Aujan: a billion dollar business

Aujan Industries, the biggest independent drinks producer in the Middle East, has agreed to sell about half of its drinks business to Coca-Cola. Four months before the deal was announced July, John Nutting met its chairman Adel Aujan in Dubai (published in The Canmaker, August 2011)

Sheikh Adel Aujan, chairman of Aujan Industries, is unequivocal about the value of the metal can to his company, the biggest independent drinks manufacturer in the Middle East.

“Cans are the biggest reason for our success,” he says, speaking exclusively to The Canmaker magazine at the company’s Dubai operational base in the United Arab Emirates.

The brand behind that success is Rani, a juice drink containing real fruit bits and called a ‘float’. The Rani brand is marketed by Aujan Industries in other types of packaging, such as cartons and bottles, but it is the can in which only the premium version with the particulates of real fruit is sold.

Hugely popular throughout the Middle East countries and increasingly in North Africa and South Asia, Rani will next year be celebrating its 25th anniversary. It also uses highly sophisticated production technology as one of the most widely-sold soft drinks using aluminium cans with nitrogen injection, a process that was pioneered by Aujan.

“Cans are the best way to deliver the float,” adds Sheikh Adel, who will be the keynote speaker on the opening day of The Canmaker Summit next month (29-30 September)and will talk about the background to the company’s remarkable growth.

In 2005 Aujan set a target of doubling sales to US$500 million which was reached early in 2009 and is expected to double again to $1 billion by 2012. With continuing expansion in the Middle East markets and elsewhere, it is more than likely to soar past the target. Growth has exceeded 20 percent a year over the past decade as young consumers increasingly drink the healthy juice. Aujan now has 14 regional locations and sells its products in 70 countries.

The booming sales of Rani haven’t gone unnoticed by competitors, who wanted to grab a piece of the action both by wooing Aujan into partnerships or launching look-alike competitors.

He’s been approached by the giant international brands, he says, but he values the family-owned company’s independence more than anything, and wants to keep it that way. “Copies – we have 20 in the market at any one time,” says Sheikh Adel, who adds that the company has a team of in-house lawyers working on keeping the upstarts at bay.

His son Abdullah, 30, is working his way through the operations. But Sheikh Adel, 65, doesn’t want to hand over too soon, expecting to “slow down” so that he can devote more time to conservation projects in Africa, where Aujan’s holding company runs tourism businesses. He’s pleased that two baby rhinos have recently been born at one of his wildlife conservation projects.

Meeting demand for drinks like Rani led to Aujan Industries growing out of Saudi Arabia, where its registered offices are based in Dammam, into the traditional Gulf markets and beyond to North Africa and Iran, a market of 70 million consumers that Sheikh Adel views as having the greatest potential.

That is why he decided to build a combined drinks canning and canmaking plant near Tehran to overcome the logistical challenges of shipping canned Rani from Saudi Arabia and Dubai, and to supply other big brands with cans. Setting up the facility presented its own challenges – it took three years to complete – but now that the plant is running smoothly, capacity is being further increased.

Now, Sheikh Adel has no illusions about setting up manufacturing plants in new markets as a pioneer. He even seems to relish it. But he’s been in the canning business long enough to understand what it takes to get things moving. “There are always ways of getting around the bureaucratic problems,” he says with a smile, “and I tell new people when they join us that there’s no point in getting frustrated. We’ve had wars in this region so we know how hard it can be.”

Neither is he a stranger to canmaking, because in the mid 1990s Sheikh Adel was instrumental in setting up the United Arab Can beverage can plant, in which he has a third share, at Dammam not far from the company’s first canning plant built in Saudi Arabia.

The construction of the Dammam canning plant was the culmination of two decades of development in which canned juices provided a market parallel to bottled carbonates. But the Aujan story goes back much farther than that, to 1905 when Abdullah Aujan & Brothers was founded as a trading company in Bahrain. It expanded into drinks in 1928 when it signed an exclusive deal with Nichols to import and later produce Vimto fruit cordial, a British staple at the time that became a similar favourite to generations of fans in the Middle East during Ramadan, and still is.

Sheikh Adel, son of one of the four founding brothers, joined the company in 1968 and set about transforming what had become a moribund organisation.

“The carbonated market really took off after the 1973 war. The oil price went up and that created insatiable demand. What happened then had great influence on the market, even today,” says Skeikh Adel. “Japan filled in the demand for carbonated soft drinks, especially Pepsi. At the time the exchange rate was competitive and there were no other canned drinks so everybody drank cola in 25cl two-piece cans from Japan, 90 percent of which was Pepsi.

“Pepsi opened the tap and gave everyone a franchise. Between Pepsi and the various export packers, and canmakers Toyo Seikan and Daiwa, they couldn’t produce enough canned drinks to export to the Saudi and the Gulf market.

“The Kingdom of Saudi Arabia was then nothing like today, with none of the supermarkets and distribution networks. Everyone was involved in selling the drinks, even barbers and tailors would buy a container load and put a stack in front of their shop to sell to the workers who were going out into the desert every day. And because the cans were packed in high-quality full cartons they shipped well. You couldn’t lose.

“The local bottlers didn’t have the capacity, and couldn’t respond to the demand,” says Sheikh Adel. “That was the beginning of the can market generally in the Gulf region.”

To exploit this and the popularity of Vimto, Aujan decided to produce a canned carbonated version, but even the British-based contract packer for Nichols couldn’t cope with the demand, so concentrate was shipped to the US where it was filled in three plants using 33cl cans from Crown for shipping back to the Middle East.

Even then there were problems with cans failing through pinholes created during the Atlantic crossing. “The containers were leaking red,” recalls Sheikh Adel. “That led us to set up our own filling plant, the one in Dammam, to substitute for the imports. Just at that time Continental Can had set up a plant to make soldered cans, yes soldered cans, for Pepsi.”

Aujan bought the soldered cans for the carbonated Vimto drink. “We did substantial business. They charged us an arm and a leg but the market could take it and they made a huge amount of money. Once when the printed tinplate was short we even shipped a load in a 747 from the US.”

The Rani brand grew out of a visit in the early 1980s by Sheikh Adel to Japan where he found an orange drink with bits of mandarin in it. “It had a unique taste and I was fascinated,” he says. He wanted his own brand and after calling it Rani as a result of a competition in the office, started filling it in Japan. “But then the yen appreciated, so we moved the filling to Korea with Lotte, using three-piece cans.

“I came across juices in two-piece cans while in Florida on business. At the time there were hardly any juices in two-piece cans. I couldn’t go with soldered cans in the quantiti
es we were talking about. I firmly believed in nitrogen filling [to pressurise the can and preserve the juice] and I think I was one of the pioneers.

“We didn’t have any quality problems with the nitrogen filling and it was a strong can: the consumer considered it a quality product. We worked with FMC to perfect the first machine after I took them to Japan and had them have a very close look at the Japanese technique of filling the ‘bits’. They saw how it was produced and then we duplicated this in our new plant.”

By the beginning of the 1990s with the growing need to meet rising demand while controlling costs, Sheikh Adel started thinking about Aujan making its own cans. “We also wanted two-piece cans so I started the initiative with some fellow customers in the region to do a two-piece line,” he says, describing the joint-venture United Arab Can plant at Dammam that eventually started production in 1997. “It took us ages because all sorts of things happened, and finally we made a deal with now defunct canmaker Reynolds and the other shareholders.

“For 25 years, from 1980 to 2005, Dammam was the hub of the Aujan business. To keep up with demand we just kept adding line after line within the plant and expanding every year until it contained 12 filling lines and got impossible to expand any more.

“So we said, okay, we would build another plant, a beautiful plant at the Dubai Investment Park near Jebel Ali, which was completed in 2005. We had been importing Barbican, a non-alcoholic malt-based drink, from the UK and after acquiring the brand from Bass we started filling it in glass bottles at Dubai. This year we started canning Barbican at Dammam.

“When we built the Dubai plant most of the production was for export to Iran and Iraq, with hundreds and hundreds of containers a month. Logistics was becoming difficult, with pile ups in the ports. So we said okay, we’ll take a chance and build a filling plant inside Iran.

“The problem was if we could build a plant to fill product in Iran, where would we get the cans? There were no cans, and importing them would have meant paying a 50 percent duty. We decided to build two plants; one to make the cans and one to fill the cans.”

Other drinks companies were facing a similar problem with logistics in Iran. “So we talked to the Pepsi and Coke bottlers who were good friends. We said we’re gonna put in a plant and asked if they wanted join us. They said yeah, we’ll take a minority shareholding in it, so they joined us and we set up the plant at Kaveh, 100km south of Tehran.”

Iran had just amended laws that allowed 100 percent foreign investment, and Aujan Industries was one of the first. “But being first is always difficult,” says Sheikh Adel. “You become a guinea pig. And the bureaucratic system is always stronger than any good intentions by the parties. So we embarked on it, and there were great difficulties with the logistics, paperwork was immense, visas for staff slowed things and we had incidents with delays to the equipment.”

As in Dammam, the canning plant uses Krones and FMC equipment, while the canmaking plant was engineered by Dubai-based NDH. Since the plant started in 2009 it has been operating tremendously well, says Sheikh Adel. Most of the staff are Iranian who he says are extremely competent, hard working, smart, and very eager to learn new technology. The canmaking plant will soon have a new plant manager, Ihab Arafah, who is Egyptian and had been with Crown for 14 years.

The Kaveh plant currently has capacity for making 800 million cans a year. It supplies both Pepsi and Coca-Cola locally as both shareholders and customers, and for other Iranian brands and fillers, says Sheikh Adel. But the capacity is still not enough to meet demand, particularly from the Kaveh canning lines, which have already been doubled up. “We have been shipping empty cans from UAC to Tehran, so we are in the process of putting a second line which will double the capacity to 1.6 billion cans at the end of 2012, along with extra warehousing,” he says.

The growth continues with Aujan viewing Iraq and Egypt, where the company ships filled cans in increasing volumes from Dammam, as future possible production bases.

Growth projects have become a significant part of the Aujan business, so how do staff cope with that and production demands? “When we were smaller, the existing manufacturing staff took in the projects in between the time they were not in plant,” says Sheikh Adel.

“Now we have a special projects team, and all they do is plan, negotiate, and deal with logistics. If it were in one country it wouldn’t be so much of a problem, but it’s in different countries and in different cultures. So it’s the only way. We can’t go through the Iran project again, with everyone tearing each other apart at the expense of manufacturing.”

As Aujan Industries approaches the billion dollar sales mark, he looks back on its growth with great satisfaction. “I attribute our success since the 70s to being focused on one industry and becoming number one instead of doing too many things, like traditional trading businesses,” he says. “I think it paid off for us.”