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UAE FMCG sector poised to grow 5.1% next year

Traditional trade significantly outperforms modern trade, study shows

The UAE’s fast moving consumer goods (FMCG) market is projected expand at four per cent this year, accelerating to 5.1 per cent in 2025, driven by robust activity in tourism, construction, and financial services sectors, a report shows.

Saudi Arabia is forecast to grow by 1.5 per cent in 2024, reaching 4.6 per cent in 2025, supported by continued economic diversification initiatives. Both markets maintain exceptionally low inflation rates – UAE at 2.4 per cent and Saudi Arabia at 1.7 per cent – significantly below the global average of 5.8 per cent, providing a stable environment for consumer spending.

NielsenIQ, the world’s leading consumer intelligence company, unveiled insights into the market dynamics across two of the GCC’s largest economies in its State of Nation for Q3’ 24. While both markets demonstrate remarkable resilience against global economic pressures, their growth trajectories show distinct patterns across various sectors, reflecting unique consumer preferences and market conditions.

The report reveals nuanced differences in consumer behaviour across both markets. Despite high promotion sensitivity in both regions, UAE shoppers demonstrate notably stronger brand loyalty compared to their Saudi counterparts, actively seeking promotions for their preferred brands. Saudi Arabia has seen a significant increase in FMCG promotions year-over-year, with temporary price discounts (TPR) dominating promotional activities and maintaining steady efficiency rates. The UAE maintains stable promotion levels, with a four percentage point increase in TPR compared to last year, accompanied by slightly improved promotion efficiency rates.

Implications for brands and retailers

Quality remains a paramount consideration for consumers across both markets, with 72 per cent expressing willingness to pay premium prices for superior products. The UAE FMCG market shows distinct polarisation between affordable brands (experiencing 15 per cent growth) and premium brands (achieving 20 per cent growth), creating opportunities at both ends of the price spectrum.

In contrast, the Saudi market is predominantly driven by mainstream brands, showing robust 14 per cent growth and serving as the market’s primary growth engine. Moreover, the report also indicates that traditional trade is experiencing remarkable momentum, outpacing modern trade in both markets, with traditional trade in the UAE growing at an impressive 6.4 per cent and Saudi Arabia achieving 2.4 per cent growth, indicating evolving consumer shopping preferences.

FMCG segment performance

Both markets demonstrate encouraging volume uplifts in moving annual total (MAT) in the third quarter, with the UAE recording a substantial 4.1 per cent value change and 2.8 per cent volume growth, while Saudi Arabia showed steady progress with a 1.8 per cent value change and 1.9 per cent volume growth. Frozen food and dairy categories emerge as growth leaders in both markets, with snacking standing out as the fastest-growing industry in Saudi Arabia. E-commerce continues its trajectory of strong double-digit growth across both regions, particularly in non-food categories, reflecting accelerating digital adoption among consumers.

Tech and durables segment

The T&D industry presents a study in contrast with the UAE achieving 2.8 per cent growth while Saudi Arabia experienced a modest 1.1 per cent decline. UAE’s growth is primarily driven by strong performance in media tablets (+11 per cent), smartwatches (+3 per cent), and home appliances (+6 per cent). The telecom sector, contributing 50 per cent of total revenues in both markets, shows divergent trends – leading growth in UAE while experiencing a pullback in Saudi Arabia. Both markets demonstrate remarkable product diversity and innovation, maintaining approximately 45,000 active products each and launching an impressive 19,000 new products annually. While premium products continue to dominate sales, value players are gaining significant market share, reflecting evolving consumer preferences and market dynamics.

“The GCC markets present a fascinating study in contrasts and similarities,” says Andrey Dvoychenkov, APP Cluster Leader. “While sharing common threads in channel evolution patterns and premium product preferences, each market demonstrates unique growth drivers and consumer behaviours. UAE’s market shows increasing polarisation between premium and value segments, while Saudi Arabia’s strength lies in its robust mainstream segment. Understanding these nuanced differences and similarities is crucial for brands and retailers seeking to optimise their regional strategies and capitalize on emerging opportunities across both markets.”