A Leading Company Experience in Saudi Arabia:

Zero Tolerance for Non-compliance

Victor Aigbogun, PhD General Manager, Quality & Product Development

Almarai Company, K.S.A.

First Arab Conference: Regulatory Control on Food, Drug & Medical Devices… Ambitions & Challenges

Presentation Outline

• Introduction

• General Overview of Almarai Company – Quality you can trust

– Product Platform

– Scale of Production

– Quality Management Philosophy

• SFDA & Almarai Interactions

• Key Challenges – Playing by the Rules

– Shelf Life Regulations

– Innovation of Foods for Health & Well Being

• Key Areas for Opportunities

• Conclusions

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General Overview of Almarai Company

• The company dates back to 1976 when HH Prince Sultan bin Mohammed bin Saud Al Kabeer developed a number of agricultural projects including expansion into dairy farming and subsequently the processing and distribution of fresh milk and laban. This has been followed by expansion into the fresh juice and cheese markets.

• In 2005, Almarai moved from being a privately owned Company to a publicly listed Company and today has over 60,000 shareholders.

• In 2007, with the acquisition of Western Bakeries in Jeddah, the product range was expanded to include bakery products. Since the acquisition, we have developed our bakery business with the creation of Modern Food Industries, improved distribution and product innovation. In addition, the construction of a new bakery facility in Al Kharj in 2010 has given us the platform to better serve KSA Central/East and the Gulf.

• 2009 saw the commencement of a new phase in the development of Almarai : – initiatives for geographic expansion through the establishment of the IDJ JV with PepsiCo; – investments in new product categories- poultry through the acquisition of HADCO; – infant nutrition through the construction of the first Infant Nutrition Plant manufacturing facility in the

GCC and the establishment in 2010 of the IPNC JV with Mead Johnson.

• Today Almarai is the largest integrated dairy company in the world, with turnover of over USD 2.6 billion and a market capitalization of ~USD 6 billion.

• Almarai is a well-recognised, front of mind brand that was ranked number 4 in Forbes’s ‘Top-40 Arab Brands’ list and identified by both Credit Suisse and the FT as “a brand for tomorrow”.

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Quality You Can Trust

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بالجودة المراعي تلتزم

لمنتجات تقديمها عبر

دائما تلبي وخدمات

وترضي الزبائن متطلبات

المستهلكين توقعات

الشركة قدرة على وتحافظ .األسواق في التنافسية

Almarai is committed to Quality, This means providing products and services which meet all requirements and continually satisfy consumer expectations and maintain our competitive advantage.

Almarai Quality Policy المراعي في الجودة سياسة

Quality You Can Trust

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بالجودة المراعي تلتزم

لمنتجات تقديمها عبر

دائما تلبي وخدمات

وترضي الزبائن متطلبات

المستهلكين توقعات

الشركة قدرة على وتحافظ .األسواق في التنافسية

Almarai is committed to Quality, This means providing products and services which meet all requirements and continually satisfy consumer expectations and maintain our competitive advantage.

Almarai Quality Policy المراعي في الجودة سياسة

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Key Success Factors Over its 30+year history, Almarai has enjoyed remarkable success due to:

• The established, strong and well recognized brand

• The quality of its products and services

• Its dedicated work force who serve the customers and consumers

• Its investments in – world-class farming, and

– state of the art processing facilities

• Its distribution network allowing its fresh products to be distributed – on a daily basis

– ~ 90,000 retail outlets

– within the 6 Gulf countries, Jordan and Egypt

– Export to 11 countries outside GCC

(Jordan, Yemen, Iraq, Syria, Jordan, Morocco, Algeria, Libya, India, Malaysia, Australia)

“Any product that we will not give to our children, we will not produce.”

Product Platform

Corporate

Dairy & Juice

Bakery

Poultry

Infant Nutrition

Geographical Expansion

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Strong Pipeline of Innovation

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Submission of an average of one product a week for approval

throughout 2012

Farming • 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

• 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

• Key figures of 2012: –Milk produced in million liters: 928.5 –Rolling Herd Average liters per cow: 13,325 l.p.a. –No of cows in milk: 71,992 @ 31/12/2012 –No of young stock-Young, dry, withheld: 56,321@ 31/12/2012 138,000

• 7 Dairy Farms : Al Hamra, Al Fanar, Al Nakheel, Al Rabiah, Al Badiah, Al Danah, Todhia • In addition, Almarai operates as small farming facility in Jordan of

1,323 milking cows @ 31/12/2012.

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The Scale of Production and the Quality Systems

Farming

If all the cows in Almarai were lined up in a straight line,

the total length would be the same travel distance from

Riyadh to Dammam (350 KM)

Logistics

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• The long-haul fleet transports raw milk from dairy farms to the Central Processing Plants

• Transports finished products from the production facilities to designated sales depots.

• This fleet undertakes approximately 130,000 trips annually, covers 185 million kilometers and comprises more than 930 tractor units and 990 trailers as well as 66 tankers all owned and maintained by Almarai

Sales Depots

We now operate from 100 distribution centers in the GCC, Egypt and Jordan

Sales Vans & Fridges

• Approximately 4,000 Vans

• Approximately 50,000 Fridges

Distribution

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We serve every day,

•~90,000 retail outlets

within the 6 Gulf countries, Egypt and Jordan

Quality Management Philosophy

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Quality with Zero Tolerance for Non-Compliance

Excellent systems Very focused, detail oriented

• If you cannot measure it, you cannot control it • If you cannot

control it, you cannot manage it •Daily, weekly

performance review •We make it

happen

Looking ahead - We cannot

change the past, only the future

• Annual rolling five year plan •Monthly rolling

eighteen month forecast

There is no Almarai

“black box” Almarai is quality

driven • Attention to detail • Everything we do,

from the cow to the consumer, we do it better

• A well established process of product approval through SASO and claim approval through SFDA

• An average of 115 Product Approval Requests for Almarai per annum

– New Products

– Packaging / Artwork changes

– Line extensions

– Product improvement with ingredient change

• High level engagement between Almarai and the Saudi/ GCC Regulatory Agencies (SFDA / SASO / GSO)

– Open dialogue between Almarai CEO and SFDA President

– Technical discussions between Almarai Regulatory Team and SFDA / GCC / GSO

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SFDA & Almarai Interactions

• Playing by the Rules There exist a number of regional disconnects hindering full market product compliance:

– Disconnect in the interpretation of GSO standards between member countries

– Disconnect as to when local country standards supersede GSO standards

– Non-compliant products as above but -

– Almarai has a Zero Tolerance policy for non-compliance - hence is commercially disadvantaged

• Shelf life Regulations – Inconsistencies in the application of GSO Technical standards across GSO member countries

– GSO Standards for the declaration of Production Dates of Fresh Dairy / Food Products are out of the norm:

• P Date is not mandatory in most regulated markets and countries world wide

– removes the responsibility and accountability for shelf life and food safety from manufactures

– encourages waste of valuable safe food which is detrimental to the region’s economy and environmental sustainability (a sin to waste food)

– does not support capital investment and thus disadvantages companies like Almarai who have already invested heavily in new technologies, and further

– disincentivizes retro upgrades/investment for smaller food processing companies

• Lack of Support for Innovation to address recognised Arab consumer health issues via more healthy food options – Support and encourage clinical research by food companies – not visible or apparent

– Health claim requirements and approval process – slow, imprecise and ineffective

– Clear guidelines for health claims – guidelines are available but lack clarity, consistency, and communication

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Key Challenges

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Key Areas of Opportunities

• Continue the good relationship between manufacturers and Regulatory Agencies to drive quality and the safe manufacture of food products in the Arab market protecting all consumers

• Initiation, Implementation and communication of a truly consultative approach to regulation within the food industry

• Review Shelf Life Regulations across food product categories to allow GSO standards to reflect: – Full responsibilities and accountabilities for shelf life via manufacturers

– The Regulators’ commitment to support quality food availability in the Arab world

• Review imported ingredient inspection and sampling procedures to: – Minimize damage, destruction, and waste, lessening environmental risks, food wastage and

financial loss

– Reduce clearing time

• Reduce the approval time for new “NO Health Claim” products

Conclusions

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Almarai is appreciative of the challenges the SFDA / GSO and Middle Eastern regulatory agencies face in driving appropriate regulation to protect all consumers

Compliance remains as the key element of the Almarai “Quality You Can Trust” policies

Almarai will continue to support regulatory agencies in all their initiatives that protect consumers for the continuous supply of quality products in the Arab Market

THANK YOU