The food and beverage industry in the Kingdom of Saudi Arabia has been going from strength to strength in recent years, providing ample opportunities for industry players to invest in new innovations, especially in product packaging, and eventually consolidate their market presence both within the country and regionally as well. The positive market forecast for the Kingdom's food and beverage industry has also led to the emergence of a new breed of players that include sub-sector groups in dairy, juice and nectar manufacturing. These producers have not only earmarked growth in the Kingdom but have also started to eye the bigger picture by looking into acquisition opportunities in the region. Companies today not only produce for a mass local market but have also started to export their products into newer markets like the UAE, Iran, and other key points in the Arab world. The industry has also found a firm ally in the Saudi government, which has continued to provide assistance by offering attractive financing schemes, duty exemption for equipment as well some raw and packaging materials. The strong support given by the local government has provided the much-needed boost for these companies to meet the majority of the domestic demand for products like juices, dairy and confectionary products. The beverage processing sector in the Kingdom represents a very large segment of the food processing industry. With over 90 licensed factories, the import of subsequent competitor products have declined over the years, mainly because the country's installed capacity is already able to meet the domestic demand. The carbonated beverage segment is, as expected, predominated by foreign trade name but all products are manufactured by local made bottles. Domestic players have cornered the juice sector, which is notably one of the strongest growth areas in the Kingdom's soft-drink sales. The high sales figures and the rapid development have pushed some dairy-based companies to venture into juice-production as well. In a country like the Kingdom, the presence of water plays an important role in the beverage industry. This importance is highlighted in the country's disadvantage in producing more agriculture-based products due to a shortage in water. A recent report from the Kingdom's Ministry of Planning notes that almost 80 percent of the country's water supply is consumed by the agricultural sector. The report also points out that as a result of the implemented agricultural expansion moves, the country's stock of non-renewable water fell by 60 percent between 1979 and 2004. The Saudi Arabian agricultural sector provided an average of 5.4 per cent of real GDP per year from 2002-2006. Although its contribution to real GDP was slightly lower in 2006 (5.4 percent) than in 2002 (5.7 per cent), this is mainly because other sectors grew more rapidly, as agricultural growth averaged 1.7 per cent per year over this period. In spite of difficult climatic conditions, Saudi Arabia has succeeded over these years to modernize its agricultural sector by introducing new and modern technologies, fertilizers and other methods of cultivation. As a result, the Saudi agricultural production amounted to a surplus and growing exports to neighboring countries. The future lies very bright for the Kingdom's food and beverage industry as foreign investors are eyeing possible joint-venture agreements and investment opportunities. To date, multinational groups have already formed strategic partnerships with local companies to produce dairy and juice products that will be distributed not only on the local front but also across Southeast Asia, the Middle East and Africa. The influx of interested investors, coupled with the vibrant outlook of the food and beverage sector definitely affirms that the industry is set to grow and develop in the next few years. - The article is written by Monther Al Harthi, GM, Al Rabie Saudi Food Company. __
