IDC Managing Director, Ashraf Bin Taj, on the evolution of IDC, how IDC has grown from a team of over 300 people to over 500 people in a year (we first interviewed Mr. Ashraf in 2017, you may read the interview here) and the scale of its operation, the imperatives for growth, how managing the growth and sustaining the culture has become the most critical challenge for IDC, IDC’s ambition to build its own brands and get into manufacturing, how IDC is dealing with financing challenge, how digital commerce is hanging retail around the world and Bangladesh and IDC’s ambition going forward, talks about the role of the CEO in an early stage company and how role of a CEO changes as the company grows, the common mistakes that early stage entrepreneurs and CEOs make, how should startups approach the world of forming a board and what should be relationship with the board in the early days, and why you should never take your people for granted.
Future Startup
Thank you for agreeing to do this interview with us. When we had our conversation a year ago you were a team of 330 people, how much has IDC evolved since then?
Ashraf Bin Taj
From 330 people last year, we have grown to be a team of 508 people. Our growth trajectory has been pretty steep. In 2017, our business grew by almost 42%. Till June this year, we have grown at an average rate of 36% which we predict to go higher by the end of this year as we have added a few new lines of business.
Our scale has increased. Previously, we mainly had three brands: Ferrero, Amul, and Nivea. From the beginning of this year, we have been handling Unilever International as well. That has helped us to enter into many urban and suburban markets. We have been entrusted with the distribution of several popular Unilever products which Unilever Bangladesh doesn't include in their portfolio right now.
In April, we have signed contracts with Kellogg’s and got the distribution rights for both of their brands – Kellogg’s and Pringles. These contracts gave a powerful boost to our business. All these brands are top-ranking ones in their respective categories. Ferrero, as you may know, is a top chocolate and confectionery brand. Then we have Nivea which ranks as the world’s no. 1 skin-care brand. Many Unilever and Amul India products are immensely popular among consumers.
We are fortunate to have such a portfolio and that too only in five years. Within this short period of time, we have been able to bring all these globally acclaimed brands under one umbrella. We feel humbled to work with these great companies and serve our customers with quality products.
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From 330 people last year, we have grown to be a team of 508 people. Our growth trajectory has been pretty steep. In 2017, our business grew by almost 42%. Till June this year, we have grown at an average rate of 36% which we predict to go higher by the end of this year as we have added a few new lines of business.
Future Startup
How much has IDC evolved organizationally?
Ashraf Bin Taj
As I was saying earlier, our office has got bigger since more people have joined IDC. You will find our headquarters a little more chaotic now than before. We have had to open new departments and recruit new people who serve emergent, necessary functions. Until last year, for instance, we didn't have a structured HR policy.
We have reformed our finance division as well. Early on, most of our operation was run in a centralized manner. But, with increased size and complexity, we needed to decentralize our operation. At distribution companies, it's essential to provide keen attention to supply chain activities. That's why we have bifurcated our operation into a commercial division and a finance and accounting division. This has also allowed us to ensure our accountability in the organization.
Our distribution capacity has also increased with a rise in the number of warehouses. The distribution manager now prepares well thought-out distribution plans beforehand. Planning has helped us with pre-distribution activities as well. We have become more competent in packaging the products for the local market which we are obligated to do as per the law.
For each line of products, we have a sales manager. We have an institutional sales team as well. We have special sales teams who dedicatedly look after that particular institutions. We have formed these teams because we have seen that corporate consumers prefer doorstep service.
Although we do not manufacture the goods that we sell, we ought to have a marketing function. Consequently, we will be undertaking trade marketing and brand activation initiatives going forward.
As our operation grows, I'm feeling increased pressure on myself. So, we may get an operational head soon so that I can delegate some of my responsibilities to her/him.
Future Startup
How many outlets do you cover now?
Ashraf Bin Taj
The number varies for each brand, For Ferrero, we are covering about 25,000 outlets now up by 47% as compared to last year. On the other hand, it is 35,000 to 36,000 outlets in case of non-food brands.
The above figures are only our direct distribution. We also reach a large number of outlets through indirect distribution with the help of our strong network of wholesalers and dealers. I can't give you the exact figure, but I can tell you that this winter will be a boost-period for our operation.
Our experience has taught us the importance of the regional and seasonal distribution of products. We are carefully studying deeper pockets of the market and trying to apply the learning in formulating far-fetched distribution strategies. During winter, for instance, Nivea can go rural because the demand is higher. Then, chocolate products should be distributed to urban areas. Products like talcum powder have a huge demand across different segments of the population. Because it is also affordable and available in small amounts.
As a distribution house, our process needs to be efficient. Although it's not like we have to send people to the last-mile outlet in case of all products. There are products which you can distribute to distant outlets through your strategic distribution partners--wholesalers, cash & carry, sub-distributors, etc. In fact, if you know how different parts of the operation work, you can fully utilize the resources. For that to happen, the value chain needs to be well-defined and each individual involved in it needs to be appropriately remunerated.
Three things are essential when you want to achieve long-term growth. The first one is the product or brand planning. For distribution houses like us, it's important what portfolio we offer to the market. Then, you need a strong team comprising of the right people. It's the people, you see, who make the actual differences. So, having an inspired and committed group of people behind the company is of utmost importance.
Future Startup
How are you doing in terms of sales?
Ashraf Bin Taj
We are doing a decent job in terms of sales. With all the businesses now going in full swing, we hope to reach the two billion taka mark by the close of this fiscal year.
Future Startup
How do you deal with legal challenges?
Ashraf Bin Taj
One thing that we have a very strict policy that whatever we do we do it properly and within legal bounds. We are the authorized distributor for all the global brands that we deal with. We have the necessary documents to prove that status. Legal compliance is a mandatory requirement in our operation. We have a position in our company which is called Manager – Commercial & Compliance. We also take necessary help and guidance from our legal advisor and company auditors.
Future Startup
Your business has grown remarkably in the last few years. How have you attracted users and grown the business?
Ashraf Bin Taj
Three things are essential when you want to achieve long-term growth. The first one is the product or brand planning. For distribution houses like us, it's important what portfolio we offer to the market.
Then, you need a strong team comprising of the right people. It's the people, you see, who make the actual differences. So, having an inspired and committed group of people behind the company is of utmost importance.
Finance is the third concern. You need to have a very clear idea about your financial planning. I've seen excellent ideas failing to see the light of day because they didn't have strong financial backing. In fact, we are in a bit of a financial stretch ourselves because growth is very costly to manage. As a result, you should solve for this equation before you go ahead with a venture.
Businesses in our country often maintain a rather long payment cycle. It can stretch to 100 days sometimes. But in the meantime, you need to run your business. Without money flowing into the organization, it is hard to keep the projects running and incur expenses. That's why a precise financial planning beforehand is critical.
Let me elaborate a bit on our process. As a single entity, it's not possible for us to reach out to thousands of outlets. It'd be a logistical nightmare. That's why we employ a strategy called Go to Market (GTM). As per GTM, we have channel partners (e.g. distributors, wholesalers). They help us in distributing, storing, and collecting cash. The rest - what to sell, taking orders from the outlets, how to merchandise, where to inventory - is done by us. Our employees go to different corners of the country and serve these functions.
Now, you have to estimate how deep into the market you want to go with a particular brand depending on its demand and popularity. Based on that estimation, you can then determine how many people you have to deploy on a particular deal. At IDC, we have the brand- or portfolio-specific sales teams. To a large extent, our outlets are common across the product lines. But outlets may differ category-wise (e.g. food and non-food).
We take a hybrid approach to sales when outlets in a given area generally take up both food and non-food products. This generally applies to suburban areas. In other instances, our exclusive sales teams look after the sales of brands they are responsible for.
This is briefly how our process works. Next comes the supervision of the front-line sales reps. We have sales heads. They comprise the crucial layer of top-line leadership. These managers supervise the entire sales process.
Now, some companies only consider figures (e.g. sales volume, revenue). But if you really want to build a sustainable business, you need to evaluate the quality of your sales. That includes taking measures such as--classifying your distribution destinations (i.e. retail outlets), segmenting your portfolio, merchandising plan, contingency planning, and so on.
IDC area managers and first-line supervisors manage strategic distribution partnership as well. It's necessary because sales reps can't always have enough products at their disposal. That's why we partner with third-party distributors to boost our sale. Our area managers look for potential distributors in their respective areas and make deal with them.
In my opinion, getting the right kind of people to do your sales will be a critical factor in the coming days. The attitude I see in many recent business graduates is that they want desk-jobs more than they want to be in the field. When I, and my friends, graduated from IBA, we were first sent to the field.
The field of sales is in need of quality graduates. The industry should also own up to a share of the blame that young people do not see sales as promising for their career. This situation must change. We see this as a challenge which we are trying to find ways to address.
We work with some of the best brands in the world and we are trying to find ways to collaborate further with our partners. If we see there are opportunities that we can explore jointly with our partners, we will certainly go for it. Apart from that, we are also exploring opportunities to build our own brands on whatever small scale possible. Now building a brand is not an easy take. It will take time and investment. We want to start small and grow slowly.
Future Startup
What are the challenges for IDC now?
Ashraf Bin Taj
Managing growth, as I have mentioned earlier, is a major challenge. Seeing the market promises that Bangladesh has to offer, many international brands, including the ones we work with, have exciting plans for the country. To meet their expectation, we need to scale up own businesses as well.
So far, our performance has been fairly satisfactory. Finance is a challenge for us. The challenge for us lies in our existing financial system which largely requires collateral if you want to avail a loan. Now there are banks which want to provide us loans but for that, we have to mortgage properties which is not feasible for us.
Although we don't have much land or housing property, we have a solid team, a growing business, a strong network of trade partners, some world-class brands and a brand name. But when it comes to availing finance from our existing banking system, these are not enough which, at times, is an insurmountable challenge for us.
On the top of that, being an importer has its own challenges. For instance, our principal partners offer us credit sometimes when we perform satisfactorily which allows us to pay them a month or so later. You can take the benefit of deferred LC if you run a manufacturing unit. But for trading businesses, it's just cash--pay up front. Although our principals are ready to offer us credit, we can't avail it because there is no option to do so in our existing financial system. So we need a fair amount of cash to run our day-to-day operation. And though we have the opportunity to enjoy credits, we can't avail them because there is no existing mechanism for that.
So, despite the difficulties banks are facing at present, there should be some sort of security systems for SMEs which they could use to avail the necessary financial and technical support. If I were relieved of the constant pressure of ensuring the inflow of working capital to the organization, I could focus more on improving the business.
Another challenge comes from the growing cost of availing real estate. The cost or high rent of land properties is giving us a really hard time. We need convenient warehouse facilities to store our inventory. That's why the volatility of the market is problematic for us. When your warehousing cost goes up, which has been the case for us in the past few years, it is hard to balance that with margin in a competitive market.
In line with rising real estate costs, I think online retail platforms will grow in the future. It can backfire if we can't prepare an efficient workforce to tackle that transition from traditional business to digital business.
With the rising interest rates, the cost of debt has also become a headache for us. Although the central bank has taken some measures against the inflation, debts are now costlier to procure than it was two years back. As we also have to import goods from abroad, the foreign trade policy affects us as well. The exchange rate has gone up dramatically in this financial year. Our cost of goods sold has increased in turn. BDT 85 to USD 1 is unmanageable, to say the least. These are some of the challenges, that are largely systemic where we don’t have much control but if these areas improve, doing business would be much easier for us.
I'd urge young people not to fall into the trap of instant gratification. The wave of digital media has led many young people to show-off every little achievement. It's self-destructive. They need to emphasize their core purpose and avoid getting distracted by any other thing.
Future Startup
Do you plan to get into building your own brands? You mentioned last year that you’re eying to invest in light engineering sector?
Ashraf Bin Taj
Yes, we are. There is no alternative to building your own brand in the long-run and we have started exploring a few areas. However, we work with some of the best brands in the world and we are trying to find ways to collaborate further with our partners. If we see there are opportunities that we can explore jointly with our partners, we will certainly go for it. Apart from that, we are also exploring opportunities to build our own brands on whatever small scale. Now building a brand is not an easy take. It will take time and investment. We want to start small and grow slowly.
Future Startup
Have you thought about taking VC money?
Ashraf Bin Taj
Yes, we are thinking about it now. The thing is that we are still a relatively small-size venture and we have been able to satisfy the resource needs through our own means. Also, to raise external investment, you also need the commitment from your principal partners whether they have plans for Bangladesh. If these are things agree, we can surely approach VCs and explore other opportunities.
Actually, I have already started dialogues with some people and I am receiving positive feedback. As of now, there has been no case such as ours in Bangladesh. Because distribution business is not ideally something that gets Venture capital back-up. But we are hopeful and will certainly explore opportunities.
When leading an early stage company, a CEO must work. He needs to get his hands dirty. Since the company has just entered the business arena, everything needs to be structured - attracting customers, making sure your products sell, creating a network of the stakeholders, and building the brand. In doing that, it's important that people see who really spearheads the company. So, sufficient visibility of a CEO in the ecosystem is important. A CEO should have a very clear understanding of her/his vision. In absence of official organizational policies and culture, a CEO must know what s/he wants to do and how.
Future Startup
As you mentioned, ecommerce is going to change how retail is done in Bangladesh. In many ways, it poses a threat to your business, how do you see this development? What are your plans regarding e-commerce?
Ashraf Bin Taj
I think that ecommerce in Bangladesh is still in its early stage. While I think that e-commerce will disrupt traditional retail in Bangladesh, I don't think important changes will come into effect within the next 10 years or so. Meanwhile, our plan is to build more partnerships with stable companies. In fact, the fact that Alibaba has invested in Daraz has completely changed my perception about the latter. Now we are carefully looking into Alibaba's strategies in emerging markets such as ours. As part of our plan, we are working with many ecommerce platforms. We plan to explore the space ourselves as well in the near future.
As our operation is growing, our next challenge is to establish an efficient enterprise resource planning (ERP) system. We need a strong IT framework in order to streamline our operation and improve efficiency. We have already applied Field Force which is currently being used for our cosmetic products in Dhaka. The results are satisfactory. The system provides a clear picture of the entire operation. The amount of data we collect using the system allows to make the real-time decision and that too data-driven. Hopefully, by October this year, we will implement an organization-wide system. A dedicated IT team is working to that end right now.
Future Startup
What should be the role of a CEO at an early-stage company?
Ashraf Bin Taj
When leading new companies, a CEO must work. He needs to get his hands dirty. Since the company has just entered the business arena, everything needs to be structured - attracting customers, making sure your products sell, creating a network of the stakeholders, and building the brand. In doing that, it's important that people see who really spearheads the company. So, sufficient visibility of a CEO in the ecosystem is important.
A CEO should have a very clear understanding of her/his vision. In absence of official organizational policies and culture, a CEO must know what s/he wants to do and how. I'd also suggest CEOs to do rigorous follow-ups. It's particularly essential as there have been one too many businesses which have fallen off the radar just because the CEOs didn't follow-up with their responsibilities.
Another thing I've learned during my years in sales is that you have to celebrate achievements. Celebrations boost up team engagement and motivate employees to plan long-term. Similarly, you also have to have a review system which would objectively evaluate everyone's shortcomings and ensure that mistakes are not repeated.
To be honest, you have to be a workaholic to build a company from scratch. It doesn't happen overnight. You need to work day and night, literally speaking, and that too for a very long time. This is where people who leave big companies to build one on their own face difficulties because they cannot give up their old habits.
Now, as a company begins to grow, the CEO needs to pay attention to the nitty-gritty of her/his organization. S/he needs to set up the processes, put an efficient system in place, and, ultimately, streamline the entire operation. A growing company also calls for the participation of right kind of people. You need professionals to run a large operation to whom you can actually delegate.
In my case, I personally used to receive product shipments when we only partnered with one brand. But now we have partnerships with multiple brands. And it's not possible for me to be present at multiple places. So I have delegated that responsibility to others.
Future Startup
You meet with a lot of young people through your business. What kinds of mistakes do you see these people are making?
Ashraf Bin Taj
Planning among other things is what young entrepreneurs make mistakes. If you take planning seriously, you'll be able to foresee a lot of challenges beforehand. That's why we do planning. A strong planning, with its contingency counterparts, empowers an idea to a great extent.
Secondly, new CEOs often fail to prioritize employees. They don't put things like motivating the teammates, giving out their salaries the importance that they deserve. As a result, it becomes tough for them to retain competent employees. If you fail to retain people, you would not be able to build a big business. At IDC, we’ve made it a priority to ensure that we treat our people well. We are one of the few companies in our sector that pays salary before the month ends. People in our trade knows that if you work at IDC, you would not have to worry about salary. And then we celebrate when there is a win, no matter how small or big it is. This has helped us to build a great team over the years and a great culture.
My experience during years in sales has taught me that ensuring customer interest is of utmost importance. Young people often make the mistake of emphasizing more on figures on their balance sheet rather than satisfying the customers first. But it's essential to look after your customer because they ultimately help your business to survive.
I've seen companies bite off more than they chew. They commit more than what their capacity permits. It actually backfires if you can't fulfill your promise which will disappoint your stakeholders (e.g. investors) and ruin your reputation. And in the market reputation is the most valuable currency. And then when it comes to communication with your stakeholders, don't paint rosy pictures. Give them the truth and commit your cent percent effort. This is much safer and effective.
I'd urge young people not to fall into the trap of instant gratification. The wave of digital media has led many young people to show-off every little achievement. It's self-destructive. They need to emphasize their core purpose and avoid getting distracted by any other thing.
To be honest, you have to be a workaholic to build a company from scratch. It doesn't happen overnight. You need to work day and night, literally speaking, and that too for a very long time. This is where people who leave big companies to build one on their own face difficulties because they cannot give up their old habits.
Future Startup
How should a startup approach the work of formation of its board?
Ashraf Bin Taj
Having a board is important in the sense that it allows you to structure things, have support and ensure accountability. Board usually consists of owners and there are independent directors or outside people who may want to have on your board. You should have people on your board who could help you take your organization forward. At the same time, the person who you wants to have should be available as well. This depends on your mutual understanding. The management should keep the board updated about recent developments in the organization.
Then, you should have people who can mentor you, kind of like an advisory board. It should comprise of people whom you are comfortable around and can freely share your troubles.
As to how frequently a board should have its meeting depends on the nature of the business. For example, we currently call board meetings once every three months, which we used to on a monthly basis in our early days. If anyone in the organization has anything important to draw the board's attention to, s/he does that instantly via the internet now. I think it depends on the needs of an organization. However, I would say it is super helpful to have an active board.
Future Startup
What are some lessons you’ve learned from your journey so far?
Ashraf Bin Taj
One of the key things is partnerships, with whom you are working with in terms of business as well as a founder. When we first partnered with Ferrero, it gave us a unique perspective on the game. That's when we began to prioritize quality over quantity. So, such selections are very important.
Next is the team. You need to keep your team as much engaged as you can. Luckily, the team I work with at IDC is very steady and result-driven. They are the ones who have the major contribution to IDC's growth.
Simplicity is another matter. You need to keep things simple for everyone. Take a less-bureaucratic approach. Personally, I am very much accessible for anyone at any level at IDC. Even if I can't be present somewhere in person, I try to stay in touch through technological means.
I've also learned valuable lessons in transparency. As a distributor, we need to provide our principals with proper accounts. Many a distribution businesses fail because of breach of trust. That's why we ensure reliable accounting and reporting practices in the organization.
Never take your people for granted. People build businesses, not the other way around. If your people are happy, they will work hard in customer service and make your customers happy. Employees always enjoy priority at IDC. They receive their salaries before everything else, even if we incur losses in that given period. We may not be able to provide extra benefits or luxury to our employees right now but everyone in the market acknowledges that you don't need to worry about your salary if you work at IDC. We have earned that goodwill.
I think IDC would be better off if I had built the IT infrastructure a little early. We couldn't do that as we were busy managing our growth which has risen at an incredible rate recently.
I have learned that it helps to manage the growth if you have multiple sources of financing. We have struggled for a while in that regard. In fact, if you're company grows at a steady rate for one or two years, you should consciously determine multiple pockets where you can draw your finance from.
This may be a little controversial but a company should have a contingency plan regarding its top management. If someone from that level leaves the organization, there should other people who fit into her/his position.
Lastly, for the last one year or so, I've been increasingly feeling the need for regular training programs for the employees. It's important since the team is growing and newer people coming into the organization. You have to invest in your people in order to help them grow and give them a sense that they have a future in your organization.
Never take your people for granted. People build businesses, not the other way around. If your people are happy, they will work hard in customer service and make your customers happy. Employees always enjoy priority at IDC.
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Interview by Ruhul Kader, Transcription by Rahatil Ashekan
