The dairy industry in Saudi Arabia: current situation and future ...

REVIEW
*Author for
correspondence.
© 2002 Society of
Dairy Technology
Blackwell Science, Ltd
The dairy industry in Saudi Arabia: current situation and
future prospects
M M AL-OTAIBI* and R K ROBINSON
School of Food Biosciences, The University of Reading, Reading, RG6 6AP, UK
INTRODUCTION
Its oil reserves make Saudi Arabia one of the most
important countries in the world today. However,
before the development of the oil industry in the
mid 1900s, most of the people lived in rural areas
and made a living as farmers, Bedouin (herders) or
traders. The diet of the local population consisted
mainly of fresh milk from goats, sheep and camels,
or milk products such as yogurt, cheese, butter and
ghee, together with dates. Cereals such as millet,
often supplemented by rice, were cooked in water
and consumed as a gruel, while barley and wheat
were made into bread. Meat was only eaten on special
occasions, such as marriage feasts, traditional
events, or when guests were present. The flesh of
goats and camels was eaten sometimes, but lamb
was the most widely available source of meat. A
fermented milk drink made from the buttermilk
recovered from butter-making was a popular drink,
along with coffee and tea.
With the development of the oil industry in
1933, large numbers of people moved to cities and
towns and, after the Second World War, the oilrelated
industries expanded rapidly and the population
of Saudi Arabia grew equally quickly. Today,
the population of Saudi Arabia exceeds 20 million,
including around 5 million non-nationals, and the
capital, Riyadh, has become the largest city in the
country.
In line with this rapid growth in population,
there was an increase in demand for milk and
related items, and Government policy focused on
the goal of achieving self-sufficiency in dairy products.
However, most of the land in Saudi Arabia is
desert; there is a lack of permanent rivers and very
little rainfall. Fortunately, Saudi Arabia does have
underground water reserves that are suitable for
irrigation or, after treatment, for industrial uses.
Consequently, milk production and processing is a
feasible option, and the Saudi Arabian Agricultural
Bank, along with the private sector, provided support
to farmers ranging from technical advice to
long-term interest-free loans. The millions of riyals
that the Bank has provided in loans to farmers has
allowed for the expansion of existing farms, the
purchase of new ones, the construction of processing
plants and the acquisition of new technology
and equipment. As a result of these and other programmes,
dairy farming has become a major enterprise
and, by 1998, the number of cows housed on
modern dairy farms was estimated to be 150 600;
a further 140 400 were husbanded by Bedouins
and small-scale farmers in the traditional manner. 1
This expansion of the national herd has allowed
Saudi Arabia to become almost self-sufficient with
respect to its needs for milk and milk products, and
has enabled the export of finished products to other
countries. Thus, it should be remembered that
Kuwait, Jordan and Iraq border the country to the
north; the United Arab Emirates, Qatar and Bahrain
are in the east; in the south, the country is
bounded by Oman and Yemen—the Red Sea forms
the western periphery. All these countries have a
long tradition of consuming milk and milk products,
so that potential export markets are readily
accessible.
MILK PRODUCTION
In 1973, the Government of Saudi Arabia started
an extensive programme to encourage modern
farming technology. The result has been a phenomenal
growth in the production of bovine milk,
which increased sharply from 166 000 tonnes in
1986 to 510 000 tonnes in 1997 (see Table 1). It
should be noted that, while the milk from modern
farms is all bovine, the figures for raw milk from
the traditional sector include inputs from local
breeds of cows, sheep, goats and camels. What is
striking about these figures is the way in which
the productivity of the modern dairy farms has
increased; over the same period, the total volume of
all milks collected from traditional farms rose from
a base of 266 000 tonnes in 1986 to only 306 000
tonnes in 1997. Currently, the total value of the
milk produced annually on modern farms in Saudi
Arabia is around 1.6 billion U.S. dollars. 2 The contrast
between the modern and traditional sectors
reflects the facts that the Bedouin farmers occupy
land that offers poor grazing because the fields
lack sufficient rainfall, and that the herds of locally
bred cows, sheep, goats and camels give only low
volumes of milk.
This expansion in the supply of fresh milk
encouraged local businessmen to use milk for
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Vol 55, No 2 May 2002
Table 1 Increase in raw milk production in Saudi Arabia
between 1986 and 1997; all figures as tonnes × 1000 3 .
The figures for the traditional sector include the milk
from cows, sheep, goats and camels, but only bovine
milk is produced by the modern sector
Year Modern Traditional Total
1986 166 266 432
1987 198 252 450
1988 208 243 451
1989 246 229 475
1990 283 233 516
1991 284 236 520
1992 310 238 548
1993 349 238 587
1994 396 237 633
1995 428 270 698
1996 453 296 749
1997 510 306 816
1998 NA NA 883
1999 NA NA 937
2000 NA NA 1039
NA: data not available
processing into products such as cheese and butter
in order to meet the demand of the local market for
these products. This trend is still continuing for, as
shown in Table 1, the volume of milk produced in
Saudi Arabia continues to rise. 3,4
DAIRY FACTORIES
The industrial production of liquid milk only began
in Saudi Arabia in the 1970s, and these first milk
processors fell into two categories. Namely, those
that operated recombining plants working with
imported milk powder and those that handled only
locally produced raw milk. Today the number of
recombining plants has increased dramatically
and there are now 17 dairies in Saudi Arabia
with recombination facilities to produce liquid milk,
or 24 dairies if those using recombined milk for
cheese and ice cream production are included. 5
However, the market for recombined liquid milk
does appear to have slowed (see Figure 1), because
many people prefer the taste of fresh pasteurized
milk if it is available.
To meet this demand, there are now a number of
dairy factories with their own farms, and factories
that collect raw milk supplies from farms located
throughout the Kingdom. The majority of these
factories are in Riyadh Province (approximately
16 factories), and there are 14 in the Eastern Province,
eight in the Western part of the Kingdom, with the
remainder spread across other areas. Their milk
supplies often come from specialized dairy farms,
of which there are 24 farms in Riyadh Province,
© 2002 Society of Dairy Technology
Figure 1 Comparison between fresh milk and recombined
milk consumption in Saudi Arabia during 1993–1999. 8
seven in the Eastern Province, three in the northern
part of the Kingdom and one in Najran Province. 4
Many of these farms only supply raw milk to
large-scale processors, and there are about eight
processors marketing significant volumes of
branded, commercial dairy products. These are
Almarai, Al-Safi, National Agricultural Development
Company (NADEC), Al-Othman, Najdyah,
Al-Matrood, Al-Hana and Aziziah. These companies
account for almost all the sales of fresh,
pasteurized milk, and have nearly 90% of the
market of laban (a traditional Middle Eastern drink
similar to a natural drinking yogurt) and 94% of the
market for yogurt.
The Al-Safi Dairy holds the distinction, as well
as a listing in the Guinness Book of World Records,
of being the largest integrated dairy operation in
the world. Al-Safi Dairy herds a total of 32 000 cattle
(including 24 000 milking cows) which produce
390 000 L of milk daily and 6000 kg of boneless
meat annually. Every stage of the production is
included in the operation. This covers the growing
of forage crops under irrigation, breeding programmes,
milk collection and processing, packaging
of the finished products and their distribution
to retail outlets. The entire operation is handled
on-site at the Al-Safi farm located in Al-Kharj about
60 miles south-east of Riyadh. This high degree of
integration has enabled Al-Safi to attain control
over 30% of the fresh yogurt and milk markets in
Saudi Arabia. 6
More recently, Danone International acquired
50.1% of the shares in Saudi Al-Safi Foods—
which own the Al-Safi Dairy—and this investment
should enable the new Al-Safi Danone Company to
enhance its competitive position and allow the
company to target the consumers, estimated to be
around 40 million, in the neighbouring Gulf States.
The Al-Marai dairy was originally established
with just 1200 Holstein Friesian cattle at Al-Kharj
about 60 miles south-east of Riyadh, but today it is
one of the leading dairy companies in the Kingdom
with over 32 000 head of cattle at its various farms
throughout the region. Before 1996, the company
operated four dairy processing plants handling

Vol 55, No 2 May 2002
fresh raw milk, and a cheese blending plant with a
70 000 litre per day pilot plant used for new product
development. However, in 1996, the Company
constructed a factory with a processing capacity of
1.4 million litres of fresh milk per day. 7 The Company
now leads the commercial fresh milk industry
in Saudi Arabia and it is the first company to have
treated the Gulf Co-operation Council (GCC)
States as an integrated market for short shelf-life
products. As a result, it is now a leading brand
name in five national markets, and supplies these
markets with pasteurized milk, laban, yogurt,
cheese, butter, ghee and processed cheese. It has
recently introduced its own real fruit laban and
stirred, real fruit yogurt (including a layered fruit
product) and it is producing Yoplait fruit yogurts
under licence.
Other success stories include the expansion of
NADEC, which has become the third largest dairy
company in Saudi Arabia. Its farms are stocked
with more than 25 000 cows which give a total production
capacity of 1 million litres per day of fresh
milk.
Saudi Danish Dairy Co. (Sadafco) is the largest
importer of milk powder and, although it is reconstituted
rather than fresh milk, Sadafco is the
second largest supplier of liquid milk in the Kingdom.
Its production makes up 19.6% of the total production
of liquid milk in Saudi Arabia, a market
share that puts it in second place after Al-Marai.
Jamjoom is another major importer of milk powder
for reconstitution and the company has a large
processing plant, located in Jeddah, which produces
around 30 million litres of liquid milk per
year. Al-Rabie Saudi Dairy Company, based in
Riyadh is also a significant producer of dairy products.
It was established in 1980 as a Saudi–Irish
joint venture, and now boasts an annual production
of 52 000 tonnes of different products using reconstituted
milk powder.
Overall, Sadafco, Jamjoom, National Food
Industries, Al-Rabie, Danya, Al-Rai and United
Food Industries account for nearly 90% of the production
of dairy products from recombined milks. 8
MILK PRODUCTS
Over 60% of all bovine milk produced in Saudi
Arabia (fresh and recombined) is fermented into
laban, and approximately 25% is pasteurized for
direct consumption as liquid milk. The balance is
processed into a yogurt-like product called Zabadi,
Ghishte (a thick ‘spoonable’ cream), labneh (a
concentrated yogurt with around 10% fat), UHT
recombined milk with around 3.5% fat (along with
a range of flavoured UHT milks), and a wide range
of natural and fruit-flavoured stirred and set
yogurts. In addition, Unilever has opened a large
ice cream plant in the Eastern region of Saudi
Arabia to supply all of the GCC markets, and
Nestlé has recently taken over the UAE Galadari
ice cream operation. Jamjoom in Jeddah makes
Mars milk under licence, while the New Zealand
Dairy Board has a joint venture with Sadafco to
repack Anchor milk powder and to produce Chesdale
processed cheese. MD Foods owns Danya and
produces processed cheese under the brand name
‘Puck’, and Kraft Foods have involvement in the
area as well.
CONSUMPTION
The consumption of milk products in Saudi Arabia
is gradually increasing and, in 1999, the total consumption
of liquid milk amounted to 335 million
litres. This figures rises to almost 600 million litres
if laban is included. This overall figure gives a per
capita consumption of around 30 L per annum
based on the current official estimate of the
population (approximately 20 million). The comparative
importance of fresh milk as compared
to recombined milk is shown in Figure 1.
Canned milk powder (e.g. Nestlé’s NIDO) is still
a very important source of milk in most Saudi
households. In 1999, this usage accounted for a
further 350 million litres of liquid milk equivalent,
suggesting a total underlying market for liquid
dairy products of approximately 950 million litres.
As mentioned earlier, a wide range of dairy
products are manufactured in Saudi Arabia, and the
pattern of consumption of some different products
(in terms of liquid milk equivalents) is shown in
Figure 2. Cheese—much of which is imported—is
one of the most popular foods, while ice cream is
in least demand.
MARKET TRENDS
Even though imports of milk powder for reconstitution
continue (≈ 80 000 tonnes during 2000), as
does the importation of pasteurized liquid milk,
Figure 2 The Saudi dairy market in 1997. Percentage
consumption. 5
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Table 2 Development of the international trade in selected dairy products by Saudi
Arabia during 1995 and 1996 and the figures available for 2000; all figures as tonnes 3,9
Import Export
Product 1995 1996 2000 1995 1996 2000
Liquid milk* 2607 3913 NA 28 330 25 354 NA
Fresh cream 1635 2748 NA 86 262 NA
Laban 77 38 93 3090 2394 4112
Yogurt 584 232 134 8997 21 605 2900
Labneh 397 136 1669 872 2640 283
Butter/Ghee 20 065 19 041 14 183 46 81 5.4
Cheese 54 081 49 964 57 082 2893 4290 4703
*Pasteurized milk (fresh and recombined)
NA: data not available
Saudi Arabia has not imported any raw milk since
the late 1980s. Table 2 shows the pattern of imports
and exports for Saudi Arabia for the period 1995–
1996 and 2000, and it is clear that the amounts
of fresh cream, yogurt, labneh, butter/ghee and
cheese being exported during 1995–1996 were on
the increase. This trend suggests that the dairy
industry in the Kingdom was extremely productive,
and that the country had not only reached
self-sufficiency in many of the products but had
an excess for export. In 1996, for example, dairy
exports from Saudi Arabia to the Arabian Gulf
States totalled nearly 57 000 tonnes.
However, these high levels of export have
not proved to be wholly sustainable and the
total dairy exports from Saudi Arabia to the
Arabian Gulf States for 2000 declined to just
under 30 000 tonnes. Obviously this latter figure
is impressive for a high temperature–low rainfall
country like Saudi Arabia, but it does suggest that,
© 2002 Society of Dairy Technology
unless there is scope for still further development
of local farms, domestic demand may soon balance
production. Obviously the statistics for 1995/1996
and 2000 are not entirely comparable, but the
figures for yogurt and labneh illustrate the manner
in which increased local demand has dramatically
reduced the export figures for 2000 compared with
just 4 years earlier.
There was, however, an increase in the export of
laban and, possibly, liquid milk. The continuing
export of cheese probably reflects an expansion in
the factories producing Feta-style cheeses from
fresh or recombined milks.
REFERENCES
1 Anon (1999) Agriculture Statistical Year Book Issue: 12.
Riyadh, Kingdom of Saudi Arabia: Department of Economic
Studies & Statistics.
2 Anon (1997) Dairy industry works toward self-sufficiency.
http://saudiembassy.net/publications/magazine-spring-97/
dairy.htm.
3 Anon (1998) Production and Marketing of Dairy in Kingdom
of Saudi Arabia. Riyadh, Kingdom of Saudi Arabia:
Department of Economic Studies & Statistics.
4 Anon (2000) Indicators for Agriculture and Water in Kingdom
of Saudi Arabia Issue: 14. Riyadh, Kingdom of Saudi
Arabia: Department of Economic Studies & Statistics.
5 Vickers A (1998) Coming together. Dairy Industries International
63 25–26.
6 Al Safi Foods. The World’s Largest in Integrated Dairy
Farm. http://www.alsafi.com.
7 Anon (1999) The Almarai. European Dairy Magazine 11
16–17.
8 O’Brien K (2000) Rites of passage. Dairy Industries International
65 27–29.
9 Anon (2000) Import and Export Statistics. Riyadh, Kingdom
of Saudi Arabia: Ministry of planning, Central Department
of Statistics and Foreign trade.