The Saudi Arabia food industry finds itself in a unique position. On the one hand, the industry attempts to serve its domestic customers in the best possible way without raising prices by trying to operate on an economy of scale. Then, on the other hand, the government takes actions which would limit the ability of the firms active in the industry to accomplish this goal.
An example of this issue occurred in August 2018. After a tweet from Canada’s foreign-policy wing voiced concern about the Kingdom’s arrest record for civil rights and women’s rights activists, Saudi Arabia recalled its ambassador, expelled Canada’s from the country, and then recalled all of their students and medical patients as well.
The authorities in Saudi Arabia even put a limit on future investment and trade transactions because of this one tweet. There was only one positive outcome from a Saudi perspective on this diplomatic issue: oil would not be impacted by what was happening. Any hope for the food industry to begin making inroads on the export market would become severely limited because of this issue.
King Abdullah has also recently launched an $800 million food security initiative intended to help stabilize the industry and the economy.
Essential Saudi Arabia Food Industry Statistics
#1. The Saudi Arabia food industry generated $150 million in revenues in 2018. This increase was 19% higher than the revenues earned the year before. (Statista)
#2. There are 5.2 million people who associated themselves with a purchase in the Saudi Arabia food industry in 2018. This figure represents a 6.5% increase from the year before. (Statista)
#3. User penetration for this market segment reached 15.3% in 2018. It is expected to reach 18.3% within the next five years. (Statista)
#4. The average amount of purchase per person is $28.68 in the Saudi Arabia food industry right now. Total annual growth in this area has averaged 10.3%. (Statista)
#5. The market size for cafés and bars in Saudi Arabia is roughly $5.7 billion. The total market size for this segment topped $12 billion for the first time in 2015. (Statista)
#6. Saudi Arabia and the United Arab Emirates account for 90% of the food and beverage sector in the Gulf Cooperation Council region. (Statista)
#7. Saudi Arabia introduced to 5% VAT on most sectors in January 2018 as a way to stabilize their income without needing to rely on the oil entirely. (Aaron Allen)
#8. 11% of the new downtown area that the Kingdom is constructing in the city of Jeddah is earmarked for hospitality purposes and entertainment, which gives the food industry hope for expansion into their domestic market. (Aaron Allen)
#9. Saudi Arabia has the most significant potential consumer market found in the Gulf Cooperation Council region. Their population of 32 million accounts for about 60% of the total census. Young people represent a majority of this number, with 70% of Saudis below the age of 30. (Aaron Allen)
#10. Over 120,000 women in Saudi Arabia have applied for a driver’s license thanks to new laws that allow women to get behind the wheel. There have been 2,000 applications for rideshare drivers, increasing the labor pool and driving revenues higher in future years for the food industry. (Aaron Allen)
#11. The total market share represented by the 14 largest companies in the Saudi Arabia food industry is 22%. (Foodex Saudi)
#12. Domestic food consumption in Saudi Arabia total is 3,130 calories per person, per day. That creates a food sector annual consumption growth rate of 18.5%. Consumption rates are expected to expand by 55% through 2023. (Foodex Saudi)
#13. The Saudi Arabia food industry imports over $14 billion worth of food and beverages each year to satisfy domestic consumption. (Foodex Saudi)
#14. Saudis consumed over 16,000,000 tons of cereals in 2015, which was 3.2% higher than the year before. They also drank 4.3 million tons of dairy products and 4 million tons of vegetables, both with roughly a 5% increase. (Alpen Capital)
#15. Over 32.9 million tons of food products and beverages are consumed in Saudi Arabia each year. (Alpen Capital)
#16. Only 1.8 million tons of meat products are consumed by Saudis annually, making at the least significant category for the overall industry. (Alpen Capital)
#17. Hypermarkets are experiencing significant growth in the Saudi Arabia food industry, averaging a 20% expansion since 2014. Supermarkets have seen an average of 12.5% during this time frame, but co-ops have only seen a 0.7% increase. (Central Department of Statistics)
#18. Over $24.5 billion of imports occurs each year to support the actions of the Saudi Arabia food industry. Roughly 70% of the imports that happen in the GCC go through Saudi Arabia. (EIU)
#19. Over 131,000 people have direct employment opportunities in Saudi Arabia because of the food industry. Over the past five years, the labor force has risen by 13% in the segment. (Foodex Saudi)
Saudi Arabia Food Industry Trends and Analysis
The Saudi Arabia food industry remains one of the strongest sectors in the overall economy. Although it tends to take a defensive position in terms of development and revenue, it is also positioned to experience long-term growth when domestic spending habits are not as cautious as they currently are.
Net income for the Saudi Arabia food industry continues to be relatively low, achieving just 4.2% and 2016. That is over 50% lower than what was achieved in 2014. On earnings of SAR 43,985 million, total profits were just SAR 1,832.8 million. Key earnings figures for growth rose by 1.7% in 2016, but they were already off by roughly 7% the next year.
The primary reason for the defensive nature of this industry is the lack of stability in the oil and gas market. With the cost-of-living dropping by over 136 points year-over-year, there is little room for error in the food industry to create profits. That is why a significant drop of 2.3% in 2017 for household spending generated a massive decline in the overall gains that the Saudi Arabia food industry could achieve.
When the oil and gas industry recovers globally, then this industry will begin to experience stability. Until that happens, expect slow and steady growth in the 1% range as consumers continue to stay guarded with their household income.
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