The entire Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) region is integrating. How is it beneficial for businesses in terms of opening new markets for export and import?
It is fantastic. We have a number of factories, and export approximately 70% of what we make. The non-oil industries are very much appreciated and sought-after, particularly food and drink. Throughout the Middle East, everybody wants Saudi-made food and drinks. The Saudi food and drink brands are highly respected and sought-after. They are very popular in other countries so Saudi Arabia has developed a fantastic brand equity that is increasing. If that is supported and nurtured more wisely and more actively, that becomes a major asset for the future. Unfortunately at the moment, each individual has been left to his own devices.
Your business started 131 years ago. How has the evolution been, parallel to the growth and evolution of Saudi Arabia?
Yes, we started in 1881. From the early days it was a low, steady growth that became parabolic from the 1970s onwards as the boom started in Saudi Arabia. From that point onward, everything in Saudi Arabia grew phenomenally. The growth has been increasing in the last five years.
Your partnership with Unilever goes back almost 80 years.
Yes, back to 1933. The company started by distributing starch for CPC, which became Best Foods, which became part of Unilever. We import starch and corn oil, and the purchase of Best Foods by Unilever gave us the opportunity to buy outright the Mazola brand for the Middle East. We produce corn oil under the Mazola brand and sell it to 25 countries in the Middle East.
We started representing more brands from the 1930s through to the 1970s. Then in the 1970s we started to build factories. We added powdered detergents, soaps, shampoos, and other products with Unilever. Then soft drinks with a Danish company, matches with a German company, and then corn oil processing with an American company. We built an ice cream factory but then we closed it down and moved it to the Emirates. We had a tea factory in Riyadh, which closed down and moved to the Emirates, and has become one of the largest tea factories in the world. As part of a joint venture with Unilever, it supplies about 30 countries around the world.
Is your business model always a joint venture with a foreign company?
Industries, yes, we have always done a joint venture with companies that have know-how and technology. Having the brand name is important, but more important is the know-how and technology to accommodate ongoing innovations and improvements. Such innovation and constant improvement has led to a situation where there are basically two companies in the world that dominate this industry: Unilever and Proctor & Gamble. Both companies invest a lot in research and development.
How do you find the niche in the market?
A lot of the products and brands have been continuously developed over time since the 1970s.
Sometimes it works, and sometimes it doesn’t. My oldest brother was the first to introduce long-life milk, by LLOYDS dairies in Wales. But then a Danish company setup local factories here so we stopped importing milk from Wales, because making it with local water is more competitive. We were also the first to introduce non-alcoholic malt beverages, and to this day we are the brand leader. We used to bring it from the U.S., but then the alcohol content started to vary. So we sought out a Swiss company that was able to make zero alcohol beer, Moussy, for Saudi Arabia. We have also been working with Kellogg cereals for more than 30 years.
We have many longstanding relationships like this where we have been able to develop the brands with the actual brand owners. Our skills set is being able to import, distribute, and develop brands with the brand owners. The concern that people have is that when Saudi Arabia signs up to the World Trade Organization (WTO) that brand owners will have no need for local knowledge or expertise. We have to make sure that the principles receive quality service for their payment. Added value is the name of the game. Unless we add value, we are obsolete.
How have you contributed the globalized consumption here in Saudi Arabia, in the sense of providing more opportunities and options?
We were the first to start the concept of modern retail supermarkets. Modern retailing started 32 years ago in Jeddah, where we had the first self-service modern supermarket. At the time it was a wonder to behold, and since then there have been hundreds of copies. We are no longer in the supermarket business, but it was a catalyst that set off others. We are importers and distributors. Fifty years earlier my eldest brother introduced direct van selling. That was such a disruptive activity that all the wholesalers in Jeddah went to my father and complained that my brother was being unfair. But in reality it was an innovation that transformed the market and created an added value. Since then we and other people have direct distribution to make availability more efficient.
Equally luxury retail clothing was available here in the 1980s in the form of ‘end-of-run stock’. Our company was the first to actually be engaged in setting formal, high quality, Western-style, Bond Street branding of luxury goods. We have been doing this now for almost 35 years, and we are the leader in luxury retail in Saudi Arabia. We always seek ways to improve either the most efficient or most enjoyable way for our consumers to find what they need.
What are the benefits of having a family business?
Passion, with capital letters. Without passion, nothing has any value. A robot has no passion. If a human does not have passion about what they do or what they believe, then they may as well be robots.
Did you grow up with the business, or did you work outside, gain experience, and then return to work with the family company?
As a young boy, my holidays were spent working in various parts of the business. Later at university age, I was sent to work with other businesses. I spent a year working as a tea taster with Lipton in Paris, and six months working with the inventers of long-life milk in Wales. Then during university vacation, I spent time with various companies learning their operations.
Although you can learn a lot from multinationals, the passion comes from having something that is your own.
Either people have passion and they succeed, or they lack passion and they wilt away like a plant without water. You either have passion for what you do, or you should find something else to do. To do something that you are not passionate about is a sin.
In 2007 the CEO of Unilever came here to celebrate the 75th anniversary of your partnership. What has it meant to you personally?
He also came in January and then last year in 2011, so he comes regularly. We have also had a number of senior people take over the position of Chairman of the Arabia Joint Venture, because it is very important. This is one of their most significant and profitable markets. These local chairmen have since gone on to head important operations in markets like the U.S. and Europe, and category divisions such as ice cream.
What is the expansion plan for this company?
We focus in Saudi Arabia. There is a saying in Arabic that if you put money somewhere other than your own country, it is like bringing up somebody else’s child. We are passionate and focused on Saudi Arabia, which is our core competence. We stick to what we know, and what we are good at, and that is Saudi Arabia.
Are there any plans for expansion within Saudi Arabia, such as bringing new brands to the market?
It happens, but equally within Saudi Arabia, we focus on our core skills set, which is industry with partners, warehouse distribution, logistics, and sales in Saudi Arabia. Saudi Arabia is a big place, which is bigger than the U.S. east of the Mississippi and bigger than Western Europe. From Jeddah to Damman is the same distance as London to Rome. We basically have a distribution network that covers the whole of Western Europe, and we move things across those distances better than anybody else, so that our partners remain with us. We are open to real partnerships, but it has to be in what we do. We specialize in fast-moving consumer goods, particularly in groceries.
What do you think is missing, or what can be further exploited from the private partnerships between the U.S. and Saudi Arabia?
The U.S. can sell a lot more to Saudi Arabia, and Saudi Arabia can buy a lot more from the U.S. For instance, we have been working with Tyson Chicken for 30 years, but for the last five years I have not been able to import as much as a drumstick from the U.S. Saudi Arabia insists on vegetarian chickens, and chickens by nature are not vegetarians. For some reason somebody decided that chickens have to be vegetarian. The yield for chicken is cut by half if you do not feed them protein, so the cost doubles. Now nearly all our chickens come from Brazil, but I do not know how they do it. If you do not give a chicken protein, it takes them 25 weeks instead of 16 to be ready for market, which doubles the cost.
So lowering barriers and restrictions would help the countries to trade more?
No, Saudi Arabia is part of the WTO, and customs barriers have come down. But like a lot of third world countries, there are non-trade barriers. The WTO is great but it only controls customs duties, not trade barriers. This happens in Syria 12 miles after you cross the border. Two years ago the Kuwait government started giving away cooking oil free of charge to all Kuwaiti citizens. That is a trade barrier if there ever was one. We were able to continue selling because we sell a premium product and the well-off didn’t like the idea of using free oil, and bought our product.
What is your perspective on media nowadays? How do you feel it portrays the right or wrong image of a country like Saudi Arabia to the world?
Today everybody is going on Al Jazeera whether it is good, bad, or causes revolutions. Who knows? Media is very influential. Saudi Arabia knows that, and that is why Saudi has entered into media in a strong way.
How do you think the media can change the perception of a country?
CNN came to life 30 years ago in 1982. When it started everybody thought, “who would want to watch the news 24 hours a day? Impossible. There is not enough news to fill that time.” But CNN became the only news source for everybody in the world, and everybody saw the world through the eyes of CNN. That became emphasized in the First Gulf War in 1992.
It was so important and influential that a request came through after the First Gulf War to fire a New Zealander employee of theirs because it was thought that he was too sympathetic to Iraq and Saddam. Since then at least 10 people have been fired or resigned from CNN because one country or another felt that the reporter was being unprofessional in their viewpoints. The big lesson was learned so many other countries now have their own news network; Al Jazeera, Al Arabiya, and more importantly, the Fox News after the right wing in America felt unrepresented by liberal media. They use that network to promote their own points of views. So, is news fact, or is it opinion? If news networks have political opinions, then they are no longer fact. It becomes more fiction than fact. Or in the case of Fox News, you can misquote something so badly that it is almost an outright lie, and not be ashamed of it. Media is very influential.
What should Americans know about Saudi Arabia?
Saudi Arabia is a safe place for all people to visit. Many times I have to go to Dubai to meet important heads of companies coming to visit, because they seem to think that Saudi Arabia is a dangerous place.
What do they fear?
The cost of insurance is based on a perception, so the premium is very high. Dubai is much lower, so they go to Dubai. If you only get sound bites from CNN about what is happening in Iraq or Syria, Saudi Arabia is the same rough neighborhood, so to speak. People do not seem to realize how large the Middle East is, and how much space there is in between. But people are not familiar with these distances, so they fill in the gaps, and the picture they get is trouble. The more information you have, the better you are able to navigate in the gaps. The perception cannot be changed without experience.