JEDDAH: Perhaps the greatest issue at present is the global crisis in food commodity prices along with currencies rising and falling against the US dollar, which is badly hitting profitability in Middle East-Gulf region and forcing difficult decisions on pricing and consumer spending despite sustained investment. The competitiveness in the modern trade and the increasing cost of doing business in this channel is also not helping the situation, according to a top executive of the packaged food industry.
Under the circumstances, business establishments will have no other option but to endeavor to put in long term cost reduction programs in place that allow them to offer the excellent quality they expect from them while safeguarding the business viability, Vishal Tikku, managing director, Kraft Foods Saudi Arabia said in an interview with Arab News.
Asked about the size of the market for packaged goods, he said: “Sales of the packaged goods industry in the Kingdom are highly fragmented, with many international players including Kraft Foods. The industry as such has been growing tremendously with 2007 recording the highest growth since 2002. This is largely driven by strong sales in established sectors such as dairy and dried processed foods.”
Although many sectors are approaching maturity, there is a great deal of growth for even established categories like cheese, biscuits, powdered beverages and rice.
In fact, the packaged goods industry in the Kingdom is expected to record a healthier trend in the coming years and sales will continue to increase due to many factors such as the growing number of supermarkets and hypermarkets, increasing population and, as the very young Saudi population becomes greater consumers of packaged foods and of consumer awareness of health and premium products and also of products with added-value features, higher disposable income and exposure to new types of packaged foods. Asked about the company’s strategies under the circumstances, Tikku said: “The strategies that we deploy are instrumental to our growth in the region, and these range broadly from rewiring the organization to reframing our product categories to quality versus cost ratios. In this region, we will stay ahead of the competition by focusing on providing the right bundle of benefits at the right price and new product innovations to drive faster top line growth. Increasing our speed and flexibility will help us reduce costs so we can reinvest in building our brands and accelerating growth.” Globally, Kraft Foods is one of the world’s largest food and beverage companies with annual revenues exceeding $37 billion, more than 100,000 employees and more than 180 manufacturing facilities globally.
“Our products are available in more than 150 countries around the world, including nine brands of cheeses, dinners and dressings, meats, cream cheese, coffee, cookies and crackers, coffees, biscuits and chocolates, with revenues exceeding $1 billion,” he said. Kraft Foods global turnover is $37 billion. North America is its largest market, with a turnover of $24 billion, followed by EU with a turnover of $8 billion. Developing markets, which includes Saudi Arabia, accounts for $5 billion.
As an international player with brands that have been present in the region for over 50 years, he said, that brands like Tang and Kraft Cheese are as Saudi as any other local products. “Our formulations are developed after research with Saudi consumers and to deliver on their taste preferences. However, a brand like Oreo is slightly different where it is a very global brand that is made in Saudi Arabia to international specifications. All our GCC manufacturing facilities supply the entire region and also international markets such as Africa, Levant, etc.” In the Middle East-Africa region, Kraft Foods has six manufacturing facilities producing a variety of Kraft’s products, the latest one being our 60,000 square meter, state-of the-art facility in Bahrain, which will produce 60,000 tons of Tang and Kraft Cheese products per annum specifically for this region.