Interview – Khulan Dagvadorj

This interview with Khulan Dagvadorj, the founder of Mongolian organic skincare company Lhamour delves into the the Mongolian agricultural supply chain, the necessity for export then branches out into Mongolia’s startup economy.

 

Interview Transcript

Enkhzul Orgodol: Ms. Khulan Davaadorj, social entrepreneur, owner and founder of Mongolia’s first, internationally-recognized beauty brand, Lhamour.

And our talk will concentrate on potential of further developing Mongolian organic branch and leverage Mongolian renewable resources, to become stronger players in the organic production which is obviously in the clear rise.

So Ms. Khulan, welcome.

Khulan Davaadorj: Thank you.

Enkhzul Orgodol: I’ve heard Lhamour has started selling its products overseas. Could you tell us where it is and where else are you planning to enter?

Khulan Davaadorj: So, last year, we started selling in parts of Russia and parts of Northern China. And last year, we were featured on NHK world which was aired in 148 countries. So we got a lot of requests to export our products. And this year actually we are going to start expanding to other countries in Asia, officially. So starting to have our products in stores overseas.

Enkhzul Orgodol: Okay. I would like to dig a bit deeper on your strategy to go international or overseas, was that mostly by standard relatively small sized of Mongolian market or higher appreciation of organic product by certain markets outside Mongolia?

Khulan Davaadorj: Both. The main vision of Lhamour is to create a Mongolian brand that produces really high quality organic beauty products which are not only for beauty but for general health. So, actually, our products was used by men, women, children, and elderly, so all ages. The whole family can use it. The main vision is to create such Mongolian brand that one day will be recognized internationally. So, anybody who has problems with skin, who has eczema, who has any kind of other skin problems or who’s allergic to fragrances, who’s allergic to synthetic ingredients hopefully will eventually use our products. So that was the main vision. We, until now, we’re focusing on sales in Mongolia because I believe if you want to be a leading company in the international sphere, you have to be a leading company in Mongolia.

Enkhzul Orgodol: In your original country.

Khulan Davaadorj: In your original country, so, that was the main vision for the coming few years. But because of the Mongolian crisis that we are facing right now with the economy, because of the with the population …

Enkhzul Orgodol: Relatively small.

Khulan Davaadorj: Yeah, relatively small. We are kind of forced to work much harder and work faster to export. So, now, I think it’s very rare for a start-up to start exporting within one and half years of having their first products launched.

Enkhzul Orgodol: How’s the reaction being overseas have with your international customers reacted in the first hand when you said our product were originated from Mongolia?

Khulan Davaadorj: Well, we had indirect exports already in the first year because a lot of Mongolian people love to give our products as a present, because soaps can be used by anybody. Lip balms can be used by anybody. So, instead of giving, for example, expensive presents such as cashmere or vodka, it’s much easier to give soaps. Let’s say, we have a lot of interests from international, from everywhere basically, because we already had a lot of regular customers who used it and then wanted to have it again. So, as I mentioned, the main focus is on sensitive skin, on dry skin, on people with allergies because for example, with the soaps, we don’t put in any additives, no coloring, no fragrance. So it can be used by anybody who has allergies. So, that’s why the interest has been already very, very high. We took part in 2015 in Asia’s largest organic product exhibition in Hong Kong and were nominated as “Best New Natural Beauty Product”. So

Enkhzul Orgodol: Based on all the ingredients and the values you’re bringing?

Khulan Davaadorj: Yeah, based on the ingredients, based on everything. Based on the fact that it’s handmade, based on the fact we used ingredients such as buckthorn oil, rose hip oil, which are now very largely recognized internationally, rare expensive ingredients, very very recognized because of the vitamins it has –

Enkhzul Orgodol: And the benefits.

Khulan Davaadorj: And the benefits it has to the skin. And we used that and make –

Enkhzul Orgodol: So do you, right?

Khulan Davaadorj: Yeah. We make daily products with it. So, especially, let’s say rose hip or sea buckthorn, in the world is used for very expensive unique products and we make daily products with it. So, it was a very huge hits when people saw that in Hong Kong.

Enkhzul Orgodol: So you basically make what used to be luxurious available to anyone.

Khulan Davaadorj: Exactly.

Enkhzul Orgodol: That’s very great to learn. Your production is completely based in Mongolia, so I would be very much interested to hear your supply chain. Could you explain it briefly?

Khulan Davaadorj: So we use the most organic ingredients because for example we used yak’s milk. So, a lot of companies use dry milk for their cosmetics products, we use fresh milk. So, that’s really really unique around the world. We use goat’s milk, so, that already creates a lot of value in Mongolia because people in Mongolia don’t milk their goat. Because we don’t use it to drink. So, now, for example, the herder family did, we have contacted, they started supplying us with goat’s milk which generates income for them. Which generates interested from other herders who have goats which eventually lead to our whole supply chain. So, a lot of ingredients are the same. So, we use rose hips that we use the fruits, and we make oil ourselves. We use thyme, we use beeswax, organic honey, so even the honey did we use for our products, we don’t use mixed honey. We use the pure organic honey which is already in itself so valuable.

Enkhzul Orgodol: And all sourced from Mongolia?

Khulan Davaadorj: All sourced from Mongolia, from the countryside. So, no pesticides, no fertilizers, just organic how it is.

Enkhzul Orgodol: That makes your brand as valuable as it can be for any organic brand, I believe. So, do you have any recent event between business and prime minister, PM suggested that Mongolia would leverage its agriculture resources namely the land and the millions of livestock. More strategically, in doing so, he basically suggested that the local producers to become suppliers to foreign brands which are much more well recognized in international markets. As an entrepreneur, relying on renewable resources, like what you just mentioned about the goat’s milk or the herbs and wild flowers etc, I would like to hear your position on this. Should Mongolia aim to become supplier of larger international brands and expand its agricultural production in volume-wise or are we better off to try to produce organic products by ourselves, yet at a smaller scale?

Khulan Davaadorj: I think both at the same time. I think the first point that the PM made is valid because I believe that if we try to supply international, larger recognized brands, we will eventually learn the standards. And if we do that at a large scale, we will learn it fast enough so that we can create our own brands. But we shouldn’t forget making our own brands as well because that’s value creation. The world doesn’t know us as end-product producer. Now, they’re starting to understand, cashmere a little bit and maybe some of the food that we have. But nobody knows us for any end-product or brand.

Mongolia, right now, is the most logical place to have organic products.

Enkhzul Orgodol: Why is that?

Khulan Davaadorj: Because it’s just our lands, it’s so huge, it’s so virgin, basically. It’s so raw, so, for example, the goat’s milk, the reason why we use the goat’s milk is the goats east the most rich plants. Especially goats they eat it with the roots. So, whatever they eat is healthy. So, whatever they, the milk they produce is the most healthiest milk that we can get. So, I think using this whole nature that we have, and this raw nature that nobody has even gone to is gonna be a very good benefit for us.

Because nowadays, all the countries all over the world are just, overly overgrazed or overly populated.

Enkhzul Orgodol: Overly populated, urbanized.

Khulan Davaadorj: So, it’s very difficult to find really rare, raw, organic places nowadays.

Enkhzul Orgodol: Earlier, you mentioned about challenges that you have to tackle maybe daily. Could you name some of the challenges you have to overcome when you’re doing business in Mongolia and have, are you handling them?

Khulan Davaadorj: So, there are a lot of challenges on –

Enkhzul Orgodol: Please, please let us know. Yeah.

Khulan Davaadorj: On a daily basis, one of the things in Mongolia that is very difficult is no knowledge about start-ups. SO a lot other countries that I have researched really helped start-ups especially entrepreneurs. Because start-ups are the companies that try to provide a solution to a lot of problem in the most innovative way.

Enkhzul Orgodol: And socially responsible.

Khulan Davaadorj: And socially responsible. So, especially with us, we still do not make any profit because obviously, currently we only sell in Mongolia and bit by bit trying to export. But we try to be socially responsible from day 1. So, every certain amount of sales of our products goes to charity, especially now during the economic crisis, I think, we’re really one of the few companies that employ more and more people on a daily basis. Last year, around this time, I had 8 people. And now, we have 36 people.

Enkhzul Orgodol: Wow. Good for you.

Khulan Davaadorj: So, the thing is, we really try to overall create this socially responsible brands. Because I think in Mongolia, during, especially after the 90’s, it was all about making money because we are developing which is fine. But I think now, it’s also time to give back, especially to the society and to the environment. So, that has been a challenge in itself because people don’t really understand that.

Enkhzul Orgodol: So, basically, about educating not only the customers but the whole society about how to conduct business in a good, responsible way. Not only in financially.

Khulan Davaadorj: We are the first company to export soap, lip balm, body butter, body scrub. So, even Customs, we need to educate, even tax people we need to always tell them this is a different product. Even standards, we wrote a lot of standards in Mongolia. So, our company is really working n almost every sector and field of Mongolia. So, it’s been a challenge so far but –

Enkhzul Orgodol: But that’s a history that’s something you can look back and say that’s what we started in now, see, where it’s come.

Khulan Davaadorj: Like, especially with me, I work 24/7, I work every weekend, I worked 24/7 for the last 3 years which already has been very, very difficult but every time you see happy customer, even if it’s a child or just a woman who says my skin is very dry, I use your product now it’s very soft. It’s just reason enough to continue.

Enkhzul Orgodol: I can tell that your skin looks very healthy and bright. And it really makes me feel like you know, I should try your face products. It feels like there are substantial number of young people in Mongolia who are eager to do similar business or you know, especially in the start-up environment like yourself. But the most of them face financial challenges, how do you see the potential of investment coming in to start-up community in Mongolia and how can them to flourish, are there, do you do feel like there are enough opportunities or enough potential in Mongolia that foreign investors can tap on?

Khulan Davaadorj: I do believe so because in 2014 when I started, nobody talked about entrepreneurship or start-ups. But now, within the 3 years, I see so many amazing start-ups who have started by themselves everywhere, in almost all sectors have my own entrepreneurship group which has amazing people that are really trying to not to sit there and complain but trying to create change in this country. Especially with investors, I think, they should focus more in start-ups more in Mongolia now because start-ups nowadays are really the ones that are making the change in the country. And a lot of the start-ups have great potential.

Enkhzul Orgodol: Could you name some of them, maybe?

Khulan Davaadorj: Yeah, we have a lot of especially in the fashion industry, we have amazing designers now, Michelle Lamazonka, we have Ariunaa who’s really trying to create a global brand. We have Zol, all of them are really doing everything themselves. So, they were leading start-ups for other brands as well. We have now, Bee Life, which is like a honey brand. We have Rock which is like a coffee brand which is Mongolia’s first large-scale brewer, coffee brewery in Mongolia. We have IT start-ups, so we have a company called Alchemist which is creating games and selling abroad actually. So that’s really successful. We have the song delivery app which is a really good start in Mongolia et cetera.

So we have actually a lot of great start-ups, and I think investors should really focus on those start-ups because those are all created by young people who have visionary mind, who are educated, who are willing to do something, work day and night. So, I think, there’s many many more start-ups.

Enkhzul Orgodol: You lived in Germany and studied in the US, right? Compare to your peers in the countryside as mentioned, especially in the US where the start-up or entrepreneurship is has been rising tremendously, how do you see the potentials of entrepreneurship you just mentioned in Mongolia?

Khulan Davaadorj: Well, the States especially is a very nice environment for start-ups because they got a lot of aid etc. But I think, well, if you can make it in Mongolia, I think, you can make it everywhere. Especially if you are … Because, well Forbes international came up with a study that 9 out of all 10 start-ups that begin fail. So, only one …

Enkhzul Orgodol: Right, survived.

Khulan Davaadorj: Survives. So, especially, within the three years. If you survive three years, I think you’re fine.

Enkhzul Orgodol: You survived your three years.

Khulan Davaadorj: I think we’re managing to be fine. So I think, the start-ups that I just talk about are also one, two years so especially because all of them are creating innovation. They actually have a lot of potential. And they could even take that internationally, so I really believe that.

Enkhzul Orgodol: I’m curious to know if you’ve received any investment offers. Given your potentials and your success, so far.

Khulan Davaadorj: We did receive. We did receive investment offers.

Enkhzul Orgodol: International, foreign, or local?

Khulan Davaadorj: Local, from big groups, actually. But I didn’t want to accept it because I think the main reason why we’re successful is because we are able to keep our own vision and our own culture, our company culture, our own way of doing things. So, I really, as I mentioned before want to lay a good, strong foundation so that this will not change. So, a lot of the success we achieve was because of our belief and I think that it’s quite different from the existing big groups or other brands and especially the ones that are here for many, many years. So that’s why, currently, we were not really accepting any investment offers, but now we are working on a business plan to actually get investment because we want to expand. My goal is to build our own production plant that is really according to international standards. So, for that, obviously, we cannot continue the way we were doing now which is just step by step …

Enkhzul Orgodol: Self-reliant.

Khulan Davaadorj: Yes, self-reliant. With the income of one product, we try to create another product and it just goes like really slowly.

Enkhzul Orgodol: Yeah, and you mentioned to me that the cycle, the life cycle of one product is quite long that you had to spend about six months in developing new type of product, right?

Khulan Davaadorj: Yeah.

Enkhzul Orgodol: Ms. Khulan, thank you very much for talking to us. You survived your three years, and I think you’re about to graduate your first semester, maybe, right? All the best in your endeavors in becoming an internationally recognized well-received Mongolian brand. Thank you,

Khulan Davaadorj: Thank you so much.

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