Chapter One: The Call from Malaysia
Upon graduating from the Stanford Business School, I went to work for Muller’s Meats, our family’s beef slaughterhouse and meat packing business in Southern Ontario.
From the fall of 1985, when I joined Muller’s Meats, to the beginning of 1994 was an extremely stressful time for us in the business. We produced boneless beef and sold it to the commissaries that made burgers for McDonald’s, Wendy’s, and Burger King. Although it was a high-volume business, we had no product differentiation and no cost advantage over competitors, and those two factors made it very difficult to make a living. Furthermore, nothing positive was on the horizon. There was no reasonable scenario under which we could purchase one of our branded customers, a common method of gaining product differentiation and thus increasing margins. There was also no reasonable way for us to cut costs to gain a cost advantage over competitors.
In January of 1994, I got a call out of the blue from a man who said he was from Malaysia, and that he had been sent to North America on behalf of his government to try to find a mid-sized slaughterhouse that would be interested in selling beef products to Malaysia. He wanted to know if I would be interested in meeting with him. I actually thought that it was one of those calls that one gets from Nigeria asking for one’s bank account information, so they can “deposit funds” into your account. However, I did some due diligence and found out that he really was from Malaysia and he really was a representative of the Malaysian government.
We met shortly thereafter, and he explained to me that up to that point, people in Malaysia ate mostly home-grown vegetables because that was all that they could afford. However, as the country was becoming more prosperous, there was a growing demand for meat. But since cattle are not raised in Malaysia, any beef products would have to be imported. As North America has a reputation for producing high-quality beef, he was sent here to look for a slaughterhouse to provide beef products to them. Having said that, he also explained that they did not want to actually buy the beef that we produced. All they wanted to buy was the lungs, the livers, and the kidneys. Why only those three items? Because, he told me, that was all they could afford at that point. Those three items are not eaten by people in North America; rather, they were being sold for pet food. Therefore, the price of those three items was very low.
He went on to tell me that they would agree to purchase every lung, every liver, and every kidney that we produced. He wanted us to box those items, freeze them, and then put them into containers for shipment via ocean to Malaysia.
He went on to explain that because eighty to ninety percent of the population of Malaysia was Muslim, any beef products that would be sent to Malaysia would have to be zabiha – slaughtered by a Muslim according to Islamic law. Being Jewish, I had a sense of the concept because of the kosher food laws which we follow. The representative explained that there were three main aspects to zabiha. First, Muslim slaughtermen would have to be hired. Second, the interior of the slaughterhouse would have to be reconfigured so that the slaughtermen would face Mecca. And third, this process involves slaughtering the cattle using a sharp, manual knife, cutting the neck veins and carotid artery in one fell swoop, as opposed to the mechanized method that we were utilizing at that time.
The Malaysians were willing to pay more for those three items than we were getting by selling them as pet food. I took the price per pound difference between what the Malaysians were willing to pay and compared that with the price per pound we were currently getting. Then I multiplied that difference by the weight of each of the three pieces. Then adding up those three numbers gave me the total extra money we would get per animal by selling these three items to the Malaysians. By multiplying that number by the number of cattle we were processing per day, I came up with the total extra revenue per day we would get by converting our slaughtering method to the Islamic slaughter. I then compared this number with the extra costs that we would incur by doing this conversion. There were two parts to this: one was the cost of hiring the Islamic slaughtermen who performed the zabiha, and the other was the cost of having the disassembly line move more slowly because the cattle had to be slaughtered by hand.
When comparing these two numbers, it turned out to be profitable for us to convert our entire slaughter to Islamic slaughter just to sell those three items to Malaysia. I proposed this to my family, and they agreed to proceed, and as of March 1994, all of our slaughter was converted to Islamic slaughter. We hired Osman Salih and Ahmed Omur, two Eritrean immigrants living in Kitchener, Ontario, to perform the zabiha. The rest of the staff remained the same, as it is only the slaughtermen who have to be religious Muslims, not any of the other staff members. The government of Malaysia appointed a local Islamic social service group, the Islamic Society of North America, Canada division, or ISNA Canada, to oversee and certify the Islamic slaughter at our plant.
In April of 1994, we began to ship containers of frozen halal lungs, livers, and kidneys to Malaysia. This added nicely to our gross margin. With regard to the other 98% of the animal, we continued to ship this product to the same customers as we had shipped it to previously. We did not mention to them that we had converted our slaughter to the Islamic slaughter, because it would have made no difference to them in any case. Furthermore, from a marketing point of view, we did not pay any attention to the fact that we had converted to the Islamic slaughter. We sent those three items to Malaysia and continued with the rest of our business as usual.
In June of 1994, I was contacted again, this time by a meat distributor in Indonesia. They had become aware of the fact that we were shipping halal meat products to Malaysia, and they said that they too wanted to buy halal meat products from us. When I asked what products they might be interested in, they responded “lungs, livers, and kidneys,” the same three products that we were already selling to Malaysia. So in late 1994, we began selling containers of these products to Indonesia as well.
At the beginning of 1995, we were contacted by Singapore Airlines. Since Singapore Airlines flies in and out of a lot of Muslim countries, they were in the planning stages of opening a halal flight kitchen. They were looking for a source of reasonably priced halal filet mignons for their first-class cabin service. We began to supply them with these. This was the first time that we actually sold halal muscle meat, as opposed to just offals.
In 1996, we were contacted by one of the major meat distributors in Egypt. They also had heard about our zabiha beef, and they were looking to distribute various beef products of ours throughout Egypt. I flew to Cairo to meet them.
I was only in Cairo for thirty-six hours, but if I had had a movie camera perched on my shoulder running continuously for those thirty-six hours, I think I would have won the Academy Award in the documentary category.
When I landed in Cairo, Ahmed, the distributor whom I was visiting, met me at the base of the stairs of the plane. Everyone else got off the plane and got into line to clear Egyptian immigration and customs. Ahmed asked me for my passport, took it, and ushered me to a different customs agent where there was no line whatsoever. He put a note of Egyptian currency – I do not know what denomination – inside the passport and handed it to the customs agent. The agent took the note, stamped my passport, and waved us through!
What was interesting at that point was that Ahmed did not give my passport back to me, and I was perplexed as to why. I found out in short course. On our way to the car, we took a detour into the duty-free shop. There he picked out four cartons of Marlboros and three bottles of Johnny Walker scotch. He took them to the cash register, handed the cashier my passport, and then paid for the goods in cash. Then on our way out the door, he handed me back my passport!
A driver was waiting for us with a Mercedes, and Ahmed and I got into the car for the drive to his facility. I soon learned that the driving methodology used in Cairo is truly unique. Each driver uses one hand to steer while the other hand is on the horn. Traffic is bumper to bumper all the way, so one is continually honking at the vehicle in front, but to no avail, as that vehicle has a vehicle in front of it as well. At one point, we were about twenty-four inches behind the vehicle in front of us, but there was a bicyclist to our front and side who was preventing our car from closing that twenty-four-inch gap. Our driver kept inching up and up, all the while honking continually at the bicyclist. The bicyclist, however, had nowhere to go as he was boxed in as well. As our driver inched up even further, inch by inch, and honking, he finally hit the bicyclist’s rear wheel and knocked him over!
At Ahmed’s warehouse, I was impressed by the operation. The place was clean and sanitary, up to North American standards. On his desk were many photos of his wife and children.
After we did a tour of the facility and discussed business, he offered to show me a bit of Cairo.
We first made a stop-off at the extraordinary Khan El Khalili Market, where Ahmed wanted to show me the meat being sold there. I was not expecting this, but there was no refrigeration. The meat – mostly beef liver – just sat there outdoors waiting for someone to order it, whereupon the butcher cut it to the customer’s specifications.
We then took a bit of a detour as he wanted to show me the Giza Pyramids. I was thrilled to see them and took some great bucket list photos. It is not Luxor, but a great bonus on this trip just the same.
They put me up for the night at the Ramses Hilton. At six p.m., Ahmed’s driver took me back to the hotel. I was exhausted and suffering from jet lag, and relieved to be able to turn in early.
What I did not expect is that at that point Ahmed asked me to freshen up, and that he would be back at eight p.m. to pick me up for dinner and entertainment. He then told me that he would be bringing a girl (not his wife!) and that he would be bringing one for me as well! It took quite a bit of effort for me to convince him that he should not bring a girl for me!
My room at the Ramses Hilton was on the seventeenth floor and had an incredible view of the Nile. When I got back to my room around one a.m., it was a bit warm and I opened the window. When I did, the cacophony of cars honking was deafening! At one a.m.!
We ended up doing a significant amount of business in Egypt over the next few years. By 1998 we were shipping halal beef to twenty-two countries around the world.
