Double-digit e-commerce growth for UAE & KSA food industry amid inflationary pressures: NielsenIQ

Amid constraints of current inflationary pressures leading to significant price hikes averaging 3% and 5%, respectively, over the past three months, Saudi Arabia and the UAE have recorded strong e-commerce growth rates of 17% and 24%. Food and beverage (F&B) sales continue to show value growth across every channel over the last 12 months.

The UAE has witnessed the highest value growth in the snacking category, while in KSA personal care segment takes the lead. This resilience and adaptability of e-commerce underscores its enduring appeal and versatility in the face of economic challenges. These insights stem from the latest NielsenIQ analysis of the region’s key Fast Moving Consumer Goods (FMCG) data up to the end of August 2023.

In contrast to the e-commerce sector’s performance, the Modern Trade (MT) sector has shown signs of gradual deceleration, indicative of a growing sense of price sensitivity among consumers. In Saudi Arabia, a substantial 69% of categories in Modern Trade have witnessed an average price increase in the last three months versus last year, while this number is even higher at 78% in the UAE. This means that even if inflation continues to slow down in both markets, consumers are feeling the impact of rising prices across a wide range of products.

One of the most notable trends in this period is the decline in consumption, as volumes are declining by –0.4% in Saudi Arabia and –0.7% in the UAE. But in this inflationary environment, consumers are also willing to pay more for the attributes that matter to them. Their interest focuses on products made of natural/organic ingredients.

Amid challenges posed by rising prices, promotions remain a significant factor in the region, with the latest NielsenIQ Barometer Report highlighting that Temporary Price Discounts (TPR) still dominate promotions.

In the UAE, promotions accounted for 33.5% of the total FMCG value in July 2023, but showed a lower overall weighting in overall sales, pointing to potential shifts in consumer behaviour. Promotion efficiency in the UAE is still a concern, highlighting the need for more effective marketing strategies.

In Saudi Arabia, promotions accounted for 40% of the total FMCG value sold in July 2023, indicating a continued reliance on discounts to drive sales. According to the latest NielsenIQ Mid-year Consumer Outlook 2023 survey, 97% of Saudi consumers have changed the way they shop for FMCG (versus 95% globally). This has seen them adopting a range of strategies to manage their spending. The three top consumer saving strategies are buying whichever brand is on promotion (29%), shopping more often at discounters (32%) and focusing on essentials (26%).

The analysis also highlighted the staying power of private labels in KSA where many consumers are managing costs by turning to store brands. More than a third of consumers think store brands usually are good value for money while 30% consider them a viable alternative to name brands.

Overall, it’s clear that the FMCG landscape in KSA and the UAE is experiencing significant shifts with rising prices and declining consumption challenging businesses operating in the region. While promotions remain an essential strategy, businesses must navigate the delicate balance between discount-driven sales and maintaining profitability.