The food and beverage sector in Saudi Arabia has undergone radical transformations in recent years. A recent report by Maktofa, a data analytics platform, revealed a significant leap in the size of the restaurant and café market, reaching record levels of approximately 100 billion riyals. This rapid growth is driven by the Kingdom's substantial economic and social development, but it also presents structural challenges that could reshape the competitive landscape in this vital sector.
Economic context and Vision 2030
This growth cannot be viewed in isolation from the objectives of the Kingdom's Vision 2030, specifically the Quality of Life Program, which has directly contributed to changing consumption and entertainment patterns among citizens, residents, and visitors. The opening up of tourism and the ongoing entertainment events have led to increased demand for hospitality services, encouraging thousands of investors and entrepreneurs to inject capital into this sector. This momentum has made the restaurant and café sector one of the fastest-growing non-oil sectors and a major contributor to diversifying the economic base.
Growth figures and revenue paradox
Market analysis for the period from 2021 to 2024 showed a compound annual growth rate (CAGR) of 7%, with the market size increasing from SAR 80 billion to nearly SAR 100 billion. In a remarkable phenomenon, the number of active outlets more than doubled from 57,000 in 2021 to over 112,000 by 2024. However, this massive increase in supply has led to market fragmentation, resulting in a significant drop in average revenue per outlet from SAR 1.4 million to less than SAR 900,000. This places considerable financial pressure on operators, particularly smaller ones.
Profitability challenges and the dominance of delivery apps
Investors in this sector face a dual challenge: intense competition and high operating costs. The report indicated that delivery apps have become an indispensable sales channel, accounting for 40% of fast-food restaurant sales. Despite their importance, the high commissions charged by these apps eat up a significant portion of profit margins, making the equation of financial sustainability more complex.
Exit rates and geographic concentration
As a result of these mounting pressures, the report identified a worrying phenomenon: 38% of new establishments exit the market within a short period of no more than a year and a half of operation. The competitive struggle is primarily concentrated in major cities, with Riyadh alone boasting 18,000 restaurants, followed by Jeddah with 12,000. This indicates that the market in these areas has reached a point of saturation, requiring investors to offer genuine added value and develop flexible business models to ensure survival and growth.
