Saudi Arabian Beverage Market 1231846055719934 3

8/13/2019 Saudi Arabian Beverage Market 1231846055719934 3

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12/19/2013 1

Saudi Arabian &GCC Beverage

Market

Prithviraj YB



12/19/2013 2

Introduction

The Saudi Arabian food-processing sector has

experienced rapid growth in recent years, with a number

of local companies reporting strong growth in the recent

years. The Saudi government supports the food and

drink industry by providing attractive financing and

subsidies on selected equipment, and through the

imposition of high tariffs on imports that compete with

locally-produced equivalents. Important sub-segments in

Saudi Arabia’s food processing industry, including meat-

processing, dairy, juice and confectionery manufacturing,

have developed to such an extent in recent years thatthey are now meeting the majority of domestic demand.



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GCC countries with neighbors



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Kingdom of Saudi Arabia

Total Land Area: 2,250,000 sq km

Population (July 08): 28,161,417

(including 18% or 5,576,076 non

naturals.

Rapidly increasing. By 2025, Populationexpected to be 105 million.

Current population growth rate: 1.945%

Age Structure: 0-14 Yrs: 38.1%15-64 Yrs: 59.5%

65 & above: 2.4%



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Contd.

Median age: Total – 21.5 Yrs

Male – 22.9 YrsFemale – 19.7 Yrs

Birth Rate: 28.83 births / 1000 popln

Fertility Rate: 3.89 children / woman Ethnic group: Arabs : 90%

Afro Asians : 10%

Literacy rate: 78.8% (can read / write)

City / Oasis density: 1000 people / sq km

Westerners: 100,000



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GCC Overview

Countries: Saudi Arabia, UAE, Oman, Bahrain,

Qatar, Kuwait

Population: 36.4 million

Largest market: Saudi Arabia

Second largest market: UAE

76% of UAE population is expatriates-have

wider range of preferences

75% of Saudi population is locals-

homogeneous consumption

Future: Saudi will be the largest market; Qatar

& UAE are markets with high potential



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Beverage Consumption in GCC

Saudi Arabia : 65 %

UAE : 18%

Kuwait : 7% Oman : 6%

Bahrain : 2%

Qatar : 2%



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Consumption of Beverages in GCC – segment wise

Total beverage consumed in 2007: 15.5

billion litres

Beverage Type Volume (million Lit)• Packed Water : 5321

• Hot Tea : 3207• Carbonated soft drinks : 2506• Liquid milk : 1865• Juice Products : 1367

• Hot Coffee : 1183• Laban : 538• All other beverages : 620

Source: IMES Research & Estimates



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Beverages and growth

Products Expected CAGR

1. Energy Drinks 8.3

2. RTD Tea products 7.2

3. Malt Beverages 6.9

4. Bottled Water 6.7

5. Liquid Milk 6.2

6. Juice Products 5.5

7. Carbonated soft drinks 5.2

8. Laban 4.1

9. Dilute Drinks 3.0

10. Tea 1.7

CAGR : Compound Annual Growth Rate



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As per the data, UAE tops in per capita consumption of

packed water, while Oman leads in hot tea and Bahrain

leads in carbonated soft drinks. Liquid milk, laban and

juice products are expected to grow indicating that people

prefer to go for naturals more.

‘Other beverages’ mentioned in the table include dilute

drinks, malt beverages, iced tea, energy drinks and sports

drinks. Dilute drinks, which contain 3-15% fruit content arethe most common but have seen general decline over the

years.

Energy drinks is small segment but has achieved avg annual

growth rate of 52% over 5 years across GCC.

Consumption in Kuwait has grown by 84% over the past 5years. Major players like Red Bull, Power Horse and

Bison face competition from new entries.



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Tea is one of the mature products, expected to grow along

with population. RTD iced tea is relatively new but one of

the stronger growing beverages.

All beverage categories expected to grow at a healthy rateover the next five years, while energy drinks are the faster

growers.

Juice Products are expected to grow at faster rate than

carbonated soft drinks.

Hot tea and dilute drinks are expected to grow at extremely

slow rates.



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SOFT DRINKS IN SAUDI ARABIA

Significant growth in the soft drinks market as a whole.

The soft drinks market registered 6% total volume and value

growth in 2007. Soft drinks’ popularity in the kingdom can be

attributed to the diversity of products, together with their wide

availability throughout the kingdom. Carbonates and bottledwater remain the most popular in volume terms, while

fruit/vegetable juice ranks second in value terms after

carbonates. Functional drinks on the other hand registered the

most dynamic growth in 2007, as these products are substitutes

for alcohol in the country. Other smaller sectors, including RTD

tea and concentrates are gaining further popularity despiteseasonal demand, especially in concentrates, where demand

almost triples during Ramadan.



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Health concerns boost sales of bottled water,

fruit/vegetable juice and low calorie options

Consumers in the kingdom are becoming increasingly health-

conscious. This trend is pushed by a couple of elements, firstly

the effect of the media and the high number of television

programs addressing health problems, and secondly, the impact

of foreign expatriates who are more aware of health issues thanlocal consumers. The trend is pushing demand for healthier

products, including bottled water and fruit/vegetable juice, in

addition to low calorie carbonates. Bottled water and low calorie

cola carbonates registered an impressive 8% growth in total

volume terms in 2007, while fruit/vegetable juice registered 6%

growth.



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Escalating competition in the market

The competition between local and international players in theSaudi market is escalating. While international brands (Pepsi &

Coke) dominate carbonates, the most popular drink in volume

and value terms, local brands dominate fruit/vegetable juice

and bottled water. Popularity and demand in the market is

measured by many factors; mainly quality, health assurance

and innovation, followed by price. Pepsi from Al Jomaih Bottling

Plant remained by far the leader in the soft drinks market, with

an 18% share of off-trade volume sales, followed by Coca-Cola

and 7-Up with approximately 9% each.



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Off-trade channel registers higher sales

Sales of off-trade soft drinks in the kingdom are higher, registering

four times the volume sales in the on-trade channel. Off-tradesales are directly linked with the expansion of

supermarkets/hypermarkets in the kingdom. Not only are existing

supermarkets/hypermarkets expanding rapidly on an annual basis,

but new supermarket/hypermarket chains are also opening outlets

throughout the country. Furthermore, sales in off-trade channelsare not limited to a certain age group or gender, whilst this is the

case in the on-trade channel due to the country’s culture. Besides,

the price of soft drinks in the on-trade channel is almost double that

of the off-trade channels.

M j B Pl i h KSA



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Major Beverage Players in the KSA

There are more than a dozen of key beverage players in the market, ofwhich only few like Almarai, Al Rabie, NADEC, NADA, Aujan and

Abuljadayel act as trend setters. A list of the companies who not onlyoperate in Saudi but also export to neighboring countries is as below.

1. Almarai Dairy Company

2. Al Rabie Saudi Foods Company

3. Abuljadayel Beverages

4. National Factory for Foodstuff Production

5. NADEC

6. Al Othman (NADA)

7. Pepsico

8. Arrow Juice Company

9. Aujan Soft Drinks10. Karim Food Industries

11. Gulf Union Foods Company

12. Najdiyah Marketing

13. Al Safi Dairy Company

14. Al Rai Food Industries



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CONCLUSION:

Majority of the companies located in Saudi Arabia havediversified themselves in terms of product range doing it from

juices, nectars, floats, drinks, milk, laban, flavoured milk,fruit+milk, puddings, tomato paste etc thereby minimizing theoperating costs.

In spite of price raise in commodities in the international trade inthe previous year, these companies have survived well and

some companies showed good growth in the fiscal ending2008.

In the current year of 2009, the companies have set to takeadvantage of the price fall in the commodities, minimizing theinventory and thereby trying to become much morecompetitive. Even though only few companies have dared for

new product launch this year, it need to be seen how far theydo well in the market and how far do the Saudi customersaccept them.

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