EYE ON EMERGING MARKETS
Activia and ISIS: Al Safi Danone lays out dairy ambition in conflict-ridden Iraq
Logistics at Al Safi Danone Iraq - established in 2012 by the Al Faisaliah Group, Al Yasra, and Al Safi Danone, a Saudi Arabian joint venture between Danone and Al Faisaliah - have been “affected over the last year by the problems," Samer Al-Qaissi, the company's supply chain and HR director, told DairyReporter.com.
Around 70% of Al Safi Danone Iraq sales come from Baghdad - 225 miles south of Al Safi Danone Iraq’s plant in Erbil in the Kurdish region of Northern Iraq.
Its location means that incoming deliveries, including bottles from Saudi Arabia and Turkey, and Activia and Al Safi Danone products en route to the Iraqi capital must pass through an area littered with Jihadi militants.
"It's on and off," said Al-Qaissi. "But we're not stopping our trucks. We've just had to divert them to avoid problems."
"If's not affecting the business, but logistics have been a problem."
Impacts moral, not business
Erbil, the capital of the semi-autonomous Kurdistan region, remains largely unaffected by the conflict.
Despite this, Erbil-based Al Safi Danone Iraq has taken some precautions.
"We have private security and Danone security here," said Al-Qaissi. "The message we've had from security is to be careful for the next ten days."
"We've been on code yellow for some years. It's not orange or red, thank God. We just avoid gatherings and big events."
"What happens happens. It has an impact on moral, but it doesn't affect the business."
Al-Qaissi acknowledged, however, that Al Safi Danone Iraq's association with the West and Saudi Arabia could make it a target.
"Some people know Danone as a French company. Some people know Al Safi Danone as a Saudi Arabian company. Saudi Arabia has issues in Iraq, so does France," he said.
"But a lot don't know the company at all; they just know that Activia is a good product."
"Crucial step forward"
The International Finance Corporation (IFC), a member of the World Bank Group, recently announced plans to invest up to US$18m in Al Safi Danone Iraq. It told DairyReporter.com the current instability in Iraq gave it more reason that ever to invest.
"IFC works with our clients to help them overcome these challenges, given IFC’s worldwide experience in working in fragile and conflict-affected environments,” said an IFC spokesperson.
The Sharia-compliant US$18m loan will finance the addition of a third production line at Al Safi Danone Iraq's plant in Erbil, which currently produces Activia drinkable and spoonable yogurt and Al Safi Danone brand laban.
Cheese and UHT milk, respectively imported from Hungary and Turkey, are also marketed in Iraq under the Al Safi Danone brand.
With IFC money behind it, Al Safi Danone Iraq can become Iraq's largest dairy manufacturer, said Al-Qaissi.
“Most dairies in Iraq import, not manufacture,” he said. “If you look at Activia, there are no other products like it manufactured in Iraq. With laban, there is a huge market, but most of it is imported, not manufactured in Iraq.”
Asked if Al Safi Danone Iraq could some day look beyond its borders, IFC said: "Turning any country from an importer to an exporter requires a substantial across all aspects of the value chain - from farm level inputs to cold storage, sales and distribution."
"The initial aim for this investment is a bit more humble than that. Still, establishing IFC's presence in this segment in Iraq is without a doubt a crucial step forward."
