RIYADH, 15 September — Al Safi-Danone, the world’s largest integrated dairy farm, is exploring the possibility of taking over a local dairy for expanding its production base.
“No formal approach has been made, but there are talks in the market with some of the smaller players. The coming months should unveil more facts about the situation,” Muhammad A. Al-Sarhan, managing director of Al Safi-Danone, told Arab News.
He was speaking on the occasion of the National Products Exhibition which will be inaugurated by Riyadh Governor Prince Salman here tomorrow.
A total of 80 national agricultural companies are participating in the exhibition, which is being organized by the Riyadh Chamber of Commerce and Industry. It will be held at the Riyadh Exhibition Center from Sept. 15 to 22.
He said Al Safi’s portfolio of new products dictates the need for more milk suppliers as well as market and distribution outlets. “Moreover, growth is either organic from within or by acquisition. Our partner, Danone, is known worldwide for its growth by acquisition. So we have agreed that we should take advantage of every available opportunity.”
He said acquisitions and mergers were important elements of survival strategy. “You will have to be a big economic entity to sustain yourself, especially as the WTO membership will require the opening up of borders. Also, we shall be extending our export promotion program to almost all the GCC states by the first quarter of next year.”
Referring to the ongoing price war in the Saudi dairy industry, he pointed out that it “could eventually hurt the consumer and the national economy, since it would eliminate the weaker players from the market and sap the element of competition.”
Al-Sarhan said the current situation in the dairy industry would affect the consumer in two ways. “Small producers will be forced to close down if the price war gets prolonged. If that happens, only two or three major players will remain in the market.”
Conceivably, these three producers could agree on a baseline price which is even higher than the market price.
Answering a question on the UAE’s charge that Saudi dairies were flooding their market with cheaper milk, Al-Sarhan said the emirates’ import of forage from Spain, Morocco and now Pakistan had jacked up the production cost of its local milk.
“As a result, Saudi milk had gained a competitive edge in the market. The UAE’s Minister of Finance had a meeting recently with the local and Saudi milk producers for regulating the supply and price of milk,” the executive said.
He said, in reply to another question, that they were doing very well in schools, where 500 vending machines had been installed at a cost of SR 8 million. More such machines would be in place at other places as part of ‘proximity marketing’. It refers to the concept of making one’s product available at places frequented by the consumers, such as malls, airport, stadium, railroad station and other public utilities.
Referring to their new product line, he said they have launched a new range of zero fat , zero sugar, flavored dairy products, such as milk, laban, yoghurt, called “ Rashaka” (or “fitness”). The number of consumers for skimmed and low-fat dairy has surged from five percent before to around 12 percent currently. The concept has been adapted from Europe and Arabized here. Al Safi-Danone’s market share stands at 28-30 percent of the total liquid milk.
This is in addition to Danao, which is 20 percent skimmed milk and 80 percent juice in different combinations—peach and apricot, orange and pineapple, mango and orange, apple and passion fruit. “It combines the health benefits of juice and milk making it a highly beneficial morning drink.” A dairy dessert spoonable product in three different flavors will hit the market by the end of this year, he added.
