TBY talks to Anan Fakhreddin, CEO & Member of the Board of Damas, on the gold industry, the company’s IPO, and projects in the pipeline.
TBY How has Damas’ relationship with the Dubai gold industry evolved?
ANAN FAKHREDDIN Damas is a 105-year old company that started in Damascus. The story of Damas goes well with the story of Dubai. Damas began to grow exponentially in the 1970s, opening up wholesale and positioning an international brand. We have expanded into international jewelry, diamond jewelry, and other precious stones, but we are still gold jewelers. We process around 10 to 11 tons of gold every year. At any given time, we have around 6,500 kilograms of gold at our branches, which demonstrates how important gold is to Damas. We have grown from being a UAE-based company focused mostly on Dubai to a multinational player. Over the last few years, and as a result of the global recession, we have focused on our global footprint. We are now focusing on the GCC market, which is considered to be our core market—we officially have businesses with about 12 markets in the region. Looking at the retail side, we have four different formats, and this is our main advantage. We have diversified across different levels. Considering the UAE business, we are in almost every product category—we offer 18-karat, 21-karat, and 22-karat gold in addition to diamond jewelry and watches. We have just announced a joint venture with a different company to propagate the five or six branches Tiffany has in the UAE. Considering this second segment of our diversification, we are present in many markets.
How did the IPO change the company’s direction? Do you foresee more local companies opting to float their shares?
Becoming a public company created huge pressure—as you know, listed companies are usually under the spotlight. I believe that the challenge was to transform from a family-run business to a listed company, especially in building policies and procedures that reflect corporate governance. The IPO did consume a huge amount of energy from the company, but we gained a testimony on behalf of the business model of Damas. The capital markets believed in Damas to the extent that people were paying money to buy our shares. Within the context of family businesses, every company needs to be evaluated separately. Floating a business obviously has its own advantages, including access to capital markets and raising money. At the same time, there are certain challenges, such as transitioning from being a family-based culture to one where individuals make decisions about structures and system policies and procedures, ensuring corporate governance and dealing with related parties. The ability to transform this culture is a key factor in terms of deciding whether to go for an IPO or not.
How has the company’s strategy adapted to deal with fluctuating gold prices?
The greatest impact on us was the weakening in demand from certain segments, especially in the lower end of the market. Gold became out of reach for certain groups. In the past, we used to see lower-income consumers buying gold; this has stopped in the last two or three years. There was an immediate demand from our clientele for lighter jewelry, and this is why the last couple of launches we have done introduced the new technology of laser cutting, which allows us to produce a piece weighing 3 grams. We gained the ability to produce a full three-piece set of 18-karat gold jewelry that weighs only 6 or 7 grams. There was a lot of pressure to produce lighter jewelry that still looked nice. In terms of consumer segments, we have seen a small percentage of the consumer base focused on investments in the belief that gold prices will continue to rise. This has resulted in more demand for the 22-karat segment, where there are better investment formulas. We see an increasing demand for small bars and gold coins.
What plans are in the pipeline for 2012?
The takeover process is complete and many of the issues we were dealing with have been solved. Now there is a lot more focus on the business, and our attention is on the management and organization of the company. We have very ambitious plans for the coming three years. Our ability to introduce new designs and reinvent certain goals that we have is being improved every day. By August or September 2012, we will begin launching new consumer initiatives, in-house plans, and general goods to satisfy the consumer demand that we are seeing. We are now looking at ways to reinvent our retail presence. We understand that some of our shops have been there for a long time, and we are looking at ways to rebuild our concept and look after the consumer needs and desires. In the coming months, we will start working on the retail format that we currently have now and begin to renovate.
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