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People still gotta eat…Part I

October 27, 2009 3:49 by Alex Malouf

Channels to market

The challenge facing the food sector is not decreased consumer spending, according to Vishal Tikku, MD, Saudi Arabia and Shared Services, Kraft Foods Middle East & Africa, but rather channels to market, with foreign retailers especially hard hit by the downturn.

“There’s no data about each hypermarket,” Tikku says, “[but] we have anecdotal evidence about consumer shopping habits, especially in the UAE, where there’s a large number of expatriates. Based on the growth of label versus non label, people aren’t making choices to move brands.”

As foreign-owned channels struggle, the expansion of local retailers is paradoxically set to also place demands on marketers. In Saudi Arabia, acquisitions by the region’s largest retailer, Savola – the owner of Panda – could affect how manufacturers market their brands, believes Lootah.

“Panda dominates the food retail market in the Kingdom, with a 60-70 percent share. They’ve been very tough to negotiate with, according to our Saudi partners. Retailers have to build strong partnerships with suppliers. The strategy of ‘you’re either with me or against me’ simply doesn’t work. If the brand owner cannot get a fair deal, then he won’t be able to pass on to the consumer any discounts, promotions or activities. That will affect the consumer and turn the food business into a dull industry.”

What is clear is that food advertisers have benefited from the collapse of spending by other sectors, most notably real estate and finance. “Outdoor prices are dramatically lower, as inventory is higher, especially in the UAE,” says Tikku. “Newspaper costs have also dropped, and you can see their reduction in terms of weight. The only medium that hasn’t changed in terms of cost is television; the big channels are just as popular as before.”

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Tags: branding, business, Financial Crisis, food industry, Gulf, marketing, Mcdonalds, Saudi