PepsiCo to open Saudi research centre for Arab tastes

• R&D facility in Riyadh to cost $8m
• Products ‘with Arab flavours’
• Targets largest regional market

PepsiCo has said it plans to open a research and development facility in Saudi Arabia focused on developing new products for Middle Eastern consumers.

At a cost of SAR30 million ($8 million), the centre will be the largest of its kind in the Gulf region and located in Riyadh, the US company said as it opened a new office in the Saudi capital.

The facility aims to develop products “with Arab tastes and Arab flavours”, said Mohamed Shelbaya, its Middle East and North Africa CEO.

“It’s an exciting time to be in Saudi Arabia,” he said, as PepsiCo opened its regional headquarters (RHQ) in the kingdom.

Saudi Arabia is PepsiCo’s biggest market in the region. Beyond Pepsi, company brands include Mountain Dew, Lay’s chips and Aquafina water.

The country is seeking to diversify its economy and create more jobs for Saudi citizens, about half of whom are under the age of 30. 

Attracting international companies such as PepsiCo to create regional bases and set up R&D facilities in the kingdom is a success for the government, especially if those enterprises have looked at regional rivals such as Dubai.

Multinational companies with business in the region and beyond have generally had their RHQs in Dubai, covering not just the six-member Gulf Cooperation Council – of which Saudi Arabia is the biggest economy – but the wider Middle East, Africa and even eastern Europe and Russia. 

On January 1 last year, the kingdom started enforcing new regulations requiring international companies wanting to take part in public sector tenders to create RHQs in the kingdom.

The Ministry of Investment had licensed 600 international companies by last month, according to the Saudi Press Agency.

• Riyadh adds 10 times as much office space as Dubai
• Saudi offers 30-year tax breaks under regional HQ scheme
• SMEs struggle as skills shortages drive up Saudi salaries

PepsiCo’s new office in Riyadh’s King Abdullah Financial District is designated as an RHQ and capable of accommodating as many as 150 staff, PepsiCo said.

“When you talked about Saudi before you would say: ‘Great market, but…’,”  Shelbaya said. “Now, there’s no ‘but’.”

In accordance with local regulations, 40 percent of the staff in an RHQ must be Saudi nationals. Local so-called Saudisation requirements have created a bottleneck in the labour market and given Saudi nationals leverage, local recruiters say.

“There is a race for talent,” said Shelbaya. “Definitely, with a lot of multinationals moving from Dubai to Saudi Arabia, there is going to be a big appetite for local talent.”