Scott McCulloch is Editor of Families in Business magazine.
It's been just over 50 years since Elia Nuqul and his sons built up the Jordanian powerhouse Nuqul Group – not bad for an enterprising patriarch whose trade booty once comprised humble consignments of chewing gum and shoe polish
The Nuqul family's sense of entrepreneurship is almost as dramatic as the country from which they hail. Elia Nuqul founded his industrial empire shortly after the 1951 assassination of King Abdullah by Palestinian gunman angry at the monarch's apparent collusion with Israel in the carve-up of Palestine. It coincided in 1952 with Hussein's proclamation as king after his father, Talal, was declared mentally unfit to rule. That same year, Nuqul began trading in chewing gum and shoe polish – a gambit that would eventually give rise to a multi-million dollar conglomerate.
Today the Nuqul Group is probably best known in the Middle East for its tissue brand Fine. Peel back the label and you'll find a diversified international organisation including 27 companies exporting to 47 global markets – making it the largest private firm in the Kingdom.
Talk to Ghassan Nuqul, Elia's son and group Vice-chairman, and you get a peculiar sense that the upheaval in the Kingdom during the group's rise to prominence was part and parcel of the challenging business landscape. It could not have been easy for the Amman-based group. And yet the six-day war in 1967, clashes with Palestinian guerrillas, intifada, food rioting and a clutch of other troubles failed to dampen the entrepreneurial spirit of the family and, in some cases, the wider Jordanian economy.
How? In a word: diversification. This, says Ghassan, was an effective but necessary tactic to reduce exposure to volatile markets. "At the time inter-Arab trade was very difficult and my father had great ambitions but the market in Jordan was very small and in 1967 when we lost the West Bank, he lost 75-80% of his business overnight."
Indeed, in the late 1960s the bulk of consumption of tissue – Nuqul's core product – was in the West Bank. At the time, east of the river (now Jordan) was "basically more less bedouins or nomads," says Ghassan. Neither well-to-do nor civilised and with little understanding of the use of tissue paper, wandering tribesman were hardly going to act as a sophisticated test bed for a conglomerate with manufacturing operations in at least half a dozen countries and whose industrial interests would one day span products as diverse as plastic bottles, diapers and finished metals.
With the loss of the West Bank came hardship. Israel took control of Jerusalem and an influx of refugees would flood into Jordan. "When [my father] lost that market he realised that one market was not enough to satisfy his ambitions," recalls Ghassan, who was five-years old at the time.
Elia did two things. "First, he began exporting to Arab countries, which was extremely difficult." The second tactic was the creation of markets through old fashioned price undercutting.
In the 1970s the group began trading with Saudi Arabia, Libya, Kuwait and even Yemen, the reputed home of the Queen of Sheba but, more dubiously, a country linked to a recent suicide attack on the US naval vessel USS Cole. "Countries such as Sudan and Yemen are not well developed but the potential is great. It takes sacrifice and knowledge of the market, and a lot of risk-taking," concedes Ghassan.
Few entrepreneurs wake in the morning with visions of coining it from the paper business, never mind the less-than-glamorous tissue market. But Ghassan's father had a cunning plan. In the 1970s tissue boxes were only sold in pharmacies. At the time Kimberly-Clark, the US tissue and hygiene behemoth best known for its Kleenex brand, sold 100-tissue boxes for 180 fils, relatively expensive in today's money. "When my father introduced tissue boxes he priced them at 80 fils – less than half the competitor price," he says. "We had a commitment to create consumption. Tissue was considered a luxury item back then. Being pioneers we created consumption by providing it at a very attractive price and by visiting every corner of the country to promote
"It was very difficult," says Ghassan, who joined the group in 1985. "If you can imagine Libya or Saudi Arabia in the late 1960s, there weren't even any hotels."
When his father Elia started the business, consumption of hygienic tissue was in its infancy. Jordanians were not used to buying tissue. "So he would barter cigarettes," says Ghassan. "He would offer small grocery shops toilet roll; they would pay him in cigarettes and he would sell the cigarettes for cash."
Times were tough. But on a routine business trip to the UK the penny dropped. Ghassan's father was watching a jumbo-sized reel of paper being installed on one of his suppliers' machines and he asked whether his supplier produced the paper himself. To his amazement he discovered that the material was imported from Sweden, processed in the UK, and then shipped to Elia's then small operations. The middle man, he thought, had to go. "So he said to himself: 'I can import the roll from Sweden and buy a machine to produce it myself. It will cost one-tenth of the current cost and I'll make a healthy profit.'"
Armed with £25,000 in cash the novice entrepreneur Elia soon found himself steering towards unfamiliar territory – banks – in his initial bid to procure the equipment that would enable him to build his family an empire that, ironically, would work well on paper because of paper. By 1975 the group comprised five companies. In 1996 there were 27 units, the full complement that stands to this day.
Growing the company into a conglomerate wasn't easy. The Hashemite Kingdom of Jordan is a small country with limited natural resources, but for years it has played a pivotal role in the struggle for power in the Middle East. But Elia's ambition was great. As the business grew, it diversified under his guiding hand. Today one of the group's key objectives is to diversify geographically and reduce exposure to markets suffering from political unrest. While most of the conglomerate's units are based in the Middle East, Nuqul retains four wholly-owned units in the US specialising in steel fabrication and rebar fabrication (steel for reinforcing concrete). The steel units, says Ghassan, fit snugly with the group's interests in structural, mechanical and industrial engineering. "We build shopping centres, offices, factories, warehouses and carry out special jobs for different industries in the US." Today the family business turnover is close to $400 million a year. Is it profitable? "Very," says Ghassan. "But we don't disclose profits."
But the core business – paper – will remain just that, paper and vertically integrated companies related to paper. "This remains our focus and our largest investment." Indeed, the group has active tissue mills and paper converting plants in Jordan, Lebanon, Egypt, Saudi Arabia, and the UAE. "As we speak we are setting up a plant in Sudan," adds Ghassan.
Like his father who once juggled consignments from ports in Beirut and Rotterdam, Ghassan's entrepreneurial spirit is irrepressible. Between sitting on his majesty's economic council and the board of Jordan's chamber of industry, his precious time is gobbled up carrying out duties as the group's de facto PR man. At the same time, he has a direct hand in the day to day operations of the group. Is that a good thing? "I am trying to limit my involvement". There's mild exasperation in his voice. "We have several committees in the group; and we have our board which meets once a month," he explains. "As we move ahead I'll pull out. However, I will continue to intervene on a daily basis in the companies that need support or are still not operating according to the criteria we have set."
For a group aged 52 years Nuqul seems extremely mature. It eschews management fads. Indeed, as a going concern it is an entity where corporate governance is the rule of law and well-entrenched. That initiative – replete with advisory boards, outside board members, risk managers, development departments and budgetary controls – was embarked upon "some years ago".
Today the Vice-chairman has bigger fish to fry. Implementing corporate governance, Ghassan says, has enabled him to throw his weight behind more important projects. "I am involved in recruitment of our top executives and implementing new projects, expansion into new countries and purchasing new machinery," he explains. "But it's a supervisory role, I don't interfere."
Going forward the group is keeping a sharp eye on the changing economic landscape. Like many private concerns, it will almost certainly benefit from trade pacts such as the Greater Arab Free Trade Agreement, which will see the phasing out of tariffs on industrial and agricultural goods traded between Arab countries. Tariff cuts are due to start at the beginning of 2005. As a result, Ghassan expects imports to flood his market. But, like a boxer goading a bloody-nosed opponent, he welcomes the dismantling of trade barriers and more competitors as only a free marketeer could. "It's a threat for them to come into my market, but it's also an opportunity for me to trade in their market."