With the UK looking at the Middle East as a potentially prime export market, John Giles from Promar International takes a look at opportunities in the Saudi Arabian market
Saudi Arabia is one of the most attractive markets for UK companies to consider in a Middle Eastern region seen as a potentially prime export market for the UK in the post-Brexit era.
The Saudi market is one that should be on the list for aspiring UK processors and exporters, according to John Giles, divisional director with Promar International.
While it is not always an easy market, the potential size of the prize is considerable, Mr Giles said.
Research
He emphasized exporters needed to do their research, identify the right market partners, find out as much as you can about the operating environment and take a mid to long term view of what can be achieved.
In summer 2022, the UK began a round of new trade talks to open up markets with the Gulf Cooperation Council (GCC), made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.
Mr Giles said: “A successful conclusion to a UK - GCC deal would mean significant benefits for UK farmers and food producers, as the Gulf is highly dependent on imported food.”
“UK food and drink exports to GCC countries were worth some 625 million last year.”
A new deal could significantly reduce or remove tariffs on food and drink exports, including in cereals, which currently face a tariff of up to 25 per cent; chocolate, up to 15 per cent; baking products, up to 12 per cent; sweet biscuits, up to 10 per cent; and smoked salmon which has a 5 per cent tariff at present.
In 2022, Saudi Arabia’s GDP was estimated at 723 billion. It has a population of 35 million and a fast-growing food manufacturing sector that benefits from both population and income growth, life-style changes, state support and favorable trade agreements.
Mr Giles said: “Demand for processed foods is growing and more multinational companies are entering the market, as a result.
“The population of the country is also swollen at certain times of the year by key religious festivals, such as the Haj, when several million Muslim pilgrims make the trip to Mecca.”
Investment
The Saudis are expected to invest nearly 70 billion in the food manufacturing sector by 2030, making it also a major producer of agricultural and food products in the region. The average per capita income for the country is some 45,000 per annum, making it one of the wealthiest markets in the Gulf.
The consumer base was also characterized by a large proportion of ex patriates from South East Asia and other Middle Eastern countries, such as Lebanon, Jordan and Egypt. Many middle and senior managers in food and drink companies come from these parts of the world.
Saudi
“In the retail sector, the more traditional retail outlets are losing ground to modern supermarkets, as demand for packaged food continues to increase,” Mr Giles said.
“Major drivers of this change include increasing disposable income, a growing population and the creation and expansion of urban centres. Total retail sales of packaged food last year were approximately 36 billion.
“Of that figure, 55 per cent was sold through traditional channels, while 45 per cent were marketed through more modern retail channels.”
Many consumers were seeking out healthier lifestyle products which presents opportunities in beef, poultry, non-alcoholic beer, dairy products, meat alternatives, fresh and processed fruit and vegetables and juices, honey and snacks.
The market is highly competitive.
Mr Giles said: “UK companies will come up against those from other EU markets and also from the US, Turkey, Egypt, India, China and the Oceania countries, too.
Non-tariff barriers can be complicated and were subject to change. Most UK exporters use the services of the so called ‘consolidating’ companies to try and minimize any potential problem areas here.
“Logistics of supply to the Gulf are though generally good for UK companies, be it via sea or air freight,” he said.
“Most imports are via the modern port facilities at Jeddah, where there are large concentrations of import and distribution companies to the rest of the country and other Gulf markets.”
Leading Saudi retailers
- Panda Retail Company: the largest retailer in Saudi Arabia. This publicly traded Saudi company has 230 retail outlets in Saudi Arabia. The firm also has two hypermarkets in Egypt and one in Dubai
- Othaim Supermarket Chain: this company has 227 stores in Saudi Arabia and 46 stores in Egypt
- BinDawood Holding: operates a total of 73 stores across Saudi Arabia, including the BinDawood and Danube supermarket chains
- Farm Superstores: has 69 supermarkets in Saudi Arabia
- LuLu Hyper/Supermarkets: a Dubai based business, with 38 outlets in Saudi Arabia, mostly hypermarkets. It has more than 150 hypermarkets in the Middle East and Asia.
- Carrefour Saudi Arabia: is a subsidiary of Majid Al Futtaim of UAE; the exclusive Carrefour franchisee in 38 countries across the Middle East, Africa, and Asia. They have 18 Saudi hyper and supermarkets
