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Nestle pulls out of Gulf ice cream market
Dammam, 28th August 2001

 After a "devastating" price war during the last few months, surviving ice cream brands may have come together to firm up prices in the local market, according to informed sources.

The withdrawal of at least one multinational ice cream brand from the Gulf markets may have hastened the process, they added. Another overseas brand might also take a decision on stepping out altogether, the sources said.

The market has confirmed that the Swiss giant Nestle has stopped production of its brands at a plant in Dubai since April. Sales of its ice cream products, branded as 'Kimo', in Gulf markets have also ceased.

According to informed sources, the plant may still be operating as leased capacity to third-party ice cream brands. There are also indications that it may be put up for sale, though no confirmation was available from any of the parties involved.

On its part, the Anglo-Dutch fast moving consumer goods (FMCG) major, Unilever, closed its 'Walls' production at a plant in Dammam in Saudi Arabia. The facility was supplying the Gulf markets. No details are available as to whether Unilever plans to pull out Walls entirely from these markets.

Also, the partial removal of EU subsidies on dairy products, including milk powder, may have played a part in the upward movement of retail prices. One removal has already been implemented, and another may be in the offing, said sources.

"The UAE market has passed through one of the must bruising price wars in the ice cream and frozen desserts category. This was initiated by leading local brands to counter the overseas brands, and from their perspective, they have been successful in their aims," said a senior manager with a local producer.

"Now we are seeing a sort of an informal grouping coming together and firming up prices across the board. We are also party to these discussions. Matters will be more clear in the next few weeks."

A senior source at Nestle said: "There were pertinent reasons why we decided to pull out of the ice cream market in the region. But as a company with a range of products in its portfolio, we will continue to remain very active in the region as we have in the past."

Said an industry source, "In any case, the consumer here is the loser, for he now has a lesser range to choose from. The local economies which had these plants will also lose out to some extent from the closures."

Source: Gulf News

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