Almarai extracts 674m litres of milk a year
Amid Saudi Arabia's vast desert tracts, Almarai extracts 674m litres of milk a year from about 55,000
mottled, black-and-white Holstein cows, which are kept comfortable in the often sweltering Middle East heat by
mist coolers.In addition to the dairy farms, Almarai manages a production, packaging and a vast distribution network that delivers food and fresh dairy products - including yoghurt, cheeses,
pastries and a range of fruit juices - to 42,000 retailers throughout the six Gulf Arab states.
"Saudi Arabia has some disadvantages, but also a lot of advantages, such as low energy and labour costs, and a large domestic population," says Georges Schorderet, Almarai's chief financial officer. "This gives us a good base to grow."
Healthy regional demand for dairy products and juices has helped Almarai
shrug off the global economic downturn. Consolidated net profits increased to SR287m ($76.6m) in the second quarter, a 22 per cent increase over the same period last year, and a 45 per cent rise from the first quarter. "Sales have held up remarkably well in what has been a challenging year for many operators," Banc of America Securities-Merrill Lynch analysts wrote in a recent research report.
Almarai is "a highly-organised and effective integrated food producer that has built up a dominant position in the fast-growing consumer markets of the Gulf", the bank's analysts said. The company has averaged a 28 per cent
compound annual growth over the past five years, helping it to become the darling of the regional analyst and investment community.
"Almarai is a very good, very solid company - one of my favourites in the Gulf," says Emad Mostaque, a London-based fund manager at Pictet Asset Management. "It's one of the companies all fund managers own."
Buoyed by its dominant position in the Gulf, and aiming to double turnover and profit by 2013, the company has started to expand into new product areas and markets.
While companies and governments across the Gulf are
delaying or scaling back projects and investments, Almarai plans to invest SR6bn ($1.6bn) on expansion in the next five years. It also recently formed a joint venture with PepsiCo to produce and sell dairy products and fruit juices across the Middle East, Africa and Asia.
Extra-Gulf expansion plans
Initially, any extra-Gulf expansion will be done through the joint venture, in which Almarai has a 48 per cent stake, says Mr Schorderet. "In the longer term we might go outside the Gulf as well, but we still have some markets to penetrate here, and room to grow."
The company recently bought a 75 per cent stake in Teeba, a Jordanian food and dairy company, which has been transferred to the Pepsi joint venture. It is also in the process of acquiring Beyti, an Egyptian dairy company, for $115m and Hadco, a Saudi
poultry and animal feed company, in a deal worth $253m. Two years ago it acquired a bakery, and earlier this year Almarai announced plans to invest SR650m ($173.5m) to launch a baby food division, which it expects to be fully operational by 2011.
Almarai's only immediate challenge is how to manage its
growth spurt, according to Mr Schorderet, particularly on the recruitment side. The company plans to increase its work force from 12,000 at the start of the year to 14,000 by the end of 2009, and the "challenge is to find the right people - people who can add something to the company", says Mr Schorderet.
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