Business, The Arab Spring And Jalila Mezni Of Société D’Articles Hygiéniques (SAH)

Tunisia

VENTURES AFRICA – In the months since the beginning of the Arab Spring in the Middle East and Northern Africa, much has changed on the political and economic landscapes of affected countries. Riots and revolutions that began December, 2010 in Tunisia make entrepreneurship in the North African country more important than ever in repairing the economy. Jalila Mezni, CEO and co-Founder of Société D’Articles Hygiéniques (SAH), which makes diapers, tissues and other products, is one entrepreneur that has weathered the storm of the Arab Spring and navigated her 17-year-old business through the worst of it.

The 47-year-old Jalila Mezni started SAH after going through her own personal revolution in 1995. She quit her comfortable job as Vice-President of a Tunisian bank to start the business with her future husband Mounir el Jaiez. She had been with the government-supported bank for five years but its bureaucratic pace and the difficulty of getting capital to those who could use it best frustrated her. She saw an opportunity in the hygienic products industry and on the suggestion of a colleague, Jalila found a government program that provided her with cheap land and tax breaks in a poor area outside Tunis. Société D’Articles Hygiéniques was born.

Jalila kept her job during the start-up phase of the company but when they secured a bank loan and production got underway, she quit her job, moved home with her parents to save money and began her climb to success. Her weekdays began at 4am with a trip to the factory and Jalila and her 24 employees worked tirelessly around the clock, attempting to break into the sanitary napkin market. Their biggest competitor was Swedish paper- and hygiene-products manufacturer, Svenska Cellulosa AB, known as SCA. Speaking about their first few months in business, Jalila says, “we were very miserable”; they did not make a dent in the market.

Luck eventually shined on SAH as their competitor introduced a redesigned sanitary napkin to replace the most popular one. Jalila heard customers complain that the new design was uncomfortable and after securing a new loan to boost production of SAH’s sanitary napkins, sales began to climb. SAH expanded its factory and staff and soon, Jalila’s Lilas brand of sanitary napkins began to dominate sales in Tunisia. Today, Lilas claims over 45% share of the market for feminine care products and diapers.

Private equity became the next natural step for SAH as the couple negotiated expansion. “My husband and I had put everything in the company. We wanted to diversify our risk,” Mezni told The Africa Report. “I was worried that I would have an investor who wouldn’t understand me.” She was wary of the reputation of private equity managers eager to make quick profits and leave. After discussions with several firms including Kimberly-Clark Corporation, SAH settled on an investment from Emerging Capital Partners in 2008. ECP, a private equity firm with investments totalling over $1.8 billion across Africa, brought a $47 million investment to SAH and in the process acquiring 49 percent of the company’s shares.

The funds from ECP proved to be a worthy investment. The money went into revamping the company’s computer systems, boosting production and sales. After the ECP investment, the company’s turnover increased by 57 percent, employee numbers expanded from 700 to 1,080 and the company launched a manufacturing plant in Algeria in 2010 with plans for another one in Libya. In a country where national unemployment is as high as 20 percent, the jobs that SAH has created makes Jalila and her husband, a former soccer star, recognised and respected figures. 2010 closed with great success for SAH and plans to list the company on the Tunis stock exchange in 2011.

The Tunisian revolution however resulted in a difficult start to 2011. For two weeks in January, the Tunisian factory was shut down and major supermarkets cancelled big orders. For fear of looting during the riots, many stores refused to stock large amounts of any product. SAH management imposed round-the-clock shifts for factory staff to protect its equipment and commodities against looting. Combined with mobs setting fire to company warehouses and the war in Libya, domestic sales went down 40 percent and export volume dropped dramatically. The planned 2011 opening of a manufacturing plant in Tripoli, Libya was postponed. However as David Cooke, a director at private-equity firm Actis, an investor in the region that takes political risk into account, said after the conflict, “people still need to buy diapers.”

Indeed, SAH eventually recorded even higher sales in March, 2011 than the previous year as the relative calm that followed the turmoil released consumer demand. Jalila Mezni continues to run the affairs of SAH as president, with her husband making sure the company’s products are on store shelves. Together with ECP, they still dream of being listed on the stock exchange. In spite of the wars and political unrest, SAH continues to grow and flourish, expanding its reach in its own personal spring.