CAIRO: Visiting the headquarters of Bisco Misr in Cairo is a bit like being Charlie in the Chocolate Factory.
Established in 1957 as the Egyptian Company for Foods, Bisco Misr produces baked goods and confectionary, including biscuits, wafers, cakes and date bars – it’s hard to leave the place without a sugar rush.
The company has seen sales increase from LE 228 million in 2009 to LE 290 million last year; and business is expected to continue growing as LE 46 million are invested in new production lines this year.
Asked whether expansion plans have been altered due to recent developments in Egypt, Bisco Misr Chairman and CEO Aref Hakki said, “No. We’re not worried…our business is booming.”
Between January and February, during which mass protests led to the ousting of president Hosni Mubarak, business was only disrupted on and off for a total of a week, he said.
By mid-May, two new production lines are expected to arrive in the Alexandria factory, with more in the pipeline.
About a month ago, the company launched Datto Jumbo, the larger sized version of the well-known date bar, one of their most popular products on the market. According to Hakki, it’s “doing very well.”
Date bars have become the company’s number two product, with four dedicated production lines working full time at the Cairo factory. “About two years ago, we got the quality 100 percent and it started to take off. Now we are selling four to five times more.”
Starting with more than 150 products, “far too many,” he said they kept cutting back. “Some [products] were successful, others traditional and some did not have a big demand or offer anything special and were not making any money. These we eliminated. We are down now to around one half of what we had.”
In the family
Bisco Misr categorizes its range of products into families. From the biscuit family, the plain Luxe biscuits, made in Alexandria, are the company’s best sellers and have “been on the market for many years.”
Without disclosing market share, Hakki said their plain biscuits are number one on the Egyptian market. As are their date bars.
When it came to wafers, they first decided to carve out a market niche with vanilla-filled wafers as opposed to the more prevalent chocolate variety. Now more confident, Bisco Misr has a new line, developing chocolate-filled wafers that are set to launch in a “few months.”
Cakes are a new family, now featuring a few products filled with chocolate, cream or jam. As newcomers to this more competitive area, they are optimistic: “Our [market] share has increased but there is still room to grow,” he said.
They also make nutrition bars for schools, and produce a high-energy version for the UN World Food Program, a shipment of which was just sent to Libya. The UN date bars are the only ones “fortified” with more vitamins, iron and are 450 calories.
The rest of their products are exported all around Africa, in the Middle East and the Gulf; and during kahk season, “we send all over the world,” Hakki said.
Changing course
With a bachelors of engineering from Cambridge University and an MBA from Seattle University, Hakki worked in Europe and the US for many years before coming back to Egypt. He joined the board of Bisco Misr in 2005 when a consortium bought the government’s stake in the company. Three years later, he became chairman and CEO.
Bisco Misr was created as a public sector company over 50 years ago and was partially privatized in the late 90s. At the time, the government retained around a 36 percent stake, which in 2005 it offered to investors who would buy its shares as well as those of any shareholders who wanted to sell.
A consortium led by Concord International Investments won the bid and now owns a majority 67 percent stake. The group comprises Concord managed funds, Karnak Investment Fund and Commercial International Bank (CIB). Other significant shareholders include Awkaaf (Religious Endowments) and Misr Insurance.
“There are two approaches to buying a company, especially a publicly owned company. One is to realize the company’s potential and build it up, which takes time and a lot of investment. The other is to spend nothing and drain the company of its assets,” Hakki said, adding that the new investors opted for the first choice.
According to a statement, total investments on restructuring and improving facilities from 2005-2010 reached LE 152.2 million. This year’s plan includes more expansion and upgrading of production lines, which brings the total to LE 198.2 million.
Step one was an overall “clean-up process,” which entailed “repainting offices, renovating the factory space, and because we deal with things that are eaten, everything had to be made spotlessly clean. Maintenance of the machinery, some were very old, new machinery was brought in,” according to Hakki.
The firm spent more than LE 88.4 million on new production lines, LE 7.4 million on infrastructure, LE 23.0 million on renovations, and LE 22.3 million on sales and distribution.
A big chunk went to integrating information technology into facilities, a total of LE 11.1 million. Modern companies have “IT systems, computers in offices, networks,” Hakki said, but Bisco Misr used to only house five or six computers in total.
Now the companies’ three factories ¬— two in Alexandria and one in Cairo — are interconnected and work with the same system, which allows executives to check on the production and stock in each, and reallocate resources based on the results in order to optimize efficiency. There is also a telephone network connecting the factories and offices.
“The people who bought Bisco Misr had a forward-looking, long-term approach to realize the potential of the company, and realized that some money had to be spent even though it affected profitability in the short term,” Hakki said. But the changes were necessary to “clean up the dust [of the past].”
There was also an organizational restructuring. “In certain areas we had overstaffing and others were understaffed. We didn’t have an IT department, so these were new faces. We had some areas were there were too many people, so we introduced a voluntary early retirement system, which [894 workers] took advantage of. That also cost money which came out of the bottom line [LE 15.9 million].
“All this restructuring had a negative on profitability especially in the first two years…but it had to be done in order to succeed in the long term.”
The number of employees went from 2,789 in 2005 to 2,784 in 2011, and all workers who had completed three years of employment were permanently hired.
In order to improve efficiency without sacrificing quality, they had to find a way to “eliminate waste.”
“We had some old lines working here that produced say 10,000 biscuits a day, broken ones were around 20 percent or more. That is cost. We spent a lot of money improving the efficiency of equipment…and rationalizing our production.
“Now we concentrate certain products in Cairo, and others in Alex. Each is specialized, more efficient, which means less people who become more specialized and experienced at their work.”
Hakki said any healthy company is a partnership between three entities: the owners, the employees and the customer. “In successful companies, all three are happy and not one at the expense of the other,” he said.
“We could make cost-saving decisions and give any quality to the customer, but sooner or later, with poor quality, no one will buy [the product]. The owner also has to be kept happy and for them it’s a matter of…expecting investments to pay off, which it has begun to do. We could pay our employees the minimum salary, but that would hurt us in the long run.”
In 2005, some employees were earning as little as LE 200 a month, which the new owners realized was not sustainable. They first introduced a minimum wage of LE 500, which this year was increased to LE 700. Production incentives, bonuses and annual profit distribution — which is three times more than stipulated by law — bring the average monthly salary close to LE 1,000.
Overall, Hakki’s view is optimistic, and he highlighted the importance of expanding the middle class to the growth of the economy.
