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Nongshim's Strategic Initiatives and Agricultural Expansion in Saudi Arabia

GOOVER DAILY REPORT August 3, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Nongshim's International Expansion Strategy
  3. Establishment of Smart Farm in Saudi Arabia
  4. Technological Innovations in Smart Farming
  5. Saudi Arabia's Support for Sustainable Agriculture
  6. Conclusion

1. Summary

  • The report titled 'Nongshim's Strategic Initiatives and Agricultural Expansion in Saudi Arabia' explores the South Korean food and beverage company Nongshim's ambitious strategies aimed at bridging the competitive gap with industry leaders by 2030. The focus is on Nongshim's ventures into innovative agricultural practices, notably the establishment of a pioneering smart farm in Riyadh, Saudi Arabia. This initiative is expected to significantly enhance productivity and sustainability in the arid region by using advanced technologies such as vertical farming and glass greenhouses. Additionally, the report highlights Nongshim's growing international market presence, particularly in Europe and the U.S., with substantial revenue growth and export volume increases. Collaborations with local retailers like Carrefour and online platforms such as Amazon facilitate effective distribution channels for smart farm produce. Furthermore, the report mentions Saudi Arabia’s Ministry of Environment, Water, and Agriculture’s support for sustainable practices and the efforts of the National Research and Development Center for Sustainable Agriculture (Estidamah) in advancing vertical farming techniques for high-yield crops.

2. Nongshim's International Expansion Strategy

  • 2-1. Consolidated Revenue Growth Projections

  • NH Investment & Securities estimated Nongshim's consolidated revenue for the second quarter to be 880.6 billion won, representing a 5% increase year-on-year. Despite a decrease in operating profit by 4% year-on-year, reaching 51.8 billion won, the overall revenue reflects significant growth. This upward trend in revenue indicates strong performance and strategic growth within the company’s international operations.

  • 2-2. Focus on European Market

  • The demand for cost-effective ramen in Europe is high, contributing to a rapid increase in export volumes to the continent. NH Investment & Securities specifically noted that the European market is becoming increasingly crucial for Nongshim's revenue growth. The competitive pricing and heightened demand for ramen have positioned Nongshim favorably in the European market.

  • 2-3. International Sales and Export Volume Increase

  • NH Investment & Securities projected that the performance of Nongshim’s overseas subsidiaries, particularly those in the U.S., will show significant growth, with international sales expected to grow by 4% year-on-year to 251.7 billion won. Export volumes are increasing rapidly, especially to Europe, showcasing the company’s successful expansion strategy and strong international presence.

3. Establishment of Smart Farm in Saudi Arabia

  • 3-1. Collaboration Partners and Roles

  • Nongshim has been working with local distribution partners to ensure that the produce from the smart farm reaches the market efficiently. The collaboration includes retail giants such as Carrefour and Lulu Hypermarket, along with online platforms like Amazon and Noon. Additionally, Nongshim's participation in South Korea's smart farm export project highlights the role of governmental collaboration in establishing a pilot greenhouse in Saudi Arabia.

  • 3-2. Technological Innovations in the Smart Farm

  • The smart farm in Riyadh, Saudi Arabia, will cover approximately 4,000 square meters and will incorporate both vertical farming and glass greenhouse models. This setup allows for the optimization of space and resources in an arid environment. Nongshim's smart farms utilize an automatic management system that controls various conditions essential for plant cultivation, such as temperature, humidity, carbon dioxide levels, light, and nutrient solutions. These innovations are the result of years of research, beginning with the establishment of a potato research institute in 1995 and the launch of a vertical farm at Nongshim’s domestic plant in 2008.

  • 3-3. Distribution Channels for Produce

  • The produce from Nongshim’s smart farm will be distributed through several channels. Locally, the produce will be available in retail stores such as Carrefour and Lulu Hypermarket. Additionally, Nongshim plans to sell the produce through online platforms including Amazon and Noon, expanding their market reach and providing consumers with easy access to fresh produce grown using cutting-edge smart farm technology.

4. Technological Innovations in Smart Farming

  • 4-1. Vertical farming and glass greenhouse models

  • Nongshim's smart farm in Riyadh, Saudi Arabia, will encompass approximately 4,000 square meters and will feature both vertical farming and glass greenhouse models. The produce from these farming systems will be distributed through Nongshim’s local partners and sold in retail stores like Carrefour and Lulu Hypermarket, as well as on online platforms including Amazon and Noon.

  • 4-2. Automatic management systems

  • Nongshim’s smart farms utilize an automatic management system that regulates essential plant cultivation conditions, such as temperature, humidity, carbon dioxide levels, light, and nutrient solutions. This system ensures optimal growth conditions for the plants.

  • 4-3. Previous smart farming initiatives by Nongshim

  • Nongshim has been involved in smart farming technology development since 1995, starting with the establishment of a potato research institute. In 2008, the company set up a vertical farm at its domestic plant in South Korea. More recently, Nongshim has been selected for South Korea’s smart farm export project, aimed at establishing and operating a pilot greenhouse in Saudi Arabia.

5. Saudi Arabia's Support for Sustainable Agriculture

  • 5-1. Ministry of Environment, Water, and Agriculture's funding

  • The Ministry of Environment, Water, and Agriculture in Saudi Arabia has allocated SR100 million ($27 million) to support sustainable agricultural practices. This funding is pivotal in boosting research and development efforts aimed at addressing challenges such as water scarcity, poor soil fertility, salinity, and sodicity.

  • 5-2. National Research and Development Center for Sustainable Agriculture (Estidamah)

  • The National Research and Development Center for Sustainable Agriculture, known as Estidamah, is a not-for-profit research center in Saudi Arabia. Estidamah's initiatives include a vertical farming program focused on optimizing the production of crops like leafy vegetables and strawberries. The center has demonstrated significant success in cultivating high-yield tomatoes and strawberries, highlighting the potential for advanced agricultural techniques in the region.

  • 5-3. Advantages of vertical farming in arid regions

  • Vertical farming offers several benefits for arid regions like Saudi Arabia. It helps conserve water, reduce pesticide usage, and enable year-round crop production. These advantages are particularly crucial in regions struggling with water scarcity and poor soil conditions. The success of vertical farming at Estidamah's greenhouses showcases its potential to significantly improve agricultural productivity in challenging environments.

6. Conclusion

  • Nongshim's efforts in establishing a smart farm in Saudi Arabia significantly contribute to its goal of enhancing market presence and competitive edge by 2030. The smart farm project demonstrates the company's commitment to leveraging technological innovation in agriculture, supported by collaborations with local distributors and global online platforms for efficient market reach. The advanced farming techniques, complemented by governmental support and initiatives like those from Estidamah, reflect a strong focus on sustainable and productive agricultural practices. Nevertheless, while the smart farm marks a forward-thinking leap, it is essential to consider the limitations such as the high initial investment costs and the potential challenges in technological implementation in an arid environment. Future prospects appear promising as continued advancements in automation and AI may further optimize agricultural yields. Practical applications of these findings cement Nongshim's strategic positioning in international markets, advocating for broader adoption of similar sustainable agricultural technologies worldwide.

7. Glossary

  • 7-1. Nongshim [Company]

  • Nongshim is a South Korean food and beverage company known for its instant noodles and snacks. The company is focusing on strategic expansion through innovative agricultural practices and international market penetration.

  • 7-2. Smart Farm [Technology/Project]

  • A smart farm in Riyadh, Saudi Arabia, incorporating vertical farming and glass greenhouse technologies. Managed by a consortium including SFarm, ioCrops, and Pomit, it aims to optimize agricultural outputs using advanced automation and AI.

  • 7-3. Estidamah [Research Center]

  • The National Research and Development Center for Sustainable Agriculture in Saudi Arabia focuses on sustainable agricultural practices, including vertical farming to address challenges like water scarcity and poor soil fertility.

8. Source Documents