Dubai: Alan Smith wants to know just about everything he can about snacking. No to to savour what’s out there, but to make a business case for it.
Because as CEO of the Abu Dhabi based food company Agthia, Smith knows that snacking habits will shape the company’s future. And provide some lip-smacking profit margins while at it.
“Absolutely, snacking is the fastest growing food category globally – whether it as a replacement for meals or for convenience eating,” said Smith. “But even in the snacking space, COVID-19 has reshaped tastes, with consumers becoming much more conscious of nutritional profiles of what they are eating. As a business, we need to be aware of all that.”
Agthia, which reported net revenues of Dh2.1 billion for the first nine months of 2021, has set a goal of its snacking interests making up 75 per cent of its overall top-line numbers in the near future. It is currently at around the 60 per cent mark.
“It’s a way to get into strong branded consumer products, preferably with a strong regional presence,” said the CEO. “That’s the way we see value being created for the business in the future.”
Agthia built its foundation around its ‘Al Ain’ bottled water and dairy interests and agri-commodities such as flour and animal feed. In these 12 months, the Abu Dhabi company has chased “inorganic growth” by buying out solid F&B brands in the UAE, Jordan and Kuwait. It has just got the regulatory go-ahead for a fifth such deal, which is to acquire BMB Group, a maker of confectionery and health food.
Agthia has a dedicated M&A that remains on the lookout for more such deals. Clearly, the intent is to grow through “inorganic” ways and the way to do is acquire food companies or brands that can help Agthia with “geographical expansion and through integration will grow faster than the original business did,” said Smith.
The earlier buys have already proved healthy on net margins, improving from 5.8 per cent to 6.4 per cent. In the case of Al Foah, the UAE dates processing company and one of the biggest names in its category, its net profit has shot up from Dh11 million to Dh31 million even as revenues remained flat.
“Those higher margins from the acquired businesses have also offset the increased costs, whether of materials or on the imports,” said Smith. “Higher costs are a challenge, but we are facing them down.
Get into farming?
Given the focus the UAE authorities have been placing on food security, will Agthia consider getting into farming on its own? That is, have direct agri interests as opposed to just being a food processing behemoth?
Smith does not see taking that route – “Farming is not in our DNA – we are more in the consumer brands space. That’s where we will remain.”