KSA Chocolate Market Outlook to 2028

KSA Chocolate Market Overview

• The KSA Chocolate Market was valued at USD 1 billion in 2023, showing significant growth due to increased consumer demand for premium and artisanal chocolates. The market has been driven by a shift in consumer preferences towards luxury and innovative flavors, coupled with rising disposable incomes and a growing middle class.
• Major players in the KSA Chocolate Market include Mars Incorporated, Nestl SA, and Mondelez International Inc. These companies dominate the market due to their extensive product portfolios, established brand presence, and strong distribution networks across the Kingdom. They continue to innovate with new product launches and marketing strategies to capture a larger share of the market.
• In 2022, Nestl announced plans to invest USD 1.89 billion in the Kingdom of Saudi Arabia in the coming ten years in a strategic move to grow its longstanding business in the country, beginning with up to USD 99.6 million to establish a cutting-edge manufacturing plant which is set to open in 2025.
• Riyadh and Jeddah are the dominant cities in the KSA Chocolate Market. This dominance is due to the higher population density, greater purchasing power, and a more developed retail infrastructure in these cities. Additionally, the presence of numerous supermarkets, hypermarkets, and specialty stores in Riyadh and Jeddah provides easier access to a wide variety of chocolate products.

KSA Chocolate Market Segmentation

By Product Type: The market is segmented by product type into Milk Chocolate, Dark Chocolate, and White Chocolate. In 2023, Milk Chocolate held the dominant market share, owing to its widespread popularity among all age groups. Milk chocolate's mild, sweet flavor appeals to a broad audience, making it a staple in most households.

By Distribution Channel: The market is also segmented by distribution channels into Supermarkets/Hypermarkets, Convenience Stores, and Online Retail. Supermarkets/ hypermarkets dominate the market in 2023 due to their widespread presence and variety of product offerings. Consumers prefer these channels for their convenience, competitive pricing, and ability to physically inspect products before purchasing.

By Region: The market is segmented by region into North, South, East, and West. The Western region held the highest market share in 2023. This dominance is attributed to the high population density, significant tourist inflow, and the presence of numerous retail outlets. The religious significance of the region, attracting millions of pilgrims annually, also boosts chocolate sales, especially during festive seasons.

KSA Chocolate Market Competitive Landscape

• Mondelez: In 2021, Mondelez International, the parent company of Cadbury, has invested USD 340 million into its UK manufacturing sites, with USD 100 million allocated to the Bournville factory. This investment has led to a 30% increase in efficiency and allowed the factory to produce the majority of Cadbury's chocolate sold in the UK. This strategic investment has also enabled the Bournville factory to implement more sustainable production practices, reducing its carbon footprint significantly.
• Nestl: In 2021, Nestl acquired the Bountiful Company, formerly known as The Nature's Bounty Co., for $5.75 billion. This acquisition aimed to enhance Nestl's presence in the vitamins, minerals, and supplements sector, which saw significant growth during the COVID-19 pandemic due to increased consumer interest in health. The acquisition also allowed Nestl to expand its portfolio of wellness products, positioning the company to meet the growing global demand for health and nutrition solutions.

KSA Chocolate Industry Analysis

Growth Drivers:

• Increasing Health-Conscious Consumer Segment: The chocolate market in KSA has seen a significant rise in demand for dark and sugar-free chocolates, driven by an increasing health-conscious consumer base. The dark chocolate segment is growing at 8% annually as health-conscious Saudis are tilting towards this type of chocolate. This shift has encouraged manufacturers to develop and promote healthier chocolate options.
• Rising E-commerce Penetration: The rapid expansion of e-commerce in Saudi Arabia has been a major growth driver for the chocolate market. Saudi Arabia imported approximately 33,200 tons of chocolate in recent years, valued at US$ 677 million in 2022, making it the 13th largest chocolate importer globally. The convenience of online shopping, combined with aggressive promotional campaigns by leading chocolate brands, has significantly boosted online chocolate sales.
• Tourism and Religious Pilgrimages: The influx of tourists and pilgrims visiting Saudi Arabia, especially during events like Hajj and Umrah, has driven the demand for chocolates as popular gifts and souvenirs. Approximately 2-3 million Muslims perform the Hajj each year, with the number of pilgrims allowed increasing post-pandemic, reaching 1 million in 2022 after restrictions were lifted. This surge in visitors has significantly boosted the chocolate market, encouraging local confectionery businesses to cater to the growing demand for high-quality and diverse chocolate products.

Market Challenges:

• Regulatory Compliance and Health Regulations: The Saudi Food and Drug Authority introduced stringent regulations aimed at reducing sugar content in confectionery products, including chocolates. These regulations require manufacturers to reformulate their products, leading to increased production costs and longer time-to-market for new products. As a result, companies have faced challenges in quickly adapting to these regulatory changes. However, it has also posed a challenge for smaller manufacturers who lack the resources to invest in product reformulation.
• Seasonal Demand Fluctuations: The KSA Chocolate Market experiences significant seasonal demand fluctuations, particularly during the summer months when temperatures soar. The high temperatures make it challenging to store and transport chocolates without compromising quality, resulting in increased costs for refrigeration and logistics. This seasonal variation in demand poses a challenge for manufacturers to maintain consistent sales throughout the year.

Government Initiatives:

• Saudi Food and Drug Authority (SFDA) Sugar Reduction Initiative: The Saudi Food and Drug Authority (SFDA) implemented its sugar reduction initiatives as part of its broader Healthy Food Strategy, with several key regulations and actions taking place from 2018 onwards. The SFDA introduced various regulations related to sugar content in food products, including mandatory labeling of total and added sugars, starting with the SFDA.FD 2233 regulation issued in 2018, which was enforced in 2021.
• Saudi Green Initiative (2024): Launched in 2021, it is part of Saudi Arabia's broader Vision 2030 strategy, which aims to diversify the economy and address climate change. SGI aims to protect 30% of terrestrial and marine areas by 2030 to enhance biodiversity and promote conservation efforts. This move has prompted chocolate manufacturers to explore biodegradable and recyclable packaging options, aligning with the growing consumer demand for environmentally friendly products.

KSA Chocolate Future Market Outlook

KSA Chocolate Market is poised for steady growth over the next five years, driven by various factors such as changing consumer preferences, government initiatives promoting healthier eating habits, and increasing tourism. By 2028, the market will likely see a shift towards healthier and premium chocolate products as consumers become more health-conscious and willing to pay a premium for high-quality offerings.

Future Trends

• Expansion of Premium and Artisanal Chocolate Segment: The demand for premium and artisanal chocolates is expected to increase as consumers seek unique and high-quality chocolate experiences. Manufacturers will focus on introducing exotic flavors, organic ingredients, and innovative packaging to cater to this growing segment. Additionally, the rise in health-conscious consumers will drive demand for chocolates with functional benefits, such as enhanced nutritional profiles or added superfoods.
• Growth in Online Retail and Digital Marketing: E-commerce will continue to play a crucial role in the growth of the KSA Chocolate Market, with more consumers preferring to shop online for convenience and variety. Companies will invest in digital marketing strategies and partnerships with local e-commerce platforms to enhance their online presence and reach a wider audience. Furthermore, the integration of personalized recommendations and subscription services will likely boost customer engagement and loyalty.