Coca-Cola has made the biggest investment into the Middle East's consumer packaged goods sector through a $980-million deal to buy around half of Saudi Arabia's Aujan Group, an established regional drinks manufacturer.
Highlighting growing investor interest in regional consumer spending, private equity group Carlyle also on Wednesday closed the acquisition of a 42 per cent equity stake in Alamar Foods from the Saudi Al Jammaz Group, which operates 185 Domino's Pizza and Wendy's Hamburgers outlets across the Middle East and North Africa. No financial details were disclosed.
In the oil-rich Gulf, the insatiable appetite for sweet drinks and fast food continues to grow, despite concerns about the high rates of diabetes and obesity. The Arab spring has underlined the political impact of the Middle East's youthful population, two-thirds of which are under the age of 30.
These demographics also present opportunities for consumer-focused companies, especially in populous markets such as Egypt and Saudi Arabia. The deals will come as a relief to financiers who have seen a drop in mergers activity amid this year's market slump.
"More consolidation has to come in Saudi Arabia," Adel Aujan, chairman of Aujan Group, told the Financial Times. Aujan, founded in 1905, has doubled revenues since 2006 to reach $850-million this year and hopes to double again over the next five years using Coke's financial clout.
Saudi Arabia, the region's largest economy, accounts for a third of Aujan's sales with the remainder coming from the rest of the Middle East and other developing markets in Asia and Africa.
Aujan's $150-million investment in Iran is being split off to keep Coca-Cola's investment compliant with U.S. sanctions against the Islamic republic.
Mr. Aujan shrugs off rising political tensions between his home country and Iran, saying he has always enjoyed good relations with the authorities in Tehran.
He also plans a further push into Egypt where Aujan has doubled sales this year, grabbing 10 per cent market share. "We are recession-resistant and political-resistant, people will drink whatever," he said.
Coca-Cola earlier this year announced plans over the next decade to invest $5-billion in the region, which has some of the highest per-capita consumption of non-alcoholic beverages in the world. The company is buying 50 per cent of a company holding Aujan's best-known brands, Rani juices and malt beverage Barbican.
The Atlanta-based company will also take a 49 per cent stake in Aujan's bottling and distribution unit, which sells Vimto, the English fruit cordial that is written into the Gulf's social history thanks to having become synonymous with the holy fasting month of Ramadan.
Carlyle, which last year bought into a Saudi lighting manufacturer, says strong gross domestic product growth and consumer trends among the region's youths underpin the investment in Alamar Foods, which operates the Middle Eastern franchise of Domino's Pizza and Wendy's across the region, excluding Saudi Arabia.
The two major inward investments into the Gulf signal an opening up among Saudi family-owned businesses as they enter into partial exits to look for global expertise and finance to expand. "This is the apex of my career, bringing our family business into alignment with such a well known company," Mr. Aujan said.