SADAFCO SWOT & PESTLE Analysis

Strength

1. Strong market share metrics enjoyed by SADAFCO and Saudia brand: SADAFCO has strong market share in its key business segments in Saudi Arabia. The company’s Saudia brand health metrics have also shown a positive trend as represented by the exit MAT (moving annual total) market share measures. The brand’s milk percentage saw an increase of 0.1% to 27.9%, tomato paste an increase of 5.8% to 53.9% and ice cream an increase of 0.2% to 25.2% which took the ice cream business to a #1 position. This is mainly due to investments made to maintain the premium position of the Saudia brand while making sure that customers continue to access high quality products at affordable prices. The company has also significantly increased its sales reach through the installation of thousand new freezers in both existing and new outlets. The total market share enjoyed by Sadafco for UHT milk is 62.3%, that for tomato paste is 54.6% and for ice cream 24.9%.

6. Strategic investments and expansion aiding growth: SADAFCO has plans underway to set up a new ice cream production facility for the completion of which it has purchased a facility adjacent to the Jeddah milk factory in 2019. The new facility is expected to cost SAR 105Mn and promote growth for the company. The new facility is to promote the company strategy of strengthening the three prime avenues of growth for the company- namely milk, tomato paste and ice cream. The company had previously in 2018 also purchased 76% of Mlekoma (Poland) to gain access to powdered milk raw materials. This has resulted in savings amounting to over SAR 10mn in 2019. The Jeddah Central Warehouse (JCW) investment to the tune of SAR 145Mn made in April 2019 has also already shown higher utilization than expected, taking savings far above the projected savings for the first year

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Saudi Arabia has one of the highest yields of cow milk: Saudi Arabia has the largest and most modern dairy farms in the entire Middle East. The dairy farms of the country have an annual production rate of 1,800 gallons per cow, which is one of the highest in the world. In 2019, it was forecasted that about 2.5 million metric tons of milk were produced in Saudi Arabia. This augurs well for domestic players such as SADAFCO which are looking to increase domestic production as well exports in regional markets.

2. Initiatives for reduction in carbon footprint: It is necessary for the larger organizations of the world to recognize the importance of maintaining human rights and safety and following environmentally sound practices. Sadafco has taken several steps to ensure that it follows these. The company has installed solar panels to reduce energy consumption and has plans to install a full solar rood at its Jeddah Central Warehouse (JCW). It also has a photovoltaic (PV) system at Riyadh Regional Distribution Centre generating 226KW via 2,088 solar panels to supplement the existing Saudi Electric Company (SEC) supply. These panels have been installed at the parking area and offer the dual purpose of giving shade to cars parked.