After UAE, Saudi Arabia is iD Fresh Food’s next Gulf frontier

Bengaluru-based iD Fresh Food is heavily expanding its footprint in the Middle East, with plans to launch a new manufacturing base in Riyadh by the end of the year to serve a booming Gulf appetite for its ready-to-cook products. After making significant strides in the UAE, the IPO-bound fresh food label is shifting its focus to localize production and reduce freight dependence as regional demand surges, PC Musthafa, global CEO of iD Fresh tells EnterpriseAM.

GCC takes center stage for pre-IPO growth

A growing revenue driver: The Gulf region is now iD Fresh's largest international market, with the UAE contributing nearly a third of its international business. “Saudi Arabia could be 3x to 4x of the UAE market, and our coverage in Saudi is very small today,” Musthafa says.

Why now? “When you have scale, it is better to manufacture locally. You can save transportation costs and inventory as well.” The expansion comes months after British private equity firm Apax Partners picked up a 35% minority stake in iD Fresh in a reported USD 152 mn (INR 15 bn) transaction.

What does iD Fresh do? The company offers both frozen and fresh products, present across 7.5k retail outlets, all served by its Ajman food processing plant. iD Fresh plans to enter Kuwait next month, followed by Bahrain. The company manages manufacturing and distribution directly rather than through retail partnerships, allowing tighter control over its perishable product supply chain. “The overall business is built with zero compromise on values, zero shortcuts, zero preservatives, zero chemicals and zero inventory,” Musthafa tells us.

The big picture: India’s food and grocery market is the world’s sixth largest, with retail making up 70% of sales. The food processing industry accounts for 32% of this market and is projected to expand to USD 535 bn at a CAGR of over 20%.

Adapting to local taste

Arabs love iDli-dosa: iD Fresh’s market research for Saudi Arabia found that a solid 64% of all customers were Arabs rather than Indians. iD Fresh currently holds up to 45% market share in ‘parotta’ (layered flatbread) in the UAE and around 25% in batter (fermented rice and lentil used to make pancakes and steamed cakes), Musthafa tells us. This is supported by strong cold-chain and last-mile infrastructure in the Gulf as well as greater acceptance for packaged and frozen foods.

Gulf consumers drive demand: The GCC has been a much easier market to penetrate for iD’s packaged fresh foods than India, where “anything in packaged form is considered unhealthy, especially batter.” With two-thirds of consumers open to buying batter from retail shelves in the UAE, that number is only 10% in Bengaluru as people prefer to make it at home, he says.

Paying the ‘fresh’ premium: “People [in the GCC] are very health-conscious. They understand the importance of clean labels and are willing to pay a premium,” Musthafa notes. The region’s business-friendly regulatory environment and distributors have also helped accelerate adoption of packaged fresh foods.

But the war is hitting their calculus: “The shipping cost has gone up like 3x for us,” Musthafa notes, adding that while raw material costs such as rice have remained relatively stable, the cost of doing business has gone up significantly since the war began.

Contingency plan in action: To manage war-related volatility, the company activated contingency plans similar to the ones deployed during the pandemic. With the market stabilizing after a brief period of panic buying related to regional geopolitical tensions, iD Fresh plans to ramp up its marketing campaigns across the Gulf this month.

What’s next for iD? “Every year we are increasing our market share by 500 basis points [in the UAE]. Over the next four-five years, we should be able to take it over 50%, if not 70%” Musthafa opines.