Modern Mills will begin construction on a new food ingredients factory in western Saudi Arabia in Q3 2026. The facility will cost SAR 87.7 million and produce 42,000 metric tonnes of baking and food inputs per year.
The project is more than standard factory expansion. It is a calculated move to reduce Saudi food manufacturers' dependence on imported ingredients.
Cutting Out Global Shipping Risk
Saudi Arabia currently imports most of the raw ingredients used to process food, including specialized flour and industrial baking components. Two problems follow from this dependence. Global shipping costs and commodity prices have fluctuated sharply since 2020. And supply chain delays make it difficult for local factories to respond quickly to shifts in market demand.
A domestic source changes both constraints. Buying ingredients inside the Kingdom insulates manufacturers from global freight volatility and shortens delivery times. The factory's location in western Saudi Arabia adds a geographic advantage. The corridor between Jeddah, Makkah, and Madinah contains the highest concentration of food retailers and processors in the Kingdom. Delivering directly into that corridor removes the step of moving freight from Red Sea ports to inland factories.
The Sugar Tax Clock
The timing of this investment connects directly to new government regulation. Saudi Arabia introduced a four-tier sugar excise tax in January 2026. Food and beverage companies are under pressure to reformulate products quickly to reduce their tax liability.
Reformulating with an international supplier is slow. The supplier must modify its research and development pipeline, obtain approvals in its home country, and then clear Saudi customs. A local supplier changes the equation. Modern Mills can adjust its ingredient specifications to meet Saudi Food and Drug Authority requirements in real time, giving Saudi food brands a speed advantage over competitors dependent on international supply chains.
"For food manufacturers reformulating under the new sugar tax, the difference between a domestic supplier and an international one is not just cost. It is the time it takes to change a recipe."
What Has to Go Right
Modern Mills is making a long-term bet extending over the next decade. For the factory to succeed, three conditions must hold. Local food manufacturing must continue to expand. Import costs must remain high enough to justify domestic sourcing. And Saudi buyers must be willing to pay a premium for supply security over cheaper foreign alternatives.
The immediate challenge is customer conversion. Many major Saudi food brands are locked into multi-year supply contracts with international vendors. Those contracts either need to expire or be broken before Modern Mills can scale its client base. That timeline will determine how quickly the new facility reaches its target output.
Signal source: 'Modern Mills to start work on food ingredients factory in Q3 2026', Zawya, 10 May 2026.