Lulu: A growing pearl of the Gulf
Manama, September 20, 2012
By Mark Lazell
By any standards, Yusuff Ali M A is a remarkable man. One of Abu Dhabi’s adopted sons – he was the first non-Arab to be voted onto the city’s Chamber of Commerce – he has built one of the most successful and instantly recognisable retail and business empires in the region.
“I was overwhelmed to be the first non-Arab in the chamber, which vindicated my vision of being part of the growth of the country. I remain loyal to the core of my business in the UAE and Gulf, and I maintain cordial relations with all the rulers of the Gulf countries,” says the managing director of the LuLu Group.
The group was established in 1966 in the UAE capital, which at the time was little more than a large fishing community. In the 46 years since, the company has grown steadily in tandem with that of its home base, but it is in recent years that the retail business growth has really accelerated. Today, LuLu has 104 hypermarkets, supermarkets and department stores across the Gulf, Yemen and Egypt, which have delivered a string of industry awards and accolades. This year, the brand was ranked by UK-based global retail intelligence firm Planet Retail as the number one hypermarket chain in the Middle East, and the sixth in the huge Middle East and Africa region.
In addition to the flagship retail chain LuLu, the group also has interests in manufacturing and food processing, imports and exports of food items, cold stores and warehousing, as well as logistics and travel and trade. The business is supported by a network of offices in 19 countries through the Middle East, Far East, China, India and Africa, through which the Group sources products and commodities to not only supply its own chain of stores but also other regional players.
A catalyst for the rapid expansion of the brand in recent years was the 2009 launch of Achieve 100, a highly ambitious project whereby LuLu aimed to open 23 new hypermarkets and shopping malls across the Gulf Co-operation Council (GCC) in just three years, taking the total to 100. Despite the obvious constraint of time, not to mention concerns among some observers about the viability of the project in an economic downturn, the milestone was duly achieved in April this year when the 100th store was opened in Ras Al Khaimah.
“Some would say it was ironic it was launched at a time of so-called recession,” says Yussuf Ali, originally from Kerala, the southern Indian state.
However, the entrepreneur’s business aspirations have rarely been diminished by what some others believe to be insurmountable challenges. He opened his first LuLu supermarket in Abu Dhabi in 1991, at the height of the first Gulf War when the region was gripped by uncertainty.
“People were running away from the region and were sceptical about investing in the Middle East,” he recalls. “I was the first expatriate to bring money in, to invest here and open the first LuLu store. I have tremendous respect for the rulers here – they understand I am not a fly-by-night operator who only wants to make money while the sun is shining. They have huge confidence in me and my brand, because we always stood by their policies and the economic stability of the country,” he says.
According to the managing director, the timing of Achieve 100 was realistic because it fitted the Group’s business model.
“We are in the business of essential commodities, not high-end luxury goods with high margins. We understood that as long as we did our business prudently and transparently with a competitive edge, we have huge growth potential. People are more aware of products and value for money [during a downturn].
“Our approach was vindicated – we always believed the slowdown was a short-term phenomenon. We did not slow down, we did not stop any projects and we opened our 100th store this year as promised.”
Now Yusuff Ali is planning the next phase of expansion for a hypermarket business which currently enjoys a 32 per cent retail market share. A further $2 billion has been earmarked to build another 20 hypermarkets, supermarkets and shopping malls in the region over the next two years. Three more projects will be opened this year alone, in Kuwait, Saudi Arabia and in India, where the Group is making its first retail foray.
The Group’s latest spending plans come on the back of a solid financial performance which saw turnover reach $4.3 billion last year, up 17 per cent on 2010.
“We are looking to maintain [turnover] growth of about 20 per cent this year as well,” says Yusuff Ali, who reveals that the typical timeframe for a return on investment for a hypermarket is about three years.
Although sales turnover growth remains healthy, the food side of the business continues to be impacted by soaring food costs, a factor which is exacerbated in the import-dependent Middle East. For a retailer trying to avoid passing costs onto the consumer, this inevitably poses serious pressure to the bottom line requiring creative mitigating strategies.
“When you import a product, you tend to import inflation. We always try to find a way to keep prices low, at least of essential commodities,” says Yusuff Ali. “Retailers are always the last link in the chain, with no control over the price - we are normally the ones who get penalised for rate hikes,” the businessman observes.
Four years ago, LuLu embarked on a plan to address the issue, launching a plan to open its own sourcing offices in different parts of the world, effectively cutting out the middle man and his costs. It will open its first London office this October, which will function as an import/export consolidation point. Similar offices are being established in parts of the Middle East, India, the Far East, Benin, Mozambique and Kenya, Brazil and Turkey. These offices will supply LuLu stores directly, helping establish a greater degree of control over quality, availability and price of products.
Another vital element in LuLu’s expanding supply chain infrastructure is a network of warehouses in the Middle East. Equipped to store food for a minimum three to six months “to meet any eventuality”, they serve a very important and specific purpose for the Group as well as the community.
“Our first priority is to maintain food security,” says Yusuff Ali.
This complements LuLu’s ‘customer-centric’ policy of selling quality goods at as competitive a cost as viable.
“However clichéd that may sound, value for money, best quality products and top of the world service is a key focus area for us. No matter how much cosmetic surgery you do to a brand, unless you deliver on these things nothing matters,” he says.
“We have a track record of keeping prices low – for example during Ramadan when there is a tendency for prices to go up we have stepped in and said no, we will take a hit.”
Yusuff Ali is clearly proud of LuLu’s roots as a UAE brand, which have provided the foundations on which he has been able to replicate the successful formula in other countries.
“We grew with the country, and this is something with which people can associate,” says the prominent businessman, who in his role in the Chamber of Commerce member travels around the world actively promoting Abu Dhabi as a regional trade, business and tourism hub for investment.
However, he believes that to succeed outside its home market the brand has also had to adapt to unique tastes and characteristics of an individual market. Unlike its competitors, claims Yusuff Ali, no two LuLu stores are the same.
“We don’t force feed what we have. Rather, we adapt ourselves to the changing needs of the location and its demographics,” he stresses.
In October, the Group will launch LuLu Webstore, an online shopping platform which will initially sell electronics and other durable products and appliances to UAE customers. Yusuff Ali acknowledges that the penetration of online shopping in the Gulf lags bigger and more mature consumer markets elsewhere, but puts that down simply to consumer shopping culture and behaviour in an otherwise youthful, IT savvy region.
“Shopping is still considered a touch and feel activity here,” he says. “Ultimately it [online shopping] will not replace the bricks and mortar format, but will bring in new customers whose time is limited.”
The company also plans to launch its own loyalty programme before the end of this year.
Hands on and high profile in corporate, charity and social circuits, Yusuff Ali regularly finds himself receiving feedback from the community on various aspects of his business. He believes it is important to set an example and present a public face for the brand.
“We don’t want some nameless identity. People can talk to me directly or my regional directors in different countries who are trained to be involved in community activities. There has to be a personal touch with the community,” he says.
Given the group’s spectacular expansion plans over the next two years, Yusuff Ali naturally hopes future generations of consumers will continue to identify with the LuLu brand.
“With each new store we open we keep trying to improve the convenience, the services, the range. It is a very evolutionary brand which we believe is still in its growth phase.
“Our goal will be to make LuLu a totally global brand coming out of the UAE. My dream would be to see a LuLu store in some of the best cities in the world, including in the Far East, Africa and Europe,” he concludes.
With his track record, few would bet against him doing this.
* The above report appears in The Gulf, our sister publication.