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Almarai among top emerging brands

Saudi Arabia's Almarai , a dairy and fruit-juice company, and Patchi , a Lebanese boutique chocolate chain, are tipped to be among the five emerging market brands that are likely to make it to the top of the world's largest food and drinks brands, shows new research.

The other three brands included in research by brand consultants Wolff Olins are Juan Valdez Café, a Colombian coffee chain; ChangYu, China's biggest wine producer; and United Spirits, India's largest drinks group.

"We have witnessed over the past few years a huge surge in the standing of local and regional brands in the Middle East," Nassim Ghrayeb, the CEO of YouGov Mena, told Emirates Business.

Indeed, the number of regional brands making their mark in the international arena is evident from the growing regional representation, which includes some of the other top brands, including Emirates airline, Al Jazeera, Emaar, Aramex and Burj Al Arab, to name a few.

"This can be measured by a number of indicators: their distribution networks, their spend and the quality of their advertising, the level of talent they are hiring (mostly people with multinational brand experience), the variety of SKUs they are producing, their spend on innovation and rate of role-out of innovative products and last but not least their spend on market research and what that research is saying about them," added Ghrayeb.

However, experts opine that the road to fame is paved with hurdles.

"The extent to which Middle East brands will be able to break through regional barriers will be their willingness to make the investments, be it in acquisitions, innovation with a global appeal and most importantly their ability to let go of some the more local routes to their brand - unless it is the reason for global appeal as in the case of Colombian Juan Valdez Café - and embrace a more global culture," said Ghrayeb.

"Our research, particularly the recently launched BrandIndex, shows that there in the eyes of consumers - many of whom are expats from all over the globe - local brands can be perceived just as strongly as multinational brands because they are able to create and have the relationships that touch people's lives positively. With that in mind, there is no reason why then, given the right conditions, they could not have greater ambitions," he said.

Almarai , the Gulf's largest dairy company by market value, recently reported its preliminary results for the second quarter and first half of 2009, registering 16 per cent year-on-year growth in its Q2 topline, while its net income grew more than 22 per cent despite the economic slowdown taking its toll on most companies in the region across diverse sectors.

Soft drinks sales in Saudi Arabia are forecast to grow 26.1 per cent through to 2013. Although it does not possess the lofty per capita GDP of some of its regional peers, Saudi Arabia boasts a large and youthful population that allows it to register as the region's largest market.

While the fresh dairy segment remains Almarai 's chief source of revenue, the company has made moves to increase sales within its fruit juice segment (fruit juice sales contributed 10 per cent to total turnover in FY2008).

Almarai has also been actively pursuing several M&A deals that had been in the pipeline over a period of time. The company plans to spend SR6bn (Dh5.88bn) on expansion in the five years to 2013.

In May, the company disclosed a revised deal to acquire Hadco , which was awaiting regulatory and shareholder approval. Earlier this year, Almarai signalled its intent by entering into partnership with PepsiCo to form International Dairy and Juice (IDJ) and is set to target a number of non-GCC Middle Eastern markets as well as the North African region. In June, Almarai transferred its 75 per cent ownership in Teeba to IDJ. Additionally, it also concluded an agreement to acquire Beyti by August 2009.

While Almarai is a listed company, Patchi is a privately held Lebanese company that sells the eponymous luxury chocolate brand throughout the world.

In November last year, the company launched the world's most prestigious and expensive box of chocolates at about $10,000 apiece.

Lonely at the top

From the GCC, the only company to make it to the Fortune magazine's Global 500 list in 2009 is the Saudi Basic Industries Corp (Sabic), ranked at 186 with 2008 revenues of $40.2 billion (Dh147.65bn), a 19.4 per cent growth on 2007 revenues.

The company, however, registered a 66 per cent decline in its first-half revenues for 2009, which is bound to have an impact on its rankings next year.

According to global consultancy firm Bain & Co, companies in emerging markets accounted for less than five per cent of the Global 500 in 2002. In 2007, the percentage had tripled to 14 per cent. This fundamental shift in economic power is likely to be further accelerated by the financial crisis in the US and the boom in commodities.

By Vicky Kapur

© Emirates Business 24/7 2009