The Maman Group’s Cargo Terminal provides Israel’s leading storage, import and export services. The terminal, located in Ben Gurion Airport, was established in 1974 and conveniently unites all of the various organizations that deal with cargo under one roof. CEO of Maman Group Opher Linchevski talks about how the company has managed to double turnover in the last five years through diversifying its operations.
The Israeli economy ranks among the fastest growing economies in the world in the OECD, way ahead of heavyweights such as Germany or the United States. In your opinion, what are the factors that explain both the resilience and the success of the Israeli economy?
In our company, we manage around 60% of the total import export transport by air. From that point of view, we have a very good sensor regarding what’s going on in the economy.
The main reasons are generally speaking innovation, hi-tech. From my point of view as a logistics service provider, exports in technology are huge. As an example, in the first 6 months of 2015, the figure for technology start-ups exits was $5.5 billion sold to major global companies. The Israeli economy is not a giant one, with only 8 million people, but the figure of $5.5 billion is very important regarding the size of our GDP. In the cargo terminal in the airport we see it more physically, the devices, the products of hi-tech, which are less depending on labor force and more depending on innovations and equipment.
The competitive advantage of Israel is a unique productivity. The uniqueness of processes, devices or patents, clearly we see it. Regarding the export statistics of Israel, certain segments of hi-tech have grown by 11%, which is a very relevant figure compared to the overall export figures of Israel, which this year were not good at all. The economy grew only by 2.5% last year, very low for Israel compared to other countries.
Education and even culture of innovation are other factors that may explain this success you mentioned before. People that are now graduating from University, in a large percentage, say their dream is to make a successful start-up, which is unique compared to other countries.
Israel is an island in terms of transportation, as there is only inland ground transportation. How do you assess the specific shipping and transportation sector in Israel and your expectations in the medium term?
Geographically, Israel is located perfectly. On the Mediterranean, half way to Asia and located in the Middle East. Sea ports of Israel could be the entrance for the whole Middle East, but practically we are an island, even if we are in peace except with the North, but the security situation is volatile and fragile. All logistics depend on sea and air because we cannot depend on a normalization of security. From that point of view it is also very unique. There is practically only one major airport: Ben Gurion and two major extensions on the two sea ports is on its way. The Government is doubling the capacity of the Ports with developments of around $2bn to be completed by 2020.
We try to stay competitive. If we take the example of other countries, 90% of the transport is by land, and Israel has to stay competitive even if transports are by air and sea. Tomatoes, flowers and products which are not expensive are not easy to sell internationally. We need to stay competitive in terms of production, and are becoming experts in niche markets, such as surveillance measurements, tracking measurement, temperature control solutions, safety security… anything you want to know about your cargo, I could say we are real experts. This type of expertise is growing as a global trend and we try to export our know-how, and we do it. We transfer military technologies into civil services all the time as an example.
Maman Group was established in 1974 as a public company that shifted in 1989 into a private company. What are the reasons of this change and also the reasons of the diversification of the company into other logistic services, railways maintenance, limousine services and others?
The Government has generally been liberalizing the market in the last 20 years. Maman was a monopoly until 1989 and the Government decided to introduce competition into the market a few years later. It is a global trend, and I think it’s good, I must say.
There was an IPO in 1989, and Taavura owns the majority of Maman with also EL AL, that owns 15% of the shares.
We compete in the Ben Gurion airport with the biggest company in the world, which is Swissport. It is a challenge to compete with them and I think we do it very well. We manage 60% of the total Israeli market in 6 years of competition since 2007, when our market was liberalized.
Diversification was crucial for the survival of the group, as simple as that. Even if we succeeded to manage the majority of the market, margins decreased, and the air cargo is not making a profit today, even if the oil prices went down. The market is very competitive and it’s a great networking area, with clients such as Air France or KLM, but it’s not a “money-maker”. A few years ago we decided to diversify, and at since that moment, Maman has doubled itself and the air cargo is now 17% of the total Maman portfolio., accounting for 0% of the profits. Air France KLM, for example, is a great long-term client and if they decide to outsource the cargo management in some city such as. Sofia or Bucharest, we have a good chance to get it, so air cargo gives us a great networking and blue chip clientele. Teva, the pharmaceutical giant, as another example’ we serve in the airport, but also provide refrigerated services, hazardous materials services, climate control devices, and a lot of processes they require all around the world.
If I had to define the company in one phrase, I would say sophisticated logistic services. We are also based in Europe in Czech Republic and Bucharest. We use the strength of the group to get agreements with various global groups that work with us because of the group’s presence and our strong local managements
What’s your expansion strategy in other markets outside Europe, especially in the United States?
We will go for good opportunities in Europe in airports, especially in Central and Eastern Europe to introduce our know-how and our financial strength to be visible. We try to focus also in specific areas in where we think we are unique, temperature control logistics, hazardous materials, etc, where we have a good know-how that we try to export.
The US market is by far the biggest export market in the Israeli economy. We focus much on China too, but commerce wise we are very active there. Eight of our airline clients have a regular line of massive planes to New York. Regarding logistic services over there, we need to be competitive in price and in terms of services. We provide really specific services where we can introduce uniqueness in the American market, like those I mentioned before such as recycling, temperature controlled devices, specific and technology related projects to global players.
You’ve headed the company since November 2010 and you have a vast experience in the transportation industry. What motivates you to work every day and what are the achievements from which you are most proud of?
After working in the Israeli Railway company, a public company, I moved to Europe in a completely different private business unrelated to Israel and related to the development of shopping centers and then I came back to Israel to a private company -- totally different again. I decided to come in only one day from Amsterdam to Lod, a major change.
Maman doubled itself in the last 5 years, both by volume and by profits. My job is to increase profits, to be unique and to be innovative. The owners are professional and ambitious people, and asked me for an ambitious expansion plan. My main question was: “would you let me go for such expansion with full engines ahead?”
They said yes, we had to diversify and five years after, I am here with a much bigger and diversified group. I’m proud to say that most of my managers are better than me in their expertise and I have a wonderful professional team that manages 3,000 employees and let me take care of business development. This is what excites me, and as long as they let me go ahead, I’ll do that.