sullivan noted that the food industry is undergoing major changes as social media, the internet, changing consumer purchasing patterns, and hectic lifestyles impact dietary habits. The total food industry in Saudi Arabia accounted for 12 per cent of GDP in 2016, according to the consultancy.

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The Saudi Arabian food and beverage market is however very competitive and austerity measures over the past couple of years to help cope with the sharp drop in oil prices have crimped the growth of the industry. Saudi Arabia’s Almarai, the Middle East’s largest dairy producer, said in July that it remains cautious for the remainder of 2017, given the overall market environment and the expected unfavourable seasonality of the third quarter.

The global food and beverage producer Nestle said in May that the growth in sales of its products in Saudi Arabia – which account for about 35 per cent of its regional business – had been “softer” in the past two years, as lower oil revenues impacted the wider economy.