Kippreport looks into the new trend and the change in strategyNovember 29, 2015 5:01
Almarai vs Al Rawabi
Both found a place in Forbes Arabia’s list of top 40 Arab brands in 2006. But who’s making a splash?
With summer drawing to a close, it’s times for kids to get back to school and also time for competition to heat up between milk brands. So which regional dairy, Al Rawabi or Almarai, will rise to the top?
Almarai, which means “green pasture” in Arabic, was started in 1976 in Riyadh, Saudi Arabia. The company began with the processing of fresh milk and buttermilk (laban) and currently claims to be the largest dairy company in the Gulf by market value.
Al Rawabi Dairy Company was started much later, in 1991, in the UAE, when 500 Friesian Holstein cows were flown in from Holland. The company’s claim to fame is that it was the first brand to pack fresh milk in plastic bottles, forcing the entire industry to follow suit. In 2000, Al Rawabi merged with Emirates Modern Poultry Company to form Rawabi Emirates, a joint stock company. Rawabi Emirates is part of the Arab Authority for Agricultural Investment and Development, which has the governments of Saudi Arabia, Kuwait and the UAE as shareholders.
Almarai became a publicly listed company in 2005, a few years later than its rival.
Earlier this week, Almarai announced that it had signed an initial agreement to buy the International Company for Agricultural Industrialization Projects (Beeaty), an Egyptian dairy and juice manufacturer. In July the firm announced that it plans to boost its investment budget to around $1.6bn for the five years.
Last year, Almarai reported sales of around $1bn, up more than 36 percent from the previous year. Its net income rose by 43 percent from the previous year to reach around $178m.
Al Rawabi, which claims to have an overall growth rate of about 25 percent a year, reported an annual turnover of $100m in 2006, and estimates a turnover of around $180m this year. It also recently said that it is planning to increase its advertising budget by 25 percent this year to reach out to a growing market.
Both the competitors offer the usual dairy products—milk (low fat, full fat, skimmed, flavored), buttermilk (laban), cheese and butter, and have also expanded into packaging and selling fresh fruit juices in the region (Al Rawabi credits itself as being the first local dairy company to do that). Almarai also includes desserts (such as custards) and tomato paste in its product list.
Last year, Almarai acquired all the shares of Western Bakeries, a producer and distributor of baked food products under the brand name L’Usine, thus expanding its product range to bakery items as well.
While Almarai is available in all six GCC countries apart from Saudi Arabia, Al Rawabi products are offered in the UAE, Oman, Qatar, Kuwait and Saudi Arabia.
In March last year, both rivals were part of a group of dairy and juice companies that was admonished by the UAE Ministry of Economy after it demanded price hikes up to 33 percent. The Ministry dismissed the attempts to increase prices as “harmful to consumers and the national economy.”
In spite of that, Al Rawabi announced that it was increasing prices of its products in June. In a notice sent to local retailers, the company hiked the prices across a range of its products from yoghurt to apple juice. The company cited increases in the costs of raw materials, packaging and transportation expenses as the reason.
A few days after it sent the notice, Al Rawabi retracted the price rise without giving any reason. It told local retailers “the price increase will be postponed until further notice.”
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