Infant nutrition company signs Persian Gulf joint venture

31-Mar-2010 - Last updated on 01-Apr-2010 at 15:24 GMT

US company Mead Johnson has teamed up with food and beverage company Almarai, based in the Persian Gulf, to target the region’s infant formula nutrition market valued at US$450m.

The 50:50 joint venture deal focuses on the manufacture, marketing and distribution of infant formula and other pediatric nutritional products in the six member countries of the Gulf Cooperation Council: Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.

Pediatric Nutritional Products

A spokesman for Mead Johnson told NutraIngredientsUSA.com: “We see the opportunity to enhance nutritional offerings and increase consumer choice in the region for infant formula and other pediatric nutritional products based on the latest science.”

The size of the market is estimated at US$450m with a 10 percent compound annual growth rate for the next four years, according to ERC Group and the Nielsen.

Steve Golsby, Mead Johnson president and CEO said: "This venture offers us a great entry point into the GCC, a market we had prioritized because of its size and attractive demographics - with strong birth rates, above-average income levels and excellent potential for growth. We see this as a tremendous opportunity to enhance nutritional offerings and increase consumer choice in the region."

A Mead spokesman claimed that his company’s combination of strong brands, manufacturing, supply chain, marketing and sales expertise would be matched by Almarai’s pre-eminent regional food and beverage brand, fresh milk supply and experience of local regulatory guidelines and procedures.

Almarai, which supplies market-leading products in the dairy, juices, and baked goods sectors, is to build a new manufacturing facility for pediatric nutrition products near Riyadh, Saudi Arabia. The new plant, scheduled to open next year will be leased by the joint venture.

Profitable in 2012

Mead reports that the joint venture will have a minimal impact on earnings up until 2011 and will become profitable in 2012.

The company points out that its infant nutrition product Enfamil and Almarai are two of the brands identified by Credit Suisse among being among what it describes as the "27 Great Brands of Tomorrow" that they believe will "significantly outperform the market over the next three to five years, as they build and leverage brand equity to grow in size, scale, and profitability."

Credit analyst, Dave Sekera commented in the Toronto Star: “Currently, multinationals Abbott, Danone, Nestle, and Pfizer hold about two thirds of the market, and no one competitor has a clear leading position.”