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Saudi Arabia Food and Drink Report Q2 2008Published by: Business Monitor International Published: May. 12, 2008 - 63 Pages Table of Contents
AbstractThis quarter witnessed a major shake-up in Saudi Arabia’s mass grocery retail (MGR) industry, asdiscussed in BMI’s recently published Saudi Arabia Food & Drink Report for Q208. In February 2008Al Azizia Panda Company, the 100%-owned retail subsidiary of diversified Saudi conglomerate Savola Group, announced that it is to merge with rival retailer The Giant Stores Company, itself a 100%-owned subsidiary of Adbul Kadir Al-Muhaidib & Sons Group. Savola will hold a majority 80% stakein the merged company, which with combined sales of US$1.3bn will become the Gulf region's secondlargestretail operator, behind the regional joint venture of France's Carrefour. The planned merger isactually a good strategic fit for both companies and it will facilitate their respective expansion plans, while also providing strong mutual benefits.The advantages of the merger for Giant will include access to improved buying and negotiating powerand involvement with a stronger retail brand. Although Giant has enjoyed considerable success in the Saudi MGR market, it nevertheless lacks the brand cachet of both local and international rivals. For Panda the primary benefit will be ease of regional expansion, for the company has long had its sights onbecoming a regional major. The improved scale following the merger, not to mention Giant's existingfoothold in a number of regional markets, should help to accelerate this objective. Both retailers are veryexpansionary in their outlook. On the back of announcing sales growth of 35% year-on-year (y-o-y) to US$986.7mn in 2007, Panda had announced plans to double the size of its 60-outlet-strong domesticsupermarket and hypermarket network, while also revealing that it was planning to expand regionally.Giant, meanwhile, had also announced plans to double its store network, from 20 hypermarkets at present, while also extending its presence in Lebanon, Qatar and Bahrain. For the two retailers' rivals, the newly-merged entity represents greater competition. Panda and Giant willnow be able to compete more effectively on price, while marketing, branding, promotional and privatelabel product development synergies should also improve their shopper pulling power. This might resultin the need for increased investment from those retailers that want to offset the threat to their market sharein what is an attractive and dynamic market. BMI is forecasting sales growth of 35.6% to 2012 in Saudi Arabia’s MGR sales, with sales across all formats reaching US$4.98bn, making this one of the largestmarkets in the region. The hypermarket format is expected to continue to dominate the MGR sector, showing the strongest growth over the forecast period with sales climbing 45.9% to reach US$2.75bn in2012. Given this market potential, many eyes in the industry will be on the new Panda-Giant jointventure, to see just how much attention it will pay to the local market, versus its regional expansion plans. Get Full Details About This Report >> |
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