Amazon, Tesla Motors and Tupperware are amongst some big company names that didn’t turn a profit for years, and are proof that if you forget about profits you can grasp market share in no time at all.
This appears to be the business model followed by entrepreneur Abdulhameed Al-Saqqaf - he took a 70 percent of the Yemeni water filter market in under two years.
Eco Systems Manufacturing and Marketing makes ceramic water filters, a product commonly used in developing countries. Al-Saqqaf was not the first in the Yemeni market but it didn’t take him long to boot out the one competitor already present.
“I wanted to produce something portable and cheap but still good quality,” Al-Saqqaf told Wamda.
A desperate need
According to reports from BBC and others, the humanitarian situation in Yemen since the outset of the war in 2011 has been getting steadily worse. The UN reports that almost 16 million people, or 61 percent of the population, are in need of some form of humanitarian assistance following the destruction of infrastructure and restrictions on imports due to ongoing conflicts.
Water is a big part of this.
In 2011 Alsakaf was volunteering with local charity Hemmat Shabab, providing food to poor areas. Noticing the lack of water and hearing regularly from friends in NGOs that water was becoming scarce, the young man decided to do something.
At the time there was just one company in Yemen supplying NGOs with water filters, typically made from plastic or ceramic. A single filter can go through one to three litres per hour and kills 99.9 percent of the bacteria in bad water.
Starting with a capital of $35,000, Al-Saqqaf and cofounder Mohamad Tawfic entered the market at the end of 2012 by renting some land and building a workshop and kiln.
Lack of experience
Al-Saqqaf admits that while he looked good on paper, in reality he didn’t have a clue what he was doing.
After graduating from university in Malaysia in 2008 the founder came back to Yemen and worked in private sector project management until 2012, so he wasn’t exactly equipped with the engineering know-how necessary for the project.
“In the first three months we failed to produce the filters,” he said. “We couldn’t get the ceramic mix right, it was all different from the ‘how to’ books I had been reading.”
He said during those initial six months he thought of quitting, a lot.
Al-Saqqaf and his team eventually got a positive result. Starting at just 2,000 ceramic filters a month they are now producing 15,000 a month from one factory.
Eco-Systems saw their one competitor, SilverFilters, as excessively marking up their products. The result? Al-Saqqaf’s company now has a 70 percent market share in Yemen - he minimized their outsourcing, made less profit and focused on large scale orders.
“Sometimes we have orders we can’t cover,” he said. “I thought maybe we could work together but they [SilverFilters] kept refusing, and now I’m OK.”
The situation now
For Al-Saqqaf ‘OK’ is actually good: they count Unicef, Care International and Oxfam amongst their clients.
By the end of 2013 they had settled all their loans and doubled operations and workshop size. They have sold more than 75,000 of their 30 liter ceramic filters and are planning on expanding operations so that they can produce 25,000 filters each month, all by the end of August this year. Their six staff have expanded to 30.
And people need the work. “Some of the cities people are just leaving and going to camps or other cities,” Al-Saqqaf said. “Many companies have left the country for Jordan, Egypt or Malaysia, so unemployment goes up every day. It’s a tragedy.”
While they are still cheaper than their one competitor, the ongoing war is driving up production costs. In addition to having no government aid, electricity shortages and poor security, raw materials have become more expensive and now their filter costs $25, up from $21 before the conflict.
Scaling out of Yemen
Yemen itself is not a big market for any product, even for one that everyone needs.
So Al-Saqqaf is looking abroad, specifically Africa. “We are expanding our operations,” he said. In January they set up shop in Somalia and they’re now in the process of building a new factory there, with the intention of entering other African countries.
According to the World Health Organisation one in 10 people on the planet do not have access to clean water. Of the 783 million people around the world without water, 37 percent are in Sub-Saharan Africa - so it’s a natural move for Eco Systems. “We think we can be helpful there,” said Al-Saqqaf.
But even with other countries to focus on (sadly those in need of clean water is never a falling number) the global market for ceramic water filters is not exactly a big bucks industry. According to research the market, which includes air filters as well as oil and water filtration and biofiltration, is expected to reach $2.1 billion by 2020.
Partnering now with a local outfit in Somalia, Target Group Co.Ltd, they are hoping to start production 2,000 filters a month, by the end of May.