DAMMAM, 25 September 2003 — A number of dairy companies in the Eastern Province are to join forces and set up a single company in order to compete in the domestic market and expand their business to other parts of the GCC. Dairy industry sources say the agreement will be signed soon.
Al-Rayan, Al-Sharqyah, Al-Reef, and some other dairy companies have been discussing joint efforts to face economic difficulties.
The dairy market has been through a difficult time due to the mushrooming of local dairy companies.
For the past two years, the dairy industry has witnessed a price war that at one stage reached such proportions that it became almost impossible for small companies to survive. The big companies, who have a major share of the domestic market and export their products to GCC countries, slashed their price to such a level that smaller companies in order to match their price tag lost millions of riyals. The products of some companies never reached market and perished in warehouses.
Eventually, the Agriculture Ministry intervened and the price of many products including milk and buttermilk has since then stabilized.
Many small companies say that with the present price tag and declining demands it is difficult for them to survive. “Small companies could not compete with giants like Al-Safi and Almarai who have a virtual monopoly in the domestic market,” said the manager of a local dairy product company in Dammam Industrial Area. “It’s about time for the smaller companies to come together or join a big group,” he said.
The dairy product market in the Kingdom has expanded over the years, and one national company has the distinction of being the largest dairy product company in the world. A source at Al-Sharqyah Company said that once agreement was signed to set up a joint company then “we will work under one brand and trade name and we will also share the cost.”
