Able Partners Abound in Middle Eastern Foodservice, Part 1

Author: Michael Schaefer

Date published: 21 Sep 2009

Finding the right local partner is an especially important factor for foodservice chains operating in the Middle East, particularly the Persian Gulf region, where a number of large, highly-diversified firms are a key part of the foodservice landscape.

The next two articles explore some of the largest, fastest-growing multi-brand/multi-unit operators in the Middle East, with a focus on each firm's key markets and areas of expertise. The first article looks at several of Saudi Arabia's largest and fastest-growing foodservice operators, while also discussing Bahrain's Jawad Group, a dominant player in that island nation. The second article looks at some of the most important firms operating in Kuwait, while also exploring the unique role played by McDonald's franchisees.

Saudi Arabia Home to An Array of Foodservice Giants

The key Saudi market is home to two foodservice giants, Olayan and Savola Group. Both companies have pursued diversification to an almost dizzying degree, with vast holdings up and down the value chain--the Olayan Group is one of the top ten largest Saudi companies, with annual sales exceeding US$4.4 billion, by some estimates, and partnerships with global brands such as Coca-Cola, Nestle, Colgate-Palmolive, Kimberly-Clark, Nabisco, and others. It is the master franchisee for Burger King restaurants in Egypt, Yemen, Lebanon, Jordan, Syria and Iraq, while also operating Burger King outlets in Saudi Arabia and the United Arab Emirates. Savola Group, majority shareholder of Saudi Arabia's popular Herfy chain of burger fast food outlets, also has interests in grocery retailing, packaging, food processing, and edible oils—its Panda chain of supermarkets is one of the largest retail brands in Saudi Arabia, while its meat and poultry processing operations supply both Herfy restaurants and Panda supermarkets. All told, the Savola Group posted sales of US$3.7 billion in 2008.

Standing alongside Savola and Olayan is the fast-expanding Al-Jammaz Group, who through its Specialised Catering Services Co division serves as the master franchisee for Domino's Pizza for the Middle East, North Africa, and Pakistan. Operating more than 100 Domino's Pizza outlets throughout the region, Al-Jammaz shares a similar story to Savola Group, beginning as a small agricultural firm and growing into a highly diversified conglomerate, with holdings in IT, travel, food production, retail, and logistics, in addition to foodservice. Building on its success as Domino's partner in the Middle East, Al-Jammaz recently signed an agreement with Wendy's/Arby's Group to build 135 dual-branded Wendy's and Arby's restaurants in nine countries in the Middle East and North Africa over the next decade, with the first of the dual-branded outlets to open in Saudi Arabia by 2010.

Bahrain's Jawad Group Expands Beyond Home-Market Dominance

Though to some degree lacking the geographic reach of it counterparts in the region, the dominance of Jawad Group in its home market of Bahrain is difficult to overstate—the company operates an impressive stable of foodservice brands in Bahrain and beyond, including global chains such as Burger King, TGI Friday's, Costa Coffee, Papa John's and Quizno's, with outlets in Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the UAE, as well as Afghanistan and India. Within Bahrain, the group is involved in a vast array of business areas, including grocery, furniture, and clothing retail, convenience stores and petrol stations, travel agencies, as well as a wide-ranging sales and distribution network, with Jawad Group serving as official Bahrain distributor for products such as Snapple Iced Tea, Tabasco Pepper Sauce, Weetabix Cereals, and others.

Though the closely-held Jawad Group does not publish sales data, it is undoubtedly one of the largest conglomerates in Bahrain, and a major player in the greater Gulf region overall. As it expands its operations in the larger Middle East, Jawad Group's commanding position in its home market could prove decisive, providing a steady stream of cash to finance new ventures. What's more, the company's leading role across the entire retail value chain in Bahrain has helped to cement relationships with many of the same major operators described here.

Focus vs. Reach

All of the companies discussed in this article offer two crucial qualities for any potential partner: experience and scale. All boast ample experience in foodservice and/or retailing, and all likewise have the resources and the wherewithal to pursue brisk expansion in multiple markets, both within the Middle East and beyond. The real question facing brands looking to enter the Middle East is one of focus—while a highly-diversified conglomerate can bring enormous resources to bear in growing a brand, there is also the issue of effective distribution of those resources among dozens of operating groups. The history of conglomerates within the restaurant industry is a chequered one, yet all of the operators described above have achieved impressive growth during their forays into foodservice. For brands looking to achieve regionwide growth in a short timeframe, the firms profiled here make very tempting partners indeed.