American University of Madaba

Subject : Agricultural marketing – Milk production – Almarai-Teeba

Subject : Agricultural Marketing

Supervisor : Dr.Luai Jraisat

Done by : Amanda Haddad , Lana Qaqish , Leen Elayyan , Sarah Abu jabber

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Table Of Content :

Summary executive

Chapter 1

1.1 Introduction …………………………………………………………………………. Page 5

Chapter 2

2.0 Literature Review

2.1 Agricultural supply chain and value chain......................................................................Page 6

2.2 Agricultural Development …………………………………………………………..... Page 7

2.3 Agricultural Sector in Jordan…………………………………………………………...Page 7

2.4 Problems Of Agricultural Marketing ...………………………………………………...Page 8

2.5 Regulations Of Agricultural ……………………………………………………………Page 9

Chapter 3

3.1 The Farm Dairy Company …………………………………………………………… Page 10

3.2 Almarai-Teeba………….…………………………………………………………….. Page 10

3.3 Milk Production ……………………………………………………………………… Page 11

3.4 Competitors Of Dairy Products ……………………………………………………… Page 12

3.5 Methodology …………………………………………………………………………..Page 13

Chapter 4

Interview discussion………………………………………………………………………..Page 15

Chapter 5

Conclusion………………………………………………………………………………… Page 16

Chapter 6

References ……………………………………………………………………………… Page 17

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Action Name Time Research Title Everyone

Week one

Introduction Elayyan-Haddad

Week one

Literature Review Agricultural

marketingElayyan Week 2

Agricultural supply chain

Elayyan Week 2

Agricultural development

Haddad Week 2

Agricultural sector in jordan

Abu jaber Week 2

Problems of Agricultural marketing

Elayyan-abu jaber Week 2

Regulation of Agricultural marketing

Elayyan-abu jaber Week 2

The farm dairy company

Qaqish-abu jaber Week 3

Al-Marai-teeba Everyone Week 3 Milk production Qaqish- Abujaber Week 3 Competitors of dairy

productsQaqish- haddad Week 3

Methodology

Elayyan Week 4

Tables and figures Elayyan-QaqishWeek 5

Results Discussion

Interview Qaqish Week 6

Conclusion Haddad Week 7

References Everyone Week 7

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Summary Executive:

This research paper will discuss the agricultural marketing definition, and setor in Jordan, the problems and regulations in which we will study the background of Agricultural marketing in Jordan and how it develops the dairy products and investments of dairy products in Jordan. Furthermore, secondary data will be used to figure out other opinions by different authors about agricultural marketing and milk production about Al-marai and Teeba company and its competitors in Jordan , and so the results of our study that will be proven later on. Also, this study will help us to find the best methods and process about using supply chain method in producing milk and dairy products .On the other hand, an interview will be conducted with the Marketing Manager in Al-marai-teeba company in order to find out whether their image as a company improved after investing in Jordan as teeba company, and their perception about competitors, and the method they are using and the regulations about selling fresh milk. Charts and figures will be used to explain the results after conducting the interview with the Marketing Manager and Evaluation based on our research.

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Chapter 1

1.1 Introduction:

The Agricultural Marketing Program provides support for farm, food, and forestry enterprises through professional assistance in marketing and business development plans , the agricultural sector has become one of the most important components of economy as the increasing trend of agricultural production has brought new challenges in term of finding market for the surplus, there is also a need to respond the challenges and opportunities that the global market offer in the opened trade , and so to benefit the farming community from the new global market access opportunities , the internal agricultural marketing system needs to be integrated and strengthen and agricultural and agricultural marketing need to be re-oriented to respond to the market need and consumer preferences .

Marketing: The science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services.” (Dr.philip Kotler)

Farms marketing : Activates related to the marketing and production of agricultural products produced by an organization or individual farmer, such activates in the process of farm’s marketing include packaging selection of brands name , promotional strategies , price policies , marketing channels and other policies .

Agricultural marketing: Agricultural marketing can be defined as the performance of all business activities included in the flow of products from the beginning of agricultural production until they are in the hands of consumers “from the farm to the fork.” (Robert G. Roy).

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Chapter 2

2.1 Agricultural marketing supply chain and value chain:

The concept of value chain is derived from porter (1980) in the analysis of competitive advantage for industrial firms, so according to porter ‘’ each firm is a collection of activities that are performed to design, produce, market, deliver, and support its product. ‘’ the value chain is thus a representation of these value activities , based on a firm’s cost structure , and highlights potential areas of competitive advantage .

Moreover, porter identifies five competitive advantages:

• Entry of new competitors

• Threats of substitutes

• Bargaining power of buyer

• Bargaining of supplier

• Rivalry in existing competition

So now, where does supply chain fits in this?

Firstly , a supply chain represents the full range of activities involved in the production of a commodity ( production , procurement , finance , logistics and marketing ) and process that integrate chain participation ( extension , information services , certification , organization ) , however , modern supply chains involve the flows of material , services , and information among chai participant .

At the end of this stage we can say that the value chain in agricultural describes the range of activities and set of actors that bring agricultural product from production in the field to final consumption , wherein at each stage value is added to the product .

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2.2 Agricultural Development

Although the agricultural sector's share of GNP declined in comparison with other sectors of the economy, farming remained economically important and production grew in absolute terms. Between 1975 and 1985, total production of cereals and beans rose by almost 150 percent, and production of vegetables rose by more than 200 percent, almost all of the increase occurring between 1975 and 1980. Production of certain cash export crops, such as olives, tobacco, and fruit, more than quadrupled. Because farming had remained labor-intensive, by one estimate about 20 percent to 30 percent of the male work force continued to depend on farming for its livelihood.

Even with increased production, the failure of agriculture to keep pace with the growth of the rest of the economy, however, resulted in an insufficient domestic food supply. Jordan thus needed to import such staples as cereals, grains, and meat. Wheat imports averaged about 350,000 tons (12.9 million bushels) per year, ten to twenty times the amount produced domestically. Red meat imports cost more than JD30 million per year, and onion and potato imports cost between JD3 million and JD4 million per year. Between 1982 and 1985, the total food import bill averaged about JD180 million per year, accounting for more than 15 percent of total imports during the period. At the same time, cash crop exports—for example, the export of 7,000 metric tons of food to Western Europe in 1988—generated about JD40 million per year, yielding a net food deficit of JD140 million. One emerging problem in the late 1980s was the erosion of Jordan's traditional agricultural export market. The wealthy oil exporting states of the Arabian Peninsula, concerned about their "food security," were starting to replace imports from Jordan with food produced domestically at costs far higher than world market prices, using expensive desalinated water.

2.3 The agricultural sector in Jordan:

Jordan's natural resources for agricultural production are very limited as Only about 5% of the land mass is considered arable, and Jordan is among the world's most water-deficit countries. The challenge for the Government is, therefore, to promote sustainable use of natural resources. agriculture in Jordan is now virtually free of all controls and restrictions and all direct subsidies have been removed. Credit to agriculture at low interest rates is now the single most important channel for GOJ subsidies to agriculture.

‘’ Jordan’s fruit and vegetable exports increased 12% year-on-year in 2014, according to official data, with the country exporting 888,000 tons of agricultural produce in 2014, compared to 790,000 tons in 2013. A total of 85% of agricultural exports were vegetables, 50% of which were tomatoes. According to a spokesperson at the agriculture ministry, produce exports are projected to increase further in 2015 to reach 1m tons. Exports of agricultural goods, food and beverages for the first three quarters of 2014 were up 9.8% to JD793.4m ($1.1bn), ahead of overall export growth of 8.6%, according to the Department of Statistics (DoS).. However, exporting farmers

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have faced a number of challenges in recent years, most notably the conflict in Syria, which has seen Jordanian agricultural exports to the country fall by around 25% as well as disrupting overland exports to other markets.

New restrictions of agricultural sector :

In order to boost foreign sales, the authorities are seeking new markets for Jordanian produce, much of which goes to Arab countries at present with Syria and the Gulf states consuming around 80% of fruit and vegetable exports. Over the past year, Jordan has targeted Russia as a potential market by seeking an exception from high import tariffs. Negotiations came to fruition in November, when the two countries inked a deal that will see Russia reduce its import duties on produce from the Kingdom by 25% in the summer and to exempt it entirely from such duties in the winter. At the end of December, Agriculture Minister Akef Zu’bi noted that exports to Iraq had improved following negotiations with the Iraqi government, which recently agreed to reduce the fees collected from each Jordanian truck entering Iraq from $2,200 to $700. Agricultural companies can also benefit from a World Bank-funded programmer implemented by the Central Bank of Jordan (CBJ) at a cost of $900m. Under the programmer, the central bank will cooperate with commercial banks in providing loans to small and medium sized companies at preferential interest rates and payback periods. Agricultural companies were previously excluded from the programmer ‘’ (Oxford Business Group 22, may 2015).

2.4 PROBLEMS OF AGRICULTURAL MARKETING :

• Lack of Transportation Facility

It is the main obstacle in the way of efficient marketing. The rural areas are not linked with the market by roads. A lot of agricultural product is wasted due to transport problem.

• Poor Quality of Product

Farmer is not using the improved seeds and fertilizers so quality of production is very poor and its prices are low in the market.

• Role of Middleman

The middleman also takes a big share of farmer's income without doing anything. A poor farmer borrows the money from them and sells his product at lower rates.

• Problems of Produce Collection

The collection of produce from small farmers is very expensive and a difficult process. It is a great problem for the efficient marketing.

• Lack of Storage Facility

The storage facilities are required by the producers as well as by the government. The farmers need storage to sell their product at a suitable time. The government needs stores for keeping

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reserve stocks. Due to lack of storage facilities a lot of product is damaged on railway stations and in open air.

• Weight and Measures

In various parts of weight and measures are not same. So a farmer suffers a loss at the time of buying selling of his product.

2.5 Regulation Of Agricultural Marketing:

• To prevent exploitation of farmers by helping them overcome the handicaps in the marketing of their produce.

• To make the marketing system effective and efficient so that farmers may get remunerative prices for their produce and the goods are made available to consumers at reasonable cost.

• To provide incentive prices to farmers for inducing them to increase the production both in terms of quantity and quality.

• To promote an orderly marketing of agricultural produce by improving the infrastructure facilities.

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Chapter 3

3.1 The farm diary company :

The Farm Dairy Company was established in 1994. The company is specialized in manufacturing different kinds of cheese, yogurt, Labaneh, sour milk (shanina) and other milk products. The farm Dairy Company started out manufacturing in bulk for hotels, restaurants and such; and now grew to having our line of packaged milk products sold throughout the Middle East. You can find and taste our products throughout the Kingdom; in most five star hotels and restaurants, most malls and hypermarkets as well as local mini markets, and in governmental establishments such as the MCE, the CSCC and the Royal Hashemite Palaces.

3.2 AlMarai And Teeba :

Almarai success story begins in 1977. It was around then that HH Prince Sultan bin Mohammed bin Saudi Al Kabeer, recognized an opportunity to transform Saudi Arabia’s traditional dairy farming industry to meet the needs of a rapidly expanding domestic market. Under his guidance and patronage, numerous agricultural projects were launched to achieve his vision. Starting with fresh milk and laban processing, the scale and scope of these initiatives soon expanded to incorporate modern dairy farms and state-of-the-art processing plants. Almarai understands the importance you place on only giving your family premium quality dairy products. That’s why they set the highest standards possible to put great tasting milk on your table every day. Nurture your family’s health and vitality by making Almarai Fresh Milk part of your daily routine. After all, milk is one of nature’s healthiest, most wholesome foods.

In 2008, Al Marai Company one of Prince Al Waleed Bin Talal Saudi companies signed an agreement of committed with Teeba Investment for Developed Food Processing Company (Jordanian company that works in the production and marketing of dairy products) to purchase of 75% of the Jordanian company’s shares,this step was taken to achieve the company’s vision in its geographic expansion in the neighbor markets. ( khaberni 2008 ) .

Later then in 2013 Al Marai signed an agreement with Teeba Investment for Developed Food Processing Company PSC to increase its stake from 75% to 100%. As this achievement came through the purchase of the minority stake of 25% and owned by Safa a total of 12 million Jordanian dinars ($ 17 million). (alquds 2013 ).

3.3 Milk Production :

The volume of milk and dairy products consumed in the GCC countries stood at 2,182 million liters a year. Saudi Arabia`s market share hovers at 65%, according to industry experts. The kingdom`s producers export between 20% and 30% of the dairy production to other GCC countries. The milk industry comprises fresh milk, powder milk and recombined milk – produced from milk powder. Fresh milk has short shelf-life and sold within several days of production. Powder milk is a globally traded commodity due to its ease of mobility and the long shelf-life of one year. It can be sold in powdered form or as feedstock for other dairy products or

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as a long life milk. The Price of milk powder surged by 170% in the past five years. Recombined milk is produced from milk powder with shelf-life of up to six months. It is worthwhile mentioning that most of the GCC production is confined to fresh milk and long life milk(1) which is estimated to be 1,344 million liters annually. Milk consumption is growing at an annual rate of 6% in Saudi Arabia. Per capita consumption is 28.9 liters, which is relatively low compared to the global average of 120 liters. The Kingdom consumes 844 million liters annually; long-life milk and powder milk represent 38% and 28% of total consumption, respectively. Fresh milk consumption stands at 34% and showed annual growth of 8.8%, since 2007, outpacing long life milk, which grew by 3.4% due to the improvement of cooling and distribution channels. Milk consumption in general is expected to increase annually by 4.9% until 2016 while fresh milk is expected to grow by 5.6%. The fresh milk market is dominated by Al Marai with 47% market share followed by Al Safi Danone with 22%. On the other hand, Sadafco has the lion`s market share of 47% in the long life milk while Al Marai has 19% of the sector`s aggregate sales.

3.4 Competitors and almarai growth :

As shown in the graph above that Al Marai Company is not affected by the surrounding competitors since its sales is growing throughout the year which leads to an increase in its profits due to its innovative way in developing its quality, these are some of Al Marai competitors. Al Marai was smart that the food consumption in in general has increased at a rapid pace over the years with the strong growth in the population. Rapid urbanization and improvement in living standards is also fueling food consumption in countries. The consumer preferences are also shifting, increasingly towards prepared and packaged food given the changing and busy lifestyles.therefore, it has expanded its line product by producing Bakery, Poultry and other sales. We can see that an increase has pccured happened between 2005 - 2014 in its overall business, with increasing its product line it has also increased its sales by around 587% which lead to an increase in its net income

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eventually. The management is confident of maintaining its topline growth rate in 2016. The company also expects to achieve positive cash flow from the poultry segment in 2015. Almarai is investing to expand its distribution network. We believe the company’s current stock price reflects its growth potential.

Since its establishment in 2004, Almarai-Teeba Investment for Developed Food Processing Company (Teeba Investment) steadily grew from a modest family business aiming to deliver quality dairy products to the Jordanian market, into one of the three largest manufacturers in its industry. In record time, the Company registered remarkable growth and surpassed all expectations. Teeba Investment's product portfolio now encompasses a diverse range of dairy, cheese, juice and confectionary items, positioning it as an undisputed market leader.

The growth continued, and Almarai-Teeba Investment’s advanced international manufacturing standards and premium quality products attracted two of the largest regional and global companies in the industry; Almarai and PepsiCo. Recognizing a lucrative investment opportunity, Almarai and PepsiCo acquired a majority stake in Teeba Investment and registered it under their joint venture the International Dairy and Juice Company (IDJ) in 2009, after which they acquired the remaining shares in 2013, positioning Teeba Investment as a wholly-owned subsidiary under IDJ.

Nowadays Almarai-Teeba brand has become synonymous with healthy and great-tasting goods that are found in every household; a proud achievement that drives us to continue to supply the market with our top quality products.

3.5 Methodology :

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This research is basically about Milk Production of ALMARAI-TEEBA company therefore, we will be using an interview sample with one of ALMARAI- TEEBA managers , using open‐ended questions (qualitative) rather than closed‐ended questions (quantitative) while mixed methods research is an approach involving the use of qualitative and quantitative approaches, and the mixing of both approaches in a study therefore quantitative and qualitative research will be used as well as exploratory and descriptive to collect the data needed to complete the study, as the quantitative data is collected through interview face to face method since they are more suitable for collecting detailed information for producing , packaging and the whole supply chain and value chain and their logistics method through producing level in Amman, Jordan and so Saudi Arabia to answer it and state their opinion about the agricultural sector specially milk production in Amman and to analyze their buying power of agricultural products . The time border that is going to take us to finish this research will be about 3 to 4 weeks, up to 2 days for the research proposal, 1 day for the interview , also about 5 days to gather the information and interpret the data into knowledgeable information in order to finalize the results. Finally, one week to present the research.

Chapter 4

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Interview discussion

This Research involved the use of interview in order to understand company’s perceptions of the implementation of Teeba AL Marai; therefore, our group had a visit to Al Marai factory, where we interviewed the Manager of almarai factory.

Our discussion started with him about The Agricultural Marketing Program, and he told us that it provides support for farm, food, and forestry enterprises through professional assistance in marketing and business development plans. He informed us that from the marketing perspective it is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit.

Then we start talking about the agricultural sector in Jordan, He informed us that Jordan's natural resources for agricultural production are very limited as Only about 5% of the land mass is considered arable, and Jordan is among the world's most water-deficit countries and that he challenge for the Government is, therefore, to promote sustainable use of natural resources. Agriculture in Jordan is now virtually free of all controls and restrictions and all direct subsidies have been removed.

Moreover, we asked him about Al Marai, He told us the story of it that it begins in 1977 and Almarai understands the importance that if you place on only giving your family premium quality dairy products. That’s why they set the highest standards possible to put great tasting milk on your table every day. Nurture your family’s health and vitality by making Almarai Fresh Milk part of your daily routine.

Furthermore, we had a discussion about how Al Marai did joined Teeba. He told us In 2013 Al Marai signed an agreement with Teeba Investment for Developed Food Processing Company PSC to increase its stake from 75% to 100%. As this achievement came through the purchase of the minority stake of 25% and owned by Safa a total of 12 million Jordanian dinars.

Also we had a discussion about the Farm Dairy Company he told us it was established in 1994. The company is specialized in manufacturing different kinds of cheese, yogurt, Labaneh, shanina and other milk products. Then we asked him if they sell in bulk products he answered us that the farm Dairy Company started out manufacturing in bulk for hotels, restaurants and such; and now they grew to having a line of packaged milk products sold throughout the Middle East.

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Our last question was for him about the upcoming plans they are expecting to do, He said that the Growth of Almarai-Teeba Investment for Developed Food Processing Company steadily grew from a modest family business aiming to deliver quality dairy products to the Jordanian market, into one of the three largest manufacturers in its industry. And In record time, the Company registered remarkable growth and surpassed all expectations.

The growth continued, and Almarai-Teeba Investment’s advanced international manufacturing standards and premium quality products attracted two of the largest regional and global companies in the industry. Nowadays Almarai-Teeba brand has become synonymous with healthy and great-tasting goods that are found in every household; a proud achievement that drives us to continue to supply the market with our top quality products.

Finally, we thanked him for the time he gave us in the interview and wished him the best luck for the company to grow more and more.

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Chapter 5

Conclusion

At the end , we experienced a new thing in this research , as from the proposal to the agricultural marketing , the agricultural sector in Jordan , and the supply chain , the process of doing the whole agricultural agreements from the farms till the end customer .

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Chapter 6

References :

http://www.teeba.jo/en/news/teeba-investment-launches-almarai-yoghurt-jordan

http://inform.gov.jo/en-us/By-Date/Report-Details/ArticleId/63/smid/420/ArticleCategory/216/Assessment-of-the-Agricultural-Sector-in-Jordan

http://www.fao.org/ag/agp/agpc/doc/counprof/jordan/jordan.htm

http://www.ifad.org/evaluation/public_html/eksyst/doc/prj/region/pn/jordan/r392jo.htm

http://www.marketing-schools.org/types-of-marketing/agricultural-marketing.html

http://www.fao.org/ag/ags/agricultural-marketing-linkages/en/

http://www.fao.org/docrep/004/w3240e/W3240E01.htm

http://www.slideshare.net/anujtaneja1/almarai-final-report

http://www.food-business-review.com/companies/almarai_company

https://www.google.jo/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjn28Lz15rKAhXGuRoKHSFxDaEQFggdMAA&url=http%3A%2F%2Fwww.almarai.com%2Fen%2Finvestors&usg=AFQjCNHZMIMb4Ot-ArMDo5Ig1PgYBM5_5Q

http://www.marketstoday.net/companies/almarai-company/Comparison/40/en/

http://www.bankalbilad.com/SiteAssets/Pages/News/-%D8%A7%D9%84%D8%A8%D9%84%D8%A7%D8%AF-%D8%A7%D9%84%D9%85%D8%A7%D9%84%D9%8A%D8%A9-%D8%AA%D8%B5%D8%AF%D8%B1-%D8%AA%D9%82%D8%B1%D9%8A%D8%B1-%D9%8A%D8%AD%D8%AA%D9%88%D9%8A-%D8%B9%D9%84%D9%89-%D8%AA%D8%BA%D8%B7%D9%8A%D8%A9-%D8%AA%D9%81%D8%B5%D9%8A%D9%84%D9%8A%D8%A9-%D8%B9%D9%86-%D8%B4%D8%B1%D9%83%D8%A9-%D8%A7%D9%84%D9%85%D8%B1%D8%A7%D8%B9%D9%8A/Almarai-Coverage.pdf

https://www.almarai.com/wp-content/uploads/2015/06/Almarai-Annual-Report_EN.pdf

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