They increased the price of one of its products by one riyal, and it is like they opened the gates of hell!!
Overnight, Al Marai just turned to be the talk of the country, and especially, the talk of Twitter! Boycotting campaigns and accusations of theft and deceiving are all over the place!
Given that anyone has all the right to reject a certain product and even invite others to boycott it as long as he/she is providing some kind of logical reasoning. What happened with Al Marai is a bit different. It is something like an explosion of illogical, and in a lot of times superficial, reasoning and poor justifications all mixed with a tone of hatred and accusation of theft and deception. Which is to be honest, a very strange reaction to one of the icons in the Saudi business environment!
The following should not be taken as a defending attempt on behalf of Al Marai, I am quite sure they have what it takes to defend themselves, I will only be trying to defend the logic of business, from where I see it at least!
In any industry, and for any product, specifying a price is the most challenging task ever. It is a mix of facts, market status, and aspirations. Facts in the sense of raw materials and production lines. The money, human resources, distribution lines costs, and so on. All these are hard figures that are built on management decisions to provide a certain product, in a certain shape, with a certain quality. And the facts might be the easiest part of the determining-the-price-process.
Then, there is the market status; who are our competitors and who are our customers? What are the prices in the market? What is the quality standards in the market? And most importantly, what is the economical status of the targeted market? The main question in here is, where does the company want to be in regard to all of this?
And finally, there is the aspirations of the company, what are the profits margins it is trying to achieve and keep, what kind of a message and values it is trying to provide?
In short, there is no book or research ever written in the logical human universe that states prices should be fixed along the whole product life cycle, or else, the company producing that product is nothing but a symbol of evil!
- They were making profit, weren’t they?
Yes they were, and guess what, they are planning to keep it that way. For those been through Al Marai financial statements and arguing that it is making profits despite its claims of maintaining the production costs under control, there are two major points to put into considerations here: First, the remarkable increase in profits goes primarily back to the brilliant accusations and product portfolio diversification strategy that the company embarked on few years ago. It is not anymore a milk producing company, it is a food company (so to speak). Second, in a volatile economical situation, it is becoming harder and harder to rely on the historical data to make accurate assumptions about the current and future statuses. For a company working in a very sensitive market to the raw materials prices fluctuations, any observer to this market should have definitely noticed the instability the food market is going through globally.
Let’s look into this from a different angel. I would guess that Al Marai could have kept the prices the same or even lower if it decided to compromise its well known quality standards. The company is in the market since 1976, and there is a reason that most of its products are market leaders each in its respective segment. Al Marai branding philosophy has always been built on quality, and I believe this is what they should be emphasizing on in such current events.
