TANMIA A story of success with plenty of determination and sacrifice Hurdles Bring Challenges When Musa Freiji decided to rebuild his company, Tanmia, in Lebanon, he thought that his move will be welcome after 15 years of civil war that destroyed the country.
He did not anticipate serious hurdles which tempted him on several occasions to shut down and concentrate his energies on 16 companies successfully operating in Egypt, Sudan and Jordan.
Yet his love to his homeland was stronger. He decided to face each challenge with resolve and commitment to succeed. After all, challenges he has faced since Tanmia was established in 1972 in Lebanon, are countless. He was constantly determined to overcome the obstacles and move forward. He has established the Agricultural Development Co. SAL known as Tanmia in 1972.
A graduate of the Faculty of Agriculture and Food Sciences of the American University of Beirut in 1957, Mr. Freiji worked for 15 years as a manager and a minority partner of a company he has established with financing partners in Lebanon. When he decided to split and establish Tanmia, he left behind him the largest and most successful poultry integration.
However he felt at that time that he can do better in the long run on his own since his partners were not willing to restructure and modernize the traditional management systems.
The first hurdle Tanmia faced was the dumped prices from the company he has left. To escape this unfair competition, Tanmia resorted to selling half of its production of baby chicks to specific farmers in the local market and the other half to customers in Syria, Jordan and Saudi Arabia at higher prices than competition.
Thanks for the special relationship that Mr. Freiji has built with such customers based on the free successive service visits he used to give them for over thirteen years.
The second hurdle was the civil war which erupted in Lebanon in 1975 and forced Tanmia to shut down its farms and facilities for twenty years. Musa Freiji did not wait or waste any time. He took advantage of his contributions to farmers and companies in the Arab countries.
He established with local partners two companies in Syria, one in Jordan, three in Saudi Arabia in the years 1975-1978. In 1984 he set foot in Egypt and within ten years he established ten specialized companies with the help of his brother Tony and two Lebanese partners Philip and Ramzi Nasrallah.
After watching the start of reconstruction following the civil war and having succeeded in all his ventures in the Arab countries, Musa Freiji had a nostalgic feeling and an urge to revive Tanmia in Lebanon.
In 1996, Musa and his daughter Rima embarked on a feasibility study to reconstruct Tanmia as a fully integrated operation that would result in the production of poultry fresh meat and further processed products using poultry meat. This step necessitated injection of USD 22 million on top of existing facilities.
The study was very convincing to IFC and to a local bank that between them financed 40 % of the needed cash requirement.
Tanmia has soon built one of the most modern set ups of poultry farms, feed plant, hatchery and processing plant in the Middle East. A new obstacle soon appeared. Breast meat (filet) was smuggled on a large scale from Syria via the Lebanese borders and sold at 60-65 % of locally produced filet.
This made Tanmia’s sales prices of the whole chicken or parts below cost of production for months. However, being unsanitary and messy, such filets were only sold to restaurants, hotels, hospitals and caterers. These outlets represent 40 % of the market.
Tanmia concentrated its sales efforts to retail outlets where fresh chicken or parts are sold to consumers. Luckily the majority of the Lebanese consumers prefer to buy fresh red meat or poultry or fish. This preference habit saved Tanmia.
A second obstacle came about when a false allegation was pointed to Tanmia as using the rendered poultry offals at its processing plant in the poultry feed it prepares for its flocks during a short period of three weeks when the Ministry of Agriculture temporarily banned the use of rendered meat upon the discovery of BSE (Bovine Spongiform Encephalopathy) in England. The allegation prompted the attorney general to shut down the rendering plant pending a final decision on the use of rendered poultry offals in animal feeds by the Ministry of Agriculture. The seriousness of this issue is when the Governor in the Bekaa district decided to invite all media to witness the closure of the rendering plant and broadcast it on all national televisions, along with false accusations and alarms to the consumers.
This incidence on its own was enough to break the camel’s back. However, Tanmia took it as a challenge to face the Ministry of Economy, the Governor, the media and the judiciary while at the same time regain the confidence of the consumers. Only one week after the Governor’s assault, the Minister of Agriculture released permission to use the rendered poultry offals in poultry feed.
This forced the attorney general to re allow operating the rendering plant. Tanmia was able to prove that during the three weeks ban it did not use the rendered poultry offals in the feeds.
Thus it was able to win its case of innocence. The judgment was published in all prominent newspapers. The campaign to clear the minds of consumers took over a period of two years and costed Tanmia close to one million dollars.
The third serious obstacle Tanmia faced was the 2006 war launched by Israel on Lebanon and the ban Israel has put on the use of trucks within Lebanon and the closure of the port.
Tanmia was unable to deliver feed to its farms nor to receive feed ingredients from Beirut Port. It was also unable to slaughter the mature flocks.
It lost most of its breeding flocks and all its broiler flocks at a cost of USD 3.9 million. At this point, Tanmia contemplated the possibility of shutting down. But, here again Tanmia considered restarting as a new challenge. It took Tanmia two years to resume full production at a lost opportunity cost of USD four million. Lebanon is a member of the Arab League and has signed the General Agreement of Free Trade between all member countries in 1994.
By 2004 the tariffs on any product of Arab origin became nil. It is a well established fact that Brazil enjoys the lowest cost of poultry meat due to its mild weather, availability of fertile land and hence feed ingredients and low cost of labor. It has become the major exporter of frozen chickens or parts all over the world. The custom duties on non-Arab chicken meat in Lebanon stand at 30 %.
The smart traders in certain Arab countries such as the United Arab Emirates (UAE) and Jordan who allow imports of Brazilian poultry meat at no duty, started to change the labels of the Brazilian packages to packages of their countries origin and ship them to Lebanon at zero duty since 2008.
This fourth challenge that Tanmia faced has restricted it from expanding its production. The government officials were not willing to act in any way against the illegal trade whether from Syria or UAE or Jordan. This policy resulted in diminishing the Lebanese production of poultry meat to 50 % of Lebanon’s consumption. For over twenty years, Mr. Freiji has written, published and lectured on the protectionist policy of local agricultural and food products. His argument is based on the fact that the member countries of the World Trade Organization (WTO) of the United Nations did not agree up till this moment on freeing the trade of agricultural and food products.
Hence, it would be advisable to encourage local production by applying import duties on such products especially that most of these products come from countries that exercise direct or export subsidies of such products especially the European Union (EU) or USA (visit Mr. Freiji’s website www.musafreiji.com) While all these obstacles hindered or delayed Tanmia’s action plans to establish itself as the consumers’ company of choice that provide them with healthy, safe and quality chicken meat and further processed products, Tanmia never stopped to proceed and act in that direction.
The plan started with a thorough market study in 1995 by Rima, Musa’s youngest daughter. Her findings came close to the findings of International Finance Corporation (IFC) of the World Bank, who as a result of their study and approval of Tanmia’s feasibility study, approved a loan of five million dollars.
The detailed feasibility study revealed a fully integrated poultry meat production project that would be the first of its kind in Lebanon. Acquisition of appropriate land sites, obtaining all licenses, constructing broiler houses and equipping them, building a fourth parent farm, expanding the hatchery, remolding and re-equipping three parent sites, constructing and equipping a modern processing plant, all took two years to finalize, at a cost of 30 million dollars. How did Tanmia Lead and Drive Competition? 1) Tanmia, unlike others, chose to separate the parent or broiler farms one kilometer or more apart thus reducing possibility of disease transmission.
These farms were built to be closed environment houses with desert cooling in the summer and heating in the winter in order to keep constant temperatures agreeable to the live birds at their various ages. The parent sites are 30 Kilometers away from the Broiler sites for the same biosecurity reason.
All those farms are equipped with automatic feeding and watering systems thus reducing labor intervention. 2) Tanmia was the first poultry company in Lebanon to introduce the evaporative cooling system in the summer to its poultry houses, hatchery, chick delivery vehicles and live bird receiving area of the processing plant. It was also the first and remains to be the only company to use olive pomace for heating the poultry houses and thus replace expensive diesel or gas.
In fact the introduction of cooling chick delivery vehicles was first designed and practiced by Musa Freiji in Saudi Arabia in 1978. Ever since, it has become the norm all over the world. 3) Tanmia was also a first introducer of pelleted feed for broilers. This method improves feeding and appetite and hence speed up growth. While most feed compounders used imported meat meals in their feed up to the year 2000, Tanmia since its inception in 1972 never used except a vegetarian feed based on corn and soybean meal. 4) Tanmia built the first modern slaughterhouse and processing plant in the region. It was designed to meet the slaughter according to Islamic rite. It was and remains the only slaughterhouse in Lebanon that treats its solid waste by fully cooking it, water treating its liquid waste to end up with water suitable for irrigation and treating the gaseous waste such that unpleasant odors are eliminated. These environmentally friendly practices are yet to be practiced by all other slaughterhouses in the country whether for large animals or poultry. 5) Besides its own broiler farms, Tanmia engages independent private farmers in a contract farming relationship. This unique method requires that the farms be built in accordance with Tanmia standards relating to insulation, biosecurity measures, equipment, etc. The farmer only provides labor, bedding, electricity and heating costs which represent only 13 % of the overall cost of the live broilers.
The rest, namely chicks, feed, vaccines and technical regular service is provided by Tanmia. Farmers’ remuneration is based on a formula combining mortality rate and feed conversion. The higher the performance the higher the farmer’s income.
In general such contract farmers are making close to 150 % yearly return on their investment. They do not have to finance 87 % of the variable costs, neither take risks on sudden mortalities due to accidents or diseases, nor worry about marketing their produce. 6) Tanmia was the first company to introduce packaging of fresh dressed broilers or their parts back in 1998. Every other producer between 1957 and 2000 did not dare package fresh broilers or their parts due to the high bacterial count which would result in deterioration and smell soon after packaging. Tanmia was able to package with confidence due to its high standards of sanitation and disease free chickens. 7) Tanmia was also a pioneer in starting production of further processed products based on poultry meat.
Not only did it produce well known U.S. and European products such as burgers, escalope and nuggets, but it has introduced traditional Lebanese recipes replacing red meat with chicken meat such as Kebbeh, Sambousik, Shishbarak, Sfeeha, etc. Such further processed products are fully cooked then frozen and packaged in attractive packages sold as heat and eat food. 8) In its strive to comply with the highest sanitation and food safety standards, Tanmia was able to obtain the first Hazard Analysis Critical Control Point (HACCP) certification of any processing plant or slaughter house in the region in 2004.
With all these advanced and innovative practices, Tanmia has set new standards that the competition had to follow. Only one competitor so far was able to come close. Yet Tanmia is very proud that it did introduce new technologies to Lebanon which will snow ball with time and thus has served the country and benefitted the consumers. It is unfortunate, however, that Lebanon today produces only 50% of its consumption of poultry meat. The rest is either, smuggled from Syria or imported from Brazil via UAE or Jordan in an illegal way.
Had the government adopted a protectionist policy and has acted to stop the illegal imports, Tanmia and other integrators would have produced to self sufficiency via expanding their production facilities and creating business opportunities to new contract farmers. Organizational Behavior of Tanmia and Wadi group Tanmia is a family business that has been started by Musa Freiji as a pioneer in poultry production for 15 years in Lebanon followed by already 36 years in five Arab countries besides a come back to the homeland since 1996. Tony Freiji, Musa’s brother, a graduate of FAFS of AUB and a holder of MSc in poultry nutrition jointed the business when both decided to expand into Egypt in 1984. Three other friends from Lebanon, Philip Nasrallah and his two sons Ramzi, an MBA in finance and Khalil, an MSc in horticulture joined the Egyptian company, Wadi Poultry Co., upon its establishment. Tony now became the CEO of all the subsidiary companies, while Ramzi is the CCO of the group and Khalil the general manager of Wadi Food. Hala Freiji Rosteck, Musa’s eldest daughter joined Wadi Holdings, the company that now owns 13 subsidiary Wadi companies in Egypt and Sudan, in 1990 and assumed the management of the Brand and Image department.
This department serves the branding and promotional activities of the group. Rima Freiji Saddi, Musa’s youngest daughter helped her father in re-establishing Tanmia in 1996 after having served in the marketing department of Wadi Holdings for 2 years and after obtaining her MBA in management and marketing. Rima now assumes the position of CEO of Tanmia, while a third Nasrallah, Wadih, a BSc in Engineering and an MBA in business assumes the general manager’s position. Both Freiji and Nasrallah second generation constitute the backbone of Wadi group of companies and of Tanmia.
They created amongst them a bond of respect and cooperation that exceeded all expectations. Thanks for Philip and Musa to have set the example especially in not deviating from a high level of ethics and values all their professional life. The sense of belonging gave the members of the two families the feeling of true ownership since they were all registered partners.
Wadi group of companies or Tanmia were to such members their own. The growth and the success of such companies represent their own success and achievement. The notion of looking for another job or another company to work with or for cannot occur to any of them. Such feeling of belonging affirms the security to both the family members and the companies they are managing. Employer – employee Relationship Musa assumed the position of CEO of the group of Wadi companies in 1990 after having sold his shares in Saudi Arabia. The first thing he did was to circulate to all employees the basic management principles that the group should abide by. These included: a) Implementation of the consultative management approach such that decision should be taken by any manager after having consulted his subordinates. However this does not constitute a democratic approach. The manager should assume full responsibility for any decision taken. b) There is only one manager to any employee. c) Any employee has the right to resort to any manager above his direct manager for consultation or complaints. The manager consulted should listen and investigate and eventually answer him via his direct manager.
A major reason for an outstanding performance of the Wadi group and Tanmia was the high professionalization of the family members as managers.
Each in his own field gained the reputation of being a reference to his subordinates to solving problems. When they resort to any of the family leaders they are almost sure to get a solution that either re-inforces their point of view or come up with a solution that did not occur to them. These characteristics stand out to a point where they became known as the Wise Leaders.
Wise they are, especially in dealing and handling subordinates.
They are continuously helping beginners to grow via closely instructing them or by subjecting them to appropriate training.
In all cases employees feel the special attention and respect and see a future in belonging to an institution that cares and supports. Numerous are today’s managers yesterday’s simple employees. They became an example and opened a wide gate of hope to others. In developing staff, targeting improved efficiency, cost reduction and upgrading quality, Tanmia and the Wadi group has resorted to specialized institutions to train and implement employees at all levels via using Total Production Management (TPM) and World Class Manufacturing (WCM) systems. Such programs lasted for 2 years for individual companies and resulted in adopting specific schemes and measurable outcomes, which have become norms for assessing performance (KPI) and upgrading targets (OGSM).
As a result employee turn-over has dropped from 5% annually to 2%. Employees get paid basic salaries and incentives based on performance indicators. They all enjoy enrollment in the government social security scheme and in most companies also enjoy a special private health scheme, end of service benefit scheme and a special usable compensation for employee family in case of death or permanent disablement. Bottom Line Almost all 13 existing Wadi production companies in Egypt, besides Tanmia in Lebanon, obtained HACCP and ISO certification for quality, organization and environment.
Several of the companies were awarded for progress, development, expansion and success in diversification and job creation. The Wadi group of companies employs today 4200 employees and exceeded a turn-over of 400 million dollars in 2010. The group forecasts employment of 5200 by 2013 with a turn-over of 600 million dollars. Tanmia on the other hand employs at present 500 employees and has a turn-over of 30 million dollars.
Tanmia’s growth and expansion is dependent on the Lebanese government policy of protecting the poultry sector from illegal imports. Beirut, 27/04/2011