The restaurants market in Saudi Arabia is estimated at 79 billion riyals. Saudis spend 7. 5% of their total income on food and beverage services, making it the most important entertainment activity in the country. This activity is characterized by high competition in terms of both quantity and quality. This is due to the ease of entry into the market and the low level of technical knowledge required in general. The number of establishments in this sector has reached 52,000, employing 289 thousand employees, of whom 37 thousand are Saudis. We anticipate that sales growth will rebound and that profit margins will continue to improve as economic growth returns, the exodus of expatriate workers stabilizes, and business confidence is restored by mega projects and entertainment seasons. There has been a recent improvement in profit margins for the sector. This is due to the high operating leverage of the activity, which has begun to positively affect sales. Additionally, the costs of financial compensation for expatriate workers, government fees and value added tax have decreased. This has led to a sharp increase in profit margins. There has been a sharp decline in sales growth in the past 4 years in all sectors of services and consumer products. Reduction in the number of foreign workers (nearly a million in 2018 alone). In addition to the increase in the prices of basic services and the application of value-added tax, which negatively affected the disposable income of the consumer, sales in the sector were also negatively affected.
Future Directions
Return on Growth The market is expected to return to moderate growth levels with the return of growth in the Kingdom’s economic activity, increase in business confidence, increase in foreign investment and a decrease in the pace of expatriate workers. According to the Quality of Life Program, which is one of the programs of the Kingdom’s Vision 2030, the Kingdom is located at a relatively late position in terms of the ratio of restaurants to population (2000 restaurants per million people). The program’s aim is to raise the rate to 2,100 restaurants per million people by 2020, and then to 3,010 by 2030. The increasing pace of women’s entry into the labor market is one of the factors of the high demand, as this contributes to increased economic growth and purchasing power, and lower rates of home cooking on the other hand.
The demand on Arabian restaurants is still high in Saudi Arabia, although there is different kitchens.
The program aims to reach 2,100 homes per million people by 2020 and 3,010 by 2030. The increasing pace of women’s entry into the labor market is one of the factors of the high demand, as this contributes to increased economic growth and purchasing power, and lower rates of home cooking on the other hand. The traditional restaurant sector in the local market is suffering from a decrease in the number and percentage of high-end restaurants with full service. On the demand side, the local product per capita in purchasing power is one of the highest in the world (770. 54 dollars), in addition to the high added value that allows the restaurant to operate a larger number of Saudis. From a broader perspective, the presence of this type in sufficient numbers provides an incubating environment for producing a generation of culinary-focused Saudis.
The Quality of Life Program also aims to improve access to high-end restaurants with full service. The goal is to have 3 Michelin-star restaurants by 2020. In a highly competitive and non-standard market, innovation and taste simulation are the cornerstones of gaining a market position and enabling sustainable growth. Organic, plant-based, and highly nutritious products are emerging as one of the most growing sectors. This recent trend of increased awareness and global interest in food quality and health has resulted in the emergence of this trend. The Kingdom of Saudi Arabia’s Vision 2030 includes a goal of promoting a healthy lifestyle for its citizens. This is part of the goal of creating a “vital society” that is prosperous and sustainable. The trend data from Google searches shows an increasing demand for this type of food, with the highest interest in the eastern region, followed by Riyadh and Makkah. Cloud Kitchens are a response to this demand, focusing on increasing the volume of orders through mass production and reducing the time spent on preparation and packaging. There is a high demand in areas that lack a sufficient supply of restaurants, so some businesses have started dedicating themselves to delivery service only. This model requires far less capital and operating costs, making it a more viable option for many entrepreneurs. The market for cloud kitchens is driven by the availability of data on consumer demand and the willingness of restaurants to meet that demand without incurring expansion costs.
Example of a Saudi’s restaurant that has positive and negative reviews is Mabshour Al Taef.
