Coca-Cola Middle East FMCG Sector Deal
The recent formation of two beverage companies in Saudi Arabia, Aujan Coca-Cola Beverages Company and Rani Refreshments , seals the largest ever investment made by a multinational firm in the Middle East's fast moving consumer goods sector. Following Coca-Cola's $980 million purchase of approximately 50% of Aujan's beverage business in December 2011, the deal signals the impressive growth opportunities developing in the Saudi Arabian drink sector. Volume sales are forecast to grow at 2.8% CAGR, with value sales showing a brisker 8.1% increase to 2017. Consumption of soft drinks in volume terms continues to be the highest in the Gulf region with consumer spending rising, indicating impressive growth potential.
Industry leaders such as Coca-Cola's pledge to invest $5 billion in the Middle East and North Africa over the next 10 years seals long-term commitment to the region. Stimulated by high government spending, the Gulf's largest economy continues to grow at a rapid pace, with GDP forecast by BMI 's Middle East and North Africa team to increase 4.5% in 2013. Paired with a large, youthful population , demand is increasingly in line with Western, global trends and consumption remains impressive. With the burgeoning middle class' s household spending set to increase, demand for commercial drink products associated with brands such as Coca-Cola is growing, as is the rising consumption of premium commercial products. These dynamic demographics offer exciting opportunities for investors and impressive opportunities for growth across the breadth of the Saudi Arabian consumer market.
Coca-Cola's substantial investment in the Aujan group demonstrates confidence in the strong potential of Saudi Arabian consumer trends. With a population representing two thirds of the Gulf, increasing purchasing power of the middle class, and an appetite for branded goods, companies such as Coca-Cola can expect promising returns. However, room for growth remains, with income per head relatively low compared to the UAE, Qatar and Kuwait. Opportunities for diversification also exist, with the supply of increasingly popular low calorie and energy drinks largely open to expansion. As deals such as the one struck between Coca-Cola and the Aujan group signal, entry into Saudi markets is both lucrative and increasingly attractive as a location for future drink investment.
|Saudi Arabia Comfortably The Largest|
|Selected MENA Markets Soft Drinks Value Sales (US$mn) - Historic & Forecast|