The Saudi Arabian food retail market is expected to rise to $54bn by 2020, up from $42.66bn in 2015. The market, which is estimated to swell at a CAGR of 4.9% between 2016 and 2020, is composed of supermarkets, hypermarkets, co-operatives, convenience stores, and discount stores. Among all food segments, cereals are likely to account for the largest share (49%) in the total market revenue by 2020.
7 Factors Expanding Food Retail Market in Saudi Arabia:
1. Increase in food retail stores
The number of retailers in the food market is rapidly increasing to meet the demands of rising population in Saudi Arabia. By 2020, the number of food retail stores is likely to reach or cross 50,000. Carrefour is looking forward to take the total number of its stores from 14 to 20. Panda is also planning to add 10 more stores to its existing chain of 240 stores by the year 2020.
2. Rising urbanisation
It is estimated that almost 88% of Saudi Arabia will be urbanised by 2025. This shows that a majority of the country’s population will have a busy and modern lifestyle and thus, the demand for ready-to-cook, ready-to-serve food items will increase.
3. Increase in disposable income
Saudi Arabia, regarded as the high-income nation, saw its disposable income exceeding $25,000bn in 2014. This suggests that Saudi nationals are in a position to spend more on retail goods as the amount spent on eatables is already more than 27% of the disposable income.
“Of the total food retail sales in the Gulf Cooperation Council (GCC) region, nearly 51% is registered by Saudi Arabia alone”
4. Invitation for Foreign Direct Investments (FDI)
As declared by the Saudi Arabia General Investment Authority (SAGIA), foreign investors can enjoy 100% ownership of businesses in wholesale and retail markets. Prior to this, foreign investors’ ownership was restricted to 75%. With this move, major investments from leading international players including Sainsbury, Walmart, and Tesco are expected.
5. Rise in population of women
Rising population of women alters shopping trends. Now-a-days, educated and independent Saudi women are demanding more for convenient and healthy food products. Demands for healthy and easy-to-prepare breakfasts have also increased.
6. Rising number of tourists and pilgrims
Saudi Arabia is known for two major Islamic pilgrimage sites- Mecca and Medina. The country sees millions of pilgrims and tourists travelling to these sites each year. Hence, there is a high demand for packaged food in the region.
7. Emergence of shopping malls as entertainment zones
Many supermarkets and hypermarkets are not only seen as shopping destinations, but also as entertainment hubs. This is because shopping centres spend a huge chunk of money on brand promotions, product advertising, interactive displays, aesthetics, et cetera. Such features help in driving footfall and increasing sales.