A Recapitulation of CPI in Saudi Arabia & its effect on Promotions- 2022 for Food and Beverages
Many raw materials and transportation costs in KSA saw an elevation leading to a rise in the CPI in the Food and Beverage Industry since the beginning of the year. The Annual Inflation Rate of Food and Beverages in June 2022 was +4.4%.
While the overall change in CPI has shown a moderate increase, there are many categories that have had a large change due to the increased transport, fuel costs as well as the Ukraine war at the beginning of 2022.
There’s a growth in the average base price of commodities. Two categories of note being Dairy and Oil. Dairy products witnessed a significant increase in price. Average Retailer Price of Dairy products grew by 18.2% and Oil by 61.4% from Q2 2021 to Q2 2022.
The prices were already on a rise due to disruptions in transportation amidst Covid-19 and have especially shot up after the Ukraine war and the ban on Indonesian export. The average regular price of edible/cooking oil has almost doubled in a span of 2 years, with the majority of the increase being felt in the recent span from February 2022.
This lead to a decrease in leaflet promotions and offers on Edible/Cooking Oil. It showed a decline by 32% from Q2 2021 to Q2 2022. 24% less offers were recorded in June 2022 than in 2021.
Sellers chose to combat price surges by offering smaller pack sizes. Three frequently sold pack sizes i.e. 1.5L, 500ml and 1L jointly contribute more than 67% of the total offers in Q2 of both 2021 & 2022. 1.5L was the most promoted pack size until February 2022.
As prices started shooting up after February, retailers reduced promotions on 1.5 litre packs and invested more in promoting smaller pack sizes. The 500 ml pack has now become the most promoted pack size and contributes 37% of the total offers in Q2 2022.
With the rising regular price, promotional prices in leaflet offers are also following a similar rising trend, indicating a relatively constant depth in discount. During Q2 2022, Avg. Promo/Offer Price per litre of edible oil became 59% costlier than Q2 2021.
To fight inflation, retailers have reduced the number of offers and more importantly switched to offers that promote smaller pack sizes rather than bigger ones.
ClicFlyer is an Analytics Company that provides Business Intelligence and Tools to Retailers in SEA.
2 replies on “A Recapitulation of CPI in Saudi Arabia & its effect on Promotions- 2022 for Food and Beverages”
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