Investment versus instability

Investment remains strong in the GCC's FMCG sector. But Kraft's decision to establish a US $40 million plant in Bahrain, and investments from NTDE, Al Tayer Group and other companies, is in marked contrast to the situation in Lebanon, where the ongoing war is crippling the country's FMCG sector.

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By  Roger Field Published  August 6, 2006

|~||~||~|The past month has brought a fresh crop of FMCG companies announcing big investments in the region, which is likely to be good news for local producers, as well as retailers who stand to gain from improved supply chains. Kraft Foods’ proposed US $40 million plant for Bahrain will no doubt have a significant knock-on effect on the local economy. Products such as cheese and powdered beverages will be produced at the plant, and much of the production process will involve ingredients being sourced from local suppliers, rather than companies based in Australia and the USA. Australian baker Brumby’s is another company with its eye on the Middle East food market. Brumby’s, a well-established brand in its home country, is looking at Bahrain, along with Dubai and Doha, as its initial markets. Saudi Arabian company Aujan Industries is also pressing ahead with significant investments in its brands, and geographical expansion into Iran. In the non-food FMCG sector, Dubai-based Al Tayer Group has acquired the GCC franchise for Missha, a cosmetics retail chain. It plans to open 15 stores in the region by 2007. This level of investment in the FMCG industry is a far cry from the situation in Lebanon, where many companies are seeing years of work and investment decimated amid the ongoing crisis. Two of the region’s best known FMCG companies, distributor Transmed, and hygienic paper producer Fine, are already counting the cost of the destruction of their Lebanon-based operations. While both companies admit they were fortunate not to lose any members of staff, the damage to their business in the Levant is significant. Fine, which was recently awarded Superbrands status, estimates that losses could amount to US $9 million. Meanwhile, Transmed in Jordan, which operates separately from its Lebanon branch, is also reeling from the crisis. The company relied on Lebanese FMCG producers for about 40% of its stocks. It has received nothing from them since the crisis started, and estimates that it could lose about US $700,000 a month. This also indicates how the war in Lebanon could affect the wider region, particularly distributors who are – like Transmed Jordan - in contracts with Lebanese suppliers. The full impact of the crisis on the FMCG sector, both in Lebanon and the wider region, will take some time to assess. While losses caused by dispruptions to production and sales may be simple enough to calculate, damage to confidence – which has helped bring in so much foreign investment in recent years – will be far more difficult to estimate. But of course, the cost brought to the FMCG sector pails in comparison with the human suffering in Lebanon, and this is something that everyone involved in the sector must remember. Roger Field, Editor. E-mail: ||**||

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