Growing demand for specialised bread products is contributing to value growth in the Saudi baked goods market, which is also being fuelled by the spread of large-scale grocery outlets. Francisco Redruello of Euromonitor International analyses recent market developments.
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Rising demand for specialised breads is fuelling growth in the Saudi Arabian baked goods market, according to Euromonitor International’s latest data. While total volumes of baked goods rose by 4% in 2006, roughly in line with population growth, value sales rose by 5% to US$2.1bn, on the back of higher sales of added-value bread products, such as whole wheat bread, brown bread and low-sugar and low-salt bread.
In 2006, brown bread was the second most popular type of bread on the market. Furthermore, the increasing popularity of Western-style bread products is also boosting the value sales of baked goods. Such products command higher retail prices than traditional Saudi flat breads.
Bread is a staple of the Saudi diet but home baking is much less common in Saudi Arabia than in neighbouring countries, such as Egypt, Jordan and Syria, which has created opportunities for mass-produced products.
Low prices, generally high per capita income, rapid and intensive urbanisation and the prevalence of local bakeries across the country have combined to foster healthy growth in bread sales since 1998, Euromonitor has found. Bread is the largest category and the most important driver of the Saudi baked goods sector, accounting for 56% of total retail value sales in 2006, with pastries representing 30% and cakes 14%.
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By GlobalDataRetail value sales of packaged/mass-produced bread products grew by 5% in 2006, outpacing the 3% growth recorded by what might be termed artisanal varieties. Packaged/mass-produced bread also accounted for more than 42% of total retail volume sales of bread in 2006.
Euromonitor International attributes the stronger performance of packaged/mass-produced bread to continued changes in consumer shopping patterns and retail development, in particular the rising number of supermarkets and hypermarkets which are taking share from local bakeries. Other products likely to benefit from this trend are packaged pastries, which managed to grow by 9% in retail value in 2006.
Giant hypermarkets, which will usually have their own in-store bakeries, are becoming the first destination for the majority of Saudi consumers in the country’s main cities. The number of such outlets increased by 125% between 2001 and 2005, with similar growth predicted for 2006 to 2011.
Unpackaged/artisanal varieties still accounted for around 55% of total retail volume sales of bread in 2006. Artisanal bread and pastries have long been produced in, and sold from, small family-run local bakeries which benefit from being close to market. But this is a fragmented market, with few bakeries able to reach a large volume of sales. Consequently, the reach of such products remains limited geographically. However, aside from their in-house sales, products from smaller bakeries are now being sold in many supermarkets and hypermarkets.
In spite of the retail development and rising demand for specialised products, Euromonitor does not expect dramatic growth in the Saudi baked goods market between 2006 and 2011 due to the already high penetration in households. Baked goods are, however, expected to perform in line with population growth, with retail volume sales forecast to increase by 18% over this five-year period.
Growth will be driven mainly by a positive performance in the bread category. While there will be little scope for dramatic growth in volumes, unit prices are predicted to rise slightly in constant terms as a result of the slow but sustained growth in added-value products.
The shift from artisanal products to packaged/mass-produced breads is also likely to continue at a stronger rate, driving value sales. Euromonitor International predicts that the number of packaged/mass-produced products on offer will increase, both in local bakeries and in large-scale grocery outlets.
In terms of distribution, while artisanal breads and pastries will remain the domain of local bakeries, which will be able to maintain a competitive edge by dint of location and the ability to provide fresh products on a daily basis, large-scale grocery outlets will continue to gain market share. Supermarkets and hypermarkets are forecast to moderately increase their relative significance as a result of the increased importance of packaged varieties of baked goods.
In terms of new product developments, Euromonitor International predicts continued growing demand for products with added-value features such as brown bread, fibre-rich bread, grain-rich bread, low-sugar pastries and premium-packaged cakes. Western-type bread will also continue to see rapid growth in the next few years.
