Dubai: Family-owned businesses in the UAE are finding it harder to grow than they did in previous years.
“It’s very hard to grow now. You’re talking about a borderline mature economic set-up,” Abdullah Al Gurg, general manager of UAE-based conglomerate Easa Saleh Al Gurg (ESAG), told Gulf News in an interview on Monday.
Al Gurg said that the UAE market is established and there are limited opportunities for new product ranges to be brought into the country.
“Everything has a supplier,” he said.
ESAG is a multidivisional conglomerate with 18 companies and five joint ventures. It has offices in the UAE, Oman, Qatar and Saudi Arabia. It operates mainly in the retail, industrial and construction sectors. Also, the company is the regional partner of over 370 brands, such as United Colors of Benetton, Siemens and British American Tobacco.
Other challenges faced by family-owned businesses in the UAE include partners changing their strategies, succession planning, such as deciding which family member should take over a business, and competition from multinational companies.
So, how can a conglomerate like ESAG maintain its growth?
“The good thing about our business is that we’re into consumables [and] the tyres business…these are needed in the daily activities of a person,” Al Gurg said.
Construction sector
Also, ESAG, a distributor of building materials, is finding growth opportunities in the construction sector which has seen a jump over the last year.
The company plans to grow by adding new products and enter new regional markets, Al Gurg said.
He said that the company looks to grow through acquisitions, and is considering acquiring businesses in the UAE, but it has not struck any deals yet. The company is not interested in expanding to Kuwait and Bahrain.
Internationally, it acquired the IBM building in London’s South Bank for £120 million six months ago, he said.
Meanwhile, ESAG aims to supply building materials for Dubai’s Mall of the World, which was announced last month. It is a massive temperature-controlled city and shopping complex that will be developed by Dubai Holding.
Al Gurg said that discussions between companies and Dubai Holding have not started. However, he said that the company “will obviously be involved in the construction phase of the mall [and] the entire district because of our supplies of steel and building materials. This has not yet taken place. I think we probably will have this discussion if not late next year then the year after.”
Healthy finances
The company has maintained a healthy financial position. Al Gurg said profit and revenue has grown by 3.5 per cent in the first half of the year compared to the same period in 2013. Al Gurg Cigarette Division, the sole distributor of British American Tobacco cigarettes in the UAE, posted the largest growth in turnover during the first six months of the year at around 7 per cent. By 2015, the company aims to double its turnover from 2012.
“We invest 85 per cent of our net earnings back into the business,” he said.
While other companies are eyeing an initial public offering (IPO), ESAG, which has been operating for 65 years, will remain private at present, he said.
On new joint ventures, Al Gurg said that the company is close to signing a deal with a Scandinavian company, which he did not name, that is involved in supplying building materials.
Meanwhile, ESAG plans to open two showrooms under two new retail brands in Dubai later this year, Al Gurg said. He did not provide the names and locations, but he did say that one showroom will sell modern furniture while the other will offer home accessories.
