Exclusive: Alan Smith on Agthia Group’s growth and food security strategy

The UAE has risen into the upper echelons of the global food security index over the past half-decade to rank first in the MENA region as the country has adopted an integrated approach that includes national strategies and the creation of an enabling legislative, and regulatory framework.

Under the National Food Security Strategy 2051, the UAE aims to develop sustainable food systems by leveraging modern technologies, supporting local production and building international partnerships to diversify food sources.

Through this initiative, Agthia Group is working to enhance food production, streamline efficiency, ensure safety, and drive innovation. The Abu Dhabi-based food and beverage firm’s group CEO tells Gulf Business how the company is revolutionising the industry to meet global food requirements.

Agthia Group has grown exponentially over the years. Tell us more about the company and the role that it is playing in advancing the country’s food security strategy.

We have transformed the food and beverage scene across the UAE and beyond. Since our inception in 2004 and the company’s listing on the Abu Dhabi Stock Exchange in 2005, our journey has been defined by growth and impact.

The company is not just about brands and products; it is about purpose. Our diverse portfolio, including water, food, frozen & protein, snacking, and animal feed, reflects our commitment to meeting varied consumer needs.

Our alignment with the UAE’s National Food Security Strategy is a testament to our commitment. Through four strategic pillars, we’re working to enhance food production, streamline efficiency, ensure safety, and drive innovation. Waste reduction is central to our strategy – it’s an obligation we take seriously.

Sustainability is not a trend for us – it’s the only way forward. Initiatives like Al Ain’s PET bottles, the first to be launched in the UAE, and the plant-based bottles underscore our dedication to a secure and sustainable food supply. As leaders, we are proud to set an example for the industry, contributing to our nation’s food security strategy.

Agthia Group is not just shaping the food and beverage landscape; we are contributing to a more sustainable and secure future. As we move forward, our focus remains clear: to make a positive impact, leaving a footprint that benefits not only our industry but the communities we serve.

Which verticals/ divisions do you expect to experience the fastest growth within the Agthia Group’s portfolio in light of the current economic conditions?

Exciting prospects lie ahead within Agthia’s diverse portfolio. We are delivering sustained growth across all our segments, we have seen rapid expansion in frozen protein and snacking. It’s a dynamic shift that mirrors evolving consumer preferences.

Our reach is far, spanning over 45 countries, and our strategic focus currently centres on markets like the UAE, Egypt, Jordan, Saudi Arabia, and India. These regions have shown promising potential, and we’re well-positioned to harness opportunities driven by local demand, exports, and potential expansion into new horizons.

Speaking of new markets, our sights are set on promising territories such as the US, India, Indonesia, and Brazil. These are exciting avenues, and we’re confident in our ability to make a meaningful impact there.

The future holds exciting growth prospects, and our commitment to excellence remains unwavering as we capitalise on opportunities within our ever-evolving industry.

Agthia has been expanding through acquisitions over the years. How would you describe the company’s growth strategy and are you considering expanding your network further?

Agthia’s growth strategy is a combination of inorganic and organic growth. In 2022, we seamlessly integrated acquisitions, leveraging synergies across our diverse operations for a stronger Agthia.

This year, our focus is two-fold: nurturing organic growth by unlocking synergies across our whole business, and, remaining open to strategic acquisitions when promising opportunities present themselves.

Looking ahead, our roadmap is guiding us to double-digit revenue growth in emerging sectors like protein and snacking while our well-established segments, water and agri, continue steady growth. Agthia’s growth is driven by astute decisions, resilience, and an unwavering dedication to delivering value for all stakeholders.

Technology and sustainability rank among GCC companies’ growth strategy priorities in 2023. Please tell us what Agthia is doing in this space.

Technology and sustainability are at the heart of our growth strategy in 2023. It’s a dynamic landscape where innovations like the Internet of Things (IoT), big data, and artificial intelligence (AI) are reshaping the agrifood industry, making it not only more efficient but also more sustainable. This transformation touches everything – from how we manufacture to how we distribute our products, and it even gives us remarkable insights into consumer trends.

Our roadmap for the next five years is rooted in this digital evolution. We’re shifting our focus from being product-centric to becoming data-driven. It’s about putting the consumer at the centre of everything we do.

This means building a digital ecosystem that enhances customer experiences across all our touchpoints. It’s not just about boosting brand equity; it’s about leveraging data to open up new revenue streams, explore fresh market channels, and truly maximise the value we provide to our customers.

But it doesn’t stop there. We are also embracing digital tools to streamline our operations and enhance efficiency throughout the organisation. It’s about driving performance to its peak.

To power this transformation, we have joined hands with Microsoft, a partnership that underscores our commitment to a digital future. Through this collaboration, we are enhancing customer and employee experiences, optimising processes, and setting ourselves up for an even more agile and responsive future.

Technology is not just for our growth but for the betterment of the communities we serve. It’s about ensuring we’re not just keeping pace but leading the way in a rapidly evolving industry.

Tell us about Agthia‘s Q2 2023 financial results and how you expect the group to perform in the year’s second half.

Agthia’s financial journey in the first half of 2023 has been strong and on track to meet full-year guidance.  Our group net revenue increased 10.3 per cent year-on-year to Dhs2.2bn, as greater diversification across the business underpinned product and channel optimisation.

Notably, our earnings before interest, taxes, depreciation and amortisation (EBITDA) margin exceeded expectations by about 100 basis points in H1, propelled by the positive impact of our snacking business mix and overall business enhancement. Our net debt/EBITDA ratio of 1.9 – an impressive drop from 2.3x in Q4 2022 – places us in a comfortable position with ample liquidity and debt capacity.

We have also achieved a significant debt reduction of nearly 600 million, a pivotal move in containing interest costs. Shifting interest landscapes – LIBOR at one per cent in H1 2022 versus 5.2 per cent in H1 2023 – underline our prudent approach. Our resilient balance sheet, and, our robust free cash flow (FCF) of Dhs325m, which increased threefold year-on-year, speak volumes about our financial strength.

If you look specifically at Q2, we achieved high single-digit revenue growth, notwithstanding the continuing currency headwind, some demand phasing from the earlier Ramadan and Eid holidays compared to the prior year, and a traditionally softer quarter for date products and gifting. Nevertheless, Agthia’s portfolio is diversified, and this decreased this seasonality impact.

From a strong cash balance to an impressive decrease in our net debt/EBITDA ratio, our strategy navigates economic waters with precision. Our confidence extends into the future – a robust EBITDA performance is our trajectory for the second half and our guidance holds for top and bottom-line growth.

How confident are you about the medium-term outlook of the Middle East’s food and beverages market? What are the challenges and opportunities that Agthia has faced in the markets that you are currently present?

We are cautiously optimistic about the Middle East food and beverage market considering many factors such as our diverse portfolio, our presence in different geographies, and our overall financial and operational ability to navigate any challenging environment.

Looking at some of the key markets where Agthia operates, GCC growth prospects in an international context remain robust, while UAE and Saudi consumers have healthy consumption and spending patterns.

In Egypt, where inflation is more challenging, our poultry and coffee are considered essentials. In poultry, we benefit from effective brand tiering to address different affordability levels in the market. In coffee, our pricing strategy is backed by the strength of the brand and the premium nature of coffee making it less elastic.

The Middle East region has tremendous opportunities looking at its large population bases and positive demographics structure. And so, we are always searching for the best investment opportunities that can generate the highest returns for our shareholders.

What is your approach to sustainability for the company ahead of COP28?

As we approach a pivotal moment for sustainability in the MENA region, I’m proud to share Agthia’s resolute commitment to this cause. Our dedication goes beyond words – it’s woven into our very fabric.

‘For the Better’ isn’t just a motto; it’s our driving force, encompassing people, the planet, and prosperity. Customer concerns about environmental impact, ethical sourcing, and packaging quality are not just heard; they’re embraced with action.

We respond to these concerns wholeheartedly. Sustainability isn’t an option; it’s ingrained in our growth strategy. Our pioneering of plant-based water bottles stands as a testament to our commitment. Technological investments further underscore our resolve to shrink our environmental footprint.

Yet, our journey extends beyond our company. We’re actively engaging with governmental bodies, advocating for sustainable solutions like recycled PET (polyethene terephthalate) to curb single-use plastics.

Our partnership with RECAPP speaks volumes about our commitment to action. Together, we have amassed 558 tonnes of recyclable materials, magnifying our positive impact, with PLA volumes seeing a remarkable fivefold increase.

This commitment isn’t just internal – it’s shared. Through continuous dialogues with stakeholders, we ensure their priorities are seamlessly integrated, from risk assessment to business implications. This collaboration ensures that sustainability isn’t just a concept; it’s a reality that we live and breathe.

As COP28 approaches, our path is unwavering. We are not just joining the sustainability journey; we’re leading it, fuelled by the belief that every step, no matter how small, brings us closer to a better world – for everyone.

Read: Agthia Group posts 6.6% increase in first-half profit to Dhs144m