The Global Economic Crisis: The Impact On Consumer Attitudes & Behaviors In The UAE and Saudi Arabia

The Global Economic Crisis: The Impact On Consumer Attitudes & Behaviors In The UAE and Saudi Arabia

Introduction

59% of consumers in the UAE and 30% in Saudi Arabia believe that their country is in a state of recession. Despite the fact that this evidence of a “recessionary mindset” falls below the global average of 69%, research shows that consumers are adjusting their consumption behaviors. 38% of Saudi and 37% UAE consumers have changed their lifestyle as a response to the global economic downturn.

Scope

*Detailed analysis documenting Saudi and UAE consumers’ ‘recessionary mindset’ and how this influences perceptions about current and future prospects

*Insights highlighting how the economic downturn has affected perceived quality of life, emotional wellbeing and financial security in the KSA and UAE

*Analysis of KSA and UAE shoppers’ changing price sensitivity, value consciousness and attitudes towards private label across four major FMCG sectors

*Countries and categories covered: Saudi Arabia and the UAE; food and non-alcoholic beverages, alcoholic beverages, personal care and household care

Highlights

The global downturn has impacted some consumers’ daily lives in both countries, albeit to a lesser extent compared with the global average. The author research conducted in 2009 highlighted greater 'recession resistance' in both countries, with UAE and Saudi consumers less likely to indicate that their lifestyle had changed.

However, when surveyed by The author in April/May 2009, less than a quarter of Saudi and UAE respondents disagreed that they were giving up some of their favorite brands in order to save money. Over half of respondents did agree that giving up some of their favorite brands had been a feature of their recent behavior.

Luxury brands have become an integral part of the Saudi and UAE lifestyle as consumers are willing to pay high prices for products that they believe will bring them social status. At the same time, value consciousness is also prevalent in luxury purchases as 'price' and 'quality' are the most influential factors that affect their purchase decisions

Reasons to Purchase

*Gain a detailed understanding of changing consumer attitudes and behaviors amid the downturn in order to determine appropriate recessionary strategies

*Obtain country and sector specific insight about pertinent recessionary themes such as private label and consumers’ value consciousness.

*Assist consumer segmentation and targeting efforts by accessing data from two waves of primary research conducted in August 2008 and April 2009.

Overview 1
Catalyst 1
Summary 1
TABLE OF CONTENTS 3
Table of figures 4
Table of tables 5
THE FUTURE DECODED 6
INTRODUCTION: Understanding how 'recessionary mindsets' influence Saudi and UAE consumers' attitudes towards and actual consumption is vital 6
While Saudi consumers are circumspect, the 'recessionary mindset' is more common in the UAE 7
The economic downturn did not appear to have a severe impact on the lifestyles of consumers in the KSA and the UAE 9
Key takeouts and implications: a 'recessionary mindset' has taken hold of fewer Saudi and UAE consumers 10
TREND: Despite economic ructions, Saudi and UAE consumers are still happy with their quality of life 11
Residents in the KSA and the UAE are, by and large, upbeat about how things are going and this appears to be having a positive impact on their perceptions about quality of life 11
Key takeouts and implications: consumers' optimistic mood is closely tied to economic progress 13
TREND: Consumers in the KSA and the UAE are guarding their money more closely amid the global economic downturn 13
The outlook for the Saudi and UAE economies is expected to improve in 2010 14
Consumers' level of satisfaction with their current financial situation has been affected by the drop in the local stock and property market 15
Although perceptions about the economy, job security, financial status and the housing market in the KSA and the UAE are leaning towards the negative side, they are above the global average 17
Consumers are also managing their finances more closely amid the downturn 23
KSA and UAE consumers are making efforts to scale back on spending but appear to be less credit-resistant 24
Key takeouts and implications: consumers in the KSA and the UAE have mixed views of the economy, with many managing their finances more closely 26
INSIGHT: The downturn has had a negative impact on the emotional wellbeing of consumers in the KSA and the UAE 27
Self-reported stress levels have worsened significantly in the KSA and the UAE compared with elsewhere during the downturn 27
Less than one third of respondents felt that their work-life balance has worsened, with many expecting the situation to improve 29
The recession has had a negative impact on the general mood of many Saudi and UAE consumers, but anticipation for the near future is more positive 31
Key takeouts and implications: consumers in the KSA and the UAE are likely to be attracted to products and messages offering doses of optimism 33
INSIGHT: Saudi and UAE consumers have become increasingly price and value conscious following the global economic downturn 34
Consumers in the KSA and the UAE are becoming more value conscious and are therefore looking to save money when buying groceries 34
Product quality and price heavily influence where Saudi and UAE consumers do their grocery shopping 37
Key takeouts and implications: the general value consciousness of Saudi and UAE consumers has intensified and is reflected by how they determine where and how to shop 44
INSIGHT: Shoppers in the KSA and the UAE are not yet embracing private label to a significant extent 45
Consumers in the KSA and the UAE appear to be willing to give up their favorite brands for more 'considered' choices 45
Comparatively higher skepticism poses a challenge for private labels to further expand in the KSA and the UAE 46
Key takeouts and implications: the value consciousness of Saudi and UAE shoppers creates an optimal platform for ongoing private label growth but skepticism may impede development 49
INSIGHT: Saudi and UAE consumers are embracing higher quality products when it comes to food and non-alcoholic beverage purchases 50
Consumers in the KSA and the UAE are opting for higher quality food and beverages but are still highly cost/value conscious 51
Many shoppers in the KSA and the UAE consider private label food and non-alcoholic beverages to be identical to famous branded equivalents 57
Key takeouts and implications: a resurgent desire to cook at home has emerged, while private label products have a long way to go to beat market-leading brand in food and non-alcoholic beverages 60
INSIGHT: Image-conscious Saudi and UAE consumers continue to embrace personal care regimes and opt for more upscale product choices 60
More than 70% of Saudi and UAE consumers are committed to looking their best in day-to-day life 61
In 2008-09, value-conscious Saudi and UAE personal care shoppers have not made notable behavioral changes in order to save money 63
The uncertainty which consumers feel towards private label personal care/beauty products is prevailing 67
Key takeouts and implications: KSA and UAE consumers' pursuit of high quality products is also apparent in their beauty regimes and product preferences 70
INSIGHT: Saudi and UAE consumers' ownership of luxury goods is influenced by their interest in the latest trends and the associated social status 70
Most consumers in the KSA and the UAE are interested in the trend of luxury branded fragrances while luxury cars are commonly considered to be a must-have for improved social status 71
Price and quality are the most influential factors on Saudi and UAE consumers' purchase decisions on luxury goods, indicating their high value consciousness 73
Saudi consumers are more likely to maintain or even increase their purchases of luxury goods compared with those in the UAE 76
Key takeouts and implications: interest in the latest trends and the association with social status shapes the purchasing behavior of Saudi and UAE consumers towards luxury goods 78
INSIGHT: UAE consumers' household care buying preferences are shaped more by price while Saudi consumers are slightly more influenced by product traits 79
Price is an important factor but does not appear to have the determining influence over Saudi and UAE consumers' household and laundry care purchases 79
The private label household care market in the KSA and the UAE is small but potentially lucrative given shoppers' higher willingness to switch 84
Key takeouts and implications: consumers in the KSA and the UAE are quality-conscious of their household care and laundry product choices, but price appears to be a more influential factor than in other product categories 88
ACTION POINTS 89
ACTION: Adopt a relentless approach to delivering and communicating better value than the competition 89
Actively demonstrate value-for-money by re-appraising marketing initiatives and ensure that the value gains for shoppers are instantaneous 89
Focus on quality to create and maintain differentiation, and prove to consumers that quality really matters 90
Evaluate and adapt cost structures so that it is feasible to offer value-for-money solutions, particularly to those with less discretionary income 91
Invest in brand management because strong brands are even more pertinent indicators of quality in emerging markets 92
ACTION: Look for opportunities to extend pre-existing products or launch new premium products 93
Explore opportunities for market entry and utilize acquisitions and alliances as a means of improving local market understanding 93
Do not assume that emerging market consumers are a large homogenous group and beware of stereotyping 94
Use local personalities as brand spokespeople when expanding into the emerging markets 94
Start planning for the longer-term by continually tracking Saudi and UAE consumers as an economic recovery begins to become a reality 95
APPENDIX 97
Methodology 97
Further reading and references 98
Ask the analyst 100
Datamonitor consulting 100
Disclaimer 100

LIST OF TABLES
Table 1: Consumer survey: level of satisfaction with "the general direction of how things are going" and "quality of life", in the KSA and the UAE (compared with the global average), 2009 13
Table 2: Consumer survey: satisfaction with current financial situation in the KSA and the UAE (compared with the global average), 2009 16
Table 3: Consumer survey: perceptions of whether broader economic and personal conditions had improved or worsened in the six months previous, and how each might change in the proceeding six months, in the KSA and the UAE , 2009 23
Table 4: Consumer survey: propensity to feel tense and the extent to which perceived levels of stress have changed in the last six months and are expected to change in the next six months, in the KSA and the UAE, 2009 29
Table 5: Consumer survey: the extent to which perceived work-life balance has changed in the last six months and is expected to change in the next six months, in the KSA and the UAE, 2009 31
Table 6: Consumer survey: happiness levels and the extent to which perceived happiness has changed in the last six months and is expected to change in the next six months, in the KSA and the UAE, 2009 33
Table 7: Consumer survey: changing value-consciousness and desire to save money when buying groceries among Saudi and UAE shoppers, 2009 37
Table 8: Consumer survey: changing efforts are being made to use coupons, change grocery store choice to save money, embrace more disciplined shopping and gather and utilize store price information, among Saudi shoppers, April 2008-April 2009 40
Table 9: Consumer survey: changing efforts are being made to use coupons, change grocery store choice to save money, embrace more disciplined shopping and gather and utilize store price information, among UAE shoppers, April 2008-April 2009 42
Table 10: Consumer survey: top five factors influencing consumers' choice of stores for grocery shopping in the KSA and the UAE, April/May 2009 44
Table 11: Consumer survey: the extent to which consumers are making effort to save money by adopting various food and drinks consumption and preparation approaches, in the KSA, 2008-09 53
Table 12: Consumer survey: the extent to which consumers are making effort to save money by adopting various food and drinks consumption and preparation approaches, in the UAE, 2008-09 54
Table 13: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands in food, soft drinks and hot drinks, in the KSA, 2009 58
Table 14: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands in food, soft drinks and hot drinks, in the UAE, 2009 59
Table 15: Consumer survey: the importance attached to looking one's best in day-to-day life, the satisfaction with physical attractiveness/appearance, and the perception of physical attractiveness among Saudi consumers, 2009 62
Table 16: Consumer survey: the importance attached to looking one's best in day-to-day life, the satisfaction with physical attractiveness/appearance, and the perception of physical attractiveness among UAE consumers, 2009 63
Table 17: Consumer survey: the extent to which consumers are making an effort to save money by using spas or salons less often, in the KSA and the UAE, 2008-09 64
Table 18: Consumer survey: attempts made by Saudi consumers to change their personal care/beauty habits in order to save money, by product category, 2008-09 65
Table 19: Consumer survey: attempts made by UAE consumers to change their personal care/beauty habits in order to save money, by product category, 2008-09 66
Table 20: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands for grooming/beauty products, and agreement that such products are good alternatives to well known or market-leading famous brands, in the KSA, 2009 68
Table 21: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands for grooming/beauty products, and agreement that such products are good alternatives to well known or market leading famous brands, in the UAE, 2009 69
Table 22: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands for household cleaning/laundry products, and how often such products are purchased to save money, in the KSA, 2009 86
Table 23: Consumer survey: perception about the relative superiority or inferiority of private labels versus well known or market-leading famous brands for household cleaning/laundry products, and how often such products are purchased to save money, in the UAE, 2009 87
List of Figures
Figure 1: Datamonitor's Recession and Recovery portal will allow industry players to continually identify emerging opportunities and track what is happening in the KSA and UAE economies as they develop 7
Figure 2: Residents in the KSA have split opinions regarding whether the country is in a recession, but the mentality is leaning towards the positive side 8
Figure 3: UAE respondents displayed a stronger 'recessionary mindset' in line with global norms 9
Figure 4: Consumers in both the KSA and the UAE are less likely than those in other countries to perceive that their lifestyle has changed in light of the global economic downturn 10
Figure 5: Respondents in the KSA and the UAE were comparatively happy about how things were going in their respective countries 12
Figure 6: Over half of consumers in the KSA and the UAE stated that they are satisfied with their overall quality of life 12
Figure 7: Despite the burgeoning economy over the last decade or so, the proportion of consumers who are dissatisfied with their financial situation is still high 16
Figure 8: Saudi consumers' negativity about the economy at large is greater than that shown towards their personal situation 18
Figure 9: Consumers in the UAE also showed more pessimism towards the external economic condition compared with their personal financial situation 19
Figure 10: More consumers in the KSA were more positive about their household finance and job security compared with the overall economy and house market 21
Figure 11: The majority of consumers in the UAE believe that economic indicators in the country will remain the same or worsen in the next six months 22
Figure 12: The majority of consumers in the KSA and the UAE have been monitoring their finance more closely since the downturn 24
Figure 13: Consumers in the KSA and the UAE are demonstrating a high willingness to save more 25
Figure 14: The level of credit-resistance among consumers is comparatively low in the KSA and the UAE 26
Figure 15: Respondents in the KSA and the UAE expressed their anxiety towards the increased stress level in their daily life, with one third expecting the situation to become worse 28
Figure 16: The global economic crisis could have caused a worsening work-life balance in the period October 2008 to April 2009 30
Figure 17: Respondents in the KSA and the UAE had become less happy since the global economic crisis struck 32
Figure 18: The majority of consumers in the KSA and the UAE are more value conscious following the downturn, and saving money has also been high on their agenda 36
Figure 19: Quality of products sold and lower prices are influential in Saudi shoppers' behavior 39
Figure 20: Value consciousness is influencing where Saudi consumers do their grocery shopping and how they shop 39
Figure 21: Quality is more important than price at shaping UAE consumers' choices on grocery shop 41
Figure 22: Changing retailer and strictly following shopping lists are common means for UAE consumers to save money 42
Figure 23: Store layout and display of product/promotion information could be crucial at influencing consumers' purchase decision 43
Figure 24: Consumers in the KSA and the UAE are more willing to give up their favorite brands to save money than consumers elsewhere 46
Figure 25: Less than 30% of Saudi and UAE shoppers are routinely buying private label/store branded products in order to save money 47
Figure 26: Private label range appears to be playing a stronger role in where people shop in the UAE compared with the KSA 48
Figure 27: The private label market is impacted by a broad range of drivers and inhibitors 49
Figure 28: Consumers in the KSA and the UAE are value conscious, but also demonstrate a high tendency to buy high quality food and beverages 51
Figure 29: Saudi consumers are adopting various responses to save on food and beverage expenditures 53
Figure 30: UAE consumers are adopting various responses to save on food and beverage expenditures 54
Figure 31: Compared with the global aggregate, consumers in the KSA and the UAE appear to be more polarized on their frequency of cooking an evening meal at home from scratch 55
Figure 32: The percentages of Saudi and UAE consumers who never have a takeaway meal are significantly less compared with the global average 56
Figure 33: Consumers in the KSA and the UAE dine out more frequently compared with the global average 56
Figure 34: Saudi consumers tend to consider private label products to be either inferior to famous brand ones 58
Figure 35: UAE consumers appear to have slightly more positive views on private label products compared with their Saudi counterparts 59
Figure 36: Saudi consumers are appearance conscious and this could lead to a high willingness to trade-up when making personal care choices 62
Figure 37: UAE consumers are also conscious about their appearance and consider physical attractiveness influential to opportunities in life 63
Figure 38: Consumers in the KSA and the UAE have high consciousness about quality and brand towards personal care products 67
Figure 39: Over 50% of consumers in the KSA consider store brand grooming/beauty products to be either far inferior or slightly inferior than well-known brands 68
Figure 40: Consumers in the UAE hold split attitudes about whether private label beauty products are good alternatives to well known or market-leading brands 69
Figure 41: Saudi consumers are generally interested in the trend of luxury goods, particularly luxury branded fragrances 72
Figure 42: Luxury branded cars are most associated with higher social status to UAE consumers 73
Figure 43: Over half of Saudi and UAE respondents agreed that high price is a sign of better quality 74
Figure 44: More than 60% of Saudi respondents consider price and quality of a product to be a key influencer of their decision on buying a luxury product 75
Figure 45: Over 75% of UAE respondents reported price and quality of a luxury item to be influential to their purchase decision 75
Figure 46: Consumers in the KSA are likely to maintain, even increase, their spending on luxury items due to a more positive expectation of the economy 77
Figure 47: In the UAE, 40% of consumers are likely to cut back spending on luxury items across categories 78
Figure 48: Product traits are deemed more influential in directing Saudi consumers' household cleaning and laundry product choices, which accentuates the need to appropriately communicate efficacy 80
Figure 49: Price is a more influential factor affecting the choice of household care and laundry products to UAE consumers 81
Figure 50: Price-led value, rather than brands, is influential for Saudi and UAE consumers' household and laundry care purchases 82
Figure 51: UAE consumers, compared to those in the KSA, are more likely to buy household and laundry products based on value-for-money 83
Figure 52: Both Saudi and UAE consumers are more likely to choose natural/organic household care products compared with the global average 84
Figure 53: Over 30% of Saudi and UAE shoppers claim to purchase private label household care products in order to save money 85
Figure 54: The majority of Saudi consumers consider private label household and laundry products to be inferior to branded equivalents 86
Figure 55: The majority of UAE consumers think private label household and laundry products are of identical quality to well-known brand ones 87
Figure 56: Manufacturers and retailers looking to deliver value-for-money must in the provision of factors associated with the PPI, but while also offering consumers lower than expected prices 91
Figure 57: Datamonitor's Recession and Recovery portal will facilitate forward thinking planning for those leading companies that start planning for the longer-term 96