By Edward Poultney
Masafi CEO Ashraf Abushady talks about how diversification will help make the brand into a global giant.
Ashraf Abushady, Masafi's Egyptian CEO, has only been in the senior position for slightly over a year, yet he is the man widely credited with driving the company's 40% revenue increase over the past half decade. Having joined the organisation six years ago as General Manager for Sales and Marketing before being given responsibility for the IT, Manufacturing and Finance divisions a couple of years later, he has pushed forward an ambitious brand extension and diversification plan that is beginning to reap big dividends.
Masafi is a name synonymous with bottled water in the UAE. What local consumers often fail to realise is the two-fold growth that the company has undergone. The first is a massive diversification into flavoured waters, fruit juices and even tissue paper. The second is the geographical reach that the group now boasts.
The company now exports over 30% of its product to Oman, Kuwait, Qatar, Bahrain, Saudi Arabia, Jordan, Afghanistan, Algeria, Egypt, Syria, Morocco and even further afield.
Established in 1976, a time when very few local businesses were already in operation, the company last year celebrated its 30th anniversary. From its primary manufacturing facility in the mountainous region of Ras Al Khaimah, (Masafi is the name of the closest village), the company now exports over 30% of its product to Oman, Kuwait, Qatar, Bahrain, Saudi Arabia, Jordan, Afghanistan, Algeria, Egypt, Syria, Morocco and even further afield to Germany, the UK, Djibouti and Japan.
In Japan alone the company's goal is to reach sales of 18 million litres this year. "We are not just a UAE company, 80% of our business is from the Gulf and the Middle East but we are aggressively available in Japan for our bottled water and soon we will have the flavoured waters and juices there. Our intention is to be seen as a ‘multinational.'" More impressively, in the majority of these markets the group has had a presence for over 20 years. Meanwhile, the push for international market share continues with Masafi eyeing Africa and Taiwan and Australasia as possible ventures for the near future.
Just as we prepare to sit down for the interview Abushady excuses himself; tickets are being booked for a flight that evening to finalise some expansion plans abroad and he just has to make sure that all is ready. This ‘hands-on' feel permeates our meeting, as well as a thorough knowledge of each individual product and their sales and distribution figures at his fingertips, Abushady is filled with a nervous energy. It is almost as though he feels that he is part of a race and every second spent sitting is one where an opportunity might be missed or a competitor might start to make some gains. And make no mistake, the regional bottled water business is far more competitive than most would believe. By 2009 bottled water sales in the UAE alone should exceed 1 billion litres and the region's consumers are being targeted by the large multinationals, as well as local firms.
"We are the market leaders; today Masafi is the generic name for bottled water," Abushady says. This is not a boast, more just the relaying of a fact (he fails to mention the enormous role the company's marketing has played in this - the group even won an award for its simplistic, yet effective ‘Fi Masafi' campaign).
The company has worked on its infrastructure and invested heavily to keep it in this position; the production plant was upgraded in 1999 at a cost of approximately US$16.5m, while US$11m was put into producing and marketing its line of fruit juices.
Expanding on these figures Abushady continues: "Because of that we now have around a 43% market share of the bottled water business, but over the last three years we've also tried to reposition ourselves and move away from being simply a water company into being a total food and beverage provider." The investment in the manufacturing infrastructure has also enabled Masafi to expand its portfolio into the business-to-business sector by selling pre-form bottles and bottle caps to competitors, which accounts for a staggering 8% of the organisation's revenue.
Once he has started it is hard to rein him in, and his enthusiasm for his vision of the company's future is evident as the numbers continue to pour forth: "In May of last year we introduced Masafi juice, and now we're one of the top five in that category (with almost 5% market share). Earlier this year we successfully introduced our flavoured water and, according to an AC Nielsen audit, we now have around a 70% market share of the non-carbonated flavoured water category, followed by Volvic."
In the coming months the company will also be announcing its entry into the bulk water market, which totals 40% of the industry in terms of value. When asked why they have stayed outside of a sector with so much potential, Abushady is specific: "For us it just wasn't the right decision three years ago to look into entering this fast-growing segment. Now the technology is there and we're ready."
Further, the company is also looking to go beyond its traditional ‘liquid' base in the very near future. "We're also evaluating a number of different products, and early next year we're going to look at introducing our first food section," he divulges.
With so much scope for expansion into a range of different fields, and the money to invest in creating the production facilities and marketing the new products, the main question must be how to choose the next sector to target: "We work with local and international consultants, and we always share our ideas with them. But more importantly we listen to our consumers, I like to say that before we take any new business we ask permission from our consumers!" he laughs. "We have to make sure that we're in line with their expectations, and for that we invest a lot of money on research and development - about 7% to 10% of our revenue is allocated to that and to making sure that every time we enter a new business it is in line with our short and long-term strategies."
At one point Masafi water was making up 70% to 80% of our revenues, today it is 50% and we are looking at introducing more products to reduce the focus.
The company's long-term strategy of diversification, which began a few years ago is already reflected in the percentage returns of the products: "We are investing in both the brand equity and the business; we are a very profitable organisation. At one point Masafi water was making up 70% to 80% of our revenues, today it is 50% and we are looking at introducing more products to reduce the focus on the core business and to make sure that bottled water is just one unit of the many products that we have."
Abushady splits his daily focus between what he considers the two core competencies that go toward running an organisation; corporate strategies and personal relationships. "One of the main areas where I spend my time is in formulating the strategy of the company. Then I obviously have to make sure that those strategies are met; new products is one of the aspects that I am spending the most time on at the moment," he admits. "I also place a lot of importance and time on our key domestic and international customers. I always make sure that I am aware of the performance and needs of our top ten customers and key accounts, we have regular visits with them, domestically and if they're abroad. But to me, the key to managing your business is the people." This has become increasingly important to Abushady as the company has grown from 250 employees three years ago to over 800 today. "When we start the day we remove our name tags, we really communicate with each other, it's very transparent. We're a family, a team."
Abushady has certainly set his ‘team' a high benchmark. With an aggressive expansion policy Masafi aims to have doubled its revenue by 2010, no mean feat in a highly competitive sector, but he remains sanguine: "You know, the way I look at it is as a long term objective, I see Masafi as another Nestle but of the Middle East. This is the vision that we want to see."
In order to achieve this vision Abushady is calling on his previous experience with global corporations and his FMCG background. "I spent 15 years before joining Masafi working for Coca Cola and Pepsi Co," he says. "I learned during those years, that big boys, multinationals, are moving from being carbonated soft drinks (CSD) companies because, as we are all aware, CSD is in decline. So they are all still trying to move from being just CSD into diversification. They're moving into juice, into water, into snacks - and that was the model that I wanted to apply here with Masafi."
The fact that the Masafi name was already well established in the region prior to Abushady's appointment has also greatly helped further his plans for the brand's expansion: "The brand has a high equity and level of accountability. Because Masafi is known as a regional company it has a nice feel for consumers compared to companies from outside. So the brand itself is actually helping me to meet my goals and objectives."
These goals and objectives are already well along the path to fruition. Abushady made sure that the core business was properly consolidated before launching his ambitious ‘second phase'. "Our objective at the beginning was to grow vertically; new products, new business within established markets - but now it's time to grow horizontally," he explains, leaning forward excitedly. "Not only by increasing our reach with the number of distributors and business partners but also by investing in places where we see potential, and we have a few countries that we are considering. Hopefully we'll soon be able to announce our investment in terms of setting up manufacturing plants outside as well as distribution, we'll also look at acquiring new companies, we want to invest in the brand equity."
With so much on the drawing board the future certainly seems rosy, but Abushady is aware that the base must be secure before the offshoots can take wing and there are always fresh challenges and market forces to be overcome: "The most challenging part of my role is juggling the cost of raw materials," he admits. "We cannot keep increasing the prices to our consumers; if we were to do that to maintain the same margins we had a couple of years ago the price could easily have risen by half as much again. This is what creates the challenge, not just for us but for everyone in our industry."
Abushady refuses to dwell on this too much, he has plans to minimise the impact that the price increases will have on his manufacturing output, but right now he needs to go and see if that plan ticket problem has been resolved. And can he tell me where he's flying off to? "Not right now," he grins. "But if it comes off you be the first to know."