Building a Business Empire

By Ujeena Rana

Ever since he was given the reigns of JGI, the company has witnessed expansion and palpable transformation in marketing and management approaches. In these years, he has also grown the business exponentially. He is among the rare few who are content in the singular pursuit of business excellence and profitability.

He endorses discipline, honesty and ethics at the workplace, and is the poster boy of compliant citizen who pays all his taxes. However, the object of envy and the current center of attraction in his life is his latest acquisition, the Mercedes Maybach S560.

“It cost me almost seven crores. There are only three of these in South Asia–two in India and mine in Nepal,” states Raj B. Shah about his latest purchase. He is not shy dropping numbers. It may come across as a grandiose display of wealth for some, but for Shah it is just a nonchalant mention of the obvious. Again a rarity as business peers shy away from talking numbers. Besides, he is unapologetic about it.

He calls it a personal choice - to spend on oneself. “It is okay to treat yourself well if you are giving back to the community. I have a beautiful home,” he says, which is an understatement. He has a palace for a home. “I have all the cars I want. I buy anything I like. I spend a lot on my family. I am very generous with people. Someone is in need; I don’t even think twice. If I was not giving back to society, if I were stealing on taxes, no, it won’t be right. But I am already giving so much that it is only human nature to treat yourself well. I am not pretending to be Gandhi. I am not. I enjoy my life. I enjoy my success. I work hard for it. I didn’t steal the money. That’s why I am not afraid. There are 100 people richer than me in Nepal but they will think twice before revealing their wealth because they are not ethical. I have nothing to hide.”

One element that reiterates during the conversation with Shah and thereby reflects in this article is the mention of taxes. Since he pays his taxes dutifully, he has the latitude of dropping numbers.

I ask him about the total number of automobiles he owns. “We have a lot of cars.” He states while checking his list (from the excel file he readied for the interview) for confirmation. “It’s 29. But you can make it 30; I am getting another one. I will have a minivan pretty soon.” He has a total of 15 classics and 15 modern cars. He also owns six motorbikes in his personal collection.

There has always been a deep divide in opinion in the auto world about the classification of cars. Are all old cars put in the classic car category? Shah belongs to the school of thought which validates automobiles above 40 years as classics. If it is just 30 years, it is old. So, in that regard, 1982 Mercedes S280, 1991 Mercedes G Wagon and 1992 Nissan Patrol in his collection do not make the cut.

He owns a 1928 Ford Model a Standard Phaeton 35-A, which, if one does a quick math, comes to be 90 years old. “It is the oldest running car in Nepal. That and a 1932 Ford Standard Fordor B160 had to be carried to Nepal from Calcutta.” Shah gives a quick history lesson. He has cars from 20s to all the way now.

Those who own a vehicle can’t stress enough on the most important element- the maintenance. There is a full-time mechanic at Shah’s house who walks around with his tool box and fixes cars all day long. “The classics need maintenance so an in-house mechanic is necessary,” admits Shah.

Interestingly, Shah was not always into classics. “Things got serious after marriage. My brother-in-law, Garishma Shrestha, is crazy about classics. He is the one who convinced me.” The daughters aged six and two also already love the classics. According to Shah, his elder daughter has already picked her favourites. “They are mine - she has already stated her claim,” informs Shah.

Raj Shah got hooked to cars as a kid. Shah’s grandfather, father and mother have all been car lovers. “My mother is an American. Obviously Americans love cars. People used to stare and point at her when she was behind the wheels.” But he didn’t inherit any from his parents. “I collected all of them over the years. Most of these are from other people. I had to convince them to sell them to me.” He persuaded the owners with offers they could not refuse. He must be an ardent fan of Godfather series. “To most, I told them that any time they want to drive their old cars, they can. I have 1964 Volvo 122s Amazon. My deal with the earlier owner, Charles Gay, is anytime he comes to Nepal, he can take it.”

By his own admission, it is not a cheap hobby - collecting cars. “Not every car is in good shape. After I buy them, I fix them. I pay all the taxes. The most expensive part is the tax.” He does not even drive those cars every day. Most of the cars get to see the world beyond Shah’s sky only three or four times a year. But he has to pay the taxes anyways. “I am lucky that I can pay. It’s not cheap. It’s an expensive habit.” He spends not less than 30-40 lakhs on each car. However, he claims that it is not for money. He considers these cars as works of art. Some like sculptures, some like watches... he likes cars. “I love putting things together. It gives me great pleasure to spend two years and have a workable car. I don’t like to buy a classic car; I like to rescue them. People who appreciate cars, they understand the value.”

He throws a hint at the prospect that he might retire from his habit of amassing classics. “I got a little bit carried away because now I got 15 of them. I think I am done now.” However, he is only sober till the next drink. “Now I want to buy only the really beautiful cars. There are about a dozen that I want to rescue, but the families don’t want to sell them.”

To an outsider, Shah’s life is perfect. That may not be entirely untrue. He is able to give shape to his dreams - collecting automobiles, which to many may appear outlandish, and to other luxuries in life, courtesy of the family business—Jawalakhel Group of Industries (JGI).

Nonetheless, it has not always been a smooth sail for JGI. There have been too many speed bumps on the way. Like many industries in Nepal, JGI also suffered its fair share during the insurgency. He keeps a box full of euphemisms handy to denote the period and calls it the ‘difficult time’, ‘transitional stage’; but does not call a spade a spade. The entire country was crippled and industries experienced the harshest blow. It has always been the case during insurgency - be it anywhere in the world - the dissidents want to hurt the government and the best way to do so is to hurt the industries.

More than the business, people were concerned for their safety and security during the period. Fear was palpable in the streets and the boardrooms. Understandably, no one was expanding their businesses; some were shut down while others relocated. “We had nowhere to go. While other companies were running away or went into hiding, we said, ‘We have to deal with this.’”

Now the landscape has changed, for the country and for JGI. The company enjoys an uninterrupted domination in the liquor industry in Nepal.

“Right now is a great time where we have been promised stability. As a businessperson, the biggest hurdle in Nepal was lack of stability. For more than a decade, Nepal was stuck with nothing happening. However, it could have been worse.” According to Shah, the fact that Nepal could get its act together after the civil war is something to rejoice about. “Look at some countries in Africa, how messed up they still are.”

But things are not great for Nepal either. Asked about the increased taxes by the Oli government, he responds, “Our country needs the money. Who is going to pay for it? Someone has to pay. And that is only through tax. I don’t like it. I am a big sufferer of it myself. But I know that the country needs the money.” Liquor industries are on the higher income tax slab.

Despite it all, like many Nepalis, Shah too is confident that the first powerful and stable government in decades will steer the country forward. “Any government is better than no government,” he underlines. “When you have stability, many long term projects happen, basic infrastructure is built.” He also addresses the elephant in the room - the airport. He is a frequent traveler and the sorry state of the singular international airport in the country invariably makes every citizen talk about it vehemently and in that case, he is no different. With most, he is careful in his word selection, but apparently, in this case, he lets his guard off and shuns objective reasoning allowing the floodgates of anger, frustration and disappointment open. “We don’t even have an airport. A country is judged by its international airport and we have one of the worst in the world and its management is pathetic. This is a perfect example of where our country is. You just go to the international airport and see it. It is a reflection of our country. You know who taught me this? The owner of Ryanair. He said he judges a country by its airport and you know what in the airport, he judges it by? It’s bathroom. And our bathrooms are horrible.” He says in almost one breath animatedly, gesticulating with his hands.

Jawalakhel Group of Industries (JGI) was shaped by Vijay Shah, Raj Shah’s father. “He knows distillation inside out. He is, I could easily say, among the top ten distillation experts in South Asia.” Shah, however, is not a technical person like his father. He claims himself to be “more of a marketing and management person”. “Today, you can hire the best of people,” which, in fact, JGI does, “but they don’t come cheap,” he admits. “My technical people are the highest paid and they get more than my CEO. To have Norbert, a German brew master with 40 years of experience, as my technical chief to work in the brewery, costs the company roughly Rs 25 lakhs per month.”

JGI manages Himalayan Distillery, Asian Distillery, Raj Brewery, Vijay Distillery, Rolling River Distillers, Food & Beverages Technology Research Center and JGI Distribution. Except for Himalayan Distillery, which is a public company, all the others are privately owned. Although it’s a family business, JGI did not want seven different managements. With everything under a single company, the team could make more money and efforts too could be centralised. “It is the JGI management, a company, which manages these multiple units,” he shares.

The manufacturing facilities of JGI are in Birgunj, Chitwan and Bhairahawa. “For now,” he quickly adds. He wants one in every province. The reason for having multiple manufacturing facilities, Shah shares is to tackle labour problems and because “we wanted separate balance sheets”. Manufacturing companies can go on strikes which can last for two weeks to two months. “My company is growing so fast I cannot afford to be shut down for 2-3 weeks.” Last year, one of the company’s units was shut down for four months because of the labour problem. “The labour problem is so bad and they are protected by the government,” he laments. So the solution is to have lots of factories. Different factories in different places to minimise risks and work continues unhindered. “That is also why I did well when everyone else gave in. Even if one of my factories was shut down because of labour problems, work continued in the others. If I had only one factory, I would have been bankrupt by now. I would have been on the streets.” Many would argue that he has multiple manufacturing facilities because he can afford to. However, in his defense, he says, “I had no choice but to have multiple units.” Contrary to popular belief, “I was not rolling in money,” he shares. He had to sell his family land to build factories. “Believe me I am not lucky. I have been bankrupt ten times. I have some businesses which are doing really well, while some completely bombed.”

An industrial revolution occurs when industries are growing. “When you have recession, when you have a failed state, and the government just decides to increase everyone’s salary, but doesn’t allow industries to fire workers, how will the industries survive?” he questions. “If you are bankrupt, you can’t even shut down your company now. So these are very left-oriented philosophies which are not good for capitalism. And leftist strategies don’t work. Look at China, they are the biggest capitalist in the world. They are the least communist. For business, the Chinese system is better than democracy.” He thinks that the downfall of American dominance has begun with its protectionist approach.

In areas where others flaunt, he recoils and in areas where others recoil, he flaunts. When it comes to exports of his products, he embraces candor. “It’s only a nominal number of products. Nothing worth mentioning. It is not that I am making money by it.” The reason being, in most parts of the world, competition in any kind of industry is only among 4-5 giants which eventually saturates to 2-3. And the liquor industry is no exception. “In the global liquor industry, it is between Diageo and Pernod. In beer, there is one big company - Anheuser-Busch InBev.”

According to Shah, JGI is an undisputed leader in the liquor industry in Nepal. “The growth of my company is fantastic to the point that it is ridiculous. Our company is one of the most profitable companies in Nepal. Definitely one of the fastest growing companies in Nepal. And I am happy to say that my family is the largest taxpayer. The 3 or 4 companies that give more tax than me—Ncell, Surya Tobacco, Gorkha Brewery are owned by foreigners. As a Nepali family, I am proud to say I give the most amount of tax. Last year, it was Rs 1700 crores,” he states with just a hint of conceit. Liquor business makes money and there are only a few businesses—casinos, tobacco, breweries, telecom—that make more money than JGI.

“All liquors fight with Ruslan. Ruslan is the biggest brand,” Shah announces. According to Shah, this year, Golden Oak has become the largest brand of Nepal and also the fastest growing brand ever in Nepal, more than 50,000 cases a month with a growth of over 100% and a shortage of 70%. “It’s growing really fast because the taxes are so high that no one can afford the expensive products. Golden Oak falls in a lower tax structure. No one wants to pay Rs 1400 for Ruslan or Rs 2,000 for Old Durbar when you get Golden Oak at Rs 650. Blue Diamond has also done really well. We are the leaders in gin, whisky and vodka. Only rum, I missed out on. And beer is left. “For now,” he quickly adds and bursts into a loud guffaw. “‘For now’ is the right word,” he underlines.

The beer market is really big and very profitable. But it is risky too. That is why, Shah claims that it is going to take time but they are patient. “I have brought a real world class beer and made it in Nepal. It is equivalent of me building a Mercedes plant in Nepal. When people from the liquor industry come to see my factory, they are flabbergasted. ‘Will this work?’ is their worry because it is so nice. I know for fact that for me to do well, I must have a great product. A great product needs a great factory. Quality does not come cheap.”

Even though, amidst fanfare, JGI announced its partnership with Warsteiner, a premium German beer, Shah acknowledges that it was not an easy feat convincing multibillionaires who have fantastic profit to come to Nepal. The business deal was signed and sealed because “of an emotional connect between the two families. Additionally, they realised for Warsteiner to grow, they must come into the emerging markets. Nepal is considered to be the third fastest economy from the emerging markets. Nepal carries tremendous prospects for investment. It’s like Burma ten years ago. It’s like Vietnam twenty years ago.”

JGI employees almost 1500 staff. He just hired 200 marketing personnel. He claims that JGI is experiencing remarkable growth and, therefore, aggressive marketing is required to catapult it. “The bigger we get, the more we spend,” he stresses.

He is the sixth generation running the family business. Undoubtedly, his parents have a large role in laying the foundation for JGI so that Shah could make it larger. His father was in charge of the technical side while his mother handled the management aspects of the company. “My father worked on the quality department as he wanted to make our products perfect. And my mother was a hard worker. Extremely,” he emphasises. Maggie Shah would appear at 7am at the office. Every week, she would drive to Birgunj, have meetings and drive back home at night. “Once a week, every week for years. She would drive it herself and that too in a sari. I learnt the hands-on meticulous micro-management skills from my mom. I learnt more from my mother than my education.”

In his observation, his parents are two different individuals “Just like how good couples should be,” he states. “My father is a perfectionist. He is irritatingly perfectionist- with everything- especially with his cooking, drinking and eating. He wants the best. He believes that to do well you must have the best in the world. And customers always want the best. If we don’t, they will go someone else who is offering them the best. Quality is of utmost importance to my father. Another thing that I learnt from both my parents is ethics. You pay your taxes. We are in a business. We don’t want to run away from the country. We don’t have any plans to escape. We want to sleep well at night. For this, you need to pay your taxes.”

His parents passed the torch to Raj Shah in 2000 when he came back a graduate from University of Massachusetts. He returned to Nepal not just because of the fact that he was next-in-line but “I knew that I had family obligation. I had an elder brother who passed away. After that I knew I got to come back and help the family because there was nobody else.”

According to Shah, his family has always been well-off. “My grandfather, Ram Narayan Shah, was extremely rich. He had a house in India with 28 bathrooms. He had many houses. My father was born in Nepalgunj. He had a beautiful house there. We had beautiful homes everywhere. We always had money because we had been in liquor.” Like they say, every good story must have a conflict, for the Shahs, it was the external factors that got in their way - like the downhill ride the country took. “When the country started falling apart, we also had troubles. Most companies went bankrupt. We were one of them. My grandfather, father had gone through ups and downs in business. And I also had my share of ups and downs in business,” he reflects.

Of course, nothing remains permanent, not even the business module of a company. Earlier, JGI was more of a production based company. Now, Shah admits, it is marketing, finance and performance orientated. His management style is completely performance based.

If not anything, Shah towers the average in ambition. He does not want to be anything less than the best. “Why even race if you are not the first,” such is his disposition. “I have a quota, 5% of the lowest performers must leave the company. We are growing too fast and I can’t afford to have slackers. We are in a race. We are always in a race. You don’t get points for being last. If you want to be in first place, you only need the fastest runners.”

He further adds, “My mother used to run everything herself. She knew the family history of every employee. Because of the growth of our company, I have realised, I can’t do everything myself. I am growing too fast. My parents had 200-300 employees. I will have 2000 employees soon. I cannot physically do all that my parents used to. And now in Nepal, you do get good and intelligent people.”

According to him, he has done well by hiring good people and delegating authority to them. He states that he has done well by working with multinationals and learning from them. Also because of his continuous endless efforts in trying to improve in multiple areas - in product, management systems, technology and machinery. “Equally important is to hire help, to bring in the best of consultants from across the world. I once got a consultant who charged $3000 an hour. We had him for three days but the value we got translated in crores. You must invest in technology; you must invest in outsourced knowledge.”

The man at the forefront of public gaze, courtesy of JGI’s colossal size, is not peevish about lack of time. Possibly because his priorities are not muddled. “If you read the books by the greatest leaders, they tell you that the most successful person is a balanced person.” It dawned upon him that success is not measured by your bank balance, but how happy your wife is with you and how happy your kids are. The family recently came back from a three-week holiday. They stopped in Germany where they spent a week with the owners of Warsteiner Beer. “Our kids spent time together because we want our kids to be friends.” The next stop was in Greece. “My daughter loves Greece because she reads about Greek gods, Athena especially.” Shah makes it a point to take 100 days off from work every year. “Your family life has to be good. Obviously you need money, believe me, the world does not work without money, but you need a good family life, inner peace, spirituality, good health. People, many a time, underestimate mental health.” He channels the spiritual wealth in him.

Now that they have forayed into beer, what’s next? “I am going to pay my loans. Also, I am going to invest in real estate in new provinces. The best business in Nepal is to buy land in new provinces since they will be as expensive as Kathmandu in the next ten years. In fact, we already have. I bought the land for the brewery for three lakhs a kattha. It’s just been five years and it is already 12 lakhs a kattha. We would have probably made more money with land than business. If I had not built my brewery, and just bought land in that area, I would have probably made more money.” He says in jest. “There is no business other than real estate that doubles in six months and that is legal.” Business has always been about numbers.

Apparently, two things have equal weight in his life - his business and his love for automobiles. Ask him about his most prized possession from his long list of cars and he hesitates. It is tantamount to asking him to pick one from the list of companies managed by JGI. On persuasion, he gives in, “I love my old ones because of their historical value. But in beauty, it’s the red one, the 1960 Chrysler New Yorker. It’s the biggest engine in Nepal, 6800cc.” He has the oldest car in Nepal, the biggest car in Nepal and the most expensive car in Nepal!

Shah reserves only superlatives for his Maybach. “It’s the best car of Germany. Maybach is said to be the only comparable to Bentley and Rolls Royce. This new model is not just an expensive car that the rich people buy, it is one of the most advanced cars in the world. It is the closest thing to an unmanned car. It is one of the most comfortable cars in the world. It is one of the most prestigious.”

He states that he had to beg to get Maybach, and, in fact, get interviewed for it. It took him more than nine months to convince Mercedes to give him one. “One of the reasons why they didn’t want to give Maybach to Nepal is that there is no service center and there is no Maybach concierge. The beauty of Maybach is the Maybach concierge.”  Seemingly, Nepal is not ready for Maybach. “No mechanic can even touch it. I have to send it to Delhi to have it fixed. I can only fill fuel,” he states. “If someone hits my sidelight, it would probably cost me 15-20 lakhs to fix it,” he concludes.

Next, probably creating JGI as an international entity.