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Saudi Arabia Food and Drink Report Q1 2011
Business Monitor International, Nov 2010, Pages: 63
Saudi Arabia Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Saudi Arabia's food and drink industry.
A promising domestic demand story continues to take shape in Saudi Arabia. Two key factors drive our core Saudi consumer view. First, a relatively large population thoroughly distinguishes it from the rest of the Gulf region, which bodes particularly well for long-term carry in household spending growth. Second, household spending is coming off a fairly low base in Saudi Arabia compared to the UAE, Qatar and Kuwait in particular, on a per capita GDP basis.
As incomes rise, Saudi consumers will spend more on fast-moving consumer goods (FMCGs), which will bump up per capita food consumption and mass grocery retail sales. In the luxury sector there is potentially huge scope for growth in Saudi Arabia. Like their Gulf counterparts, Saudi consumers are very brand conscious. As incomes grow, demand for high-value luxury goods will follow suit as more high-end retailers flock to the country.
Headline Industry Data
- 2010 per capita food consumption = +1.48%; forecast to 2015 = +52.94%
- 2010 soft drink value sales = +2.03%; forecast to 2015 = +41.12%
- 2010 mass grocery retail sales = +6.77%; forecast to 2015 = +82.7%
Key Company Trends
Companies Growing Top Line – Some of Saudi Arabia's largest food and drink companies continued to report strong top and bottom line growth over the H210 (calendar) period. In October 2010, the Middle East region's largest dairy firm by annual sales Almarai reported Q310 (three months to September 30 2010) year-on-year (y-o-y) net income growth of 17% to SAR424.5mn. Strongly positioned in the dairy sector across the Gulf, and increasingly looking well placed to catch what we anticipate will be a strong pickup in consumer spending in some of the Middle East and North Africa (MENA) region's fastest growing economies (most notably Egypt), Almarai is likely to continue posting double-digit growth over H210.
In June 2010, Saudi Arabia's Aujan, the largest privately owned soft drinks firm in the Gulf - with group sales expected at US$600mn in 2009 – announced that it was targeting annual sales of US$1bn by 2012. According to Aujan Chairman Adel Aujan, the firm is an anti cyclical 'one riyal (US$0.27)' business. He argues that discretion in 2009 extended largely to higher priced goods, with demand for low cost nonessential goods like Aujan's core range of drinks holding up well, and in some cases outperforming.
Key Risks to Outlook Decline In Oil Prices – With Saudi Arabia's economic fortunes tied linked to oil prices, a sustained decline would hit the economy, and subsequently the outlook for domestic demand.
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