Nasser A. Abanmi, Group CEO of ARASCO, talks about the organization’s role in the country’s food security.
2023 marks the 40th anniversary of ARASCO. Can you provide an overview of the company?
ARASCO was established by its visionary founders in 1983. From its humble beginnings of serving the wheat production sector in Saudi Arabia, ARASCO has grown into an over SAR4 billion company with over 2,500 passionate employees and operates an international farm-to-fork value chain. Today, ARASCO is a leader in serving the food security sector of Saudi Arabia through its portfolio of six strategic business units that offer animal nutrition solutions for livestock, poultry, beef and dairy, aquaculture, etc.; animal protein products like poultry meat, red meat, and eggs; corn-based food ingredients and alternative sweetener solutions through ARASCO’s joint venture with Cargill; agricultural and veterinary solutions; food safety and laboratory solutions through ARASCO’s joint venture with Mérieux NutriSciences; and supply chain, grain trading, and logistics solutions. ARASCO runs its operations through facilities in Riyadh, Kharj, and Dammam. Today, ARASCO ranks among the 100-largest companies in Saudi Arabia and one of the major food companies in the GCC region. As we look toward the future, we remain committed to our vision of supporting sustainable food security for not only the Kingdom of Saudi Arabia but also for the Middle East region.
What are the expectations for the new strategy currently underpinning ARASCO’s growth?
During 2020, we realized the need to strengthen key building blocks for our organization that would help us accelerate our growth and strategy realization. With that in mind, we launched the ARASCO Transformation Program with seven critical projects focusing on various aspects of the organization. These projects included human resources transformation, customer experience enrichment, corporate governance, procurement synergy, technology enablement, operational excellence, and value consciousness. These projects were led by our senior executives and designed to rally the entire organization toward a common mission and purpose. This program resulted in significant structural changes to the organization. We also enhanced our operating model to introduce new functions and capabilities. For instance, we established the strategy and growth function to drive our strategic agenda and focus. We established the shared services role centralizing all procurement, information technology, project management, and facility management functions to leverage economies of scale advantage. On the business front, in late 2021 we launched our ambitious “FOODS 600” project. This project was undertaken to deliver a quantum leap in the poultry production of our Entaj brand from 240,000 birds per day to over 600,000 birds per day. On June 21, 2023, His Excellency, the Minister for Environment, Water, and Agriculture (MEWA), along with the deputy minister, other government officials, and our shareholders, inaugurated the new facilities for the FOODS 600 project. The facilities have undergone commissioning and will progressively ramp up to 600,000 birds per day in the coming 18 months. We are very proud of this project, especially as it serves in realizing Vision 2030 and the latest MEWA strategy of achieving 100% self-sufficiency for poultry meat by 2030. Along with these organic growth initiatives, we are mindful of the consolidating poultry market and proactively looking toward inorganic growth opportunities, too. As part of our aggressive and ambitious growth plans for the coming four to six years, we aim to position ourselves among the top three leading poultry producers in the Kingdom. Driven by the Kingdom’s vision of achieving self-sufficiency in the sector by 2030, the Saudi Arabian poultry market has seen rapid growth and investments to the tune of SAR13 billion. This, along with several other governmental support schemes like reducing poultry imports, supporting financing schemes up to 70% of capital costs for projects with modern technology in the poultry sector, as well as facilities for granting land for poultry projects, makes us confident that the Kingdom will achieve its targets ahead of schedule. At ARASCO too, we are planning to grow our poultry capacity to 1.2 million birds per day in the coming years. In the animal nutrition sector, too, ARASCO FEED is expanding its product portfolio by introducing products across various protein contents, products specialized for different species, enhanced barley products, as well as long fiber solutions. All these efforts from ARASCO are aligned with MEWA’s drive and the Kingdom’s vision of improving livestock and poultry farming efficiencies and increasing the utilization of compound feed as an animal nutrition solution.
Supply chain management plays a vital role in agriculture. How does ARASCO ensure a robust and efficient supply chain to meet market needs?
ARASCO, in collaboration with its partners, operates an international supply chain that is the backbone of its operations and brings agricultural commodities like corn, soybean meal, barley, and other animal feed raw materials from international ports of origin to ARASCO’s technologically advanced material management and port facilities at Dammam, Saudi Arabia. From there the raw materials are moved to ARASCO’s feed manufacturing locations and then finished products are moved across Saudi Arabia through a diverse mix of land transportation options including roadways and railways. A key feature of ARASCO’s capabilities is that this entire value chain does not involve any human handling of material, assuring the highest levels of biosecurity and traceability. Similarly, for ARASCO’s poultry business, too, we operate a value chain from sourcing eggs to developing chicks, transporting chicks to our bio-secure farms, transporting live birds to our processing facilities, and managing cold chain operations to deliver fresh as well as frozen Entaj poultry products across Saudi Arabia. Leveraging the strengths of our supply chain networks as well as our long-standing relationship with international agricultural commodity trading giants like ADM, Bungi, and Cargill, we launched the Grain Trading Unit (GTU) in 2022 as part of our newly reconfigured group of ARASCO Solutions. GTU’s focus is to bring agricultural commodities into the Kingdom for other potential buyers and serve the overall animal nutrition industry as well as other consumers of agricultural commodities. There are a few key partnerships that position ARASCO uniquely in leveraging the full strength of its value chain. The first one is ARASCO’s joint venture with Bahri resulting in Bahri Dry Bulk (BDB). Through BDB, ARASCO owns and operates five Panamax vessels with a capacity of about 80,000 metric tons of grain each. We plan to further expand this fleet to twelve vessels in the coming years. As part of another strategic alliance, we have signed a 25-year agreement with Mawani for the use of our facilities at the King Abdulaziz Port in Dammam. Along with our trucking operations, we also operate logistics through railways and have recently renewed a 25-year agreement with Saudi Arabia Railways (SAR) for the transportation of raw materials—primarily grains—from our port facilities in Dammam to feed mills in Kharj. We are continuing to improve our internal processes with business excellence and capability-building initiatives focusing on integrated business planning, commodity risk management, network optimization, asset management, and so on.
Does the company aim to position itself as an international case study of efficiency when it comes to food security?
We continue to strive to enhance our operational efficiencies on a daily basis and deliver the best value to our customers. Since establishing our first feed mill in the late 1980s, we have expanded our feed mill capacity to 4.6 million tons per year through both capacity expansion projects as well as operational excellence initiatives. This has given ARASCO the largest feed mill capacity in the Kingdom. Our state-of-the-art feed mills use advanced linear programming tools to optimize the cost of feed production and maximize its nutritional content while considering variables like the cost and inventory levels of raw materials like corn, soybean meal, barley, etc. We leverage our strong relationships with our partners to bring valuable international know-how into the Kingdom. One great example of this is ARASCO’s joint venture with Cargill – MEFSCO. MEFSCO has emerged as a leader in corn-based food ingredients in the Kingdom and has a strong export business. During the period of high corn prices in 2021 and 2022, MEFSCO’s value creation initiatives improved the value generated through our by-products and in turn increased the overall margins that could be generated over each metric ton of corn. This improved MEFSCO’s bottom-line performance despite the corn price headwinds. We remain committed to leveraging our vast experience and many national and international partnerships to generate the best value for our customers while contributing to the Kingdom’s goals of always providing reliable and sustainable access to food for everyone.
What is your main target for this year?
We have several critical customer-value-driven focus areas for the remainder of 2023. Among them, the two critical ones include our preparation to take our FOODS business for an IPO in 2024, for which we are working with the Saudi National Bank as our financial advisor. We plan to bring our prospectus by the end of 2023 and enter the market by the first quarter of 2024. Another critical focus area comes from our partnership with NEOM and Cargill to explore how we can accelerate the growth of sustainable aquaculture and bring in international best practices to rapidly scale up this sector and meet the rising domestic demands. This partnership will also look into the R&D of more sustainable aquaculture feed sources.