FOOD FOR THOUGHT

or our food and agriculture chapter, we noticed two divergent trends in the growth of the food and beverages sector and the slow decline of agriculture.

The F&B sector has seen many new regulations focusing on quality, safety, performance, and environmental standards, which in the short term created quite a few hurdles for firms in the industry. Interviewees noted the cost of maintaining a business has increased dramatically, with labor costs and fuel prices all growing. However, the biggest issue for the sector was new fees for expatriate families, a regulatory change that affected both revenues and costs, with the market undergoing a reduction in size.

With foreigners leaving Saudi Arabia, it is not only the demand side that will be affected. Indeed, the jobs of the departed will be filled by Saudi citizens, but only a handful of Saudis are interested in pursuing careers in the food service industry, which requires long hours and does not necessarily offer a glamorous environment. Local interest in the segment is apparent in coffee shops, with new places opening up at a rapid pace. Each claim to offer a different product or experience from their competitors, with some shifting toward fresh, organic products.

These trends demonstrate how Saudi Arabia’s F&B market has become more mature and competitive, focusing on details to attract more customers. We noticed that the most successful concepts across the customer segments tend to rely on three main features: superior hygienic standards, a pleasant and comfortable environment

Fand strategic location. The Saudi F&B market is headed in two directions: fine dining and fast food. Fine dining is not price sensitive, but a fastfood purchase hinges on a customer’s decision to spend a few more riyals.

On the agricultural side, the decision by the government to reduce the amount of water for agricultural purposes has had several consequences. There are various new cultivation techniques being tested in Saudi Arabia, including indoor hydroponic cultivation. The most recent ventures include using grow towers in abandoned factories, shorter growing cycles, new germination technology, filtration for light, water and air, nutrient delivery systems, and automated harvesting. These developments are slowly taking hold in Saudi Arabia, thanks to the efforts of entities like Saudi Agricultural and Livestock Investment Company (SALIC) and Agricultural Development Fund (ADF), which not only support new technologies, but also ensure agricultural operations are commercially viable and in line with the Kingdom’s agricultural and water policies. SALIC is responsible for investments in agriculture outside of the Kingdom, while ADF invests domestically.

Meanwhile, on the export front, political instability, concentration of production, high insurance costs, and protectionist measures all contributed to a tougher economic reality for locally processed commodities. Internal demand still brings the highest percentage of revenues, although most companies that TBY met with said they want to bring more products to foreign markets. ✖