Following a fierce price war for fresh milk in the Saudi market, local manufacturers assess their daily losses at 1.8 million Saudi riyals ($479,000) and predict heavy losses to come by the end of the year. Some local dairy firms, particularly smaller ones, have subsequently had to put off expansion plans while others seek to cut expenditures.
The losses incurred are the result of price wars which have led to a 20 to 25 percent drop in retail dairy prices, according to Al-Sharq Al-Awsat daily. Milk companies in Saudi Arabia have started lowering milk prices in July, breaching a price-fixing agreement signed by the Dairy Producers Authority in May 2000.
The latest battle in this decade-long war reportedly broke out when the larger companies boosted production and lowered prices to encourage consumption and expand market share. The unilateral price cut compelled smaller dairies to cut theirs prices as well.
The most sophisticated in the Middle East, Saudi dairy industry has long achieved self-sufficiency, and is currently supplying milk to the entire Arabian Gulf region, capturing a 65 percent market share of all dairy products in the GCC, according to the MEED.
The three largest dairy producers dominating the Saudi market are Almarai, National Agricultural Development Company (Nadec) and Al-Safi-Danone. Estimated at over two billion dollars in 1999, Saudi retail dairy market is expanding at a 6.5 percent annually. The kingdom’s milk cows are estimated at 75,000. — (Mena Report)
© 2001 Mena Report (www.menareport.com )