Opportunities for Palm Oil in Saudi Arabia’s Horeca Sector

Background

Saudi Arabia’s HORECA has been experiencing rapid socio-cultural changes over the past two years, mainly due to the major diversification of the economy initiated by the Kingdom to remove its dependencies on crude oil. Tourism is among various new sectors being focused for economic growth and development; it is anticipated that the country will welcome 100 million tourists in the Kingdom in 2030. The significant changes in Saudi Arabia have created mass development of new restaurants and hotels in the kingdom.

Saudi Arabia Oils & Fats Scenario

Saudi Arabia’s Total Oils and Fats Balance (000 Tonnes)

2017 2018 2019 2020 2021
Production  112.8 93.0 142.8 114.7 129.2
Total Imports 808.9 906.0 939.7 907.9 884.1
Total Exports 93.1 119.2 114.6 135.9 170.1
Consumption 871.2 911.3 912.4 906.6 887.5
Caput Use (kgs) 26.3 27.0 26.6 26.0 25.1

Source: Oil World

Saudi Arabia imports almost all the oils and fats for its local requirement. In the past five years, the average import of Saudi Arabia’s oils and fats was around 890,000 tonnes per year. Saudi Arabia’s government policy on social and tourism activities has pushed the nation’s import figure to surpass 900,000 tonnes, except in 2021 due to pandemic social restrictions.   In 2021, Saudi Arabia imported 884,100 tonnes of oils and fats and consumed 887,500 tonnes. Besides palm oil, Saudi Arabia also imported 130,800 tonnes of sunflower oil, 61,900 tonnes of corn oil and 36,400 tonnes of olive oil in 2021.

Palm oil is the largest consumed edible oil in the Saudi Arabia and accounted for 63% of the total consumption in 2021. Imports of palm oil into Saudi Arabia in 2021 came from Malaysia (50%), Indonesia (38%), Oman (7%), UAE (4%), and others (1%). Saudi Arabia also exported 47,900 tonnes of oils to neighbouring countries.

In the past five years, the per capita consumption of oils and fats in Saudi Arabia has been in the range of 26.00 kg to 27.00 kg which is lower than the global average of 30.47 kg in 2021. The market has a great potential to expand in the oils and fats market.

JAN – JULY 2022 JAN – JULY 2022 Difference % Difference
SAUDI ARABIA 330,248 152,151 178,097 117.1

Source : MPOB

Malaysian palm oil imports continue to show an upward trend in 2022. In July 2022, the import of Malaysian palm oil by Saudi Arabia stood at 330,248 a significant increase of 178,097 (117.1%) from Jan-July 2021. The removal of travel bans, the recovery in the HORECA sector, the shortage of sunflowers in the market, and the export ban on Indonesian palm oil are the reasons behind the increase.

Opportunities in HORECA

The instability of crude oil prices the recent years has pushed Saudi Arabia to find other sources of income for the country. Tourism is one of the sectors that Saudi Arabia’s government identifies which can generate high revenue for the nation. Even though Saudi Arabia receives millions of visitors for religious tourism, the trend of non-religeous tourism is almost negligible. The kingdom as recently removed a lot of social restrictions which will make the county to be more tourist friendly.

This development is in line with the Kingdom’s Vision 2030 which anticipates 100 million tourists will visit the Kingdom in 2030. The focus on enhancing tourism has spurred the development of new hotels in the Kingdom. The expected number of new hotel keys available between 2022 to 2025 in the major cities are as follows:

Year 2022 -2025
Cities Riyadh Jeddah Makkah Damam/Al Khobar
New Hotel Keys
Qty
5,300 2,300 11,800 3,000

Source: Deloitte

From the table above a total of 22,400 new hotel keys will be available in the market by 2025. Even though the COVID-19 pandemic gave a significant effect on the Kingdom’s plans for boosting tourism, but it has recovered since they open their border. Even during the strict border restriction in 2021, 4,500 new hotel keys were available in Makkah. This positive trend is believed to continue until years to come.

The transformation also can be seen in the Kingdom’s social activities segments. New and trendy restaurants are being opened in major cities such as Riyadh, Jeddah, and Dammam. The international fast-food chains also make their presence in the Kingdom.  Popular fast-food chains such as Mcdonald’s, KFC, Pizza Hut, Hardy’s, and Pizza Hut along with popular local brands Al-Baik and I’m Hungry can be found in every shopping mall and around the major cities.

With limited options available for entertainment, the culture of eating at restaurants/food trucks gained higher preference in the country. Unlike before, these restaurants are not limited to males or families only, they are open to women patrons as well either when they are alone or in a group which has a significant impact on the establishment of new restaurants in the Kingdom. It is good momentum in Saudi Arabia’s Foodservice market growth which is one of the largest in the Middle East, valued at USD 27.8 billion in 2021, and according to Mordor Intelligent it is projected to grow at a CAGR of 7.71% during the forecast period, 2022-2027. The industry also faced great challenges during the pandemic but with the lifting of the social restriction in the Kingdom, the industry is on the road to recovery at an encouraging rate.

The HORECA in Saudi Arabia is projected to continue to prosper in the future. New hotels and restaurants are mushrooming all over the Kingdoms. The drivers for these expansions are:  

  1. Government’s Policy: Changes in social gathering laws and visa approval to encourage the growth of their tourism industry that focus not only on foreigners but also on their local citizens.
  2. Demographics: Young population, 53% of the population in Saudi Arabia are between the ages of 15-44. Most of them are affluent and are the main consumers in these sectors.
  3. Disposable income: High disposable income that allows them to spend more on food and hotel accommodations.
  4. Expansion of the Tourism and Entertainment Industries: Main catalyst for the expansion of HORECA industries in Saudi Arabia. It revolutionizes the demand for food outlets and hotels in the Kingdom.

Conclusion

Malaysian palm oil industry members need to take this advantage of the situation in Saudi Arabia. They need to persuade the Kingdom’s buyers to maintain and increase their purchase of Malaysian palm oil. The leading local players such as Savola, Arab-Malaysian Vegetable Products, United Flowers, IFFCO, and Mazola are looking forward to working with Malaysian palm oil companies. They are not restricted in terms of palm oil supply but also in other areas related to palm oil supply chain businesses. MPOC KSA is always available to assist those who are interested to meet their potential local partners on this matter. 

Prepared by: Muhammad Kharibi

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

Source:
1.MPOB
2. JLL / Saudi Arabia General Authority for Investment (SAGIA)
3. Mordor Intelligent
4. USDA

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