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Home > Food and Beverage > Food > Food - General Markets
Saudi Arabia Food and Drink Report Q3 2009
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Saudi Arabia has fallen back into fourth place in BMI’s regional Food & Drink Business EnvironmentRatings table for Q309. A decline in crude-oil prices and private investment has forced BMI to revisedown the kingdom’s GDP growth forecast to 2.1% in 2009. Although it does not possess the lofty percapitaGDP of some of its regional peers, Saudi Arabia boasts a large and youthful population thatallows it to register as the region’s largest market. Despite a weakened near-term macroeconomicoutlook, a number of food and drink companies have continued to fare well, not least within thecompetitive dairy sector, as discussed in BMI’s recently published Saudi Arabia Food & Drink Reportfor Q309.
In the past quarter, Saudi-based dairy major Almarai reported Q109 net income of SAR197.4mn(US$52.64mn) - a 22% year-on-year (y-o-y) uptick. The posting fell in line with expectations andadded authority to claims that the company should continue to post solid financials in FY09 despite theGulf Co-operation Council (GCC) region’s vulnerability to the global financial meltdown. In a furtherdevelopment, leading domestic company Savola Group increased its equity position in Almarai to29%. The additional investment is reputed to have been worth SAR500mn (US$133.3mn).
Although Saudi Arabia has the ignominious distinction of possessing one of the world’s widest foodand drink trade deficits, its dairy sector has emerged as the region’s standard bearer. In line with anuptick in food consumption, demand for white goods picked up considerably on the back of the oil-ledboom up to Q308. Almarai’s Q09 results attest to the sector’s likely resilience in 2009. The dairy majortussles with Saudi Dairy & Foodstuffs Co, Al Safi Danone and Al Rabie Saudi Foods for marketshare in what is arguably the kingdom’s most competitive food sector.
While the fresh dairy segment remains Almarai’s chief source of revenue, the company has made movesto increase sales within its fruit juice segment (fruit juice sales contributed 10% to total turnover inFY08). Earlier this year, Almarai signalled its intent by entering into partnership with PepsiCo to formInternational Dairy and Juice and is set to target a number of non-GCC Middle Eastern markets aswell as the North African region. Domestically, competition is provided by local rival Aujan, andUAE-based Masafi, which has a large regional export business.
BMI has forecast food consumption to push up by 10.9% though to 2013, which, banded together withtheir regional sales, should allow Saudi Arabia’s dairy majors to register steady turnover uptick. Thecompetitiveness of the sector means potential foreign investors are likely to look elsewhere. Yet thekingdom’s soft drinks industry remains a valid target for investors seeking regional entry. BMI hasforecast soft drinks sales growth of 26.1% through to 2013.
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