Aiming for perfection

For the Modern Bakery Group, attention to detail and an emphasis on quality control is proving to be a key business asset.

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By  Roger Field Published  April 9, 2006

|~|MGT-200.jpg|~||~|Since its formation back in 1975, the UAE's Modern Bakery has become one of the region’s largest and most modern bakeries. Its daughter company, Modern General Trading represents more than 28 international food and non-food companies and supplies goods to all the major hypermarkets, Co-ops, four and five-star star hotels, airline companies, catering firms and supermarkets, among other organisations.

Dr Fawaz Al Bahri, director and chief executive, Modern Bakery and Modern General Trading, tells RNME about the company’s development, the importance of quality control and why supermarket listing fees could be acceptable if managed in fairly.

RNME: Modern Bakery is reputed to have been the first industrial bakery in the UAE? Would you agree with that evaluation?

Al Bahri: Modern Bakery was established in 1975, when bakeries were usually very small. They used to produce in limited space, with a mixer and an oven. While in the West artisan bakeries had transformed into industrial operations decades ago to cater to the growing demand of their local and foreign consumers, in the Middle East, the artisan bakeries persisted throughout early 1980s.

When I took over in 1982, Modern Bakery was still relatively small without any key focus on product lines and on the future requirement of UAE's consumers. We started identifying future demands of the market and the aim of transforming our artisan bakery into hi-tech industrial bakery was clear before us.

RNME: How did the company become one of the region’s biggest bakeries and food companies?

At the beginning of 1980s the demand for bakery and confectionery goods in the UAE increased tremendously. The UAE was aiming at high level of quality and services in all sectors. At this time there was a need for manufacturers who could supply high quality products.

In 1991, we decided to set up a new production line to allow us to supply buns to international fast food chains. With the induction of this line, we became a big player and from that day until 2006 we have made a lot of improvements. We have added one more line and we are now also supplying confectionery items to high-class coffee shop chains.

RNME: Has gaining quality control accreditation been a cornerstone of the company’s development?

We have been audited by international institutions since 1985, and this has allowed us to gain approval to supply all fast food chains across the GCC, as well as other international organisations.

That was long before the municipality started to encourage companies to gain any accreditation. In 2004 we became the first bakery in the Middle East to gain HACCP certification for all of its products. This is a food safety accreditation and stands for Hazard Analysis & Critical Control Point.

We have about 800 products and we are HACCP approved for all of them. HACCP system assists and helps us to prevent unhygienic conditions through the chain of supply, starting from the storage of raw materials through the production process until the goods reach end consumers.

We have a team of 22 specialist staff members who work round the clock to make sure that we maintain the HACCP standards. We undertake various lab tests, such as taking swabs from utensils and workers' hands, water test periodically and hold the different documentations etc.

It has now become a requirement of the municipalities in the UAE for companies involved in the food sector to have HACCP accreditation, and they have been given a deadline of June 30, 2006.

RNME: You must be gaining a lot of business from having this accreditation in place at an early stage?

We are not having full benefit out of it as yet, because the most important criteria for many customers remains price. A product produced by a HACCP approved manufacturer is certainly more expensive than the same product produced by a non HACCP approved supplier. Unfortunately most of the customers are not ready to pay little higher price for this fact. The prime reason is that the awareness and significance of HACCP is not yet well spread among most of the customers.

To achieve HACCP and maintaining its standards is costly and this reflects on the product cost. For an organisation like Modern Bakery it is a must to ensure that food processing and handling is done under strict hygiene control. We are known for that.

RNME: But it must have helped you gain some business?

It brought us to the level of Singaporean and Australian competitors when it came to
a tender for a company supplying the US army. We needed HACCP approval to participate in such tenders.

For us HACCP was a must out of principle, now it is a must because of regulations. It is the only way for us to survive in this market. If you want to be a special player in the market you must adapt to the international standards. We scored best in a blind test by Burger King in London three times in a row. Based on our quality standard we are exporting to Lebanon, Africa, Afghanistan, Bahrain, Oman and Qatar.

RNME: What is the most important side of the business?

While we were developing the company we realised there were many raw materials that had to be imported directly by us, otherwise we had to rely on other distributors – and a gap or shortage would create a disaster for us. Therefore we started to strengthen our trading division. That was in 1985. Now our trading division has become the biggest contributor to company’s total business. About 60% of the total turnover is generated from the trading arm of the group, which is Modern General Trading.

MGT is further divided into four divisions: a consumer division, an industrial division, a hotel division and a non-food division. We represent about 28 internationally reputed companies. Our strong and well-managed network helped us gain exclusive distribution rights from all round the word.

Our consumer division represents branded consumer goods. We are exclusive representative in the UAE, and in some cases for Oman as well, where we are appointing a sub-agent. The companies whom we represent are highly specialised in raw materials and ingredients for the bakery, food industry as well as consumer products.

RNME: What products have a good market share in your portfolio?

We are definitely the largest player in bakery ingredients, starting from yeast and ending with flavourings. We supply to bakeries, food manufacturers as well as the food service sector. We have a market share of at least 58% for instant dry yeast. On some items we have maybe an 80% market share.

In the consumer division, besides our other brands for retail market, we have about five leading brands which can be ranked as top-selling in their relevant category. For example SIS from Singapore in retail pack sugar section, Happy Cow from Austria in the cheese section, and Langnese honey from Germany in honey section. In olive oil we are also one of the top three players.

Although we do not claim to have many brands in our portfolio, shat we do have is all in the upper range; we are concentrating on what we have and not on collecting brands. Our aim is to support our existing portfolio and assure a constant and steady growth.

RNME: How do you go about developing a brand?

We keep very close eye on the economic statistics. We always target to stay either abreast with the economic growth or a step ahead. If we see the population is growing by about 5%, then we should expect an organic growth of at least 5%. In the process of brand developments, we add new SKUs from the existing brand. For example, at one stage we had only clear honey from Langnese, then we added black forest, royal jelly and other varieties.

We can also increase the market share of existing brands by the way of implementing innovative marketing techniques. Frequent feedback from trade and consumers help us design the correct modus operandi. Our customer service and good relations with our customers has so far helped us a lot to develop the many brands we deal in.

RNME: Do you work closely with the brand owners of the products you represent?

A close co-ordination and exchange of views with our principals has proved successful in most of the cases. We co-operate very closely with the manufacturer. We don’t want to gain experience through trial and error, because this could have a negative impact on the brand. We plan any developments very well.

Before we start any new line extension we make sure that the surveys and the market studies are completed and the new product has a very good chance of success. The experience of brand owners from other international markets also helps us know and design our brand development strategies in advance.

RNME: You obviously have to work closely with supermarkets. What is your opinion of supermarket listing fees?

Of course listing fee is a burdensome on suppliers. The listing fees can be considered as justified if taken in full fairness as suppliers participation to the operational cost of supermarkets such as rent, electricity and staff.

In other words, the retailer is having a saving in his operation cost due to this participation and this saving must be passed on to the end customer. The adverse effect of listing fees is when the funds generated against listing fees are incorporated to make larger year-end profitability of the retailer.

RNME: Do you think listing fees keep some smaller players out of the supermarkets?

No doubt the listing fees are in favour of large companies that can afford them. A newcomer, if they are small, will have a very difficult time. But listing fees can have an advantage, which might sound controversial: they contribute to reduce the price for the consumers. Theoretically, listing fees reduce the retail price because they help cut operational costs for the retailer. Listing fees are also a result of over competitiveness of suppliers. It's a war for entry of products onto the shelves, which allows the retailer to demand a fee.

RNME: Some retailers are talking about cutting out distributors and importing goods directly. What do you think about that?

We don’t mind suggestions from retailers that they plan to import directly. If they try, they will see how difficult it is and how much more expensive it will be. Let them take the expiry date problem, for example or deal with the insurance problem that accompanies a lost shipment. You never get something for free in life.

It is against the law of nature that a person thinks he will do farming for his food, weaving for his clothes, and tanning for his shoes to avoid other costs. Every human being has his limitations and capacities so we are very much dependent on each other.

RNME: What plans are there for the future at the Modern Bakery group?

We are consolidating our Dubai operations. We are planning to move to Dubai Industrial City. We have signed an agreement with Dubai Industrial City for 1.2 million sq ft of land. We will be concentrating all our activities in the new premises. It will be our main office, production, warehousing, store and distribution centre.

We have our warehouses in Abu Dhabi, where we also have a factory. We have our warehouses and sales offices with sales teams stationed at sight in Ras Al Khaimah, Fujeirah and Al-Ain.

Ambitions are never ending and the pace of development in the UAE is pushing on all of us to be pro-active, creative and to plan for the future. To be satisfied and stay where you are is equal to sinking. In Dubai you either have to move forward or quit. You cannot stay where you are or you will disappear.||**||

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