Category: Almarai

The purpose of the given paper is to discuss some concerns that arise after reviewing the income statement of the Arabian Gulf’s biggest dairy company Almarai. In 2018, the organization earned 2,007,222,000 SAR of profit, compared to 2,159,963,000 SAR earned in the previous year (Almarai Company, 2018, p. 114).

This 8% decrease in profit can be viewed as a reason for concern. The shareholders may wonder about the negative dynamics of the company’s development and doubt the efficiency with which the organization generates profit from its daily operations. A decrease in profit can be attributable to a decrease in revenue from dairy and juice and bakery segments, which were most sensitive to the changes in the market dynamics. The top line of the dairy and juice segment was adversely impacted by a decrease in the number of shops, the introduction of value-added tax, as well as the introduction of the expatriate levy by the government. At the same time, the revenue from the poultry segment increased.

While general and administration expenses decreased, other expenses increased from 211,071,000 to 301,299,000 SAR. Such an alarming increase is equal to 43%, and its size may be questioned by shareholders who are suspicious of creative accounting and fraud practices. Using the information from the company’s annual report, an increase in other expenses can be explained by a loss on disposal of biological assets due to the deterioration of market conditions in the secondary dairy herd market and the impairment of assets (Almarai Company, 2018, p. 163).

The impairment of assets was associated with the cessation of production of alfalfa and green forage and the change in some business operations, which led to an asset impairment charge (Almarai Company, 2018, p. 163). Other factors that contributed to an increase in other expenses are the loss on disposal of an investment, which occurred after the reclassification of foreign operations, and the loss on disposal of property, plant, and equipment (Almarai Company, 2018, p. 149). However, it is worth mentioning that the dividend on equity investment was lower in 2018 than in 2017, yet the difference was insignificant.

A major increase in the actuarial loss on end of service benefits can be a cause for concern since, in the previous year, there was the actuarial gain on end of service benefits. The company, however, does not give explicit clarification regarding this issue. It should be further investigated why Almarai Company paid a higher amount than expected. There was a significant increase in settlement of cash flow hedges transferred to inventory/PPE, from -13,728,000 SAR in 2017 to -20,529,000 SAR in 2018. This 33% increase in settlement of cash flow hedges transferred to inventory may indicate that the company was not successful in managing the risk of changes in cash flows.

Furthermore, the company did not provide any notes regarding a decrease in movement in fair value on cash flow hedges. However, the movement in fair value on cash flow hedges decreased three times from 2017 (from 128,475,000 SAR to 39,652,000 SAR) (Almarai Company, 2018, p. 114). This concern is important as the organization lost a significant portion of its total comprehensive income for the year. The question that logically arises is why the business entity did not mitigate the risk of changes in the net value of its assets as efficiently as it did in 2017.

Reference

Almarai Company. (2018). Resilience through quality: Annual report 2018. Web.

Mission and vision statements are an integral part of strategic planning for any company that intends to achieve a clearly defined and properly articulated goal. By extension, mission and vision statements are also essential for creating and supporting an effective performance management system, since they provide overall guidance for the efforts undertaken by the company. Admittedly, the statements themselves are not enough, and they do not guarantee a positive result in terms of performance unless followed by the concrete actions aimed at implementing them in practice (Aguinis, 2014). Yet while mission, vision, and the strategic plan they result in are not sufficient for effective performance alone, they are undoubtedly necessary, which is why most companies craft them carefully. Almarai, a Saudi food and beverage company, offers an outwardly focused vision and a mission statement that identifies the company’s products as well as sends a message on their supposedly unique features. However, it leaves out many components from the targeted consumer groups to managerial philosophy, which makes it inferior to that of SADAFCO, a competing company in the same industry.

As the vast majority of the contemporary firms, Almarai presents its mission and vision alike on the company’s website. According to it, the mission Almarai sets for itself is to provide “quality and nutritious food and beverages” (2018). Moreover, the company claims that its products are meant to “enrich the consumers’ lives every day” (Almarai, 2018). The vision statement, as formulated on the website, is “to be the consumers’ preferred choice by leading in chosen markets with superior food and beverage products” (Almarai, 2018). Thus, at their most basic level, both mission and vision statements designed by Almarai set the long-term goals for the organization and, as such, are evidence of strategic planning inherent in the company’s culture. Evaluating whether this planning coincides with specific actions designed to transfer Almarai’s mission and vision into life is quite another matter that is outside the scope of this paper. However, the statements themselves deserve a thorough evaluation as well to see how much they correspond to the ideal mission and vision statements.

Almarai succeeds in implementing and demonstrating several elements necessary in the ideal mission and vision statements. The vision statement is formulated in a simple language and sets a laudable goal – thus, it is straightforward, understandable, and inspiring, as it should be (Aguinis, 2014). It is also outwardly focused, meaning it concentrates on what the company does for society rather than what it does to its product (Engel, 2018). As for the mission statement, it describes the basic products offered by the company – food and beverages – and hints at their supposedly unique features, which are both required elements (Aguinis, 2014). Thus, it corresponds to at least two criteria of an ideal mission statement.

However, it does not display many other characteristics of an idea statement, and the downsides are more numerous than merits. To begin with, Almarai’s mission statement does not identify its customers, thus leaving open the question of which population group they intend to serve. Apart from that, the vision statement does not mention the firm’s self-concept of business or managerial philosophy. Other components, from timeline verifiability to technologies used, are also assent, although they are all necessary for an exemplary vision statement (Aguinis, 2014). Thus, the mission and vision statements of Almarai demonstrate some components of a perfect composition but are missing much more, which makes them less than ideal.

This contrast becomes even more evident when one compares Almarai’s mission and vision to those of SADAFCO, a competing company in the same field. Just like Almarai, SADAFCO’s vision is to be “the customers’ brand of choice” (2020). The mission also refers to the company’s products – foods and beverages – and nutrition as their primary feature (SADAFCO, 2020). Yet apart from these, SADAFCO also offers several components that are utterly absent in Almarai’s statements. For instance, SADAFCO identifies their targeted customers as belonging to “all age groups,” which, albeit vague, is better than not outlining this category at all (SADAFCO, 2020). Additionally, it states that the company always intends to “create maximum shareholder value through teamwork” (SADAFCO, 2020). This claim makes it evident that SADAFCO endorses stakeholder theory rather than stockholder theory and, therefore, sends a clear message on the company’s managerial philosophy – yet another component of good mission/vision statements (Aguinis, 2014). These facts make SADAFCO’s mission and vision much better articulated and, as a consequence, more efficient as the means of planning for the future of the firm.

One should not underestimate the potential dangers of having a flawed mission statement. The effective functioning of any organization, including a business enterprise, is a result of synergy between the activities of multiple stakeholders. It is a common misconception that mission and vision are meant exclusively for higher leadership, but, in truth, they should guide the actions of all employees on all levels (Taiwo et al., 2016). To achieve this purpose, statements should be comprehensive enough and encompass all or at least the majority of essential components – otherwise, efficiency begins to suffer. For instance, Almarai’s vision statement does not include managerial philosophy, which leaves the employees and leaders to solve this question for themselves. It may cause some managers who adhere to stockholder theory to pursue shareholder interests at all costs, while those who accept stakeholder theory try to benefit all stakeholders involved. SADAFCO, on the other hand, will not have such problems due to a clear emphasis on stakeholder theory in its mission ad vision statements. This lack of cohesion is just one example of how insufficiently thorough mission and vision statements may affect the company’s performance adversely.

As one can see, Saudi food and beverage companies offer mission and vision statements of varied quality with different potential consequences for their performance. Almarai identifies its products and the unique features they supposedly have as well as articulates the ambition to be the customers’ favorite brand, but never even refers to who these customers are. Other elements of good mission and vision statements, from the self-concept of business to technologies used in production, are also absent. This is a sharp contrast with the mission and vision formulated by SAFADCO, another Saudi company in the same field. Unlike its competitor, SADAFCO identifies its customers and clearly point at stockholder theory as the managerial philosophy shared by the company’s personnel. These characteristics make SADAFCO’s statements more articulate while still concise and understandable, which makes them a better foundation for strategic planning than those of Almarai. One may assume that Almarai may suffer from a lack of cohesion due to the absence of openly declared managerial philosophy as well as other issues caused by insufficiently thorough mission and vision statements.

References

Aguinis, H. (2014). Performance management (3rd edition). Pearson Education.

Almarai (2018). Mission, vision, & values. Almarai. Web.

Engel, M. L. (2018). Crafting the ideal mission statement for your organization. Leader to Leader, 2018(87), 8-12.

SADAFCO (2020). Our vision, mission, and values. SADAFCO. Web.

Taiwo, A. A., Lawal, F. A., & Agwu, M. E. (2016). Vision and mission in organization: Myth or heuristic device? The International Journal of Business & Management, 4(3), 127-134.

Ways of promotion

Almarai specializes in the production and distribution of a wide range of food and beverages. The company offers a broad choice of juices (Almarai, n.d.). Still, currently, the set of the provided flavors of juice are relatively limited and, therefore, the introduction of a new flavor will benefit the company. In the current presentation, I will focus on how to promote the newly introduced juice flavor. The strategies to be discussed include advertising, public relations, personal selling, direct marketing, and sales promotion.

Advertising

Advertising is the most apparent means of promotion of almost any product. Acting on behalf of a marketing manager, I recommend focusing not only on creating TV adverts but also on the launching of advertisement campaigns on the Internet and social media. The study conducted by Belanche, Cenjor, and Pérez-Rueda (2019) reveals that millennials are particularly susceptible to adverts that they see in Instagram Stories. Besides, Instagram is also a platform for native ads from famous bloggers. The generation of their parents prefers Facebook to Instagram and, hence, it essential to make them see adverts for a new flavor of juice on this social network. Finally, it would also be a beneficial idea to use PPC advertising on websites.

Public relations

Public relations is a critical component of the promotion strategy of any product of any organization. In order to keep a good public of the entire company and promote a new flavor of juice, it could be suggested for Almarai to establish a partnership with some charity organizations. During the events held by these organizations, Almarai could place its juices so that the audience could drink them. This way, people will remember that Almarais beverages are connected with something decent and nice. This, in turn, leads to the fact that in the shop, the costumers are more likely to prefer Almarais juices to ones of other firms because of the awareness about the relation of Almarai to charity organizations.

Personal selling

From one point of view, it seems that personal selling is inapplicable to promoting food and beverages. That is because the concept of personal selling implies that the process of communication between a salesperson and a potential customer (Cant and Van Heerden, 2005). In this process, a salesperson’s critical task is to identify the needs of a customer and show how a product could satisfy these needs. In the case of promotion of a new flavor of juice, Almarai could install several point-of-purchase (POP) displays or organize degustation in the shopping malls. This way, a salesperson could easily communicate with people who enter a shop and persuade them to buy a new product.

Direct marketing

The concept of direct marketing implies that a product is sold directly to the public via online and TV advertisements, flyers, articles in newspapers and magazines, messages and calls, and promo actions. The main task of direct marketing is to interact with potential customers and attract their attention to a new product. Almarai could launch a promo action in a supermarket so that a person who purchases any two products of Almarai receives a package of a juice with a new flavor for free. Degustation and coupons also seem to be a promising way to familiarize people with a new product. Emails, phone calls, messages are not useful in promotion of a new beverage because people usually ignore them.

Sales promotion

Sales promotion is the last marketing strategy to be discussed in this presentation. The goal of sales promotion is to increase customers demand for a good. The cross-national research conducted by Fam et al. (2019) reveals that customers, most of all, like discounts and coupons. In this regard, it is recommended to Almarai to perform promo actions using discounts and coupons. More precisely, the company could sell a package of new juice at lower prices during the first two weeks after the product is launched. This will heat the interest of the public to a new flavor of juice and make people willing to buy it while its price is lower than after the end of a promo action.

References

Almarai (n.d.). Juices.

Belanche, D., Cenjor, I., & Pérez-Rueda, A. (2019). Instagram Stories versus Facebook Wall: an advertising effectiveness analysis. Spanish Journal of Marketing-ESIC.

Cant, M. C., & Van Heerden, C. H. (2005). Personal selling. Juta and Company Ltd.

Fam, K. S. et al. (2019). Consumer attitude towards sales promotion techniques: a multi-country study. Asia Pacific Journal of Marketing and Logistics.

Almarai Company (Almarai) is a large conglomerate based in Saudi Arabia, which specializes in manufacturing and distributing food and beverages. It is the largest dairy company in the country, with sales exceeded SAR 13 billion in 2018. Its stock id is 2280, and the current share price is SAR 51.40. This report presents a financial statement analysis of Almarai along with the calculation of key financial ratios compared with the industry averages. The analysis is based on the financial reports of the company for the last two years.

Table 1 presents the trend analysis of Almarai’s Consolidated Statement of Financial Position and Consolidated Statement of Profit or Loss in a summarized way.

Table 1. Trend Analysis.

Table 2 presents the common size statement analysis of Almarai’s Consolidated Statement of Financial Position and Consolidated Statement of Profit or Loss in a summarized way.

Table 2. Common Size Analysis.

The trend analysis indicates that the current assets, excluding inventory, of Almarai declined by 12.4% in 2018. Its inventory increased by 24.1%, which highlighted a slowdown in the company’s international sales. The company increased its investments in 2018 to generate income from other sources. The total assets increased by 1.3%, but its shareholders’ equity declined by 3.8%. It implies that the company had to raise funding for its assets by acquiring additional liabilities. Furthermore, the company’s sales and cost of sales reduced in 2018. The company’s net income declined by 7.1%, which could raise concerns among shareholders about its future profitability.

The vertical analysis of Almarai’s financial position indicated that its fixed assets were almost 70% of its total assets. It is also noted that the company’s inventory as a proportion of total assets increased from 9.8% in 2017 to 12% in 2018. Although the company’s current liabilities reduced, Almarai’s non-current liabilities increased as a proportion of total liabilities. Finally, the shareholders’ equity also declined in 2018. The analysis of Almarai’s statement of profit indicates that the cost of sales increased from 59.9% in 2017 to 60.3% of sales in 2018, which also affected its gross margin. The company maintained the same allocation to its admin and marketing expenses in both years. Almarai’s business is registered in Saudi Arabia and does not pay taxes; instead, it made a zakat contribution of 0.5% in 2018. The company’s net profit reduced from 15.5% in 2017 to 14.6% in 2018. However, it could be stated that the profitability of Almarai remained strong in both years.

The financial ratio analysis calculates the values of key financial ratios provided in Table 3.

Table 3. Financial Ratio Analysis.

The current ratio of Almarai improved to 1.31 in 2018 but was lower than the industry average of 1.36. The short-term liquidity position of the company was regarded as weak because its quick ratio value was less than one and lower than the industry average. The asset turnover of the company slightly declined in 2018 and was lower than the industry average. The net profit margin of Almarai reduced from 0.155 in 2017 to 0.146 in 2018 but was higher than the industry average of 0.1048. The equity multiplier value increased in 2018 that indicated that the proportion of assets financed by the company’s equity decreased.

The ROE was 13.83% in 2018, which was less than the industry average. Similarly, its ROA was less than the industry average, and the company only generated SAR 0.06 in revenue for every SAR 1 in assets. The Debt to Equity ratio value indicated that the company had high leverage, which was also greater than the industry average.

The accounts receivable turnover declined in 2018 and was less than the industry average. It implies that the company took a long time to receive cash for its credit sales. The allowance for doubtful trade receivables was SAR 76.824 million and SAR 57.333 million in 2017 and 2018, respectively. It indicated that this allowance was almost 4% of the total trade receivables, which was a significant value.

There is no change in the method of recording inventory, and the company uses the periodic method of accounting for inventory that records all purchases and sales continuously and updates the purchase account at the end of the period. The company’s inventory increased by 24.1% in 2018, and its inventory turnover was just 2.14 in 2018 as compared to the industry average of 3.59. It implies that Almarai’s business efficiency weakened in 2018 as it did not manage its inventories effectively that resulted in a high cash amount held in non-income generating items. The company’s total assets were SAR 32.318 billion in 2018, and its total liabilities were SAR 17.802 billion. The company’s goodwill was SAR 1.038 billion in 2018, which was less than its value in 2017 due to its impairment. Almarai recorded goodwill upon the acquisition of three companies in 2007, 2009, and 2012.

Almarai is a conglomerate based in Saudi Arabia that was founded in 1977. Its primary focus is food processing, including dairy products, beverages, and poultry. The company has enjoyed its leading position in the Saudi market for years. Nonetheless, recent changes introduced by the government as well as economic shifts and rising competition endanger the status of Almarai and call for new ideas in development and production. This report will analyze the environment of the company as well as its history and opportunities to identify the existing problems and present a list of solutions. Then, a recommendation will be made based on the advantages and drawbacks of actions available to Almarai.

Analysis

Environmental Analysis

Political

The government of Saudi Arabia is hugely involved in all steps of business sourcing, manufacturing, and delivery. This level of governmental control can be explained by the country’s history and its strategic plan – Vision 2030. On an international level, the country’s approach prioritizes local professionals and self-sufficiency, limiting the businesses’ chances of hiring foreign workers. Furthermore, the new changes to the country’s vision mentioned in the report may hurt the company, primarily if cost control severely lowers Almarai’s subsidies. Another political factor that may impact Almarai’s expansion to other territories is the tension in the Gulf region that leads to recurring conflict situations.

Economic

The change in consumer spending has already affected Almarai’s revenue, and this trend is likely to continue due to the cut subsidies. Moreover, the shift in expatriates’ rates in the country also influences the prosperity of Almarai since its fresh milk – the main product line – is very popular among working immigrants. On the other hand, native residents prefer fermented and processed goods. Second, the exchange rate fluctuation can become an essential factor if Almarai chooses to work in different markets or changes its supply chain members. The evolving self-sufficiency economy of Saudi Arabia may influence Almarai’s decision in this case.

Social

The mentioned above vision shift presents new prospects to the image of the brand. While Almarai has a strong presence in the country, the rising localization of the workforce, and the decrease in foreign employees and migrants provides new opportunities for branding and marketing. Additionally, people are becoming concerned about their health and the environment, which poses new challenges and opens new markets. Depending on the product lines, some of Almarai’s goods may be in higher demand during a particular season. For instance, if the country is celebrating a national holiday, some traditional foods can increase in popularity.

Technological

Almarai’s previous contribution to the country’s technological advancement is massive. The country’s stores often depend on Almarai’s cooling systems and transportation networks. However, some opportunities for investment and innovation still exist in manufacturing and distribution. Technological progress has introduced many new ways of producing, storing, and delivering products with increased efficiency and reduced costs. The company can use these new approaches to modify its processes.

Legal

Saudi Arabia has recently made changes to regulatory laws, taxation, and compliance with quality standards. As a result, Almarai also needs to review its policies and make sure that the new legal requirements do not negatively affect the business. In the case of entering new markets, specific laws and regulations make companies vulnerable to legal problems. Additionally, international trade requires Almarai to attentively consider the laws of the countries in which the firm wants to expand.

Environmental

The idea of conscious manufacturing is a growing international trend, and the Saudi Arabian government is concerned with this issue as well. The government introduces some standards to which all businesses have to adhere. An increasing number of companies are searching for sustainable options in all spheres of development. The use of natural resources is an indispensable driver of national policies in Saudi Arabia. Water and land occupied by agriculture and animal farming present a concern to Saudi Arabia due to climate change and the land’s overuse. Thus, businesses are encouraged to lower their consumption and reduce wastage.

Competition

In the beginning, Almarai was among the only companies in Saudi Arabia to integrate several levels of the supply chain and follow the principle of local self-sufficiency. However, Almarai’s leadership in Saudi Arabia is disputed by the rising competition. More and more businesses enter the market and take up the niches previously dominated by Almarai due to the increasing access to technology and changes in subsidies by the government.

SWOT

The main strength of Almarai is its brand image, which connects the company to such aspects as high quality and locality. Furthermore, the level of brand recognition and the share of several markets make Almarai a distinctive leader, the products of which are chosen due to high customer loyalty. The firm’s vertical integration and control over development and distribution provide Almarai with a high degree of security and tools to maintain product quality. Finally, Almarai’s trusting relationship with small local grocery shops (bakalas) creates a strong base for growth and expansion.

Nonetheless, Almarai is highly dependent on raw materials and their quality since its main product categories require fresh milk and poultry. Thus, any change in the sourcing step of the production makes the company vulnerable. Next, although Almarai has made tremendous efforts to overcome the challenges of the region’s weather, new problems in resource use may disrupt the operations. Finally, Almarai is recognized in markets for milk and juices, and it relies on them to deliver the man part of the profit.

Such opportunities as product line diversification and expansion to new geographic locations can be highlighted. The business’s brand image is beneficial for marketing to locals and expatriates. The potential for dairy market growth exists not only in Saudi Arabia but in other countries that Almarai can target. The company has resources and technology to outperform the competition. However, growing firms are also a threat for Almarai, as new partnerships and mergers make other businesses strong rivals. Furthermore, similar to the situation with Qatar, Almarai can be affected by any other conflict in the region. As mentioned above, the high dependency of the company on raw materials may lead to devastating disruptions in supply. Finally, if the government continues to remove supports for Almarai and Saudi Arabia citizens, the company may see a decrease in consumer interest.

Market Segmentation and Positioning Strategies

As Almarai is a conglomerate, it has a share in many markets, including fresh and processed dairy (milk, yogurt, cheese, and butter), juice, baked goods, and poultry. Arguably, all products can be a part of one’s daily consumption, thus having the potential to target many customers at once. Nonetheless, some segmentation exists; demographically, Almarai creates products for people of all ages who consume milk and dairy products, juices, bread, and chicken. The price of the products matches those of the main competitors, and Almarai works with small and large stores to access low-, middle- and high-income consumers.

Using behavioral segmentation, Almarai appeals to locals with its traditional products, especially accounting for their behavioral patterns during national and religious celebrations. By using the image of locality, Almarai also connects its various products with other Saudi Arabian brands. The psychographic segmentation shows that Almarai targets expatriates with offers of fresh milk, which is considered to be a nutritious requirement in one’s diet. Similarly, Saudi Arabian and Muslim cultures are supported by Almarai with such products as laban. Finally, the conglomerate has made attempts to segment its customer base geographically when moving into other markets.

Almarai’s early entrance to the dairy market and its significant presence in the region give it an advantage in choosing a positioning strategy. The company uses a mix of cultural symbolism as a contrast to its competition and product characteristics. Thus, it promotes the local culture and traditional foods, highlights its fresh milk and yogurts’ natural contents, and argues that its production, storage, and packaging are superior to all other manufacturers and beneficial for customers.

Customer Analysis

The ubiquitous nature of food products makes customer analysis challenging. Nevertheless, Almarai presents several categories that it deems the most valuable. In the dairy market, the firm distinguishes residents with their preference for long-life products. These consumers do not believe that fresh milk is superior, preferring a low price and long shelf life of dairy produced from milk powder. Out of all fresh products, these customers like the national type of yogurt, laban. On the other side of the spectrum, Almarai places expatriates and visitors from other countries who mostly prefer short-life fresh milk. For these consumers, the higher price of the product is a weak argument against purchasing fresh foods. Analyzing the local stores and supermarkets, Almarai found that not all stores have similar purchasing power. Thus, the company further attempted to distinguish customers by their choice of bakalas and large shops, offering products based on location.

Overall, the first image of a customer for Almarai shows an adult with a family who purchases milk, poultry, and bread for several people regularly. This person lives and works in Saudi Arabia and often makes purchasing decisions based on income, brand loyalty, paycheck dates, and season. Another image is a working professional who came to Saudi Arabia from a different state. These individuals want to have foods that resemble the diet of their culture, and their buying choices rely on personal taste, income, and store location.

Marketing Mix: 4Ps

Product

As mentioned above, Almarai’s product range is broad, but overall the company focuses on fresh and processed foods. The first category is dairy – it includes fresh dairy products (milk, laban, zabadi, flavored yogurts, and desserts) and long-life (powdered and ultra-high-temperature, UHT) dairy foods. The next segment is fruit juice, the resources for which are imported. The other categories are butter and cheese, baked goods, and poultry. Apart from these main products, Almarai also develops infant formulas. Overall, one may see that the majority of products have a short shelf life, and this aspect lies at the foundation of Almarai’s brand image of freshness and high quality.

Price

Almarai’s prices for most goods, apart from fresh dairy, are comparable to those of the competitors. UHT and powdered dairy products are cheaper than the rest of the market due to Almarai’s lack of focus on these categories. The company had to increase prices on its fresh milk due to the change in resources, which caused a strong adverse reaction of the consumers. The price of such foods is incredibly sensitive, and small increases or decreases can determine the demand due to the economic position of Saudi Arabian residents.

Place

Consumers can find Almarai products in small local shops as well as major supermarket chains. The company protects bakalas’ role in the food industry but also works with large stores as they provide more opportunities for outreach. The ubiquitous presence of Almarai on the market was established when the conglomerate sent its refrigerators to bakalas, thus creating the space for its products in most stores. Currently, many competitors do the same, while supermarkets place products according to the type and not brand.

Promotion

Almarai uses all traditional channels of promotion, including advertisements in print and television media. Moreover, the recognizable image of the brand can be seen in stores on branded refrigerators. Almarai’s model also relies on word of mouth for both locals and expatriates. Increased promotion is beneficial during traditional celebrations, although there are no definite seasonal limits for the popularity of dairy and other categories. Competitors often tried to mimic Almarai’s strategies, creating similar branding, or using the same refrigerator approach.

Alternative Solutions

Almarai can consider a variety of strategies due to its powerful brand image and sufficient resources. The first idea is to enter new market categories, including fresh produce (fruit and vegetables) and fish. Almarai has land that can be used for these activities, and it may further expand by acquiring local companies centered on these markets. This decision may be beneficial because the demand for fish is not well established in the region, and Almarai can integrate its cooling technologies to fish transportation. The company’s packaging also helps the business to provide customers with a comfortable and smooth purchasing experience. However, as Almarai does not have expertise in these fields, this expansion may be unsuccessful. Fish products and produce require their own unique environments for transportation, and such products as fish and dairy cannot interact due to smells, customer allergies, and product quality.

Apart from venturing into completely new spheres, Almarai can develop new product lines based on the existing resources, namely dairy. Such options as ice cream and infant formula use milk, and their manufacturing can be integrated into the established processes of the business. Here, the main benefit is the existing base of raw materials. In contrast, the central risk of entering these markets is the lack of specific knowledge and distribution contacts, especially in the infant formula segment. The current efforts of the company to penetrate this market are not successful. Such sections as soy milk are underrepresented in Saudi Arabia, but the lack of customer interest can make this choice unprofitable.

The third option is geographical expansion – Almarai can enter dairy, juice, and other markets in several countries in Southeast Asia and the Middle East. Some of the states do not have a well-structured network for dairy, and the lack of stiff competition can give Almarai an advantage. It is a company with a robust brand image that is recognized outside of the Gulf by travelers and expatriates. Thus, this option offers some potential, notably if Almarai established strong relationships with local farmers. In contrast, the failure to find connections can lead to the lack of fresh resources for Almarai to use in production since fresh dairy foods benefit from local raw materials.

In relation to the existing operations, Almarai can invest additional resources into process optimization. The company’s experts find that growth in the dairy market cannot be substantial, and benefits have to come out of improved manufacturing and transportation. Almarai has already made some steps in this direction, introducing new vehicles and automation of milk processing. Nonetheless, new technological solutions are continually appearing in the field of manufacturing, and Almarai can focus on reducing waste and resource use while lowering the time of production and costs without sacrificing product quality. Here, the main benefit is the long-term effect on productivity, while the drawback is slow growth.

The option of reducing control over sourcing exists in Saudi Arabia, where the government is shifting away from extreme self-sufficiency programs. The company can move its production into another country where the environment is less harsh and demanding. The local government may support this particular choice, but it endangers the quality of fresh products. Most importantly, it may negatively affect the brand’s image of a local business.

Finally, Almarai may reduce its product range and abandon segments where it does not experience growth. The primary industry where Almarai currently struggles is infant formula. This segment has intense foreign competition and different distribution channels. The benefit of this choice for Almarai is the reduction of the financial burden and an opportunity to focus on profitable areas. The potential disadvantage is that Almarai will not evolve in new directions, which may lead to reduced economic improvements.

Recommendation

Reviewing the company’s analysis and the list of possible solutions, one may see that Almarai needs to prioritize optimization and use its current resources before entering new regions or drastically expanding its product line. The history of the company shows that innovation, while necessary on some steps, was not prioritized to distinguish Almarai from the competition. As a result, the company encountered a problem due to the change in the government’s vision. The depleting resources of Saudi Arabia and the focus on local workers and foreign raw materials are in contrast to the existing structure of Almarai that employs many expatriates and uses local sources. Thus, the company has to invest in automation and efficient use of resources. As Almarai already has suitable land for fresh produce and dairy for ice cream production, these areas seem to be ideal for expansion. Almarai can focus on them after improving its existing manufacturing processes.