Kuwait Flour Mills & Bakeries Company

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Kuwait Flour Mills & Bakeries Company

P.O. Box 681
Safat,
Kuwait
Telephone: (965) 484 1866
Fax: (965) 484 1590
Web site: http://www.kuwaitflourmills.com

State-Owned Company
Incorporated: 1961
Employees: 2,300
Sales: KWD 73.4 million ($250 million) (2003)
NAIC: 311211 Flour Milling; 311812 Commercial Bakeries; 311823 Pasta Manufacturing

Kuwait Flour Mills & Bakeries Company is the state-run flour monopoly in Kuwait, responsible for ensuring the supply of flour and other grains to the country. As Kuwait has no arable land, and little domestic food resources apart from fish, the country is entirely dependent on imports for its food needs. In this respect, Kuwait Flour Mills plays an essential role in the Kuwaiti economy. The company imports wheat and other grains, processed at the company's port and silo complex in Shuwaikh, and operates its own flour mills. Kuwait Flour Mills & Bakeries supplies flour and flour products to other bakers but also produces its own range of breads, including Arabic breads; European breads including white bread, hamburger and hot dog buns, and hard and soft rolls; and other baked goods, such as hard and soft cookies and crackers. The company also produces pasta, animal feed, and corn- and soy-based vegetable oils. Kuwait's operations are conducted at nine facilities located throughout Kuwait. The company also owns a minority stake in Bahrain Flour Mills. Kuwait Flour Mills & Bakeries remains controlled by the Kuwaiti government, and is led by Chairman Salah M. Al-Kulaib. The company's revenues in the middle of the first decade of the 2000s topped KWD 73 million ($250 million).

ENSURING KUWAIT'S FOOD SUPPLY IN 1961

For most of its history, Kuwait's small native population was able to adapt to the harsh conditions that prevailed in the desert region, subsisting on fish and the few resources provided by the desert. The area's extremely high temperatures, the near nonexistence of arable land, and the absence of any natural lake, river, or reservoir prevented the development of any form of domestic agriculture. Into the 18th and 19th centuries, the region emerged as a strategic port on the Persian Gulf. The arrival of the Al-Sabah family as leaders of Kuwait heralded its transformation into a major harbor, with trade and pearl diving its major industries. The collapse of the pearl industry in the 1920s, however, decimated Kuwait's economy. By then under British protection, Kuwait became one of the world's poorest states, and relied almost entirely on the British government for its food supplies.

The growing global dependence on petroleum, however, changed Kuwait's fortunes considerably into the second half of the century. From the world's poorest country, Kuwait emerged as among the world's richest, with a population of less than 700,000 atop one of the largest oil reserves in the region. By the early 1960s, Kuwait had stepped out from under the protection of the United Kingdom, establishing itself as an independent state in 1961. The Al-Sabah family remained the country's ruling family.

The new Kuwaiti government quickly turned its attention to the country's low level of industrialization and the high degree to which it remained dependent on imported goods. The availability of flour and wheat was of particular concern, given that bread had become the country's staple food. With no resources, and no industrial infrastructure, Kuwait had to rely on imports of flour and other processed food products. As a result, these were often very expensive, and subject to a high degree of price fluctuations. At the same time, the perishable nature of the imported foods led to a lot of waste through spoilage.

Soon after the state's independence, therefore, the Kuwaiti government initiated a program of industrialization, creating a number of new companies under its control. One of these was the Kuwait Flour Mills Company, founded in 1961. Kuwait Flour Mills became responsible for the country's wheat and flour imports. At the same time, the company began preparations to construct the country's first flour mill. This process was begun in 1962 when the company awarded a £750,000 contract to Lancastershire, U.K.-based Thomas Robinson and Son, a specialist in constructing flour mills. The contract called for Robinson to build a mill in Kuwait capable of processing 150 tons of flour per day.

Kuwait Flour launched production of flour at its own mill in 1965. The company quickly began expanding its facilities in order to develop fully integrated operations. As such, the company constructed its own silos and wheat-discharging facilities at Shuwaikh port. In this way, the company was able to offload ships directly into its silos. Over the next decades, Kuwait continued to develop its integrated operations, installing automatic milling systems complete with integrated packaging lines. Kuwait Flour's production in the meantime expanded to include a full range of flours, including specialized flours used in the production of Arabic bread types, as well as processed flours used in European breads.

LEADING KUWAITI FOOD GROUP FOR THE NEW CENTURY

Much of Kuwait Flour's production was taken up by sister company Kuwait Bakeries Company. That business was established in 1978 as part of the government's effort to ensure the supply of high-quality Arabic bread types. By then, Kuwait Flour had been expanding its own product range. In 1969, for example, the company built a new manufacturing facility and launched production of pasta and macaroni. The following year, Kuwait Flour began producing cookies and crackers, developing brands such as Marie biscuits, Petit Beurre, and Tic saltine crackers. By 1976, Kuwait Flour had also become responsible for the country's vegetable oil needs, importing corn and soy oils marketed under the Dalal label.

Kuwait Flour Mills took on more importance in the Kuwaiti food industry in the 1980s and into the 1990s. The creation of the Gulf Cooperation Council (GCC) among Bahrain, Oman, Kuwait, Qatar, and the United Arab Emirates helped establish a new, larger foods market. With the formation of the GCC, the member countries and their governments established the development of the region's food manufacturing sector as a priority. In this way, the governments sought to reduce the region's dependence on oil revenues, while also meeting the demand for food in their fast-growing populations. Kuwait, for example, had seen its population swell dramatically since independence, with a population—including so-called "expatriate" workers—growing to nearly three million at the end of the century. The larger GCC market also enabled Kuwait Flour Mills to begin developing a range of products for the export market, including its Al-Joud brand macaroni.

COMPANY PERSPECTIVES

The idea of establishing Kuwait's own Flour Mills was a natural conclusion. Established in 1961 under the name of "Kuwait Flour Mills Company," focused to expand its interests in specialized food products and introduced several products to the market under its own brand names at affordable prices, which now has become part of everyday life of general public in Kuwait.

Like other members of the GCC, the Kuwaiti government encouraged the large-scale investment into the country's food industries. Although part of this investment came from the private sector, the government's own food businesses also grew strongly. Kuwait Bakeries Company, for example, began setting up a network of eight modern production bakeries throughout the country. While these bakeries focused on the production of traditional Arabic breads, Kuwait Bakeries Company also met the growing demand for European-style breads, such as hamburger buns, hot dog buns, sweet rolls, hard rolls, and the like, building a state-of-the-art bakery in Sabran. By 1988, Kuwait Bakeries was merged into Kuwait Flour Mills, at which time the company adopted the full name of Kuwait Flour Mills & Bakeries Company.

The attempted Iraqi annexation of Kuwait in 1991 had extreme consequences for most of the country's industries. The food industry was hit particularly hard, and the country's supply lines remained in disarray for some time after the end of the first Persian Gulf War. Yet, as many of Kuwait's food producers were owned or managed by foreigners—especially Jordanians and Palestinians who fled the country during the conflict—Kuwait Flour Mills & Bakeries emerged with a still stronger market position during the 1990s.

The company's range of operations, and presence among state-owned industries, was further enhanced in 1994 when the company took over the operations of the Kuwaiti Supply Company. Formerly attached to the Ministry of Commerce & Industry, this company had been responsible for purchasing, importing, and storing most of the country's strategic raw foods needs, such as milk powder, rice, pulses, and sugar. The addition of the supply operations further positioned Kuwait Flour Mills & Bakeries as the center and leading force in the Kuwaiti food sector.

Another growing part of the company's operations was the production of animal feed and pet foods. In 1996, the company expanded its presence in this market with the construction of a new factory for the production of concentrated animal feed. The facility allowed Kuwait Flour Mills & Bakeries to provide specialized feed products for the country's sheep, cattle, and camels.

KEY DATES

1961:: The newly independent Kuwaiti government establishes Kuwait Flour Mills Company to ensure country's supply of flour and wheat.
1965:: Kuwait Flour Mills commissions Kuwait's first flour mill.
1969:: The company launches production of pasta.
1970:: The company begins production of cookies and crackers.
1976:: The company launches the import and production of vegetable oils.
1978:: The Kuwaiti government establishes Kuwait Bakeries Company, which begins producing Arabic breads.
1988:: Kuwait Flour Mills merges with Kuwait Bakeries Company, becoming Kuwait Flour Mills & Bakeries Company.
1994:: The company takes over the government-run Kuwait Supply Company.
1996:: The company constructs a new animal feed mill.
2002:: Silo capacity is expanded.

Into the mid-first decade of the 2000s, Kuwait Flour Mills & Bakeries had become the leading company in Kuwait's food industry. The company had established itself not only as an important provider for the consumer markets, but for the wholesale and foodservice sectors as well. As such, the company became a primary supplier for the growing fast-food sector in Kuwait, spearheaded by the arrival of McDonald's, Burger King, KFC, and others into Kuwait. To meet demand, the company invested in expanding its storage and handling capacity, contracting with the United Kingdom's Redler for a silo extension in 2002. By the middle of the decade, Kuwait Flour Mills & Bakeries had seen its revenues rise past KWD 73 million ($250 million). With the continued population growth in the Persian Gulf region, the company was certain to play a key role in the Kuwaiti food sector for many years to come.

M. L. Cohen

PRINCIPAL COMPETITORS

Alexandria Flour Mills; Hayel Saeed Anam Group of Cos.; General Establishment for Cereal Processing and Trade; Al Ghurair Group of Cos.; Grain Silos and Flour Mills Organisation; National Milling Corporation; Osem Investments Ltd.; Arab Supply and Trading Corporation; Central and West Delta Flour Mills.