Required Report - public distribution

**Date:** 10/31/2006

**GAIN Report Number:** SA6016

SA6016

**Saudi Arabia**

**Retail Food Sector**

**Update**

**2006**

**Approved by:**

![](media/image1.wmf)David Rosenbloom

Agricultural Trade Office, U.S. Embassy

**Prepared by:**

Hussein Mousa

**Report Highlights:**

Saudi Arabia is a \$6 billion import market for food and agricultural
products. Saudi imports of consumer-oriented products are growing
approximately five percent annually and are now estimated at \$3.5
billion. Imports from the United States reached a record \$131 million
in calendar 2005. Intermediate and bulk agricultural products also play
a major role in U.S. agricultural trade with Saudi Arabia. With a young
and growing population, Saudi Arabia will continue to be a growth market
for U.S. food products in the years to come. This report provides an
overview of the Saudi Arabian retail market.

> Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Riyadh \[SA2\]

\[SA\]

###### Table of Contents 

[**I. MARKET OVERVIEW 2**](#i.-market-overview)

[Political Situation 2](#political-situation)

[Economic Situation 2](#economic-situation)

[Trade Situation 2](#trade-situation)

[Agricultural Trade Situation 3](#agricultural-trade-situation)

[Competition 3](#competition)

[A summary of Opportunities and Constraints in the Saudi market
5](#a-summary-of-opportunities-and-constraints-in-the-saudi-market)

[for imported U.S. foodstuffs: 5](#for-imported-u.s.-foodstuffs)

[SECTION II. ROAD MAP FOR MARKET ENTRY
6](#section-ii.-road-map-for-market-entry)

[1. Entry Strategy 6](#entry-strategy)

[2. Doing Business with Saudi Importers
8](#doing-business-with-saudi-importers)

[4. Profiles of Major Saudi Supermarkets
11](#profiles-of-major-saudi-supermarkets)

[5. Market Structure of Supermarkets
12](#market-structure-of-supermarkets)

[6. Competition Among Major Retailers
13](#competition-among-major-retailers)

[7. Structure of Wholesale Markets 13](#structure-of-wholesale-markets)

[8. Structure of Corner Grocery Stores
13](#structure-of-corner-grocery-stores)

[SECTION III. COMPETITION 14](#section-iii.-competition)

[1. Local Food Processing Sector 14](#local-food-processing-sector)

[2. Imports 14](#imports)

[SECTION IV. BEST MARKET PROSPECTS
15](#section-iv.-best-market-prospects)

[A. Products in the Market with Good Sales Potential
15](#a.-products-in-the-market-with-good-sales-potential)

[B. Banned Products 16](#b.-banned-products)

[SECTION V. POST CONTACT & FURTHER INFORMATION
17](#section-v.-post-contact-further-information)

# I. MARKET OVERVIEW

## Political Situation

The Kingdom of Saudi Arabia, located on the Arabian Peninsula, is a
country of approximately 27 million people, including 8 million
non-Saudi residents. The country's current King is Abdullah bin Abdul
Aziz Al Saud. The monarch is both the chief of state and head of
government. Ministers are appointed by, and responsible to, the king.
The Council of Ministers exercises both legislative and executive
powers. The King appoints a 150 member Consultative Council (Majlis
al-Shura) that mainly has an advisory function, but can also initiate
legislation.

In recent years, Saudi Arabia has been engaged in fighting
Al-Qaida-sponsored terrorism. Militants intensified attacks on Western
and Saudi Government targets in early 2004. The government's campaign
aimed at dislodging locally-grown terror cells has intensified. The
number and the frequency of terrorist attacks appear to be lessening in
2006 and the overall political situation in the country has remained
stable.

## Economic Situation

This is an oil-based economy with strong government controls over major
economic activities. Saudi Arabia possesses 25 percent of the world\'s
proven petroleum reserves, is the world's largest exporter of petroleum,
and plays a leading role in OPEC. The petroleum sector accounts for
roughly 75 percent of the government's budget revenues, 45 percent of
GDP (estimated at \$338 billion in 2005) and 90 percent of export
earnings. In 2005, the Kingdom earned about \$155 billion in net oil
export revenue, up 35 percent over 2004. Saudi oil export earnings are
forecast to reach \$160 billion in 2006, with overall GDP growth,
projected at 6 percent. Per capita income is estimated at more than
\$12,500.

Saudi Arabia's population is growing at about three percent annually,
with 70 percent of the population under the age of 30. The Kingdom's
population will reach 40 million in the next 20 years.

## Trade Situation 

Saudi Arabia became the 149^th^ member of the World Trade Organization
(WTO) on December 11, 2005. Trade and foreign investment will benefit
from the commitments made by the Kingdom as part of its accession
agreement. Saudi Arabia agreed to reduce trade restrictions and improve
trade and investment avenues in an effort to diversify its economy. The
Saudi government is committed to reducing tariffs, eliminating import
prohibitions in the manufacturing and agricultural sectors, and opening
additional markets in telecommunications, energy related services,
insurance, and other financial services.

The Kingdom is a member of the Gulf Cooperation Council (GCC), which
includes Kuwait, Qatar, Bahrain, the United Arab Emirates and Oman.
Membership confers special trade and investment privileges to member
countries. Manufactured food products produced in any of these countries
are imported into Saudi Arabia duty free. In January 2003, the GCC
implemented its long awaited customs union. According to the agreement,
the six member countries agreed to implement a five percent
across-the-board duty rate on most imported foodstuffs that enter member
countries from non-GCC suppliers.

Saudi Arabia also is a member of the Arab League, which recently agreed
to negotiate an Arab free trade zone.

## Agricultural Trade Situation

Saudi Arabia is the largest importer of agricultural, fish and forestry
products among GCC countries. The potential for agricultural production
in Saudi Arabia is limited due to the lack of arable land (less than 2
percent) and water. Food imports are projected to grow in tandem with
the population.

In 2005, the country's total agricultural imports were estimated at more
than \$6 billion. High-value products account for 50 percent of total
import value. Imports of intermediate agricultural products were
estimated at about one billion dollars. Total U.S. agricultural exports
to Saudi Arabia in 2005 reached \$380 million, with exports of
consumer-oriented food products valued at a record \$131 million. Recent
data provided by major foodstuff importers indicate a continued
significant growth in U.S. consumer-oriented foodstuff imports thus far
this year. According to U.S. census data for January-July 2006, high
value product imports from the United States increased 20 percent over
the same period a year earlier. A strong euro relative to the U.S.
dollar is a factor supporting import demand for U.S. food products. Most
food product imports are subject to a 5 percent ad valorem duty. Corn,
soybean meal, barley, crude/semi-refined corn oil and rice enter the
Kingdom duty free.

Saudi buying and eating habits have changed significantly since the
introduction of Western-style supermarkets and restaurants in the late
1970s. Built initially to cater to Western expatriates, modern
Western-style Class A supermarkets are popular in Saudi Arabia and
continue to expand in major urban areas of the Kingdom: Riyadh (Central
Province), Qaseem, Jeddah, Mecca and Medina (Western Province), and
Dammam, Al Khobar, and Dhahran (Eastern Province). The increased number
of supermarket outlets has made it feasible for many chains to import a
portion of their stock directly from the United States. Supermarket
chains and other retailers, however, depend primarily on local importers
for sourcing, merchandising, and inventory control.

## Competition

The continued expansion of U.S. foodstuff exports to the Kingdom is
threatened by a growing competition from both locally-produced and
imported food products from the EU, and nearby Arab and Asian countries.
The number of food processing companies in the Kingdom continues to
grow. Most food processors rely extensively, if not entirely, on
imported food ingredients.

Saudi consumers are discriminating and enjoy new food products. With a
young and growing population, U.S. food and agricultural exports to the
Kingdom will continue to expand in the coming years.

Import demand for institutional-size food products by the catering
sector is being driven by the large number of expatriate third country
nationals working in Saudi Arabia and the increasing number of foreign
pilgrims visiting the two holy cities (Mecca and Madina). More than
eight million expatriate workers reside in the Kingdom, most of whom are
from the Sub Continent of Asia (India, Pakistan, Bangladesh) and the
Philippines. The number of foreign pilgrims traveling to Saudi Arabia
for Haj and Umra rituals is estimated at about five million per year.

Dining at fast food restaurants is popular among Saudi families and
expatriate workers. American fast food chains such as KFC, Burger King,
and McDonald's together with local chains such as Herfy import at least
part of their food needs from the United States. Large catering
companies, especially those serving Western expatriates, also buy a
portion of their requirements directly from the United States.

# A summary of Opportunities and Constraints in the Saudi market 

# for imported U.S. foodstuffs: 

+----------------------------------+-----------------------------------+
| **Opportunities**                | **Constraints**                   |
+----------------------------------+-----------------------------------+
| The Saudi population is growing  | Increased competition from        |
| at about 3 percent annually and  | locally produced food products    |
| is expected to nearly double in  | and imports from Europe, nearby   |
| 20 years from its current level  | Arab countries and Asia.          |
| of 27 million to more than 40    |                                   |
| million.                         | Freight costs from the United     |
|                                  | States are higher compared to     |
| The potential for agricultural   | those from Europe and Asia.       |
| production is limited. Imports   |                                   |
| of food will grow with the       | Local importers prefer to         |
| population.                      | initiate import-purchasing        |
|                                  | activity with small quantities.   |
| The market for retail food       |                                   |
| products is expanding.           | Arabic and biotechnology labeling |
|                                  | requirements increase costs.      |
| Changing lifestyles. The number  |                                   |
| of working women is expanding,   | Halal certification required for  |
| and demand for prepared food     | all meat and poultry products     |
| items is growing.                | exported to Saudi Arabia.         |
|                                  |                                   |
| Saudi consumers are quick to try | Additional manufacturer or        |
| new products and are shopping    | producer statements. Health       |
| more frequently in supermarkets. | certificates must indicate that   |
|                                  | meat is derived from livestock    |
| The U.S. is viewed as a supplier | not fed with feed containing      |
| of quality foodstuffs. Under     | protein, fat or remnants of       |
| normal political and economic    | animal origin.                    |
| conditions, U.S. origin and      |                                   |
| brands associated with the       | Saudi regulations restrict the    |
| United States make a favorable   | number of different food items in |
| impression on Saudi consumers.   | one container to 25.              |
|                                  |                                   |
| Voluntary shelf life labeling    | Saudi support for boycotts of     |
| was introduced in December 2005. | American products for political   |
|                                  | reasons.                          |
| More than 7 million pilgrims     |                                   |
| travel to Mecca each year.       | The Saudi economy is overly       |
|                                  | reliant on oil revenue and        |
| A growing number of fast food    | subject to sharp swings caused by |
| restaurants, hotels and resorts  | volatile oil prices.              |
| and a thriving catering sector   |                                   |
| all depend heavily on imported   | Limited U.S. cooperator or SRTG   |
| institutional food products.     | activity for standard trade       |
|                                  | servicing.                        |
| Young population: 70 percent are |                                   |
| under the age of 30. Younger     | U.S. companies are hesitant to    |
| Saudis express a strong          | travel to Saudi Arabia to         |
| preference for Western-style     | evaluate export opportunities due |
| foods compared to their parents. | to security concerns.             |
|                                  |                                   |
| A rapidly growing                | Saudi importers have reservations |
| food-processing sector depends   | about traveling to the U.S. to    |
| on imported ingredients.         | attend agricultural trade events  |
|                                  | following 9/11.                   |
| Per capita income increased to   |                                   |
| more than \$12,500 in 2005.      |                                   |
+----------------------------------+-----------------------------------+

# 

# SECTION II. ROAD MAP FOR MARKET ENTRY

## 1. Entry Strategy

The Saudi import market for foodstuffs is dynamic, with new-to-market
products introduced daily. Managers of Saudi supermarkets indicate that
in order to survive in this highly competitive market, a wide array of
products must be available to consumers. Recommendations applicable to
new-to-market exporters who wish to enter the Saudi market include:

-   Find a strong Saudi partner: A company with a professional sales
    force and a strong distribution network is desirable. The U.S.
    Agricultural Trade Office/Riyadh (ATO Riyadh) maintains lists of key
    importers.

-   Visit Saudi Arabia: ATO Riyadh can help with logistics. A visit will
    enable a potential U.S. exporter to see first hand the types of
    products found in Saudi supermarkets, corner grocery stores, and
    wholesale markets; to view cold storage facilities, infrastructure,
    and to meet one-on-one with key importers. Face-to-face meetings in
    the Arab world are very important and help build trust and
    confidence. Most Saudi businessmen speak fluent English.

-   Understand Saudi Arabia's labeling and cultural requirements: A
    product label showing a woman's legs would not be acceptable, for
    example. Likewise, a product with a recipe inside the box calling
    for pork would not be accepted, nor a product containing alcohol.
    Saudi Arabian Customs rejected several containers of gelatin a few
    years ago because of the detection of traces of pork in the product,
    even though the product label clearly indicated beef gelatin.
    Alcohol is banned in the Kingdom as a product and as an ingredient.

-   In December 2001, the Saudi Ministry of Commerce and Industry (MOCI)
    implemented its biotech labeling requirement for foodstuffs
    containing biotech ingredients. Following is a summary of the MOCI's
    biotech labeling requirements:

    -   Ban on Biotech Animal Products: One of the main features of the
        decree was an immediate and total ban on imports of foodstuffs
        containing genetically engineered animal products into the
        Kingdom. The directive did not justify this ban. However, ATO
        trade sources believe that the decision was taken to make sure
        that all imported foodstuffs are Halal and do not contain
        products from swine and other animals banned for consumption by
        the Islamic religion.

    -   Positive Biotech Labeling: If a product contains one or more
        genetically modified plant ingredients, the information should
        be clearly communicated to the consumer by labeling. A triangle
        should be drawn and in it the text should read \"Contains
        Genetically Modified Product (s).\"

    -   Bilingual Labeling: The biotech statement must be clearly
        written in both Arabic and English, with an ink color different
        from that of the main product table.

    -   Health Certificate: Biotech products or genetically engineered
        products exported to Saudi Arabia must have been approved in the
        country of origin for human consumption. Each shipment must be
        accompanied by a health certificate issued by appropriate
        government agencies stating that the Biotech ingredient (s) used
        in the foodstuff is approved in the country of origin (United
        States) for human consumption. One certificate could be issued
        that certifies a list of biotech found in the food item.

    -   Quality Standards: All genetically modified food products should
        be in compliance with legal and ethical controls observed in the
        Kingdom and must meet pertinent Saudi Arabian standards
        specifications.

    -   Locally Produced Foodstuffs: Biotech labeling requirements also
        apply to locally produced agricultural products.

    -   One Percent Maximum Biotech Threshold: MOCI requires biotech
        labeling if biotech content exceeds one percent of product
        weight.

    -   Random Sampling: MOCI randomly samples imported foodstuffs at
        ports of entry for testing. According to reports from MOCI, test
        results thus far have been good. Rarely have food products
        declared biotech free tested positive. However, there have been
        some cases of undeclared biotech presence detected in foodstuffs
        imported from Asian countries and a couple from the United
        States. Companies involved in exporting biotech foodstuffs
        without proper labeling are banned from exporting food products
        to Saudi Arabia.

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-   Understand Saudi Arabia's shelf-life requirements: In December 2005,
    Saudi Arabia

> implemented a voluntary shelf life standard (manufacturer-determined
> use-by dates) for most foodstuffs, with the exception of selected
> perishable foods (fresh or chilled meat and poultry; fresh milk and
> fresh milk based products; margarine; fresh fruit juice; table eggs,
> and baby foods) that must meet Saudi Arabian Standards Organization's
> (SASO) established mandatory expiration periods. The revised standard
> (SASO 457/2005) no longer bans imports of food products with less than
> half of their shelf life remaining.

-   Shelf life must be indicated by clear and unambiguous production and
    expiration dates. The use of any of the following statements for
    expressing expiration dates is permissible.

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```
-   Expiration Date

-   Use by (date)

-   Fit for (from the day of production)

-   Use Before (date)

-   Sell by date (for food products having an expiration period
    exceeding 3 months).

```{=html}
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```
-   Production and expiration dates should be declared on the package
    label in an uncoded manner as follows:

```{=html}
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```
-   Day-Month-Year: for foodstuffs with an expiration period less than
    three months.

-   Month-Year: for foodstuffs with expiration exceeding three months.

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```
-   Dates shall be "engraved or in relief," printed or stamped with
    permanent ink directly on all packages or on their original label by
    the producer only. Adding stickers for production and expiration
    dates is not permitted. Product labels may not show multiple
    production or expiration dates. Dates cannot be changed.

-   Products with No Specific Expiration Date: products with no
    specified shelf life such as salt, spices, milled rice, etc., only
    the date of production or processing need be shown as: mm/yy.

ATO Riyadh recommends that when putting together an order for a Saudi
importer, a U.S. exporter cross check information contained on his/her
food label, including Production/Expiration dates, with the Saudi buyer.
FAIRS report SA6008 provides detailed information on Saudi Arabia's food
and agricultural import regulations.

-   Provide Product Performance Information: Saudi importers and
    distributors usually like to know how a product performed in the
    United States in terms of sales before test marketing in Saudi
    Arabia.

-   Attend FMI and Regional Food Shows: It is vital that prospective
    U.S. exporters consider attending the annual Food Marketing
    Institute (FMI) Convention held in Chicago as well as international
    expositions such as ANUGA in Cologne, Germany; SIAL in Paris and the
    Gulf Food Show in Dubai. The Gulf Show is held every year. More
    information on international shows can be obtained by contacting the
    respective FAS office located in each country. Smaller local food
    expositions are held bi-annually in Riyadh and annually in Jeddah.

-   Consider contacting U.S.-based consolidators that source American
    food products from wholesalers. ATO/Riyadh maintains a list of major
    U.S. consolidators selling to Saudi buyers.

## 2. Doing Business with Saudi Importers

When searching for an importer to distribute your product, it is
important to understand how the company operates. The section below
outlines four basic types of importers:

1\. Private labels are becoming common in Saudi Arabia. Some large Saudi
importers purchase foodstuffs under their own brand names or import
ingredients and pack locally using their own label. Private labels with
Arabic sounding brand names appeal to Saudis and other Arabs in the
Kingdom. Others use labels with Western‑sounding names to position their
products as high quality American or European origin foodstuffs to
appeal to Saudis as well as expatriates living in Saudi Arabia. Salim
Basamah Company, perhaps the largest importer of grocery products in
Saudi Arabia, uses its private label, \"Goody\" on a wide variety of
food products imported from the United States. Another large importer
uses an Arabic sounding private label, \"Al-Alali\" to appeal to Saudis
and Arabs, even though a significant percentage of its products are
American origin.

Hence, a can of American peaches can be marketed in Saudi Arabia under
several different labels:

‑‑under an established U.S. brand such as Monarch or Libbys

‑‑under a Saudi private label: like Goody, Freshly or Al-Alali.

‑‑a U.S. private label representing the exporter/consolidator: such as
American Garden or AFFCO.

2\. Some importers contract directly with U.S. manufacturers of national
brands, such as Kellogg's, Campbell Soup, Budweiser non-alcoholic beer
and usually require sole agency agreements. The Saudi importer will help
build the brand, but will request support from the U.S. company. The
U.S. manufacturer usually offers promotional and marketing assistance.

3\. Some companies import a wide range of food products for mass
distribution, employing the use of consolidators in the United States.
Often, consolidators are sole regional agents of major U.S.
manufacturers or brand owners covering the entire Middle East and
African regions. Most U.S.-based consolidators assist Saudi food
importers by sourcing products from wholesalers, such as Fleming, and
providing services such as placing stickers on labels. Current Saudi
regulations allow U.S. suppliers to place an Arabic language sticker on
the original English language label. The stickers translate key
ingredient and product information into Arabic. Stickering is a
laborious task and many manufacturers do not want to bother with this.
Most U.S. consolidators are based in Houston, New York, Miami and in
other port cities that have large wholesalers.

4\. Géant and Carrefour (French hypermarket chains) as well as many
locally-based supermarkets with the ability to handle large import
volumes, are importing directly part of their needs. One local company
that operates a modern supermarket chain imports several containers of
American food products monthly for sale in its stores and lends support
to a wide range of brands without a binding agency agreement.

If a product has performed well in the market, a U.S. company may opt to
go beyond the sticker stage and develop a bilingual label in both Arabic
and English. Monarch is one of many U.S. companies that has developed
bilingual labels for the Middle East. Non-alcoholic Budweiser beer was
launched in the Kingdom in 1999, with a red, white, and blue bilingual
label. However, a significant number of U.S. origin grocery items found
in Saudi supermarkets continue to use stickers.

Saudi importers are constantly searching for new products, and often
request support from suppliers for promotion and advertising. The Saudi
consumer is discriminating, closely examining labels and looking for the
best deal. Advertising is considered a necessity to win Saudi consumers.
Two-for-one deals are very popular in large supermarkets in moving items
that are approaching their expiry dates. Major Saudi supermarkets are in
the initial stage of introducing category management. As the system
becomes more popular, many product brands are expected to be eliminated.

3\. Distribution Channels**:**

The flow chart below highlights the different marketing channels through
which a food product can arrive in Saudi Arabia from a manufacturing
plant in the United States.

![](media/image2.wmf){width="6.915277777777778in"
height="8.190972222222221in"}Food manufacturers normally sell directly
to sole agency importers, wholesalers, or U.S. consolidators. U.S.-based
consolidators buy from manufacturers and/or wholesalers. Some
consolidators act as sole distributors for U.S. manufacturers in the
Middle East. U.S. consolidators sell directly to Saudi importers and/or
major Saudi supermarket chains, such as Tamimi Markets, Al Azizia-Panda,
or Danube Supermarkets. About ten consolidators sell an estimated 70 to
80 percent of all U.S. high value products exported to Saudi Arabia.

Major Saudi importers operate well established Kingdom-wide distribution
networks and sell directly to retailers, institutional customers, and
wholesalers. Corner grocery stores and convenience stores source their
products locally from wholesalers.

## 4. Profiles of Major Saudi Supermarkets 

The table below provides a partial list of supermarket chains in Saudi
Arabia. Sales data and floor space figures are not made public. There
are no food publications or supermarket journals in Saudi Arabia. The
U.S. Agricultural Trade Office in Riyadh compiled information shown
below from personal interviews with supermarket managers.

+-------------------+-------------+-------+--------------+------------+
| **Retailer Name   | **          | **No. | **Location** | **         |
| and Outlet Type** | Ownership** | of    |              | Purchasing |
|                   |             | Outl  | **(ci        | Agent      |
|                   |             | ets** | ty/region)** | Type**     |
+-------------------+-------------+-------+--------------+------------+
| Al Azizia Panda   | Local       | 50    | Riyadh,      | Impo       |
|                   |             |       | Jeddah,      | rter/local |
|                   |             |       | Dammam,      | buyer      |
|                   |             |       | Dhahran,     |            |
|                   |             |       | Jubail,      |            |
|                   |             |       | Rastanura,   |            |
|                   |             |       | Mecca and    |            |
|                   |             |       | Qassim       |            |
+-------------------+-------------+-------+--------------+------------+
| Universal         | Local       | 35    | Riyadh,      | Importer/  |
| Marketing         |             |       | Qassim,      |            |
| (Al-Othaim)       |             |       | Hafralbatin  | Local      |
|                   |             |       |              | Buyer      |
+-------------------+-------------+-------+--------------+------------+
| Farm Supermarkets | Local       | 18    | Dammam,      | Local      |
|                   |             |       | Jeddah,      | buyer      |
|                   |             |       | Al-Khobar,   |            |
|                   |             |       | Dharan,      |            |
|                   |             |       | Qatif,       |            |
|                   |             |       | Jubail,      |            |
|                   |             |       | Rastanura,   |            |
+-------------------+-------------+-------+--------------+------------+
| Bin Dawoud        | Local       | 14    | Jeddah,      | Importer/  |
| Superstores       |             |       | Mecca &      |            |
|                   |             |       | Madina       | Local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Giant Sores       | Local       | 12    | Riyadh,      | Local      |
|                   |             |       | Dammam,      | buyer      |
|                   |             |       | Jeddah,      |            |
|                   |             |       | Khamis,      |            |
|                   |             |       | Jubail       |            |
+-------------------+-------------+-------+--------------+------------+
| Tamimi Markets    | Local       | 11    | Riyadh,      | Importer/  |
|                   |             |       | Dammam,      |            |
|                   |             |       |              | Local      |
|                   |             |       | Al-Khobar    | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al Raya           | Local       | 10    | Jeddah,      | Local      |
|                   |             |       | Mecca,       | buyer      |
|                   |             |       | Medina, Taif |            |
+-------------------+-------------+-------+--------------+------------+
| Omar Ali          | Local       | 7     | Riyadh       | Local      |
| Balsharaf         |             |       |              | buyer      |
| Supermarkets      |             |       |              |            |
+-------------------+-------------+-------+--------------+------------+
| Danube            | Local       | 7     | Jeddah       | Importer/  |
|                   |             |       |              |            |
|                   |             |       |              | local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Star Supermarkets | Local       | 6     | Jeddah,      | Local      |
|                   |             |       | Yanbu        | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Arabian Food      | Local       | 5     | Dharan       | Importers/ |
| Supplies          |             |       |              |            |
|                   |             |       |              | local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+

+-------------------+-------------+-------+--------------+------------+
| **Retailer Name   | **          | **No. | **Location** | **         |
| and Outlet Type** | Ownership** | of    |              | Purchasing |
|                   |             | Outl  | **(ci        | Agent      |
|                   |             | ets** | ty/region)** | Type**     |
+-------------------+-------------+-------+--------------+------------+
| Ahmed Al-Ghamdi   | Local       | 5     | Dammam       | Importers/ |
| Supermarket       |             |       |              |            |
|                   |             |       |              | local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Sarawat           | Local       | 4     | Jeddah,      | Local      |
| Supermarkets      |             |       | Medina       | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al Hamada Stores  | Local       | 4     | Jeddah       | Local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Géant Hypermarket | L           | 4     | Riyadh,      | Impo       |
|                   | ocal/French |       | Jeddah, Al   | rter/Local |
|                   | joint       |       | Khobar,      | buyer/     |
|                   | venture     |       | Jeddah       |            |
+-------------------+-------------+-------+--------------+------------+
| Carrefour         | L           | 5     | Riyadh,      | Impo       |
| Hypermarket       | ocal/French |       | Jeddah, Al   | rter/Local |
|                   | joint       |       | Khobar       | buyer      |
|                   | venture     |       |              |            |
+-------------------+-------------+-------+--------------+------------+
| Marhaba           | Local       | 3     | Jeddah       | Local      |
| Supermarkets      |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Halwani           | Local       | 3     | Riyadh,      | Local      |
|                   |             |       | Jeddah       | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al Sadhan         | Local       | 3     | Riyadh       | Local      |
|                   |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Sawary            | Local       | 3     | Jeddah       | Local      |
| Superstores       |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al-Salhiya        | Local       | 3     | Hail         | Local      |
| Supermarkets      |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al-Nakhel         | Local       | 3     | Jeddah       | Local      |
| Supermarkets      |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Astra             | Local       | 2     | Tabuk        | Local      |
| Supermarkets      |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al-Ghounam        | Local       | 2     | Abha, Khamis | Local      |
| Supermarkets      |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Watani Super      | Local       | 2     | Jeddah,      | Local      |
| Center            |             |       | Mecca        | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Max Discount      | Local       | 1     | Riyadh       | Local      |
| Center            |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Euromarche        | Local       | 1     | Riyadh       | Local      |
| Superstore        |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+
| Al-Mandarin       | Local       | 1     | Madina       | Local      |
| Supermarket       |             |       |              | buyer      |
+-------------------+-------------+-------+--------------+------------+

## 5. Market Structure of Supermarkets 

The chains listed above represent the larger supermarkets in the Kingdom
(in terms of floor space and volume) and are referred to by the local
food trade as Class A supermarkets. There are approximately 225 Class A
supermarkets operating in the Kingdom. Smaller supermarkets using
grocery carts number at least 100 and they are referred to as Class B
supermarkets. The distinction between Class A and Class B supermarkets
is not well defined in Saudi Arabia. The recently introduced
hypermarkets are huge (up to 100,000 square feet), with up to 60
checkout counters, and provide more than 55,000 items including
foodstuffs, clothing, tools, toys, and electronics. There are more than
10 hypermarkets dispersed in the three major cites of the Kingdom
(Riyadh, Jeddah and Dammam). Saudi companies are not subject to income
taxes and financial information is not available to the public.

Class B supermarkets are found in all major urban areas and medium-size
cities of the Kingdom. The number of Class A and Class B supermarkets
increased from about 80 in 1984 to more than 300 in 2006 and continue to
grow. Factors that have contributed to the growth of supermarkets
include more exposure to the West via satellite television and travel,
changing lifestyles, and a craving by Saudi consumers for variety.

Major Saudi supermarkets such as Azizia-Panda, Tamimi and Danube as well
as the two French hypermarkets import a significant percentage of dry
goods directly from the United States, employing consolidators. Tamimi
imports chilled beef, and dairy products, fresh fruit and vegetables
directly from the United States. Chilled beef, strawberries, apples,
celery, lettuce, and other selected produce are flown in, while others
arrive by ship in containers.

## 6. Competition Among Major Retailers 

The entrance of the two French hypermarket chains Géant and Carrefour in
2004 along with the opening of Hyper Panda (a local chain) in the same
year has launched a new era of retailing in the Kingdom characterized by
a state of the art shopping experience and aggressive competition. Hyper
Panda, owned by Al Azizia-Panda Inc., is the largest supermarket chain
in Saudi Arabia. It has 50 outlets found in all major cities of the
Kingdom. Supermarkets\\hypermarkets strive to reduce costs to enhance
their competitiveness. They also try to increase their profitability by
introducing various revenue schemes. Local distributors are being asked
for listing fees ranging from \$2,000 to \$27,000 depending on the size
and power of the distributor. The bigger the distributor, the more power
it has to negotiate a lower listing fee. In addition to listing fees,
distributors are asked to provide a specified percentage rebate on total
annual turnover, contribute to advertising campaigns and provide at
least 60 day payment terms and reimbursements for expired items.
Distributors frequently authorize retailers to conduct special offers to
consumers such as buy one and get one free for products usually with 60
days or less of remaining shelf life.

Saudi retailers are constantly searching for new products, and often
request support from suppliers for promotion and advertising. The Saudi
consumer is a discriminating consumer, closely examining labels and
looking for the best deal. Advertising is considered a necessity to win
Saudi consumers. Major Saudi supermarkets are in the initial stage of
introducing category management. As the system becomes more popular,
many product brands are expected to be eliminated.

## 7. Structure of Wholesale Markets

Traditional wholesale markets normally cover a large area and are
divided by product category: a fresh fruit and vegetable market; cold
storage shops selling meats, cheeses, and poultry; and stores selling a
wide range of dry goods. The largest wholesale markets in Riyadh are the
Utega Center and Rabwa, each located 15 minutes from downtown. About 30
percent of all food purchases by Saudis are done at wholesale markets.

## 8. Structure of Corner Grocery Stores

Corner grocery stores (convenience), commonly referred to as bakalahs
are found in every Saudi Arabian neighborhood. Despite the growing
number of modern supermarkets in Saudi Arabia, the food retailing role
of bakalahs continues to be important. The bakalahs maintain some
advantage over supermarkets in providing services to shoppers looking to
quickly buy one or two items. A number of bakalahs have developed a
credit system that allows customers to pay at the end of the month.
Women in Saudi Arabia are not permitted to drive and depend on grocery
stores within walking distance of their homes. Most third country
nationals working in the Kingdom also do not own automobiles. Most
compounds housing expatriates contain one or more corner grocery stores.
Arabian Food Supplies owns and operates more than 60 corner grocery
stores in Western compounds throughout the Kingdom.

Bakalahs are filled with many consumer-oriented products originating
from the United States and most have refrigeration and the capacity to
store frozen foods. In addition to corner grocery stores, there are
hundreds of ethnic stores in the Kingdom, catering to Indians,
Pakistanis, Filipinos, and other Asians. Foods from many parts of the
world are found in the Kingdom.

In addition to bakalahs and ethnic stores, the number of gas station
mini-marts (Gas-Marts) is increasing markedly. Virtually, all gas
stations in the Kingdom have stores ranging from small kiosks to more
than 500 square meter convenience stores. The stores are well
refrigerated and carry a diverse variety of high-value products.

# SECTION III. COMPETITION

## 1. Local Food Processing Sector 

Food manufacturing in Saudi Arabia is expanding rapidly. The Saudi
government assists this sector by providing attractive financing and
subsidies on selected equipment and by imposing higher import tariffs on
certain imports that compete with locally-produced goods (poultry meat,
table eggs, infant foods derived from milk, sugar, macaroni and similar
products). Locally-produced food products also have an advantage over
imported food products because they can be exported duty-free to any
country within the Gulf Cooperation Council (GCC). GCC member countries
include Kuwait, Oman, Qatar, Bahrain, United Arab Emirates, and Saudi
Arabia. Hence, the market for locally-manufactured products consists of
the entire Arabian Peninsula, including Yemen. The expanded market has
prompted many international companies to establish licensing agreements
with local manufacturers in Saudi Arabia to produce their brand. Such
companies include Kraft/General Foods, Delmonte, Frito-Lay, and Nestle.

The vast majority of consumer-ready food items sold in Saudi
supermarkets, however, are imported. Most locally-made food products are
made with imported ingredients. Sunbullah, for example, imports blocks
of frozen vegetables and repackages into smaller consumer-size
containers for sale in Saudi retail outlets.

## 2. Imports 

**Poultry**

Saudi poultry production is dominated by broiler meat which meets 55
percent of local demand. The gap is filled by imports of frozen broilers
and parts, mainly from Brazil, France, and China. According to Saudi
Customs data, poultry imports in 2003 totaled about \$450 million.
Brazil, France and China account for respectively 60 percent, 27 percent
and 10 percent of total imports. The U.S. ranked a distant sixth at less
than one percent. Strong competition from Brazil and France, coupled
with increases in local production and the 2001 Saudi Government
requirement that poultry meat imported into the Kingdom must be obtained
from birds fed solely on vegetable protein, are major constraints facing
U.S. poultry meat sales to Saudi Arabia. Additionally, poultry meat sold
in Saudi Arabia must be free of growth hormones and must be slaughtered
in accordance with Islamic "Halal" rituals.

**Cheese**

Saudi Arabian cheese imports exceed \$250 million. Leading suppliers
include Denmark, Australia, France, Poland, and New Zealand. U.S. market
share is no more than 1 percent. With a steady increase in demand for
cheese and cheese products, coupled with the development of new cheese
processing companies (there are now 7), the demand for imported bulk
cheeses is expected to increase.

**Red Meats**

Saudi Arabian imports of red meat in 2003 were valued at \$224 million.
The United States enjoys a 5 percent market share. Leading suppliers are
Brazil (30 percent), Australia (28 percent), New Zealand (18) and Sudan
(8 percent). Virtually all imported red meat from the U.S. is beef and
is sold primarily in Class A supermarkets, "Western" hotels, and
American fast food chains. The main barrier to expanding U.S. beef sales
to Saudi Arabia is price, more than double alternative suppliers. Red
meat exported to the Kingdom must be obtained from cattle fed solely on
vegetable protein. Beef sold in Saudi Arabia must be free of growth
hormones and slaughtered in accordance with Islamic "Halal" rituals.

**Processed Fruit and Vegetables**

The United States accounted for 15 percent of Saudi Arabia's processed
fruit and vegetables imports valued at about \$170 million in 2003.
Other major suppliers included the Netherlands, Spain, Egypt and the
U.A.E. Processed fruit and vegetables are sold in all types of retail
outlets from Class A supermarkets to neighborhood convenience stores.

**Snack Foods**

Saudi Arabia imports of snack foods, excluding nuts, in 2003 were valued
at 205 million. Leading suppliers were the U.A.E., the Netherlands, the
U.S., and Italy. U.S. exports were valued at about \$20 million. More
than 60 percent of all Saudis are in their teen years, which as a group
tend to be important consumers of snack foods. Local snack food
production is expanding rapidly and now accounts for about 50 percent of
local consumption.

**Apples**

Saudi Arabia is the largest GCC market for imported apples. Imports in
2003 were valued at \$46 million. Chile is the dominant supplier
followed by France, the United States and Iran. Red apples dominate the
market. Import demand for apples is projected to grow 4 percent annually
over the next five years, with the U.S. share expected to increase to
about 5 percent. Promotional activities to expand awareness of U.S.
apples and varieties will be needed to maintain and increase U.S. market
share.

**Tree Nuts**

Saudi Arabia's imports of tree nuts in 2003, consist largely of almonds,
is estimated at \$27 million. The United States was the dominant
supplier, accounting for nearly 45 percent. Most of the remainder was
made of Iranian and Indian product. Almonds are an integral part of the
Saudi diet, used in sweets, cakes, and biscuits. A marked increase in
demand occurs during the holiday month of Ramadan and the Haj (the
pilgrimage to Mecca).

# SECTION IV. BEST MARKET PROSPECTS

## A. Products in the Market with Good Sales Potential 

Most Saudi importers buy for mass distribution and employ consolidators.
Consolidators source products from wholesalers, apply bilingual
stickers, and arrange mixed containers for shipment to Saudi Arabia.
Consolidators often recommend new-to-market products to Saudi Arabian
importers. Given the affinity for new products by both Saudis and
expatriates living in Saudi Arabia, Saudi importers and supermarket
executives are constantly searching for new food items to introduce.
Popular product categories include prepared fruits and vegetables,
beverages, poultry parts, snack foods, candy, honey, sauces, mayonnaise,
cereals, bakery products, condiments, jams and jellies, peanut butter,
salad dressings, gravies, desserts, sunflower seeds, chips, dried beans,
peas, soups, seasonings, and almonds.

Demand for dietary and health foods is increasing in the Kingdom as
Saudis become increasingly health conscious. Saudi Arabia's population
has one of the highest rates of diabetes in the world and obesity is
widespread.

## 

## B. Banned Products 

For religious reasons, Saudi Arabia bans imports of alcoholic beverages,
live swine, pork, and foodstuff ingredients or additives that contain
pork products, including pork fat, lard and gelatin. Other banned
products include donkey and mule meat, frog legs, poppy seeds, hemp
seeds, hops and swine leather.

# 

# SECTION V. POST CONTACT & FURTHER INFORMATION 

1\. Post Coordinates:

U.S. Agricultural Trade Office

Regional Director

American Embassy

Unit 61307

APO AE 09803-1307

U.S. Agricultural Trade Office

Regional Director

American Embassy

P.O. Box 94309, Riyadh 11693

Tel: 966-1-488-3800 Ext. 4351

Fax: 966-1-482-4364

Internet E-Mail Address: Agriyadh@usda.gov

2\. 2006 Post Reports Relating to the Saudi Food Industry:

By accessing the website: www.fas.usda.gov (Country, Saudi Arabia,
Attaché Reports), one can obtain the following reports on the Saudi food
industry, submitted by the U.S. Agricultural Trade Office/Riyadh:

SA6001: Trade Policy Monitoring Annual Report

SA6002: Grain and Feed Annual

SA6003: Quarterly Barley Trade Report

SA6004: Saudi Arabia Bans Imports of Live Bovine Animals from State of
Alabama

SA6005: Saudi Missions Notarization Requirement for Some Commercial
Documents Dropped

SA6006: Saudi Arabian Applied Tariff Rates for Agricultural Products
2006

SA6007: Biotechnology Annual Report

SA6008: Food and Agricultural Import Regulations and Standards Update

SA6011: Quarterly Barley Trade Report

SA6012 Saudi Arabian Poultry Annual Report

SA6014 Post Export Certificate

SA6015: Update Saudi Arabian Exporter Guide Annual Report