Agriculture: Saudi Arabia not suitable for agriculture due to lack of water

Interview with Seifallah M. Sharbatly, Deputy General Manager of Mohammed Abdallah Sharbatly

What are the positive changes with Saudi Arabian agricultural policies? What is the outlook for the sector?

I think that the water policy in Saudi Arabia has changed in the last few years, as we soon realized that we don’t have enough water to support all the agricultural products that we were growing. For example, we were growing alfalfa wheat for animals, which we learned required a lot of water, as well as wheat and potatoes. These all required a lot of water, which is already very scarce in Saudi Arabia. My point of view is that we shouldn’t waste this water on planting agriculture products in Saudi Arabia. The agricultural sector needs to start looking for items or products that are suitable for our weather, soil, and water resources. I think we should revise the policy for all products, even dates and watermelons, which actually needs more than 150 liters of water for one watermelon – imagine if you had a field of water melon!

One of the changes in the policy was that Saudi Arabia tried to secure land outside of the country in African countries?

There are more than 25 countries that are listed in this policy where we can go and grow for strategic reasons; some of these countries are in Africa. I think it’s a good idea, but it has a lot of disadvantages; for example, if you have rice farms in Ethiopia, and there is a big famine in Africa, I don’t believe that you would be able to export this rice out of Ethiopia or Africa to Saudi Arabia. It’s not that simple.

What’s the best way for Saudi Arabia to diversify this risk?

One of the ideas is to plant farms out of the country, but the only strategic reserve you have is the dollar. Then, you can purchase anything from all over the world. Going to Africa and other countries, there are a lot of political risks there. Sudan was one of the countries that was promoting and cultivating thousands of acres of land for Saudi Arabian agricultural companies. When the Saudi investors paid money and went there to work and start businesses, the political situation wasn’t stable and a lot of Sudanese reclaimed the land for themselves with their guns. It wasn’t a pleasant experience for the Saudis. One of the most important things you should look at before investing in agricultural is the political situation in the country; agriculture is very long-term investment, it takes at least 20-30 years to establish your company and products.

How is doing business in Jeddah different from other regions in Saudi Arabia?

Jeddah is different because it’s been a trade port for more than 1,400 years. Our existence depends on trade, and we were the hub between the east and west. The people in Jeddah are more open and hospitable because trading was their job for hundreds of years. It’s much easier to penetrate society in Jeddah and become one of the people there.

You are one of the leading families in Jeddah, and Saudi Arabia, what is the outlook for family-run businesses? How are they going to evolve in the future?

We evolve like the rest of the world; now, you see family business being run in the third or fourth generation. This is the most critical stage in the company, if we manage to get through this stage, then the family business would continue. Ninety-five percent of businesses that continue after that fourth generation threshold usually last for hundreds of years. Today, families in these companies are writing by-laws on how to take it to the next step. In my case, the situation is manageable because we are only three brothers, but we all have sons now and look to the future of the company. We are regulating the relationship between the owners and the business, and we need to differentiate the family business and the business of the family. That is one of the biggest challenges that face family businesses, is that you take family problems to the office, and business problems home – you need to try and separate these two issues, as much as possible.

What are your key success factors and strategies in managing the business?

Our vision is to put fruit on every Saudi table, and give all Saudi families the opportunity to eat fruit. We work on wholesale and quantity, and want to reach as many people as possible across the Kingdom. That’s why I have 12 cold stores [refrigerated storage warehouses], in each region of the kingdom, and each distribution center has vans that go directly to the shops. Also, I’m trying to cancel seasonality, which is another one of the challenges we face. To tackle that, we utilize the northern and southern hemisphere. In the winter, we get oranges from Spain, Egypt, and Morocco, but go to South Africa and Argentina in the summer time, when it’s winter in those countries.

How do you identify the best quality products and bring them to the most sophisticated consumer market in the Middle East?

We know our business and we know what to buy – and not necessarily, always the best quality, you have to keep an eye on the price. The Saudi Arabian market is very price sensitive, and people are becoming more rational consumers. I try to get the whole spectrum of products to satisfy the different segments of the market: from Washington Grade 1 to commercial.

Has the market changed a lot over the last several years?

Yes, we see the trend of consumption is changing, that people are becoming more aware and rational.

Supermarkets are becoming more important, and we see that Saudi families have both parents working so there is not enough time to go grocery shopping. Twenty years ago we used to only sell 20 kg cartons, but now I’m making and selling ready-to-go packaged plates that have an apple, banana, and an orange on it. We keep up with the trends in the market, and sometimes we create the trends – this plate of fruit, for example. Another example, and one of the proudest projects that I’ve worked on, was hiring 250 women to work on the factory line to repack bigger cartons into smaller packages for distribution. This is a trend seen all over the world and now we brought it to Saudi.

Have consumer tastes and consumption patterns changed as well?

Yes, consumer tastes change because of the international market. When I joined 20 years ago, normal red apples had the highest demand, now it’s the bicolor Royal Gala apple. We have more demand for golden apples, not Granny Smiths. The Saudi market look at fruit as something sweet, the Granny Smiths are too bitter, and grapefruit never did well in the market. Bananas are the number one fruit – Cavendish banana is the highest selling fruit because the price is reasonable and the protein fills you up. Many of the local sweet dishes are made out of bananas as well.

Do you see any increase in consumption?

Always, and I link it to the growth of population – Saudi Arabia is one of the fastest-growing nations at around 5% every year, so the demand grows steadily around 5% per year. The consumption of fruit by Saudi Arabians is still not as high as Americans or Europeans, but it’s increasing. For economic reasons, it’s cheaper to buy a 20 kg carton of Royal Gala apples than a birthday cake. We’re doing campaigns in schools for children to try and create more awareness about healthy aspects of food, and try to make eating fruit cool and hip, which is difficult to compete with Coca Cola, Pepsi, and Red Bull. We support and endorse many of the Ministry of Health’s campaigns.

What is your vision for the company?

We want to become the biggest or the main fruit operator in the Arab world, not only the Middle East – but my dream is to operate from Morocco to Bahrain. Today we are in Bahrain, Dubai, Kuwait, Saudi Arabia, and Egypt, and from Egypt we’re going into Libya, but it’s a little difficult there right now.

What are the main challenges that your business is facing?

My biggest challenge is perishable fruits, and I’m always working with deadlines and attempt to improve the transit time. I don’t have an expiration date, but the fruit can go bad at any time. I have to make very calculated decisions and weigh different options because it’s a very tricky and risky business.

What are the policies that you set out to keep the fruit fresh?

We have a warehouse here, which has the best technology in keeping the fruit fresh, and have controlled spaces and containers at the source where we get the fruit. We try as much as possible, but even if you’re 100% careful, you still only have 10-14 days of shelf life to transport it from Jeddah port to all the restaurants and grocery stores. This is a logistical nightmare, and a reason why we have a separate sister company that is only in charge of transportation and logistics. We realized that doing it ourselves was easier and more professional, so we created this transportation company. Even if we can add more hours, not days, to the shelf life of these fruits, then that means more money for the company.

What are the key real estate projects that the Sharbatly family is developing?

We have a real estate department, and one of our projects is the Sharbatly village, which is a 1,000-villa compound. Now, we’re looking at building a hotel in Jeddah, another compound like Sharbatly village, working on buildings in the downtown area, and renovating my grandfather’s old house in historic Jeddah. The house is over 100 years old, and we want to restore it and make a cultural center there. There are a lot of side businesses, but our main business is the fruit business. We work 24/7; there is no day off.

Do you feel that the food imports and exports are sufficient in the Kingdom?

We need to change the equation because more than 90% of our exports are oil-related, and I think the government is doing something about that. We need to become less dependent on oil, but the $100 billion question is how the government will solve that problem, but they’re working on that.

There is a space for investment in agriculture in Saudi Arabia, what are the profitable areas?

I remain pessimistic about agriculture in Saudi Arabia because we don’t have water.

Anybody that comes up with any idea, I’m not eager to hear about it because there is not water. Any water that we have should be for drinking, and I know this isn’t what people want to hear. When we decided to plant farms, we went to Chile, Egypt, and South Africa, and now we are thinking about the Philippines because they all have water and it’s not in short supply. Agriculture is only for economies of scale, you need big farms, and greenhouses won’t solve strategic food security, only symbolic and beneficial for experiments.

You do business in a lot of countries, how is it like to do business in Saudi Arabia? Is it a good place to do business like the World Bank says or is it different?

Saudi is a good place to do business, especially in the last 10 years with the new laws that have introduced and attracted foreign investment. More foreigners came here and have it easier than Saudi businesses; we joke and say that it is easier for foreigners to start a business than Saudi Arabians.

Are you currently looking for any strategic partners or investors?

We can work with anybody, but we’re not looking for partners, as we want to keep the business in the family. I’m always interested in hearing about new ways and technological inventions for keeping the quality of the fruit good and increasing shelf live during the long journey. When the oil prices go down, then transportation becomes easier; but faster transportation hasn’t changed in the past 100 years: it took 4 weeks from Cape Town to the United Kingdom and now it takes 4-6 weeks, so it’s the same. Ships transport 90% of all the trade in the world because it’s very expensive to ship by plane.