Agthia Group’s Critical Success Factors, Valuable Resources, and Competitive Advantages

Subject: Case Studies
Pages: 7
Words: 2072
Reading time:
8 min
Study level: Master

Introduction

Agthia Group is a leading Abu Dhabi company engaged in producing, distributing, and marketing high-quality food and beverage products, primarily serving customers in the Middle East. The company was founded in 2004 in the UAE, but its main assets are currently situated in Turkey, Saudi Arabia, and Oman. The firm’s product line offers a wide assortment of water-related items, yogurts, fresh juices, tomato paste, flour, frozen vegetables, and animal feed. Due to such diverse product choice, Agthia Group possesses many brands operating in 30 international markets, including Al Ain, Ice Crystal, and Grand Mills. Nevertheless, despite noticeable achievements in the food and beverage (F&B) industry, the company encounters fierce competition and needs to focus on manufacturing innovative products, considering modern trends and the sector’s determinants. This paper provides an in-depth report for Agthia Group, containing a literature review of critical success factors, valuable resources, and competitive advantages in the given industry, analyzing potential alternatives, and offering specific recommendations.

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Literature Review

Ashraf, S. R. B., Rashid, M. M., & Rashid, A. H. (2017). Implementation of 5S methodology in a food & beverage industry: A case study. International Research Journal of Engineering and Technology, 4(3), 1791-1796.

The given study examines the implementation of the 5S approach, a lean manufacturing instrument, to a real scenario in the F&B industry. The strategy focuses on fostering a corporate culture that targets continuous improvement, sustains high-quality housekeeping, and provides a safe and productive workplace. 5S process implies sort, set in order, shine, standardize, and sustain. In particular, sort requires removing unnecessary items from offices, which are not used for immediate continual operations, to increase cost savings. Set in order entails putting office and work items in order that provide their best functioning and improve their visibility. Shine assumes taking specific cleaning and sanitizing activities in the workplaces, namely, removing clutter, waste, and dirt. Standardize means implementing standards not only in operational processes but also in the administrative processes, including customer service, book-keeping, and HR management. The final stage, “Sustain,” requires maintaining standards regularly and keeping premises in efficient and secure order forever. As a result, despite first temporary difficulties, the 5S approach usually leads to money- and space-saving, amplified productivity, and reduced scraps of components.

Bresciani, S. (2017). Open, networked and dynamic innovation in the food and beverage industry. British Food Journal, 119(11), 2290-2293. Web.

The given article examines several important topics connected with innovations in the F&B industry, with a particular emphasis on the benefits of the open innovation paradigm (OIP) for companies’ prosperity. In particular, Bresciani summarized the evidence from 13 articles of different authors who concern issues such as the new product development (NPD) process, branding activities, marketing strategies, knowledge, and ideas generation within the F&B context. The author indicates that despite the F&B sector’s maturity, shifts in consumers’ needs and taste, large-scale digitalization, and the product lifecycle shortening make respective participants develop creative approaches and business models stimulating innovation. Based on findings, Bresciani recommends enhanced involvement in e-commerce, a combination of traditions and innovations, and the consideration of customer value creation and market and product segmentation. Besides, it is beneficial for F&B firms to actively engage customers in value co-creation and widen their participation in the international market. Finally, the author recommends paying attention to lean production methods in supply chain management to increase performance and improving managerial capabilities and cross-industry partnerships.

Chowdhury, M. T., Sarkar, A., Paul, S. K., & Moktadir, M. A. (2020). A case study on strategies to deal with the impacts of COVID-19 pandemic in the food and beverage industry. Operations Management Research, 1-13. Web.

The study is primarily noteworthy in that it explores the short- and long-term impact of the COVID-19 pandemic on the food and beverage industry. The short-term effect includes losses because of product expiry, restricted operations of trade partners and distributors, and deficit of working capital. Specifically, the lack of working capital was connected with decreased sales volume resulting in cash flow shortage, while limited distributors’ operations were caused by the closure of retailers and restaurants due to governments’ restrictions. The long-term impacts are complicated and difficult to foresee; they mainly embrace deteriorated performance metrics, including investment return, problems with staffing, and the firms’ contribution to gross domestic product (GDP). In the end, the scholars offer strategies to strengthen resiliency in a varying business environment, such as First Expiry First Out (FEFO), product rotation, the sacrifice of remuneration, and the extension of the working day. Additionally, companies can temporarily decrease their trade promotion costs and restructure supply chain designs by embedding online sales.

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Long, T. B., Looijen, A., & Blok, V. (2018). Critical success factors for the transition to business models for sustainability in the food and beverage industry in the Netherlands. Journal of Cleaner Production, 175, 82-95. Web.

The present study raises a theme of the successful and smooth transition of companies to sustainable business performance by investigating sustainability characteristics, critical success factors, and barriers. The researchers pay much attention to internal processes and consider management perspective and the concepts of organizational change management business models for sustainability. The data was gathered from 14 cases via semi-structured interviews with small and medium-sized enterprises (SME) in the Dutch F&B sector. The results demonstrate that a consistent, clear narrative and vision, active collaboration, continual innovation, profitability, a sustainable foundation, and external events significantly contribute to developing a business model for sustainability. On the other hand, barriers mainly comprise insufficient support from governments, principle-agent issues, including whether a company is a landlord or tenant of premises, and external events if conducted at the wrong time. Finally, the authors highlight that firms aiming at sustainability should establish this concept as their fundamental principle and gradually engage suppliers, customers, and governments in tight cooperation.

Analysis

Agthia Group is an exemplary F&B company that managed to become a genuine leader in its field of activity in a short time despite tough competition. Its impressive development has been primarily stipulated by its progressive corporate culture, continuous focus on innovations, the consideration of trends and customers’ tastes, developed network of partnerships. For reference, as of 2020, Agthia Group is regarded as brand number one in the water, animal feed, flour, and tomato sector in UAE, with net revenue accounting for over AED 2 billion (“Wholeheartedly committed,” 2020). Nevertheless, there are still vast room for growth and unseized investment opportunities that can help unlock and realize the company’s tremendous potential under their appropriate exploitation. For this reason, it will be relevant to conduct a SWOT analysis, an instrument for strategic and management planning, widely used to evaluate core internal and external factors and build a respective strategy.

Strengths

As indicated above, Agthia Group is currently a leader in the F&B industry, with a broad assortment of products and innovative policies. The principal advantage of the company is that it manages to maintain ethical and profitable business throughout its operation. In particular, as of 2020, Agthia Group managed to sell 1 billion bottles of water, yielding a net profit of AED 34.5 million (“Wholeheartedly committed,” 2020). Such rates are because the firm possesses eleven factories in six countries, which manufacture and deliver products in over 30 states, including those in Europe, Asia, Middle East, and Africa. Furthermore, according to the report, customer satisfaction with its products consists of 95 percent, which also guarantees stable demand and favors brand image (“Wholeheartedly committed,” 2020).

It is also worth noting that the company has an excellent reputation due to the low rate of product recall from the markets and its transparency and sustainability policy. For example, during 2020, Agthia Group succeeded in decreasing electricity consumption by 10 percent, introduced plant bottles, and made 35 percent of packaging from recycled materials (“Wholeheartedly committed,” 2020). The firm also cares for its work environment, communities, and staff. For instance, employee satisfaction comprises 84 percent, while the turnover rate – 5.7 percent, one of the best indicators globally (“Wholeheartedly committed,” 2020). Such rates ensure high performance and dedication of employees, which directly reflects on the quality of product and service. Finally, an extensive network of cooperation with partners and stakeholders in many countries, promoting its technological exchange and development accordingly.

Weaknesses

The first drawback is connected with income since it remains low compared to other F&B firms. For example, in 2020, Almarai Company had net income equaling $529.16 million, while Agthia Group was only $9.39 million (“Agthia Group,” n.d.; “Almarai Company,” n.d.). Herewith, this indictor for Agthia Group in 2016 comprised over $69 million, which is almost 8 times less over the past 5 years (“Agthia Group,” n.d.). This decline is primarily connected with the persistent and substantial cost of revenue amounting to $387.52 million. Another weakness of Agthia Group is the insufficient kit of products offered for the customers. Presently, the company primarily operates in water sectors, providing a broad product line, whereas the diversity of animal feed, dairy items, flours, agriculture products are significantly restricted or even absent. The lack of diversification can lead to severe risks and limited capacity to reveal the company’s potential.

Opportunities

The opportunities for Agthia Group considerably stem from its weaknesses mentioned above. The company should focus on diversifying its production by developing new lines and types of products and gradually penetrating other business sectors, primarily those connected with agriculture. Considering the rising popularity of sports, especially bodybuilding and powerlifting, Al Ain Water, Agthia’s brand, can launch vegan protein water that can become a real alternative to traditional protein shakes mostly produced from egg and milk. Moreover, Agthia Group may intensify its effort on sustainability by making bottles and other plastic-based items from 100% recycled material. This resolute step will be appreciated by the world community deservedly. In addition, based on the literature review, the management can incorporate lean manufacturing methods, namely the 5S approach, to provide cost- and time-saving and improve personnel and administration performance. Finally, the company can make a strong emphasis on e-commerce and social media that have recently become powerful promotion instruments, especially in the contemporary contexts of the COVID-19 pandemic.

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Threats

As in almost any business, the core threats result from fierce rivalry for customers and market share. In this regard, Agthia Group’s main competitors include Masafi, SADAFCO, IFFCO Group, Arla Foods, Adecoagro, and Almarai. The latest company deserves special attention since this company has tremendous resources enabling it to compete in the production of animal feed, juices, frozen goods, among others. The second menace is related to COVID-19 and its consequences. Governments’ large-scale restriction measures will compulsorily have far-reaching aftermath in terms of costs and the need to transform the business models and approaches. The last risk is global warming that provokes the rapid expansion of deserts, which leads to the exhaustion of water resources. This risk may require the implementation of expensive modern technologies and systems allowing for ceaseless water provision.

Conclusion and Recommendations

The paper has provided a comprehensive report for Agthia Group, comprising a literature review and SWOT analysis of external and internal business mediums. In particular, the reviewed articles primarily concern the open innovation paradigm, e-commerce, success factors for the transition to sustainability, and COVID-19’s impact on the F&B industry. Based on an in-depth literature review and thorough SWOT analysis, Agthia Group can first recommend commencing activities on diversification of its products. For example, Al Ain Water should produce vegan protein water that contains 10g plant-based protein per serving. This product should also have B vitamins and be devoid of artificial flavors and colors to gain recognition from buyers. Besides, in the condition of the COVID-19 pandemic, it is beneficial to focus on promotion campaigns through e-commerce and social media, especially Facebook, Instagram, Twitter, Pinterest, YouTube, and Tiktok. Since social platforms currently have a massive audience, literally gathering billions of people, extensive advertising could become a potent instrument enhancing the public awareness of the new products and their advantages.

Another direction the company should focus on is undoubtedly cost reduction. As the SWOT analysis demonstrates, Agthia Group, including Al Ain Water, has enormous expenses that eventually hinder its growth. In this regard, the firm should incorporate the 5S approach that usually provides effective cost-saving results, decrease in waste material, and staff’s increased performance. Furthermore, the amplified focus on sustainability policy will boost the firm’s reputation and help avoid or mitigate water resources’ depletion. Finally, Agthia Group should enhance the collaboration regarding technologies and receive support from governments in terms of tax reduction or holidays.

References

Agthia Group PJSC. (n.d.). Dun & Bradstreet, Inc. Web.

Almarai Company. (n.d.). Dun & Bradstreet, Inc. Web.

Ashraf, S. R. B., Rashid, M. M., & Rashid, A. H. (2017). Implementation of 5S methodology in a food & beverage industry: A case study. International Research Journal of Engineering and Technology, 4(3), 1791-1796

Bresciani, S. (2017). Open, networked and dynamic innovation in the food and beverage industry. British Food Journal, 119(11), 2290-2293. Web.

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Chowdhury, M. T., Sarkar, A., Paul, S. K., & Moktadir, M. A. (2020). A case study on strategies to deal with the impacts of COVID-19 pandemic in the food and beverage industry. Operations Management Research, 1-13. Web.

Long, T. B., Looijen, A., & Blok, V. (2018). Critical success factors for the transition to business models for sustainability in the food and beverage industry in the Netherlands. Journal of Cleaner Production, 175, 82-95. Web.

Wholeheartedly committed to Sustainable Living: Sustainability Report 2020. Agthia Group. Web.