GFM FOOD TECH SUMMIT Saudi F&B Market · Global Specialist in Food & Agribusiness 200+ Sector Specialists. Global. Reach & Experience. Established. Over 15 years. Clients. Corporate

GFM FOOD TECH SUMMIT

Saudi F&B MarketAddressing Health and Wellness

as the New Growth Wave

07 November 2018

FARRELLY & MITCHELLChaitanya GRK, Senior Manager Middle East & Africa

2

Farrelly & Mitchell

GFM Food & Tech Summit: Saudi F&B Market Addressing Health and Wellness as the New Growth Wave

Global Specialist in Food & Agribusiness

200+Sector Specialists

Global

Reach & Experience

EstablishedOver 15 years

ClientsCorporate & Government

StrengthOperational & Strategic

Value ChainFarm to Fork

3 GFM Food & Tech Summit: Saudi F&B Market Addressing Health and Wellness as the New Growth Wave

Agenda

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SECTION

SECTION

SECTION

SECTION

What do demographics and economic aspects of Saudi indicate

Where does Saudi stand on ‘Health’

What are the bankable opportunities in Saudi

What should companiess address to capitalise the opportunity

Disclaimer: The information in this presentation is intended to give information in general nature, great efforts has been exerted to ensure the accuracy of this data at the time the presentation was drafted. Farrelly & Mitchell Business Consultants Ltd. and its Branch offices or affiliates does not provide any implicit or explicit guarantees on the validity, timing or completeness of any data or information in this presentation. Also we assume no responsibility on the appropriateness of the data and information for suiting any particular purpose or reliability in trading or investing. Please note: Unless provided otherwise and in writing from us, all information contained in this presentation, including logo, pictures and drawings, are considered property of Farrelly & Mitchell Business Consultants Ltd.

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1.5%

Favourable demographics to drive Saudi F&B demand


Fast growing with median age <10 years than developed countries’ average

32 82

128

320

39 82

122

355

Saudi Germany Japan USA

2015 2030

CAGR 2015-2030Population in Mn

29.8

45.9 46.337.634.7

47.6 51.5

39.8


2015 2030

Median age, years

Almost 10 years less than average of all developed countries

Saudi population is growing at a faster pace than some of the developed economies …• More mouths feed in future

…with larger base of youthful population• Contributing to strong economic growth• Increased economic freedom

0%-0.3%

0.7%

XX%

Source: World bank

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Strong consumer spending potential indicates wider opportunities in F&B


Per capita GDP comparable to developed countries

+ USD 7,500 (~14%) Growth from 2017 to 2023

Saudi per capita GDP (PPP) is comparable to developed countries…• Higher consumer spending potential

…which is set to increase further• Wider avenues to spend• Only 18% of household expenditure is

on F&B (2013)

54,532 50,804 42,942

59,792 62,122 62,705 51,423

72,861


2017 2030

54,53255,926

57,35858,399

59,55160,780

62,122

2017 2018 2019 2020 2021 2022 2023

Competing against developed countries

Per capita GDP (PPP), Units in USD

Source: World bank and Saudi General Authority of Statistics

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59%68%

34%

14%23%

60%

23%

7%

39%27%

4%10%

35%

70%

35%

9%

Physically inactive Overweight Obese Diabetic


However, health challenges set to change consumer approach to F&B


Limited physical activity increasing NCDs, which contributes to 73% of adult mortality

• Obesity is key reason for Noncommunicable Diseases (NCD).

• Around 73% of the adult mortality is due to NCDs in 2016

Young population base but inactive lifestyle creating larger health challenges• Consumers are increasingly getting health conscious • Social media penetration playing a major role • Marginal awareness push from F&B companies % of adults

Source: World Health Organization

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Economic situations displacing base population in Saudi on long term


Eventually impacting F&B industry

27,963

34,568 33,385 31,150 28,102

2013 2014 2015 2016 2017

(33,143)(61,483)

(94,389)

(277,025)

(234,191)

(290,381)

2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2

11.7

6.7

(5.0)

Expats 2016 Anticipated expatsleaving by 2025

Expats by 2025

Around 1 Mn Expat workers left from 2017 till 2018 Q2

Increased employment to Saudis – More spending

Decreased by 19% from 2014

Consumer spending sentiment negatively impacted due to economic situations

Expat employees leaving the country resulted in change in base population

Around 5 Mn expats estimated to leave by 2025. Resulting in 3 Mn jobs for Saudis

Expat employees leaving the country Total expats (employees and dependents) in MnConsumer expenditure per capita, SAR

Source: Saudi General Authority of Statistics and Farrelly and Mitchell Research

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But higher employment rates for Saudis to sustain the industry as affordability increase…


Around 3 Mn Saudis to replace expats as part of Saudization

On average 3 times higher than an expat

Around 27% higher than expat household

INCREASED EMPLOYMENT TO SAUDIS

HIGHER SALARY TO SAUDIS

HIGHER HOUSEHOLD SPENDING OF SAUDIS

HIGHER AFFORDABILITY

Increase in per capita spending

Increased preference for premium products

CONSUMER TURNS

HEDONISTIC

1

Source: Saudi General Authority of Statistics and Farrelly and Mitchell Research

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…with prevailing health challenges, consumers seeking ‘Healthy Food’ to substantially increase


1

HealthChallenges

CONSUMERS WILL EVENTUALLY GET

MORE HEALTH CONSCIOUS

2

NEED FOR FOOD ADDRESSING

‘HEALTHY’ FACTOR

3

Less artificial, sugar free, low salt, fat free, natural colours, no preservatives etc…

Offering specific benefit like D Vitamin, bone health, gut health, immunity, heart health, brain health etc…

Clean Food

Functional Food

Source: Farrelly and Mitchell Research


Dairy, Poultry, Bakery and Beverages to attract higher consumer attentionFunctional benefits to gain the most

Existing market maturity for health food Low – Med Low Low-Med Low - Med

Future scope High High High High

Type of benefits to address Functional Clean Clean and functional Functional

Product benefits to address• Protein• Probiotics• Bone health

• Hormone free• Natural feed• Omega 3

• Ancient grains• Organic• High fiber• Protein• Diabetic

• Vitamins• Antioxidants • Gut health

Key target consumers Kids and women All Adults Kids and Adults

DAIRY BAKERY BEVERAGESPOULTRY


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Prevalence


Consumer negligence on some of the basic health issues…

…>50% of mortality due to cardiovascular, cancer and musculoskeletal diseases

Vitamin D

Leadingto bigger health

challenges

>60% of population are deficient

Overweight Hypertension Diabetes

68% population

26% of adults

14% of adults

Cardiovascular Cancer Musculoskeletal

Hyper-cholesterolemia8.5% of adults20% in border

Colorectal cancer 15% men

10% women on overall cancer

instances

Osteoporosis34% female

31% male over 50 years

Precaution Low carbs Low sodium Low sugar Supplementation Low saturated fat High fibre and

Antioxidants High calcium

Next growth wave of opportunities in the Saudi F&B space

Source: World Health Organization and Farrelly and Mitchell Research

Hypertension, Vitamin D deficiency, Musculoskeletal and Colorectal cancer challenges could be addressed through nutrition; untapped by F&B companies

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Immense scope to launch low sodium commodity portfolio. Substantial opportunity for high fibre, fortified calcium and functional beverages


• Potentially attractive but consumer awareness is low; requires substantial outreach • Low volume variants but becomes an essential differentiator to win ‘Heart Space’ of the consumer;

addresses most commonly faced challenge by large companies in the region

Poultry –

–

Functional drinks

–

Dairy Low sodium cheese, laban

Low sodium processed meat - Cold cuts, franks etc

Low sodium bread/bakery

–

Low sodium - Snacks, condiments, processed food, canned food etc

Bakery

Hormone free/clean products

High fibre/Whole grains

Clean - Free from Additives, colorants, preservatives Functional drinks - Immunity, anti oxidants

–

Beverages

Fortified dairy

–

–

Hypertension Vitamin D Cancer Musculoskeletal

Others



Product relevance overpowers consumer preferenceBrand loyalty, price and packaging which are key attributes of mass products are underweighted

HEALTHY FOOD PRODUCTS

RelevanceBenefits that the product offers to the consumer

BrandSmall to medium sized companies gaining when they differentiate

PriceConsumer is ready to pay reasonable delta if the product is relevant

PackagingNot critical as long as the labelling is clear

R

B P PBrand Price Packaging

Relevance



What should companies address to capitalise on the opportunity?Letting know the product benefit and digital marketing are crucial aspects

Companies marketing/venturing to market healthy products need to prioritize four key aspects

Product labels• Product benefit• Ingredients

Digital marketing• Social media

playing crucial role• Paid promotions through

ambassadors

Product distribution• Distributor• Product reach

Product visibility• Retail shelf space• Merchandise


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Questions? Shukran!


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Malachy MitchellManaging Director

Unit 5A Fingal Business ParkBalbrigganCo. DublinIreland K32 EH70

Tel: +353 1 690 6550Fax: +353 1 883 4910Mobile: +353 86 806 0843Email: [email protected]

Saudi Arabia

Najeeb AlhumaidRegional Manager

Al-Rusais BuildingSuite 510Olaya Main Road6468 Al Ulaya - Al UlayaRiyadh 12211 - 3857Kingdom of Saudi Arabia

Tel: +966 11 4634406Mobile: +966 54 338 7199Email: [email protected]

www.farrellymitchell.com

Europe

Farrelly & Mitchell is a leading international agribusiness and food management consulting firm with offices in Europe and the Middle East.

We help our clients to build and implement sustainable restructuring, transformation or growth strategies across each link of the agribusiness and food value chain - from large scale farmland crop and livestock investments and agribusinesses to consumer food or beverage manufacturing, distribution, retail and hospitality.

Headquartered in Ireland with an office in the Middle East, the firm works with corporate, investment bank, private equity, family office and government clients throughout Europe, Middle East, Africa and globally.

At Farrelly & Mitchell we help our clients to grow, invest and improve efficiencies.

About Farrelly & Mitchell

© Farrelly & Mitchell 2018

Middle East and Africa

Chaitanya GRKSenior Manager

Al-Rusais BuildingSuite 510Olaya Main Road6468 Al Ulaya - Al UlayaRiyadh 12211 - 3857Kingdom of Saudi Arabia

Tel: +966 11 4634406Mobile: +971 551991356Email: [email protected]


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GFM FOOD TECH SUMMIT Saudi F&B Market · Global Specialist in Food & Agribusiness 200+ Sector Specialists. Global. Reach & Experience. Established. Over 15 years. Clients. Corporate