Exploring The Growth Of Food Services In Saudi Arabia And UAE: Economic And Social Catalysts

The food services sector in Saudi Arabia and the UAE, encompassing restaurants, catering, and cloud kitchens has seen growth recently. This expansion is driven by various economic and social changes that have increased demand for food services across the region, a new Emirates NBD report stated.

Over the past decade, Saudi Arabia's food services sector has experienced growth due to social and economic transformations. The easing of social restrictions has led to a surge in new restaurants and cafes nationwide. This trend is expected to continue as social norms evolve. Additionally, robust economic growth and an increasing population—including both citizens and immigrant workers—are anticipated to further drive the sector's expansion.

Understanding the Food Services Sector

The food services sector includes all establishments that prepare ready-to-eat meals for consumers, excluding grocery outlets. This encompasses cafes, full-service restaurants, quick-service restaurants (or fast-food outlets), canteens, and cloud kitchens.

Cloud kitchens, also known as ghost or dark kitchens, specifically prepare meals for third-party establishments or takeaway. The sector has shown robust growth across Saudi Arabia and the UAE and is expected to continue expanding in the coming years due to several factors, including changes in social norms, population growth, and tourism.

In 2020, the United Nations World Tourism Organization (UNWTO) reported that the number of food-serving establishments in Saudi Arabia had risen to 60,000 from fewer than 40,000 a few years earlier. This rapid growth aligns with the relaxation of social restrictions and the development of the leisure tourism sector. Although the COVID-19 pandemic initially impacted these numbers, they have likely rebounded strongly since then. In 2022, employment in the food services sector reached 608,700—a record high and a 16.9% year-over-year increase.

Growth in Saudi Arabia

The Saudi government has initiated efforts to rapidly expand domestic tourism, which will likely fuel additional growth in the food services sector. According to the Saudi Arabian General Authority for Investment, consumer spending on food services was predicted to expand by 6% annually over five years from 2021. Current data supports this forecast with strong consumer spending and a notable increase in food service establishments.

Growth opportunities in Saudi Arabia's food services sector have attracted increased investment from both domestic and international companies. Notable players include Americana Restaurants operating 687 restaurants under brands like KFC and Pizza Hut and Al-Shaya with 450 Starbucks outlets. With an expanding population and ongoing social changes, more outlets are expected to open.

Expansion in UAE

The UAE's food services sector is smaller than Saudi Arabia's due to its smaller economy and population but significant on a per-capita basis. The UAE boasts a more extensive leisure tourism sector, higher GDP per capita, and a longer-established culture of socializing in commercial eateries and cafes. As of 2021, UNWTO reported 22,517 food-serving establishments in the UAE; recent estimates place this figure closer to 30,000.

In terms of employment, the UAE's food services sector had 207,600 employees in 2021—up from a low of 197,200 in 2020 but still below pre-pandemic levels of 286,100. However, as COVID-19 impacts diminish and population grows significantly over recent years—especially in Dubai—the number of employees has likely rebounded.

Dubai welcomed a record 9.31 million international overnight visitors in early 2024—an increase from both previous year figures and pre-pandemic levels. Abu Dhabi saw 2.4 million guests between January-May 2024 according to Emirates News Agency WAM. This surge generates substantial demand for restaurants within hotels; Abu Dhabi National Hotels (ADNH) Catering serves over eleven million meals monthly.

The UAE’s national accounts data reflects this growth; accommodation/food services component GDP averaged a robust pace over three years ending at an impressive rate last year suggesting continued momentum ahead despite reopening gains tapering off slightly now stabilizing around healthy levels overall moving forward positively impacting broader economy too indirectly benefiting related sectors alike aviation where Emirates airline carried 51.9 million passengers.