The Middle East has seen enormous economic and population growth over the past decade, with Saudi Arabia emerging as one of the highest-potential markets for food and beverage development in this region.
This has been driven by population demographics as well government policies such as opening up its trade and Saudi Arabia’s Vision 2030 which prioritises retail reform and has attracted many international brands.
Key facts about the population of Saudi Arabia:
- Population of approximately 35m people and growing
- 70% to 75% of entire population is below 26 years of age
- Majority of population is Muslim
So what do food brands have to be aware of to gain entry and thrive in this burgeoning market? Here are the top must-knows below:
1) Halal certification and local partnerships
The majority of Saudi Arabian consumers are Muslim, which means halal certification is a necessity for brands to gain a footing in this market.
“Apart from seeking the relevant halal certification, brands also need to ensure continuing compliance with Saudi Food and Drug Authority (SFDA) regulations,” said Saudi grocery retail company BinDaWood CEO Ahmad BinDaWood.
“This can be a complicated process for the uninitiated, so for the Saudi market, a local partner that understands the regulations and local consumers preferences is essential.”
Local collaborations are also important to determine what products would do well in which segment of the country, as the market preferences can differ from region to region.
“Saudi Arabia is a large country and there can be considerable regional variations in the consumer shopping behaviour throughout the whole geography,” he added.
“So a beverage that does well in the eastern region for example may very well not be as promising in the western region, and it takes local insights to decipher this.”
2) Logistics are one of the most important challenges to consider
The weather in Saudi Arabia is well-known for being hot and arid, so logistics are inevitably one of the biggest challenges for food firms.
“Cold chain and logistics are of course a big challenge, but can also be a big opportunity,” e-commerce platform Danube Online CEO Majed Al Tahan added.
“Companies like Danube which focus on fresh and difficult-to-deliver items have a competitive advantage in the market by exploiting the difficulty of this challenge.”
These difficult deliveries require effective utilisation of delivery hubs, temperature control and retailer collaborations to ensure products remain fresh.
“Maintaining freshness, especially for frozen foods, requires robust cold chain logistics with constant temperature monitoring,” he said.
“The other component to this is of course the immediate replacement of products if any of the shipments are compromised, and this is important to maintain consumer trust.”
3) Freshness is crucial, but this does not mean premium profits
One of the reasons cold chain logistics is so crucial lies in a rising consumer demand for fresh foods in the market.
“We are definitely seeing the freshness element become more and more important which of course increases the challenges involved as the weather becomes hotter,” Al Tahan added.
“Crucially, in this market consumers are generally not willing to pay any premium for fresher ingredients – any requests for them to pay more for a freshness service will not be well-received, so we usually have to absorb these costs and offer free delivery.”
Absorbing the costs for fresh product logistics is considered an important part of remaining competitiveness in this market, and this is the same even if the product in question is frozen or chilled.
“There is a good amount of competition here, so if we do not absorb these costs it will be difficult to remain competitive in the Saudi Arabian e-grocery market,” he said.
4) Test the market first - and prioritise omnichannel retail
Due to the variable nature of product preferences as well as the complications involved with logistics, BinDaWood urged companies with an interest in Saudi Arabia to test their products in the market first before making large investments.
“It is strongly recommended to test the market with limited quantities of your food or beverage product before moving into large-scale distribution here,” he said.
“I would recommend starting with an online channel due to the rise of e-commerce after the pandemic, but it is also important to remember that offline stores are crucial to offer consumers a tactile experience with your products that can increase conversion rates.”
Omnichannel retail involving both online and offline sales have become an important mainstay in Saudi retail, and the growth of younger consumers has resulted in a shift from traditional trade (eg wet markets) to modern trade (eg supermarkets and hypermarkets).
“With the country opening up, going to the supermarkets and department stores are important to locals in terms of checking out what’s new and what trends are hottest, and this is not something that is going away any time soon,” he said.
