While operating in a number of regions that have seen peaks and troughs in the last decade, both politically and economically, Hoshan Pan Gulf (HPG) has managed to maintain steady growth. However, for such a successful and large business, it still manages to stay out of the limelight. This is partly due to the modesty of former CEO Paul Jabbour, who last year stepped down as CEO to remain more active behind the scenes, and partly due to the steady focus of the business on its own markets.
OPI caught up with Bandar Al Musallam, the new CEO, to find out more about this smooth operator that is slowly expanding to more and more regions in Africa and Asia.
OPI: Can you tell me a bit about HPG; what is the business’s history?
BAM: Hoshanco Holding, the parent company of HPG, started as a small enterprise. It was founded in 1964 by Ahmed Hoshan and still remains a family business today with its headquarters in Riyadh, Saudi Arabia. Over the years the company has kept growing and expanding, and today it is one of the largest holding companies not just in Saudi Arabia but in the Middle East and African markets.
OPI: In how many countries do you operate?
BAM: Now we are active and have fully fledged operations in around 20 countries.
OPI: You have a mixture of distribution, manufacturing and retail, is that right?
BAM: Actually within Hoshanco our many activities include trading, manufacturing, retail, real estate and financial services. The trading arm is HPG, which distributes stationery, office products, printing solutions and paper, as well as having a graphic arts division and a number of retail outlets.
OPI: So what percentage of Hoshanco is HPG?
BAM: Around 70%.
OPI: And is that business spread over the 20 countries?
BAM: Yes, HPG is spread across the Gulf, and in northern and central Africa. In Africa, where we’re looking to expand, we have also now established businesses in Morocco, Tunisia, Algeria and Kenya.
OPI: I understand that even within HPG you have a number of different activities, including retail and government contracts?
BAM: Yes, which can be very challenging but at the same time it provides an opportunity to get involved in different industries within HPG. The challenge is that each industry has its own benchmark and we need to align all our activities under one strategic goal or objective.
OPI: Is that what you’re working on?
BAM: We’re trying to create strategic goals and objectives, which should be cascaded down from Hoshanco to each CEO, and from there go down by department and so on.
OPI: How many employees does HPG itself have at the moment, and in how many offices?
BAM: We have around 1,200 employees, more or less. Our main office is here in Riyadh, Saudi Arabia, and we have other locations in most of the key cities in the Gulf and some of the minor regions as well that look after customer service.
OPI: Can you tell me a bit about your customers?
BAM: If we talk about our trading operations, HPG, we divide customers into two main segments; one we call modern and the other traditional. If we talk about traditional markets, we are referring to office supplies, direct sales, and traditional wholesale and retail customers. If we talk about the modern trade we are referring mainly to the mass market, hypermarkets, department stores and so on. We also have a channel called export sales, which serves customers in markets where we do not have any local hubs. Finally, we have a DIY store chain. All in all we have almost 4,200 customers and stores that we distribute to.
OPI: As these customers are spread across all your regions, where are your distribution centres?
BAM: We have four main logistic hubs. One in Dubai to serve all the Gulf countries except Saudi Arabia, one in Saudi Arabia to service the whole of the country, a third in Tangiers, Morocco, to serve the North and West African markets, and the last in Jordan to serve the Levant area, which consists of Lebanon, Syria, Jordan and Iraq.
OPI: Do you have your own transport or do you use a third party?
BAM: We have distribution between branches that is outsourced, while we have our own fleet that carries out deliveries from our warehouses to customers.
OPI: In general, how is HPG faring at the moment?
BAM: It’s going well. Despite some factors internal and external to our regions, all in all we have managed to achieve steady growth over the last year.
OPI: Can you share any financial figures?
BAM: I’m unable to share numbers, but the growth we’re talking about is 10% in 2012.
OPI: How have you achieved that growth? Have you gained new customers?
BAM: Well, actually it’s mainly from existing customers; it’s organic growth.
OPI: Since you cover a number of regions, are you looking to acquire any competitors or any smaller businesses?
BAM: We are thinking seriously about it, but nothing has been crystallised at the moment.
OPI: Do you have many direct competitors?
BAM: In a sense. There are competitors in each region, including some international brands. Each business in the Hoshan portfolio has different potential competitors. However, we don’t see anything coming from those competitors that would present a major challenge. Our main challenges, at least in the short term, come from counterfeit products. Even though the success of these projects is short lived once the customer realises the poor quality, it is a big challenge where we operate. We are suffering from this, but we try to work with our suppliers to offer customers a much better alternative.
OPI: Is the government trying to tighten the laws around counterfeit?
BAM: Yes, to some extent. We are trying to work with the government as well to educate customers and end-users about counterfeit products, and the problems with low quality. It’s an ongoing process that will keep going as long as there are people who believe that selling cheap, counterfeit products will make them money. But those items do have a short life; as soon as the customer sees them he will not use them anymore, and the seller has to make something else.
OPI: Speaking of products, what does HPG manufacture itself?
BAM: In Saudi Arabia we manufacture items such as box files, hanging files and some pens. We have our own private label ranges so that we can offer our customers a total solution for their needs; the brands are called Alpha, Atlas, Ayman, Fantastick, Funbo and Al Khatat. However, manufacturing will never become the leading role of our brand.
OPI: So is private label more popular than other brands in the areas that you serve?
BAM: Yes, it is popular, but it will never substitute or replace the role of the top brands that we supply. The key to success for us moving forward lies in understanding the role of private brand in our long-term business strategy, making sure that we are bringing the right products to the market and to customers in Gulf Cooperation Council countries, the Middle East and Africa.
OPI: Does product demand vary between regions? You serve quite a mix of cultures.
BAM: It does to a certain extent. If we look at the Gulf, the countries here always share the same habits, the same culture, and the same customer preferences. For the African market we need to have tailor-made solutions, and products that suit each country. This mainly focuses on more economical products because the purchasing power and income per capita are much lower than in the gulf countries.
OPI: It must be interesting to see the different markets you serve evolve at different speeds.
BAM: Exactly, and thanks to our team we can cope with this. The customer requirements for stationery and how the market behaves are always changing, including which products we should focus on. Our product development team continuously tries to come up with a portfolio that would match or fulfil everybody’s requirements, but it’s not easy.
OPI: I’m sure you’re aware that across Europe and the US, as well as some other regions, people are reporting a decline in traditional office products sales. Have you noticed that in your regions?
BAM: Frankly speaking, the way we see it is that we need to understand customer needs. Even though there are now people shifting towards using more technology and this might eventually have a negative impact on traditional stationery products sales, there is still a need and we are trying to cope with this.
OPI: As well as a growth in technology, have you noticed any difference between the products that the younger generations are buying, and those that older customers are buying?
BAM: Not particularly. New generations will always try to go with the trendy products that have fancy colouring, for example, and are more interested in popular brands. But they are all very loyal to the brands that they have always had around them, because they have been raised since they were children with certain products. There are of course changes in customer behaviour all the time, but we rely on certain products, as well as suppliers that keep coming up with products that suit these changing expectations from end-users.
OPI: I read recently that Africa in particular will transform from little use of technology to high use very quickly, missing out the middle ground. Do you think that’s likely to happen?
BAM: For Africa I don’t see that happening in the near future, but there is major growth coming from that market. We would like to capture such growth in either Central Africa or in North and West Africa.
OPI: There’s quite a lot of political unrest in some of the areas you serve. Has that affected your business at all?
BAM: Like any business in any industry in these areas, we have been affected by political unrest and unpredictable buying behaviour. For example, large orders become smaller or less consistent. However, so far it has been OK. While sales in some areas have been affected, this has been compensated by the growth we have experienced in more stable markets. I believe that our infrastructure and the stability that we like to communicate to customers, as well as our understanding of social, economic or political challenges, have kept us in a strong position.
OPI: So you’ve been able to maintain business as normal?
BAM: Our challenge has been to generate constant growth without compromising on quality and reliability during what can be long periods of turbulence.
OPI: So as well as maintaining growth, what are your main focuses for HPG at the moment?
BAM: We actually have a number of goals that we’d like to reach by 2015. The first one is to improve our working capital, which we have put a very strong focus on. This mainly means that we want to have better control of our inventory and receivables, which will help us to generate a healthy financial position for the company that will provide adequate and sufficient liquidity and capital to meet future company expansion.
Secondly, regarding investment, we want to attract younger talent into the business. We feel that it’s very important to understand that having fresh blood and ideas, combined with the experience of our current team, will give us a more dynamic platform to help us cope with the changing marketplace, which is happening right now.
Finally, with regards to increasing our operations and market capability, I think it’s very important that we continue aiming for the growth that we owe to our employees and customers. They have high expectations for the standard of our operations. As well as expanding in Africa, which I mentioned earlier, I would love to see this kind of expansion take clear steps forward. Africa will continue to offer renewed growth opportunities in the near future, so this is one of our main goals that we’re working on at the moment.
OPI: That all sounds quite ambitious.
BAM: Well, we try to be!
OPI: Another development that we’re seeing in many countries is the rapid emergence of competition from online businesses such as Amazon. Is e-commerce growing in the regions that you serve, and are you planning on getting involved?
BAM: We actually have work in progress to see where we can go in terms of e-commerce with B2B customers.
OPI: Do you have much B2B trade?
BAM: We increasingly do, as we are in the process of establishing full and dedicated teams to capture this kind of channel.
OPI: And is that in all your regions or are you starting in one place first?
BAM: This will have to start in Saudi Arabia, and we’ll see if this type of business has positive results.
OPI: You mentioned to me on a previous occasion that government contracts are quite a good growth area for you. Is that still the case?
BAM: We work with the government mainly through tenders, and we have been maintaining these kinds of sales for quite a long time. However, now we’re trying to pay more attention to these contracts and have a better focus on servicing them, as it’s a very promising market. There is huge government spending in Saudi Arabia, but they want to be serviced by this channel in a more efficient and productive way.
OPI: Looking at the wider world, have you considered expanding even further outside your regions or into different product categories such as facilities management?
BAM: At the moment, we don’t see anything that we want to aim for. We are focused right now on our current product range and organic growth, and expanding into different markets that are close by. We might touch upon neighbouring industries in the future, but right now we are concentrating on stationery and office products, where we believe our strengths lie.
OPI: Final question: where would you like the business to be in five years’ time?
BAM: That’s a very good question! I think we see before us a good potential to grow, either from a product point of view or from a geographical perspective. But really, we’d like to continue to be a reliable, regional distributor for both our suppliers and customers, while taking a lead role in fulfilling our social responsibilities. As a business we take corporate social responsibility very seriously and believe we have many obligations in this area, to live up to the expectations of all our stakeholders.
OPI: Tell me a bit about your career. Did you used to work for Hoshanco Holding, HPG’s parent company?
BAM: Exactly. I worked for Hoshanco Holding from September 2008 until I became CEO of HPG in September 2012, although I had been working with HPG for the two years before that. At Hoshanco I was responsible for the finance department. Before that I spent about 11 years gaining experience of a variety of industries as a credit consultant in the Saudi Industrial Development Fund, which is the government bank responsible for encouraging industrial sectors to set up projects in Saudi Arabia.
OPI: So you must have worked with quite a lot of different businesses during that period.
BAM: Oh yes, a huge variety. Initially I was responsible for food businesses, then I moved to the pharmaceutical industry. From there I went into the department focused on construction and buildings, which again gave me a different perspective. Following the Saudi Industry Development Fund and before joining Hoshanco, I worked for around two years with the Al Safi Danone dairy company, and also for one of the biggest food companies in Saudi Arabia called United Food Industries Corporation.