INTERVIEW | Melo Hili: ‘People come first, strategy second’

He is McDonald’s business licensee in Malta and five other countries, but is also heavily involved in maritime transport, logistics, technology and real estate. Melo Hili speaks to Business Today about Hili Ventures’ current and future endeavours, in Malta and abroad

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Your group has invested in a wide spectrum of industries. Can you give us a brief rundown of your investments in Malta?

Hili Ventures’ biggest enterprise under its business portfolio is Premier Capital, the McDonald’s Developmental Licensee for six different countries – Malta, Romania, Greece, Latvia, Lithuania and Estonia. Across these countries we employ over 8,000 in our McDonald’s restaurants, of which we have just under 150, and growing by 12 restaurants a year. That represents the biggest part of our business in terms of turnover, people and profitability. This particular venture came to the Hili family in 1995, while I myself joined this area of the business in 2005.

Under our 1923 Investments arm, we run an Apple business, primarily in Poland, where we operate 26 Apple Premium Resellers under the iSpot brand. We also have a joint venture with another Maltese company in Hungary, where we operate four APRs under the iCentre brand.

1923 Investments also includes a technology division – Harvest – where we operate a traditional IT solutions company PTL (previously Philip Toledo), a payment gateway APCO Systems, and APCO Limited, which essentially provides a mix of firewall protection systems and maintains most of the ATMs on the islands.

Our logistics business, which also forms part of 1923 Investments, is based in Malta, but we also operate a freight forwarding business in Poland. We have a sizeable joint venture with CMA CGM, the second-largest container shipping company in the world.

Hili Properties’ main business revolves around acquiring commercial property for rental. We have 24 properties across Malta, the Baltic states and Romania. In Malta, primarily we own three office buildings and a restaurant/office-building. In Romania we own a very large hospital, but of course we are not involved in its operation. Moreover, in the Baltic states we own and rent out several shopping centres which generally contain a large supermarket and a number of various shops.

Both the holding companies of the McDonald’s and properties businesses and 1923 Investments have bond issues listed on the Malta Stock Exchange.

Our group also has an engineering arm, Motherwell Bridge Industries, which offers customised engineering services. We have operations in Malta and Morocco, primarily covering the areas of ports servicing and supplying heavy equipment. We also work with Konecranes, one of the largest crane manufacturers, in locations around the world. We’ve done work for Konecranes all around Europe, Indonesia, the United States, West and East Africa.

Which is the most lucrative investment for your group?

Profit depends somewhat on the size of the business. Our Romanian McDonald’s business is the most profitable in this regard, because we operate 70 restaurants and employ close to 5,000 people in Romania, accounting for over 50% of the approximately 9,500 people employed throughout Hili Ventures. We’re growing by seven restaurants a year in Romania.

You operate McDonald’s in Malta and in other countries under a franchise. How easy or difficult is it to run a franchise of a fast food industry leader?

It’s as easy or difficult as any other business. The fact you’re operating within a system doesn’t necessarily make it easier, but it makes it more structured. The way we run McDonald’s has taught us a lot – we operate systematically, and what we’ve done in Malta, we’ve replicated in other places. However, the customer must be the focus of the business – all else follows after.

Which is the busiest McDonald’s outlet in Malta and how many customers does it serve daily?

Our nine McDonald’s restaurants in Malta and Gozo serve 20,000 customers a day. The busiest are those with a drive-through – the one in Naxxar and the one just outside the airport.

Are franchises dealing a death blow to independent outlets?

I wouldn’t necessarily say that they are. What’s really gobbling up the high street in general is online shopping – that’s a fact – although maybe less so in Malta. Online shopping is more convenient for some, while others prefer to see a product in person.

How much of Maltese culinary tradition would you care to consider for Malta’s McDonald’s? McDonald’s in Italy, for instance, incorporates certain elements of Italian cuisine in some of the burgers they serve.

Yes, McDonald’s allows markets to localise their food products to a degree. As a matter of fact, a few years ago McDonald’s in Malta was offering the McFtira. And in Greece, for instance, we offer the Greek Mac. Wherever we think it’s interesting, we are open to such localised products.

How much do Mc Donald’s traditional main competitors - like Burger King - factor into your business decisions locally?

In terms of competition, I wouldn’t say there’s only Burger King, since there are several franchise businesses. We have a larger operation than Burger King.  While we respect competition wherever it comes from, I think we’re very much ahead of the game in terms of restaurant experience – be it our drive-throughs or table service, which is something relatively new to this industry.

It must be kept in mind that several eateries are competition to McDonald’s. When we analyse the market, we look at the informal eating out sector, which includes everything in this area – including kebab shops, pastizzerias, and so on – and we’re by far the largest in this sector. But at the end of the day, it’s important to be the best, not the biggest.

We’ve just witnesses the opening of another US franchise in Malta - Starbucks. Is this a challenge to you, or is it not your competition?

It will compete with our McCafé outlets, of which we have seven. The McCafé operation in Malta is one of the best-performing McCafé operations in Europe – we maintain a very high standard.

Which projects does Hili Ventures have in the pipeline, locally and abroad?

We do have a couple of projects coming up. As we announced recently, we’ve set up three other business units. The first is Cobalt Leasing, a leasing operation based in London, the business model of which is to lease containers to shipping companies.

The second is HV Marine, the mission of which is to take over our Malta and Morocco engineering business and to develop projects related to marinas and yacht repair. It’s still early days for this business, since we’ve started operating it only a couple of months ago.

We’ve also set up HV Hospitality, which has the mission of developing properties related to hospitality. We’re about to acquire a sizeable stretch of land on one of the Greek islands to develop villas and tourist-related activities. We’re also well on the way to acquiring the Comino project, which involves taking over the Comino Hotel and upgrading the existing tourist complex. The deal is not yet done, but it’s well in the making.

Was your decision to expand overseas due to the limitations of Malta’s small area, or was it purely based on financial return?

The fact that we started out as a shipping company meant we already had a lot of connections with companies overseas, and this gives you the mindset of endeavouring to do things outside of the country your operations first started in. Malta is small, but there’s a lot of business here.

In a number of cases, we tried to replicate what we started in Malta, outside. For example, we started the McDonald’s business on the island, and then expanded on it elsewhere. In fact, this is the case for all our businesses, except our Apple business, which has no presence in Malta.

An important point to make here is that we’ve got the right people and the right structures to expand overseas. We have teams in ten countries, and we’re all supporting each other, so we have the capabilities to operate internationally.

Our business does not have a big bureaucratic structure, but we pick the right people. People are everything. We have plenty of ideas and access to capital and funding. But if you don’t have the people, you can’t flourish. I always say that people come first, strategy comes second. I think we’re blessed that we have around us some of the best people we could ever have – good people running markets, good people running businesses.

Is Malta’s current economic and political climate conducive to investments by companies such as yours?

The investment we will make in Comino will be one of our biggest, and that’s the major opportunity we currently have locally. But this doesn’t mean there aren’t other opportunities for others doing business in Malta.  

You have expertise in a number of other countries. Do these countries make it easier than Malta for companies like yours to invest in?
I think the business climate changes over time. With the exception of Morocco, we operate in European Union countries. Our aim is to operate in business-friendly locations, and which offer a safe environment for the people we engage and for the business itself.

Obviously, for our consumer-based businesses, the bigger the population, the better. Romania has a population of over 19 million people, offering a lot of growth potential. Our growth comes from the bigger market. Next after Romania is Greece, which is a fantastic place. It’s had its economic issues, but our operations are robust, and we’ve turned around the business very positively, with our people having done brilliantly there. And I think we have opportunities in Greece in areas over and above our McDonald’s operations.

It’s essential to underline that we are very committed to investing in our business. We don’t just open a business and hope it grows – hope is not a strategy. We put our money where our mouth is and invest heavily in people, structure and resources, generally through a three-year plan.

Can you expand on this concept of having three-year plans?

At this time of the year we would have already started looking at our planning going to 2020 and beyond. Every year, between June and September, we put a plan together for the next three years. Now we’re looking at the 2020-2022 plan, for each business under Hili Ventures’ umbrella.

The key thing here is to not overcomplicate. We try to keep things as simple as we can, and we encourage people to come up with ideas. Moreover, we’re not in a rush to realise returns straight away. The end game is to grow the business, but certain business can’t grow exponentially in six months.

Which is the fastest growing business under your investments umbrella?

In terms of numbers, it’s the McDonald’s which grows fastest, as it grows in comparative sales year in year our, and expands in terms of stores.

But a lot of our other businesses grow satisfactorily. And if you take our new marine business, this has some very good growth potential. Once we set up marinas in places we’ve earmarked, the business will start from zero and grow.

This year Hili Ventures will post €500 million in turnover across the board. By next year, we’ll have surpassed 10,000 employees in the business. From 2019 to 2021, we have a €200 million investment programme, half of which will be invested in existing businesses, and the other half in the new ones which I mentioned.

Is there a decision which your business had made in its long history which you would not repeat today?

Yes. I think we had a couple of situations where we had opportunities to get involved in something and we didn’t. This is always at the back of my mind. Whether it would have been good or not, I don’t know. But there were cases when we could have ventured into something but shied away from it. This said, at the end of the day, someone must make the call, and you can’t just look back – you have to look ahead.

Could you give a one-word reaction to describe the following?
•  Franchising – (a) system
•  Burger King – competition
•  Joseph Muscat – Prime Minister
•  The EU – framework
•  Brexit – Boris

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