Would you please introduce the framework of ACICO?
I would first like to explain the management of our company in relation to each sector. My main area is the manufacturing sector for ACICO industries; my sister is covering the construction sector, one of my brothers manages the cement, and my other brother manages the real estate development. Overall, ACICO has added a lot to Kuwait since 1998. ACICO started as a small company specifying in building material-aerated concrete blocks and reinforced slabs. When you combine these two products you have a building system, which is based on load-bearing walls, that enables a fast process in construction. You can build the skeleton structure of a house in three days. This is our competitive edge in comparison to the traditional cast institute system. Our product has other advantages such as being fireproof, soundproof, seismic proof so it is considered a very special product that was brought from Germany. At that time, our company was called Aerated Concrete Industries, the brand ACICO had still not been established. My father, the CEO, wanted to share the system and market it in Kuwait. It was difficult because Kuwait was used to the traditional system. The customers used to overview their house being built through the cast institute, and the seven day curing process, and they were unfamiliar with blocks like Legos built in three days. It was a huge shift for them. That is why we created another arm for ACICO called Masaken (meaning home in Arabic). This company was created with financial engineering and we had an IPO [initial public offering]. Originally the strategy was to buy residential land and we would subdivide it into plots to display our ready-made villas, hundreds of them, and they were in huge demand selling very easily. There is a high demand for homes from Kuwaiti individuals. The homes were ready for the buyers to move in. Due to the high demand, we did not have the issue of people coming in and wanting to change the design. We created the most efficient design for the system and the production in the factory. This is how ACICO became renowned in Kuwait. Individual projects started approaching us and proposing for their homes to be built using our system. This is how we came up with the brand of ACICO in 2006. The system and product were well known; we did not want to have to keep returning to Germany for the product—we wanted to have our own. We contracted with a branding company from South Africa that came in and did a three-day workshop. They heard from the manufacturers, the construction sector, the C-level executives different stories. That is how we created ACICO, when you think of HSBC you do not assimilate Hong Kong Shanghai Banking Corporation. That is what we did with ACICO; people do not realize it is Aerated Concrete Industry Company. Before this time, the real asset was my father’s name, Ghassan Ahmad Al-Khaled, as people in Kuwait work by trust. We associated that with the brand name so that when we went global we would be recognized as a brand like Pepsi or Coca Cola. The brand, the product, and the service were of priority to us to ensure that we met the customer’s expectations and needs.
What do you think was the change from 2006 that occurred to persuade homebuyers to embrace your product?
When my father first brought in the system, people were hesitant and he questioned how he could convince those people to use the system. The first step was building his own home. He created a very complicated modern design to convince people that with this system you can build any kind of model. The concrete blocks were ideal as they isolate the temperature so during the summer (the hottest months of the year), we were able to preserve energy from the air conditioning. At present, this is very important in Kuwait given the issues with electricity; people can start saving money on their expenses.
With the projects different developers intend to implement in 2015, what percentage does ACICO see as its maximum market penetration? Do you feel the technology you possess can be used in every project or do you specify?
Our system cannot be built to more than four floors, so we focus on horizontal projects—residential/resorts, not high-rise buildings. For example, major residential real estate developers from Dubai contracted over two hundred villas. When there is such high demand they look for solutions provided by our company because time is of the essence in these projects. So we focus on private residential villas/complexes, sometimes with high-rise buildings when they require a two-story expansion—we can do that, as our product is a light solution for them.
How do you persuade people of the cost value?
In this region, contractors care about the cost, and individuals often focus on saving money for their interior design and furnishings, which are tangible things they can see rather than the notion of saving on energy. In the past, electricity has always been subsidized, but now it is something that they will have to start looking into paying themselves. At present, with the high demand of over three hundred thousand Kuwaitis applying pressure to the government to give land to the nationals to build homes, the government will have to invite the private sector to help them build these homes for them. Currently, the government is giving the Kuwaitis allowances for rented homes and apartments, which is costing them a lot. It will save a lot of government money if they start giving the land and inviting the private sector to develop these plots and make homes. Personally, as ACICO, we have been working closely with the government to find solutions; they are very interested in us, as we are very fast and the price is far less than the conventional building methods.
Would these development plans follow the pattern of your previous models that you sold very quickly?
We can now contribute to a bigger master plan because we have factories in Kuwait, Saudi Arabia, Qatar, and Dubai. From these, our level of production can be far greater than in the past.
The international audience looks at the Middle East for comparisons and similarities; what we want to do is differentiate. You have been operating all over the Middle East. How would you differentiate your progress in Kuwait compared to its regional neighbors?
Kuwait is very different. The biggest difference is the culture, so the marketing has to be very different. It has been a huge challenge for us. We are recruiting marketing managers locally for each country who understand the individual market and networks better. Initially when we came in, we thought that if we were successful in Kuwait, we could use the same prototype in the different neighboring countries. We found this not to be true except in the larger business projects. We do always prefer large-scale projects; dealing with one reliable company with a good track record with mass housing plans is far easier than dealing with individuals on an individual basis. This does not mean that we do not want to cater to those individuals who are still very much our target. In neighboring contries, this system is very new for them. That is often why we go to developers who develop land on a large scale and then people buy through those developers.
Do you do much marketing to construction companies to use ACICO?
Initially, we started with one contractor, but since our expansion we try to give other contractors the know-how; we sell them the system and offer them an engineer from the contracting division to supervise and help. We care about the liability, safety, and responsibility factors. We do not want to simply sell the system; we want to execute it properly to ensure that we are still available for changes within the model for the future. Not any engineering company can work with our product; it is a very complicated design structure.
Over the next five to ten years do you consider ACICO’s priority to be in consolidating the building system that you have or are you looking for other technologies?
We always think of diversification, and of course we are open to it. Personally, I was thinking about different forms of manufacturing, for example manufacturing glass or steel. However, recently since 2014, all the changes happening in Kuwait and the region have proven to us that we do need to focus on our core business. With the huge housing developments happening in Saudi Arabia, Qatar, and Kuwait, to meet that demand we have to expand in our line of business and continuously upgrade it to be less labor intensive and more automated to ensure we are ready for what is coming in the next five years. The only new thing we have looked at is our new acquisition of IBC [Industrial Building Construction Company], previously under the Industrial Bank of Kuwait. We studied the company and saw huge potential in the precast concrete; however, it is not the same as our model. In this way we can ensure we cover commercial projects such as hospitals, bridges, roads, transportation, and schools. It worked very well with our vision; we are very proud of this new acquisition.
Where do you think the balance of development in Kuwait will lie—what proportion will be housing, transport, etc.? Where do you see the majority of the momentum going?
For the market as a whole, a lot of focus is on the airport project. If we do take part, we have to be ready. Even if it is not in the construction, but instead as a building material supplier, we can contribute to the development of Kuwait overall. We can sell our building material individually; by law in Kuwait it is compulsory to use the white blocks as coverage for any commercial building and housing project. It is considered a commodity in Kuwait. We sell it daily and it is considered one of our mainstream cash-flow sources. This is what we are looking at in Saudi Arabia, where a new law was passed to use the white block as insulation for homes. This all adds up to ACICO’s contribution, whether it be housing, commercial projects, or building materials for the government.
Opportunity is evident regarding the demand of your product; how do you intend to ensure that ACICO is ready to take on all these opportunities? What are the key challenges that you have to be aware of?
As a company, we have to be very aware of the competitive edge in terms of pricing. Competition in Kuwait is very high. We want to be competitive and provide high quality at the same time. We have to ensure that our strategy margins meet our profits, so we may also please our shareholders and provide dividends each year. We aim to meet the customers’ expectations and make them happy, so we work very dynamically with our customers and salesmen. We work on the ground up to the higher level to ensure execution of the production. Overall, we have a solid, high-quality product.
Regarding the group as a whole, how can it diversify further as it has over the past years? Are you looking for new partners or simply consolidating what you have?
For now, we are not looking to diversify further. We have a clear plan for the next three to five years. Unless there is a unique opportunity that comes along, the focus is on the core business. We have a lot to do and there is always room for improvement. We have targets to reach our maximum efficiency. We have to restructure some of the internal management as we are presently doing with a centralized quality-control department, which examines and updates the COO of each production line. This has resulted in a much higher quality production and with very little waste. Our method of fine-tuning this process has resulted in an impressive display of numbers in our balance sheets. In terms of human resources, the staff have been through rigorous training and evaluations, and we have introduced very open discussions between the management and employees. This results in a high moral and staff loyalty towards ACICO. We have very fertile soil for young graduates to grow in and establish a career path; we do this through encouragement and training. If we see they have strong potential, we encourage them to go and study an MBA [master of business administration] and attempt to finance what we can. We are huge believers in the science of management. We do a lot of research and case studies in terms of management. We focus on having good management, good controls, and good audit departments. If you look at ACICO, we are one of the only companies that have different departments—finance, accounting, treasury, risk management, management information, internal audit, IT, and so forth, which differentiates us from most other competitors. We believe in focusing as it results in perfections.