The corporate hygiene sector will undergo a large shake-up in 2018, with smaller players in the market likely to be squeezed out, according to a senior industry executive.
The industry, which supplies things like paper towel dispensers, wet wipes, air fresheners, soaps and other chemicals, is still fragmented, according to Chandan Singh, CEO of Dhofar Global.
Dhofar Global is one of the largest suppliers of such products to hotels and retailers in the UAE, with Singh claiming to control 70 per cent of the market.
This is only set to increase, he says.
“You will see more changes coming in the second quarter of 2018,” Singh said, adding: “In business, when any turbulence comes, the bottom people get affected.”
The turbulence Singh is referring to is the arrival of the value added tax (VAT).
The UAE and Saudi Arabia are among the first countries in the Gulf to implement the 5 per cent tax on goods and services starting January 1, 2018. It is expected to provide a new source of revenue for governments to spend on infrastructure and other public services.
“In business, [when] any turbulence comes, the bottom people … get affected because they don’t have cash to manage the business, and the big fish manage the whole thing,” he said.
This coming change would ultimately see the “big fish manage the whole thing”, Singh added.
According to the CEO, factors such as cash flow and financial strength would see the “best” companies retain the market.
Singh conceded that these top firms in the market might see a slight impact on their margins from VAT, but added that the companies at the bottom may very well have to close down their businesses.
“They cannot sustain the kinds of margins that will be shrunk …[in the end] only the top five yield guys will still be there, and out of the top five, only the top three guys will be earning profit,” Singh said.
Rather than acquiring these smaller companies, Singh said that these smaller companies were likely to simply become “victims of business,” and Dhofar would scoop up the contracts.
To keep pace with a rapidly changing industry, Dhofar Global, an Omani company which has contracts with hotel groups including Emaar and AccorHotels Group, is looking to distance itself from the competition.
This will be achieved through the introduction of a new business model.
According to Singh, the company conducted a market evaluation this year, assessing the strengths of Dhofar’s competitors.
The CEO says that he realised his company’s strength was supplying end to end solutions instead of individual products. Following Dhofar’s pivot from a supplier to a solutions provider, Singh says that the Omani company won around 170 large contracts from its competitors.
“The strength we have is being able to offer everything. [Our competitors] don’t have chemicals, don’t have tools. If we have a challenge with the tissue, we can offer chemicals, and the tissue and chemical go as a combo,” Singh said.
“We will kill the competition then and there,” he added.