According to Etienne Debbane, chairman and CEO of Exotica, the horticultural and contracting company, the key to success has been to exploit the synergy of opposites: war and peace, indoors and outdoors. A bit of flair, an emphasis on service, staying tightly competitive and a strong regional presence have also helped the corporate cause.
“When we started in 1978 and opened our 5,000m2 outlet in Zalka, the doubters all said, ‘these people are crazy. They have more money than sense and they will soon be bankrupt’,” he recalls.
Debbane is sitting in his office at Exotica’s 100,000m2 nursery and head office in Louaizeh in Zouk Mosbeh. “They were wrong. People were spending more time indoors because of the war and they needed something to make their living environment more agreeable. They needed plants. Till then it had been an alien concept. It was the same with the offices. We won contracts with banks, insurance companies and other major businesses to supply and maintain plants in the work environment.”
With peace, the Lebanese emerged, blinking into the sunlight. “The stress was on gardens. Again we were pioneers. Look at Fakra. It is arguably the greenest area in Lebanon. Why? Because the promoters of the development were crazy enough to go for our idea to plant around the hotel. Again we had our doubters. They said we were crazy putting plants in the snow. They will die, they said. But tell me, who builds a chalet in Fakra today and doesn’t plant a garden? Who today invites people to dinner and doesn’t put flowers on the table? We have created or at least contributed to this culture.”
A household name
Exotica’s origins are embedded in Societe Debbane Freres, the agricultural arm of the Debbane group. Etienne’s father was what he calls “a pioneer farmer” who began the importing and contracting of pesticide application in Lebanon and abroad. “I joined the group in 1971 and my father told me to bring new business ideas, so I implemented the greenhouse and plastic undercover business to Lebanon in 1971 and 1972 and then began producing ornamental plants in 1979. This is how we started the distribution company. We then moved to Kuwait and Saudi Arabia, and grew from there.”
Today, Exotica is a household name with annual revenues in the range of $10 million. With five points of sale and the mammoth Zouk nursery, it can sell you a dozen home grown roses, a 2,000 year old olive tree or ranks of fast-growing, Leylandi conifers to block out nosey neighbors. It will landscape, plant, irrigate, and maintain your garden, manicure your lawn, plant a golf course or lay a football pitch. Exotica produces 2 million plants a year and imports those it can’t grow locally or which are too expensive to grow locally. Today, the retail side accounts for 50% of business, landscaping 30% and plant production 20%.
Exotica has been a regional player from almost the very beginning. In 1981 it established one of the largest companies for landscaping in Saudi Arabia and for 22 years worked on palaces, universities, golf courses and sports pitches. Does this entity still exist? If not, what happened?
In 2004, the company embarked upon its second regional project and now divides its Middle East activities between two corporate entities. Exotica SAL today serves the Levant – Jordan, Syria and Iraq – and North Africa – Egypt and Algeria, while Exotica LLC, an Emirati company with local partners, conducts business in the UAE, Qatar, Bahrain and Kuwait. Both companies are looking to target regional markets with renewed vigor. “We have just built a 50,000m2 nursery in al-Rahba area of Abu Dhabi. It will be fully operational by September 2006 and is geared to outdoor plants,” explains Debbane.
In the last three years, Exotica has been more active in the region, a strategy born out of a gradual contraction in the Lebanese market. “We need to focus on countries where there is wealth and demand. Lebanon is getting poorer. You need a consumer to sell and today there is less money to spend. Big jobs have been delayed or even stopped.”
Still, the infrastructure was in place to serve regional demands, while the know-how built up over a quarter of a century of working in the region has, claims Debbane, given Exotica a genuine edge. “We are executing gardens by shipping straight from the source or Lebanese nursery,” he explains. “If you want to be a big player you have to be there as a legal entity and to have a nursery producing plants that others don’t have and to be price competitive with other local producers. And this is what we have done. Today 20% of our business is outside Lebanon but within five years, we expect this to climb to 50% with overall revenues hitting $30 million.” According to Debbane there are no plans to undertake an IPO. “There is no need. We have a very powerful partner in the Emirates and in Lebanon we are doing well.”
A unique selling point
Despite the regional push, Exotica’s main hub is still in Lebanon. The Zouk nursery is a source of immense pride for Debbane. “It is probably the largest in Lebanon with the widest selection of plants, around 3,000 items.” Debbane points out that due to Lebanon’s unique range of microclimates – tropical, sub-tropical, desert and alpine – the company finds itself in the unique position of being able to cater to all zones, including the Gulf countries. “We are probably the only company in the world that caters to all these climates.”
Self-production and slavish attention to the bottom line has also sharpened Exotica’s competitive edge. It is an area of the business of which Debbane is particularly proud. “When it comes to quality and price on the plants we produce, we are unbeatable. We are highly mechanized and professional. For instance here in Zouk we produce 1 million rose stems, using hydroponics, a soilless culture in an ultra-sophisticated computer-controlled greenhouse system. The investment has been extremely expensive but we sell what we produce and we make the best roses in the country. Whether it’s annuals, perennials, small plants, or shrubs, we are also unbeatable because we use mass, mechanized production. We handle the plant once, put it in its pot and when it is ready for sale, we unplug and sell it.”
Debbane is also keen to stress that while Exotica is a successful family business, it is run as a corporation. “We have rules. We are clearly regulated, well-organized and financially transparent. There are two ways of running a family business. There is the family way: low cost, no investment and where everyone in the family works haphazardly and then sells without calculation. We do it in reverse. We look at it as an industry. We say the end product is this. What should we do to get it at price of not more than this? How many should we produce and what are the means of producing?”
The result is a competitive pricing policy that is often at odds with the company’s glamorous image. “People are normally shocked by our the prices. They think we charge for our name. This is not true,” claims Debbane. “The name is the gravy. All our plants have prices and are fixed. This is security to the consumer. Customers can come here and book a tree and come back for it in two months.
Exotica grows 1.5 to 2 million plants each year. “Everything that we can grow that is cheaper than importing we grow and in the same vein everything that we can’t grow here or is cheaper to import we will. For example, we used to get Palm trees from the North but now it is cheaper to ship them in from Egypt. They may not be as good as ours and a few may be diseased but it is still worth it. The plants we grow here are plants that reach maturity in 1-4 years and which we can sell easily. There is no point in investing in long-term trees when the market is so uncertain and in the contracting game you have to keep overheads low all the time as a precaution against the lean periods.”
The Debbane Group
Precaution or not, Exotica’s fortunes have been firmly rooted in the solidity of the Debbane Group, without which Debbane says Exotica would probably not be around today. “We owe our success to the support of the Debbane group. We have had highs and lows.” The lows were…well, pretty low, especially a particularly lean spell at the end of the civil war. “When things went bad, no one would have come in. Who was going to pay $500,000 for 90% of Exotica when they see you are bankrupt, even though 50% of the company should be worth $4-5 million? The Debbane Group, with income from other sectors in other countries, has been the key to our success.”
Debbane is one of six family owners in the group which established Exotica and which has revenues of around $100 million. The core activities are spread over seven other companies: Societe Debbane Freres, importers and distributers of agricultural material; Sodap, Insulco and BCL, which make construction material, insulation and cement respectively, Pesco Telecom and Evert M which provide telecom and data transmission services, and Enoteca, the upmarket wine importers and retailers, a business that grew out of a hobby and which now serves both the on and off-trade. It is another area in which Debbane feels the group has contributed to new trends in modern Lebanese living. “People used to serve whisky and arak with a meal. Now it has to be wine.”
The CSR experiment
Exotica devotes 5% of its revenues to advertising, “the norm by western standards.” Given the company’s green – metaphorical and literal – profile, surely it must be heavily involved in corporate social responsibility, working among the community and leading the way to a greener Lebanon? Debbane sighs. “To be honest, most of our efforts to help the public sector have failed. We have planted roundabouts, medians and trees on pavements mostly without success because the day we hand them over to the municipality, they are not well looked-after. We have planted some areas as much as six times. If we had been allowed to do it properly they would be fantastic places by now. It kills you. I was involved in a roundabout project with Pikasso [billboards]. When we maintained it, it was fine but when we left it, it died and had to be replanted within two years, probably at a higher cost. So you can see there is little incentive for us when we are let down all the time.”
Yet Debbane has sympathy for the Ministries, who he says are underfunded. “Look at the ministry of agriculture. It has 0.04% of the national budget for a sector that employs 25% of the workforce. In 1974, we were pioneers. Today, Lebanon has fallen behind its neighbors in this field, while other have learned new methods or brought in know-how.”
Value-added service and know-how
Know-how is a key strut in the Exotica corporate structure. “You have to get the best people. Without people there is no business. The key is that we have always invested in people. We have found the best and brought in the best and trained our staff abroad on the latest techniques, buying know-how when we have to.”
As a result, Exotica has 15 technical teams supervised by engineers that are on call to visit the nation’s gardens, assessing, planting and maintaining. It is, claims Debbane, all part of the total care package. “We guarantee everything. You can call us and say, ‘I have a garden in Tyre. Can I plant lavender?
’ We will ask if you have checked your water. Is it too salty? We will check the water and the conditions and if you can’t plant lavender we will tell you why. Others retailers will just say, ‘You want lavender? Take three plants, what’s the problem? If they die, come and take three more.’ We are still maintaining gardens that we planted years ago.”