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ALMARAI Capex of SAR 600 million to develop Al Kharj cheese plant in 2012 March 05, 2012 CHEESE MARKET INITIATION OF COVERAGE EQUITY RESEARCH Demand for cheese in GCC reached 87.7 million kg in 2011, 68.3% are consumed by KSA. Chart 7: Cheese Demand by Country Source: Nielsen Company, 2011 The GCC cheese market was valued at USD 1.1 billion in 2011, and it is expected to increase at a CAGR of 10.9% in the coming 3 years. The cheese market in GCC is very concentrated with 4 players dominating 85% of total market. Chart 8: GCC Market Share Source: Nielsen Company, 2011 Almarai sales increased 12.8% in 2011 to reach SAR 1.4 billion. On a close look to the cheese market, it appears that Almarai has a leading market share in 2 segments (jars and slices) out of 5 segments it has presence. Almarai ranks second after La Vache Qui Rit in the triangles market, but with close market share, representing high competition between the 2 names. It also ranks second after Kraft in the square portions but with low market share of 14.4% compared to 84.5% to Kraft which also dominates the cheese tins market with 57.5% share, followed by Almarai with 32.9%. As such, it seems that Almarai can improve its presence in the cheese market by developing new products and improving its marketing strategy in segments other than jars and slices. Almarai plans to spend SAR 600 million to develop AlKharj cheese plant in 2012. 6
ALMARAI Almarai is well positioned to gain from the changes in the consumption patterns in the Juice sector March 05, 2012 FRUIT JUICE MARKET INITIATION OF COVERAGE EQUITY RESEARCH KSA is the largest juice consumer in GCC with a market share of 67%. Demand for fruit juice in KSA grew at a CAGR of 5.8% between 2004 and 2010 to reach 983 million liters. Consumption is positively affected by rising health awareness, and hot weather. KSA possesses 38 factories producing all types of juices in various sizes, and this scale of production represents more than 90% of the domestic needs. Going forward, yearly consumption is expected to exceed 1.3 billion liters in 2014, with a market value of SAR 7.5 billion. Chart 9: KSA Juice Market million liters Source: Department of Agriculture, Forestry and Fisheries, Euromonitor The juice market in GCC is highly fragmented due to low barriers of entry. Almarai ranks first with 14.3% market share, followed by Rani (13.3%), Al Rabie (11.2%) and Suntop at 6.6%. As consumers have become more conscious of the nutritional value of products, they have started to switch from nectars (25-99% juice), various products in which contain preservatives and high sugar content, to 100% juice. This has encouraged companies to enhance their product offerings in 100% juice by launching new variants, such as 100% Orange Juice with Pulp from Almarai, which was launched in 2010. Product innovation, in addition to focused distribution positively affects the company’s revenues which are increasing at a faster rate than the market. Revenues grew by 20.2% and 19.2% in 2010 and 2011, respectively. BAKERY MARKET The bakery industry in KSA is witnessing a tremendous growth and representing a major share in the domestic food and beverage market. Demand increased by more than 70% during the last 5 years to reach more than 250 million kg in 2011. The supernormal growth is expected to continue during the coming 3 years, and demand is expected to reach 309 million kg in 2014. Chart 10: Bakery Products in KSA Source: Euromonitor 7
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Page 19 and 20: ALMARAI FAIR VALUE DEFINITION March

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