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Almarai Company Analysis

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Almarai Company Analysis

Executive summary
This report provides a critical analysis of Almarai, a thriving food and beverage
multinational organization in the Middle East. It posits that the 44-year-old firm has grown
exponentially over the years and serves about ten nations. It has a hierarchical organizational
structure led by the chairman of the board of directors. Almarai is a public company whose
diverse product portfolio underpins its financial capabilities. However, the firm faces the threat
of political tensions and dependence on imported raw materials. The report concludes that
Almarai should increase its power over suppliers, develop risk mitigation strategies, and align
production with social-cultural changes to improve its inefficiencies.   
Introduction
Considered a leader in food and beverage production and distribution, Almarai is one of
the most successful companies in the Middle East. Its reputation for the provision of quality food
products augments its market leadership in the region. Therefore understanding Almarai’s
structure, functions, success factors, and areas hindering its growth is crucial in optimizing its
revenue generation. Furthermore, analyzing these elements is pivotal in developing strategies to
help the firm capitalize on its resources and capabilities while mitigating its inefficiencies. This
report evaluates Amalarai’s history, structure, ownership, and business environment. In addition,
it provides insights into the firm’s efficiencies and inefficiencies coupled with strategies to
counter its limitations. The report, therefore, provides crucial information regarding Almarai, its
capabilities, and ways of increasing profitability.
History and Size
Since its inception in 1977, Almarai has enhanced its growth in size and financial
capabilities. Almarai serves the Middle East region, and its headquarters are in Riyadh, Saudi
Arabia (Almarai homepage, 2021). The head office houses its subsidiaries and over 5,000
employees; it is a multi-billion complex sprawling on a ten-acre property. The firm serves over
42 million consumers daily (Singh & Hagahmoodi, 2017). 4 million liters of Almarai milk are
consumed every day, and the company distributes over 1.3 million liters of fruit juice. The firm
also produces about 1.5 billion bakery products annually and sells 100 million poultry packs
every year (Brands, 2021). These statistics indicate that Almarai is a gigantic multinational
organization
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Below is an image of Almarai’s head office. Retrieved from (Almarai homepage, 2021)

Almarai is one of the largest employers in the Gulf region. As of 2020, the organization
had over 42,000 employees. Thirty-six thousand are men, and about 6,400 are women
(Mohamad & Asfour, 2020). Therefore, women make up about 17% of these employees.
Almarai primarily offers its food and beverage products in the Middle East and North Africa. It
has branches in Saudi Arabia, Oman, UAE, Kuwait, and Bahrain, which are the Gulf
Corporation Council countries (GCC). In these countries, it has dairy and poultry farms and sales
depots (Mahjoub, 2018). Additionally, the firm has a manufacturing plant in Egypt and dairy
farms in Jordan. It also has arable farms in the United States and Argentina.
 
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Organizational Structure
The chart below shows the top-level management staff at Almarai. Retrieved from (Board of
directors, 2021)
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There is a top-down chain of command in Almarai, and thus the firm has a tall
hierarchical organizational structure. The board of directors controls the senior level
management, which manages the organization’s day-to-day operations. In this structure, the
chain of command flows from the board of directors through the managing director into the
organization's executive management. The managing director answers to the chairman of the
board of directors (Board of directors, 2021). The chief and executive officers are accountable to
the managing director. Senior-level managers and executive vice presidents answer to the
executive officers of their respective departments. They are in charge of middle and lower
managers who manage the regular employees. These subordinate staff report directly to the
managers above them. At the top management level, there is a narrow span of control. The board
of directors controls ten executive officers, who control one senior-level manager or executive
vice president (Board of directors, 2021). However, there are more employees in the lower
management levels, and therefore, the span of control is wide. 
The board of directors manages Almarai’s corporate affairs. They appoint a chairperson
responsible for leading the board and the managing director who forms the link between the
corporation and its top-level management. The managing director develops organizational goals
and policies with the help of the executive officers. The executive officers are in charge of daily
operations within the firm’s departments. They align the cooperate goals with their department’s
operations. They also liaise with senior-level managers to ensure different areas within their
departments are running smoothly. The senior-level managers work closely with the lower
managers to actualize the company goals. They are in charge of smaller units of responsibility
and the regular employees. The regular employees comprise the technical, administrative, and
support personnel responsible for activities that keep Almarai running.
There are ten departments in Almarai. 
 The finance department handles the firm’s funds to ensure that there is enough cash flow for
the day-to-day operations.
 The human resource department oversees various aspects of employment and manages
Almarai’s workforce (Board of directors, 2021).
 The strategy and planning department is responsible for setting priorities, allocating
resources, and strengthening operations.
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 The bakery department manages the production and distribution of Alamarai’s baked
products.
 The poultry department handles the farming and processing of poultry.
 The marketing department is responsible for making Almarai’s products known to potential
consumers. 
 The dairy and juice department handles the production of Almarai’s beverages.
 The farming department ensures there is enough feed for poultry and dairy cows in the
organization (Board of directors, 2021). 
 The sales and logistics department is vital in distributing Almarai’s products.
 The corporate affairs department handles internal and external relations with stakeholders. 
Ownership
Alamarai is a joint-stock company whose shares are available to the public and freely
traded. It is, therefore, a public company since its shareholders are liable for its liabilities (Al
Mheiri et al., 2020). The primary advantage of this type of organization is that it has a
comprehensive source of capital and spreads its risks to shareholders. Additionally, being a
publicly-traded company augments the firm’s prestigious profile and growth opportunities. The
limitations synonymous with public companies are the high levels of transparency requirements
and regulatory processes. Additionally, these types of organizations have long decision-making
processes. 
Almarai has nine directors headed by Sultan Al Kabeer, its chairman (Board of directors,
2021). The board chairman owns 23% of the firm’s shares, while Savola, a parent company of
Almarai, owns 34% of the sharers. Saudi Arabia’s Public Investment Fund (PIF) owns 16% of
Almarai, and the remaining 19% is owned by the public (AL Zubaidi & Nobanee, 2020). The
firm has a certificate of incorporation detailing its purpose, value, and shares. The primary
financial category used to set up Alamarai was banking. Its mission statement is ‘enriching its
consumer’s lifestyle by providing quality and nutritious food and beverages.
Organizational Structures
SWOT and PEST analyses are vital in evaluating a business’s internal and external
environment. A SWOT analysis gauges a firm’s strengths, weaknesses, opportunities, and threats
to determine its resources and capabilities. It helps evaluate areas organizations should capitalize
on and improve on to optimize profitability. A PEST analysis evaluates a venture's political,
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environmental, social, and technological environment. It helps gauge the external elements that
affect a firm’s revenue generation. 

 SWOT Analysis 
Strengths Weaknesses
 A wide and robust distribution network.  Dependency on imported raw materials.
 Market leader in food and beverage  Highly dependent on the beverage
production in the Middle East. segment.
 Strong brand value and quality products  High costs of operations.
(Mohamad & Asfour, 2020).  Limited to the Arab speaking nations.
 Hot climatic conditions ideal for
beverages market.
 Vertical integration allowing control of
the supply chain.

Opportunities Threats
 Product diversification.  Political tension in the region.
 Increased Muslim tourists.  Disruption of feed supply.
 Population growth will increase the
market share.
 Growth of the milk market in GCC
countries.

 PEST Analysis
Political Forces
Saudi Arabia’s strict control of company operations, especially when it comes to cost,
might hurt Almarai’s revenue generation (Kulish, 2016). Additionally, there is uncertainty due to
the tension polarized political climate in the Gulf region.

  Economic Factors
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The exchange rates are bound to have ripple implications for Almarai’s profitability.
Additionally, the reduced consumer spending following Covid-19 and trade wars will affect the
supply and price of raw materials.
  Social Factors
There is an increase in health and environmentally conscious consumers. Cultural
underpinnings limiting the number of women in leadership positions are also eroding
(Henderson, 2021). Depending on how Almarai responds to these social changes, the company
will increase or reduce its market share. 
  Technological Factors
There is rapid innovation and adoption of technology. Technology is vital in enhancing
operational efficiency, cost reduction, and quality optimization (Osland, 2021). However, in the
short run, high investment costs in technology will affect Almarai’s profitability. 
 Conclusion
Almarai faces critical inefficiencies in optimizing revenue generation by increasing its
market share. The organization is limited to the gulf region, yet there are numerous emerging
markets in Africa and South America. Capitalizing on product diversification and a robust
distribution network will enable Almarai to reach consumers beyond the gulf region (Osland,
2021). The firm’s reliance on imported raw materials is also bound to affect its revenue
generation. Therefore, it must develop policies that ensure it controls its raw materials and has
power over suppliers. There is also the threat of political tension in its region of operations
coupled with social-cultural changes. Forward-looking risk management strategies aimed at
tackling unforeseen political situations will help Almarai overcome this challenge. The firm also
needs to develop health-conscious products, embrace sustainability, and inclusivity to align
operations with the social changes in the gulf region. 
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References
Al Mheiri, W., Al-Mahmoud, M., Sultan, F., Juma, F., Al-Kaabi, M., Al-Alawi, H., &
Nobanee, H. (2020). Financial Analysis of Al Marai Company. Available at SSRN
3594800. https://dx.doi.org/10.2139/ssrn.3594800
AL Zubaidi, A., & Nobanee, H. (2020). Performance Analysis of Almarai. Haitham,
Performance Analysis of Almarai (August 16, 2020).
https://dx.doi.org/10.2139/ssrn.3675016

Almarai homepage. Almarai. (2021, April 29). https://www.almarai.com/en/.

Board of directors. Almarai. (2021, March 15).

https://www.almarai.com/en/corporate/almarai/board-of-directors/.
Brands. Almarai. (2021, March 16). https://www.almarai.com/en/brands/.

Henderson, C. (2021). The rise of Arab Gulf agro-capital: continuity and change in the
corporate food regime. The Journal of Peasant Studies, 1-22.
https://doi.org/10.1080/03066150.2021.1888723

Kulish, N. (2016, October 13). Saudi Arabia, where even milk depends on OIL, struggles to
REMAKE its economy. The New York Times.
https://www.nytimes.com/2016/10/14/world/middleeast/saudi-arabia-oil-prices-
economy.html.

Mahjoub, L. B. (2018). Sustainability reporting and income smoothing: Evidence from

Saudi-listed companies. Assessment and reporting, 17.
https://dx.doi.org/10.5772/intechopen.79219

Mohamad, K. A., & Asfour, A. M. (2020). Is the Business in Saudi Market Sustainable?
Case Study of Almarai. IIUM Journal of Case Studies in Management, 11(2), 7-14.
https://journals.iium.edu.my/ijcsm/index.php/jcsm/article/view/112

Osland, A. (2021). Saudi Arabia: Almarai and Vision 2030. SAGE Publications: SAGE
Business Cases Originals. http://dx.doi.org/10.4135/9781529755794
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Singh, A., & Hagahmoodi, S. O. (2017). Performance Measurement of Almarai Products and
Customer Satisfaction. International Journal of Management Science, 4(1), 1-12.
http://www.aascit.org/journal/ijms ISSN: 2375-3757