From Shopper Signals to Strategic Shifts: What Saudi Grocery Trends Mean for Retailers and FMCG
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This article is brought to you by our Knowledge Partner Oliver Wyman
The grocery market in the Kingdom of Saudi Arabia (KSA) is undergoing a significant transformation. As the largest grocery market in the Gulf Cooperation Council (GCC), it presents both challenges and opportunities for Fast-Moving Consumer Goods (FMCG) companies.
As the KSA grocery industry matures and modern trade’s market share increases, competition for customer traffic and spend will intensify, driving increased consumer expectations for value and quality. Depending on their priorities, consumers will increasingly seek affordable options, differentiated products and experiences, or formats that find a good compromise between both.
According to Oliver Wyman’s Market Pulse 2024 report, consumers across the UAE and KSA are young, digitally savvy and more discerning than ever. In KSA, demand is shifting towards differentiated retail propositions ranging from value-focused formats offering competitive pricing and limited assortment, to premium concepts built around exclusive products and experiences.
This evolution creates ample opportunities for FMCGs to innovate and tailor their offerings to meet the diverse needs of consumers, emphasising the importance of a customer-centric approach in a market that is becoming increasingly savvy.
What This Means for Retailers
These consumer changes are set to reshape the Saudi grocery landscape. One of the most notable trends is the rise of discount models, which are expected to exert pressure on margins across the entire value chain. As consumers increasingly favour value-led shopping experiences, traditional retailers must reassess their offerings, strengthen their private-label ranges and adapt their strategies to remain competitive.
To compete in this environment, leading retailers should focus on enhancing their capabilities, particularly in category management and efficient operations. By taking a more data-driven and location-specific approach, they can better match product selection with customer preferences across stores and regions and ensure that the right products are available at the right time. This strategic approach is not merely a response to changing consumer preferences; it is a proactive response to securing a competitive edge in a rapidly evolving market.
What This Means for FMCGs
As retailers evolve, FMCGs will need to respond across three critical areas:
Increased Focus on End-to-End Efficiency
FMCGs will need to collaborate with retailers to maximise end-to-end efficiency in the value chain. Retailers are beginning to challenge traditional direct delivery models, seeking more efficient alternatives that can streamline their supply chains and store operations. Additionally, there is a growing emphasis on reducing food waste, an issue that has often been relegated to suppliers. As end-to-end costs are increasingly scrutinised, retailers can take greater responsibility to minimise waste and returns in order to achieve better prices.
Moreover, retailers will conduct more scrutiny on stock levels and slow-moving items, ensuring that inventory management practices are both effective and responsive to consumer demand. This heightened focus on efficiency will ultimately benefit FMCGs as they align their operations with the expectations of modern retailers.
Upgraded Category Management Capabilities
As the retail landscape adapts, so will the commercial models employed by retailers. There is a noticeable shift towards attractive buying prices and unconditional bonuses, moving away from traditional shelf rental models. This transition will compel FMCGs to demonstrate the value of their products to secure coveted shelf space. Retailers will increasingly take ownership of product assortments and store layouts, influencing not only what is displayed but also where it is positioned within their stores.
In turn, this will require more robust revenue growth management capabilities, including:
- Directing investments into the highest-growth channels and formats
- Collaborating with retailers on promotions to ensure mutually beneficial outcomes
- Adjusting range and price-pack architecture to serve different shopper profiles and missions
- Partnering on innovation and personalisation, including new products, new formats and digital touchpoints
Smarter, Data-Led Decision Making
Success will depend on embedding customer insight and analytics into every stage of the sales and planning cycle. Daily decision-making should be informed by a deeper understanding of shopper behavior, store-level dynamics and promotional performance. FMCGs that can act on this intelligence faster and more precisely will have a competitive advantage.
The Road Ahead
KSA’s grocery sector is entering a new phase defined by the balance between value and differentiation. To thrive, retailers and FMCGs alike will need to sharpen their focus, strengthen their capabilities and reimagine collaboration.
For FMCGs in particular, the path forward lies in becoming true strategic partners to retailers: improving supply chain agility, co-creating the right offers for diverse customers and using data to unlock growth.
Ultimately, those that succeed will be the ones who combine deep consumer understanding with data-driven, day-to-day decision-making, enabling them not just to respond to change, but to lead in a dynamic, maturing market.
Sources:
- "Market Pulse 2024 — Grocery Retail Trends in the UAE and Saudi Arabia" report, Oliver Wyman
- Customer Perception Map (CPM) Survey, Oliver Wyman
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