Almarai’s pursuit of quality ensures unique success story

As part of its interests to maintain transparency and to highlight the quality of the day-to-day operations that reflect the company’s dedication toward producing world-class food and beverages, Almarai provided an opportunity for 60 representatives from the local and international financial community, accompanied by members of the press to see its state-of-the art facilities in Al Kharj, some 100 kms from the capital of Riyadh on Wednesday.
“We are pleased to welcome the local and international financial community and members of the press to the heart of Almarai’s operations. This tour gives us the opportunity to demonstrate Almarai’s relentless pursuit of quality firsthand, and share our latest developments and future vision with these very important partners,” Talal Alotaibi, Almarai’s public relations manager said, while welcoming the visitors to the farm.
The comprehensive tour showcased a number of Almarai’s state-of-the-art facilities including the company’s dairy farms; its juice and dairy processing factory, its bakery facility, as well as the region's first infant nutrition factory.
Furthermore, Almarai officials briefed the guests about the company’s latest financial and operational results including the recently announced SR 15.7 billion five-year capital investment plan.
Almarai is the largest integrated dairy foods company in the world with an unrivaled reputation synonymous with delivering excellence and quality across its entire range of products. Currently operating across the Gulf region, Almarai employs over 22,000 employees servicing some 40,000 retail outlets with a turnover that exceeded $ 2 billion in 2011.
The Almarai success story began in 1976,when its Chairman Prince Sultan bin Mohammed bin Saud Al-Kabeer recognized the potential to transform the traditional dairy farming in the Kingdom to meet the needs of a burgeoning domestic market.
Under his visionary guidance, numerous agricultural projects were developed toward achieving this objective. What began with the processing of fresh milk and laban, soon expanded into modern farms and state-of-the art processing plants.
In the early 90s, Almarai entered into a restructuring and reinvestment phase moving away from decentralized to a centralized structure. The first Central Processing Plant was commissioned replacing five decentralized plants. It also established four large dairy farms in the central area replacing 10 decentralized small farms. The investment phase created the base for Almarai to become a low cost producer in the region.
Since then, the company has continued to invest in technologically, advance production facilities and recruiting the right caliber of people. A second and larger Central Processing Plant, incorporating a new cheese plant, was commissioned in late 2005.
Two new super farms were commissioned, bringing the total number of farms to seven. Today it is capable of serving high quality products to more than 43,500 customers within the GCC on a daily basis.
In 2005, Almarai moved from being a privately owned company to a publicly listed company and it has over 70,000 shareholders.
In 2007, with the acquisition of Western bakeries, based in Jeddah, the product range was expanded to include bakery products. Since the acquisition, it has developed its bakery business by creating the Modern Food Industries, improved distribution and product innovation.
In addition during 2009, it commenced the construction of a new facility in Al-Kharj.
In 2009, poultry was added through the acquisition of Hail Agricultural Development Company (HADCO). In the same year, a joint venture (IDJ) was initiated with PepsiCo, pooling respective expertise in dairy and juice to enable geographic expansion outside the GCC.
During 2009/2010, Almarai made a commitment to enter the infant nutrition market and commenced the construction of the region's first infant nutrition plant at Al-Kharj.
Recognizing that the best approach was to work with acknowledged experts in the area, Almarai reached an agreement with Mead Johnson to a form a 50-50 joint venture known as the International Pediatric Nutrition Company (IPNC). The infant products will be co-branded Almarai and Mead Johnson's flagship 'Enfa' range.
The facility, which is to start production in a few months, would start its distribution three months following the commissioning of the infant food factory. It hopes to produce three types of nutritional food for infant at different age-levels.
Fort the past six years, more than 30 percent of Almarai's sales revenue has been plowed back into business development, infrastructure and technology, creating a sound platform to maintain the company's reputation consistent quality and drive continued growth.
Growth was steady in the early years but has taken on a spectacular trajectory in recent times. It took two decades to achieve annual revenue of SR 1 billion but only one decade to double this. In just four years to 2010, total annual sales have soared to reach just short of SR 7 billion, driven by the relentless pursuit in every business aspect that has become synonymous with the Almarai brand.
The success is attributable to a unique blend of state-of-the art infrastructure which includes farms, production operators and go-to-market systems.
This painstaking dedication to quality enables Almarai's Saudi Holstein cows to each produce an average of more than 13,000 liters of milk every year-almost double the European figure and close to 1,500 liters more than the nearest international competitors.
A milking herd of roughly 60,000 produced more than 800 million liters a year. With the herd accommodated in seven farms covering 36,000 hectares, the Almarai name, meaning 'pastures' in Arabic, sounds very appropriate.
The seven dairy farms include Al Harm, Al Fanar, Al Nakheel, Al Rabiah, Al Badiah, Al Danah and Todhia
Two weeks ago, the board of directors of Almarai approved its strategic five-year plan for the period 2013-2017. The plan aims at growing Almarai’s business, in all segments, to further product quality and to better serve its consumers. To meet these ambitious goals, the board of directors reviewed and approved the largest capital investment plan ever put forward by Almarai.
This plan will amount to SR 15.7 billion over the period. In addition to the replacement of the existing investment base, this program will cover the expansion needs in all areas of farming, manufacturing, distribution and logistics. Further, it will also address the investments required in product innovation, new business development, increasing the efficient use of available resources and development and training of national manpower.
Financing of this program will be mostly done from the company’s operating cash flows but it will also utilize expansion of its financing capabilities either via traditional bank facilities, SIDF and ADF funds or via the Sukuk program recently launched.
This plan reaffirms company and its board of directors conviction of the importance of national investment, as well as investment in the food industry in general.
Making a presentation during the visit, Paul Louis Gay, Almarai chief financial officer, said one of the inherent strengths of Almarai is its ability to produce high quality fresh raw milk, an achievement made possible through highly developed farming skills.
Ikram Ulhaque, group operational finance investor relations manager, also took part in the presentation.
“The company’s continuous improvement efforts in the standards of health, breeding, nutrition, farm design, animal husbandry and crop management have resulted in a wealth of in-house built technology and know-how, ” Gay said.
Quoting last year figures, he said 867 million liters of milk were produced with a rolling herd average per cow amounting to 13,267 liters. Total number of cows recorded last year was 67,700.
“We now operate from 90 sales depots in the GCC . With approximately 3,000 sales vans and 45,000 fridges,” he said, adding that 50,000 retail outlets are being served within the six Gulf countries.
“Top line growth of 17.0 percent versus Q1, 2011 is testament to our unwavering commitment toward quality and product innovation and continuous improvement in the provision of services to our consumers.”
This growth is underpinned by strong growth of 50 percent in poultry portfolio, 39 percent in bakery and 25 percent in Juice.
In a statement issued by Almarai Chairman Prince Sultan Al-Kabeer, it was revealed that despite the global economic crisis, the company's sales increased by 14.7 percent reaching SR 7,9510 million in 2011, yielding a net operating income of SR 1,517.6 million.
Highlighting the company's performance, the prince said the dairy business recorded sales of over SR 4,236.9 million in 2011. Putting in place the platform for future growth was a key focus of 2011 as Almarai invested in excess of SR 3 billion in capital projects. They included poultry expansion, the region's first infant nutrition facility, continued investment in dairy and juice production facilities and distribution capabilities and a downstream investment in securing supplies of feed, with the acquisition of an Argentinian agriculture company.
The prince said that during 2011, the company undertook two strategically important initiatives. Firstly, the company imported 100 percent of the Alfalfa required to produce the dairy products exported outside of the Kingdom, compared to a government mandated amount of only 20 percent. Secondly, Almarai purchased a company that owns and operates three farms in Argentina.
“This investment forms part of Almarai's continuous efforts to improve its supply chain and ensure access to the highest quality for both its dairy herd and poultry business,” the prince concluded.