Small dairy companies in Saudi Arabia set to fold in milk price war
Small dairy companies in Saudi Arabia are set to fold as they struggle to compete in a cut-throat milk industry bedevilled by an ongoing price war, dairy executives warned Thursday, December 6.
"Dairy companies have put themselves in a difficult situation. They can't sustain a price war and many companies, especially the small ones, are hurt," said Prince Mohammad Khalid Al-Faisal, vice chairman of Al-Faisaliah Group which owns major player Al-Safi-Danone Co., a Saudi-French joint venture.
Prices of fresh milk products in Saudi Arabia, which is the region's leading milk producer with more than 700 million liters (185 million gallons) a year, have dropped by more than 25 percent since the price war kicked off in July.
"The solution for small companies is either to merge together or sell up. The healthy solution is merging together to form a strong entity," said Mohammed Al-Sarhan, managing director of Al-Safi-Danone Co. Demand rises sharply during the Muslim fasting month of Ramadan, but the situation is tipped to worsen after that as "supply far exceeds demand and this will constitute a danger to the market," Sarhan told AFP.
According to analysts, Al-Marai and Al-Safi-Danone control 60 percent of the market, which has an annual turnover of more than six billion riyals ($1.6 billion). The Nadek and Nada companies control a further 25 percent of the market share, while 10 smaller companies fight over the remaining 15 percent. — (AFP, Riyadh)
© Agence France Presse 2001
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