For generations of men, his suave image, brutish handling of evil and ability to seduce the girls, put British master spy James Bond in admirable light. The Ian Fleming imagined licensed killer’s ability to bonk, booze and bamboozle his way through a crisis in some exotic location also had a fan in Fouzul Hameed, then a clothes retailer aspiring to build a brand. “LeBond”, a men’s clothes brand, to date the most successful one he has created at his family’s firm Hameedia, easily gives away his source of inspiration.
The sartorial elegance and sophistication of Bond also universally appeals to his target market; men. But there is a challenge, because, unlike women, men don’t much bother with grooming, style and fashion despite their admiration for those that do. This also typifies the general challenge in retailing clothes to men; getting their interest.
For years Hameedia Managing Director Fouzul Hameed has been travelling to the fashion capitals of the world Milan, Paris and London for buyer events. So when he aspires to be world class, benchmarks are set high. “One day that’s where I want to be, that’s the confidence with which I’m driving this,” he says during an interview at his office in the outskirts of Colombo, adjoining which a factory that supplies 60% of the firm’s product line is located. The rest are imported brands or are sourced under Hameedia’s own brands. Soon the firm will send a shipment to London, not for the first time. Its 2006 launch of Hameedia’s premium brand Envoy in London with a store failed to gain traction despite the significant investment. It was wound down and this time they are moving far more cautiously.
Fouzul Hameed is credited with turning his father’s tailoring shop into a network of boutiques that owns Sri Lanka’s top men’s fashion brands. Passed down from his father to Fouzul and his two brothers who have equal stakes, the firm’s annual turnover is edging towards Rs3 billion putting it just shy of retailers like public listed Odel which had a Rs3.8 billion top line in the last financial year.
However behind Hameedias success lies a unique value system overseen by the matriarch in the family, the mother of Fouzul Hameed, Hussain Sadique & Faizal Alavi. She is chairperson and more crucially the conscience of the business and the family.
“The vision of my grandmother and their family when they gave the business to my father was to look after the family,” explains Fouzul whose family comes from a village in Beruwala. Fouzul’s father took over the family confectionary business in 1949 and converted it in to a tailoring venture. “The vision was that my father looks after the family, relatives and the village.”
Fouzul’s mother Mrs Raffeedeen has left an indelible mark on the business. Fouzul’s father’s business wasn’t doing well in the early 50’s and he wanted to sell the shop at Wellawatte junction. “But my mother insisted, “don’t sell; you sell coconuts if you have to, but don’t sell the shop. The children are small and it will help them one day.”
Her devotion to the family and loyalty to the original vision remains undiminished. Mrs Raffeedeen, a private person who never grants interviews, heads Hameedia’s social outreach projects and lives in the same house in Dehiwela where she raised her family.
However with scale and international ambition some of the firm’s values coming from its matriarch may be in conflict. Fouzul Hameed who is Managing Director, the chief visionary and designer and his younger brother Hussain Sadique who is Deputy Managing Director and heads all aspects of operations and finance, are acutely aware of the choices they face. “Hussain is very keen to go public and I also think it’s the right time. If things go well in the country maybe in the next three years,” confides Fouzul.
Mrs Raffeedeen divided the equity in the family business equally among her three sons. While Fouzul provides leadership to the business, Hussain the youngest of the three boys is Deputy Managing Director and the oldest Faizal Alavi has not played any role in Hameedia for decades. “Everybody gets equal salary – all three of us. My elder brother is not in the business but he gets an equal salary,” explains Fouzul of the values that foster family unity. “Our parents brought us up quite well, they showed us the bad and sad parts, how a business breaks if there is no unity.”
Just as quickly Fouzul also contends the challenge now for the business is to streamline while at the same time maintaining those family values at the heart of its success. “This year onwards we are going into a different format,” says Fouzul expectantly. “The family is getting bigger and we have to now streamline as everybody wants some money to educate their children.”
Before going public a number of challenges need to be overcome and decisions regarding the firm’s fidelity to the founding values have to be made. Fouzul and Hussain say details of that transformation are being worked out to transform the business to meet both the emerging needs of an extended family as stakeholders and become more ‘corporate’ in anticipation of becoming a public company soon.
The firm has to change for two reasons while trying to stay true to the values of its founding shareholders and their vision about its public role. The first of the challenges is the need to sustain growth in a firm that already has significant scale. Fifteen years ago Hameedia started hiring professionals when the firm’s around 25% annual growth had made it necessary to have senior managers holding substantial responsibility besides Fouzul and younger brother Hussain. Eight years ago alongside its factory at Ratmalana it built administrative offices.
A long term plan is coming together that addresses its transformational challenge according to Hussain Sidique. “If everything goes well we will go public, because it’s good for the sustainability of the business, but irrespective of that we will look like a public firm by 2015,” he says. The transformation which started with the recruitment of professional managers took on a more serious turn a couple of years ago. An employee share option scheme is in the works and a share trust holding equity is contemplated to undertake Hameedia’s social outreach.
The existing three shareholders are expected to give up at least five percent each of their holding , creating a pool of share of between 15 to 20% some of which will be allocated to the Employee Share Option Scheme (Esop) and some to the trust that will undertake Hameedia’s founding vision of social outreach.
The family already funds a 300 student school in Beruwala, orphanages for differently abled children and is offering scholarships for academically gifted children. Most social outreach initiatives are led by the firm’s matriarch Mrs Raffeedeen. Hussain confides that more discussion is needed before details are worked out, but has obtained legal advice on the mechanics of undertaking these changes while a valuation of its stock has been done in preparation for the change.
Fortunately shareholders don’t always frown on the social conscience of a firm they have invested in, even when it means lower returns. However by establishing a trust the family can ensure some of the social outreach work can be funded provided the firm starts paying a dividend, which under family control so far it has not done. However profitable public listed companies usually pay a dividend. A cagey Fouzul asserts that net margins now perhaps are around ten percent indicating a Rs300 million bottom-line. Odel the only listed department store in the country has a six percent plus net margin.
The second reason for the change is the need to include the extended family. When Fouzul, Hussain and Faizal’s father passed away in 1975 the business was given to the three boys while the three girls in the family, who had also helped their father in the business, did not get an equity stake. Fouzul took the lead to turn the family tailor shop to a destination for sartorial workmanship and then built successful clothing brands.
“Extended family will have a share in the future and be looked after, this will cover the three sisters and their families who are not shareholders now but they have contributed and worked for Hameedia in the past,” explains Hussain who has three daughters. One of Fouzul’s three kids is a son, and the eldest in the family Faizal has three boys, the eldest of whom was an apprentice at the company recently before leaving the island for higher education. The three brothers expect to award an equity stake to their sisters and their families through the planned dilution of their stakes.
Broad basing ownership and setting up share trusts to reward employees and continue social engagement through dilution of existing shareholder control ahead of a public offering of shares is intended to continue the founder’s vision. Transition to the third generation however is expected to be far more challenging because Hameedia may by then, as a listed firm, have more stakeholders who won’t necessarily agree that a third generation of the family are the most suitable for leadership.
Fouzul realizes, despite the safeguards, that a third generation of the family will view the business differently. “I think the coming generation won’t understand,” he muses. “My mother thinks one way and all her children were influenced by that. “With the next generation there are three mothers who will think in three different ways,” he says referring to his brothers’ and his own wife.
The choices they make will undoubtedly change the structure and maybe even the values of the company over time, which is crucial to get right for continuity. “It’s not easy when the family grows,” he refers to one side of the challenge. “When outsiders come (after a possible IPO) it’s not going to be easy because Muslim culture is not easy,” he muses.
The three brothers have agreed that each will choose one child who will join the business. “I have been telling Hussain that from each family only one will come in to the business,’ explains Fouzul of the broad strategy of transition to the next generation. “They will be assigned responsibilities for different areas of the business. The others can be shareholders or directors, but will not be involved in operations.”
Fouzul faced down two challenges from 1990 when he decided to transform the family firm from a tailor shop cum readymade men’s clothes retailer to the premium clothes brand it is today.
Hameedia has always been a business targeting the more difficult of the two sexes and to that degree has had to entice and educate its potential customers than chains that also cater to women, who succumb to spending on fashion easily. A Sri Lankan man would easily spend Rs5 million on a family car but would shrink from investing on a quality shirt or wouldn’t think much about being seen in a faded pair of trousers. This was the first challenge Fouzul Hameed faced, of convincing Sri Lankan men to take greater interest in personal grooming by investing in a wardrobe that suits their lifestyle. He was convinced that Hameedia’s core market already had the disposable income, which they were investing in things like cars, to also divert to their wardrobe. After years of hard marketing, Hameedia and others have persuaded some of their core market, the rich and the middle class, that their wares confer sophistication and class. Fouzul was in the forefront of raising design literacy among men, holding grooming workshops for male staff at private firms and using every available media opportunity to sublimely reinforce the fashion message. But that was only one half of the early challenge when Hameedia was building its own stable of brands.
The second challenge was a result of Fouzul Hameed’s own decision to only retail their own original brands, when the entire market was dominated by fake brands or flitted duty free stock lots from readymade clothes factories manufacturing for export. “You struggle to come here, but there is no respect for a brand, instead the fakes are flooding the place and a lot of people made money. So you get really fed up,” says Hameed who launched his first brand LeBond in 1990, at a time when Colombo’s swankiest clothes retailers and department stores were stocked full of cheap knockoffs of international brands or duty free stock lots smuggled out of factories manufacturing for export.
Its 20 plus specialist stores retailing its top brands LeBond, Envoy and Signature together with the sports apparel Adidas franchise makes it perhaps the largest predominantly own brand clothes retailer in the island. Its reputation is being built on craftsmanship and quality that people will be happy to pay a bit extra for.
Hameedia didn’t get to the point overnight. For nearly one and a half decades after taking over his father’s business Fouzul says he learnt the trade “I was like a salesman, Hussain was cashier and my cousins were part of the team,” he says during a chat at his modern office which adjoins a large display area for some of the products available at his stores. Hussain’s job has scaled up from cashier to officer in charge of everything besides design, according to Fouzul. Hameedia started resembling its current form during the 1990s’.
“I dream too much,” says Fouzul. “When I go to Paris and see the stuff there I want to also take my products to that level,” he says pulling out made to measure shirts in wrinkle free high quality fabric he purchased in Milan just weeks earlier, which cost him the equivalent of Rs22,000. “My target is that,” he says running the unwrapped shirt dextrously in his fingers and referencing its quality to that which he wants to achieve at Hameedia here.
At first convincing the top mills in the world to supply material proved challenging because of the low volume orders he was placing and Hameedia’s lack of reputation. “Those were tough times, going to Japan and trying to convince them.”
However his desire for long-lasting and well-made shirts and trousers that are distinctive and could be bought with confidence, brought in a new generation of fashion sensitive young people to Hameedia. Their only alternatives were factory rejects and fakes that were freely available. At the same time he railed against upmarket department stores for duping customers by selling rejects and fakes of international brands.
Somewhere down the line Fouzul Hameed also transformed from the guy running a tailor shop at Wellawatte junction to the quintessential Sri Lankan metrosexual. However in this whole transformation the values that underlie Hameedia were not compromised. “I will not mislead customers,” he declares of the motivation leading to launching his own brands instead of adopting the tested strategy of selling fakes and duping customers that they are originals. “My mother always asked… ‘why do you want to lie? You just need 50 rupees to fill your stomach, you don’t need millions so don’t bring that money and give us’.”
Fouzul was motivated by more than the need to offer a good shirt or trouser to a customer. He relished the sartorial challenge of making the garment from scratch, explaining the passion simply as, “it’s a lot more fun to do it ourselves, there is no fun in sourcing it.” Through an office in China the firm sources accessories for manufacturing garments here and selects finished products where there is no expertise or scale to manufacture here. Almost all shirts and most trousers sold locally are stitched here. Leather goods and high end Indian ethnic wear are imported. Some suits are made here and some imported.
Despite the growth Fouzul is still hands-on, on the business. “I am hungry for quality, hungry for style,” he says with a glint in his eye. He spends a couple of hours daily on the factory floor ensuring products are faultless and inspiring staff strive for zero defects. Products at Hameedia don’t have loose stitches or buttons that fall off, sometimes common in merchandise purchased at other popular department stores. “Everyday my team makes mistakes and I keep on correcting them and suppliers sometimes send the wrong stuff. Of course there are great days… when I see great products I’m happy,” Fouzul who often expresses himself simply explains.
Every other day Fouzul visits stores in the retail network, keeping staff on their toes and ensuring customer service remains a priority. In 2013 the group is planning up to seven new stores including a line of Signature branded ones to tap lower spenders. Signature, a brand not promoted at Hameedia branded stores selling LeBond and Envoy branded merchandise, is getting a new lease of life. A second specialist store for the brand was opened at Piliyandala joining the one at Matara. “We are not going mass market and in to volume with the Hameedia brand,” he points out. A number of the new stores to be rolled out during 2013 will be branded Signature.
“I just can’t get my mind away from innovation. Every day I come up with something new, I want to be something new all the time,” says Fouzul allowing insight in to the passion that sustains the business.
LeBond is Hameedia’s biggest brand in terms of topline contribution, followed by Envoy and Signature. Being the premium brand, Envoy’s margins are perhaps the highest admits Fouzul. However the firm is keen to not supply their brands wholesale to department stores to be sold alongside fake international brands or low quality apparel. Unlike department stores Hameedia makes margins on both manufacturing and retail.
Shirts, trousers and sometimes a jacket is now standard battle attire in corporate Sri Lanka. In the last two decades as private sector jobs opened new opportunities, more men have been willing to invest in a wardrobe, considering it not a trophy but a necessity. Hameedia and its brands are well positioned to benefit from the rise of corporate Sri Lanka having a stable full of brands to cater to an entire spectrum. However it’s not just the elegance of the cuts or the quality of the stitching that will sustain this successful family firm but also how smoothly it absorbs a third generation of the family and maintains the highest governance standards. Sartorial elegance Fouzul Hameed says is only one part of the challenge.