Boston, MA -- (SBWire) -- 12/31/2013 --We retain a bullish view on Saudi Arabia's private consumption outlook and forecast growth of 6.0% in 2013 (revised up from 5.0%) and 5.0% in 2014. As we have noted in the past, the outlook for the retail sector is set to remain bright over the medium term, with sales benefiting from rising disposable incomes, favourable demographics and increasing urbanisation.
Headline Industry Data
- 2014 food consumption growth in local currency = +8.0%; compound annual growth rate (CAGR) 2013 to 2017 = +7.8%
- 2014 confectionery value sales growth in local currency = +6.9%; CAGR to 2017 = +6.7%
- 2014 mass grocery retail sales growth in local currency = +10.3%; CAGR to 2017 = +9.9%
Key Company Trends
Poultry Sector Profitability Improvement In Sight: We expect Saudi Arabia's poultry production to grow for the second consecutive year in 2013/14 after the large-scale outbreak of disease in 2011/12 led to a decline in output that year. We forecast production to reach a record high 660,000 tonnes, up 15.8% year-on-year (y-o-y), driven by investment in production capacity and support from the government.
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Room For Growth Across Soft Drinks: As the region's largest economy by some distance, it is no surprise that Saudi Arabia's soft drinks industry is also the Gulf region's largest in volume terms. By volume, we believe that it accounts for about two-thirds of the region's soft drinks sector. In per capita terms, consumption of soft drinks, which by our definition includes bottled water, carbonates, juices and functional drinks (energy drinks), increased from 217 litres in 2004 to nearly 253 litres in 2012. In value terms, the size of the industry grew from US$5.5bn to US$8.5bn over the period, with bottled water and carbonates between them making up about 80% of sales.
MGR Sector: Potential Regional Outperformer? Saudi Arabia's consumer outlook remains an attractive prospect to mass grocery retailers looking to capture impressive Middle Eastern growth. Given the country's large population and enviable economic profile, increased formalisation of the sector is a trend we expect to gain momentum as both domestic and international investors target the increasing spending power of the Saudi consumer.
Risks To Outlook
The government's recent intensification of workforce nationalisation efforts (under a programme known as 'Saudisation') poses a downside risk to the economic outlook. We expect heightened 'Saudisation' measures to add to the costs for the private sector over the medium term, leading to an increase in project delays and a more difficult business environment overall.
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New Market Report: Saudi Arabia Food & Drink Report Q1 2014
New Food market report from Business Monitor International: "Saudi Arabia Food & Drink Report Q1 2014"