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Evolution in Saudi Arabia Infrastructure Is Driving the Growth of Foodservice Sector: Ken Research

Posted on 01 December 2017 by KenResearch Food and Beverage,

Saudi Arabian economy had a drastic impact with the fluctuating oil prices and government carried out major reforms to control consumers public spending. Inflation of petrol, introduced taxes and VAT on sugary drinks, energy drinks and tobacco and other wide range of products were a part of country’s economy downtrend. The food services industry consists of Quick Service Restaurants (QSR) channel and Full Service Restaurants (FSR) channel along with catering services. Full Service Restaurants (FSR) in Saudi Arabia is the leading channel with close to fifty percent share of profit in terms of sales. The coffee and tea shop channels in Saudi have a relatively small share in the Saudi Arabian food service market due to consumers opting for more energy beverages than coffee or tea. Quick Service Restaurants and Full Service Restaurants growth is very slow due to less transactions and lack of alcoholic beverage service. Saudi is not sufficiently developed in the restaurant alcoholic beverages service sector. The restaurants in Saudi Arabia are generally for broad occasions with family or friends. The food service companies are restaurants, fast food, cafés/bars, delivery and takeaway food service, and others food service. The leading foodservice companies in Saudi Arabia are Dine Equity, Domino's Pizza, Herfy, Kudu, Piatto, Maestro Pizza, McDonald's, Pizza Hut, The Savola Group, and Yum! Brands.

According to the study “Saudi Arabia-The Future of Foodservice to 2021”, many foodservices are introducing a wide range of healthy and nutritious meals in their food menu attracting more health conscious consumers. These foodservice chains offer half or full-size salads containing fresh vegetables. There is a stiff competition among the foodservice providers based on pricing, product quality and packaging innovation, quality of food, service, menu variation, and calories intake per meals. The improved living standards, increased disposable incomes, and altered customer lifestyles in Saudi Arabia are the major factors driving the growth of the food service market.

Catering services is another major sector in the foodservice market. The major end users of the catering services are Industrial/Construction, Hospitality, Education, Corporate, Flight, Healthcare and others. To develop the infrastructure of the country’s economy and to reduce the dependence on oil sectors, the Saudi Arabia government has invested in many construction activities. This is a major factor that affected the growth of the catering service in foodservice sector. With the development of many industries in the areas of education, technology, health, textiles, energy and other has demanded for catering services for their employees. Industrial catering services has accounted for the largest revenue share in the recent years followed by the hospitality sector such as hotels, hajj catering and corporate event catering. The catering services in Saudi witnessed an increasing use of technology and modern methods of production such as online ordering apps, vehicle tracking systems and inventory management platform.

The major players in the catering sector in Saudi Arabia are Gulf Catering Company, Nesma trading Co. Ltd., Algosaibi Services, Saudi Airlines Catering Company, Saudi Catering and Contracting Company and Tamimi Global Company Ltd. Gulf Catering and Saudi Airlines Catering Company have invested heavily in technology to ensure premium quality food and service. The Saudi Arabian catering services market in the foodservice sector is expected to grow drastically over the coming years.

Saudi Arabia is witnessing a downtrend in the economy with fairly high unemployment rate, and population growth. The young and urban population in the country will surely continue to drive a strong growth in Quick Service Restaurants (QSR) by the year 2021. The Full Service Restaurants in Saudi will account for nearly fifty percent of the foodservice sector in the near future. The urbanized youth in Saudi depend on the foodservice, for socialization, nourishment, and supporting the growing roles of women in all fields and help in contributing the growth of the foodservice sector. This growth will predominantly increase the numbers of transactions and inflation in the country. Westernized lifestyle also encourages more occasions to eat out. The ever rising population, increase in privatization, demand for skilled workforce and sedentary lifestyle of Saudi Arabian nationals are the major factors driving the future of foodservice market.

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Ken Research
Ankur Gupta, Head Marketing & Communications