Almarai Company: Milk and Modernization in the Kingdom of Saudi Arabia Harvard Case Solution & Analysis

Almarai Company:Milk and Modernization in the Kingdom of Saudi Arabia Case Solution

PESTLE Analysis:

A detailed PESTEL analysis has been performed in order to gain an insight about the company’s external challenges and the prevailing trend which has been faced by the company.


Saudi Arabia was highly dependent on the import of food products due to the scarcity of water that is similar to other oil-rich states. In a period of ten years, the import of wheat had significantly increased to 3.6 million MT from 2286 MT and forage products to 386,000 from 2280 MT. In response to the increased import, the government of Saudi Arabia led the domestic production which contributed to around 20 percent of the state’s needs in 2017. The government brought reduction in the financial support which was both directly and indirectly provided to the households of Saudi Arabia.

As a part of Subsidization program, the government was also enforcing the increased employment of Saudi nationals in private sector to make it costly to employ expatriates. Besides that, the expatriate’s spending power hit after the government planned to impose fees on expatriates. Additionally, the Saudi Arabian agricultural bank is supportive to the local farmers as it provides financial and technical support in order to make the farmers self-sufficient in the production of milk. This is an opportunity for the company as well as a threat, because of an easy entrance in the market and less barriers for the new entrants.



There has been a significant change in the economic condition of Saudi Arabia because of tighter economic reality about the oil-fueled prosperity. In recent years, the change in the economic policy of the state tied to the Vision 2030 strategic plan had profound effect on the consumers and businesses of the country. Similarly, around 75 percent of the market is dominated by expatriates which play an important role in driving potential growth of the company and the state. Before the change in economic policy, the labor cost was cheap but the introduction of big fees on foreigners had led to a significant increase in the wages of expatriates. Additionally, the date at which employees are provided with their salaries has been more closely associated with the shopping behavior of the individual.

Due to an increase in the per capita income; there is a likelihood of improvement in buying capacity and consumption of food. With high disposable income; the people are not able to afford quality products, which in turn creates a conducive investment atmosphere in the food industry by the foreign players as well as the indigenous players. The economy of Saudi Arabia is highly affected by fluctuation in oil prices, which affect the market value and micro level of the company. The significant or slight fluctuation between Saudi Riyal and foreign country currency affect the company’s profit and cost, since the products purchased by Saudi Arabia are dominated in mostly Euro and Dollar.



The Saudi Arabians represented high per capita disposable income, ratio of young population grew at the rate of 4 percent per year. Considering the families with children, dairy products were considered to be one of the nutritious products. The buying habits of the consumers were mainly dependent on the upbringing and culture. The change in economic policy had also led to tighter household budgets and departure of expatriates from Saudi Arabia had resulted in market contraction by around 2.6 percent in the year 2017. However, the annual consumption of fluid milk was around 21 liters per capita i.e. lowest in comparison to other countries.

The dairy and food industry of Saudi Arabia are classified as the largest market in Gulf Cooperation Council (GCC). The health awareness is one of the significant factors that has been playing a crucial role in driving the dairy products in the market. People in Saudi Arabia are more concerned about cutting their high calorie and fatty foods, thereby shifting to healthier products. The consumption of milk is 2nd highest reinforced by consistent growth, over the period of time.


Due to the increased water scarcity in Saudi Arabia, the government had heavily invested technological approach of desalination to increase the supply of water supply. Similarly, the introduction of new policies was to stimulate the investment in the foods that are resource-efficient like poultry and other technological approaches like greenhouse farming and advanced drip irrigation. Similarly, the dairy organizations had also reported the sales of milk product with UHT treatment and UHT milk was highly preferred by the consumers of Saudi Arabia. The gradual introduction of new dual-temperature vans was to transport both fresh dairy and bakery products.


The initiatives taken by Saudi government were based on restricting the economic which mainly included the implementation of new taxes i.e. the addition of fee on the foreign workers in order to increase the employment rate in the Saudi Arabians. The cutting of subsidies and price controls led to the increase in the operational cost of a business. However, the state subsidies and cheap energy was the primary reason behind the low cost of feed and water for Almarai.

The duties and responsibilities of the management team include: reviewing effectiveness of procedures implemented and report on safety & health conditions to all business levels. The training procedures on the issues related to health and safety should be available to all employees. Also, the periodic evaluations and appraisals on the business environment should be carried out. The review could only be carried out by the well qualified staff member, who is able to adequately assess the compliance of employer with the specified laws.


For the protection of environment,the approach of greenhouse farming was introduced which was primarily to provide the crops with favorable growing conditions, and protection against pests and unwanted weather changes. Similarly, the use of green forage as the animal feed served as the excellent food source for the livestock but it led to more than 100 times consumption of maize leading to increased imports.

Market Segmentation

The market segmentation is all about the brands used to segregate its target market into different segments to maximize the marketing exposure for successful implementation.(Wilson).Besides that, the market segmentation of dairy product, at Saudi Arabia, were comprises over two segments-

  • Fresh dairy products and
  • Almarai

These two product segments captured 70% of the fresh product market at Saudi Arabia- specifically targeting the expatriate’s consumers. There are four types of market segmentation that helps in targeting the specific customers and meeting their demands.................

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