Confectionery in Saudi Arabia

Prospects

Return to growth as consumers adjust to higher prices

Having seen sales fall in 2018, due to the imposition of 5% VAT and the departure of expats as a result of the government’s Saudization policy, chocolate confectionery returned to current value growth in 2019. The improved performance resulted in part from consumers having become accustomed to the increased prices due to the introduction of VAT.

Health trend helps organic chocolate tablets to stand out

Organic chocolate tablets was one of the strongest performing segments in chocolate confectionery in 2019. Organic products are not perceived as overly expensive in the Saudi market, as they retail at similar price points to available non-organic brands, such as Lindt and Godiva.

Manufacturers targeting demand for portion control

Small, bite-sized chocolate products are gaining in popularity in Saudi Arabia. As with organic chocolate tablets, these products are benefiting from the rise in health-awareness and body-consciousness, as consumers pay increasing attention to their calorie and, particularly, sugar intake.

Competitive Landscape

Leader Mars investing in regional production infrastructure

Mars retained a strong lead in chocolate confectionery in 2019. Saudi consumers are well known for their love of international brands, especially in chocolate confectionery, and their loyalty to Mars remains strong.

New premium brand boosts FMC’s performance

Food Manufacturers Co (FMC) was amongst the stronger performers in the tough conditions prevailing in the Saudi market in 2019. The company’s growth was driven by the introduction of the Godiva brand to the market.

Expansion of imported and health-orientated offer to meet consumer demand

Imported brands are becoming increasingly common in the Saudi market. Retailer, Danube has notably introduced new chocolate brands, such as Meybona Organic chocolate tablets, which have expanded the organic segment and extended the offer targeting health-orientated demand in the market.

Prospects

Gum recovery to continue as functional positioning attracts new consumer base

Challenging economic conditions and the imposition of VAT forced consumers to consider their budgetary priorities in 2018. In addition, the departure of expats as a result of Saudisation is leading to a contraction of the consumer base.

Sugar free gum benefiting from prevailing health trends

Increasing awareness of the impact of sugar on health is encouraging growing numbers of consumers to attempt to reduce their sugar intake. This is driving growing demand for sugar free chewing gum, which encouraged the launch of new brands in the segment in 2019.

Modern grocery retailers’ discounting drives sales

With consumers having become increasingly budget-conscious, and gum being particularly vulnerable to consumers cutting back on spending, category sales are being driven by continuous discounts and promotions on the part of hypermarkets and supermarkets. Such moves helped to drive the ongoing shift in the distribution of gum from independent small grocers and, to a lesser extent, food/drink/tobacco specialists to supermarkets and hypermarkets.

Competitive Landscape

Leader focusing on sugar free gum to fend off competition

Batook Chewing Gum Ind Ltd retained the lead in gum in 2019, with its strong position supported by its widely recognised brands, which have established significant levels of consumer loyalty. The leading player is considered to use high-quality ingredients to achieve the taste of its gum.

Mentos sees growth driven by flavour innovation

Perfetti Van Melle Group’s Mentos was amongst the fastest-growing brands in gum in 2019. The brand has benefited from the introduction of new flavours, including green tea, which targets consumers who are focusing on a healthier lifestyle.

New sugar free gums launched

2019 saw new gum products introduced into the Saudi market, primarily targeting the growing demand for sugar free gum. Prominent amongst these was Ülker Oneo, which comes in a variety of different flavours, including spearmint, strawberry, watermelon and peppermint.

Prospects

Increasing consumer budget-consciousness dampens sales

Economic conditions and the imposition of VAT heightened consumer budget-consciousness towards the end of the review period, dampening demand for non-essential products such as sugar confectionery. The category was also hit by expat families leaving the country as a result of the Saudization policy, which led to a contraction of the category’s consumer base.

Negative image of sugar exerting a growing influence

Sugar confectionery is being hit particularly hard by rising consumer awareness of the adverse effects of sugar consumption on health. Parents are paying increasing attention to their children’s health and eating routines, and particularly to reducing their sugar intake.

Borgat’s broad offer taps into pastilles, gums, jellies and chews’ ongoing popularity

Pastilles, gums, jellies and chews is a popular category with children in Saudi Arabia and performed strongly in 2019. Al Wefag Trading Est’s Borgat is one of the most influential brands in pastilles, gums, jellies and chews, thanks to its extensive geographic coverage in the market and competitive pricing.

Competitive Landscape

Deemah benefits from building broad consumer base

Offering a wide range of brands and products, local company, Deemah – United Food Industries Corp Ltd is the leading player in sugar confectionery in Saudi Arabia. The company’s locally produced eponymous brand has established a high level of loyalty, while the breadth and competitive pricing of its offer have enabled it to build a large consumer base extending across socio-economic groups.

Innovation serves Halwani Bros Co well, maintaining its loyal consumer base

Despite the challenging economic situation, Halwani Bros Co Ltd put in a strong performance in 2019. The company is the leading player in halva, and maintains consumer interest and loyalty through product innovation.

Baqalahs channel benefits from convenience and tradition

Baqalahs is the biggest channel in sugar confectionery. The leading company, Deemah - United Food Industries Corp Ltd, primarily focuses on distributing its products in baqalahs, which are conveniently located in residential areas and traditionally embedded in Saudi shopping habits.

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