What’s Fueling the Growth in KSA’s HORECA Sector?

NielsenlQ has shared some interesting insights into how shoppers in the UAE and KSA behave. In the UAE, shoppers tend to be slightly more loyal to their favourite brands compared to those in KSA, but they still look for promotions when buying. Both markets have seen strong economic growth, with KSA keeping inflation in check, while the UAE’s growth has been more broad-based, driven by tourism, construction, and financial services.

When it comes to promotion sensitivity, both countries' shoppers are influenced by deals, but UAE consumers lean a bit more toward brand loyalty. In KSA, brands are really using promotions strategically to boost sales while keeping costs down, mainly through temporary price reductions. Meanwhile, in the UAE, promo intensity is stable, but there's been a small dip in efficiency, with price cuts becoming a key tactic in recent years.

Now, let’s talk about what this means for brands and retailers. Quality is key. Around 72 percent of UAE shoppers and 71 percent of KSA shoppers are willing to pay more for quality products, and this has increased by 4 percent compared to last year. Health and wellness are big priorities. Convenience is another trend. A growing number of consumers, 63 percent in the UAE and 64 percent in KSA, are willing to pay extra for anything that saves them time, like smaller stores or e-commerce options.

In the FMCG sector, the UAE market is split between affordable and premium brands, while in KSA, mainstream brands dominate and drive growth. KSA's FMCG market is more focused on mid-tier brands, leading to fewer options. In contrast, the UAE is seeing more new and innovative premium brands coming in. Beverages, frozen food, and dairy are strong performers in both markets, while categories like home care and baby care are declining as people shift to online shopping and changing lifestyles.

In KSA, the HORECA (hotel, restaurant, café) sector has seen major growth, particularly in coffee and tea shops, which have jumped by 67 percent in the past few years. This reflects a shift in Saudi lifestyles and a higher demand for these types of stores.

For the tech and durable goods (T&D) segment, both the UAE and KSA are seeing varied performances. Organised retail is still the top shopping choice, with growth in premium brands, especially in KSA, which saw a 4 percent rise, while the UAE had a 2 percent increase. The entry-level market also grew, but mainstream brands are struggling as consumers either go for value or aspirational brands. Active brands and products in T&D have surged by over 27 percent in KSA and 28 percent in the UAE, highlighting emerging opportunities in the sector.

In terms of retail channels, organised retail is growing fast in the UAE, but traditional trade is still much bigger in KSA. However, independent retailers in the UAE are gaining ground, showing that consumers' preferences are shifting, and competition is heating up in the T&D space.

To sum it up, Andrey Dvoychenkov from APP Cluster explained that the UAE’s diverse population and varying income levels have created a polarised FMCG market. Affordable brands appeal to price-conscious shoppers, while premium brands cater to those seeking luxury. KSA, with its larger population, is driven by mainstream brands that balance quality and affordability. The T&D sector is booming in both markets, with a significant rise in active brands and products as companies capitalise on new opportunities.