Not every riyal consumers pay for food goes back to the person who grew or raised it. Between the field and the shelf, packaging plants, brands, refrigerated warehouses, distributors, stores, restaurants, and digital platforms all play a role. Each stage adds something to the product — and some add far more to profits than others. In Saudi Arabia’s food industry, it is not enough to know what is being produced; more important is knowing where value is created and who has the ability to retain it.

The wheat grain that enters a mill is not the same product consumers buy as a packaged loaf of bread. The coffee bean that leaves the farm is not the same as the cup sold in a specialty café. And dates sold by the kilogram have a different economics when they are turned into paste, a natural sweetener, an energy bar, or a luxury gift box.

The raw material may be the same.

But its economic value changes with every step it takes along the food chain.

This is what is meant by value added: the difference between the value of a raw input and the value of the product after a company adds processing, packaging, quality, branding, distribution, or service.

But value does not accumulate at equal rates.

A company may operate in a multibillion-riyal trade with extremely thin profit margins, while a much smaller company achieves a higher margin because it sells a product that is difficult to replace or carries a brand consumers can recognize.

This raises one of the most important questions in Saudi Arabia’s food industry, which the report estimates at around 200 billion riyals: not only where the sector is growing, but which stages are capable of retaining the largest share of value?

At the Start of the Chain: Essential, but Not Necessarily High-Margin

The journey begins with farms and raw materials.

Economically, this stage appears critically important. There is no milk without cows, no poultry without feed, and no baked goods without grains.

But strategic importance does not always translate into pricing power.

Basic agricultural products are generally closer to commodities — products that buyers find difficult to distinguish significantly from one ton to another. When price becomes the main factor in choice, profitability is determined largely by production costs and global market prices.

In Saudi Arabia, the equation is made more complex by water scarcity.

That is why the model described in the report is based on clear selectivity: intensive domestic production of products such as poultry, dairy, eggs, dates, and greenhouse vegetables, while importing water-intensive inputs such as grains, feed, crude oils, and raw sugar.

This means that owning the raw material is not necessarily the best place to capture profit.

Sometimes the greatest value lies in what happens to the material after it reaches the factory.

The Factory: When Food Stops Being Just a Commodity

At the heart of the chain is the conversion process.

A raw material goes in, and a product that can be differentiated, packaged, and marketed comes out.

But even within the factory, the economics vary greatly.

The report describes milling and oil production as activities that depend heavily on scale: huge volumes, relatively limited margins, and sensitivity to global commodity prices and operational efficiency.

These are not weak businesses. In fact, sheer scale can itself be a barrier that protects incumbent companies. But in this setting, factories generally earn more by processing more tons with greater efficiency, rather than by significantly raising the price of each unit.

At the other end are products such as health foods, ready-made meals, and specialty coffee. The report notes that gross margins in some of these activities can exceed 35%.

The difference is that consumers are not merely buying a raw material.

They are also paying for convenience, health, taste, branding, or the experience.

This explains an important rule in food economics:

The less directly comparable a product is with its alternatives, the greater a company’s opportunity usually is to achieve a higher margin.

What Is a “Margin,” Anyway?

Margin is one of the most widely used financial terms and one of the least clear to non-specialists.

If a company sells a product for 100 riyals and the cost of purchasing or manufacturing that product is 70 riyals, 30 riyals remain before other expenses are accounted for.

These 30 riyals represent, in simple terms, the gross profit margin.

Salaries, marketing, administration, financing, taxes, and other costs are then deducted, and what remains is called net profit.

That is why looking at revenue alone is not enough.

A company generating 10 billion riyals in sales with a 3% net margin may earn relatively less than a much smaller company that retains 15 halalas from every riyal of sales.

The report offers a clear Saudi example.

SADAFCO recorded a gross profit margin of 34.6% in 2025 and a net margin of approximately 15%, with net profit of 477.4 million riyals.

This represents a model showing that strength does not come from scale alone. The company’s focus on long-life milk, high-margin ice cream, and selected products gives it a different economic profile from a company dealing primarily in raw commodities with volatile prices.

Branding: The Invisible Factory

Two factories can use similar materials and comparable machinery, yet one can sell its product at a higher price than the other.

The difference is not on the production line.

It is in the consumer’s mind.

Branding allows a company to turn a replaceable product into something that appears less replaceable. The more consumers trust a name or its quality, or become accustomed to it, the less sensitive they become to price.

That is why the report says, when comparing the Saudi experience with that of the United States, that long-term value in the food industry is built not only in the factory, but also in the brand.

This helps explain part of the model of a company such as Almarai.

Its strength lies not only in owning farms and factories. It also lies in connecting these assets to a distribution network and brands that reach consumers every day across a large number of categories.

This is important because capital investment alone does not guarantee high returns.

A machine can be bought.

The trust of millions of consumers is much harder to buy.

Dates: How Crop Value Rises Without Planting Another Palm Tree

Dates illustrate the idea directly.

According to the report, the Kingdom’s production exceeds 1.9 million tons, while exports reached 1.94 billion riyals in 2025 and extended to more than 125 countries.

But the opportunity to increase value does not necessarily mean increasing agricultural production.

The same date can be turned into a paste used in food manufacturing, a natural sweetener, an energy bar, or a luxury product packaged as a gift.

In each case, the product moves another step away from being a raw agricultural commodity.

This means the Kingdom can increase the economic value of each kilogram produced by the sector without necessarily producing an additional kilogram.

The distinction is highly significant.

An agricultural economy asks: How much did we produce?

An industrial economy asks: How much value were we able to extract from what we produced?

Coffee: The Most Valuable Part of the Bean May Be Far from the Farm

Coffee offers an even clearer example.

The economic value of raw coffee beans is incomparable to the final value of the cup a consumer buys at a specialty café.

Between the two are roasting, grinding, packaging, branding, location, design, service, and experience.

Each stage takes its share.

That is why the development of a national coffee value chain in Saudi Arabia should not be assessed solely by the size of the crop.

According to the report, the Saudi Coffee Company plans to invest approximately 1.2 billion riyals over ten years, while increasing annual production of Khawlani coffee in Jazan from around 300 tons to 2,500 tons.

But the greatest economic opportunity emerges when the chain does not end with the sale of the beans.

The more it extends into roasting, branding, cafés, and distribution, the more possible it becomes to retain a larger share of the final price within the local economy.

Then Comes the Stage Consumers Do Not See: Cold Storage

The factory and the store may be easy to see.

But between them lies an entire economy that consumers barely notice: the cold chain.

Simply put, it is the network of warehouses, trucks, and storage systems that keeps products within suitable temperature ranges from the time they leave the factory until they reach the point of sale.

In a country where summer temperatures can exceed 45 degrees Celsius, this network is not merely a support service.

It is part of the product itself.

Milk that has not been kept at the proper temperature is not simply lower-quality milk; it is a product that may not be sellable at all.

That is why the ability to deliver food safely becomes a source of value and, at the same time, a barrier to competitors.

The report presents Almunajem Foods as an example of this stage: 12 refrigerated warehouses, capacity of nearly 250,000 tons annually, and a network serving more than 18,000 customers.

The company does not need to own every product it sells.

A large part of its value comes from the ability to deliver the right product, to the right place, at the right time, without compromising its characteristics.

Whoever Owns the Shelf Also Holds Power

At the end of the chain, the product reaches retail.

According to the report, hypermarkets and supermarkets still account for approximately 57% of food retail trade.

Here, the balance of power shifts once again.

The factory needs access to consumers, while the store controls that access.

That is why large retailers can negotiate over prices, shelf space, and promotions, and may introduce their own private labels to compete with the factory itself.

This reveals another rule of value chains:

The stage that controls access to the customer can often demand a larger share of the value.

That is why it is not enough for a factory to make a good product.

It must secure the shelf as well.

Then the Phone Arrived and Redivided the Bill

For years, the relationship was relatively straightforward: factory, then distributor, then store or restaurant, then consumer.

The app added a new intermediary.

This new intermediary does not merely deliver food; it controls the interface where consumers decide what to eat.

The report notes that the expansion of delivery apps and cloud kitchens changes not only the purchasing channel but also the margin structure of the entire industry, as platform commissions have become a new player in dividing the value of a meal.

If a consumer pays 50 riyals for a meal, the question is no longer simply how much goes to the restaurant and how much goes to raw materials and labor.

There is now a delivery platform, payment fees, and possibly in-app promotion costs.

But the platform also obtains a more valuable asset over the long term: data.

It knows what the consumer bought and when, what they searched for but did not buy, and what price they responded to.

Thus, a new stage appears in the food chain that does not produce a single grain of wheat, but may possess the information closest to the purchase decision.

Sometimes the Highest-Margin Stage Is Completely Invisible

The report draws attention to a category less familiar to consumers: food ingredients and additives.

These include flavors, emulsifiers, proteins, and specialized ingredients used in the manufacture of finished products.

According to the report, this is one of the least localized stages of the chain in Saudi Arabia and perhaps one of the most attractive in terms of margins; net margins at some of the world’s largest ingredient companies exceed 20%.

The reason is that these companies do not sell volume alone.

They sell expertise, formulations, and performance that are difficult to replace.

If a factory needs a product that delivers a specific taste, texture, or shelf life, the material consumers never see may become more profitable than the product they see on the shelf.

That is why the report views this stage as a logical candidate for a new generation of local industrial investment.

So Where Are the Real Profits?

The less exciting, but more accurate, answer is: there is no single point.

Profit shifts according to the commodity, competition, technology, and consumer behavior.

But the report reveals a clear pattern.

Stages close to raw materials depend more on efficiency, scale, and resource management. Industrial stages can increase margins by turning a commodity into a differentiated product. Logistics creates value when reliable access is difficult. Retailers, restaurants, and platforms derive their power from their proximity to the consumer.

Across all of this, the highest margins tend to emerge when a company possesses one or more of four things: a brand that is difficult to replace, specialized technology and expertise, infrastructure that is difficult to replicate, or a direct relationship with the consumer.

This also changes how food-localization policies in Saudi Arabia should be viewed.

Importing a raw material is not necessarily an economic loss if the local economy controls the stages that follow: processing, packaging, distribution, branding, and possibly export.

That is why the report distinguishes between importing inputs and importing finished products. A riyal spent on a raw material can return through a chain of local wages, profits, services, and value added if that material is processed within the Kingdom.

In this sense, the next competition in Saudi food will not be solely about who produces the largest quantity.

It will be about who controls the most valuable stages.

Food may begin in the field, but profit does not necessarily live there.

And often, the closer a product gets to the consumer — and the more processing, branding, knowledge, or convenience is added to it — the farther its price moves from the value of the raw material from which it began.

A food product therefore does not simply travel from field to shelf.
It climbs a ladder of value. And the real question for Saudi companies is: At which rung of this ladder do you want to stand?