Saudi Arabia ‘the next frontier’ for F&B operators, says KPMG

Although the huge optimism that the sector was generating at the start of 2020 has been dampened somewhat by the global coronavirus pandemic and the resultant lockdown measures and VAT increase in the Kingdom; KPMG believes that the “underserved” Saudi market will see growth in demand outstrip growth in supply.

The Vision 2030 programme will see USD64 billion invested in leisure; entertainment, and culture in Saudi Arabia in order to boost tourism and encourage spending in the local economy; while cultural changes such as the presence of women in the workplace has also supported F&B spending.

KPMG’s report found that although 85% of respondents have reduced or eliminated dining out in the near-term; two-thirds will resume their eating out habits by early 2021.

More and more international brands have been confirming their intention to enter the country, with the likes of Zuma; Black Tap, Gaia, and La Serre all preparing to open locations in the Kingdom in the coming year.

Exsisting challenge

However, KPMG noted that challenges related to set-up and operations continue to exist, including lengthy licensing processes; operational challenges, and rising labour costs (such as increasing dependent fees for expatriates and tightening of expatriate visa regulations).

The pandemic has also brought up new concerns. Social distancing and reduced demand were cited by 100 percent of respondents to KPMG’s survey; with 57 percent mentioning cash flow and costs.

More troublingly, said KPMG, was 86 percent of operators expecting sales to contract between 40 and 60 percent over the next 12 months; with the tripling of VAT from five percent to 15 percent playing a part in operator concerns on near-term outlook.

Despite these challenges, 37 percent of operators expected to see high growth (greater than 10 percent YoY) in the medium term; more than double the response from operators in the UAE.