FOOD HEAVEN

Kuwait 2017 | FOOD & AGRICULTURE | INTERVIEW

TBY talks to Fares Hammami, Group CFO of Mezzan Holding, on its successes after its IPO, expanding into Saudi Arabia, and evolving food trends.

 Fares Hammami
BIOGRAPHY
Following a career in investment banking, Fares Hammami joined Mezzan Holding as CFO in August 2016, which was soon after the company’s successful IPO and shortly before it unveiled its expansion strategy starting with the 70% acquisition of Al Safi Foods in KSA. Hammami has extensive experience in finance, and before working at Mezzan, he was the Director of NBK’s Investment Banking Division as part of his 10-year career at the bank. Hammami is a graduate of McGill University, a Chartered Financial Analyst, and has previously served as board member of the CFA Institute’s Kuwait Chapter.

Mezzan listed after nearly six decades of family business operations. How have you performed since the IPO?

Mezzan Holding listed on the Kuwait Stock Exchange on June 11, 2015 after its transformation from a family-owned business. Mezzan's stock is still up 30% from the private placement price prior to listing. From day one there has been a great deal of traction because, first of all, it is a defensive sector, secondly a Kuwaiti story, and thirdly a credible name and a food and beverage company. Our stockholders include Al-Wazzan family members at 63% and Oberoi family members, while approximately 30% of our stock is free floated and owned by Kuwaiti retail, GCC quasi-sovereign, and corporate institutional investors, as well as international, regional, and local asset managers. The primary objective of listing was succession planning beyond the second generation. Today, around 75% of Mezzan's operations are in the food business, while 75% of our revenue is generated from discretionary and non-discretionary fast-moving consumer goods. Mezzan's operations span seven countries, where Kuwait—our home market—accounts for 65% of revenue in addition to operations in UAE, Qatar, Saudi Arabia, Jordan, and Afghanistan. In 2016, we recorded sales of KWD207.4 million, with profits of KWD17.2 million. Of course, because of our soft parallel portfolio, we are exposed to certain risks; however, our investors are pleased as our risk profile is diversified, both geographically and in terms of product portfolio and range.

In August, Mezzan Holding acquired a 70% stake in Saudi Arabia-based Al Safi Foods. What are your expansion plans there?

The Saudi market is the largest consumer market in the GCC. We went to look for the right asset and the right partner to execute our venture into Saudi Arabia and to grow our holding there. We found Al Safi Foods, whose owners decided it preferred to be an investor rather than an operator. This partnership had potential, and we injected KWD7.3 million into the company for a 70% stake and our partners Al Faisaliah Group own the remainder. Mezzan Foods will be the vehicle through which we expand our operations in food manufacturing and distribution in the Kingdom. We now consider different options to increase our product portfolio there and local production. In two years' time, we expect Mezzan Foods to make up around 5-10% of our business.

How do you envision diversification within your portfolio?

We look at vertical integration, including production and integrating more parts of the process to lock margins. If we find great brands in non-foods, we will certainly consider them; however, our focus outside of Kuwait is primarily on food. Having a core strength gives us bargaining power through our distribution platform. It is becoming more in our DNA to look not only at organic growth but also inorganic growth.

What are your thoughts on the evolution of food trends in the MENA region?

There is a shift toward healthier products and greater awareness, and we are on track to adopting healthier eating habits. Water is becoming more prevalent vis-à-vis sparkling drinks and it is becoming a health fad growing in Kuwait and the region. Following consumer trends we adjust our products as well, as we now have kettle-cooked chips that use around 40% less oil. A short-term trend is spending awareness, and people are spending less at restaurants and instead buying in grocery stores.

What are your ambitions for the company in the year ahead?

We have committed ourselves to the Saudi market, and my ambition is to win a 5-10% share in the market there. In Kuwait, we are expanding in the right sectors and are putting together a new line of water beverages. At an operational level, we seek to enhance our efficiency and invest in technology and infrastructure. For example, we will improve centralization in our warehousing and distribution for the different product lines in our food business in Kuwait and the UAE.