The National Agricultural Development

April 7, 2017 in Infrastructure

It has been a hugely successful couple of years for the national Agricultural Development Company – better known as Nadec.

In 2015 the Riyadh, Saudi Arabia-based company opened a new Research and Development (R&D) Innovation Centre in Haradh City. The state-of-the-art centre serves as a hub for the development of new products, packaging, and processing for Nadec’s businesses throughout the region.

Industry-ME was recently privileged to catch-up with CEO Karim Manssour Dahbi to discuss the success of this diversified business.

In your own words, please give me an overview of what Nadec does and the business split between food manufacture and agriculture

Nadec stands for National Agricultural Development Company, and was created by a royal decree about 35 years ago, with the objective to settle the Bedouins in the Haradh region in an Agricultural entity. The company started by cultivating many crops, among which wheat, barley, alfalfa, corn – and in parallel started a dairy business that the management overtime, developed to become the main activity of the company.

Today, the dairy and beverages business represents 87 per cent of the sales of the company, whilst the Agri-sector represents about 13 per cent of the total Nadec sales.

Nadec is one of the largest vertically integrated dairy companies in one location, if not the largest in the world. The operation in Haradh starts from growing the forage feed given to our 75,000 cows in the six large dairy farms  where we produce in-house about 1.3 million litres/day of fresh milk, then the milk is directly packaged in one of our two processing plants that produce over 6 million bottles/day, which are dispatched through 180 trucks of primary distribution to reach our 50 depots and distributors across the Middle East and North Africa region, and about 950 van sales trucks with a sales force of 3,000 people to reach 40,000 retail and catering customers.

What sorts of food? How many sku’s are you producing?

Our focus in Nadec is in three main categories:

Dairy products, both fresh and long life, including Milk, Laban, Yoghurt, fruit yoghurts, Breakfast Cream, Labneh, butter.

Juices: Fresh Juices, with about 20 different flavours and four for long life drinks.

Cheeses, including Jar Cheese, Triangle cheese, single serve slices.

We also make and sell Organic Virgin Olive Oil from our Farms in Al-Jouf in the extreme north of Saudi Arabia. In total we produce about 180 SKUs.

Who and where are your customers?

We make a clear distinction between customers and consumers: our customers are about 40,000 point of sales in GCC. These 40,000 are mostly groceries, small shops, but also big supermarkets and hypermarkets. Our consumers are about 60 million in all the GCC countries, both locals and expats from Asia, Europe, and other Arab countries.

What is the history of the company and how has it evolved? Have there been any important moments in the company history when the company took big steps forward?

Established in 1981, Nadec is the first and biggest Agricultural share holding company set up by royal decree by the government. Today it is the largest vertically integrated dairy farm and processing unit in one location in the world.

With the purpose of nourishing people’s lives, Nadec strives to provide the finest and healthiest nutritional products and agricultural produce through two sectors – Foods and Agriculture. Nadec is proud to play a role in helping to provide food security and sustainability for the Kingdom.

Nadec has five major agricultural projects today and is looking to expand further. In KSA, four projects cover over 100,000 hectares of land, in addition to this, significant investment is going into a major project in Sudan.  Total production from the projects delivers in excess of 450,000 tons of forage and Alfalfa to produce high quality animal feed for Nadec’s cows. Additionally, over 85,000 tons of fruit and vegetables including corn, potatoes, onions, peaches, plums, apricots and over 280,000 tons of premium quality organic dates are harvested across the Kingdom.

In Al Jouf, Nadec has invested in one of the largest organic olive orchards in the world with three million olive trees and targeting five million in the coming years. Nadec organic olive oil is consistently recognized to be of the highest quality and has received recognition through many global awards for its products.

Managing scarce resources in the Kingdom, especially water is important. In order to conserve resources and maximize the output from the land Nadec uses the best watering methods and scientific techniques to help measure soil humidity in order to preserve nature’s precious resources.

Additionally, compost fertilizer produced by the company is used to improve the yield from the soil and is a key component in ensuring the natural quality of the produce.

The dairy farm and factory located in Haradh is one of the largest in the region and is vertically integrated to ensure the highest standards of quality at every step from the farm to the shop

Today Nadec has seven dairy farms with more than 75,000 Holstein cows producing over 1.3 million litres of milk per day. The farms are equipped with the latest technology and milking parlours to allow for efficient and smooth milking processes whilst ensuring the highest quality of milk.

Dairy processing is a major activity within Nadec, milk from the farms is processed to develop a wide variety of dairy and food products. The factory located in Haradh is equipped with 35 production lines of the latest technology to ensure the highest standards of quality at every step from the farm to the shop.

The factory produces more than 200 variants of a wide range of dairy products including laban, fresh and long life milk, yoghurt, cream, labnah, as well as, over 20 juice varieties and multiple food products including butter and cheese. The products come in different pack formats, sizes and prices to suit different consumer tastes and occasions.

In order to guarantee the highest quality standards, the labs at Nadec are equipped with the latest technology and are managed by nutritional and quality experts who implement the best diagnostic procedures and processes. Over 8,000 tests are performed daily to comply with international quality standards.

As a result, the company has been awarded many national and international certificates for the quality of its products, processes and hygiene standards. Examples include the King’s First Prize for the Ideal Food Processing Plant in the Kingdom; Ceres Organic Food and Farming Certification; and the International ISO 9001 and ISO 22000 amongst other awards.

To ensure our products reach consumers in the best possible condition, Nadec’s investment in its supply chain consists of over 34 distribution centres across the GCC, with over 3,000 sales associates and a fleet of 1,000 refrigerated trucks servicing more than 40,000 shops across the region on a daily basis.

For employees Nadec is constantly evolving and growing, providing a stimulating environment for personal growth and career development. Over 7,000 employees from 35 plus nationalities combine to create an innovative and progressive business dedicated to nourishing lives.

Nadec has deep roots in the culture and commerce of Saudi Arabia and the Gulf countries. Across the region our farms, factories and products have long been a part of the fabric of daily life. Placing family health and well-being at the heart of every endeavour, Nadec is committed to quality excellence and will continue to play an active role in the development of the Kingdom’s human and natural resources.

When did the company become partially-listed? What difference has this made to operations?

Nadec company became a list company in January 1993. The key shareholders are the government through the PIF at 20 per cent and Rajhi family with about 25 per cent.

How many production facilities are there? How big are these and how automated?

Nadec has two major Dairy Plant processing facilities in Haradh. These are state of the art technology both for the Long Life plant and Fresh processing plant. In both units, the processing and the filing lines are completely automated. The downstream with packers and stackers are partially automated.

How many employees does the company have? How skilled are these workers and what role does training play?

The total human capital head count is about 8,000 employees. About 1,300 employees work in the Agri sector, 1,000 employees in the dairy farm, 1,300 in operations and manufacturing, 1,000 in SC, 3,000 in sales and 250 in the head office.

What proportion of the workforce are Saudi? Is this a figure you are looking to increase?

Our Saudization ratio is about 14 per cent and our target is to bring it to 20 per cent in 2020.

Where do you source your milk from? Are you actively involved in the farming side of milk production? How many cows and farmers are involved?

As I explained before, we are fully vertically integrated, all our milk is produced in our own six dairy farms with 75,000 cows, half of which are milking cows.  These farms are the state of the art technology, and the quality of the milk is one of the best in the world with the lowest levels of bacteria per litre.

What is the role of R&D within the business? How successful has the R&D Centre been over the last two years since opening?

R&D is a key part of our strategy for growth. I consider “Innovation” as one of four pillars for our company’s growth and also for building the brand image. Over the last 12 months, we have managed to launch seven new products and reworked on 4 existing recipes as part of our renovation plan.

The seven new products were:  Fruit Yoghurts; flavoured Laban; Butter in tub and foil; Crème caramel; Evaporated Milk; Long Life Cream; and recently Bakery products (Croissant in four variants).

These “innovations” came after extensive testing with consumers to make sure we launch products that will bring healthy nutritional benefits to our consumers.

More products launches are being prepared for the near future and with reach consumers before the end of the year.

Within the last 2-3 years, the two innovations that we are the most proud of in Nadec, are: Ayran (Salty refreshing Laban) where we are leading the industry and now all the competitors are copying us in this product, and Olive Oil, where we produce Organic Virgin olive oil from our 3.5 million olive trees in our farm in Al-Jouf, north of Saudi Arabia at the borders with Jordan.

On top of these innovations, we are revisiting the recipes/formulae for a few of our existing products to make sure they are better or at least equal to our top competitors in each category.

How challenging is the commercial environment in Saudi Arabia? What makes Nadec the leading brand? Who are your main competitors within the region?

The dairy and beverages market in Saudi and GCC in general is very competitive, with many players for each segment of this industry. When I talk about our industry, I include dairy products, juices and cheeses. This a total market of about SR 23 billion in all GCC, where Saudi represents 60 per cent and UAE 20 per cent.

Nadec’s overall position in this market is number two behind Al-Marai with about 12 per cent market share, with higher numbers in KSA and Bahrain, and much lower market share in UAE where there is the highest number of competitors.

Also, if we take it by segment, Nadec is number two in fresh juices in KSA with over 25 per cent market share, and the same for fresh milk where we are number two with about 15 per cent market share. If we look at it by region, we are stronger in the Central region of the Kingdom of Saudi Arabia, with above 15 per cent market share.

What are the main operational challenges each day? How do you overcome these?

The beauty of the dairy business is the freshness of its products. At the same time, that’s the key challenge because for the fresh dairy business the main supplier is a biological one: the cow, and we cannot stop it when we want: “the milk” is flowing day in day out with a certain level of production that we have to package and distribute to our consumer every day with the required quality and quantity.

In other words, the key challenge is to ensure a high quality supply chain for our milk, with a perfect balance between the production from the dairy farm cows and the required customers’ volume to avoid wastage on the shelves.

How much do milk prices fluctuate and how does this impact on the business?

The milk for us in Nadec and for most of our key competitors in KSA (except Sadafco who uses powder milk) is produced in-house, therefore the price or the cost of milk depends on the cost of the feed and the efficiency of the dairy farms which is reflected in the yield per cow. The challenge in 2016 came from the 40 per cent cost increase in diesel which is used for pumping the water for the irrigation of the forage in our farms. It reduced our profit by 65 MSR.

How do you manage quality?

I always tell my team that the first two priorities for the company are safety and quality. We give quality a high importance and put high standards in place with clear policies and procedures in each and every department. For all our operational departments, the standard operating procedures define clearly the specifications for each product, from the recipe to the materials involved, including the monitoring tests and their frequency. Our labs are equipped with state of the art testing equipment to check the quality parameters at each stage of the production and distribution. We have also put in place ISO standards as well as HACCP standards.

How do you manage supply chain (and quality within)?

As explained earlier, we distribute our products through from our Central Supply Chain Platform in Haradh to our 35 owned depots in Saudi and other GCC countries and to about 15 distributors throughout the region.

For the primary distribution, we operate some 180 reefers and for the secondary distribution to the retail some 950 van trucks servicing about 40,000 stores.

About 1,000 employees in our supply chain department make sure that our products are maintained under standards quality during the whole cold chain from the factory to the final consumers, reaching a very high customer service level.

All the key depots in our network are HACCP accredited centres. Our Supply chain teams are also responsible for managing the planning and forecasting allowing us to better manage our inventories and keep them at the lowest levels. To further improve transportation systems and cost we have recently gone live with an IT Transportation Management solution as part of our ERP system.

How big a fleet of vehicles does the company have and are these specialised, with temperature control?

Our van-sale fleet is one of the biggest in KSA with about 950 refrigerated vehicles operating at 5 C to ensure the Cold Chain Management up to the final consumers.

Please give me some examples of how Nadec has improved the bottom line through innovation

We have worked with the different departments to improve the productivity of the teams and generate savings to mitigate the energy cost increase from the government.  Examples from SC where we increased productivity by 11 per cent through re-engineering the routes of our network.

What major investments has Nadec made over the past 12-18 months? What benefits have these brought to the business?

We keep investing in all our capabilities. One of the latest investment examples was to build a full in-house cheese and butter plant with processing and filling lines capable of producing triangle and slice cheese, as well as foil butter.

What are your main aims for the company over the coming 12 months in terms of investment, acquisitions, supply chain, new products, new markets?

Our growth plan to gain market share and expand volume over the next 18 to 24 months is based on 4 strategies:

  • Continue to grow our strong distribution network and improve our presence in the existing stores deploying our fridges and improving our visibility in the stores.
  • Strengthen our brand equity and image: Nadec is a strong brand in the region and we can make it even stronger to attract more consumers and build market share. That’s why we are investing more in marketing over the last 2 years to reinforce our position of “Smile everyday” with Nadec nutritious healthy product.
  • Innovations: we will continue to innovate within our Dairy and Beverage categories and bring new innovations, mainly inspired from our local culture, but also benefiting from other international experiences. We will also introduce food products that are in adjacent categories to the existing ones, to benefit from the synergy.
  • Geographical expansion: we will continue to expand in the region. Oman is our next move as we will introduce our portfolio in cooperation with a strong local distributor. Also, we will reinforce our presence in UAE where we are weaker than other GCC countries. And finally we will continue to explore all the MENA region for all potential opportunities.