The Mahfoods: continuing a rich family tradition

BUSINESS LEADER NOMINEE # 1

For a family that has survived 72 years in business, and to date, two seamless generational transitions, the Mahfoods, owners and operators of the Wisynco Group of Companies remain remarkably vigilant against taking anything for granted.

Their collective sense of caution is summed up in a basic principle expressed by one family member - a point of view that, by his own acknowledgment, appears to fly in the face of conventional wisdom.

The Wisynco executive team and broad family (from left) Sam Mahfood, chairman; Andrew Mahfood, executive director in charge of group finance; Devon Reynolds, executive director in charge of manufacturing and human resources; Francois Chalifour, executive director in charge of IT and drinks manufacture; Gerald 'Jerry' Mahfood, executive director in charge of operations; William Mahfood, chief executive officer; Saleem Mahfood, general manager of warehousing. (Photos: Bryan Cummings)

"The secret to any family business surviving," declares William, Wisynco's chief executive officer and for the past several years, the public face of the Mahfoods, "is that the family's interest must come first....ahead of the business."

There is, of course, an unspoken caveat to this counter-intuitive philosophy. The fact is, so close-knit and heavily invested are the family members in Wisynco, that their personal interests and that of the company's are virtually indistinguishable.

"The company is our life," William continues. "We know nothing else. Everything that we have is tied up in this business."

William Mahfood, chief executive officer of Wisynco Group examines a bottle at the blow molding machine. Some 26,000 bottles can be produced each hour.

William's idealism aside, it is Joe, his father and non-executive chairman of the group, who has taken practical steps to ensure that Wisynco's future is not held hostage to the caprice of any single family member now, or in the future.

"After we saw what happened with Thermoplastics we reorganised the company, registered it overseas and put in place a system where if a major shareholder dies, the company and its employees are protected against infighting from family members," explains Joe. "It will require near unanimous vote for major changes, and if someone now or the next generation wants to sell his shares he must sell them to the current shareholders. We are thinking two to three generations down the road."

The Thermoplastics lesson is a reference to the plastic products manufacturing company (founded by the late industrialist Thomas Desulme) that collapsed under the weight of an internecine family squabble following his death in the 1990s.

William (right) and Devon in the bottle blower plant. The high pressure compressor create bottle molds at 650 psi.

The Wisynco Group is a vertically integrated manufacturer and distributor of a wide range of non-alcoholic beverages, water, plastic products, and some of the world's best known consumer brands.

Its corporate headquarters and manufacturing facilities are located at White Marl near Spanish Town, with its main warehousing and distribution centre five minutes away.

By several measures this is one of the largest, most diversified and dynamic companies held by local private hands.

Last year, sales reached $8.5 billion, driven equally by market demand for its manufactured beverages and plastic products, and the growing list of international household name brands for which the company has local distribution rights.

Richardo Francis (right) one of 400 drivers and sidemen contracted by Wisynco to distribute its products, prepares to load goods on his van while Dian Ricketts warehouse supervisor makes final checks to the list of goods to be delivered. Jerry is at left.

Investments in plant upgrade as the Mahfoods sought to broaden product range, increase capacity of current lines while reaching for cost efficiency, gained momentum in the mid-1990s and accelerated to staggering levels over the past three years.

"We have invested one billion dollars over the past three years," notes Andrew, the group finance director, and cousin to William. "Most of this money was borrowed from Exim-Bank and the Development Bank of Jamaica," he lets on. "These institutions are the lifeblood of manufacturers. I do not believe they themselves appreciate the crucial role they play in allowing companies like ours to grow and employ workers."

The loans are denominated in Jamaican currency at fixed annual interest rates that range from 10 to 12 per cent - an important factor that allows Wisynco to invest with the assurance of predictable monthly debt repayment.

"We would simply not be able to survive without such a facility," says the finance director.

Some $450 million of the $1 billion invested by Wisynco went into the acquisition of 44 acres of land and the construction of a modern, 260,000-square foot warehousing, cold storage and distribution centre near White Marl.

At the last count, 1,500 individuals were on the company's payroll, of which just under 400 were contract workers - primarily individuals with their own transport who are contracted to truck the company's nearly 4,000 different products to retailers and wholesalers across the island.

The company has had to reinvent itself multiple times over the past several decades to weather Jamaica's brutal business cycles, and to maintain relevance in an environment of shifting market taste.

In its latest incarnation, Wisynco Group Ltd is a holding company under which four divisions operate:

Manufacturer of beverages - a combination of locally developed products and international brands, under licence. Among them: Bigga soft drinks, and Wata brand of purified drinking water; Coca Cola, Sprite.

Manufacturer of plastic products: Sweet brands of disposable bags, Sampson garbage bags, cups and plates made from foam as well as a range of plastic containers. The company also manufactures all the plastic bottles that it uses as containers for its own beverages.

Wisynco Trading distributes a wide range of consumer goods that include well-known names like Kellogs, Bumblebee, Ocean Spray, Welch's, Libby's, Pillsbury, and General Mills in addition to the locally produced goods.

A restaurant division under which the high-end ice cream outlet Hargandaaz, as well as the recent acquisitions - Wendy's restaurant and Domino's Pizza - operate.

With the task of managing an operation of the scope and complexity of the enterprise that they have built, it should come as no surprise that the Mahfoods have in place a formal management structure that could stand against the best of Jamaica's publicly listed firms.

At the helm of this showpiece of corporate self-regulation, Joe is the only second-generation Mahfood remaining in the business.

The other executives:

- Joe's son William.

- Andrew Mahfood, the son of Joe's brother Sam, who, for years prior to his death in 2003 was chairman of the group.

- Jerry Mahfood, son of Joe's brother Ferdinand, is director of operations.

- Devon Reynolds, a non-family member is director of manufacturing operations and human resources.

- Francois Chalifour, husband of William's sister Michelle, is director in charge of information technology and beverages manufacturing.

- Saleem Mahfood, brother of Andrew, is general manager of the company's warehousing and distribution centre.

Andrew cites the collegiate decision-making at Wisynco -through which ideas are burnished before they are translated into policies or committed to investment decisions, as important to the company's success in winning big distributorship and gaining market share.

"Yes we have a chairman and a managing director, but this is a flat organisational structure," he stresses. "All board members have equal voice and say in decision-making and we have to be persuaded by the evidence."

Devon Reynolds concurs, drawing attention to his own position where, as a non-family member "I have equal say to William or any other member of the family in board decisions".

There is recognition among the executives that in a group with such diverse personalities, consensus building is the best approach to critical decision making.

"William's instinct is to create products then aggressively go out and seek markets for them," explains Devon. "He is the most bullish among us. He is an incurable optimist."

Andrew, a chartered accountant who joined Wisynco in 1992 after a four-year stint with Price Waterhouse in Canada, embodies the conservatism that is the hallmark of his profession.

"I am the most conservative one in the group," he confesses. "My job is to say, 'show me the data first', and then to ask 'can we afford this'?"

The differences in approach are played out at the monthly board meetings where, by William's account, "all of us have strong views and because we are family we are not afraid to speak what is on our mind".

He too recognises that these differences make for a more functional organisation.

"We all have interests in separate aspects of the company," he notes.

"If we had the same interests we probably would be at each other's throat and it would not work."

The seeds for this multifaceted family-run business were sown in 1935 by Saleem Mahfood, a Lebanese peasant who emigrated to Jamaica in 1921 in search of a better life.

Saleem spent the first thirteen years working for R &H Haberdashery operated by two of his uncles. He went to Lebanon in 1934, returned the following year with wife Evelyn, and immediately started his own haberdashery, Mahfoods Commercial on Harbour Street in Kingston.

Household items, clothes, shoes etc would be brought into the island from the UK, Czechoslovakia, the USA, Hong Kong, for sale to retailers.

Saleem secured distributorship for BATA shoes and Cebo water boots, two popular brands that helped to drive his business.

"That is how we got into the water boot business," notes Joe, in reference to the decision by Wisynco during the early 1960s to establish a full-fledge water boot manufacturing plant in Jamaica.

Saleem and Evelyn had six children - all born between 1936 and 1944. They are: Mary Louise, Ferdinand, Pamela, Saleem (Sam), Joe, and Robin.

It is noteworthy, though not surprising - given Saleem's strong paternal stock and the cultural norms at the time - that none of the girls, nor for that matter their children, ever got involved in the family business.

That legacy is evident in the all-male third-generation Mahfood family that is now in control of Wisynco.

By the time of his death in 1962, Saleem had build quite a substantial business - generating £200,000 in annual sales.

That turnover seems dwarfed by the stupendous numbers now being churned out by Wisynco, but to place that revenue in historical context, Joe recalls that it cost him £7,000 to build his 6,000-square foot family house in the mid-1960s. A similar size house would cost upwards of J$40 million today. By this crude measure, Saleem bequeathed to his children a distribution business that was earning the equivalent of $1.4 billion in gross annual revenue at today's prices.

Importantly, this business was profitable enough to enable Saleem the luxury of investing in his children's university education - a privilege that he himself was denied in his youth.

"With the earnings from the business Saleem invested in the education of his children," says Joe. "He insisted on educating us because he did not have an education. He was from the peasantry, from farming stock and never had an education."

Joe was studying at McGill University in Canada and Robin at Loyola when their father died in 1962, leaving the business in the hands of the two elder boys, Ferdinand and Sam.

Fortuitously, the second-generation Mahfoods had taken the reins of the trading company immediately after independence, when the political leaders, led by then industry minister Robert Lightbourne, saw rapid industrialisation as the way for post-colonial Jamaica to escape mass poverty.

Within this new dispensation, opportunities abounded. The Mahfoods, young and fortunately at the time not over- invested in trading, began to reach for new opportunities in manufacturing.

"Sam had this idea of getting into manufacturing," recalls Joe. "He wanted to take advantage of the zero tax and other incentives offered under the new industrialisation policy, and saw an opportunity to manufacture water boots."

In 1963, Sam, still in his 20s, and in a move that foreshadowed his later achievements as one of Jamaica's foremost industrialists, paid a whopping 7,000 pounds to a man who Joe now remembers only as "a Mr Hanna", for the blueprint to produce water boots. The package included industrial incentives, feasibility study, and the technical specification for the equipment and required processes.

According to Joe, "Sam needed all the help he could get and asked me to quit university and go to France for four months to learn water boot manufacturing".

With Joe back from France in 1965 armed with the technical understanding of water boot production, the Mahfoods were about to became part of that post-independence, indigenous pioneers of manufacturing.

But not without some challenges. For, even with the government's effort to seed the process of transformation with a host of incentives, the young Mahfoods were surprised at just how difficult it was to secure loans for production.

"We were turned down by our own banker who we were with for years," complains Joe, his institutional memory undimmed by the passage of time. "But when we approached Don Banks at NCB (then Barclays)," he quickly adds, " he listened to us for about two hours and then decided to give us a line of credit to fund the project."

It took £150,000 to construct and equip the 6,000-square foot factory that had a production capacity of 30 pairs of water boots per hour.

The Twickenham Park, St Catherine land on which the factory was erected was acquired at concessionary rates (under the industrial incentive scheme) from the state- owned Jamaica Industrial Development Corporation.

"Only two of us could operate the machine, me as plant manager, and David Carr, so we took turns, each doing twelve-hour shifts seven days per week," recalls Joe.

By 1968 when the name Mahfood's Commercial was changed to Wisynco Trading, the manufacturing arm, run by Sam and Joe, was producing a wide variety of plastic products. Ferdie and Robin remained at the distribution company. The once popular Gator brand of shoes was among the products for which Wisynco was best known.

"We added 8,000 square feet, then were up to 20,000 square feet, and by the end of the 1970s were at 60,000 square feet," recalls Joe, in indexing the growth of the company.

Ferdie became the first of the Mahfood siblings to leave the company when he migrated to Miami with his family in 1972. He was later joined by Robin with whom he partnered to establish a distributive company, and later the world-renowned Food For the Poor charity organisation.

The 1980s saw an expansion in the distribution of branded consumer products of which Carib Shandy, Cole Cola and Chubby soft drinks - all manufactured in Trinidad, were the most popular.

The success of this distributorship set the stage for Wisynco's investment in its own drinks-producing plant in the mid-1990s.

"We always felt that we should produce these drinks including Cole Cola and Chubby locally," explains Joe. "When the volume got to 87,000 cases in one month we approached the owners in Trinidad to allow us to produce the drinks in Jamaica. They said they had just invested in a new factory in Trinidad and therefore had no interest in producing anything in Jamaica."

Joe says that the rapid devaluation of the Jamaican currency in the early 1990s, accompanied by hyper-inflation, doomed that business model.

"The problem is that with the devaluation of the period we could not keep on importing," he says. "It was putting pressure on prices, demand, and sales."

Shortly after the distributorship agreement came to an end in the mid-1990s, Wisynco introduced its own brands of beverages into the Jamaica market.

Joe who by then had retired from active participation in the company was recalled to oversee the launch of the Bigga brand of soft drinks.

He was joined in this endeavour by his son-in-law Chalifour.

Wisynco's foray into the drinks market was preceded by years of turbulence, as the company struggled to adjust to the rapidly changing environment.

For example, its entry into fisheries, and rice importation in the early 1990s brought early rewards that quickly evaporated once market conditions and the regulatory framework changed.

In a nutshell, Sam, having spotted opportunities in conch and lobster production, set up Wisynco Fisheries division in 1991 and invited Jerry, who was residing with his father Ferdinand in Miami, to Jamaica to run the division.

"We used to produce 1.2 million pounds per year using a Russian trawler and divers from Jamaica and the Dominican Republic," Jerry explains.

But after conch was listed as an endangered species, a production quota of 1.2 million pounds per year was established for the island, with Wisynco allowed to produce a mere 300,000 pounds or a quarter of its normal output.

"It was the beginning of the end," laments Jerry. They closed the division in 1997.

While this was happening, William was catching his tail at Wisynco Trading.

He recounts the story of how the company almost went insolvent:

"We tried to corner the rice market and had two buildings full of rice that we had shipped from Guyana that was equivalent to about six months supply. The market got flooded. Grace, Facey and Geddes Grant were the big players. We got clobbered. At one stage we were giving away 100 bags of rice to anyone who bought 100 bags."

On top of this, there was also the more fundamental shift in the environment that had to be responded to. The market for basic, non-branded bulk items like detergents, cake soaps, tinned mackerel - all products in which Wisynco Trading was heavily invested - had become ruinously competitive. Margins were disappearing.

The Gator shoe company was among the first victims of the new open market policy: unable to respond to the fierce competition from imports, it was closed.

Andrew says that the challenges that were being encountered in the market were amplified by the poor financial management that he found within the group.

"The group had a poor financial management structure," he says. "There were lack of controls and proper procedures. There was not much financial discipline. The plastic manufacturing company was bankrolling everybody else. The trading company would take goods from it and not pay for them. We would be paying GCT on goods that were sitting in our warehouse."

The result was severe cash flow problems that placed the Wisynco Group in imminent danger of insolvency.

"I wanted to gain an understanding of all the issues, the risks and opportunities," he explains.

William and Andrew appeared to have had an epiphany around the same time. Here is how William remembers the meeting that would change the course of the company:

"Andrew and I sat down one day and said that the bulk items made no sense. The margins were too thin and there was too much competition because the market had started to open up. Our strategy would have to be to go into higher-end, higher-margin brands that we could represent on an exclusive basis in Jamaica."

That strategy was complemented by a move to address the issues that posed the most immediate threat to the company.

"To deal with the immediate cash flow problems the company took a decision to slash inventory to the point where we kept running out of products and would carry two weeks of inventory for distribution," says William.

He continues: "Accounts receivable was pursued aggressively, and more favourable credit terms negotiated. Salaries were frozen, and strict motor vehicle policies imposed. We all had to make sacrifice."

Indeed, Andrew remembers having to drive a pickup "and it was even a sacrifice to buy a pickup, because of the economic stress; we either had to turn it around or get out of the business".

With the Fisheries division shuttered, Jerry was brought over to Wisynco Trading as operations director.

As finance director, Andrew led the streamlining of the group from four separate entities into a single company with distinct divisions.

By the mid to late 1990s, having emerged as a more streamlined organisation that had settled on its core activities, Wisynco began a series of investments aimed at efficiency improvement and building capacity for those products it would continue to manufacture and distribute.

In 1996 US$3 million was borrowed to build a 10,000-square foot factory for the production of Bigga soft drinks.

That same year the company spent US$1 million on a major upgrade to the machines at the foam factory and to add 10,000 square feet of factory space.

Another US$1.2 million was spent in 2002 to add 24,000 square feet to the same production facility.

By the turn of this decade, the company was able to enter the purified bottled water market, thanks to the earlier investments in its bottling plant.

So fast-paced was the penetration of Wisynco's brands into the local market that between 2001 and 2005 the company was operating from 200,000 square feet of rented space - facilities that ultimately proved costly because they were scattered all over the place, and involved expenses related to transportation, administration and security.

"We decided to invest in a new distribution centre that would simplify our operation," explains Andrew.

Work on the 260,000-square foot, $450 million distribution centre began in 2006. This project remains the showpiece of the $1 billion investment undertaken by Wisynco over the past three years.

"What is rewarding," notes Andrew, in commenting on the investment, "is that the cost of servicing the debt is the same as the rental, trucking, security and all the other costs that we were incurring with the previous system of satellite warehousing. The investment is paying for itself. "

The US$5-million expansion to the drinks-manufacturing line beginning in 2007 has almost doubled throughput, allowing Wisynco to take on board the manufacture and distribution of Coca Cola and Sprite soft drinks under licence.

"The Puerto Rico company (that has the franchise for Coca Cola) saw strengths in us and we saw strengths in their products," explains Andrew.

So much so that the Mahfoods were willing to drop their Bigga Cola and Bigga Lemon drinks to remove product conflict with Sprite.

Last year Wisynco discontinued producing Iron Man water boots, as well as some of its plastic bags.

"Wisynco was the biggest customers for those bags," says Andrew. "We found that we could actually buy them cheaper from China."

The current focus is on the export market.

"Currently we export to the UK, Cayman, Suriname, Barbados, USA, Guyana, Trinidad, Belize, Antigua," says Chalifour. "Our Bigga soft drinks brand is very popular in some of these markets."

Chalifour's role in improving efficiency at Wisynco to give its exports a fighting chance in those highly price-sensitive markets, is two-fold. Apart from being directly responsible for the drinks-production operation, he oversees the IT department that is mandated to improve worker productivity at all levels within the company.

"The entire operation of the company is computerised," he notes. "Our sales staff members are equipped with computers to enable them to place orders from anywhere. Our invoices, orders, production, inventory etc etc are all computerised."

For Devon Reynolds, if there is one aspect of Wisynco that makes the company special, it's the relationship between the staff and management.

"Sam was strong on relationships," he notes. "The same is true for Joe and all the other executives."

Indeed, in touring the Wisynco compound with the owners, this writer was struck by the evidence for this assertion.

"Hi Joe", beamed a clerk in greeting the chairman of the company. "William, shall I send him in?" asked another in a telephone call with the chief executive officer.

It gradually became evident that, as Joe himself expresses it, "the Wisynco family is not just the Mahfoods, but the entire staff".

Wisynco, some facts:

Employment: 1,500 workers.

Office, factory space: 400,000 square feet.

Gross annual revenue, $8.5 billion.

Major brands: Bigga soft drinks, Ocean Spray, Wata, Coca Cola.

Restaurant business: Haagen-Dazs ice cream; Wendy's fast food; Domino's Pizza.

Sponsorships: numerous, including National U 21 Football League - $71 million over three years; prep school track meet, $1 million.

Revenue stream: manufactured goods, 50 per cent of revenue; Ocean Spray items, 10 per cent; salt fish, 10 per cent; all others, 30 per cent.

Number of products: approximately 4,000.

From the Jamaica Observer