Saudi Arabia’s grocery revolution: retail formats for a new generation

Saudi Arabia, the Middle East’s largest grocery market, is more than a decade into its Vision 2030 mega project. Launched in 2016, Vision 2030 aims to diversify Saudi Arabia’s economy, reduce reliance on oil, and reshape the Kingdom into a global hub for investment, innovation, and culture.

This has been a catalyst for significant development and innovation in the market, which is reflected in the grocery sector. Existing retailers are launching new concepts, and new players, with the potential to disrupt existing structures, are entering the market. Assortments are also evolving to meet changing and future needs.

Its capital city, Riyadh, is the central hub of innovation. We recently visited the city, and, in this article, we explore some of the most fundamental changes impacting the market.

Targeting a younger, busier shopper

Saudi Arabia is highly urbanised; 85% of people live in cities, with this projected to rise closer to 90% by 2030. In the last decade, Riyadh’s population has grown by approximately 41%, to almost 8 million, from around 5.65 million. The city’s median age is under 30, and youth make up a large share of its nearly 8 million residents. Younger people are moving to the city for better job opportunities, and properties are being built to house them quickly.

SPAR entered the market in 2016, but until last year, it only operated supermarkets. Over the last year, the retailer has been going through a transformation phase, opening smaller stores that range from 540 sq. ft to a maximum of 3,200 sq. ft. Its first openings include strategic, high-footfall locations such as the King Abdullah Financial District (KAFD) Metro Station and the National Guard Hospital, one of the biggest hospitals in the Middle East.

The SPAR Express proposition is new and different to the experience offered by the market’s existing convenience stores. The stores are modern, open 24 hours and focus on snacking, hot and cold beverages, premium grab-and-go and ready to eat meals. SPAR’s proprietary bakery offer is elevated and some stores offer freshly made hot food including pizza/manakish and pastries.

SPAR is also adding timesaving technologies like self-checkouts and digital ordering points for hot food and drinks. The proposition has strong appeal among transient customers and young professionals who are becoming increasingly time poor. SPAR is taking a proven concept that have been successful in other markets and is making it locally relevant.   

Appealing to affluent shoppers and foreign workers

There is also a growing community of foreign workers in Riyadh, and these are expected to represent more than half of the city’s population by 2030. This includes expats moving to the city for high-level jobs, as well as those entering for manual/low-skilled jobs, such as construction.

Riyadh is seeing a shift in demographics, with a growing middle class and rising incomes. This shift is central to Vision 2030’s goal of building a thriving economy. In response, retailers are emerging that aim to appeal to a more affluent consumer.

Spinneys entered the market in June 2024 and opened a second, smaller location, store in December 2024 in the Business Bay area. Spinneys has been hugely successful in Dubai and is looking to replicate its success in Saudi Arabia. The stores are in affluent areas targeting tier 1 and 2 customers.

The store designs are modern and have a premium look and feel. Perishables are visibly fresh and of a high quality, and the retailer is market-leading for fresh fish and flowers.

The stores play music, which is uncommon in the market, and are the first to tap into Westernised seasonal events, e.g. Halloween. More than 40% of the assortment is imported, and there are over 1,000 SKUs from Waitrose’s private label ranges. Spinneys is quickly becoming the go-to destination for Western expats and affluent locals.

Al Hatab Market is a new supermarket concept from Al Hatab, a successful operator of premium bakeries. Al Hatab designs and fits out its stores and manufactures its private label, giving it greater control over the product mix. Its private label is premium quality and accounts for 60% of the assortment. The retailer expects to increase this to between 80% and 90% in the future.

The quality of its fresh produce and juices stands out, as well as its signature bakery offer, living up to its strapline, “Fresh is our promise”. This is brought to life with impressive merchandising and upmarket fixture designs. Al Hatab is the first retailer in the market to offer chilled ready meals, once again appealing to time-poor customers.

The retailer is expanding aggressively, planning to open a new store every fortnight in the medium term.

Online sales are growing at pace

Technology and mobile penetration is high in the market, and the online channel is seeing strong growth. Delivery is fulfilled by several quick commerce players, including HungerStation (owned by Deliveroo), Ninja, and Jahez. Taking SPAR as an example, its online average basket has a value of between £30 and £40 and can be fulfilled within 45 minutes.

A market poised for transformation

This is an interesting period of transition for Saudi Arabia. While traditional trade still accounts for a little under half the market, the sector is becoming increasingly modern and diverse, and evolving rapidly. For decades, modern retail has been dominated by large format stores operated by the likes of Carrefour, Lulu, Panda and Danube, which customers have used to carry out their big weekly shop.

While we expect the older generation to remain loyal to these, there is a younger, more travelled generation who seek convenience and have a greater awareness of international players like SPAR and Spinneys. As a result, we are starting to see the early signs of a shift in channel dynamics. The retailers mentioned above, and a handful of others, are looking to get ahead of the curve, opening future-proofed formats.

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