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Saudi Arabia Food and Drink Report Q4 2011
Business Monitor International, Sep 2011, Pages: 75
Business Monitor International's (BMI) Saudi Arabia Food and Drink Report (Q4 2011) 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.
Saudi Arabia has something the other Gulf countries lack: a large population. It contributes about two thirds of the total Gulf population and should serve up significantly greater long-term opportunities on the consumer side. The fact that Saudi Arabia leads BMI's Middle East and North Africa (MENA) business environment ratings says as much.
With political stability remaining intact in Saudi Arabia and fiscal stimulus spending firmly under way, BMI's MENA team has become even more bullish about the medium-term prospects for the economy. Elevated oil prices and an increase in production, combined with expansionary fiscal spending, will contribute to robust growth led by fiscal spending and exports. With many of the fiscal stimulus measures announced in April 2011 having an immediate effect on employment opportunities and wages, this bodes well for consumer spending. Private consumption made up 32.6% of GDP (in real terms) in 2010, so BMI's expects the 39.5% increase in the minimum wage, stipends to jobseekers, public sector bonuses and promises of new jobs to have a marked impact on consumer demand for products and services.
Headline Industry Data
- 2011 per capita food consumption growth in local currency = 6.48%; forecast compound annual growth to 2015 = 7.20%.
- 2011 soft drinks value sales = 5.40%; forecast compound annual growth to 2015 = 7.90%.
- 2011 mass grocery retail sales = 11.45%; forecast compound annual growth to 2015 = 11.40%
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 January, Almarai, the Middle East's largest dairy firm by annual sales, reported FY10 (12 months to December 2010) year-on-year net income growth of more than 17% to SAR1.28bn. Strongly positioned in the dairy sector across the Gulf and looking well placed to catch what BMI expects will be a strong pickup in consumer spending in some of the region's fastest growing economies (most notably Egypt).
In June 2010, Saudi Arabia's Aujan, the largest privately owned soft drinks firm in the Gulf – with estimated group sales of 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 Saudi low cost non-essential goods – such as Aujan's core range of drinks – holding up well, and in some cases outperforming.
Key Risks To Outlook
The climate of unrest in the MENA region is by no means over, and BMI cautions that political risks pose a threat to Saudi Arabia's long-term economic potential. The government has done little so far to engage in meaningful political reform and has taken an increasingly hard line against dissent. The lack of willingness to address political and structural economic imbalances indicates that stability over the long term will be difficult to achieve. A period of instability would not only likely affect foreign direct investment inflows, but possibly also the country's ability to export oil.
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