2012-02-03 16:42:00 - Saudi Arabia Food and Drink Report Q1 2012 - a new market research report on companiesandmarkets.com

The outlook for Saudi Arabia´s consumer sector remains very positive. We expect strong economic growth in the near term, and the large population will offer plenty of long-term growth opportunities. The country continues to lead in our Middle East and North Africa business environment ratings, a reflection of this positive outlook. We are retaining our forecast for real GDP growth in Saudi Arabia of 6.3% and 4.0% in 2011 and 2012 respectively. We expect that continuing increases in public spending, private consumption and fixed investment – prompted by the government´s massive fiscal stimulus package – will insulate the economy from global economic headwinds to some extent, in spite of a forecast decline in oil revenues. Massive public spending has been

 

 

the key to Saudi Arabia´s robust growth performance in 2011, and we expect this to remain the case through 2012. This will continue to boost household spending throughout 2012, leading us to forecast private consumption increases of 6.5% and 9.0% year-on-year in 2011 and 2012, respectively.

Headline Industry Data

- 2011 per capita food consumption growth in local currency = -0.99%; forecast growth to 2016 = 47.7%.
- 2011 confectionary value sales growth = 0.2%; forecast growth to 2016 = 49.4%.
- 2011 mass grocery retail sales growth = 7.4%; forecast growth to 2016 = 76.0%

Key Company Trends

Growing Popularity Of Eating Out: While traditional foods and eating habits still dominate, there is a major shift taking place in Saudi Arabia´s consumption habits. Eating out on a regular basis, as opposed to just on special occasions, is becoming increasingly popular, with fast food also growing in popularity.

Accordingly, many companies have been increasing their investments in the Saudi market, which is both in response to and feeding this trend. The dynamics of the consumer sectors in Saudi Arabia work well for casual dining and fast-food. With a total ban on alcohol, these restaurants serve as family-friendly locations. In October 2011, US-based pizza restaurant chain Pizza Fusion, a Samir Group brand, opened a new branch in Jeddah, Saudi Arabia. It is the chain´s fifth outlet in Jeddah.

Convenience Retailing Heating Up: While the hypermarket segment has largely led significant developments in organised retail channels over the past decade in the Gulf region, the convenience format is increasingly drawing attention from investors. In September 2011, France-based food retailer Casino´s Middle East business announced plans for a pan-Gulf region expansion that will include 30 stores, with the majority being smaller convenience-type stores. Casino is planning on embarking on this aggressive expansion plan because the financial crisis brought down real estate prices throughout the region.

Key Risks To Outlook

There are two primary downside risks to Saudi Arabia´s growth outlook. First, a sharper-than-expected downturn in the global economy, if it was to translate into a substantial decline in oil prices, could call into question the Saudi Arabian government´s ability to finance its expenditure plans. Second, the persistence of political and social unrest across the Middle East highlights ongoing uncertainties in Saudi Arabia´s domestic political environment. Although the government has sought to deal swiftly with any signs of discontent by stepping up public spending and clamping down on protests, underlying tensions remain. A significant escalation of political unrest would almost certainly weigh on foreign direct investment inflows and could impact on domestic investment and consumption patterns more generally.

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