Coca-Cola has turned to the Gulf in search of growth with a near US$1 billion investment that signals the increasing importance of the region to the world's corporate giants.
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As investment opportunities dry up in many western economies, multinationals are eyeing rising consumer spending in countries such as Saudi Arabia, where the government is ploughing billions of riyals into job creation.
The drinks giant said yesterday it agreed to buy almost half the bottling and distribution operations of Saudi Arabia's Aujan Industries, in the largest deal of its kind in the region. On the same day, the Carlyle Group, one of the world's biggest private equity companies, bought into the Saudi group that franchises Domino's Pizza and Wendy's restaurants.
Aujan has plants in Saudi Arabia and Dubai and a major presence in the UAE, manufacturing Rani, a line of juice drinks, and Barbican, a non-alcoholic malt drink. It also has regional rights to Vimto, the cordial popular during Ramadan.
Foreign investors are being drawn to the region's retail and food industries that benefit from a young population, an expanding middle class and rocketing public spending.
"Population growth is very strong, and most of this population is young and inclined towards quick-service restaurants," said Walid Musallam, a Carlyle managing director. "Consumer purchasing power is also increasing."
The Middle East and Africa already has one of the youngest populations in the world, according to Euromonitor estimates. Their combined populations are expected to grow to 1.5 billion people by 2020 - and average age may fall even further in the process. In Saudi Arabia, consumer spending on food increased by 5 per cent last year after growing 6.6 per cent in 2009, Carlyle said.
"It's a virtuous circle for consumer goods but especially beverages," said Tom Emmet, a senior official at Royal Bank of Scotland, which advised Aujan on its deal.
"It's not surprising that investor interest is strong and increasing in this area. In troubled economic times, food and beverages are a lot more attractive as a defensive bet."
Aujan plans to use its capital injection partly to expand its operations, building new plants in Iraq and north Africa, according to the company's chairman, Sheikh Adel Aujan.
It could also use the relationship with Coca-Cola to add to its international presence.
The Coca-Cola and Carlyle Group investments follow a lull in deal-making this year as parts of the region have been buffeted by both political and economic turmoil.
ghunter@thenational.ae
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