business opportunities for lituanian exporters: saudi arabia and uae

© Euromonitor International

1

BUSINESS OPPORTUNITIES FOR LITHUANIAN EXPORTERS: SAUDI ARABIA AND UAE JUSTINAS LIUIMA, SENIOR INDUSTRY ANALYST

VILNIUS, 2015-01-29

ABOUT EUROMONITOR INTERNATIONAL

COUNTRY KEY FACTS

CONSUMER MARKETS IN SAUDI ARABIA

CONSUMER MARKETS IN UAE

CONCLUSION


3 ABOUT EUROMONITOR INTERNATIONAL

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COUNTRY KEY FACTS



CONCLUSION


5

United Arab Emirates (UAE)

Population (‘000): 8.415

Total GDP, 2013 (€ mn): 303.027

GDP per capita(€): 36.009

Saudi Arabia

Population (‘000): 29.319

Total GDP, 2013 (€ mn): 563.704

GDP per capita (€): 19.226

Key facts

COUNTRY KEY FACTS

COMPARISON

GDP per capita in Lithuania:

€ 11.762



6

Real GDP growth 2008-2014

COUNTRY KEY FACTS

-15

-10

-5

0

5

10

2008 2009 2010 2011 2012 2013 2014

%

Saudi Arabia UAE Lithuania Germany

Saudi Arabia

High reliance on oil exports

Ongoing diversification of economy

Real GDP growth – 4% in 2015-2020

UAE

Trade, tourism and manufacturing drives economic diversification

Country is highly vulnerable to external shocks

Real GDP growth – 5% in 2015-2020



7

Consumer profiles

COUNTRY KEY FACTS

Exp. per capita €, 2014 Saudi Arabia UAE Lithuania Germany

On Food and Beverages 1.469 2.525 1.854 2.271

On Clothing and Footwear 259 1.338 522 915

On Home Furnishings 155 157 118 471

Consumers are open to new product developments

Migrant workers influence consumption:

1 million in Saudi Arabia;

7.8 million in UAE



COUNTRY KEY FACTS



CONCLUSION


9

Packaged food and Soft drinks: key trends


Packaged food is profitable but highly competitive market

Consumers are brand conscious and aspirational

Private labels target low-income consumers

Islamic holidays impact sales of packaged food

Healthier alternatives - on the rise

Reduced fat and sugar products saw an increase in shelf-space

Juice producers benefit from restrictions on carbonate drinks

Impact on packaging - manufacturers are ensuring to mention inclusion of vitamins, minerals, cholesterol free, etc.



10

Packaged food sales up 62%

Spending per capita reaches €488 in 2014, compared to €162 in MENA and €556 in Lithuania

Bakery and Dairy – largest categories

Dried Processed Food, Confectionery and Oils&Fats hitting €1 billion sales mark

Packaged food market


0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

2009

2010

2011

2012

2013

2014

€ million

Other Bakery Dairy Dried Proc. Food Confectionery Oils and Fats



11

Bakery

Sales stand at €4.2 billion

Artisanal bread and small bakeries dominate

Hyper/Supermarkets offer artisanal bread

White bread and brown bread grows in popularity

Dairy


Milk consumption grows

Yoghurt and Cheese are the fastest

growing dairy categories

Spreadable cheese dominates cheese category, but soft/sliced cheese grows in popularity

Packaged food market (cont.)




12

Confectionery


Aggressive promotions in supermarkets, led by multinationals

Sugar and chocolate confectionery see strong growth

Imported products are popular

Frozen/Chilled Processed Food

Sales stand at €463 million

Meat products dominate

The most popular - chicken, beef products

Consumption of fish and vegetable products is limited to expat workers





13

Packaged food sales are forecast to grow by 41%

Sound economic prospects and population growth are keys for growth

Increasing competition - more suppliers and product offerings anticipated

Packaged food market: future forecast


0 4,000 8,000 12,000 16,000 20,000 24,000

2015

2019

€ million

Other Bakery Dairy Confectionery Oils and Fats Baby Food



14

Soft drinks sales up 45%

Spending per capita at €112 in 2014, compared to €54 in MENA and €81 in Lithuania

Carbonates is the largest category

Sports and Energy drinks – the fastest growing category

Soft drinks market


0 500 1,000 1,500 2,000 2,500 3,000 3,500

2009

2010

2011

2012

2013

2014

€ million

Other Carbonates Juice Bottled Water



15

Soft drinks sales forecast to grow by 33%

Marketing strategies (digital media) to intensify

Carbonates sales to remain strong, despite health awareness

Soft drinks market: future forecast


0 1,000 2,000 3,000 4,000 5,000

2015

2019

€ million

Other Carbonates Juice Bottled Water



16

Modern retail dominates

Hyper/Supermarkets relatively new concept, but growing in numbers and popularity

Changing shopping habits: consumers visit supermarkets once a week

Over 40,000 grocery retailers in 2013, with number anticipated to grow by 15% by 2018

Supermarkets expected to introduce more private labels

Sales channels


Wholesale

Wholesale market is quite fragmented, with around 1,000 companies

Operators target small and independent retailers

Cash & Carry failed to gain foothold, due to competition from hypermarkets

Top stores, 2014

Hyper panda

Aziziah Panda

Al Othaim

Bin Dawood

FarmSuperstores



17

Sales of Apparel and Footwear up 43%

Per capita spending at €354

Jeans - the most popular item

Clear distinction between middle-class and low-income consumers

Economy sales generate bulk of sales

Apparel and Footwear market


0 2,000 4,000 6,000 8,000 10,000 12,000

2009

2010

2011

2012

2013

2014

€ million

Apparel Footwear



18

Apparel and Footwear market is forecast to grow by 23%

Value for money products (for e.g. Splash) to strengthen position in the market

Lower income consumers expected to afford branded goods

Middle-income consumers will continue to trade mid-level clothing to luxury items

Apparel and Footwear market: future forecast


0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

2015

2018

€ million

Apparel Footwear



19

Specialist Apparel and Footwear retailers dominate

Franchises with Western brands dominate, companies such as Fawaz Al-Hokair Group and M.H. Alshaya have leading positions

Unbranded/economy products also available in the supermarkets

Sales channels


Top stores, 2014

Max/City Max

Splash

Bossini / Sparkle

H&M

Shoe Mart



20

Furniture market

Saudis traditionally prefer houses over flats

Large houses dominate: average size stands at around 460 sq. meters

Younger population opt for flats due to lower price

Traditional style dominate in furniture sales, upsurge in Turkish style observed in recent years

Shortage of 2 million homes – future opportunity

Key trends

Sales of furniture up 42%

Spending per capita at €458

Furniture Sales


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2008 2009 2010 2011 2012 2013

€ m

illi

on


21

Saudi Co for Hardware (SACO) leads, followed by IKEA

Local independent stores also hold strong positions

Competition expected to intensify, as newly-launched Abyat Megastore targets SACO

There are nearly 7,600 outlets as of 2013

Sales channels


Top stores, 2014

SACO

IKEA

Al Mutlaq Furniture

Al Aamer Furniture

Al Jedaie



COUNTRY KEY FACTS



CONCLUSION


23

Market is dominated by mixture of private label, domestic and multinational brands

Private brands are important in food categories consumed by migrant workers

Increasing health awareness, efforts to limit fizzy drink sales

UAE is unable to provide sufficient amount of food domestically and rely on imports

Packaged food and Soft drinks: key trends


Highly fragmented market

Locals consume a mixture of traditional and Western packaged food products

Large population of expat professionals from Western countries drives demand for Western food, e.g. cheese

Large number of migrant workers from Asia creates demand for products such as rice, noodles



24

Packaged food sales up 46%

Spending per capita at €340, compared to €162 in MENA and €550 in Lithuania

Dairy and Bakery - two largest categories

Other key categories include Confectionery and Sweet & Savoury Snacks

Packaged food market


0 500 1,000 1,500 2,000 2,500 3,000

2009

2010

2011

2012

2013

2014

€ million

Other Dairy Bakery Dried Proc., Food Confectionery Snacks



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Dairy


Milk prices remains under government cap

Flavoured drinking milk dominates in drinkable milk category

Traditional Laban yoghurt is popular, other also yoghurts perform well

Influx of expats drives demand for cheese

Bakery


Traditional bread dominates

Pastry, cakes growing in popularity

Introduction of bakery snacks and marketing campaigns fuel growth



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Confectionery


Large share of imported goods

Consumers are brand conscious

Shift towards smaller packages

Sweet/Savoury Snacks


Various snacks are popular due to large number of expat workers

Nuts and chips – most dynamic category

New flavours (such as pizza, cheese, nacho) are becoming popular





27

Packaged food sales forecast to grow by 30%

Increasing focus on health and wellness anticipated

Packaging sizes expected to shrink as on-the-go consumption grows in popularity

Packaged food market: future forecast


0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

2015

2019

€ million

Other Dairy Bakery Dried Proc. Food Confectionery Snacks



28

Soft drinks sales up 45%

Spending per capita at €137, compared to €54 in MENA and €81 in Lithuania

Fizzy canned drinks, juices and smoothies are popular

Fruit and vegetable juice on the rise in recent years as healthier alternative

Soft drinks market


0 200 400 600 800 1,000 1,200

2009

2010

2011

2012

2013

2014

€ million

Other Juice Bottled Water Carbonates



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Soft drinks sales forecast to grow by 40%

Juice to remain the most popular category

Competition in the market expected to intensify

Government’s efforts to tackle obesity could have an effect on carbonates prices/sales

Soft drinks market: future forecast


0 500 1,000 1,500

2015

2019

€ million

Other Juice Bottled Water Carbonates



30

Wholesale

There are around 350 wholesalers in UAE

Jaleel Wholesale Point is one of the largest FMCG wholesaler

Cash & Carry is insignificant

Most independent retailers by on credit or in bulk from hypermarkets

Modern retail dominates and hyper/supermarkets consolidate their share

Hypermarkets account for 58% of grocery retail sales, followed by supermarkets with 24% share

Hypermarkets offer better price due to economies of scale and better logistics channels

There were more than 9,500 grocery retailers as of 2013

Sales channels


Top stores, 2014

Carrefour

Lulu Hypermarket

Union Co-operativeSociety

ADCOOP

Choithram



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Sales of Apparel and Footwear up 35% (from €7.9 billion in 2009 to €10.6 billion in 2014)

Per capita spending at €52

Sales boosted by flourishing tourism

Fast fashion and mid-price segment dominates

Cheaper apparel grows in popularity as migrant workers return to UAE

Apparel and Footwear market


0 2,000 4,000 6,000 8,000 10,000 12,000

2009

2010

2011

2012

2013

2014

€ million

Apparel Footwear



32

Sales of Apparel and Footwear forecast to grow by 23%

Large share of demand is expected to be generated by tourists

Competition in the market to remain fierce, differentiation and introduction of new collections to accelerate

Apparel and Footwear market: future forecast

UNITED ARAB EMIRATES

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

2015

2018

€ million

Apparel Footwear



33

Modern retailers dominate, but department stores and hypermarkets gain ground

Hypermarkets attract more lower-income consumers with no-thrills apparel brand

Dominant retailers plan to consolidate their market share

Sales channels


Top outlets, 2014

Forever 21

Aldo

Max

H&M

Splash



34

Key trends

Furniture sales shift from investors to real estate to private consumers

Traditional and modern style furniture is popular in UAE

Replacement cycle for furniture is 3-4 years

Multinational brands dominate, IKEA is popular among locals, Asians and Westerners

Furniture sales

Furniture sales up 17%

Spending per capita at €548

Furniture


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2008 2009 2010 2011 2012 2013€

mil

lio

n



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Specialised retailers dominate, with IKEA having dominant position

Competition in the market expected to intensify and put pressure to keep furniture prices unchanged

There are nearly 8,200 retailers operating as of 2013

Sales channels


Top outlets, 2014

IKEA

Home Centre

Marina

Ace

The One



COUNTRY KEY FACTS



CONCLUSION


37

Packaged food and Soft drinks

Private labels – possible solution for food producers

Opportunities for yoghurt, dairy exporters

Carving niche markets in bakery, meat products

Possibilities for fresh juice producers, as health awareness increases

Apparel and Footwear

Attractive, but highly competitive market

Expanding value-for-money offerings, hypermarket private labels

Children clothing – profitable, but highly competitive and niche market

Home textiles

Furniture

Returning expats – opportunity for furniture exporters

Home shortage in Saudi Arabia – future possibility

Fierce competition, multinational retailers hold strong positions

Possibility to open boutique furniture shops in UAE

Opportunities for Lithuanian exporters

CONCLUSION


THANK YOU FOR LISTENING

Justinas Liuima, Senior Industry Analyst

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business opportunities for lituanian exporters: saudi arabia and uae

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