Ten years ago, Murad Al-Katib had the kernel of an idea and launched a new business out of his basement in Regina, Saskatchewan. We asked Al-Katib for insights on how his business has sprouted to become Alliance Grain Traders, one of the largest lentil- and pea-splitting companies in the world.
Alliance Grain Traders, with some 460 employees, now controls about a third of global lentil exports and is forecasting close to $750 million in sales this year. Operating under the slogan, “From producer to the world,” Alliance cleans, splits, sorts and packages lentils, peas, beans and chickpeas in bulk and bagged formats to 105 countries worldwide. Here, Alliance president and CEO Murad Al-Katib looks back at how the company started and some of its key growth strategies and challenges.
Create a vision based on a real need
“The vision was to take specialty and pulse crops that were grown in Saskatchewan and process and directly export them to end-use buyers and consumers all over the world,” says Al-Katib of the company’s 2001 debut.
“There was a gap in the market,” explains Al-Katib, a son of Turkish immigrants who grew up in the town of Davidson, Saskatchewan. He noticed that Saskatchewan lacked a processing infrastructure for pulse crops and companies that could reach emerging markets. “I saw all of this product being exported in raw commodity form. My view was that we could process it competitively at the origin of supply.”
Identify partners, capital and distribution channels
As a start-up, the young entrepreneur needed capital and people who could help provide him with access to markets and processing expertise. Al-Katib partnered with a company he met while working for the provincial trade development agency STEP (Saskatchewan Trade Export Partnership): Arbel Group, Turkey’s largest exporter of pulses and a food supplier for more than half a century.
“It’s all about setting up the global distribution channels,” says Al-Katib. By 2003, he was visiting emerging markets – where pulses are important sources of protein – establishing partnerships and finding buyers. “We produced a very high- quality product and we were very competitive. We were also pretty well financed to start. As a result of that, business started to boom.”
When you look at five flavours of hummus in every grocery store in Canada, you see how mainstream our products have become.
– Murad Al-Katib
By 2004, Al-Katib’s company was awarded Exporter of the Year by Saskatchewan’s Chamber of Commerce. Within the first four years of operation, the company had almost $100 million in sales and went public on the Toronto Stock Exchange soon after.
Take advantage of insurance and risk management services
The desire to export came naturally to Al-Katib. He has an MBA in international trade and finance. As well, while working for STEP, he specialized in emerging markets, risk management and finance.
That experience made him familiar with EDC and he hasn’t hesitated to use its services. “EDC has been with us every step of the way,” says Al-Katib, noting he took out an insurance policy as soon as he began exporting and is now one of EDC’s largest policy-holders in Western Canada.
EDC provides Alliance with accounts receivable insurance and backs the company’s performance bonds. “They’ve been a very important part of our overall operations. They’ve helped to bring comfort to our financial institutions and to the people who invest in our company. Having our book of worldwide receivables insured gave us even more comfort in growing our business in very difficult emerging markets.”
Alliance now has 28 production facilities in the world’s top pulse-growing areas – 12 in Saskatchewan, Alberta and Manitoba, and another 16 in the U.S., Turkey, China and Australia. In 2009, Alliance bought Arbel Group. That move added Arbella Pasta – which is sold to 60 countries and has the world’s largest-capacity pasta production line – as well as rice, milled durum wheat and bulgur to its repertoire.
Al-Katib says Alliance has been successful from the start because it focused on building a risk management program that included currency hedging, obtaining credit insurance on receivables and building internal capacity for export documentation and letters of credit.
“Even in the financial crisis of 2008 we were able to come out with a relatively good position because we knew our customers, we had a risk management program in place and we were able to mitigate the risks.”
Alliance’s risk management strategies paid off when floods and rains this year and early frosts last year affected crop deliveries in North America.
Top 3 Tips for Venturing Abroad
- Find the right international partners.
- Ensure the company is properly financed.
- Develop strategies to mitigate business risks.
Those strategies were also effective last December when the company lost a few warehouses in Turkey to fire. The fire loss was minimized because Alliance had proper insurance and fire suppression systems that contained the blaze and allowed the company to rebuild the facilities faster. “It’s just like credit insurance. I always say to people I carry credit insurance not because I think I’m going to have a default, but just in case.”
Keep on learning
Al-Katib advises other business people to ask EDC, Canadian banks and government trade commissioners questions about doing business abroad in unfamiliar areas. “Be inquisitive. I still learn every day,” says Al-Katib, who spends half the year on business trips outside Canada.
With hummus sales humming, Al-Katib sees only bright skies ahead for Alliance. “When I started this company a decade ago, I never could have projected hummus [mashed chickpeas] consumption being the way it is today in North America and Western Europe.”
Al-Katib forecasts that Alliance’s product line will become an even bigger part of people’s diets. He envisions people eating bakery goods with lentils as a flour and breakfast cereals, dips and meatless dishes that will include beans, peas and lentils.
According to the Food and Agricultural Organization, consumption of lentils is growing six per cent annually, but Al-Katib thinks it is growing even faster. “We see lots of growth in the developed world of high-protein, high-fibre ingredients and more of a desire for vegetable protein.”
Consumption of Alliance products is even rising in countries that have recently seen political unrest, like Egypt and Libya. “A basic building block of civil societies is full tummies,” notes Al-Katib.
While current global economic volatility is an issue, Al-Katib says Alliance is minimizing risk by closely examining the liquidity of its partners abroad. “Our items are basic staple protein for consumption. The world needs to eat and our trade flow will continue.”