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Almarai SWOT & PESTLE Analysis

ID : 52351853| Feb 2018| 12 pages

COMPANY PROFILE -Almarai

Business Sector :Consumer Goods

Operating Geography :Middle East

About Almarai :

Almarai is a leading food and beverages manufacturer and distributor in the Middle East as of 2017. The company and its subsidiaries are active in the Middle East and the North Africa region through five categories which are Dairy, Bakery, Juice, Poultry and Infant Nutrition. The dairy and juice is marketed under the Almarai name. Bakery business is done through Western Bakeries Company Ltd under the brand name L'usine products.In terms of joint ventures, the company operate through Internaltional Dairy and Juice(IDJ) for dairy and juice products in Egypt and Jordan. For Bakery segment, they operate through Modern Food Industrie(MFI) under the brand name 7Days. The company has its headquarters in Riyadh, Saudi Arabia.

Almarai Revenue :

SAR 3.37bn– Q3 ending Sept 2017

Competitive Analysis of Almarai

SWOT
PESTLE
The SWOT analysis for Almarai is presented below:
Strengths
Weaknesses
1. Market leader in Dairy market in GCC
2. High quality products
3. Strong Distribution network
4. Hot climatic conditions conducive for beverages market
1. High operating costs
2. Over dependence on dairy and juices segment
3. Major dependency on imports for raw materials
Opportunities
Threats
1. Growth of Milk Market in Gulf Cooperation Council (GCC)
2. Product Diversification
3. Increasing number of tourists visiting Saudi for Hajj and Umrah to propel demand
1. Political Situation in the Gulf Region
2. Feedstock supply disruption will increase cost
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Detailed SWOT Analysis of Almarai

 

Strength

1. Market leader in Dairymarket in GCC: The Dairy Market has 5 product categories namely fresh milk, long-life milk, milk powder, laban and Zabadi. Dairy is the core segment of Almarai and it has grown from strength to strength in years making Almarai the market leader with a share of 35%. The closest competitors of Almarai in this market are Nestle and Al Safi with a market share of 7.6% and 7.4% respectively. Hence Almarai holds a strong grasp on the dairy market in the GCC.

2. High Quality products: Almarai maintains stringent quality measures and highest food safety standards at every step of supply chain. Complete ownership of supply chain helps them source their raw materials and other requirements in an efficient manner and ensure high quality standard. This efforts have made them one of the most trusted brands in terms of quality and reputation which can bee seen from the survey of YouGov. A BrandIndex survey conducted by YouGov named Almarai as Saudi Arabia’s top brand, the ranking was based on overall brandhealth taking into account the customers perception about the brands and their satisfaction with them.

3. Strong distribution network: Almarai’s Transport and logistic division is the largest in Middle East. They employ more than 3000 staff in transport, Warehousing, maintenance and planning departments across GCC in their Sales depots which are a total of 88 depots. This extensive infrastructure helps them deliver products to over 110,000 retailers across GCC. More than 8000 trucks deliver 2 billion kg of high quality products on time.

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Weakness

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Opportunity

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Threat

1. Political situation in the Gulf Region: Q3 earnings of Almarai took a beating with revenues down 4.5% than that of Q3 of 2016. The results are on the back of Saudi led blockade of Qatar which has entered into 2018. The blockade resulted in Almarai losing access to the Qatar market. Increasing tension in the Gulf region can prove to be detrimental to the sales of Almarai as more than a quarter of its revenue comes from the GCC.

2. Feedstock supply restriction will increase cost: Almarai will have to import all of its feedstock from 2019 as Saudi Arabia government has come up with a three year plan ending in 2018 to stop the production of the feedstock in the country as it being a high water needing cultivation and water scarcity is a major problem in the region. This decision added a cost of SAR 200 million in 2016 with cost rising each year till 2019. The company had to buy land in California to cultivate the necessary fodder for import. Any such changes in regulation can further increase Almarai’s costs.

References

1. Almarai repory Albilad : http://www.albilad-capital.com/Research_EnglishReport/Almarai-Detailed%20Report-EN.pdf

2. Blockade to weigh on Almari’s Q3 revenues: https://www.thepeninsulaqatar.com/article/06/10/2017/Blockade-to-weigh-on-Almarai%E2%80%99s-Q3-revenues

3. Almarai reports third-quarter revenue 4.5% lower than 2016: https://www.foodbev.com/news/almarai-reports-third-quarter-revenue-4-5-lower-than-2016/

4. Almarai says third-quarter profit flat, warns of tough market conditions: http://www.arabnews.com/node/1181596/business-economy

5. Consolidated Financial Results for period ending September 2017: https://www.almarai.com/wp-content/uploads/2017/10/Press_Release_-Financial-results-for-Q3-2017-EN.pdf?x11237

6. GCC Fresh Milk Market Share, Size and Forecast 2017-2022: https://imarcgroup.wordpress.com/2017/09/26/gcc-fresh-milk-marke/

7. These Are the Corporate Winners and Losers of the Qatar Standof: https://www.bloomberg.com/news/articles/2017-06-11/these-are-the-corporate-winners-and-losers-of-the-qatar-standoff

8. Fodder Cultivation to be banned: http://www.arabnews.com/saudi-arabia/news/707616

9. Almarai and Al Baik among Saudi Arabia’s best brands: http://www.arabnews.com/node/1134921/business-economy

10. Almarai Annual Report: http://annualreport2016-en.almarai.com/

11. Saudi dairy company Almarai buys land in California to grow fodder: https://www.reuters.com/article/almarai-california/saudi-dairy-company-almarai-buys-land-in-california-to-grow-fodder-idUSL8N14U05620160110

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Almarai SWOT and PESTLE analysis has been conducted by Parth Ashar and reviewed by senior analysts from Barakaat Consulting.

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Almarai SWOT & PESTLE Analysis
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