In the Lebanese economy, trade houses and regional distribution ventures have long resided at the nexus of business success. And while at first it may look unassuming, the import and distribution of plumbing supplies, sanitary wares, heating equipment and tools is a fascinating part of this crucial but underreported economic activity. Georges Khoury & Co is one of the leading players in this particular industry.
Based in Beirut, the enterprise, which employs around 100 staff, supplies locally manufactured as well as imported tiles, pipes, bathroom fixtures and related materials to commercial and individual customers. Founded in 1937, the company’s operation in Lebanon looks back on almost 70 years of action in its sector. For the past three years, the firm has also been running branch operations in Syria and Iraq.
Business in this subsector of the building industry currently is, “slow in distribution and good in projects, and this is symptomatic,” business development manager George Khoury told EXECUTIVE. This situation is symptomatic for the country’s economic mood, he elaborated, in that individual clients of the middle to lower middle income groups hesitate to invest in building new homes or undertaking major renovations whereas larger investors, such as hotel and up-market property developers, show more optimism about Lebanon’s potential.
With warehousing space of some 20,000 square meters between all its locations, Georges Khoury & Co manages an inventory of some 10,000 stock keeping units (SKUs) ranging from items of less than a dollar to luxurious shower cubicles running at $20,000 per unit.
According to Khoury, the company is large in its sector on the Lebanese enterprise scale and a medium to large player in the highly segmented regional building supplies sector. Due to company policy, however, he would not disclose turnover figures or the amounts which the company invested into building its operations in Iraq and Syria.
Politics don’t much impact the business of Georges Khoury & Co but the fortunes of the local economy are likely to reflect directly upon the performance of the company, which achieved good business with major project developments and can show a contract to supply the Four Seasons Hotel on the Beirut waterfront as a recent example.
Being able to win such contracts has a lot to do with having a track record of experience and knowing contractors, consultants and developers in Lebanon and beyond. Having this track record gives Khoury confidence that the firm will be able to tap into the lucrative market for large real estate developments and outright mega-projects that are emerging in Syria.
Gulf boom
Khoury said that working in the reconstruction of Lebanon primed the company to be a strong contender for projects in the Levant that range from hundreds of residential units to entire communities designed from scratch, mostly by Gulf–based developers and financiers. What gives Georges Khoury & Co and other Lebanese firms an additional edge in this new market is the fact that the building materials suppliers and contracting firms in the GCC countries are already highly stretched in handling the construction boom in their home markets, he added.
Besides strong industry contacts, the manager referred to technical knowledge and consistent development of human resources as key factors for success in the sanitary wares and plumbing supplies business, as much as for any modern business today. While they may not always look the part, the humble drain and the average faucet are more than just off-the-shelf components. Selection of appropriate systems even in the budget end of the market influences the long-term performance of a building project, whether individual home or apartment complex, and produces substantial consequences for long-term operating costs and replacement needs.
Regional expansion
On the top end of the market, technical expertise is also a crucial factor in representing manufacturers who measure their products by performance improvements of shower thermostats that respond to water pressure changes three-tenths-of-a-second faster than rival products, and seek to distinguish bathroom technology with names such as “dreamspray” and “silkmove”. The space at the top of the global faucet and bathroom systems manufacture is a hotly contested realm where players seek to woo the competition with innovations such as household water recycling systems that allow for discarded water from your kitchen sink to be re-used in flushing the toilet.
Georges Khoury & Co carries products of around 25 manufacturers, among them three Lebanese brand producers, Lecico, Uniceramic, and Future Pipes. For other suppliers, the company relies on manufacturers from all price ranges and many countries. China, for instance, is not the only good source for low-cost products, Khoury said, pointing to Turkey and Egypt as very competitive regional producers and referring to the latter country comparable to China in terms of labor cost as well as productivity.
Representing such a wide range of suppliers, means that a distributor plays different roles for different corporate partners. High-end manufacturers in Europe run strong marketing and presales departments on their home turf but in a market like the Eastern Mediterranean, the distributor acts as more than a wholesaler, Khoury said, and is a partner in promotion and brand building of the products he carries.
The same may not apply in relations with local manufacturers, which make their own investments into acquiring market share and may view distributors merely as one in a number of equal channels to market. This creates interesting questions on the role of intermediary companies and the value they add in representing international vis-à-vis local brands.
Sitting in a first floor office in the Beirut suburb of Sid al Bouchrieh, George Khoury is a third generation family member in the management of Georges Khoury & Co. He just returned from scouting market and industry developments at a sector trade show in Egypt. His desk is lined with neat miniatures of Dutch houses in a testimony to his admiration for this European country.
Role models
His admiration for the Dutch relates in part to the similarities between Lebanon and the Netherlands, he said, as far as the widespread abilities of both peoples to converse in several languages and their success in trade.
Among business role models, Khoury expressed high esteem for the management of Kuwait’s PWC Logistics company, which transformed itself within a few years from a local to a global enterprise and logistics provider to such picky clients as the Pentagon.
While the business development plans for Georges Khoury & Co are not quite as high-flying, the company appears to be working on reinventing itself, although Khoury would not reveal details. But he is adamant in describing the strengths he sees in the Lebanese, praising the country as a series of micro-economies. “I call the Lebanese market dynamic. It is constantly changing,” he said.
Georges Khoury & Co. still derives the bulk of its turnover from the local market but Khoury anticipates many changes for the sector at large and for the company. “The future is outside [of the country],” he said, but “Lebanon is our strong base for the region, it provides us with our strength, the people that work for the company.”
