Pressure is on manufacturers to maintain current prices
Gulfood 2008, the region’s largest food, drink and foodservice exhibition, has attracted major players in the industry to Dubai.
Emirates Business spoke to Aujan Industries President Kerry Anastassiadis. The company has 50 per cent of the non-alcoholic beer market in the region and 24 per cent of the juice market.
Anastassiadis said the beverage industry is enjoying strong growth in the Middle East, buoyed by a young population with increasing disposable income. He shook off fears that inflation will eat into profits and hurt growth and said advances in manufacturing have enabled the industry to keep prices down. However, he acknowledged that the obesity culture and inflation are the biggest challenges to the industry.
How is the beverage industry in the UAE and the region performing?
We are in one of the most dynamic regions in the world. The Arabian Peninsula has one of the fastest population growth rates in the world and the largest youth percentage of the population – and that is ideal from a beverage perspective. A young population every day consumes the kind of drinks they like, which are soft drinks, juices and carbonated beverages. On top of that, you are operating in an area of the world where disposable income is increasing because of the oil wealth. There is a lot of money around and a lot of people buying beverages. And let’s not forget the climatic conditions where the average temperatures are also among the highest in the world.
Disposable income has taken a hit this past year with the inflation GCC countries have been experiencing and the weak dollar, which most GCC currencies are pegged to – all of which has put consumers on tighter budgets. How has this affected the beverage industry?
It is a fact that GCC economies are faced with the phenomenon of inflation and the impact of devaluation of the dollar, both of which are affecting people’s spending. Nevertheless, relative to everywhere else, the amount of money people have in their pockets to spend is higher than many other places around the world. Secondly, beverages for the past 25 to 30 years – and I am talking about the price of a single unit of a beverage – have remained flat. I remember in the mid-1970s that for soft drinks such as Pepsi or Rani, I used to pay one riyal or dirham for that can and today we still pay the same.
So while inflation has gone up, the consumer is paying the same for such products. The pressure is on manufacturers to be able to maintain their price.
What types of challenge is the beverage industry facing?
The pressure is how to contain inflation and not to pass it on to consumers. It is unclear, due to inflation, how long the beverage industry can maintain its costs and absorb costs without passing along that increase to the consumer’s price.
What has been allowing the industry to absorb such fluctuations in prices?
Essentially, the cost efficiency, improvement in equipment, improvement in the utilisation of water, improvement in purchasing, product formulation, reduction of waste and productivity in sales.
Do you think more consumers in the Middle East are hesitant to purchase sugary beverages due to health concerns, compared to 10 years ago?
In the Middle East, like anywhere else in the world, consumers are beginning to have different perceptions and expectations about beverages. This has been driven by the obesity challenge that resulted from how people spend their time. Youngsters are not as active as they used to be 30 years ago. The amount of food they used to eat was not necessary much less, but they are not burning it off enough now. This is the net result of this scenario. The net consequences of this are that people are looking for new choices.
They are more conscious of the calories they take in. They are more conscious of good beverages versus not-so-good beverages. I think the soda companies are very conscious about carbonated soft drinks and that is why they are undergoing this change from consumers. And that is why they are expanding their portfolios. For companies like us, we have always been in juices and able to provide people with more of an alternative and we are pleased with that.
What is your market share?
We are predominantly in juices so we do not compete with soda companies. We do not manufacture carbonated soft drinks. In the non-alcoholic beer category, we are the dominant market leader across the GCC where we have more than 50 per cent market share.
And in the juice business, we have a share in excess of 24 per cent.
Your company has its roots as a trading company founded in Bahrain in 1905. More recently, you moved and expanded in Saudi Arabia. Why has it taken you so long to move into the UAE and why is this your first time participating in Gulfood?
If you go back in history, we have been developing our business across the world. We decided consciously to target certain markets to have the right projects. Because of this consistent approach in terms of our products, of where we sell and how, we have found markets that have been traditionally underserved and where demand has been increasing. Consequently we have taken the decision to be here. Secondly, over the past three years, Aujan Industries has made huge investments in production capability and that is why we opened a new $60 million plant at Dubai Investment Park in 2005. In three months time, our beverage filling plant in Iran will start operating, so in a matter of three years, we have more new plants than we used to. This will allow us to satisfy consumers’ demand much better and so it is the best time to be here and take part.
Aujan Industries was founded as a trading company in Bahrain in 1905, but is currently based in Saudi Arabia. Over the past 100 years, the company evolved into one of the most expansive direct distribution systems within the GCC. Using state-of-the-art technology in the manufacturing of its products, along with well-entrenched strategic alliances with leading international brands, Aujan is today one of the largest privately owned trading companies in the GCC and independent soft drink and confectionery manufacturer.
As marketer and distributor of beverage brands such as Rani, Hani, Barbican and Vimto, it employs 2,200 staff with a turnover of $350 million. Aujan Industries operates in 12 regional locations in more than 25 countries within the GCC, the Levant, Iran, Iraq, North Africa and Central Asia.
Aujan Industries has embraced the future with a strategy entitled “Aujan 555” that means $500m in five years with five brands. The company’s construction of a manufacturing plant at Dubai Investment Park complements its existing facilities in Dammam, Saudi Arabia.
With a current annual capacity of more than 300 million litres and one billion packages, the DIP plant will allow Aujan Industries to boost its production capacity by 50 per cent.
President, Aujan Industries
Anastassiadis was appointed president of Saudi-based Aujan Industries in February. He retired from the Coca Cola Company in September 2005 after he had worked for it for nine years, where he oversaw markets ranging from North West Africa to the Levant. He was also the senior regional manager to the division president for Greater China and until most recently Italy and Alpine. Before joining the Coca Cola Company, Anastassiadis was the group general manager of Aujan Industries for five years where he had laid the foundation of the company’s distribution operations in the Gulf and relaunched the Rani and Vimto brands.
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