Saudi Arabia’s food and beverage consumption will continue to grow robustly over the next year, according to a new report from research firm Business Monitor International.
According to Saudi Arabia Food & Drink Report Q1 2014, the country’s food and beverage consumption is forecast to grow 5% in 2014, slower but still healthy from a revised growth of 6% in 2013.
The report added that the outlook for the retail sector is set to remain bright over the medium term, with sales benefitting from rising disposable incomes, favourable demographics and increasing urbanisation.
According to the report, food consumption in 2014 will grow 8% and with a compound annual growth rate (CAGR) of 7.8% from 2013 to 2017. Confectionery sales will grow 6.9% in 2014 with a CAGR of 6.7% to 2017. Mass grocery retail sales in 2014 are expected to grow at 10.3% and at a CAGR of 9.9% to 2017.
Chicken production to grow
It also found that Saudi Arabia’s poultry production will grow for the second consecutive year in 2013-14. The country’s poultry production had stalled after the large-scale outbreak of disease in 2011-12 led to a decline in output that year.
“We forecast production to reach a record high 660,000 tons, up 15.8% year-on-year, driven by investment in production capacity and support from the government,” it said.
The report pointed out that by volume, Saudi Arabia’s soft drinks industry accounts for about two-thirds of the region’s soft drinks sector.
“In per capita terms, consumption of soft drinks, which includes bottled water, carbonates, juices and functional drinks (energy drinks), increased from 217 litres in 2004 to nearly 253 litres in 2012,” it said.
“In value terms, the size of the industry grew from $5.5bn to $8.5bn over the period, with bottled water and carbonates between them making up about 80% of sales.”
Grocery sector remains attractive
The report said that Saudi Arabia’s consumer outlook is attractive to mass grocery retailers looking to capture impressive Middle Eastern growth.
“Increased formalization of the sector is a trend we expect to gain momentum as both domestic and international investors target the increasing spending power of the Saudi consumer,” it forecasted.
The report warned that the Saudi government’s recent intensification of workforce nationalisation efforts under Nitaqat system did pose a downside risk to the economic outlook even in the food and drink sector.
“We expect heightened ‘Saudization’ measures to add to the costs for the private sector over the medium term, leading to an increase in project delays and a more difficult business environment overall.”