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(Fourth and fifth paragraphs updated; Third Q&A on trends removed)
Dubai-based supermarket chain Spinneys, operating around 80 stores in the UAE and Oman, plans to expand its store network, taking advantage of whitespace opportunities in both the emirate and Saudi Arabia.
Owned by UAE national Ali Albwardy, Spinneys has established a strong reputation for providing top-quality produce and delivering exceptional customer service.
In an exclusive interview with Zawya Projects, Sunil Kumar, CEO of Spinneys, emphasised that the company is banking on robust population growth, positive GDP projections, and relatively lower inflation rates in both the UAE and Saudi Arabia. These factors are expected to bolster increased consumer spending, facilitating the chain’s growth.
Kumar elaborated: “As consumer preferences lean towards fresh food, we, as a dedicated fresh food retailer, are positioned to meet the rising demand for healthy options. The emphasis on convenience is also a growing trend, with customers opting for time-saving choices. With our already high online penetration and strong customer ratings, we are poised to capitalise on the projected 2.5x increase in online activity in Saudi Arabia.
We are also seeing an uptick in private label penetration. Acknowledging the market dynamics in Saudi, we consider the cost advantage and quality of our private label as pivotal, especially in a market where promotions play a dominant role.”
Amidst escalating competition, the firm relies on its vertically integrated supply chain, combining a global sourcing model with locally owned production facilities, to address challenges within the retail industry effectively.
He noted that their differentiated value proposition is founded on an extensive range of high-quality fresh food products.
“We also have a strong vertically-integrated local and international supply chain, which helps us maintain product availability on our shelves,” added Kumar.
Following a partnership agreement with the Al-Hokair Group in 2022 to introduce the Spinneys brand in Saudi Arabia, the company is poised to inaugurate its first store in Riyadh later this year, with the second slated for the King Abdullah Financial District (KAFD).
When discussing Saudi Arabia, he highlighted Riyadh and Jeddah as particularly attractive locations due to their higher household income and significant share of the Kingdom’s total population.
Excerpts from the interview:
Could you elaborate on the whitespace potential identified in both the Saudi and broader Middle East markets that make them attractive opportunities for Spinneys?
We see a large whitespace opportunity in both the UAE and Saudi Arabia, which is an important factor in our plans for continued expansion of our store network. In the UAE alone, backed by strong population growth and accelerating real estate development, whitespace is projected to grow at a compound annual growth rate (CAGR) of 2.2 percent to 2028, according to AT Kearney’s market report.
To put that in context, such an increase is equivalent to adding nearly 540 new Spinneys or Waitrose stores, surpassing our current count of 70 Spinneys, Waitrose, and Al Fair stores. This presents a huge opportunity for us to tap into.
Meanwhile, in Saudi Arabia, the whitespace opportunity demonstrates even more compelling potential, enabled by a growing and increasingly affluent urban population. It is projected to grow at a CAGR of 2.8 percent to 2028, according to Kearney’s market report, which is equivalent to almost 1,200 Spinneys or Waitrose stores. While it would not be possible to occupy all the whitespace available in these markets, it goes a long way to showing how much growth potential there really is for us.
How does Spinneys manage its global supply chain to stay ahead of challenges and competition?
We collaborate closely with freight forwarders and shipping companies, and we have access to an extensive air freight network, limiting our reliance on shipping. We believe that our vertically integrated supply chain is competitive, assisting us in maintaining on-shelf availability of the high-quality products customers expect from us every day. By way of example, during the COVID-19 pandemic and the Suez Canal obstruction in 2020-2021, we maintained on-shelf availability above 84 percent.
We are investing in local supply chains as well. Initiatives such as the Spinneys Farmers Club are integral parts of our efforts to support local producers and sustainable agriculture. By partnering with local farmers, we aim to reduce transportation costs, reduce food miles, strengthen the local economy, and promote food security. We strive to maintain a balance between international sourcing for products that our customers are loyal to, as well as supporting local producers.
When considering standalone shops versus co-located concepts, what factors influence Spinneys' choice of the type of retail space it seeks in the region?
When considering any location, our primary focus is on meeting the needs of the prevailing customer within that specific area. Once we ascertain that there is an unmet need for high-quality fresh food, we assess available options within the catchment area. We have the flexibility to operate different formats, catering to the diversity of customer demand that characterises each neighbourhood.
Various factors influence this decision, including available spaces, property usage, and visibility. We are witnessing great traction in community centres, and we are increasingly seeking out these kinds of locations, where we can be alongside other core retail offerings, serving as an easily accessible gathering place for communities.
Reflecting on the past year, how does Spinneys assess its performance in 2023? What are the company's key strategic priorities for continued growth in 2024?
We delivered a good performance in 2023, with strong revenue momentum driven by healthy like-for-like growth, as well as the opening of new stores in the UAE. We also achieved healthy bottom-line margins.
Looking ahead to 2024, our priorities include the introduction of our innovative “The Kitchen, by Spinneys” dine-in concept, the launch of our hyperlocal e-commerce platform, and the opening of our first Spinneys store in the Saudi market. We have much to be excited about this year as we celebrate the Spinneys brand’s 100th anniversary in the region.
(Reporting by Syed Ameen Kader; Editing by Anoop Menon)
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