Discussing Retail and FMCG in Kuwait with Makram Malaeb of Kuwait Agro Holding

Interview with Makram Malaeb, CEO at Kuwait Agro Holding

What are the challenges that you face to boost your business?

I spent 16 years in the retail industry and then I became the head of this company one year ago. The major challenge that I had to go through was changing the cultural mindset. This is the biggest challenge for any leader who comes and takes over the reins of any organization, regardless of the performance of the company. The other challenge is, of course, competition, especially when you are in a business where the competitors are very strong, very solid, and are part of very large groups in the region. I always believe that 60 – 70% of any organization’s challenges are in the energy that is burned within the organization. Even in large corporations, there are sometimes bureaucracies that affect the organizational performance. This was my biggest challenge and my biggest focus. This is what has helped us go through a turnaround, and we are in better shape today for it.

What has been your progress through this cultural change you have enacted?

I have completed about 90% of this change. I brought in a team who have worked with me before, who are young, dynamic, resilient, agile, tech savvy in that they understand technology and the importance of technology in digital transformation. It is an ongoing exercise. You can never be perfect.

Do you feel that you have revamped the company and modernized the way of doing things internally? Are you doing things externally as well to revamp the way that you do business as a company?

Every change starts internally. I was Chief Commercial of a retail chain with 1 billion USD sales. I was in charge of all the commercial activities across the region. When I came from a company that sells 1 billion, to a company that sells a fraction of that, I came as a different person. My mindset was changed. The ways I approached things, the decisions that I made, were completely different versus the previous company. The change is ever evolving. It is a way of life and one which starts by changing ourselves. We did a major change in the first six months. The first 100 days were supposed to be an exploration but I did not wait because some things you can just see right away, especially when you live in the industry, because I have been in FMCG for the past 18 years. When you step in, you can sense sometimes, you can smell even; you do not need to analyze. We did the upgrade and the changes within the management and the leadership team and we finalized it in only six months’ time, but we are still changing today. Sometimes, you have high hopes on individuals who used to be good in one area but are not good in the others and that becomes your responsibility as a leader because you need to make sure that you put the right talent in the right place. Sometimes, there is a great talent, but it is like you are putting a Formula One driver on a football team. The right talent is key and it was a good learning experience for us. The results were outstanding. In 2021, we are going to double the revenues of 2019 from the turnaround plan that we did.

What are the changes that you still want to implement? Do you feel you have more to improve upon?

Now, there is a major opportunity for vertical farms and for sustainable production of fruits and vegetables. That is one area that is becoming more popular in Kuwait as well as everywhere in the region.

Internally, we invested in technology. We are in line with what is happening in the region but the region is still far below the international standards when it comes to digital transformation. Everyone talks about it, but very few practice it. For example, we sell to all the retail chains in Kuwait, some of them are regional or international chains. Even today, sometimes they send us a handwritten order on a piece of paper and they send it by WhatsApp to our salespeople. The EDI was active in Walmart 20 years ago. Suppliers had access to the shelves and inventories and the suppliers were replenishing Walmart’s inventory by themselves. They have access to data, they analyze it, they place orders a weekday versus weekend, Christmas versus Thanksgiving versus Black Friday, and so on. As much as they talk about digital transformation in our part of the world, we are still behind. That is why I am never content. I am tech savvy. I always try to cut down processes. One of the things I did in the first three days that I joined the company was to layoff a considerable layer of the staff because the company was not fit. We had a lot of people, but we have very few processes. So, we had to review process by process. We discovered that we have lot of manual and bureaucratic processes that we had to let go. We increased our business by 50% with way less staff. This was phenomenal and it was through very little investment in technology. It was more of a revision of the process itself. But now, with more investment in technology, we can double the turnover of 2019 this year with the same people or even less people.

What are your main verticals of the business?

The distribution company was established a year ago. We have four verticals in this company. The first vertical is the brands that we represent. We are the agent of Chobani, the Greek yogurt brand. We also represent Del Monte which is an international produce brand. We bring in a lot of produce from the US. We have twice a week shipments coming from California. We sell fresh produce from Del Monte, Driscoll’s berries, all the fresh fruits and veggies that you see on your shelves such as celery, carrots, mushrooms, broccoli, potatoes, sweet potatoes, mini potatoes, all the American fruit and veggies that comes to the region we bring from the US. In addition to Chobani, we acquired another seven brands last year from Australia, Holland, and the UK. We are investing now in a brand similar to Beyond meat. It is a protein-based meat alternative named The Meatless Farm. We have 10 brands in this vertical that we have developed just from last year. The second vertical is our own brands that we have developed. We created a brand called Chef Mak, the only in house brand that is more expensive than the leading brands on the shelf. For retailers, when they do private brands, such as with Walmart who has Great Value, Kroger, etc., usually their private label positioning is priced 10% to 20% below the leading brands. We did it the other way around. The packaging is black and shiny gold and we are venturing into categories that by nature are not commodities. I saw an opportunity in this area. We do not do the basic ketchup and salad dressings and the rice and the pasta. Rather, we went to categories which are very unique. The first product we did was a wagyu burger. Wagyu is the highest quality grade meat in the world. Each burger we sell for $6.50 USD for a single piece of frozen meat while you can buy 10 pieces of meat from the domestic market of Kuwait for $5 USD. This is by far our number one selling item now. It is the leader in the burgers category and in Kuwait. We are also doing smoked salmon from Spain, Manuka honey from New Zealand, etc. The brand proposition is very premium and it has been a great success. In addition to Chef Mak, we did Layla’s Organic which is our house brand with a motto of “organic made affordable”. The objective of this brand, the category, is still not developed in Kuwait because all the organic brands are very expensive in Kuwait. What we are trying to do in Layla’s Organic is to be only 20% to 30% more expensive than the conventional product to make organic affordable to everyone. We are developing 100 items this year. We already have two items on the shelf, including organic eggs and olive oil from Spain with a very competitive price. So, we have one brand that is premium positioning, we have another organic which is also premium, but it is also competitive within its category. This is the second vertical of the trading. The third vertical is a very interesting one. In my previous company, the Sultan Center, we used to do a lot of imports from the US. Kuwait has one of the highest GDP per capita in the world, the second highest in the region, actually. There is a very good disposable income in Kuwait. Customers want the premium line; they want the high end. Kuwaitis travel a lot to the UK and to the US. When they go on holiday in summer, they go for two months. When they study abroad, they spend three or four years. When they come back, they want to see their American favorites. So, we created a brand called The American Truck. We created an actual truck. It is six meters or 24 feet in length, and eight feet in width. You can even turn it on and it moves. Inside, there is a very unique design but also, it is full of shelving. We have around 400 American products, all the products and the leading brands that you see in the US, such as Kraft mac and cheese, General Mills cereals, Kellogg’s pop tarts, Hostess, Starbucks coffee, Dr. Pepper. We are bringing the American variety that is not available with the local vendors. We are implanting this truck in Co-ops, which are supermarkets developed by the government and managed by a board in the area where they operate. They represent around 55% of the retail sector. They are already there, but they do not know how to import. It is not in their DNA. We told them that we will bring the truck and we will implant it for them. We will manage the availability and the inventory and they just take their share of the sales. This has been very successful. We have opened four so far. Tomorrow, we have an opening for the fifth and we are opening another three this month and in May. The first opening was very successful. The last vertical we are beginning to develop is a non-food division such as cosmetics and other products.

Are there some areas in the sector where you feel that there is a lot of potential growth in Kuwait?

For Kuwait as a country, 99% of the export is crude oil. Kuwait does very limited production of FMCG and fresh fruit and vegetables. Almost everything is imported. The climate condition in summer gets to almost 60 degrees Celsius. So, the production of the agricultural industry in general is very small. That makes it very highly dependent on imports. Now, of course, in this pandemic, everyone was thinking of localization, about less dependency for the basic, core commodities on imports, because all of a sudden, the entire world was disconnected. The supply chain was severed. Now, there is a major opportunity for vertical farms and for sustainable production of fruits and vegetables. That is one area that is becoming more popular in Kuwait as well as everywhere in the region. The other side which we are investing in is the production of livestock. We are investing now in chickens and eggs. We are the only producer of European certified organic free range eggs in Kuwait. We have invested in state of the art facilities, all developed in Europe, shipped from Europe, and installed in Kuwait. We have two houses and now we are building the third. Each house can accommodate 11,000 birds. With the younger generations today, everyone is becoming more health conscious. The trend towards a healthy lifestyle is moving quickly for two main reasons. First is the pandemic which made people very conscious about their health. COVID showed that whoever is fit and healthy was safe. Whoever had any blood or sugar or heart issues had the highest mortality rate. The younger generation reads a lot, they go to the gym, they do sports, they understand the importance of healthy food. The third is the development of the retail market in general because the retail market is the main driver of how the industry moves. Earlier, there was only a single retail chain in Kuwait dealing in healthy food, organic, gluten free, etc. Now, there is more competition. Everyone is aware but healthy competition brings us the best of companies and they can drive the industry to a better place. Those three things have made the trend towards a healthier lifestyle faster and bigger. The third trend definitely is technology and this applies to each and every business. Today, we live around smartphones. Everything is driven by technology today and the spending is going towards this area, too. These are the three major opportunities in the coming five years in Kuwait.

Are you looking for any investors or technological partnerships?

We are very dynamic. We do not leave an opportunity on the table. Whenever an opportunity comes along, we can just punch it. We are a relatively small company. We are not bureaucratic. We decide something in the morning, we execute, and we check on the results in the evening. The decision making process within the company is very fast. We are in the process of expanding to Saudi Arabia because one of the agencies that we represent here was exceptionally happy with our performance in Kuwait. They offered us the agency in Saudi and we are just in the final process of company registration. We were a bit delayed because everything is closed in Kuwait and Saudi with the pandemic. If we get the right partners in other GCC countries like UAE, Qatar, Bahrain that can expand or expedite our expansion, that is an opportunity that we can take on.

What is your international reach?

The core objective of the in house brands was to go beyond the borders of Kuwait. Kuwait has the second highest GDP per capita in the world but at the same time, the overall population is 4.5 million. It is a relatively small market, while Saudi Arabia just next door has a population of 28 million. That is six times the market size. With our own house brands, one of the key objectives of developing those first is strategic. We own the brand so we do not live under the mercy of any principal. These brands would be our ambassadors for regional expansion and international expansion. This is a core competency that we have: we own the brand, we have the proposition, and we just play in other markets. When we do well with a certain brand in Kuwait, we will take it to another part of the region. This pandemic has expedited the digital transformation which means everything is managed remotely now. You just need a few people on the floor, but everything else can be done remotely. We are headquartered in Kuwait. The plan is to be in other markets before the end of the year. We have a registered company in UAE, Dubai, as well as in Saudi, and we will have an operation in Saudi before the end of 2021.

What is one of your success stories that you are most proud of?

I am proud of the cultural change within the organization because the culture is the cornerstone of any company. It is the DNA of the company because when you have the right culture and the right mindset, everything will become a reality. If you have a culture of rewarding good performance and a culture of no tolerance on bad performance, then everyone will either be on their toes because they know they are going to be rewarded or for those who know that they do not fit, they will shape up by themselves. The cultural change was key. Nothing happened from the external, it was just focusing internally, setting the right mindset, the right processes, giving autonomy to people to make decisions, allowing them to make mistakes- but definitely not out of negligence. People should make mistakes so that they learn from them. When you create the right culture, everything else becomes secondary. That is something that I am the most proud of among the other achievements that we did last year.

How do you approach an environmentally conscious mindset in your business? You have organic foods, you represent a lot of American brands, etc., how do you apply that to the environment?

The majority of our team are young. We did not set targets but we always talk about reducing our carbon footprint such as the very minor things that we do in the head office like going paperless to the initiatives to support beach cleaning activities. We are reducing the use of plastic bags and now all our ecommerce deliveries go out in a paper bag. The second step is reusable bags. For our loyal customers, they can receive their delivery and give us the previous bags back all for free. Apart from the cultural mindset within the team for everyone to think environmentally and think about reducing plastic on the development part, we are bound by our suppliers at the end of the day, but whenever possible, we try to work towards more sustainable packaging. We do a lot of awareness internally and externally. World Earth Day is this month and we are using it like an awareness campaign for our clients and for our staff to further capitalize on this area. The third point and a critical one is localization. Vertical farms consume 70% less water than regular farms because they are in a controlled environment. You reduce the water which also reduces our carbon footprint. We believe in that as individuals. We let everyone in the management team have the same awareness and act accordingly.

What are your competitive advantages? What do you bring to the market that is different?

I like the FMCG industry. I have spent my life in it. I have attended more than 100 International Trade Shows from Australia to Japan to the US and South America to Europe and Malaysia, Hong Kong, Thailand, and China. I have spent my life between the supermarket shelves. Even when I go on holiday with the family, my wife and daughter go to the mall and shop and I go to the supermarket and look at the groceries. I have gotten a very good understanding of the market trends and this has reflected in the brands that we have acquired. The portfolio that we have acquired is very unique. This is also reflected in the company’s vision and mission statement whereby we want to be a needed, a wanted, and a preferred business partner for every online and offline retailer in Kuwait and the region. Now, we are quite needed because the portfolio of the brands that we have is a necessity and a big added value for every retailer. We produce locally through Yasmin farms which offers the most premium dairy products and the only dairy products in Kuwait and the region that are homemade. There are zero preservatives, zero additives, zero colors. It makes the product very challenging to us because the shelf life is very short. But it is the only product that is 100% natural, like what our ancestors used to do at home. On top of that, within our dairy we have a wide variety of goat products which no one else has in Kuwait. That is another value added and differentiating element. On the farm, we grow 100% natural produce. We use zero pesticides in our farm and everything is all natural. Also unique to our company in Kuwait is that we offer organic free range eggs. No one else does this. We have selected the brands that stand out in every category. I worked a lot in retail and I used to see a lot of products that are on our shelf but not at our competitors. In my company today, we do not have a single product that is not listed in each and every retailer in Kuwait. The reason is that I was sitting in the shoes of the commercial managers and the buyers and the commercial directors. I knew when I was there what to buy and what not to buy. So, we have selected brands that stand out and that are very differentiating. For example, Chobani created the Greek yogurt industry in the world. Twinkies represent the category itself. We have a bread brand from Australia that is 70 calories per loaf. It is the least calories in a single loaf of bread in the world. It comes in chia, barley, corn, quinoa, and 13 different varieties of breads. It is a mandatory for any retailer to have a bread like that versus one that is 300 calories per loaf. The dairy free and the meat free are going to be the biggest trend in the next five years. Today, the meatless meat or the protein based meat could be 4% or 5% of the category in the US, but it can be 60% to 70% of the category in the coming years. The largest dairy companies in the world are suffering because consumers are moving into plant based alternatives. We have plant based and other products that are differentiating us today and we have products that will differentiate us in the next two years, three years and five years. This is what makes us very unique and very special.

Are you implementing the digitization more on the supplier and wholesale side or on the consumer side? Do you have any specific apps, platforms, or technology you are using?

I would split digitization into three elements. The first is something internal that has to do with our processes: where we can be more efficient, have less carbon footprint, have less people do the jobs that are more dependent on system as opposed to manual work. I spent three months from November to January outside the office. I was doing 95% of my job from my home country in Lebanon. This was only possible because of the digitization milestone that we have achieved. All our approvals are digital. I do not sign a single document except the ones that have to do with the government and a few of the local banks. Everything else is digital. I think we are advanced compared to any other distributor in Kuwait, whereby they still run like the old government offices with batches of papers and signatures and stamps. Each and every process of ours is digitized now. We still have milestones to go on the system itself to be smarter, to adopt artificial intelligence within our system, to enhance our practices and our product availability. The most important thing is to work with our partners for more integration because they are behind versus the rest of the world. The second is that we have launched our own ecommerce platform last year. As of Q1 2021, it represents 6% of our sales. We are a distributor. When we as a distributor go and sell business to customers, to consumers, that has major effects on our P&L because when we start with the consumer, we eliminate the middleman who takes the margin, commissions, and the listings, etc. As a distributor, when you sell to the retailers, they need payment terms and credit terms and reconciliation. It is another headache. When we sell to the customer, we just get paid in cash. This is going to be the future and the results that we are achieving are phenomenal – 6% of the sales for a distributor, within six months of launch. The platform is a browser but is also mobile friendly. It has the same feel and look of an app. Now, we are developing the app in the final stages and it is already on the Apple Store and Google Play. Our window to the world is gourmetpicks.com where you can find all our brands online. This is the second part of that of digitization that takes a good portion of my time, personally. Today, everything is online. All the millennials are online. So, this is where we invest.

Project yourself into the medium term. How do you see yourself in three years’ time? What do you want to achieve?

Our plan is within three years from today to be in three countries in the Middle East. We want to grow from a Kuwaiti based company to a regional company. We are going to be in another two markets- Saudi and UAE. Today, we represent 10 brands. We want to have 30 brands in our portfolio. In our private brands, we will have 500 items whereby you can shop for whatever you need for your table. If you need to buy organic, you can find everything from Layla’s Organic, all of the basics. The same applies to covering each and every niche category from Chef Mak. Again, this is a never ending exercise. Products and trends change every day. 20 years ago, the leading brands in the US were Yoplait and Dannon. Then, Chobani all of a sudden came up with something new, and then they became a leader. The same applies to product lifecycle. There are always new trends. Every time you go to the shelf, you will see a water with electrolytes, water with caffeine, etc. The minute you start something new, you need to start again because customers in general worldwide always want to try something new. They want to see new trends. They want to see healthy and unhealthy. Definitely, the trend is more towards healthy, but customers always want to see something new when it comes to taste. At the end of the day, food is the second level of Maslow’s hierarchy of needs. Food is the second motivator for human beings. So, the innovation will always continue. It will never stop.

What exactly has been your drive, your ambition, being in this market and in this business?

I do not like to talk about myself, but from my experience, some people are competitive by nature. Some people are competitive internally. They like the challenge. They like to do something new. Some others like complacency and quiet areas and they are very limited. That is the nature of the individuals and this comes from their background. I grew up in Lebanon and I was born in the middle of the war. We used to sleep sometimes in three different locations in the same night. In the fourth grade, I went to three campuses of the same school in the same year. The first school would be bombed and we would move to the second school and get bombed. As bad as this feels, I think it has created in us the drive and the resilience. All these features are very important for any kind of change. When the pandemic happened last year, people were panicking. I have seen managers crashing because we used to do a plan in the morning, change it at 12:00, and then change it at 6:00 in the evening because there were decisions happening every hour with the government and the lockdown and the curfews. When you have a tough background like the one that I had, as bad as it is, I can never imagine putting my daughter in a situation like the one that I was put through. But, it turned out to be positive. I like challenges. I like competition. I do not take “no” for an answer. I am always positive and positivity is key. We can solve any issue and any problem with positivity and with the right mindset and the right drive.

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