Kuwait-based food and beverage company Mezzan Holding has acquired a 70% stake in Saudi Arabia’s Al Safi Food Company for SAR 90.75 million ($24.2 million).
Mezzan Holding plans to invest in food manufacturing facilities in Saudi Arabia to serve the domestic and neighbouring markets. The capital injection includes planned capital expenditures leading up to the end of 2017.
Riyadh-based Al Safi, which was established last year by FMCG group Al Faisaliah, represents the first time that Kuwait-based Mezzan has expanded into the Saudi Arabian market, giving it a local platform from which to build a food manufacturing and distribution operation in the country.
Mezzan’s distribution portfolio includes Red Bull, Lurpak and sparkling water brand San Pellegrino.
Al Safi Food Company will be renamed as Mezzan Food Company as a result of the deal.
Mezzan Holding vice-chairman Mohammed Al Wazzan said: “Saudi Arabia represents a key growth market for our company. We look forward to grow our business in the kingdom and serve Saudi households with high-quality food products along our local partners, the Al Faisaliah Group.”
According to Mezzan Holding’s CEO, the company expects to add between 5% and 10% to its top line as a result of its Saudi operation, highlighting the potential of the Saudi market for food companies in the region.
“The acquisition marks our real entry into the [Saudi] kingdom’s food manufacturing and distribution sector,” Garry Walsh said. “Though the company was acquired while in a start-up mode, it has a high turnaround potential and will immediately provide a new platform for both margin growth and distribution scale, in addition to complementing our activities in other markets and contributing to the group’s bottom line, starting from 2018 and beyond.
“Our Saudi Growth Strategy leading up to 2018 has three main priorities. Our first priority is to streamline operations by managing operating expenses, raw materials, and SKU rationalisation. Our second priority is to introduce Mezzan-manufactured products from other countries, while raising the efficiency and production of Al Safi Food’s baked goods production. Our third priority is deploying the injected capital in expanding new product lines and build new factories to serve Saudi from within Saudi, and serve growing demand in Kuwait and neighbouring markets through Saudi.
“By 2018, we expect our Saudi business to contribute between 5% and 10% to our top line, and to grow there as the new Saudi-based food manufacturing facilities that we have planned start production.”
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