A very Happy and Prosperous New Year to all of you. After all the hype it’s good to know that 21st December 2012 has come and gone, and we’re still around to tell the tale. And there are plenty of tales to tell in the dairy and beverage business…..
Let me start with some recent acquisition news. National Food Products Company, or NFPC, sometimes better known as Lacnor and/or Milco here in the UAE, have been on an acquisition spree. Not only did they amalgamate Gulf & Safa Dubai into the fold as of late, but the beverage filling business of Mehdi Foods in Oman is now also part of NFPC. Two very interesting developments indeed. On the Gulf & Safa acquisition – is this all about aseptic carton filling capacity for NFPC? What about the laban-up, cupped juices and STERILAC yoghurts? Will the SAFA brand survive this acquisition or are we looking at a strengthening of the LACNOR and MILCO brands perhaps instead? A few questions are still a bit open for me there.
“ “Mehdi Foods is a little easier to discern – of course it makes perfect sense for NFPC to fill products currently exported from UAE to Oman locally, if they can – and now they can.”
Mehdi Foods had been a relative newcomer in Oman, with new filling facilities in Tetra Prisma Aseptic packaging, something that ties in quite well with NFPC’s own filling in the UAE in the same format. The original Mehdi business was split in two – beverage went to NFPC, snack foods to an Omani food group. All fairly neat – I expect fully that Mehdi’s existing brands, not much looked after at the best of times, will not be maintained, with ORIENTA etc more likely to be consigned to history. It would make much more sense filling LACNOR brand now locally in Muscat, replacing shipments from several hours away from across the border.
Another piece of news we are currently puzzling about is the situation in ambient milk in the region, notably the activities of Almarai. First having converted from fresh milk to recombined milk for all UHT milk last year, it now seems that Almarai have suspended exports of ambient white milk to most destination markets in some form –in UAE, Bahrain and Qatar only skimmed and semi-skimmed ALMARAI 1 litre cartons are available with full cream out for the last month or so, and in Oman 1 litre cartons have been discontinued completely. However, ALMARAI milk in 500 ml and 250 ml cartons have now started to make an appearance – both unusual sizes for most Gulf markets.
In addition, there is the news that the Saudi government asked Almarai to reverse a price increase on flavoured milk, initiated in November. It now seems that Almarai may well prepare to pull at least some product variants from the Saudi market completely, if only to take a stand. All very strange goings-on – almost certainly part of the margins game.
“Undoubtedly all of this is rooted in the company’s inability to increase UHT prices for the key packaging sizes, with several regional governments at loggerheads with the company over consumer pricing, but still a bit of a puzzle, considering that Almarai’s competition appears to be picking up the slack rather happily at present.”
But other companies have also done things I can’t currently explain – Al Safi Danone for example now have both fresh and recombined UHT white milk in their portfolio. Different brands in AL SAFI and SAFIO, granted – but I dare say that both consumers and the trade will before long be hopelessly confused on what is what. Nadec and Nada Dairy have so far withstood the allure of starting to recombine. On the reverse side, there are signs that there may well be investment in aseptic dairy filling facilities in the UAE – are the dairies here anticipating a demise in Saudi exports? Perhaps with half an eye on Oman and Qatar, in addition to UAE domestic sales?
I talked about pricing and margin issues here before and the problem, if anything, seems to be coming to a head. Price scuffles, downsizing, and the emergence of the dreaded vegetable fat-filled dairy products (evaporated milk, SCM, sterilised cream, even blended butter and ghee hybrids) in the region are all signs that not all is well in the world of GCC dairy margins. Governments are unwilling to allow dairy price increases. Some dairies are unwilling to take declining margins as an inevitable certainty. Other dairies again are willing to take share from those who are unwilling to succumb – but for how long can they do that, before they in turn have little choice? All dairies are clamouring for some sort of solution – will it be a quiet subsidising of the dairies by the GCC governments to hide the issue from the consumer? Are governments seeing the establishment of fresh dairies in the 80s and 90s as a costly mistake they would rather forget about, given the groundwater issue? Is the future in diversifying out of mainstream dairy products? Is recombining and imported milk powder the comeback darling of GCC governments? Questions, questions…… confusion reigns. Perhaps you could give me your take on the issue? I would be most interested.
With my very best wishes for what looks like another highly excitable year!