Saudi Arabia - Almarai Set to Spend More Than US$1bn on Poultry

08 Jul 2011 • by Natalie Aster

BMI has highlighted Saudi Arabia's Almarai as probably the star performer in the Gulf food and drink universe over the past few years. It has a very strong dairy business and has taken some really positive steps to diversify both in terms of geography and business categories. Almarai's recently revealed plans to invest about US$1.1bn in developing its poultry business, which in its FY10 contributed a modest 2.5% to overall sales, re-enforces what we have been saying.

Until it acquired Saudi Arabia's leading poultry company Hail Agricultural Development Company for about SAR950mn (US$253mn) in 2009, Almarai did not have a poultry business. So to be prepared to invest more than US$1bn two years on is a big deal.

Diversification is particularly important to the big Gulf-based consumer companies, especially those based in Saudi Arabia (by far the biggest Gulf market by population), because once you have established yourself as a market leader in your core business (fresh dairy in Almarai's case), what you can do in the likes of the UAE, Bahrain and Qatar is probably not going to compare as these are all much smaller markets.

So your two big options are going for the frontier Middle East and North Africa (MENA) economies more aggressively (Gulf companies can have a real advantage here) and leveraging off you strength domestically to try and re-invent yourself as a more diversified company domestically by entering new businesses (usually via acquisitions and joint ventures). BMI’s agribusiness team sees poultry consumption in Saudi Arabia growing at a compound annual rate of 4.2% between FY10 and FY15.

It could be that Almarai may have some pretty strong regional aspirations for its poultry business, with consumption likely to rise across the wider MENA region. However, in the meantime Almarai is probably going to focus a lot of its attention on its domestic market, with the aggressive regional expansion that gathered momentum in 2009 and 2010 probably being moderately reined in for the time being.

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