Cheese is the most valuable category in the dairy market accounting for more than 30% of total dairy spends.
Over the last five years cheese consumption has grown well ahead of the population growth with per capita consumption growing at 3.4% CAGR.
The cheese market in KSA has witnessed a strong growth of 6.7% in 2014 and this is attributed mainly to strong growth in processed cheese and also a renewed focus by suppliers to include natural cheese varieties in consumer diets says Dubai based ManSci Research.
Cheese consumption is mainly driven by the concept of health and goodness that dairy products represent. Cheese has become an integral part of breakfast for many Saudi families and has found its way into sandwiches carried by children in school lunches and as an evening snack as opposed to confectionary, chips or chocolates, and into meals in the form of pizzas and pastas.
Due to the highly competitive nature of the category, margins are always under pressure. Retail prices follow international dairy commodity price trends. For instance the sharp drop in international cheddar cheese prices from approx. $4900 per metric tons in January 2014 to $2700 per metric tons in August 2015 has had direct implications on the retail cheese prices in Saudi Arabia.
While most local companies are focusing on margins but increased competitive activity and aggressive pricing strategies by large global suppliers are determining the competitive landscape in the commercial cheese market.
The cheese market is broadly divided into three categories – Processed, White and Natural.
Processed cheese accounts for 60% of the total cheese market in KSA. Processed Cheese is available in different packaging types catering to diverse customer needs, for example tubs, cans, slices, triangle portions, square portions, spreads and blocks. Strong growth in processed cheese has spurred innovations in terms of product and packaging, accompanied by significant advertising spend, which keeps consumer interest high and fuels further consumption.
Cream cheese varieties in squeezable bottles were launched by both Kraft and Arla in 2014. Almarai launched Almette cream cheese, a product of Hochland Germany which is positioned as a premium product. Bel introduced La Vache Qui Rit in Gold Extra Cream and White Extra Cream varieties. Most of these launches have been accompanied by high decibel marketing campaigns.
Cheese slices are used widely in the food service sector. The sector is also heavily promoted at different times of the year mainly ‘back-to-school’ times. The slice segment is dominated in the food service sector by Lactalis with its Pride, President and Yasmin brands while Almarai is the leading player in retail segment.
Square portions are synonymous with Fromageries Bel’s Kiri. Square portions have been established in the region for more than three decades and are popular with local Arab as well as expatriate consumers. The launch of Regal Picon has boosted consumption in 2014. Lactalis introduced new products to this segment with its President square portions in 2015. ManSci will be monitoring the impact of increased competition in this segment that contributes approx. 11% of the total processed cheese market.
Almarai continues to be the market leader in the processed cheese segment followed by Formageries Bel. Pricing strategies, new product launches and improvements in retail distribution have helped Arla and Lactalis gain market share in the last few years.
White cheese is a staple in the Middle Eastern cuisine and accounts for 21% of the total cheese market. Growth in white cheese consumption has been close to population growth rates due to the market reaching a mature stage. Little to no branding and low advertising spend is partly responsible for the flat growth in this category.
Apart from feta white cheeses include Akkawi, Halloumi, Cottage cheese, Mish, Ariche, Shellal and Nabulsi. Fonterra’s Saudi New Zealand Milk products factory in Dammam is the largest producer of white cheese in the region.
The growing trend of including natural cheese in Saudi cuisine is attracting interest from many global players. Saudi Arabian supermarkets display a wide selection of natural cheeses sourced from Europe, Australasia and the USA. With the exception of Mozzarella, Cheddar and Kashkeval, natural cheeses are not often found outside of the larger supermarkets. The most significant natural cheese consumed in Saudi Arabia is Mozzarella followed by Cheddar, Gouda, Edam, Emmental and others.
Consumption of traditional mature cheeses is lower as compared to international standards but it is growing at a brisk pace. Although there is no tradition of eating cheese at the end of a meal amongst the local population, the food service sector volumes have increased mainly because of business visitors and increasing popular trend of eating out-of-home.
ManSci expects the overall cheese market to growth at 4.9% CAGR through till 2019 with significant contribution from the processed and natural cheese segments.
ManSci has recently published it Commercial Cheese Reports with forecast, trends, packaging and competitive landscape for GCC countries giving you insights of the markets.
For more information please visit www.mansci.net, or call +971 4 457 9185.