GCC region - Key consumer segments

Dairy - >$4Bn market and growing:

GCC regions dairy market is close to US$4bn in size with Saudi Arabia leading in
market share at 60% of the total volumes. The product mix includes fresh milk,
longlife milk, milk powder, laban and zabadi (yoghurt). Compared to the
developed world per capita dairy consumption of 90-100kgs, the dairy
consumption per capita is among the lowest globally in Saudi Arabia and the GCC
region at 49kgs.
Excluding the consumption of Laban and Zabadi, the milk usage per capita drops
further to 30kgs; highlighting significant room for continued double digit growth,
in the medium term. The dairy market is quite fragmented across the GCC region
where key players include Almarai, Nestle, Al Safi (Danone) and SADAFCO. With a
healthy mix of local and foreign players, the top dairy producers account for 65%
of the total market volumes.



GCC Juice:
The GCC regions >US$2bn Juice segment is highly fragmented given low entry
barriers. There are more than 16 active players where the top three control only
32% of the market unlike Dairy, Cheese and Butter where the top three
producers on average control more than a 50% market share.


Saudi Arabia Bakery segment:
Volume growth in bakery products has been driven primarily by bread over the
last couple of years where Saudis are ranked among the top 5 consumers in the
world in terms of per-capita bread consumption. According to company data,
bread sales in KSA account for ~66% of total bakery volumes followed by Pastries
and Cake sales at 16% and 12% respectively. The bakery segment is also highly
fragmented where the top 14 players account for ~54% market share and a
number of local and unbranded players dominate regional sales. Almarai's
Western Bakeries is the leading manufacturer in KSAs bakery market, while its
other brand 7-days has also managed to gain market share since its launch 3
years ago. The companys two brands currently control 27% of the bakery
volumes in KSA. Growing at a 4-year average growth of 16%, we expect bakery
volumes in Saudi Arabia to reach 463mn kgs by 2015 with the segment valued at
US$6.7bn.


KSA Poultry- Set to become a US$5.2bn market by 2015:
Saudi Arabias poultry consumption has been steadily growing at an average rate
of 5% per annum over the last 5 years. KSAs poultry consumption was estimated
at 1Bn kgs in 2011 valuing at US$4.6bn and implying a per capita consumption of
42kgs. Assuming a conservative 2.8% growth, the poultry consumption should
grow to 1.2bn kgs with total value at US$5.2bn by 2015 based on our estimates.
Like other perishable items, the Saudi poultry market is quite cyclical in nature
where consumption rises significantly during Ramadan and the Hajj season due
to an increased number of visitors in the country monthly visitors average
jumped to ~2.6mn during the 2011 Hajj season up from an average of 1.8mn
visitors during other Islamic months. Chicken is consumed on a regular basis and
generally constitutes the main ingredient of traditional Saudi dishes. The market
is dominated by imported frozen chicken meat which represents ~57% of the
total volumes. Locally produced fresh chicken accounts for 28% market share in
total poultry volumes, while local frozen product accounts for 15% share. Based
on Almarais annual poultry sales of ~22mn kgs in 2011, we estimate the
companys share in total market volumes at ~2%. However, considering only the
fresh retail segment, Almarais share in total volumes comes to ~7% while in
value it equals ~31%.



GCC Food & beverages sector Competitive landscape:
While there are more than 55 listed companies in food and beverages sector
across the GCC region with a combined market cap of US$21bn, only 12 are more
than US$300mn in market cap. Almarai is the largest listed food manufacturing
company with a market cap of US$7bn followed by Savola Group with a market
cap of US$5.3bn. Kuwait Foods (Americana) is the third largest listed by market
cap and these three account for >70% of the total GCC Food & beverages sector
market cap.