'From Economist to Entrepreneur'

Dr Mohammad Zubair Khan is a well-known figure in the country's economic policymaking circles. He is a PhD in Political Economy from the illustrious Johns Hopkins University in the United States, and served at the International Monetary Fund (1981-1992), which followed a brief stint at the World Bank.
He also served as the Federal Minister for Commerce in the caretaker government that oversaw the 1997 general elections. Since his return to Pakistan, he has been consulting for the World Bank, Asian Development Bank, UNDP, JBIC and other international organisations on a range of monetary, fiscal and social issues.
BR Research's recent sitdown with Dr Zubair in Islamabad was supposed to be about fiscal and monetary challenges. But the conversation swiftly turned to an interesting new product the economist is about to launch. Some select excerpts are published here:
INVESTING IN PAKISTAN "I am sold to the notion that unless we dig in our heels here, we will not contribute towards change in the country. We all owe something to Pakistan. I used to work at the IMF, but I didn't apply for US immigration and left my tenured job to come back to Pakistan in 1992 after 18 years. People with money have been leaving Pakistan for temporary residence or citizenship abroad. I don't want to be bracketed amongst such people. I want to invest in the future here. This is our home and nowhere else are we more welcome." This is how Dr Zubair explains reasons behind his living, and now doing business in Pakistan rather than settling abroad.
Convinced that there is a largely unmet demand for 'natural mineral water' in Pakistan, Dr Zubair started working on a project some five years ago to bringing to the market a water sourced in Pakistan rather than importing overseas brands. Bela Power Pvt Ltd, his company, is about to commercially launch this product in Islamabad. His daughter and son are assisting him on this modest project. This is a small family business, financed by Dr Zubair's personal savings and some of his real estate assets.
NATURAL MINERAL WATER Dr Zubair and his team found a natural water aquifer on his farms in Swabi which he says is being fed from water that flows from the mountain ranges and permeates deeper into the soil. "The aquifer that we are using is located in a pristine and quite area, right next to a nature reserve that I own. This is a natural resource which is accessible to me. This water is so deep down that it cannot be touched by bacteria. On its way from the mountain ranges, it has already-absorbed minerals the way nature provided. We are lucky that the water course is through good areas so that the water quality is already healthy. We take the water out of the aquifer and filter out suspended particles and treat it to remove bacteria if any, but we do not add any chemicals or anything. We give you the water essentially the way it is. Even the bottling is done on site which is about a 100 kilometers from Islamabad," he stated.
Dr Zubair is, however, quick to differentiate his product from the competition. "We are providing a superior, different product. We are bringing the gift of nature to consumers. When you call something 'natural mineral water', you cannot take anything out of the water composition or add something to it. Our product is similar to 'Evian'. However, what is being currently sold in the market is 'bottled water'. Companies are drawing water from the underground wherever they are located and selling it after removing most chemicals through Reverse osmosis and later addition of chemicals," he said.
He explained that since this is not an open aquifer, pollution or contamination from the top (through rain or irrigation) is not possible. "This aquifer is protected under a very thick layer of impermeable rock. The layer is 30 feet deep, so any contamination due to agrarian activity or urban development cannot reach it."
The business idea sounds easy to implement, but it is not! "It took us seven months to get to the aquifer, which involved huge costs. To access water of this quality, in the kind of terrain where we have done, is extremely difficult. Besides, the geological structure is also very weak down below. Only in our third attempt did we manage to reach the aquifer," he explained.
When enquired about the aquifer's sustainability as a natural resource, Dr Zubair told BR Research that he had geologists estimate the recharging rate of the aquifer. "It turned out that what we are pulling out is very small compared to the rate of replenishment down there. As I mentioned before, such aquifers are being fed by the entire run-off from Karakorum and Himalayan mountain ranges. The ice pack over here is said to be the largest in the world outside the polar region. That renewable ice pack slowly melts to feed these huge rivers of the Indian subcontinent. So, it is a sustainable resource."
The whole process is fully automated, from extraction to bottling, he said. "It's a turnkey, state-of-the-art project, and is being run with latest technology. The equipment has been sourced from abroad, and it is all stainless steel, food-grade equipment. The automated plant will be able to produce 600 bottles per hour, which may seem small compared to our competition, but it will be enough for our niche market."
IN GIANTS' COMPANY Dr Zubair is well aware that he is about to enter an industry of giants with established, trusted names. Yet he seems unruffled, for he is focused on creating a new market, "because we are selling a different product altogether. We need to generate awareness that natural water and bottled water are two different things. Once that awareness sets in, the demand will grow. We are bringing water that has minerals in exact chemical composition as nature intended - nothing added, nothing removed. However, bottled water sold in the market has mineral composition in wide ranges that often go to the limit of human tolerance levels. Their water is synthetic, ours is real, genuine water."
The name of the product is 'O1', and the company will start selling it from Islamabad. "Ours is premium water, not just any water, so it will be priced well above any bottled water available out there. We aim at producing 5,000 bottles a day. We will shortly conduct a soft opening of our water in Islamabad. We will start from here, and take it to Lahore in a month. We are prepared for a real demand onslaught. We are building our stocks first before we enter the market. We will later introduce small bottles, which will be specialised and won't be like other bottles that one can't hold in their hand," he explained.
The distribution strategy relies on in-house resources rather than external distributors who can cannibalize prospects of small businesses. "We are setting up a warehouse in each city, from where our own delivery vans will deliver water to customers. We have our own call centre for customers to order the product. We will be distributing the product ourselves, to homes and offices, which is why we are going with large bottles first. We will also give people initial taste of this water through our mobile vans parked in upscale neighbourhoods. Hopefully, the word of mouth will catch on. Our advertising firm is convinced that this product will help us defeat the big giants. After all, we have invested in the best, latest technology, and there is no other company in Pakistan right now that has a fully turnkey plant like we have," he said.
"We have a very attractive, refreshing packaging. The big bottles look very sporty and evoke the feeling of healthiness. We are introducing large bottle cabinets, which we are in the process to copyright. These cabinets will be given only to select stores initially. Our distribution strategy relies more on our delivery vans. These vehicles are branded and will serve as roving ambassadors for our product. We are developing our website that will educate people on natural water and promote the brand. We will distribute product brochures and flyers to upper income homes, corporate areas, health spas and organic food outlets. We have a call number, which is very catchy: 111-WATER-1. People can call our call centre and order O1 for their homes and offices," he dilated further on the distributions avenues.
Dr Zubair acknowledges that one thing that he doesn't have is deep pockets. "But there is a business approach to handling that constraint. Number one, we need sustaining power, which requires very low debt ratio in investment financing. We have that. Number two, we need to spend our money in marketing and sales efforts in a very targeted manner. We are going to do that," he stated confidently.
BEWARE BUDDING ENTREPRENEURS Based on his experience with this startup, Dr Zubair advises upcoming entrepreneurs to stay clear of the banks because banks are only interested in security and collaterals, and not the business ideas. "One thing that I discovered while doing this business is that banks do not help new entrepreneurs; neither do all these public entities like Smeda. Banks do not want to deal with small businesses, period. They are only interested to have relationships with big businesses and that also only in terms of working capital. When it comes to providing project finance, they back off, because they are already minting money on treasury bills. I was a first-time investor, venturing out in a new product area, so bank financing was not available. Not only was the interest rate prohibitive, but also the securitisation of the loan," he added.
Therefore, Dr Zubair recommends a bit of "asset management" which he practiced. "One should convert into equity those assets that aren't a source of any significant income. That is a better approach than to mortgage one's entire property and live in a constant fear of failure. This way, one only risks what one has converted into equity. I have learned from my experience that this approach works. Other entrepreneurs can give it a try. If you don't have assets, then you try to team up with other investors. In the US, some of the greatest inventions have been done as result of collaboration between venture capital firms and young bright guys. Over here, we don't have that kind of tradition. Therefore, one needs to have a mechanism to generate equity," he concluded.