Saudi F&B Market – Addressing Health and Wellness as the New Growth Wave

GFM FOOD TECH SUMMIT
Saudi F&B Market
Addressing Health and Wellness
as the New Growth Wave
07 November 2018
FARRELLY & MITCHELL
Chaitanya GRK, Senior Manager Middle East & Africa

2
Farrelly & Mitchell
GFM Food & Tech Summit: Saudi F&B Market Addressing Health and Wellness as the New Growth Wave
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3 GFM Food & Tech Summit: Saudi F&B Market Addressing Health and Wellness as the New Growth Wave
Agenda
01
02
03
04
SECTION
SECTION
SECTION
SECTION
What do demographics and economic aspects of Saudi indicate
Where does Saudi stand on ‘Health’
What are the bankable opportunities in Saudi
What should companiess address to capitalise the opportunity
Disclaimer: The information in this presentation is intended to give information in general nature, great efforts has been exerted to ensure the accuracy of this data at the time the presentation was drafted. Farrelly & Mitchell Business Consultants Ltd. and its Branch offices or affiliates does not provide any implicit or explicit
guarantees on the validity, timing or completeness of any data or information in this presentation. Also we assume no responsibility on the appropriateness of the data and information for suiting any particular purpose or reliability in trading or investing. Please note: Unless provided otherwise and in writing from us, all
information contained in this presentation, including logo, pictures and drawings, are considered property of Farrelly & Mitchell Business Consultants Ltd.

4
1.5%
Favourable demographics to drive Saudi F&B demand
Fast growing with median age <10 years than developed countries’ average
32
82
128
320
39
82
122
355
Saudi Germany Japan USA
2015 2030
CAGR 2015-2030Population in Mn
29.8
45.9 46.3
37.634.7
47.6
51.5
39.8
2015 2030
Median age, years
Almost 10 years less than average of all
developed countries
Saudi population is growing at a faster pace
than some of the developed economies …
• More mouths feed in future
…with larger base of youthful population
• Contributing to strong economic growth
• Increased economic freedom
0%
-0.3%
0.7%
XX%
Source: World bank

5
Strong consumer spending potential indicates wider opportunities in F&B
Per capita GDP comparable to developed countries
+ USD 7,500
(~14%) Growth from 2017 to 2023
Saudi per capita GDP (PPP) is comparable to
developed countries…
• Higher consumer spending potential
…which is set to increase further
• Wider avenues to spend
• Only 18% of household expenditure is
on F&B (2013)
54,532 50,804
42,942
59,79262,122 62,705
51,423
72,861
2017 2030
54,532
55,926
57,358
58,399
59,551
60,780
62,122
2017 2018 2019 2020 2021 2022 2023
Competing against
developed countries
Per capita GDP (PPP), Units in USD
Source: World bank and Saudi General Authority of Statistics

6
59%
68%
34%
14%
23%
60%
23%
7%
39%
27%
4%
10%
35%
70%
35%
9%
Physically inactive Overweight Obese Diabetic
However, health challenges set to change consumer approach to F&B
Limited physical activity increasing NCDs, which contributes to 73% of adult mortality
• Obesity is key reason for
Noncommunicable Diseases (NCD).
• Around 73% of the adult mortality is due to
NCDs in 2016
Young population base but inactive lifestyle creating larger health challenges
• Consumers are increasingly getting health conscious
• Social media penetration playing a major role
• Marginal awareness push from F&B companies
% of adults
Source: World Health Organization

7
Economic situations displacing base population in Saudi on long term
Eventually impacting F&B industry
27,963
34,568 33,385
31,150
28,102
2013 2014 2015 2016 2017
(33,143)
(61,483)
(94,389)
(277,025)
(234,191)
(290,381)
2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2
11.7
6.7
(5.0)
Expats 2016 Anticipated expats
leaving by 2025
Expats by 2025
Around 1 Mn Expat workers left
from 2017 till 2018 Q2
Increased employment to
Saudis – More spending
Decreased by 19%
from 2014
Consumer spending
sentiment negatively
impacted due to
economic situations
Expat employees leaving the
country resulted in change in
base population
Around 5 Mn expats estimated
to leave by 2025. Resulting in
3 Mn jobs for Saudis
Expat employees leaving the country Total expats (employees and dependents) in MnConsumer expenditure per capita, SAR
Source: Saudi General Authority of Statistics and Farrelly and Mitchell Research

8
But higher employment rates for Saudis to sustain the industry as
affordability increase…
Around 3 Mn Saudis
to replace expats as
part of Saudization
On average 3 times
higher than an expat
Around 27% higher
than expat
household
INCREASED EMPLOYMENT TO
SAUDIS
HIGHER SALARY TO SAUDIS
HIGHER HOUSEHOLD SPENDING
OF SAUDIS
HIGHER AFFORDABILITY
Increase in per
capita spending
Increased preference
for premium products
CONSUMER
TURNS
HEDONISTIC
1
Source: Saudi General Authority of Statistics and Farrelly and Mitchell Research

9
…with prevailing health challenges, consumers seeking ‘Healthy Food’ to
substantially increase
1
Health
Challenges
CONSUMERS WILL
EVENTUALLY GET
MORE HEALTH
CONSCIOUS
2
NEED FOR FOOD
ADDRESSING
‘HEALTHY’ FACTOR
3
Less artificial, sugar
free, low salt, fat free,
natural colours, no
preservatives etc…
Offering specific benefit
like D Vitamin, bone
health, gut health,
immunity, heart health,
brain health etc…
Clean Food
Functional Food
Source: Farrelly and Mitchell Research

Dairy, Poultry, Bakery and Beverages to attract higher consumer attention
Functional benefits to gain the most
Existing market maturity for
health food
Low – Med Low Low-Med Low - Med
Future scope High High High High
Type of benefits to address Functional Clean Clean and functional Functional
Product benefits to address
• Protein
• Probiotics
• Bone health
• Hormone free
• Natural feed
• Omega 3
• Ancient grains
• Organic
• High fiber
• Protein
• Diabetic
• Vitamins
• Antioxidants
• Gut health
Key target consumers Kids and women All Adults Kids and Adults
DAIRY BAKERY BEVERAGESPOULTRY

11
Prevalence
Consumer negligence on some of the basic health
issues…
…>50% of mortality due to cardiovascular, cancer
and musculoskeletal diseases
Vitamin D
Leading
to bigger health
challenges
>60%
of population
are deficient
Overweight Hypertension Diabetes
68%
population
26%
of adults
14%
of adults
Cardiovascular Cancer Musculoskeletal
Hyper-
cholesterolemia
8.5% of adults
20% in border
Colorectal cancer
15% men
10% women on
overall cancer
instances
Osteoporosis
34% female
31% male over 50
years
Precaution Low carbs Low sodium Low sugar
Supplementatio
n
Low saturated fat
High fibre and
Antioxidants
High calcium
Next growth wave of opportunities in the
Saudi F&B space
Source: World Health Organization and Farrelly and Mitchell Research
Hypertension, Vitamin D deficiency, Musculoskeletal and Colorectal cancer challenges
could be addressed through nutrition; untapped by F&B companies

12
Immense scope to launch low sodium commodity portfolio. Substantial opportunity for
high fibre, fortified calcium and functional beverages
• Potentially attractive but consumer awareness is low; requires substantial outreach
• Low volume variants but becomes an essential differentiator to win ‘Heart Space’ of the consumer;
addresses most commonly faced challenge by large companies in the region
Poultry –
–
Functional drinks
–
Dairy Low sodium cheese, laban
Low sodium processed meat - Cold
cuts, franks etc
Low sodium bread/bakery
–
Low sodium - Snacks, condiments,
processed food, canned food etc
Bakery
Hormone free/clean products
High fibre/Whole grains
Clean - Free from Additives,
colorants, preservatives
Functional drinks - Immunity, anti
oxidants
–
Beverages
Fortified dairy
–
–
Hypertension Vitamin D Cancer Musculoskeletal
Others

Product relevance overpowers consumer preference
Brand loyalty, price and packaging which are key attributes of mass products are underweighted
HEALTHY FOOD PRODUCTS
Relevance
Benefits that the product
offers to the consumer
Brand
Small to medium sized
companies gaining when
they differentiate
Price
Consumer is ready to pay
reasonable delta if the
product is relevant
Packaging
Not critical as long as the
labelling is clear
R
B P PBrand Price Packaging
Relevance

What should companies address to capitalise on the opportunity?
Letting know the product benefit and digital marketing are crucial aspects
Companies marketing/venturing to market healthy products need to prioritize four key aspects
Product labels
• Product benefit
• Ingredients
Digital marketing
• Social media
playing crucial role
• Paid promotions through
ambassadors
Product distribution
• Distributor
• Product reach
Product visibility
• Retail shelf space
• Merchandise
3
21
4

15
Questions? Shukran!

16
Malachy Mitchell
Managing Director
Unit 5A Fingal Business Park
Balbriggan
Co. Dublin
Ireland K32 EH70
Tel: +353 1 690 6550
Fax: +353 1 883 4910
Mobile: +353 86 806 0843
Email: mmitchell@farrellymitchell.com
Saudi Arabia
Najeeb Alhumaid
Regional Manager
Al-Rusais Building
Suite 510
Olaya Main Road
6468 Al Ulaya - Al Ulaya
Riyadh 12211 - 3857
Kingdom of Saudi Arabia
Tel: +966 11 4634406
Mobile: +966 54 338 7199
Email: nalhumaid@farrellymitchell.com
www.farrellymitchell.com
Europe
Farrelly & Mitchell is a leading international
agribusiness and food management consulting firm
with offices in Europe and the Middle East.
We help our clients to build and implement
sustainable restructuring, transformation or growth
strategies across each link of the agribusiness and
food value chain - from large scale farmland crop
and livestock investments and agribusinesses to
consumer food or beverage manufacturing,
distribution, retail and hospitality.
Headquartered in Ireland with an office in the
Middle East, the firm works with corporate,
investment bank, private equity, family office and
government clients throughout Europe, Middle East,
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At Farrelly & Mitchell we help our clients to grow,
invest and improve efficiencies.
About Farrelly & Mitchell
© Farrelly & Mitchell 2018
Middle East and Africa
Chaitanya GRK
Senior Manager
Al-Rusais Building
Suite 510
Olaya Main Road
6468 Al Ulaya - Al Ulaya
Riyadh 12211 - 3857
Kingdom of Saudi Arabia
Tel: +966 11 4634406
Mobile: +971 551991356
Email: cgrk@farrellymitchell.com

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