By Udayan Nag
Al Able Trading and Contracting’s Division Manager, Mohammad Mansoor, talks about how the embargo imposed on Qatar by its GCC neighbours has opened up new avenues for local companies.
On August 5, 2017, the blockade on Qatar, the main perpetrators of which are Saudi Arabia, UAE, Bahrain and Egypt, will be two months old. With the world’s attention focussed on the region, amid desperate efforts on all corners to end the standoff, how are the local businesses coming to terms with the deadlock?
“In every loss, there is an opportunity. This is a learning experience for Qatar,” says Mohammad Mansoor, Division Manager, Al Able Trading and Contracting, adding that once the embargo was imposed, their company was flooded by orders which were impossible to carry out.
Services offered by the Able Group comprise waste management, construction and engineering. They are also the distributors of rice and other food items to some of the major retailers in the country. Their clients’ list includes Qatar Airways, Qatalum, Ezdan Holding and Ashghal.
“There has been hoarding, and Islam does not allow you to hoard, especially food items. We knew where the direct consumer interaction was. So we have been going in that direction to ensure that there’s proper stock movement. Things are running haywire as far as Fast Moving Consumer Goods (FMCG) products are concerned.”
The Able Group had come out with a statement that they will continue to supply foodstuff to retailers in Qatar at the same prices despite the transport embargo imposed on the country. However, Mansoor also says that there is no way to ensure that the retailers pass on the benefit of “same prices” to the customers.
“Our current retailers are Smile Hypermarket, Grand Mart, Ansar Gallery, Quality, and K Mart, to name a few. These are direct consumer-driven companies. There is no chance of any wholesalers, so we trust them. We supply goods to them at a rate which is less than the market rate. However, they are also interested in margins because it’s retail. Having direct control over them is not possible. It’s not in our hands.”
Mansoor further talks about the steps taken by his company to counter the ill-effects of the blockade, which include releasing limited stocks in order to avoid hoarding, and booking a full shipping vessel to get a better rate.
“We are releasing limited stocks to make sure that people don’t hoard. The demand has gone up by about 30-35%.
“We are releasing limited stocks to make sure that people don’t hoard. The demand has gone up by about 30-35%. Even though our profit margins have been badly hit, we are supplying goods at the same price, whereas other distributors have increased their prices by 15-20%,” he says.
“Other distributors actually called us and expressed their displeasure because we did not increase our rates. After the media reported on our prices being constant, many of the distributors are now reluctant to increase their rates. Shopkeepers are also now aware of the fact that the inflation is artificial and are therefore questioning the distributors,” he adds.
Mansoor says that another way to get around the situation was to book an entire shipping vessel rather than a part of it. “Since we booked a full vessel, it’s costing me $1200 instead of $2000, so I am saving $800,” he explains.
However, Mansoor feels that supply vessel operators like Maersk should be operating through the government and should have fixed rates, at least as long as the blockade continues. “The rate (for hiring shipping vessels) which was $600-800 before has now become $1800-2000 because of the blockade. At this juncture all the dealings should be through government channels. This will reduce artificial inflation,” he says.
According to Mansoor, quicker import clearance and increasing warehousing facilities will also help companies like Able to counter the embargo. “Warehouses will help me reduce my costs by about 10%. That will straightaway help me boost my margins, especially for food items. Before the embargo, it was not very feasible to store items like rice for even a couple of months because it’s expensive. On the other hand, countries like Iran and Saudi Arabia have the capacity to store items for about a year.”
However, companies like Able, which get their products from India, have been confronted with another dilemma – the Goods and Services Tax (GST) introduced recently in that country. “If I get my rice packed in India then it will come under my brand, and the GS T for rice is 5%,” says Mansoor. “We are monitoring the situation very carefully and planning accordingly. We might import our rice from countries like Pakistan, Thailand and Vietnam, or bring the rice from India and get it packed in Qatar.”
As far as the Able Group’s current and future plans are concerned, Mansoor says that apart from rice, the company also distributes frozen items. However, in a major development concerning the company, its water plant project slated to come up in New Industrial Area has been expedited because of the blockade.
“About 60% of the work is over. The pre-installation facilities are already in place. We are set for a soft launch in October, and if the government supports us, we can start our operations in October itself. Post the soft launch we need to get approvals from the various ministries. It’s an in-house production. We have got our machinery, technical knowledge, and we have got the market for our product. It’s an area where we can make profit.”
Mansoor adds that they will be looking at a production of 20,000 half litre bottles per hour to start things off, and are expecting to capture at least 4-5% of the market share (water) in a year’s time. That in fact matches Able’s current market share which the company is looking to increase to 8-10% in six month’s time.
“My simple strategy right now is: don’t look for profit; ensure that you are breaking even. It does not matter even if we have to sacrifice a year’s profit. This is the best way to tackle my competitors right now. According to our annual plan, we were supposed to capture 4% of the market share. The blockade is turning out to be an advantage for me because it’s going to help me increase my market share.”
As far as the FMCG market in Qatar is concerned, Mansoor says that the total share held by local companies is 2-5% and how the blockade affects that figure depends on how long the situation continues. According to him, independent strategies of the various companies in the country will also play its role.
And finally, having planned so meticulously to deal with the blockade, what would the effect be on the Able Group if the embargo is lifted sooner than expected?
“We have just modified our plans, not changed them completely,” says Mansoor. “We have got plan B in case the blockade is lifted. The precautions that we are taking because of the embargo will stand us in good stead in the future, and our profit margins are going to increase. I am looking at this opportunity as a blessing in disguise. I am better prepared for unforeseen circumstances now.”