Are small Saudi grocery stores in for consolidation? The Kingdom’s recent ban on small shops selling key goods — including tobacco, dates, meat, fruits, and vegetables — is expected to trigger consolidation in the fragmented retail market, according to a note by Fitch Solutions’ BMI. The expected consolidation comes amid efforts to improve food safety, supply chain efficiency, and tax compliance.

The reforms are expected to see supermarkets expand their share in the Kingdom’s retail market, currently standing at third (compared to 55% in the UAE). The reforms could also help minimize hidden foreign ownership in the retail market, which is reportedly dominated by Indians representing 75% of employees, according to the note.

The decision creates new space for real estate developers, logistics firms, and e-grocery platforms to grow, especially in underserved areas. Larger retailers like Al Othaim Markets, BinDawood Holding, Panda Retail, Carrefour, and LuLu will be well-placed to expand due to the increased footfall into larger supermarkets, expected to gain a bigger share of household spending on food, which accounts for nearly a fifth of Saudi household budgets in 2025.

IN CONTEXT- New rules were issued last week by Municipalities and Housing Minister Majid Al Hoqail barred small grocery shops — under 100 sqm — from selling these goods, allowing their sale only at supermarkets and hypermarkets, with meat sales requiring a separate license. The rules come with a six-month grace period for existing grocery stores to adjust.

ALSO- Minimum size requirements for different types of stores were introduced, setting 24 sqm for groceries, 100 sqm for supermarkets, and 500 sqm for hypermarkets.

DATA POINTS- Saudi households’ spending on food and drinks through large-scale retailers is expected to grow 6.2% this year to about SAR 343 bn (USD 19.4 bn), with growth extending over the medium term at an average rate of 6.1% to reach SAR 433.5 bn (USD 116 bn) by 2029, BMI notes.

Tags: