Weekend Interview: Yousuf Ali, Managing Director of Emke Group Changing the retail landscape

Thursday, Sep 02, 2010

Retail king is confident that his children will soon follow in his footsteps

Dubai A rule of thumb in assessing a corporate chief is to find out what his people say and feel about him — in private, of course. Going by that yardstick, Yousuf Ali’s standing with his workforce is that of a much-loved and admired family patriarch.

Whenever they bring his name into a conversation, it’s not with the usual honorifics such as ‘sir’ or ‘Mr’, but the more intimate bhai, which translates as elder brother. That says as much about the man as the management style he deploys as managing director of the Emke Group, a $3.5 billion (Dh12.8 billion) enterprise that inludes the Lulu retail network.

Then again, none of this should be a surprise as Ali has, in the 30 years of the Group’s existence, built up a business that still operates like a neighbourhood family store, but scaled to suit the needs of a hypermarket chain.

In conversation with Gulf News, Ali offers a sneak preview on what’s coming next from the Group as it consolidates its hold on the retail sector and at the same time ventures into related businesses.

Gulf News: There has been intense speculation in recent times that the Emke Group might venture into hospitality by owning hotel properties in the Gulf. Many in fact see it as a natural progression. Is there any truth to this?

Yousuf Ali: I am not going to step out of my core business here. The core business is rooted in retail and its allied sectors — sourcing, logistics, wholesale and distribution.

There is no time to learn about any new business possibilities. I am comfortable with expanding the line I know well.

But in India we are constructing what will be the country’s biggest shopping mall, in Cochin, which also has a hotel attached to it. This will also be the first Le Meridien property in the country.

But such a development was thought necessary strictly because we found synergies there in doing so. But a hospitality business division within the group is not something I want to go after.

Can you categorically say the mixed-use development in India will be a one-off?

I do have a few other plans specific to India and those too are multi-use projects. The geography of that market allows that. I have already started scouting for locations.

There are quite a few in my mind, particularly in southern India — Chennai, Bangalore and Hyderabad. All have interesting possibilities for a presence.

Any plans for alliances with Indian business houses for any of the proposed projects?

I am going to launch the first project, which is owned by us and cost Rs15 billion (Dh1.17 billion), then look at the results before making any further moves. There are a few developers who have already approached us.

The second speculation revolves around some sort of a share offering on the Group’s part. Your comments?

Never ever. OK, I will rephrase that: we are not looking at any sort of public or private offering at this juncture. Now my focus is to expand with my own cash.

I don’t want to use public money, I don’t need to. Of course, I will seek the support of banks.

If you are good with the banks, whatever be the state of the economy, they will be willing to do business with you. We are in that ideal position vis-à-vis our banking partners.

But, in my personal opinion, I don’t find anything untoward if banks are seen as tightening their credit lines. They have to protect their interests.

You also rule out a debt offering?

At present, there are no such plans.

We recorded 17.89 per cent growth last year and that’s the rate we have had in previous years as well.

All through the recession we never stopped adding to the network. In fact, when the first Gulf War broke out and lots of people were returning in the early 1990s, that’s when I started building my business.

I have the fullest confidence that the worst is over for the economy. The side-effects are temporary. And I intend to build another hypermarket in Dubai.

A hypermarket costs between Dh250 to Dh300 million, which includes the building. These investments signal our unshaken confidence in the market’s ability to bounce back.

Are there any new business lines that you would like to get into? In other words, leveraging the Lulu heritage.

There’s Lulu International Exchange that’s been there for less than a year now. I realise it’s not as popular as our other ventures … as yet.

But I am waiting for the completion of its first year of operations before expanding the branches in the UAE from the present four. And the one-year timeframe has been utilised by the existing branches to create a good first impression in the market, with our clients and the authorities.

I will be opening branches in Oman, Kuwait, Bahrain and, by 2012, intend to have about 50 in the GCC.

I see this business line as being complementary to our hypermarkets and shopping malls. I don’t want our loyal customer base, who frequent our hypermarkets, to go to any other exchange for their transactions.

We will have a mix of in-mall and outside locations for the exchanges. Preferably, I want to have them within our retail network.

We have 84 locations for retail, and that’s already quite a significant base to build on. We are getting 425,000 customers every day, and potentially all of them can be clients for our exchange house. It’s a nice thought … and doable.

Are there any other ventures on the drawing board?

Very shortly, we will get into the restaurant business fully utilising the Lulu brand’s prominence built up over three decades. The hypermarkets and malls provide the ideal platform for these restaurants.

We will bring in our own concepts as well as have franchises with international chains if need be. We intend to roll this out quite soon.

You recently opened a second location in Saudi Arabia. How would you assess progress there?

I want to build up a successful model there before we look at the possibility of a joint venture, but one exclusively for the kingdom. We have a major expansion plan which might require such a model.

Does the same hold true for Egypt?

Whatever plans we have for Egypt will be done on our own.

Our next round of expansion will take in the Maghreb markets, where the concept of a hypermarket is yet to gain momentum.

While the Emke Group is emphasising the ‘hyper’ outlets, your competition is going for the neighbourhoods with smaller ‘express’ stores. Shouldn’t you be in that space as well?

We already are, with nine mini-outlets, all of which are in the new residential communities.

Having said that, I have a preference for hypermarkets. The new generation believes in viewing all available options. If it’s a toothpaste, they want to see all 35 varieties of it.

‘Express’ means convenience. That’s why they are only focused on in select communities.

The competition in the retail business is intense. Do you see it getting more so?

Look, this is a very easy industry, anyone can come in. Prices of most retail products are known by everyone. At the end of the day, the consumer has the power to choose.

You are closing in on the 100-store mark. What next?

I want to see how fast — and where — we can reach 150.

The retail business is like a train. If you have a very good engine, adding more compartments is not going to be a major cost overhead.

In fact, it proportionately increases your buying capacity. You get the best deals from the principals. The principals also don’t mind having such an arrangement with a single retailer rather than having to do business with 20 smaller players.

Wholesale remains an integral part of your business. What’s its contribution to the turnover?

Last year, we touched 28 per cent on the wholesale side. This year, in the first half it shot up past 30 per cent, and we are hoping to close at or around the 35 per cent mark.

If you are running a vast retail network, you have to have the sourcing arrangements and you need to be as close to them as possible. We have bases in Thailand, China, Hong Kong and some of the African countries. This way, I get to control the quality and there will not be a supply break.

We are one of the largest meat processors and exporters with five factories in northern India. These were all green-field ventures.

On other food products, we have tied up with many cooperatives directly to eliminate the middleman. We are financing them — a sort of micro-financing, one can say. All of this is in north India, especially in rice and wheat.

Yours is an out-and-out family-owned business. Have you started grooming your children to assume an active role in the running of it? Do you see them following in your footsteps?

They are as yet not actively involved. There’s still time.

Right from my great grandfather, our family has been in business. My children will take after me. I have no doubt about that.

ABDUL RAHMAN/Gulf News

Satisfied man

Yousuf Ali speaks to Gulf News at his company headquarters in Abu Dhabi.

YOUSUF ALI: MANAGING DIRECTOR OF EMKE GROUP

Empire

Growing rapidly

Apart from a turnover of $3.5 billion (Dh12.8 billion), the Emke Group has on its rolls a 23,100-strong workforce, which pitches it among the top employers in the private sector. As the group closes in on 100 stores in its network, the numbers are going to go up further.

There is also the fact that nearly 17,000 of the workforce is from India. This has not gone unnoticed as Yousuf Ali, managing director, has been handpicked to serve as a member of the Indian prime minister’s global advisory council of overseas Indians. This was set up to serve as a strategic think tank to nurture and sustain India’s engagement with its overseas community.

By Manoj Nair?Associate Editor

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