Anan Fakhreddin reveals the secrets behind Damas' extraordinary growth over the past half-decade
When Anan Fakhreddin talks about Damas, the overwhelming emotion he exudes is pride.
And the CEO of the Dubai-based jewellery giant has every right to. Since taking on the top job in 2010, he has guided the company out of crisis and back to prominence, re-establishing it as one of the region’s leading luxury brands.
Fakhreddin joined Damas on the back of a major business scandal in which the family business’s three Abdullah brothers were convicted by the Dubai Financial Standards Authority of withdrawing $167 million in unauthorised transactions. The UAE-listed company’s share price had plummeted, and millions of dollars were owed to the banks.
“We had our ups and downs, but the company has always been very strong. The starting point was that Damas is an excellent company, and a very good brand. We are 100-plus years old, and we enjoy the market leadership position. At any given point in time, we have enjoyed the ultimate consumer confidence when it comes to our products. That was key in the success story of Damas and always will be.”
In 2014, the company concluded a two-year period of restructuring after being acquired by Qatar’s Mannai Corp for $445-million in 2012. The acquisition was made in partnership with Egyptian investment bank EFG-Hermes, which sold its 19 percent stake to Mannai for $150m in 2014.
In its most recent annual report, Mannai revealed that Damas “delivered the largest profit contribution” to the company in 2015, despite the challenges in the GCC’s retail market.
Economic headwinds may have affected the sector, but Damas still achieved sales revenue of US$572-million and a net profit of US$68-million, according to the report.
Fakhreddin credits the company’s resilience and relatively strong performance in 2015 to the establishment of and adherence to solid business pillars, launched after the Mannai buyout.
"We started by making sure we focus on what is really important, which is the confidence in the brand – the way it looks and feels,” he explains.
"That was the first of our five key business pillars. We made sure that we revisited the strategy, and we were pushing the business, steering it in the right direction. There is a big future in terms of consumer demand and market trends, and understanding that was a critical part in formulating the new strategy. Then we shifted attention to the four other areas that we needed to look at.”
The company’s official Four Pillars of Damas are craftsmanship, innovation, Dubai, and trust. The CEO explains that the fruits of these areas of focus can be seen in two things: The product and the sales force.
“Today, if you look at our shops, the product line that we carry is as fresh as it gets,” he says. “That’s extremely critical – our ability to understand consumer tastes, design products to look after that, understand market trends, and put all of that in the format of jewellery was never better than now."
"The sales force was and is a key for the business. Within the 300 Damas shops that we have, we have more than 400 Gemological Institute of America graduates, which is the authority when it comes to diamond and jewellery cleaning in the world.
“We made a commitment in 2013 that we will have a certified expert in every shop, and we’ve already crossed that. We also give continual refresher courses, have improved uniforms and working hours, and we test all of this with an agency that does mystery shopping for us. We mark all of our shops and rank them against the Damas Signature, which is our brand behaviour tool."
"We want always to make sure our shops and our employees are in line with our policy and procedure. All of these improvements were happening at the same time, elevating the image of the brand and delivering on the commitments we made to our customers.”
There is clearly a lot for the CEO to be cheerful about, but he makes a point that Dubai’s growing economy as a key factor in the company’s revival.
“Yes, there were many challenges, but all this was done on the back of a fast-growing economy. Especially in the UAE and our home city of Dubai. It was all done in a very positive environment. The economy was growing, tourists were coming, and new malls were being built. They still are. In fact, we are securing space in all of them, but there aren’t enough of them coming to meet the demand. But like I keep saying, retail and jewellery is like a marathon – an endless marathon. It’s a non-stop journey.”
One recent highlight on this journey was the opening of the company’s new factory in Dubai Investments Park. The factory could take in-house manufacturing capabilities from around 35 percent to more than 50 percent in the first year alone, with phases two and three building on this.
“It’s a factory on a different scale for the UAE,” beams Fakhreddin. “The state of the art machinery is there, and we’re proud of it. I believe it will add a lot to the consumer confidence in Damas. The things that we manufacture in house, in Dubai, will always take a closer spot in our heart – being locally made in the UAE.”
The new factory is also expected to increase the company’s rate of expansion, in both product and market, with international opportunities under continual consideration.
A steady growth in store numbers in the GCC should develop into Middle East-wide coverage while hopes to expand into Europe and the United States still a possibility. But Saudi Arabia and Egypt are first on the to-do list.
“We’ve made good progress,” claims Fakhreddin. “When we started we thought on two routes. One is organic growth, so we started looking at all new segments, all new possibilities for us in the UAE, and I believe we are there. We then gave a lot of attention to Abu Dhabi, and we are fine there now – we have quite a few new shops that are already operational."
“The last 18 months it was expansion in Saudi foremost. We’re hoping Saudi will come to its full potential for Damas in 2017 – I think after that we will start looking at other options like Egypt, Turkey, and Iran. I think Egypt will be next on the radar, from the angle of organic growth.”
The global expansion, should it take place, will happen through acquisitions, explains the CEO. But he admits the jeweller will not be rushed into making big moves, with no timeframe on the company’s plans.
“We announced two years back that we have every interest to expand globally through acquisitions, and we looked at opportunities in the Far East – none of them materialised,” he said.
“We are more focused now on Europe and the States, hoping that the search will identify some good targets for Damas to acquire. But I don’t think it will be organic growth – I don’t think you will see a Damas store in the West – I think it will be Damas buying, investing in an existing retail network that will give us the exposure to these markets."
“With acquisitions, out of ten times, you might get lucky and hit once. There isn’t a time frame. The commitment is to find the right target that delivers the expectations of the owners of the business, and more importantly serves the strategy that Damas carries.”
The long-game is a strategy that has served the company well in recent years, and Fakhreddin believes its Damas’s sensible approach and planning that has kept it on an upwards trajectory.
"If you do your homework right, you can always make your business go in the right direction,” he says. “For example, we saw a slowdown in the market in the second half of 2015, partially because of the volatility of gold prices. Because we were looking ahead, we had the right answers for it. We responded by launching a new brand that looks after a new segment – an Asian segment – that was launched in October."
“Looking ahead is always important. We keep hunting for new opportunities, new segments, to bring more business to Damas, and with existing clientele we keep reinventing ourselves with products, with promotions, to make sure that the traffic and the frequency of it to the shops is always as high as possible.”
Trying to lead in a competitive market makes it necessary for brands such as Damas to be trendsetters. A tag that Fakhreddin admits is sometimes difficult to shoulder, but one that he is happy for his company to wear.
“It’s a burden that we have to accept, by definition of being market leaders. If there is a new trend that is going to come to the UAE it will have to come to Damas first,” he says.
The firm’s group of in-house designers, as well as contractual suppliers in Italy, Lebanon, Hong Kong and Singapore, ensure creativity and production can be turned around quickly, meaning Damas can react swiftly to the results of their market research on customer and product trends.
Fakhreddin adds: “Most of the time, especially in our segments, for example, Arab and Asian segments, we have a team of designers who will react quickly to briefs issued by Damas. They will come up with proposals, then we will select some, test them, modify them, and they end up becoming products on the shelves of our stores. This is the business cycle that we follow, and it allows us to stay ahead."
"We have very strict criteria when it comes to maintenance of products or shops, and anything that does not deliver the expected return on investment is not kept. I think it’s a fact of life for all retailers. You have to be brave and admit that most of the times it will work, but sometimes it won’t work, so we call it a day, ship the product somewhere else and move on to the next product."
Ultimately, however, Fakhreddin puts the success of Damas down to what he believes is the company’s greatest asset: The staff. I’m always proud of all of them,” he says.
“I was visiting the shops at around midnight, and I saw the shops packed with people. And I saw how good our people are regarding customer service, and in terms of looking after the requirements of customers. I was really proud every minute of that field trip.”
The CEO is quick to point out the importance of long-term relationships in the jewellery business, not just with customers, but with the employees, too. “If you have the status of being the family jeweller, you would want to keep that for generations,” he explains.
“I’m very proud to say that we have families where we have third generation girls buying their marriage jewellery from Damas. That is that kind of heritage we don’t want to let go."