Tech Feeding Frenzy: Exploring Saudi Arabia’s Booming Food Delivery Economy
Food delivery with a touch of a button on our smartphones feels like it’s been an integral part of most of our city dwelling lives.
Just like ordering an Uber to the airport, many tech startups have honed-in on delivering digital efficiency and convenience and applying it across a variety of daily services such as dry-cleaning and laundry pick-up or home cleaning and maid services. The pandemic accelerated the adoption of online ordering practices, and at the end of 2023, the entire global online food delivery industry was estimated to be worth over US $1 trillion. What’s more, it is expected to grow to US $1.8 trillion by 2029.
Despite there being over a billion food delivery app downloads around the world today, these food delivery companies are still a relatively new phenomenon. After all, the first app-centric smartphones were invented in 2007, and the app store was only released in 2008.
The first food delivery app was only built by DoorDash in 2013 in San Francisco – a mere decade ago. Of course, prior to delivery apps, there also existed many website companies like Waiter.com, who built the first online food-delivery marketplaces back in 1995, to pave the wave for the nextgen food delivery app companies.
That said, food delivery as a service has been around for centuries. The first-ever food delivery that was recorded goes back to 1763, when a novel written over 260 years ago cites the home delivery of cold buckwheat-noodle soups in Korea. Over 120 years later in 1889, King Humberto and Queen Marguerita of Savoy, famously requested a pizza be delivered to them in Naples by the famous pizza maker Rafaele Esposito. I myself have great childhood memories of ordering Pizza Hut with the family at home in Canada - one of the few restaurants that would deliver to your doorstep in the 80’s and 90’s.
Saudi Arabia has embraced food delivery in a major way. HungerStation was the Kingdom’s first home-grown food delivery player, establishing itself in March 2012. Eleven years later, the Saudi food delivery market is worth US $10 billion. For comparison, that’s a larger market than Canada’s food delivery market, which is expected to reach US $8.1 billion at the end of 2024. Both countries have similar populations – hovering around 38 million inhabitants; though the spread of inhabitants across each country, the number of cities served by food delivery players, and the average revenue per user (ARPU) drastically affects the size and growth of each food delivery market.
Saudi Arabia has one of the highest ARPU’s in the world, at $624 per user. In comparison, Canada’s ARPU hovers at $370 – equal to that of the UAE’s ARPU; while it’s $489 in China, and just $130 in France; the world average is expected to hit $415 in 2024. The United States’ ARPU indicates just how much room for growth there is for markets like Saudi Arabia, as the average revenue per user in the US was $1,360 in 2023, more than double that of Saudi’s ARPU today.
The opportunity in Saudi Arabia is massive. By 2028, the Saudi food delivery market is expected to reach US $14.9 billion, with much of that growth attributed to consistent growth in restaurant meal deliveries, but also driven by an increased adoption of grocery delivery.
Today, only 12% of food delivery is attributed to groceries, but by 2029 that should extend to 20% of the Saudi food delivery market; a market which will grow by $1 billion each year from now until 2029.
Grocery delivery is still in its nascent stages but is expected to double in size in the next five years. While Saudis spend more on meal delivery than people in the UAE, they spend nearly 2X less than people in the Emirates on grocery delivery – indicating another opportunity for growth.
In the past five years since 2019, Saudi foodtech startups have attracted over $555 million in funding; food delivery startups have snapped up 48% of that total funding ($266 million), indicating just how integral the food delivery sector is to Saudi’s foodtech startup ecosystem. Interestingly, grocery delivery player Nana, is the most dominant player in terms of funds raised, securing the position as most funded foodtech startup after raising $212 million across several rounds.
Nana’s latest $133 million Series C round in 2023 showcases continued investor confidence in the grocery delivery sector at large.
Saudi Arabia’s food delivery sector has also been able to provide some successful exits for investors, most notably Delivery Hero’s acquisition of HungerStation in 2016 and Jahez’s successful IPO on Saudi Arabia’s secondary market in 2022. There have been several other smaller M&A transactions as the market begins to consolidate.
Investors seem bullish about the growth and exit opportunity for foodtech in Saudi Arabia – especially as all of the Kingdom’s foodtech unicorns have been able to reach billion dollar valuations without stepping food outside of its national borders.
