Intercoil: Building the dream
Intercoil makes for an intriguing case study because it marks the convergence of three critical aspects of running a business: the succession of a family-owned firm, the journey of a manufacturer and the transition from a small business to a large enterprise. Hassan Al-Hazeem speaks to SME Advisor and highlights the peaks and pitfalls
Hassan Al-Hazeem is your typical entrepreneur – passionate, organised and extremely driven. As soon as we sit down, he gets straight to the point: Let me tell you how it all started. Intercoil International was established by my late father Abbas Ali AI-Hazeem over four decades ago, and I took over the management of the company in 1999. My father’s first business was carpets trading in 1958, which later evolved into a furniture and furnishing retailing and manufacturing group. Intercoil started as a polyurethane foam company in 1974, the region’s first company of its kind. Over the years, Intercoil continued to expand and diversify, and eventually identified mattresses as its core offering when it recognised the importance of sleep on an individuals health and wellbeing. We realised that without it, even the simplest of tasks can become insurmountable. So we made it our responsibility to not only provide healthy sleep solutions, but to educate our customers on the importance of a healthy lifestyle.
And, it has been an incredible journey for Hassan and his family. One with its fair share of opportunities and challenges. “Absolutely! We have worked hard over the last 40 years to build a brand that connects with our customers and delivers an excellent value proposition. We have been fortunate to receive several accolades for excellence in business performance, such as the Mohammed Bin Rashid Al Maktoum Business Award, and we have successfully implemented an ambitious growth strategy outside of the Gulf region, and developed a strong presence in 23 countries. We also signed our first licensing agreement with the Bombil Group in Kenya, which signified the maturing of our company on an international scale. These are all significant achievements for the company, which have contributed to making Intercoil the company it is today.”
After his father, Hassan was at the forefront of one of the most prestigious manufacturing firms in the region. He knew he had a mammoth task at hand. He did not take his position for granted and began looking for ways to improve the company’s offering.
The first step was the investment: Our investment is ongoing in order to ensure we stay abreast of the latest technologies and at the forefront of this competitive market. Our most recent investment of AED 35 million on the automation and re-engineering of our manufacturing processes has enabled us to increase our output and meet increasing demands.
The second step was product diversification: It is important for us to continually introduce new product innovations. Our newest mattress series Evolution is a breakthrough innovation in the mattress industry which took between six to eight months to be developed. Our research showed that when a customer is shopping for a mattress, the biggest bottleneck in choice of a mattress is uncertainty over choice of comfort level (the softness of the mattress) and the disagreement between couples in terms of whose preference should be considered. At a later stage in the life of the mattress, another important product failure is that when the mattress gets dirty/stained, there is no recourse for the customer to restore the hygiene and cleanliness of the product, except by replacing the whole mattress. Evolution overcomes these two critical product gaps by designing the mattress as a modular product with separate parts. The design process was thorough, as we established our own research and development team that conducted extensive tests internally, followed by a number of focus groups externally. We had no pre-launch problems, although we received some valuable feedback about finishing and fabrics which we incorporated into our final modifications. As with any new mattress, we initially tested the Evolution in Dubai, before rolling it out to the other Emirates and greater Gulf.
He adds: We are continuously investing in our company to improve all facets of the business, from people and talent, to technology, infrastructure and performance. We are constantly communicating to customers, listening to feedback in order to refine our products and service, and to maintain our brand promise and sustain consistency. We are fortunate to enjoy a strong and loyal clientele in the region, but we never stop looking for ways to innovate, grow and expand in order to remain competitive. More importantly, we promote healthy sleep and healthy life, and this is something that we are passionate about and something which goes beyond the bottom line.
And, these strategies have surely worked for Hassan. Under his leadership, the business has expanded into new markets and new verticals through an ambitious growth plan. Today, Intercoil operates eight distribution centres and 23 retail outlets across the region, covering 23 countries in MENA and the Levant, with over 500 employees, 50 distributors, vendors and agents and three state of the art manufacturing facilities, including one in Saudi Arabia. It also recently completed the first licensing agreement for Intercoil in Kenya, East Africa.
Identifying lapses and finding solutions
Funding regional growth and expansion has been an ongoing challenge for Intercoil. A burgeoning economy, growing population, geographic centrality and healthy income levels have earned the UAE a front runner position in global emerging markets in recent years. There are, however, certain barriers to growth that can hinder a company’s development such as ownership laws, rules and regulations and general financing issues, says Hassan.
We have overcome some of these challenges by starting lean, despite the initial temptation to set up a larger infrastructure due to economies of scale. When setting up distribution centres in new markets, we outsource logistics and implement an effective just-in-time (JIT) inventory approach, which allows us to capitalise on warehouse space and increase efficiency while decreasing waste and associated inventory costs. Obviously this requires a strong understanding of the market, customers and forecast of demands, so we ensure we have an innate understanding before expanding into any fresh market and a likelihood that new showrooms will be self-sustainable. Once a business grows and justifies scaling up, we remain prudent in building in-house capacities and resources.
Upgrading through innovation
There is no one better placed than Hassan to talk about some of the industry’s leading trends. He considers technology as one of the biggest disruptors and is ensuring his team is ahead of the curve. We are currently working on our e-commerce platform to provide a streamlined and convenient shopping experience to customers. In terms of products, we recently launched a revolutionary new mattress called the NGMatt. A fully customised ergonomic mattress, NGMatt can adjust to the sleeping patterns and positions of its users. With built-in intelligence to monitor sleep quality and patterns, and the ability to learn and self-adjust its firmness configuration, it allows users to fully maximise their sleep. The whole world is fast moving towards digitisation, and bearing this in mind the mattress is easily controlled through a smartphone app, and provides the user with reports on their sleep quality.
Another trend that Hassan identifies is personalisation. There is a growing demand for personalisation. The one size fits all philosophy is convenient but ultimately unsatisfying, especially for couples who have differing sleep habits and patterns. For instance, we have a global patent pending for the new Evolution Series we have developed and manufactured – giving the customer the creativity and freedom to personalise their comfort levels, support, and different fabric technologies for each side of the bed. Each segment is easily replaced, thanks to a detachable top panel, offering easy customisation, he explains.
Intercoil recently began operations in its new manufacturing facility in Saudi Arabia, so understandably its immediate priority is to ensure that its new facility is fully functional and everything is running smoothly enough to enable it to increase its market share in the region. We are looking to develop our retail footprint further and have plans to open another seven showrooms in the GCC alone in coming months. We are also looking to enhance our presence in primary markets through franchising and licensing agreements, and are particularly interested in Africa, CIS countries and Eastern Europe, explains Hassan.
He adds: In the long term, we are taking steps to launch new manufacturing facilities in both Egypt and India to better service the surrounding areas. We have aggressive and ambitious plans for 2017 onwards and plan to double in size again over the next five years after consolidating and leveraging our current resources and infrastructure.