Background

Saudi Arabia’s hotel, restaurant and catering sector (HORECA) has been experiencing rapid socio-cultural changes over the past two years, mainly due to the Kingdom’s major effort to diversify its economy, in order to end its dependence on crude oil. Tourism is among the various new sectors being earmarked for economic growth and development; it is anticipated that the country will welcome 100 million tourists in 2030. These significant changes have in turn led to the mushrooming 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 needs. In the past five years, its average import of Saudi Arabia’s oils and fats was around 890,000 tonnes per year. Saudi Arabia’s government policies on social and tourism activities have pushed the nation’s import figure to surpass 900,000 tonnes, except in 2021 due to pandemic 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, which means that the country’s oils and fats market has a great expansion potential.

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

Source : MPOB

Malaysian palm oil (MPO) imports continue to show an upward trend in 2022. In July 2022, the import of MPO by Saudi Arabia stood at 330,248, recording a significant increase of 178,097 (117.1%) as compared to Jan-July 2021. The removal of travel bans, the recovery of 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 in recent years has pushed Saudi Arabia to find other sources of income for the country. Tourism is one of the sectors that the Saudi Arabian government has identified as a highly-profitable revenue stream for the nation. Even though Saudi Arabia receives millions of visitors for religious tourism, its non-religious tourism activity is almost negligible. The Kingdom has recently removed a lot of social restrictions, which is aimed at making the county more tourist friendly.

This development is in line with the Kingdom’s Vision 2030, which anticipates 100 million tourists to visit the Kingdom in 2030. The focus on growing its tourism industry has spurred the development of new hotels in the Kingdom. The expected number of new hotel keys available between 2022 to 2025 in its 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

The table shows that a total of 22,400 new hotel keys will be available in the market by 2025. Even though the COVID-19 pandemic had negatively impacted the Kingdom’s tourism plans, they have recovered since the borders were reopened. Even when the border restrictions were strictly enforced in 2021, 4,500 new hotel keys were still available in Makkah. This positive trend is expected to continue for years to come.

The transformation can also be seen in the Kingdom’s social activities segment. New and trendy restaurants are being opened in major cities such as Riyadh, Jeddah, and Dammam, while international fast-food chains are also gaining a foothold 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 almost every shopping mall in major cities.

As entertainment options are limited in the country, the culture of dining out has become more popular. Unlike previously when these restaurants would only serve male diners and families, they have now opened their doors to female patrons as well, which has significantly boosted the establishment of new restaurants in the Kingdom.

Saudi Arabia’s growing food and service market is currently gaining momentum as one of the largest in the Middle East, valued at USD 27.8 billion in 2021. And according to Mordor Intelligence, it is projected to grow at a CAGR of 7.71% during the forecast period of 2022-2027. The HORECA in Saudi Arabia is projected to continue to prosper in the future. New hotels and restaurants are mushrooming all over the Kingdom. The drivers of this growth are:

1. Government policies: Changes have been made to social gathering laws and the visa approval process to encourage the growth of the country’s tourism industry that targets not only foreign visitors, but also the locals.
2. Demographics: A young population as 53% of the Saudi Arabian population are between the ages of 15-44. Most of them are affluent and are the main consumers in these sectors.
3. Disposable income: Saudi Arabian citizens possess high disposable incomes that allow them to spend more on food and hotel accommodation.
4. Expansion of the Tourism and Entertainment Industries: Main catalyst for the expansion of HORECA industries in Saudi Arabia, boosting the demand for food outlets and hotels in the Kingdom.

Conclusion

MPO industry members need to take advantage of the situation in Saudi Arabia by persuading the Kingdom’s buyers to maintain, or even better, increase their purchase of MPO. Furthermore, the leading local players such as Savola, Arab-Malaysian Vegetable Products, United Flowers, IFFCO, and Mazola are looking forward to working with MPO companies, not just on the matter of palm oil supply but also in other areas related to the palm oil supply chain business. MPOC KSA is always available to assist those who are interested in meeting their potential local partners. 

Prepared by: Muhammad Kharibi

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