A restaurant owner shopping for
new kitchen equipment has
plenty of choices. Around 23
different companies compete on the
main market for industrial kitchen supply,
which is worth about $12 million. Here,
three firms – Vresso, Salarco and
Malifer – dominate the business, each
claiming to be the leader.
They supply the
bulk of big projects like
large international
hotel chains, hospitals
and army compounds.
But in today’s
shrinking economy,
competition
is hot.
Vresso seems
to be sweating a
bit less than the
others.
By diversifying outside this
market, the company has been able to outflank its competitors.
Roughly 70% of Vresso’s revenues, which have grown from $2.25
million in 1993 to $5.3 million last year, are generated from the sale
of kitchen equipment. Vresso also has about a 10% slice of the $1.5
million market for laundry and dry cleaning equipment. “Whereas
others subcontract this sector and collect a margin, I import,” says
Vrej Sabounjian, Vresso’s president. ‘The sale of ten machines, each
costing $10,000 to $15,000, is substantial.” The company supplies
$2 million’s worth of refrigerators to supermarkets each year, holding
an estimated 20% of the market. “Some might include a project
to supply Spinney’s or Monoprix with stainless steel works on a reference
list. But I am one of the few that supplies the actual refrigeration,
which is 90% of the sale,” says Sabounjian. Vresso also sells
cold-room sullies, with about a I 0% share of this $3 million market.
And recently, Vresso completed a $120,000 project for Monoprix.
Another part of the company’s strategy was to go after niche areas
within the kitchen supply market. For example, Vresso is the
biggest supplier of kitchen equipment to major restaurant chains.
Its clients include Burger King, McDonald’s, Pizza Hut and
Crepaway. Working with solid international franchises provides
a steady source of income for Vresso, but some in the business are
not so convinced. “Honestly, my sales people don’t know how to
sell for these small projects. Just how much can be earned from
them, $50,000, $60,000?” asks Raymond Bacha, managing
director at Solarco.
But diversification has not been Vresso’s only survival tactic.
After the recession set in a few years ago and competition intensified,
profit margins dropped from 25% to 5%. Rather than trying to defeat
its rivals by pricing them out of the market, Vresso has sought to
acquire them.
Last year, the company bought Cutlass, an outfit specializing in
the sale of small kitchen tools such as meat cutters. Vresso let some
Cutlass employees go, consolidated the company’s two warehouses,
bought new equipment and improved the distribution
system. The result: Cutlass’ annual sales increased by 200% to $1
million, and Vresso had one less rival to worry about.
Vresso has approached both Solarco and Malifer with similar
offers, but neither was interested. Currently, the firm is negotiating
the purchase of another rival, whose name has yet to be disclosed.
“This is a good company with limited resources. In this environment,
you have to be bigger, manage your finances well, cut
costs, reorganize your company, attack the market aggressively, sell
large volumes and take away market share,” says Sabounjian.
Vresso has also created its own market called “shop fitting.” The
company claims to be
the first to design and
install a specialized
kitchen equipment that
fits the needs of particular businesses. “It’s a
multifaceted concept,”
says Sabounjian. He
points to La Cigale in
Ashrafieh, an eatery
selling gourmet pastries,
chocolates and ice
cream that Vresso
recently equipped with a
range of specially
designed kitchen equipment. ‘We will be the only ones qualified to
do a large number of these projects in the future,” says Sabounjian.
And what a bright future that could be. No matter how competitive
this line of business becomes, as long as Vresso can continue
to keep one step ahead of its rivals, it will do okay. ‘There is room
for everyone in the market and I respect my competition, but we
won’t stop here. We will keep growing,” says Sabounjian.
A lighter side to food services
There is a lighter side to the food service business. While a
plethora of companies struggle to survive in the fiercely competitive
market for hefty kitchen equipment, a few smaller
outfits have found that selling small cutlery items – such as
forks, knives and plates – can be quite lucrative. Horequip
and Eastern Imports are two examples. Both cater to
hotels and restaurants. “A sale to a 100-room hotel can make
me about $50,000 on plates alone. You also have cutlery and
other accessories,” says Naim Chami, part owner of
Horequip, which has annual revenues of about $500,000.
Chami claims to supply 80% of the high-end hotels in
Lebanon and 20% of restaurants.
Eight years ago, Eastern Imports switched from the
household retail business to commercial food service.
The firm ships high-end glassware, chinaware, kitchen
utensils and plates from the US to Lebanon. “Thanks to the
boom in hotels, our imports doubled to about $4 million last
year,” says Hagop Beylerian, operations manager and
part owner of Eastern. But similar to what happened to
kitchen equipment suppliers, competition has increased in
recent years and profit margins have shrunk from around
25% a few years ago to 5% today.
