Ethar El-Katatney

Old School

Posted in Business Today by Ethar El-Katatney on January 16, 2008

Old School
Business Today
In the Black
January 2008

Available at: http://www.businesstodayegypt.com/article.aspx?ArticleID=7820
Photo Credit: Khaled Habib

These three iconic Egyptian brands don’t spend a cent on advertising, yet remain popular hits in stores across the country. What can be learned from their unlikely success?

By: Ethar El-Katatney

Consider two almost identical products with similar prices and packaging. One sells like hotcakes and the other flops miserably. Why? Business textbooks will tell you it’s due to the customers’ perception of the product, which is built mainly thorough good marketing — crafting a brand identity and the seeking the Holy Grail of modern marketing: buzz.

So what about companies that began in the 1960s and 1970s as innovators, quickly built large consumer bases with their widespread advertising campaigns, and then stopped mid-track, like a Jurassic-era insect trapped in amber? Business sense tells us that their products will follow the typical life cycle of growth, maturity and eventual decline.
Sometimes, however, such businesses maintain an inexplicably solid market share long after their retro packaging, old-time styling and seemingly outdated product proposition should have, by all logic, ceased to sell. We all know these products, the old mainstays that were fixtures in the kiosks of our grandparents’ time as much as they are today. How do they do it?
Three local companies with long-running hit products agreed to talk about their formula for success and longevity in the notoriously competitive consumer goods sector. For Samara, Five Fives (5 x 5) and LORD, business continues to blossom long after what many would have thought to be a natural expiry date.
The Companies

Established in the 1960s and overhauled in the 1980s, Samara (www.samaragum.com) is synonymous with its eponymous baladi chewing gum, which put it on the map and overshadows all of its other products. Available in individually wrapped sachets, they are sold individually (20 pieces will only set you back LE 1), in boxes of 150-250 or as sheets. Samara also sells sugared gum (Ori-gum), flavored sweets and chocolate, although these products are supplementary to their main product.
Five Fives (5 x 5, www.five-fives.net) was founded in 1971 by Charles Antoine as a company selling baby- and adult-care products, with talcum powder as the first product. It was the introduction of its lemon-scented cologne, 5 x 5, in 1981 that really pushed the company forward (A 220-milliliter bottle costs LE 7.75). It now offer a full range of similar body products, including shaving creams, deodorant, and everything related to the baby: talcum powder, oil, crème, and shampoo.
Last but not least is LORD Precision Industries (www.razorslord.com). In 1930, the first mechanized factory for the production of razor blades in the Middle East region was establis hed in Alexandria. Half a century later, a joint venture with the former Wilkinson Sword UK improved and modernized the company’s manufacturing systems, procedures and quality controls, leading to the LORD we know today.
LORD now has a range of products for both sexes, including traditional double-edged, single-, twin- and triple-blade disposable razors, in addition to cartridges and shaving-focused cosmetics. It is, however, most known in Egypt for its double-edged disposable razor (LE 2), introduced to the market in 1986.
Although each company has a broad product line, it is one iconic product that largely defines each business to the general public. None of these products — chewing gum, cologne or double-edged razor — are luxury goods; each is largely a discretionary purchase, with strong competitors in the market. Although each product is priced at the low end of the market, they are also targeted at heavily price-conscious customers whose brand loyalty to a brand fades in the face of a cheaper alternative.
All three products and companies target C-class Egyptians living in mostly rural areas. Samara gum and 5 x 5 cologne are aimed at both genders and all ages, while the razor is for men aged 20-60.
According to Ahmed Ismail, business development manager for LORD, the double-edged razor holds 90% of the domestic market. LORD has over 200 variants of the standard product, and each product “targets a different market with respect to the demographic and psychographic segmentation.” The company is constantly developing new products, but the double-edged razor continues to hold its own — as it has for the past 20 years — as the most popular brand in the country, despite no major changes since its launch. Quality control is a priority for the company, and LORD has both ISO 9001 and ISO 14001 certifications.
Mohamed Lasheen, executive manager of Samara, tells us that the gum itself has never changed. After 30 years on the market, Samara introduced a sugar-coated product under the Ori-gum brand, but kept the baladi gum the same. The only change to the product has been how it’s made: updated machinery has automated the entire production process. Samara is currently working towards gaining the ISO certification of quality.
Cologne 5 x 5 was, according to Nevine Antoine, CEO of the family-owned business, a national product. “Everyone used it,” she says. “Now, it’s older people, not for youth but for people who used it from a long time ago.” The cologne, according to their entirely English website, uses “pure, highly effective, carefully selected and blended ingredients [] approved by Egypt’s Ministry of Health.”
For products with a long-running, loyal customer base, packaging can reassure consumers that the brand is staying true to its roots. The three iconic products have seen little to no changes in packaging. LORD has added only an anti-copying hologram to their double-edged razor package, Samara changed the plastic wrapping when a safer plastic alternative was identified, while Cologne 5 x 5 remains exactly the same. That said, Antoine hopes the cologne bottle will see a facelift soon, as it is “very, very easy to copy,” citing the infamous Three Fives brand, an almost identical knock-off.
Pricing of all the products, adjusted for inflation, has remained essentially the same. Samara’s Lasheen explains that the biggest challenge his company faces is keeping the final retail price in check, while the costs of key components “can increase in 24 hours in an unbelievable way. Today, I might be quoted a price, and tomorrow they tell me the price has risen. So how do I work? I play on my profit margin [] I don’t think that stabilizing my price for a certain period of time is considered a loss, if I keep my customers and don’t make them feel my problems.”
Less-than-ethical competitors aren’t making it easy for the companies to keep prices low. Antoine explains that there are companies who cut costs by using methanol — which is poisonous and can cause blindness when ingested or absorbed into the body — instead of ethanol in their colognes. A liter of methanol is LE 3 compared to LE 12 for a liter of ethanol. As customers often can’t tell the difference, it’s hard for 5 x 5 to stay competitive and still make a profit.
“I rely on natural flavors imported from Africa, [but some] of my competitors get wax, which is the result of the distillation of oil, but still lawful in Egypt,” says Lasheen of the gum. “They then add to it the [artificial] taste of things I get naturally, so in end the product seems the same, but it costs us much more.”
As for distribution, the three companies agree that widespread market coverage is vital to their success. Business Today Egypt found Samara gum in two out of three kiosks, the LORD double-edged razor in two out of four small supermarkets, and the 5 x 5 cologne in one out of three pharmacies.
Ismail says that “most of the company’s sales were done through the common trading channels. Nonetheless, over the years this situation has changed and [LORD] is now directly serving an immense number of retail outlets via its distribution fleet.”
Antoine says Five Fives uses the same approach, noting that sales representatives and distribution centers ensure that the product is widely available in governorates in Upper Egypt. The company looks to see their cologne in “supermarkets, small shops, pharmacies and kiosks — and hopefully in big supermarkets like Metro and Carrefour.”
Exports play an increasingly important role for all three businesses. LORD tops with list with exports to 75 countries. Samara sends its products to countries in the Arab region and abroad: The sweeter Ori-gum is mostly exported, while baladi gum is focused on Egypt). Five Fives exports its 5 x 5 cologne to countries in the Arab region — Antoine admits it’s an “acquired smell” — and other products to Europe.
All three use websites as a key tool in attracting importers and will make changes to product design and packaging to meet the needs of foreign clients. For example, Samara produces its Ori-gum in rectangular shapes for its international clients, although the gum sells here in squares.
The (Lack of) Advertising

It sounds like a straightforward and lucrative proposition: a product customers like, sold for a good price, easily available and well made. Following the marketing manual, the next logical step is advertising. Because as any B-school graduate knows, no matter how well-known your product is, without constant reminding about it those fickle customers will go elsewhere and sales will decrease. So what approaches do these companies use? Personal selling? Advertising? Sales promotion? The answer: almost nothing.

Above-the-line (ATL) advertising, using mass media to communicate with customers, is not part of the marketing mix any of the three companies. Below-the-line (BTL) advertising, including sales promotions, sponsorship and other unconventional means, plays a minor role, with LORD sponsoring events and all three offering slight promotions to their wholesalers.
It flies in the face on conventional wisdom, until you look closely. These companies were innovators that jumped on the advertising bandwagon decades ago, with TV campaigns that swept the nation. Ismail explains that “upon the launch of the [LORD] brand, extensive marketing campaigns took place to create awareness and to increase double-edge razor usage. Nowadays, the above-the-line marketing activities have ceased after achieving a 75% share in the Egyptian marketplace.”
Lasheen and Antoine report remarkably similar reasons for their respective lack of promotional activities. Simply put, they don’t need them. Instead of advertising budgets, all three companies divert would-be marketing funds toward making sure their products continue to be of high quality, properly distributed and well priced.
“We rely on people still remembering Samara gum today,” says Lasheen. “A long time ago, there were huge campaigns in Egypt, on TV during Ramadan in the 1960s and 1970s [] Our theory is that proliferation [in the market], having wide distribution and the product available under people’s eyes, is better than spending on a radio while my customer can’t even find my product.”
Antoine adds that Five Fives was “marketing in the beginning, on television, to raise awareness [] until the product became known and people began asking for it by name. We advertised for years until we didn’t need it any more. To have a product firmly installed in a market takes time, not one or two years. And what helps us is we never change our quality […] The fact that our customers still buy until today without advertising means that we kept quality constant.”
Lessons for Today

We now live in an age where 80-95% of all new products fail, competition is global and cutthroat, and people are bombarded with literally thousands of marketing messages each day. Companies trying to compete can learn a lot from Samara, LORD and Five Fives.
First, find a product that offers something unique, something that differentiates it from the market. Love it or hate it, there is no denying that Cologne 5 x 5 has a 100% unique scent — one so distinguishable that it is immediately identifiable in EgyptAir bathrooms. It doesn’t hurt that its millions of loyal customers can use it as a perfume, air freshener or even sanitizer.
Likewise, Samara gum tastes like plain wax to many people, but it is a uniquely Egyptian product, wholly natural with no artificial flavors or colors. It’s an acquired taste, and people who love it buy it in boxes. “The whole world is now going back to natural products [] they will come back to us in the end,” Lasheen adds, gesticulating intensely.
When it was introduced, LORD’s double-edged razor was unknown in the market, a product using the best quality steel at a price that is affordable to the majority of the population.
Competitors immediately latched onto each company’s ideas and copied the products. by virtue of being the first to market, raising awareness and keeping their quality and price in check, all three companies retained market share, even though many customers may not have been able to distinguish between theirs and competing products.
Market saturation is a must. Ismail notes that LORD’s competitive advantage is in its “highly professional market coverage, through the distribution fleet as well as the wholesale channel, supported by the ongoing promotional programs.”
Lessons for Tomorrow

While the three companies are the quintessential success stories, each faces a looming demographic challenge. At the risk of sounding callous, the people that make up the largest percentage of their customer base — those who grew up with the products and internalized their advertising messages — are not going to be around forever. The products are literally outliving their market.

Lasheen hesitantly agrees, saying that Samara is “not going to keep focusing on the percentage of people who know us, because this percentage will decrease. So what to do to increase this percentage or stabilize it? It needs study. We have to tell people of our existence.”
The new generation is an untapped market with huge potential, but have often only heard of these products through their parents and grandparents. This is a double-edged sword — yes, they are exposed to the products, but the perception is that they are for older people. Each company is working to bring in new customers by introducing new products, but they shouldn’t lose the hard-won reputation of their mainstays or cannibalize their own sales. Ismail admits that their biggest competitor is Gillette, who has captured youth as a large segment of their customers; thanks to advertising, Gillette is associated with characteristics like youth, strength and endurance.
Although all three companies are lucky enough to have the entire country familiar with their products, re-positioning the products will be vital for the future.
The challenge is to avoid alienating loyal, longstanding customers, while simultaneously making the product appeal to a vastly different kind of consumer. Having little-to-no marketing budget helps keep costs low in the short-term, but at this transitional stage could spell disaster for the future.
Capitalizing on a brand name, building a brand character and raising awareness among new customers will help bring these iconic businesses into the new century. If they one day find themselves in the position of never needing to advertise ever again, then all the better. bt

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