Saudi supermarket boss Ahmad BinDawood got off to a bad start in his retail career. As a child, he worked in his family’s store, once spending eight days as a toy sales assistant without selling anything.
“We learnt about retailing while other families went on holiday,” the down-to-earth 36-year-old recalls. “We started as bag packers, then cashiers. Aged 11, I remember figuring out that I needed to ask the right questions to make a sale. I celebrated selling my first toy on the ninth day.”
Today, BinDawood is chief executive of one of Saudi Arabia’s largest retailers, BinDawood Holding, an established family group that controls two supermarket chains and Danube Online, the country’s biggest online grocery platform, with 3m users, or nearly a 10th of the population.
But the global coronavirus crisis has brought challenges, even though food retailers were excluded from the Saudi government-ordered closure of shopping malls. Many of BinDawood’s stores are staying open 24 hours a day, with shoppers making fewer trips but buying more.
The kingdom’s public finances have been hit hard by plummeting oil prices, and VAT will triple to 15 per cent on July 1. But BinDawood says despite falls in eating out and discretionary purchases, consumers are maintaining grocery spending. “Our sales are outperforming, with all our stores remaining open under the curfew timings implemented across the kingdom,” he says. “Robust systems, and the staff’s dedication and professionalism, have ensured the business hasn’t suffered any downtime.” He adds that “rigorous sanitisation, social distancing and other measures ensure employee and customer safety”.
Shoppers near a BinDawood store in Mecca
BinDawood, who took control of the company a year ago, represents a generation rising up the ranks of Saudi family businesses — and one seeking greater influence. He and many peers are a university-educated cohort open to bringing in stronger corporate governance, more professional leadership and a greater readiness to work with partners such as foreign investors.
He says he remembers wanting, from a young age, to make his mark in retail. “I dreamt of accomplishing something in my own right that would influence the industry.”
Many of his generation of executives in their twenties and thirties are supporters of Vision 2030, an economic programme set out by the controversial 34-year-old Crown Prince Mohammed bin Salman. The plan, which may be amended because of the pandemic, aims to modernise the economy, reduce dependence on oil and develop sectors such as leisure, infrastructure, health and education.
But even before Covid-19, business sentiment had been severely damaged by the anti-corruption crackdown Prince Mohammed launched in November 2017, in which more than 300 princes and senior businesspeople were locked up in the Ritz-Carlton hotel in Riyadh. Most were later released, but many secured their freedom only after handing over assets to the state. BinDawood declines to comment on this shock to commercial confidence.
Samiha Alshaikh, a Dublin-based consultant to the Ireland Saudi Arabia Business Council, says there are about 1,000 profitable family-run businesses in the kingdom that are expected to perform a pivotal role in economic growth.
BinDawood is well placed to play his part. His group is a leading operator in a grocery market valued at $46bn a year by Euromonitor, the market research group. He oversees 73 stores branded as either Danube or BinDawood, with combined revenues of more than $1.6bn, employing 10,000 people and recording double-digit sales growth. The 46 Danube stores cater to expat and upmarket shoppers, offering fresh, imported and organic food, while the 27 BinDawood outlets, in pilgrim cities such as Mecca, target more traditional tastes and serve the less well-off.
One of the company’s Danube branches in a shopping centre in Taif, Saudi Arabia
He took over the running of the business from his uncle, Khalid BinDawood, who remains on the board with another uncle, Abdul Khaliq, and his father and executive chairman, Abdulrazzaq Dawood BinDawood.
The family fortune was founded in trading more than 50 years ago by BinDawood’s grandfather and two great-uncles. In 1984, BinDawood’s father and two uncles established BinDawood Holding, which today spans a commercial empire with an annual turnover of several billion dollars, ranging from a hotel and four luggage franchises to the Jumairah-brand toy and food wholesale distribution companies, several Etre department stores, and a bakery chain called Danube Star.
BinDawood remembers a grounded upbringing, rather than one with a sense of entitlement. Even today, he is no stranger to flying economy, for example, he says. After studying business at Jeddah’s King Abdulaziz university and taking management short courses at Cambridge university in the UK and New York’s Columbia University, BinDawood was offered a role by his father in the family business. He agreed, starting at 22 as a fruit and vegetable buyer.
Succession in such complex groups with multiple potential heirs is rarely easy. Alshaikh quotes statistics that show only 30 per cent of businesses survive into the second generation, 12 per cent reach the third and just 3 per cent still exist in the fourth generation.
BinDawood says his selection last year as chief executive was “performance-led” rather than based on “family-led” considerations, and formed part of a general executive shake-up. He is circumspect about the details, but a cousin and brother are in the BinDawood leadership team alongside him. Other cousins, siblings and half-siblings are involved elsewhere in the supermarket company and other group businesses. Those that did not remain as senior executives were encouraged to retrain and reapply for roles. Some pursued different paths, BinDawood says. He declines to say whether they receive dividends or other payments.
An influential role in the process was played by Investcorp, a Bahrain-based international private equity investment group, which took a minority stake in 2016 after Saudi Arabia relaxed its rules on foreign investment in retail.
BinDawood negotiated the investment, in talks that covered management and corporate governance, he says. Of 16 family members that worked in the retail operations, only five remained after the management overhaul.
“It was a tough process looking at everyone’s contribution. Family members had to prove they had earned their positions, rather than had them because they were family,” he says.
BinDawood declines to explain who has what stakes in the business. “Decisions are made through a highly collaborative process between the generations,” he says. “Family protocols or constitutions help us to provide clarity and clearly defined roles and responsibilities, following best practices, which all employees must follow.”
Investcorp, which declined to comment, has invested in several Saudi family businesses, including gold and jewellery maker L’azurde, which was founded in 1992 by Abdulaziz Saleh al-Othaim.
A survey in 2017 by consultants Deloitte of 40 prominent Middle Eastern family businesses found 75 per cent said they had to meet specific return targets, with most families seeking to an annual return on capital of 7-15 per cent.
BinDawood’s ambitions fit a pattern. Alshaikh says that in Saudi family firms, “modernisers” have often followed more traditional managers and sought outside investment. She cites Hamad Alessa’s Alessa Group, founded in 1935, where successive generations have diversified from an air-conditioning business into General Motors dealerships, home appliance sales and a 7-Eleven convenience store franchise. Last year, the group took an outside investor when Aseer, a Saudi listed diversified trading group, bought a 38 per cent stake.
A high-profile modernising young businessman is Hassan Mohammed Abdul Latif Jameel, perhaps best known for having once dated the singer Rihanna. He is the grandson of Abdul Latif Jameel, founder of the Abdul Lateef Jameel family business that has evolved since 1945 from a regional Toyota car distributor into a multinational conglomerate. He and his brother Fady are influential in its international investments and diversification drive, though their father Mohammed is still chief executive. But unlike Alessa, Abdul Lateef Jameel has stayed clear of large external investors.
Meanwhile, BinDawood describes as speculation reports that the business engaged US banks JPMorgan and Goldman Sachs for an initial public offering to raise $400m to $500m for a minority stake, reportedly valuing the business at $1.8bn. Even though the coronavirus shock has cast a global shadow over stock markets, he leaves the door open to an eventual IPO, saying: “Like any well-run private company, we regularly review our funding requirements. All options, including an IPO, are considered to take advantage of the opportunities offered by the market.”
In the meantime, he is focusing on more immediate expansion. “We need to enhance our presence in major cities like Riyadh, Dammam and Jeddah, as well as others such as Khobar. For international expansion, timing and opportunity are key. Bahrain and the United Arab Emirates interest us, either through new stores or maybe an acquisition.”
Danube Online, a separate operation, is also growing fast. The online supermarket’s orders have surged during the pandemic. “It’s a lean business that we’ve invested in heavily, expanding to more cities. We think it will be huge,” says BinDawood. There is plenty of competition in online groceries, including smaller rivals such as Sary, Nana Direct and Haseel as well as foreign investors including Majid Al Futtaim, a Dubai-based retail conglomerate, and US online giant Amazon, which owns Souq.com, a local online retailer.
But BinDawood, who has a young son, is undaunted. “This is a family business we want to take to the next level. We want to pass it on to the next generation even stronger, as a proven success story.”