Brazilian food processor BRF SA on Tuesday announced an agreement to invest around $120 million to build its first chicken processing plant in Saudi Arabia in a bid to strengthen its position in what is considered a key growth market.
The company, which claims to be the largest food exporter in the Gulf region, has four production facilities in the Middle East - three in Turkey and one in the United Arab Emirates - where growing populations will lift demand for food.
"The company estimates the investment amount to be around $120 million, which will allow BRF to expand and consolidate its presence in the Saudi market," it said.
'A Leading Supplier'
The investment underscores BRF's strategy to remain a leading supplier to countries of the Gulf Cooperation Council (GCC), a six-nation alliance including Saudi Arabia, Kuwait, the UAE, Qatar, Bahrain and Oman.
Earlier this month BRF said its in Abu Dhabi plant was being audited and that Saudi Arabia had restricted buying of some of its products.
Most of the output from the new plant would be for the Saudi market, but can also be exported to neighbouring countries.
BRF said it expects the plant's product portfolio will include breaded and marinated products and burgers, among others.
Meat Consumption
According to the USDA, Saudi Arabia's chicken production in 2019 is forecast at 730,000 tonnes and is projected to increase to 750,000 tonnes next year. Chicken consumption this year is estimated at 1.33 million tonnes and is forecast to reach 1.38 million tonnes in 2020.
BRF said the precise location, capacity, investment schedule and capital structure of its Saudi Arabia factory would be determined at a later date.
In the second quarter, BRF sold 298,000 tonnes of chicken in the "halal" market, which requires an animal be slaughtered in accordance with rules for its meat to be acceptable for consumption in Muslim countries.
Based on volume sold, the halal market represented about 27% of BRF's food shipped globally in the second quarter, generating net sales of R$2.4 billion ($602 million).
BRF has more than 6,000 employees in the Middle East, where it set up a subsidiary headquartered in Dubai that is responsible for catering to the Islamic world.
In Brazil, the company has eight plants authorized to sell to Saudi Arabia.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
