Seven Graphs Illustrating The Growth Of Saudi Arabia's Food Delivery Industry While meal delivery currently dominates the market, grocery delivery is rapidly gaining momentum, indicative of shifting consumer preferences and the emergence of innovative service options.
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The food delivery market in the Kingdom of Saudi Arabia (KSA), valued at US$10 billion in 2023, is projected to reach $14.9 billion by 2028. This growth is being driven largely by food-delivery startups, which are adeptly responding to evolving consumer needs.
The industry is flourishing across two primary segments: meal delivery and grocery delivery. While meal delivery currently dominates the market, grocery delivery is rapidly gaining momentum, indicative of shifting consumer preferences and the emergence of innovative service options. At the forefront of this transformation is HungerStation, the pioneering homegrown food delivery company that has led the market since its inception in 2012.
Here are seven graphs that will help you better grasp the state of the food delivery market in Saudi Arabia:
1. Saudi Arabia's food delivery market continues to soar, projected to reach $14.9 billion by 2028
In 2023, the food delivery market in Saudi Arabia was valued at $10 billion, with a forecasted growth rate of 8.1%, leading to a projected market value of $14.9 billion by 2028. The meal delivery segment currently dominates the market at 88%, but recent trends suggest a shift towards grocery delivery services due to the emergence of new players and changing consumer behavior. HungerStation is currently leading the market, boasting the largest market share as of 2023. It has over 40 million app downloads, and it has formed partnerships with thousands of restaurants and stores across Saudi Arabia. This makes HungerStation the top choice for food delivery among Saudi consumers.
2. Saudi Arabia's meal market braces for slower growth during the transition post the COVID-19 pandemic
The meal delivery market in Saudi Arabia is projected to reach $12.1 billion by 2028, with a compound annual growth rate (CAGR) of 6.4%. This slower growth rate reflects the increasing maturity of the market. In 2019, the market was valued at $2.3 billion, a quarter of its current size. Initially concentrated in Riyadh, consumer demand has since spread across the country. The rapid growth experienced in 2020-21, driven by the COVID-19 pandemic, saw a significant shift towards online food delivery options as stay-at-home orders limited restaurant visits. This trend has reshaped consumer behaviors and preferences in the market.
3. Saudi consumers have the highest annual revenue per user (ARPU) in the MENA region for food delivery orders
The meal delivery market is currently the largest in Saudi Arabia, and it is expected to balloon up to over $12.1 billion by 2028 due to both the population and spending capability. In 2022, the average ARPU per year was also the highest in Saudi Arabia, at over $600 per person, while it was the lowest in Egypt. In addition, the ARPU in the Kingdom was more than 25.6 times the average revenue in Egypt, and 1.7 times the average revenue in the UAE.
4. Saudi Arabia's grocery delivery market is poised for rapid expansion in the next five years
The grocery delivery market in Saudi Arabia is projected to reach $2.8 billion by 2028, growing at an impressive rate of 18.2% CAGR. This growth outpaces the 6% CAGR of the meal delivery market, highlighting the potential for significant market expansion. With grocery delivery still in its early stages in Saudi Arabia, the market is ripe for development. Key players such as HungerStation Market are leading the way with a wide range of products available through its app, including fresh essentials, canned goods, snacks, and sweets. These well-established and user-friendly applications are driving a shift in consumer habits toward online grocery shopping.
5. Saudi Arabia's grocery delivery users spend 1.9x less than their UAE counterparts
The grocery delivery market size in Saudi Arabia modestly exceeds that of the UAE, largely due to Saudi Arabia's significantly larger (3.8x) population size, despite the UAE having a much higher grocery delivery penetration rate. Moreover, the UAE's average ARPU surpasses that of Saudi Arabia by 1.9 times today, and it is expected to maintain a strong benchmark. Saudi Arabia's average ARPU is forecasted to reach just over $209 per user in 2028, while the ARPU of a UAE consumer is expected to exceed $677 by 2028.
6. Food delivery startups in KSA are thriving with venture capital Investments
Over the past five years, food delivery startups have successfully raised a total of $266.2 million in funding. This extensive investment has fueled the growth of the market, with support coming not only from venture capital, but also through initial public offerings and acquisitions.
7. Food delivery is playing a central role in funding in Saudi foodtech
In the dynamic landscape of food delivery startups in Saudi Arabia, funding trends have experienced significant fluctuations over the past five years. In 2020, delivery startups dominated, receiving an impressive 94% of total investment totaling $56.6 million. However, in 2021, funding for these startups drastically decreased to just $2.9 million, as investors turned their attention to other ventures such as cloud kitchens. Key players like HungerStation had already integrated cloud kitchens into their operations, showcasing foresight and adaptability in meeting market demands. This strategic move not only facilitated the entry of new entrepreneurs into the restaurant business, but also highlighted the company's commitment to staying ahead in the industry. Fast forward to 2023, and delivery startups have staged a remarkable comeback, securing 85% of total funding. This resurgence reaffirms their pivotal role in Saudi Arabia's thriving foodtech sector.
For more insights about Saudi Arabia's food delivery market, download and read our full report on the sector here.
This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa's tech and entrepreneurial ecosystems.
Related: A Booming Market: A Look Into Saudi Arabia's Rapidly Evolving Food Delivery Landscape
