Aiming for serial growth

Al Ghurair, already a leading food producer in the Middle East, is turning its attention to its own brand, Jenan.

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By  Roger Field Published  October 4, 2006

|~|AlGhurair200web.jpg|~|Ayman Hammed: "One challenge is to make products that are being sourced outside of the Middle East suit the different needs of the region."|~|With one of the largest flour mills in the Middle East, the biggest soya bean crusher outside of the USA, as well as its rapidly growing Jenan brand, Al Ghurair is a formidable force in the region’s FMCG sector.

Ayman Hammed, the company’s group marketing director, tells Retail News Middle East about the company’s successes and how the business is facing up to the challenges of diverse consumer tastes and the growing power of retailers.

RNME: Al Ghurair has come a long way in the past few years. What do you put this down to?

Ayman Hammed: They [the directors] were visionary and wanted to provide local food at a time when everything was imported. The biggest break was starting the mill, and that started this era of food production and allowed our own brand of flour to become more self-sufficient, although this was originally on a small scale.

Early on, there was a part of the company that traded in food without even bringing it to the UAE, such as flour and wheat from Australia that is sold in Africa. The thinking was that if the company could do that, why not process it and add more value, so some foodstuff was brought here to Dubai for processing. This started with the flour and then moved to other products.

Now we process flour and oil. In fact we constructed the largest soya oil crusher in the world outside of the Americas is in Jebel Ali in 2003, and soon after, the company realised it could add more value by refining the oil as well, and so the company added a refinery and started selling refined oil to a third party.

From producing products for third parties, we thought: “why don’t we have a real brand of our own” and this is how Jenan came to exist. Initially, this brand was known as Bustan and was only available in the UAE. We then changed the name from Bustan to Jenan for most of our products. The only product that we produce that is still known under the Bustan name is eggs, and they are only available locally in the UAE.

RNME: How big is the trading side of the business?

AH: We are around a AED2.5 billion company with sales of around 2.5 million tonnes of foodstuff across the whole business. The trading business is worth around AED500 million. The processing and manufacturing side of the business eventually took over, and most of the food we sell now is processed or manufactured. I distinguish between both because some of the products are just processed, like crude oil, while others are put through further processes, such as refining.

Then we go the extra mile and put some of the food through further processes for certain third party labels, own labels or our own brands, so our branded business has three legs; one is third party, another is our own trade marks, and the third is our exclusive umbrella brand, Jenan.

RNME: When was the Jenan brand developed? How important is it?

AH: Al Ghurair created the Jenan brand about two or three years ago. We are looking to build Jenan to the Middle East equivalent of a brand such as Nestle. We think the Jenan name is so strong that it will lend itself to further expansion.

The name will be used as an umbrella under which other products will be rolled out. In terms of size, the Jenan base is quite small at the moment, but let’s say we are doubling and even tripling it very quickly. In Saudi Arabia, we went from selling 900 tonnes to 5000 tonnes of oil in one year.
We are expanding geographically and adding more SKUs and extending the brand itself in terms of sub-brands. We have an oil product group and a pasta group. Each one handles its own business, and I’m responsible for the overall strategy of the umbrella group.

RNME: What market share do your oil products have?

AH: At the moment we have around a 3% market share from the Jenan brand, coming from a standing start, although in some markets we’re much higher than others. We think that the market is moving towards favouring our branded portfolio, so instead of making generic oil and generic pasta, we are making our own.

However, we still make pasta for Panda and other big companies. We’ve been doing well making third party products so we thought why not put this know-how into our own business.

Within Al Ghurair, oil trading and processing probably accounts for about 45% of the business. The flour is also huge, and is still growing strong. It’s primarily an unbranded business. We’re into tenders in a big way and we supply other manufacturers of pasta. This side of the business is huge in South East Asia.

RNME: What are some of the main challenges that the business faces?

AH: One of our biggest challenges is how to meet the needs of different people in different continents. The Middle East is the biggest market for the branded business but in terms of where we sell products – including non-branded – it is not necessarily the biggest. We sell in Africa and Asia and we are big there.

The duel nature of the business is an advantage because it gives us access to first-hand sources, so we don’t have to buy through an intermediate. If I need flour I just go to our own mill, so the vertical integration gives us a huge advantage. Our raw materials come from all over the world, from countries including Canada, Australia, Argentina.

RNME: How would you explain company’s success to date?

AH: There are three elements: price, growth and quality. You need to give the consumer the right price but one that is comfortable for us and will generate the right level of growth at a quality that is superior to anything else available. We want to be the preferred supplier in each of our categories.

If you look at pasta you see that in each area there is a local player, but we’re the only one to cover the entire area from North Africa to Oman. We are in Saudi Arabia, we are in the Levant, and the GCC. We are just launching in Egypt, Morocco, and Sudan. We are all over the place with one brand. We compete with local and multinational players. We have one brand that stretches across all types of oil; canola, corn, sunflower, and our products are everywhere.

RNME: How do you go about promoting the brand?

We have an umbrella campaign and we use pan-Arab media. We use above-the-line, and we have a new TV commercial for oil and pasta. In advertising we spend something like US $2 million on TV commercials alone. We also do outdoor, radio, press, below-the-line and sampling.

RNME: Are there any challenges specific to the MENA region?

AH: One challenge is to make products that are being sourced outside of the Middle East suit the different needs of the region. It sounds easy but it is not, because the people of Egypt are different from Saudi Arabia. It is not just people of the Middle East because, for example, we supply flour to Indonesia and we get the flour from Canada.

We mill it here and then we ship it to Indonesia. We are Middle Eastern by the fact that we exist here but our scope stretches from the Far East to North America.

RNME: How do you address this particular challenge?

AH: We have to be very close to consumers and we have to know what consumers want. We spend money on research and we look at the trends to understand the market. It’s not easy and you can only do it by staying close to the consumer.

RNME: Do you think there should be more consistency in regulations between Middle Eastern countries?

AH: We are dealing with that challenge like everybody else. We take it on a country-by-country basis. All sorts of regulations differ: In Egypt, Morocco and Algeria you have to list the products’ producer, country of origin and importer. Then there are sell-by-dates.

In some countries we have one year, in others we have two years – even though it’s the same product with the same specifications. It adds to the costs of production because you have to make separate packs. It is not easy having so many small entities and everybody is vying for their own regulations. Obviously if there was more synergy between the GCC countries or a common market in terms of regulation, free access of goods, it could make everybody’s life easier.

RNME: Many brand owners complain about listing fees? What’s you opinion as a brand owner and food producer?

AH: Supermarket listing fees are exorbitant. It just does not make any economic sense. I think these fees are becoming a source of income for some supermarkets more than anything else.

Supermarkets make money whether they sell an individual product or not, because there is the listing fee and then there is rental and you have to pay both. Even if you de-list something there is also a fee.

It puts us on a minus when we go for a launch and you have other expenses. It’s in tens of thousands of Dirhams for a country like Saudi Arabia because you have to pay for each SKU in each store. There is a trend where the centre of power is moving from the manufacturer to the retailer. The retailer now has power in terms of extracting the rents that they want on the products that they want.

This has to be looked at as a movement. Before, the producer was the one who controlled. In Europe now, the centre of power has already shifted.

RNME: How do you deal with this?

AH: By relationship building and incentives. You have to put the business case to the supermarket that by putting this product on the shelf it will generate so much turnover that it is money in the bank.
Aiming for serial growth

RNME: Do you think this is harmful for production? Could it lead to fewer products coming to market?

AH: In a way it is because in any free market, business thrives on free competition, but when the market starts to dictate terms, then you have to question whether the consumer be served by having four brands instead of 10?

RNME: How about in terms of the products. What challenges are you seeing?

AH: The biggest challenge now is that oil has turned into a commodity, because of house brands and a perception that there is little difference between oils.

However, we know that having the right quality standards and putting in the right oil from the right countries makes an enormous difference to the quality of the final product. Right now I can get corn oil from six or seven locations but I choose to get it from a location like the USA, which produces very good quality corn oil.

The refining process is also important – what processes are you using, what chemicals are you using, how are you cleaning the oil, how are you cleaning it and filtering it? The challenge is educating people about this and making them respect the fact that there is a difference.

RNME: How are you communicating this to the consumer?

AH: That is really the biggest challenge because people are obviously becoming more price conscious and we are charging a premium. We are not the most expensive on the market but we are giving people good value. We have a line that is double-filtered and it says so on the pack.

This is a very simple, basic thing for customers to understand. It’s a simple thing for us to say. Other aspects of our production would be more complicated to communicate, but this is a simple and effective thing to say. We also use point-of-sale materials such as neck hangers to promote our products.
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