Analysis of Demand and Supply in the Saudi Arabian Vegetable Market

This report provides a detailed analysis of the demand and supply dynamics within the Saudi Arabian vegetable market. It examines the factors influencing the vegetable market, including consumer behavior, disposable income, and health awareness, leading to increased demand. The report is divided into three key markets: the vegetable market itself, the vegetable juice market, and the supermarket and household sector. It explores how changes in consumer preferences and the rise of supermarkets impact the supply chain. The report also considers the influence of complementary goods, such as vegetable juice, and the impact of global price fluctuations and competition. It concludes by highlighting the key drivers of market growth and the challenges faced, such as supply chain costs and competition from other countries. The analysis uses supply and demand graphs to illustrate market trends and changes in price and quantity. The report also covers the impact of increasing disposable income, and the rising awareness of health among the consumers in Saudi Arabia that has led to the increase in demand for vegetables.

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Economics

Supply
Equilibrium
Demand
P
Q Quantity
Price
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Introduction
The two most imperative backbone of the economy is demand and supply that measures the total
quantity of a commodity desired by customers as well as offered by a market. In other words,
demand is the quantity for which individuals are willing to pay a particular price. On the other
hand, supply is the quantity that is willingly supplied by producers at a particular price. The
intersection of demand and supply is termed as equilibrium.
Figure 1: Demand and Supply
(Source: Esper et al., 2010)
Summary
The vegetable market in Saudi Arabia accounts for approximately USD 1,122,972.2 thousand
and is anticipated to increase by 4.7 percent within the year 2023. The individuals residing in

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Saudi Arabia has increased the demand for high quality vegetables due to rise in the presence of
hypermarkets as well as superstores. With the increase in disposable income of the individuals,
the demand for vegetables in Saudi Arabia has raised. In the past, the individuals avoided
consumption of fresh vegetables due to harsh environment. As a result, they preferred to live a
nomadic lifestyle. The diet of the residents has mostly revolved around cereals as well as dairy
products (Ali and Al-Qahtani, 2012). However, the raised concern related to increasing obesity
has increased the demand for vegetables in Saudi Arabia. The report will reflect on the demand
and supply analysis of the vegetable market in Saudi Arabia. The report has been divided into
three parts that will provide an overview regarding how increase in demand for vegetables in
Saudi Arabia will influence the other markets that are related to vegetables.
Market 1: The Vegetable Market
a. Good: Vegetables
b. The customer: Residents of Saudi Arabia
c. The producer: Vegetable Sellers
Demand and Supply Analysis
The change in taste as well as preference has shifted the demand from traditional low levels of
vegetables consumption to higher levels of vegetables consumption. At present, Saudi Arabia has
turned out to be the largest as well as purchaser of fresh vegetables.
Figure: Increase in Demand

D1
D
Supply
Price
P1
P
Q Q1
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According to Osman et al. (2010), the vegetable costs has witnessed a rocket high during the first
half of 2018 due to diminishing supply from major vegetable supplying countries. As a result,
the vegetable price has been on rise due to supply shortages. The shortage in supply has taken
place due to high temperature as well as restricted supply from Turkey.
Figure: Shortage in Supply

P1
P
S1
S
Q1 Q2
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The graph shows that with increase in price that shifts from P to P1 the vegetable market
witnessed shortage in supply and the supply curve shifts from S to S1. The demand for vegetables
has largely increased due to the individuals who are being educated as well as aware regarding
their health and the benefits that are associated with the consumption of high-quality vegetables
(Al-Rethaiaa, Fahmy and Al-Shwaiyat, 2010).
(Source: Al-Rethaiaa, Fahmy and Al-Shwaiyat, 2010)

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In terms of vegetables, the country has always been independent however; it has been exposed to
global price fluctuations. The increasing awareness among individuals in Saudi Arabia and rising
disposable income of the residents has been the major cause that led to increase in demand in the
vegetable market.
Market 2: The Juice Market
a. Good: Vegetable Juice
b. The customer: Residents of Saudi Arabia
c. The producer: Local producers
Demand and Supply Analysis
The increase in the demand for vegetables has also raised the demand for vegetable juice. At
present, vegetable juice has been regarded as the second-largest source of revenue. The local
producers are able to generate approximately 24 percent of total revenue. The change in taste as
well as preference of the customers has persuaded them to switch from multiple products
containing preservatives as well as high sugar to 100 percent natural juice. This in turn improved
the juice market thus increasing the demand for premium brand vegetable juice such as Caesar.
On the other hand, standard brands such as Almarai as well as Al Rabie dependent heavily on
widespread distribution as well as packaging of product. This has been accompanied by in-store
support as well as above the line promotions. In this case, vegetable juice and vegetables acts as
complementary goods as the positive change in taste and preference for vegetables has increased
the demand for vegetable juice (Al-Hazzaa et al., 2012). Complementary commodities mostly
possess a negative cross elasticity of demand as they are linked to each other.
Figure: Complementary Goods

Demand for vegetable juice
Change in taste and preference of vegetables
Complementary Goods
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The economy brands make limited distribution to supermarkets that are mostly acquired by low-
income as well as middle-income based individuals. Parents who are conscious about the health
of their children make the demand for vegetable juice majorly. As a result, the vegetable market
has witnessed launch of multiple new products in the form of fruit juice.
Market 3: Supermarkets and Households
a. Good: Packed vegetables sold in Supermarkets
b. The customer: Households
c. The producer: Supermarkets
Demand and Supply Analysis
The supermarket as well as households accounts for approximately 51 percent of market share,
providing quality storage facilities. On the other hand, a rousingly popular culture of dining out
in Saudi Arabia has contributed to on-trade development. As a result, the traditional distribution
of vegetables in restaurants has increased the growth of fast-food outlets such as McDonalds as

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well as Burger King. This in turn provided advantage to the sellers of vegetables thus improving
the domestic market. On the other hand, the leading suppliers of vegetable juice producers in
Saudi Arabia have also been witnessing a positive development (El Bcheraoui et al., 2015). The
leading suppliers of vegetables have also been able to diversify their market. This persuaded
them to invest largely in marketing mostly by advertising through outdoor media. On the other
hand, the supermarkets have also been able to introduce variation in terms of packet sizes as well
as differentiate in terms of product flavors. This has helped to raise business-to-business
transactions of vegetable supply chain that has captured approximately 59 percent of the market
share. The widespread distribution network has benefitted the vegetable market to a large extent
thus having a strong supermarket presence. The demand for vegetables is also anticipated to
increase in the upcoming years that have also been accompanied by rich oil-based economy of
the country. The increasing disposable income of the household as well as increasingly
developed retail trade has stimulated fiscal consumption of vegetables. The introduction of new
products such as multi-vitamin juice has also been initiated due to growth in the vegetable
market. The improvement in packaging that eventually expanded product lifecycles. A different
trend that has been increasing demand for vegetables includes greater employment of young
individuals as well as rousing westernization of the country. The supermarkets will also be
benefited, as the sales of frozen as well as canned vegetables will rise. These products will
provide the households with an easy solution of getting access to home-prepared meals. As a
result, the overall turnover is likely to increase by 11 percent that will reach a target of 3.8
billion. The increase in export has also provided benefit to the supermarkets.

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(Source: El Bcheraoui et al., 2015)
The graph shows that export was initially high during the year 2012 however; it witnessed a little
downfall during 2013 that has been adjusted with increase in vegetable exports by 2015. There
are hardly any countries that dominate the vegetable market in Saudi Arabia. There has been
multiple non-EU countries that has been presently exporting huge volume of vegetables to Saudi
Arabia. The countries include Philippines, South Africa, Turkey, Ecuador, China as well as the
United States and India. This has however increased competition within the national market
regarding the sale of fresh vegetable juice (El Bcheraoui et al., 2015). A further challenge has
been related to the supply chain that has been accompanied with large expenses. It has been
challenging to secure a dependable independent scale provider in order to diminish transportation
as well as storage costs.
Conclusion
It could be concluded that the increase in disposable income of the individuals, has raised the
demand for vegetables in Saudi Arabia. The economy brands make limited distribution to
supermarkets that are mostly acquired by low-income as well as middle-income based
individuals. Increased health awareness of customers in Saudi Arabia has been positively
influencing the demand for fresh vegetables. It could be inferred that the leading suppliers of
vegetable juice producers in Saudi Arabia have also been witnessing a positive development. The
change in taste as well as preference of the customers has persuaded them to switch from

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multiple products containing preservatives as well as high sugar to 100 percent natural juice. The
leading suppliers of vegetables have also been able to diversify their market. The raised concern
related to increasing obesity has increased the demand for vegetables in Saudi Arabia.

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