Milk prices are government-controlled, so producers must be inventive if they are to grow revenues.
Dubai-based Al Rawabi aims to milk profits with new ‘supermilk’
Al Rawabi, the Dubai-based dairy, is looking to come up with new products to grow in a fiercely competitive market where milk prices are capped by the Government.
Despite the absence of rolling fields and lush pastures, milk yields from the UAE’s industrial farming methods are almost double that of Europe’s pasture-fed animals.
Al Ain Dairy, Saudi Arabia’s Almarai and Al Rawabi control 85 per cent of the local market.
According to Al Ain Dairy, the market is growing at about 8 per cent a year. With milk prices across the UAE controlled by the Government – a rise has not been permitted for eight years – producers are eager to focus on improving manufacturing efficiency to boost margins.
Al Rawabi said it was adding another 2,000 cows to its 12,000-head herd, and land for a new 5,000-cow dairy was being scouted. Last year, Al Ain Dairy said it would boost production with a Dh400 million investment in a new farm and factory in Al Ain.
Al Rawabi has also launched a “super milk” with added vitamin D to its range that it hopes will boost market share.
“The super milk will not help drive profits but it will increase our consumer base,” said Ahmed El Tigani, the general manager at Al Rawabi. “It cost us Dh2 million in R&D to create the super milk. Seventy-six per cent of UAE residents are vitamin D-deficient, so it makes sense. The super milk costs Dh12 for two litres. We sell about 180,000 litres of milk a day, and we think the new product will sell about 30,000 litres a day, until people realise the benefits. The margin is tiny – the name of the game is to have a large group of consumers and we are hoping by introducing the new products we will win over our competitors’ customers.”
Local producers are also facing rising production costs, including agri-feed and delivery costs, and growing competition from international players that already make up a shortfall in supply during the summer months and Ramadan.
Earlier this year, Fonterra, a New Zealand dairy company, opened an ingredients warehouse at Jebel Ali in Dubai to support growing demand for dairy products in the Middle East, Africa and Central Asia. New Zealand exported about NZ$1.6 billion (Dh5bn) in primary products to Saudi Arabia, the UAE and Oman last year.
“If we make 2 to 3 per cent on the milk we are happy,” said Mr Tigani. “It is very expensive to distribute our products, as we have 6,800 outlets to service every day with 340 delivery vans – supermarkets, grocers, and petrol stations. These costs have also increased, so we have to create margins elsewhere. We will be delivering the super milk to every one of the outlets. We can only grow as the UAE and our neighbours grow. Fresh milk is a perishable product – the shelf life is only five days – so we can only sell it in the UAE, Qatar and Oman.”
Al Rawabi also hopes building a greater connection with its customers will help the dairy thrive and has been encouraging its customers to visit the farm.
“We want our customers to come and see the cows being milked and the calving,’ said Mr Tigani, “Two years back we opened the farm and 6,000 visitors came because it is a beautiful, exciting, different experience. It is not like going to the mall and the movies – it is a great afternoon for the whole family. This is how we build a relationship with our customers.”
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