Fame Fortune and Franchise

Mohammed Alshaya has become one of the world’s most powerful Arabs by securing many of the top retail franchises on the planet, and bringing them to the Gulf. He now has his eye on aggressive expansion, including into Eastern Europe. Everyone knows how successful his group M.H Alshaya is, but what really makes the man himself tick? In a rare interview, he speaks to Anil Bhoyrul.

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By  Anil Bhoyrul Published  September 24, 2006

|~|Mohammed-Alshaya-200.jpg|~|Success: Mohammed Alshaya has managed to build up one of the biggest retail giants in the Middle East. But he plans to get even bigger.|~|Mohammed Alshaya has become one of the world’s most powerful Arabs by securing many of the top retail franchises on the planet, and bringing them to the Gulf. He now has his eye on aggressive expansion, including into Eastern Europe. Everyone knows how successful his group M.H Alshaya is, but what really makes the man himself tick? In a rare interview, he speaks to Anil Bhoyrul. Half an hour into the interview with Mohammed Al Alshaya, we get down to the nitty gritty. The subject of money. Just how much profit does Al Alshaya’s sprawling, spectacular global retail empire really make? “I don’t want to tell you because you will be disappointed. It’s quite little actually, but it pays the bills,” he says. As with most things in Alshaya’s life, modesty prevails. The boss of Kuwait’s M.H Alshaya was earlier this year registered as the 16th most powerful Arab in the planet. He employs over 7,000 people, and owns franchises in the region for some of the world’s biggest brands, including Starbucks, Next, Debenhams and Top Man. A massive expansion plan for the year ahead is underway, with 400 new store openings in the pipeline. Russia, Turkey and Poland are latest countries to fall under the Alshaya umbrella, and last month Swedish giant H&M opened its first store in the Gulf - again, thanks to a franchise deal with Alshaya. But as for Alshaya himself, you are more likely to find him wearing a pair of jeans and T-shirt, wondering around a European city, getting a “feel” for the market. “It’s flattering when people in power respect what you do, but me personally? No, I’m not powerful. I don’t even want power, I just want to feel stimulated. And I do that by looking around new places, blending in. Yes, I do walk around in jeans and T-shirts in new places so I can decide for myself whether the Alshaya way of working can make a difference there.” Making a difference he is certainly doing, and arguably his company M.H Alshaya is having a bigger impact on the world’s retail industry today then at anytime since it was formed in 1890. The arrival of Swedish retailer H&M in the Gulf is a move into low cost shopping, while earlier this year UK based chemist Boots was signed up to roll out several stores across the Gulf. Back in 1985 the group had just four stores in retailing, preferring car dealerships and real estate. Now the 45 year old runs more than 600 franchise stores and is even getting his hands into the food business. Marks & Spencer foods are coming to the region this year, while a deal is being penned with “a very big food retailer.” It is non-stop, aggressive expansion – and pretty risky too. And Alshaya knows it. “Of course we are aggressive and I am happy with that. And yes, it is very risky. That is why we are diversifying not just our products but our markets. If we have a bad time in the Middle East we will still be safe because we have interests in other places. That is why we are opening stores in Moscow, in St Petersburg and in Warsaw. It is why we are always looking for new markets. But I know things can go wrong. I have made mistakes before – in one year alone I once had to close 50 shops. Things didn’t work out in some cases, because our shops were affected by other factors. The important thing is that your mistakes can be tolerated and that you learn from them.” The Alshaya family has done its fair share of learning. Mohammed Hamood Alshaya started the company in India 150 years ago, and Alshaya is the third generation of that family. He studied at Kuwait University, and went on to attain an MBA at Wharton University. But he is keen to stress that it has been no easy ride. At the age of 24, he spent three months working at Mothercare in the UK, before heading back to the Gulf to continue his shop floor training. “I didn’t just go to university and then land in a fancy office one day,” he says. “I had to work in a warehouse. I had to do all those things you really need to in order to understand the business you are in. I went to showrooms, I fixed appliances. Studying at Wharton taught me a lot of things, but the really important training comes with living. Long before I was studying at university, my father taught me the value of working with good people, and treating people well and taking care of them. One year in the seventies, I remember things were really bad for the company and we had to borrow money to pay the staff. It taught me the importance of having strict rules so you make sure you pay people on time, even before time if you can – because I know what it’s like when that doesn’t happen. It is very difficult to build a reputation, but very easy to lose it.” M.H Alshaya’s early experiences were in real estate, largely to service the needs of the growing oil industry. In 1965 it opened its first hotel, the five star Sheraton (the first Sheraton outside the US) but given its policy of not opening outlets were alcohol is served, didn’t move much further down the hotel road. Through the eighties, the fresh “graduate” Alshaya became involved in attaining franchises for the company from around the globe, and by the end of the decade has taken on the role of chief executive. But just as things were beginning to take shape, disaster struck. In 1990, Iraq invaded Kuwait. The company’s car dealerships were badly damaged, and its shops and warehouses looted. Alshaya himself – on the instruction of his family – left Kuwait and began managing the business from Riyadh and Dubai. “It was a very difficult time. A very big shock, especially for all the people who worked for us. In one single day, we had to shut down everything. We lost a lot, and we had to learn about rebuilding very quickly,” he says. That he certainly has done, and even by his own admission, “beyond what I imagined we could do.” However, success, as so often in business, brings crisis. M.H Alshaya’s securing of the Starbucks brand across the region has turned out to be one of its most successful ever. But it also drew criticism given the ethnic background of Starbucks founder Howard Schulz. Most of the critics of course completely missed the point: Starbucks Inc is a massive public company with shareholders from around the world, including many from the Middle East. Yet even know, Alshaya is unhappy as the criticism he attracted. “That is rubbish and unfair and wrong. It is stupid, stupid, stupid. Starbucks Inc is not attached to any kind of politics and people who say that are stupid and ignorant. A lot of Arabs have shares in Starbucks. The things that were said were malicious and should not be tolerated. You see, when you are a big brand like Starbucks then people become envious and try to stab you in the back. They become envious of your success. I mean, look at the trouble Coca Cola is having in India, and some of the things people there are claiming. Again, it is stupid and it is malicious.” He adds: “The retail business is generally populated by humble and simple people. There is no place for arrogance.” Arrogance is one thing nobody can accuse Alshaya of. Persistent and persuasive yes. H&M’s billionaire boss Stefan Perrson, during a visit to Dubai last week, was full of praise for his “friend” Alshaya. He tells Arabian Business: “Mohammed has been trying to get me to come to the Gulf for many years, and I couldn’t say no. He is very charming and very persuasive, but he knows exactly what he wants and he knows how to get it. I think he is one of the finest retailers anywhere in the world. That’s why we chose to do business with him.” There is no difficulty finding compliments for Alshaya, seen by many as a rare combination in business – extremely sharp and focused, but genuinely humble. Having done so much and still only 45, the big question is where next? Alshaya says there is hardly time to think. Apart from H&M and Boots, the group is also close to wrapping up a similar deal with Gap Inc., the largest clothing chain in the US, to open Gap and Banana Republic stores in the region. This would be Gap’s first deal to franchise its stores outside the US, as the company owns all of its stores in Canada, Germany, Spain and the UK. “This year, we are looking at [opening] 10 [branches of Boots], but over the next five years we’re looking at [opening] around 200,” he says. The company is planning to develop the Boots brand in the region over several stages. In the initial phase, Boots stores will be opened in Dubai and Kuwait. “Boots is the first chain of drugstores that will be professionally run in the Middle East,” he says. The products will not necessarily be imported, but also bought from local manufacturers. What we are going to offer are careers, training, job creation for young pharmaceutical [graduates]. It will be good news for these people… creating up to 4000 jobs, a good offering for the consumer and also a good value for money.” Value for money appears to be the key. Friends of Alshaya describe him as “Richard Branson without the fanfare.” And like Branson, there is no day complete without endless proposals and ideas being pitched to Alshaya. Every financier and budding entrepreneur wants a slice of the Alshaya action. So far though, he has resisted. The company is run under tight rules. Despite the family ownership, there is a strong team of professionals at the top – from outside the family – with full autonomy to make decisions. “The proof of that is that this year, I take a two month vacation, going all over the world. Two months heh! How many other people who run big companies can go away for that long? I can. It is because I trust the people I have delegated work to, and they have the power to make decisions.” And there are some big decisions to be made in the coming months. Although annual revenues are above the US$1 bn, continued expansion means that M.H. Alshaya isn’t averse to seeking outside capital. He says there are no plans for any kind of public flotation as “the reasons you do that don’t exist.” However, Alshaya admits that there is a chance of outside investors coming in to take a stake in the business. “What we want is stability, not people looking for a quick profit,” he says. Alshaya himself is rather coy about what drives him personally. “I suppose, to be honest, I am the sort of person who gets bored very quickly. I always want new things and new ideas. That is how I get motivated. I have to be around creative people. But don’t get me wrong – I actually think I have the best job in Kuwait.” He adds: “As I said before, I don’t consider myself powerful. But what we do is powerful, because we create jobs. Retailers are the largest employers in the world. Look at Wal Mart. They have 1.7 million staff – that’s more people than many countries. And if you look at what we do, it makes me feel good. People can sit in Starbucks all day on nice sofas and read the papers for free. We are giving them a chance to do something that maybe they can’t do in their own house. That is power, but not me, I don’t have it.” So what does Mohammed Alshaya himself actually want most from life? He pauses for a moment. “Not power. Not money. Success yes, but most of all? What would I really like most of all, more than anything? I would like more time, more time for myself. I get so busy these days. Yes, more time would be nice.” There is little chance of that happening in the near future.||**||

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