Procter & Gamble Mideast chief says region’s ‘mindset needs to change’

Mohammed Samir
Updated 31 May 2017

Procter & Gamble Mideast chief says region’s ‘mindset needs to change’

If Procter & Gamble (P&G), the giant US consumer products group, were a country, it would be the 45th biggest in the world ranked by its market capitalization and 75th ranked by profits.
That is an awful lot of money made from diapers and anti-dandruff shampoo (among many other everyday consumer products), and such financial power gives P&G a prominent place at the gatherings of the global elite who increasingly determine every aspect of the lives of consumers, from the big issues of macroeconomic policy right down to which detergent powder you will put in your washing machine.
I caught up with Mohammed Samir at the Middle East and North Africa (MENA) meeting of the World Economic Forum (WEF) at the Dead Sea resort in Jordan earlier this month. He is a P&G lifer, with 28 years’ service in a career that has brought him from his native Egypt to work in virtually every corner of the world.
“I traveled around a lot when I was young, in Libya, the US, Saudi Arabia and back to Egypt before (joining) P&G,” he said.
He is currently president of P&G’s business in India, the Middle East and Africa, with nearly half the population of the planet as his potential market, so who better to talk to about the global forces shaping everyday lives in the region?
He has become a regular attendee at WEF meetings since he got his current job three years ago. With a couple of Davos meetings under his belt, he is convinced of the benefits of the annual round of discussion forums that is the WEF’s stock-in-trade.
“At the WEF, I feel like we’re in touch with what’s going on in the world, like the digital transformation and the Fourth Industrial Revolution. The good news is that all that conversation is taking place; it is evolving. But now we have to look at how we can turn that into action. I think that is happening more. For example, bringing 100 regional start-ups to Jordan this year — that was certainly turning talk into action,” he said.
Samir participates in WEF sessions that discuss the broad economic forces that determine the P&G business — consumption patterns, how goods are produced, gender policies and sustainability issues.
The region for which he is responsible is right at the heart of all those challenges.
“The region plays a big part in the overall P&G portfolio, with more than $5 billion of annual sales. But it is all about growth. It is a very young region, compared with the big global regions of North America and Europe, which have aging societies and it has a growing level of consumption. The potential is enormous,” he said.
On a quick review of the geographical area he runs, Samir said: “India and Pakistan are growing fast, very positive business outlook there. The Middle East is at a stage where the mindset needs to change. With the change in oil prices and the economic effects that it has had, the outlook is very different from what it was five years ago. We will all have to adjust to that. Africa is a slow burner but with great potential. It is one for the future,” he weighed.
“The key element that determines our business is the rate of growth of the economies in which we operate. Faster GDP (gross domestic product) growth equals higher sales. Also (factors like) the rate of urbanization and youth demographic are positive for the region,” he added.
For MENA, he echoed a point that was made many times at the Dead Sea gathering: That states in the region had to trade more with each other, taking advantage of the big indigenous markets and more efficient supply chains, especially states of the Gulf Cooperation Council (GCC).
“One essential thing I would say is that the region needs to focus more on intra-region trade, between MENA states. Less than 10 percent of the total trade in the region is between states, compared with nearly 60 percent in the EU, for example,” Samir said.
One of the key executive decisions he has to make is where to source and manufacture products. The policy is to base manufacturing plants close to the big markets that they will serve, so there are significant manufacturing facilities in India, Egypt and Saudi Arabia.
In the Kingdom, P&G has manufacturing plants in Jeddah and Dammam, from where products like shampoo and other personal hygiene goods are shipped all around the rest of the region. P&G is responsible for SR1.6 billion ($427 million) of exports a year from Saudi Arabia.
There is some small manufacturing in the UAE, where the regional offices are based and where Samir lives, but the Emirates is really a business hub and innovation center, he said.
And what are people in the region buying? “Our best-selling brand is Pampers and it’s a very important brand for us. There is a lot of potential in this region because many people still use old-fashioned disposable nappies. So we see plenty of upside in the market as people’s living standards rise and they move into cities. For example, we see more business in this sector in Nigeria than in the US and Europe combined,” the P&G top executive said.
Detergents and washing powders, part of the fabric and home care division, are the biggest-selling products worldwide. Personal care products are also big, both globally and in the region.
In fact, P&G brands read like an inventory of what is on every kitchen shelf and bathroom cabinet in the world — Ariel, Tide, Gillette, Always, Oral B, Braun, Tide, Mr. Clean.
The group’s corporate motto is: “The consumer is the boss,” but of course even a global giant like P&G must answer to a higher authority — the government of the country in which it operates, which sets the legal and business environment for its operations.
A lot of the talk at the Dead Sea was of the need for greater involvement by the private sector in the public commercial process, and Samir agrees.
“What is essential and what we need to discuss more both at the WEF and elsewhere is the role of government and business in this transformation. The public-private partnership is key,” he said.
The relationship with governments is obviously a key issue for Samir and other top-ranking P&G executives.
“The role of government in business is vital. The No. 1 requirement for a company like P&G is to have good regulation, allowing business to get on with the job and be done easily. The default position of government should be that citizens and consumers will behave in a good, positive way, without the need for too many laws and regulations. But, of course, I recognize it is not always like that, and that’s when the need for good regulation arises.
“And we as corporates should be involved with government when they seek our help, for example in helping frame good regulation. But at the end of the day, we represent business and we should focus on business. They are government and regulation is their responsibility.”
Samir believes that particularly in the education sector, there is a need for greater independence for the private sector.
“What is the harm of letting the private sector run schools? Why should governments be stipulating which books are to be studied? Education is a business in many parts of the world, and it is unfair to ask schools to be run like a charity,” he said.
In the GCC, the governments are about to expand their roles in business significantly next year, when value-added tax (VAT) is down to be simultaneously introduced across six states. How does P&G view that move?
“I don’t expect the introduction of VAT next year will have too much of an impact on our business. The rate, at 5 percent, is a reasonable amount. There could be some glitches short- term, but we’re ready for it in terms of our accounting systems and the procedures,” he said.
In the context of Saudi Arabia, he is very much aware of the big transformation underway in the Kingdom’s economic system with the plan to diversify away from oil dependency under the Vision 2030 plan.
P&G has played a big role in Saudi business and commercial life for 70 years, in partnership with the Abudawood trading family of Jeddah. It employs 1,000 people in the Kingdom, of whom 70 percent are Saudi nationals. It has a market share of above 50 percent in many categories, rising to as high as 80 percent in some, Samir said.
“In Saudi Arabia, we’re focused on the consumers and what effects them. But anything that makes doing our business easier, we would welcome. I think the changes underway in the Kingdom will be good for us. It will lead to more urbanization and more consumerism,” he said.


New emissions blow for VW as German court backs damages claims

Updated 26 May 2020

New emissions blow for VW as German court backs damages claims

  • Scandal has already cost firm more than €30 billion; ruling serves as template for about 60,000 cases

KARLSRUHE, Germany: Volkswagen must pay compensation to owners of vehicles with rigged diesel engines in Germany, a court ruled on Monday, dealing a fresh blow to the automaker almost 5 years after its emissions scandal erupted.

The ruling by Germany’s highest court for civil disputes, which will allow owners to return vehicles for a partial refund of the purchase price, serves as a template for about 60,000 lawsuits that are still pending with lower German courts.

Volkswagen admitted in September 2015 to cheating in emissions tests on diesel engines, a scandal which has already cost it more than €30 billion ($33 billion) in regulatory fines and vehicle refits, mostly in the US.

US authorities banned the affected cars after the cheat software was discovered, triggering claims for compensation.

But in Europe vehicles remained on the roads, leading Volkswagen to argue compensation claims there were without merit. European authorities instead forced the company to update its engine control software and fined it for fraud and administrative lapses.

Volkswagen said on Monday it would work urgently with motorists on an agreement that would see them hold on to the vehicles for a one-off compensation payment.

It did not give an estimate of how much the ruling by the German federal court, the Bundesgerichtshof (BGH), might cost it.

Volkswagen shares were 0.5 percent lower. The BGH’s presiding judge had signaled earlier this month he saw grounds for compensation.

Costs mount

“The verdict by the BGH draws a final line. It creates clarity on the BGH’s views on the underlying questions in the diesel proceedings for most of the 60,000 cases still pending,” Volkswagen said.

A lower court in the city of Koblenz had previously ruled the owner of a VW Sharan minivan had suffered pre-meditated damage, entitling him to reimbursement minus a discount for the mileage the motorist had already
benefited from.

The court at the time said he should be awarded €25,600 for the used-car purchase he made for €31,500 in 2014.

“We have in principle confirmed the verdict from the Koblenz upper regional court,” said BGH presiding federal judge Stephan Seiters.

Volkswagen had petitioned for the ruling to be quashed altogether by the higher court, while the plaintiff had appealed to have the deduction removed.

A Volkswagen spokesman said that outside Germany, more than 100,000 claims for damages were still pending, of which 90,000 cases were in Britain.

The carmaker also said it had paid out a total of €750 million to more than 200,000 separate claimants in Germany who had opted against individual claims and instead joined a class action lawsuit brought by a German consumer group.

The carmaker said last month it would set aside a total of 830 million for that deal.

In a separate court, Volkswagen agreed last week to pay €9 million to end proceedings against its chairman and chief executive, who were accused of withholding market-moving information before the emissions scandal came to light.