Why Hossain's starting out again

Hossain Rezaei has run the gauntlet with the British legal system, acts of God and political turmoil in his own country to build a successful business career in the UK.

Hossain Rezaei

Hossain Rezaei has run the gauntlet with the British legal system, acts of God and political turmoil in his own country to build a successful business career in the UK. He talks to Nigel Stirling about his salvation of Pride Valley Foods and what his future holds.

It is often said of successful entrepreneurs that they are driven, not by a desire to make money, but to prove something. Hossain Rezaei, at the age of 52, has done both.

The Iranian-born entrepreneur, best known for the painstaking resurrection of his County Durham flat bread company Pride Valley Foods, after fire gutted its Seaham factory, throwing 200 jobs into doubt in the mid 1990s, has had more obstacles thrown in his way than most.

A seven-year legal battle all the way to the House of Lords with Pride Valley's insurers and architects following the fire, burnt to the ground a week after an extension doubling the size of the Seaham factory was the most public of these.

But at the same time, Rezaei, who The Journal reveals today sold the company he founded in 1990 to North American conglomerate Gruma SA last October, endured clashes with two sets of management bought in by venture capitalist backers, while he built back up Pride Valley Foods to what is now Europe's biggest speciality bread maker essentially from scratch.

Relaxing at his plush home on the Burn Hall country estate, on the outskirts of Durham, Rezaei recounts with some pride the precociously early start to his business career as a 13-year-old schoolboy in Tehran.

"Since the age of five I was helping my father with his transport business. Father had an accident, in which he was partially paralysed, so I took a one-year sabbatical and ran the business. All the things that I had been telling Dad that he should do, when he wasn't around, I did myself," he recalls.

With pleas from the firm's 10 staff for the youngest of his father's three boys to stay on still ringing in his ears, Rezaei went back to school.

"From then on I hardly did any studies 100% because I always had to work and study," he says.

But he had has his appetite for running a business on his own account whetted.

It was, however, out of necessity and political events at home in Iran, rather than any immediate desire to make his mark as an entrepreneur, that was to lead to his first real breakthroughs running his own businesses, and this time in the UK.

At 21, having finished a diploma in electronics at a industrial high school in Tehran on the completion of his secondary education, Rezaei followed his eldest brother to the UK, to further his education, leaving the business his father had returned to several years before.

"I have always been an ambitious guy; I always wanted to do well. I also knew inherently that I could do better than what the circumstances would allow me to do over in Iran."

However, Rezaei, excited by the prospect of tasting life in a new country and culture, only planned to stay a few years, complete his studies and return home to Iran.

The fall of the Shah and the Ayatollah Khomeini's Islamic revolution in 1978 it ushered in was to prove a life turning event for Rezaei who had only been in the North-East for two years and was still studying at Newcastle Polytechnic.

"All communication between Iran and the West stopped, and my £50 a month allowance with it. I was suddenly a foreign student having to pay huge fees - £4,500 - without any income."

Jobs in pubs and restaurants in Newcastle, coupled with his studies, which he still applied himself to diligently, helping him to continue being placed near the top of his polytechnic classes, helped support him through the rest of his studies.

"I was sleeping something like three to four hours a day for years. Nothing in the middle could give. If I did not pass university, I would lose my visa. If I did not have the income I could not pay the fees."

But a post-graduate diploma at Durham University meant an increase in fees, and the requirement for more cash.

An understanding Lloyds bank manager - and a 150% mortgage - gave Rezaei his first real chance as an entrepreneur, buying Tyneside flats, converting them and renting them out to students in the mid 1980s.

"I remember my bank manager said to me `there are three criteria for lending: character, capability and capital.' I had no capital but plenty of character and capability. I got a project delivered on time, did well, and the next one came and then the next one.."

What did come next was takeaways (a frustration with the lack of quality pitta breads gave Rezaei the idea to set up Pride Valley Foods), and the Pot Black snooker hall in Gilesgate in Durham, both examples of Rezaei's ability to spot a trend and exploit it commercially.

"By 1989 and 1990 the Tescos and people like that had started to put pitta bread on their bottom shelves. It was starting to come into the retail industry as well as the takeaway industry."

Pride Valley Foods was set up in Gateshead in May 1990, initially to service the big retailers - Tesco, Marks & Spencer and Sainsbury's - with efficient distribution networks where the breads appeared in shops the same day as delivery to those retailers' depots.

Rezaei refined the production process to produce a pitta bread with a longer shelf life so that the "second tier" retailers could stock his bread.

It was after this innovation that Pride Valley went stratospheric; turnover increased from £87,000 in the first year to £690,000 in 1993 and jumping to £6.4m the following year, employing over 200 workers, making it the biggest employer in Seaham after the council. "We could not make the products fast enough. The factory was bursting at the seams, every minute of every production line, every day, and being fought for by every customer."

A 50,000 sq ft extension to the factory - double the capacity of the existing plant - was commissioned. But in 1995 disaster struck.

"After three years I thought I would have my first day off. On a Sunday morning - Sunday December 4 - I went and booked a surprise holiday."

At 10 minutes past six the following morning, Rezaei was awoken by knocks at the door from his staff informing him that the Seaham factory and new extension was on fire.

A missed call by the local fire brigade, which meant it was the last fire service to arrive at the scene, and inoperative fire hydrants at the factory, meaning water had to be pumped from a mile-and-a-half away, meant the factory was razed to the ground.

"I stood on a pile of pallets that afternoon, and told 200 very emotional families, that we have done exceptionally well in the last five years and said `we are very skilled joiners, whose tools have just been stolen.' All that we needed were some new tools."

Rather than wind up Pride Valley Foods, which had run up large debts building the new factory, Rezaei and his fellow directors - Roger McKechnie, founder of Derwent Valley Foods, maker of Phileas Fogg branded snacks, and North Yorkshire businessman Michael Hughes - decided to try to keep the company trading.

"Everybody was advising me to wind it up and start as Pride Valley Food Services or something. I had a lot of small suppliers relying on me; a lot of people I had gone to and said `This is my idea. I want to grow this. I want to be a big customer of yours. I want you to base your business around mine and I want you to give me this and that and the other terms so we can grow together'.

"I knew that if I wound Pride Valley Foods up, four or five other businesses would have been wound up with it and I just could not stomach that."

The company's smaller Gateshead plant would serve key customers, while Rezaei set about fitting out a new factory on an adjacent site, with the target of getting it up and running within three months.

However, the comeback plans received a severe setback at the end of January when Pride Valley's insurers refused to pay out on the £12m cover Rezaei believed the factory had been insured for. "From an outset they took a very aggressive line. They interrogated my staff, they put them through sheer bloody hell to try to prove their point.

"What had actually happened was that somebody had lit an oven 15 minutes too early, the flue had become red hot. There was no insulation between that and the PVC ceiling and it caught fire."

While one insurance company settled out of court, as did the local insurance broker who had failed to file the appropriate documents with the insurers despite taking cover out for the factory over the phone, another held out.

The case went as high as the House of Lords as part of a seven-and-a-half year battle through the courts for compensation, before Pride Valley pursued the architect - again as high as the House of Lords - on the grounds that the factory was not fit for its purpose. The architect, backed by an American insurance company Lexington, eventually settled out of court, but of the £20m being claimed by Pride Valley (£12m claim; £8m in legal costs and interest), the company recouped around 30%, Rezaei says.

He says typically a third of his time during the seven-and-a-half years was spent concentrating on Pride Valley's court cases. And not surprisingly he has little time for the "arcane" British legal system.

While Rezaei pursued Pride Valley's compensation claims with his lawyers he appointed two management teams to take over the day-to-day management of the company, which was at this point 22% owned by venture capitalists.

While the new factory was commissioned on time four months after the fire, the company had to wrestle back the competitive advantage and customers - many of whom had been signed up on three and four-year contracts by Pride Valley's rivals.

"I had to expand into European markets, and into new products. A crafty idea I had was to come up with something that the contracts did not cover. I came up with a pre-cut, scored bread which was educational for the user at home about where you cut it."

Just how instrumental Rezaei was in the company's rise from the ashes was illustrated by the decision of Barclays - which backed Pride Valley before and after the fire - to take out "key man" insurance on Rezaei to hedge its £5m loan to help rebuild the factory.

By the time Rezaei sold Pride Valley in October last year for £20m to Gruma SA - the world's biggest maker of tortilla and corn flour producers, with turnover of $2.8bn - the company had exceeded turnover achieved before the fire of £10m and employed some 300 staff - 100 more than before the blaze.

It had established itself as the biggest specialist bread maker in Europe. So with things turned around, why did Rezaei decide to sell?

"The next question was to ask can we get this business to the world stage. And you need to be unselfish and ask what is right for the business. What was right was to find an international buyer with a lot more clout, muscle and diversification, to get the concept across the world."

Rezaei, who admits his health has suffered since 1995, is now "fitter than I have been for decades" and with his 85% stake in the company cashed up, is looking for new challenges.

"I de-Hossained Pride Valley in the last six months, I needed to before I sold the business, rather than trying to after I had sold it.

"I am going to set up at least three or four businesses, possibly five or six. The two businesses I am looking at, at the moment, with the both of them I am going to run them the way I finished Pride Valley, rather than the way I started that business."

For the region, and the wider business world, it is to be hoped they won't be "de-Hossained" too much.

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CV

1976 - Diploma in Electrical and Electronic engineering from industrial college, Tehran, Iran;

1978 - Higher Education Foundation Course, Newcastle College;

1978-82 - Newcastle Polytechnic. Electrical and Electronic Engineering degree;

1982- 85 - Postgraduate Studies Durham University;

1983 - Started takeaways and snooker club in North-East;

1984-90 - Business interests in property, car sales, kitchens sales, takeaways, snooker club.

1990-2006 - Managing director of Pride Valley Foods, Seaham, County Durham;

1999 Awarded MBE by Queen for services to food industry.

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The questionnaire

What car do you drive?
Two powerful Mercedes

What's your favourite restaurant?
Little Italy, Seaburn, and Ali Baba, Newcastle

Who or what makes you laugh?
Sergeant Bilko, Del boy, Vicar of Dibley

What's your favourite book?
Su Do Ku Xpert.

What was the last album you bought?
Buddha Bar 8.

What's your ideal job, other than your current one?
Carpenter.

If you had a talking parrot, what's the first thing you'd teach it to say?
To sing meditation "Ohmm, Ohmm ..."

What's your greatest fear?
Losing loved ones.

What's the best piece of business advice you have ever received?
Take the helicopter seat

Worst business advice?
Do it yourself

How much was your first pay packet and what was it for?
Working as a £1 per hour barman in Gateshead, but getting £2 per hour for doing the job of three people.

How do you keep fit?
Playing volleyball, football, or going to the gym every day bar Sunday

What's your most irritating habit?
Noticing everything.

What's your biggest extravagance?
Super cars.

Which historical or fictional character do you most identify with/admire?
Lots of self-made individuals who do their bit for humanity.

How would you like to be remembered?
A fair person who did his bit well, despite everything.

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Business Editor
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