Some of the products Candia sells in Morocco, a market it entered in 2007

Some of the products Candia sells in Morocco, a market it entered in 2007

Northern Africa and the Middle East are firmly in the geo-political spotlight, with the political unrest that surfaced in Tunisia last month spreading to the current ongoing protests in Egypt. There are also signs of dissent in Jordan and Yemen. just-food's Stuart Todd spoke to Jean-Luc Deher, international director of French dairy processor Candia, about the Sodiaal-owned company's presence in the region and the risks of operating in such an environment.

just-food: What have been the milestones in Candia's expansion in north Africa and the Middle East over the past decade?

Deher: In north Africa, it all began in Algeria with the launch of Candia in 2001. The brand already enjoyed some recognition there via French TV ads and we also had some small-scale export activity to Algeria in packaged milk powder and butter. Backed by solid industrial investment, we were the first company to launch good quality UHT milk onto the market and, ten years on, Candia has 85% share of the UHT milk market. We expect to record sales of 100m litres this year. We capitalised on our success in Algeria by signing other franchise agreements in north Africa: Libya (end-2005), Tunisia (2006) and Morocco (2007). Our presence in the Middle East began with Lebanon and this served as a springboard to enter markets in Egypt and, latterly, Syria.

just-food: Can you explain how you have gone about establishing the Candia brand in emerging economies and the provision you've made to cater for the local aspects of national markets? 

Deher: In Africa and the Middle East, our strategy has been to position Candia as the brand of a local manufacturer, backed by the image and the guarantee of an international brand, not the other way round. This has enabled us to place a local or traditional label on a broad range of dairy products, from fresh and UHT milk to traditional fermented milks such as laban, ayran and raïb, as well as home-grown cheeses, processed cheeses and cream cheese and by so doing achieve a deeper market penetration. Through innovation in UHT products, we are now 'stretching' the brand to milk drinks, fruit juices and ice creams too.

just-food: In Lebanon you had just got your business started when the production plant of your franchisee was destroyed by Israeli bombs in 2006. How did you cope with this setback?  

Deher: It was a major blow but our franchisee Liban Lait showed amazing resilience and powers of recovery in setting up a temporary production unit on the same site shortly after the bombings while awaiting the construction of a new plant. It's not been an ideal situation but we've continued to serve the market almost uninterrupted. Construction of the new plant was completed only very recently and will move to full production during the first quarter of 2011. The plant is the same size as the former one and will have a similar production range although greater place will be given to home-grown products.

just-food: Has the current political upheaval and civil unrest in Tunisia and Egypt made you less confident about having business in this part of the world and pursuing further expansion? 

Deher: We are perhaps more cautious rather than less confident. With regard to Tunisia specifically, the plant operated by our franchisee, Tunisie Lait, was not subjected to damage or pillaging during the uprising and has continued to operate more or less normally. However, one has to accept that there is little visibility at present on future political stability in Tunisia. The revolution has generated great expectations in the minds of ordinary Tunisians, particularly young people and meeting them is the major challenge facing the country’s leaders in the months and years ahead. The same goes for Egypt, too. 

Throughout north Africa, Candia has an established market presence, based on strong local links and while the risks attached to a changing political context are not something we take lightly, we are probably less exposed than we would be if we were just starting out. 

just-food: Candia recently concluded a franchise agreement in Syria. What are your plans in this country? 

Deher: We've teamed up with local food processing group, Al Wais, which has already invested US$30m a new dairy plant in Aleppo. We are planning to launch the Candia brand in Syria by the end of the first half of 2011 and aim to become market leader within the next two years. 

just-food: Are there any other countries in the Middle East-Africa zone where you are poised to mark your entry?  

Deher: We've recently signed several other franchises but I can’t say much more at this stage as we are still finalising the investment aspects of the agreements.

just-food: Is eastern Africa on Candia's radar? 

Deher: Doubtless, there are opportunities to seize in countries such as Kenya, Ethiopia, Sudan, Uganda and Tanzania and to lesser extent, Mozambique. But we are not yet at the stage of indentifying prospective local partners which is crucial to moving into new markets. 

just-food: Any news to report from Nigeria which was added to Candia's map of Africa just over a year ago? 

Deher: Nigeria is a potentially massive market where oil and gas revenues are driving up the country's living standards but we remain in a start-up phase. The plant of our franchisee, Ranona, is currently only operating at one-quarter of its maximum capacity so there is considerable scope to increase output.  

just-food: Political uncertainty aside, what are the main issues facing the dairy industry in emerging markets today and what is the outlook for the next few years?

Deher: Increases in food commodity prices, while having a global impact, are likely to be keenest felt in North Africa and the Middle East given the zone’s heavy dependence on imports and relatively weak purchasing power. 

North Africa has enjoyed almost uninterrupted annual growth of around 10% in local dairy production over the past decade but this rate could well decline over the next two to three years. I think some relief will come from the end of CAP quotas in 2015 and with it, the prospect of a fall in food commodity prices as EU output rises. 

On a company level, in the short to mid-term, Candia will be able to considerably enhance its milk ingredients offering to emerging markets in both quality and quantity, thanks to the addition of Entremont to the Sodiaal group and its expertise in this field.