Small dairy farms face tough times, says official

RIYADH – Owing to cut-throat competition, the next five years will be crucial for the survival of small dairy companies in Saudi Arabia, according to a high-ranking official of a leading dairy company here.

Muhammad Bin Abdulaziz Al-Sarhan, chairman of the Board of Directors of Al-Safi-Danone Company Ltd., said that small dairy farms would not be able to stand up to the competitive business environment and as a result the country within the next five-year period would witness a number of mergers and acquisitions (M&As).
Al-Sarhan was speaking at a press conference in Riyadh, Saturday to mark the 30-year anniversary of Al-Safi’s establishment in Al-Kharj, some 70 km from Riyadh.
Ali O. Al-Rakban, Executive General Manager of Al-Safi-Danone, was also present.
Al-Sarhan said it was a memorable occasion for Al-Safi that has successfully completed 30 years of commercial production. The company had witnessed some difficult times in the very beginning of its establishment, he said. “We have also assessed and evaluated some of the failures that we faced in the beginning,” he said.

However, with the wise leadership and determination of Prince Abdullah Al-Faisal, head of the Board of Directors of Al-Faisaliah Group of which Al-Safi Danone is a subsidiary, the company successfully overcame its difficult times, Al-Sarhan said.
He said it would be very difficult for small and fragmented dairy companies to stand up to the cut-throat competition today. However, large dairy companies could survive and continue to meet the increasing demand for fresh milk, he said.

There has been an annual increase of five percent in the demand for fresh milk in Saudi Arabia, he added. “Today, we are meeting the local demand and in fact exporting some dairy products to neighboring Gulf countries,” he said.
There are around 18 to 20 dairy companies with some of them being very small and fragmented farms located across the Kingdom, he added.
With 250,000 tons of fresh milk produced per year, Al-Safi-Danone has 25 percent of the market share of the SR6 billion Saudi dairy market, he said.
Al-Safi was listed in the Guinness Book as the world’s largest integrated dairy farm. Al-Sarhan said that record still remains because no other dairy company in the world has so far claimed that position.

He said the Saudi dairy market represents about 14 percent of the country’s agriculture sector which contributes over one percent to the Kingdom’s non-oil GDP growth.
Al-Rakban said Al-Safi started to import cows in 1979 and had 6,000 by 1982. However, later cows were bred at the farm and today there are 40,000, he said. “The last cow that Al-Safi imported was in the year 1982,” he added. – SG

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