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.