Growth opportunities for Almarai

Hult – EMBA 2016 - OUSHA Group 3 - Toolbox Assignment 27 October 2014

BY : Taher AlDabbagh, Minna Herranen, Sayed El Anany, Harri Taipale, Hasnain Javed

Agenda

1. Executive Summary

2. Financial Highlights

3. Growth Analysis

Business Life Cycle

Competitive Advantage

Portfolio Analysis

Growth options - What is possible for Al Marai

Surplus Value

4. Recommended Solutions and Key Asks

Executive Summary

Key Finding : Al Marai Can continue a profitable growth at 10+% in the next 5 years by :

Introducing New Products: ICE CREAM, starting in Saudi Arabia

Expanding Geographically: Expanding Dairy Business in north Africa (Tunisia , Algeria & Morocco ).

Driving Efficiency: Consolidating Bakery factories and driving surplus value.

Based on CEO endorsement of this Analysis, a detailed Business Cases will be conducted for

CEO & Board approval.

This is a high level Presentation highlighting findings of several analysis conducted to examine the potential growth of

al Marai.

YTD Q3 2014 Product Categories Sales Percentage & Growth

42%

14%

13%

12%

10%

8%

1%

Product Categories - % of Total Sales Q3

YTD 2014

Fresh Dairy

Cheese & Butter

Fruit & Juce

Bakery

Long-Life Dairy

Poultry

other

7%

10%

10%

13%

15%

27%

0% 5% 10% 15% 20% 25% 30%

Cheese & Butter

Long-Life Dairy

Bakery

Fresh Dairy

Fruit & Juce

Poultry

YOY Growth % Q3 2014

Growth %

Source : Al Marai Q3 2014 report, http://almarai.com/en/investors/presentations/

YTD Q3 2014 Geographical Countries Sales Percentage& Growth

66%9%

5%

5%

5% 5%

2% 2% 1%

Sales % By Country - YTD Q3 2014

Saudi

UAE

Oman

Egypt

Kuwait

Qatar

Jordan

Bahrain

other

8%

9%

11%

15%

16%

19%

23%

26%

0% 10% 20% 30%

Jordan

Kuwait

Saudi

Bahrain

UAE

Oman

Egypt

Qatar

YOY Growth % Q3 2014

Growth %

Source : Al Marai Q3 2014 report, http://almarai.com/en/investors/presentations/

Business Life Cycle

Almarai is a growing company and it

can still grow with same business

model than in the last couple of years.

Almarai is in business life cycle strongly

in growing stage:

• Bakery business started 2007 1)

• Poultry business started 2009 1)

• Geographical expansion started

2009 1)

• Infant nutrition started 2010 1)

• Almarai has strong pipe line of

innovations in each product

categories 2)

Source : 1) http://almarai.com/en/about-us/history/

2) Al Marai Q3 2014 report, http://almarai.com/en/investors/presentations/

Competitive Advantage Dairy Products

Broad

Narrow

COST LEADERSHIP

Nadec

Al Rawabi Dairy Company

Cost Focus

Saudi Dairy & Foodstuff Company

Al-Ain Dairy

Differentiation

ALMARAI

Nestle S.A

AL-SafiDANONE

DIFFERENTIATION FOCUS

United Kaipara Dairies Company (PSC)

Source : team collective feed back (perception ) as end users

Portfolio Analysis

Infant products are

new business , not

fully proven yet

,however with proper

focus it can in few

years become a star

Juices has proven well in the last few years , Bakery & poultry the relatively new lines are also catching up in the market

Dairy products are the core of al Amaraicompany and represent a solid cash cow for last decided, Need to continue it’s differentiated and leadership position

How we can Grow the Business

1. Improve

2. Replicate

4. Reinvent

3. Evolve

Based on the Portfolio Analysis, the following growth option is to be adapted

Bakery

Poultry

Cheese

Dairy Expand Dairy (Key Cash Cow product ) to

Tunisia , Algeria & Morocco

Enlarge and consolidate Bakery factories

Ice Cream Capitalize on availability of raw

material and introduce Ice cream in

key and home country Saudi Arabia

Surplus Value of new Milk packing

Extra 1 Million Milk bottle can be transported under no

addition operation cost with introduction of a New packaging

Requiring less storage space

Minimizing Logistic cost is Key to Al Marai as it has expanded both in products and

geographies.

photos are published on

https://www.google.com.kw/search?q=Al+maria+transportation&biw=1920&bih=931&source=lnms&tbm=isch&sa=X&ei=sTNEVInpGuL

MyAOc94HoDA&ved=0CAYQ_AUoAQ#tbm=isch&q=Al+marai+milk+transportation

0

0.5

1

1.5

2

2.5

3

0 500 1000 1500# of transporation Tractors

Surplus value of new packing.

Growth Caused by Changeing the trasportation Tractors model.

Million of Milk

Bottle

transported

Growth Caused by increasing trasportationTractors .New Package ; easy to

carry ; easy to transport

Conclusion (1 out of 2 )

Almarai is a growing company and it can continue to grow about 10% with the same way than in the past years.1)

The concentration should be in new innovations.

New innovations in each category needed. Focus should be :

To support market growth for our cash cows and rising stars (Fresh Dairy, Long-life Dairy, Yogurts, Cheese &

Butter, Poultry and Juices)

To support market needs and quality for our rising stars (Infant Formula, Dessert and Bakery) to be able to

strengthen our brand in these markets.

Also focused Marketing campaign for Long-life milk, Enfa grow infant formulas and Vetal fortified fresh milk in

focus countries Egypt and UAE is needed.

Strengthening of special milk products brand image throughout the region by consumer promotions and

advertisement campaign.

Poultry and Bakery products sales enhancement in Egypt

Selective Geographical Expansion

Based on preliminary analysis , following markets are good potential as new entry for the dairy business

(Tunisia , Algeria & Morocco )

Conclusion (2 out of 2 )

New Product launches

premium packaged Ice cream business has a potently higher margins than dairy and we would

recommend exploaring launching it in Saudi Arabia as a start

Driving efficiency and maximizing surplus value

it is critical to Consolidate all Bakery Factories in Saudi Arabia , the new obtained land in king Abdulla

economic city in Rabag to shall be used , this shall drive operational cost down and will lead to increased

capacity 1)

Last year Marai distribution expenses increased % was higher than Sales (17,5% VS 11,7% 2). Introducing

new means to lower logtic cost is a must , by the proposed new packaging we can reduce it by an

estimated 2 to 4 %

Key Asks

CEO agreement to farther study the details if the proposed growth expiation strategy and a agreement

to allocate SR 5 million Riyal to hire a management consultant company and a market research

company for the needed studies , if agreed after 3 months a full business case will be presented.

Source : 1) http://almarai.com/en/investors/press-releases/

2) A http://almarai.com/en/investors/presentations/