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ALMARAI COMPANY: Milk and Modernization in theKingdom of Saudi ArabiaTable of ContentsIntroduction......................................................................................................................................................Problem Statement......................................

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ALMARAICOMPANY:Mi l kandModer ni zat i oni nt he Ki ngdom ofSaudiAr abi a

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Table of Contents

Introduction......................................................................................................................................................2

Problem Statement............................................................................................................................................2

Situational Analysis..........................................................................................................................................3

PESTLE Analysis........................................................................................................................................3

SWOT Analysis...........................................................................................................................................5

MARKET SEGMENTATION And POSITIONING STRATEGY.............................................................7

MARKETING MIX.....................................................................................................................................9 Alternative Solution........................................................................................................................................10

Recommendation............................................................................................................................................12

Conclusion......................................................................................................................................................12

Bibliography...................................................................................................................................................13

Appendices.....................................................................................................................................................15

Appendix-1 PESTLE ANALYSIS..................................................................................................................15

Appendix-2 SWOT Analysis.....................................................................................................................16

Appendix-3 Market Segmentation.............................................................................................................17

Appendix-4 Marketing Mix.......................................................................................................................18

Appendix-5 Alternatives............................................................................................................................19

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Introduction Almarai Company, a Saudi based conglomerate, established in 1977, is a leading manufacturer and distributor of dairy products, infant nutrition, poultry, juices and bakery products, in the Middle East, with revenues of about SAR 14 billion ($3.7 billion) in the year 2017. It has diversified its portfolio of products by acquiring a Saudi poultry operation (to expand poultry business), Western Bakeries (to enter into the bakery segment), by entering a joint venture with a Greek firm, for the production and distribution of its 7Days brand, and by entering to another joint venture with U.S infant nutrition company to enter to into the infant formula business, with sales across the Egypt, Gulf region, and Jordan. Such diversified portfolio of Almarai products made it a market leader in manufacturing and distribution sector of food and beverages. It is one of the largest companies of the world which is rapidly growing. Almarai Company is a market leader in providing high quality standard products that are suitable for all age groups of consumers. It owns a title of being a trusted local brand among its potential consumers and its unavoidable presence in the fresh dairy products gave it a strong and renowned brand position in the market. [ CITATION Alm19 \l 2057 ] Problem Statement During 2008, Almarai’s core business operations (i.e. sale of branded fresh dairy products in Saudi Arabia and distribution through the traditional retails channels such as bakalas) are facing severe pressure under the restructuring program proposed by the new Saudi Arabia’s crown prince, Mohammad bin Salman. The changes in the government policies for the

3 expatriates (i.e. one-third population of Saudi Arabia and key customers of Almarai Company), new taxes and subsidy cuts along with finding new opportunities for the future growth of the company are the key problems the company is dealing with now. Situational Analysis Almarai Company’s current situation could be analyzed using different frameworks to ensure a possible solution of the problems the company is facing after the restructuring program proposed by the Saudi crown Prince, Mohammad bin Salman. PESTLE Analysis PESTLE framework could be used to assess the macro environment of the industry in which Almarai Company operates. The analysis of political, economic, social, along with technological, legal and environment will ensure that how actively and proactively Almarai is responding to the macro-environment changes. [ CITATION Ala16 \l 2057 ] Political factors Almarai Company has expanded in different countries thus exposing itself to many different political environment of different countries. Further, in its local market, the potential risk is of major direct and indirect subsidies introduced by the Saudi government. As the government is now considering ‘Saudization’ (which is to enforce the employment of Saudi nationals rather than foreigners) the potential impact of this would be on the companies such as Almarai. Also, the country is heavily depended on the food imports which may act as a constraint in the dairy products production

4 Economic factors The economic factors will include the factors affecting the economy of the country. Saudi Arabia’s economy is highly affected by the oil prices fluctuation and as far as the Almarai Company is concerned, the fluctuations in the home and foreign currency may affect the cost, revenues and profit of the company as it is expanded in various countries. Further, the fact that Expatriates leaving the country could not be ignored as expatriates are one-third of population and in the stability of its economy these expatriates plays a vital role. Social factors The factors impacting the social environment of the country constitutes the social factors. The food and dairy industry of Saudi Arabia is one of the largest market and thus impacts the consumers in a greater way. With increasing awareness of the usage of products among people, the health awareness is also one of the significant element which people are now considering and thus avoiding products containing fats and high calories.. Technological factors The food and dairy industry is highly based on innovative technology. The right temperature requirement for the processing of milk, dessert and other dairy products, the technology needed to cool down the products at various temperatures, all depends on the right and efficient use of technology.

5 Environmental factors The different pressure groups in the country focuses on the waste (from the production of dairy products) to be dumped in a right place not affecting the marine life also ensuring the reduction in food waste. The companies are advertising their products with honesty and transparency to meet the requirements of potential consumers and the ethical standards. Legal factors The legal factors includes the government’s laws and regulation related to the food and dairy industry. The companies are required to perform in accordance with the safety and health regulations implied by the government of Saudi Arabia. This should be assess by the legal and compliance officer with in the company to ensure the proper implementation of specific laws and regulations related to the industry and company. SWOT Analysis The SWOT analysis for the Almarai Company will explain the strengths, weaknesses along with the potential opportunities and threats of the company. This may help the company in strategic decision making, considering the internal weaknesses and external threats exposed to the company. Strengths The Almarai Company enjoys a benefit of being a market leader in dairy market in GCC. The company has a strong brand name and is well-known for its high quality products. It has

6 a diversified range of products which gives it an edge over its competitors. Almarai Company has a strong distribution network which is also a strength for the company. Weaknesses The internal weaknesses of Almarai Company is its high operating cost and pricing strategy. Further, it’s over reliance on juices and dairy segment also adds to the weakness of the company. Also the raw materials required for the production are imported (as mentioned above Saudi Arabia highly depends on its imports) and thus the company is highly dependent on the imports of raw materials. Opportunities Almarai Company has numerous opportunities to look forward to. It may build large-scale dairy farms in new markets and attract long term expansion in other major geo-graphical areas. The company may also consider manufacturing of more new products (such as icecream, soy milk) as it has an excellent experience of introducing new successful products or may expand the poultry business especially the packaging of fish products or it may expand in other market but using the decentralized dairy sourcing. Thus, it has various relevant and excellent opportunities to grow its business. Threats Almarai Company is exposed to the threat from the sudden changes in the government policies. Many employees of Almarai Company are expatriates and thus the government policy for the encouragement of local employment is a threat for the company as it has a

7 significant number of expatriates’ employees. The majority customers of Almarai company are also expatriates and thus the company is facing threat of loss of potential customers. also the distributors of Almarai Company i.e. retail stores such as Bakala are now facing difficulty in selling its products as the consumers are now more price conscious. MARKET SEGMENTATION And POSITIONING STRATEGY The market segmentation refers to the methodology brands used to divide its target market into different segments to optimize the marketing, and sales efforts.[ CITATION Wil \l 2057 ] The Almarai Company has a wide range of products which indicates that the company needs to adopt a particular market segmentation strategy to implement and market its product so that the marketing for its different products get easier and the required demand of its products could improve. The Four types of market segmentation helps in targeting the specific customers and meeting their demands. Demographic Segmentation The demographic segmentation divides the market in various variables which helps in targeting the specific market of consumers on the basis of their age, gender, income, education level etc. The various products the company offers to its customers follows a demographic segmentation as;

8 The targeted age group of its products are infants and adults. The infant formula it offers is an attractive product and targets the infants the other dairy products it offers such as fresh milk, yogurt and cheese are the products mostly used by adults. The product it offers are not gender biased. Both male and females are targeted through its products. Almarai is a brand name and mostly educated people are concerned about the brands thus the targeted customers are educated. Also it’s an expensive brand which targets the consumer of upper income level. Geographic Segmentation Through Geographic segmentation the target customer are based on the geographic boundary i.e cities, states, and countries. Almarai Company offers its product in Egypt, Gulf region, and Jordan thus, targeting different markets in different countries at the same time with its diversified products. Psychographic Segmentation This segmentation focus on the intrinsic traits the customer has such as values, interests, attitudes, lifestyle, and opinions. The customers now are more cautious about the quality of food they consume. Almarai’s strong brand name comes with the quality of its products. the high quality of its products attracts the customers of different values, interests, attitudes and lifestyle. Behavioral Segmentation The way the customers make decision regarding the purchase of anything cover this type of segmentation. The attitude towards the brand, the knowledge of the brand, the way they use

9 it covers the behavioral segmentation. Customers being quality conscious are also conscious about the price of the products they purchase. The purchasing behavior of customers is to have the best quality in less reasonable price. MARKETING MIX Marketing Mix is a tool a company could use to achieve its marketing objectives in the target market. Almarai Company owns a high brand image and various range of products which enforces the company to have a strong marketing strategy for its different products to compete in the highly competitive environment of food and dairy industry. The 4P’s of marketing i.e. product, price, place and promotion may be used by Almarai Company while consider the sources of future growth in different markets with different products. The Product consists of the brand offering the product, the services it offers and its packaging. Considering Almarai Company, it’s a recognized brand worldwide thus introducing a product under its brand name will be successful in any market. Further, Almarai is known for its quality of services, the brand offers a product with high quality. Therefore, Almarai should consider introducing a new product under its brand name with the same quality of service it provides now. Considering the target market of Almarai company the consumers are now not willing to pay high prices for the products as they are more price conscious than before. Thus, the pricing strategy should be set according to the customers demand and their willingness to pay.

10 Further, the places its products are being sold (i.e. Bakala) are exposed to the threats as they’re facing difficulties in selling the products also the promotions for Almarai brand should be taken into consideration as the company is thinking of expanding in new places. Alternative Solution Alternative-1: Large Scale Dairy Farms in New Markets Almarai Company may build a large-scale dairy farm in new markets such as in Iraq, Pakistan, and Turkey for long term benefits and in Indonesia, Malaysia, and Sri Lanka. As these markets are considered to have a high consumption of dairy products especially milk but the expansion may lead to some governmental issues among countries Pros: 

High capital investment.



Long term benefit in expansion.

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Could bring scale and efficiency in these markets.

Cons 

Political risk.



May impact the locals business in these markets.



Unfavorable weather conditions.

11 Alternative-2: Manufacturing in Other Markets The other alternative available to Almarai Company is to manufacture in other markets but with the decentralized dairy sourcing. This will reduced the potential political risk that could arise while adopting the alternative-1 but at the same time it will also reduce the Almarai’s control on the dairy products which the company could not afford ast the core area of Almarai is its dairy products. Pros: 

Reduces political risk.



Expansion in different markets.



Long term benefit.

Cons: 

Lost control over dairy products.



May not be able maintain its quality.



May reduces the sale of fresh milk. Alternative-3: New Product Segments

Considering introducing new products such as ice-cream or farm, process and market fish products under the brand name of Almarai would be another alternative for the company. Almarai’s brand is recognized and it has a history of introducing successful new products in the market. Thus. This would be beneficial for the company in the long term also.

12 Pros: 

History of introducing successful products.



Recognized brand name.

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Expansion through products will increase the market share.

Cons: 

Costly investment.

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First timers in introducing a novel product.



Risky investment.

Recommendation From the above alternatives it is recommended that Almarai Company should consider Alternaticve-3 (i.e. New Product Segments) as this alternative is beneficial in terms of the wide range of products it offers. Also Almarai has a history of introducing successful new products in the market. Further the introducing new products under its brand name will encourage its targeted customers to purchase as it offers quality product to its customers. Conclusion In a nutshell, Almarai Company is a market leader and a recognized brand in food and dairy industry as it offers wide range of products. The sudden changes in the governmental policies affecting the company in an unfavorable aspect could be managed by

13 responding to the changes efficiently and expanding its share in the market through further expansion in new products market.

Bibliography Alanzi, S. (2016). PESTLE ANALYSIS INTRODUCTION. Retrieved from https://www.researchgate.net/publication/327871826_pestle_analysis_introduction Almarai Company: Milk and Modernization in the Kingdom of Saudi Arabia (2019). Last Name, F. M. (Year). Article Title. Journal Title, Pages From - To. Last Name, F. M. (Year). Book Title. City Name: Publisher Name. Wilson, C. G. (n.d.). Market Segmentation, Targeting.

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15 Appendices Appendix-1 PESTLE ANALYSIS

PESTEL ANALYSIS Political

Economic

Social

Technological

Legal

Environmental

Factors

Factors

Factors

Factors

Factors

Factors

Expansion in different countries (i.e. exposing itself to different political environment )

Fluctuation in foreign currency.

Largest food and dairy industry

Efficient use of technology

Governmen t laws and regulations.

Pressure groups.

Government subsides. Dependence on Grain Imports.

Fluctuation s in Oil Prices. Expatriates departure from Saudi Arabia.

Cutting off high calorie and fat product from diet Increasin g awareness among people

Right temperature at various stages of dairy products production.

Specific laws related to Food and dairy industry. Assessment through the compliance officer

Waste from production. Honest and transparent advertisements.

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Appendix-2 SWOT Analysis SWOT ANALYSIS STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

Market leader in dairy market in GCC.

High operating cost.

Build large-scale dairy farms in new markets.

Sudden changes in the government policies.

Pricing strategy. Strong brand name. High quality products. Diversified range of products. Strong distribution network

Over reliance on juices and dairy segment. High Dependence on imports of raw materials.

Manufacturing of more new products (such as ice-cream, soy milk).

Expatriates employees and consumers

Expand the poultry business.

Price consc...