In high spirits

Lebanon’s alcohol distributors talk growth and trends

Photo by: Greg Demarque/Executive

Behind that flute of prosecco or gin-based cocktail enjoyed at a bar after a long day—or even the single malt whisky or bottle of wine recommended by a premium specialty liquor boutique—there is an intricate distribution chain.

Executive sat down with Lebanon’s major spirit importers and brand owners to discuss the Lebanese drinks of choice for 2017, the drinks consumption trends, how they were consumed, and by whom.

Reasons to celebrate

Spirit distributors had several reasons to toast in 2017. Diageo marked its 20th anniversary with various promotional activities, which introduced Lebanese consumers to the company behind well-known brands like Johnnie Walker whisky and Dom Pérignon champagne. “We wanted to highlight Diageo’s contribution to the business in terms of elevating the standards of service, building markets, growing the trade, [and] providing leadership for the industry,” says Ziad Karam, MENA corporate relations director for Diageo. Lebanon, he added, is among the key sales markets for Diageo worldwide.

Having acquired and re-launched the Edrington Group portfolio in Lebanon early in 2017, Carlo Vincenti, the owner of G. Vincenti & Sons, says its brands—in particular The Famous Grouse blended Scotch whisky and Macallan single malt whisky—had record growth. “The Famous Grouse had an almost 50 percent increase in sales in 2017 when we took over, and is now the preferred brand in [bars and restaurants]. The Macallan also had a record year in 2017, with an almost 100 percent increase from 2016: For example, we sold a Macallan Lalique bottle,” says Vincenti, referring to a 65-year-old limited-edition bottle priced at $36,000.

In fact, all the spirit distributors who spoke with Executive say 2017 was an overall growth year compared to 2016. “It was a very good year for spirits, with an overall double-digit growth across most of our spirits portfolio,” says Jeanine Ghosn, managing director of Gabriel Bocti.

Etablissements Antoine Massoud (EAM) also reports a positive 2017 for both its spirits-distribution arm and its retail arm, The Malt Gallery, which completed its third year of operations early in 2018. “The growth rate for EAM spirits arm is 10 percent, while for The Malt Gallery it’s 40 percent. The Malt Gallery has become an important component of our business and constitutes almost 14 percent of our sales,” says Anthony Massoud, EAM’s owner and managing director, adding that while whisky is a major contributor of sales in The Malt Gallery, wine and craft beer are becoming important components as well (for more on craft beer see article).

Is it party time in Lebanon?

Sales flourished last year despite the usual obstacles, both in the on-trade (hospitality venues such as restaurants and bars) and off-trade (retail spaces such as supermarkets or specialty stores) sectors.

Summer 2017 saw the opening of several new rooftop bars and clubs, much to the delight of spirit distributors, who see them as an opportunity to showcase their brands. “The summer was very good for the industry—especially for on-trade, since a lot of new places opened, and they were all very active and fully booked on weekends. Such clubs have a 1,500 [person] capacity, so it’s very good for business. However, these clubs usually have exclusivity deals with spirit distributors, so while profitability shrinks, it’s still a showcase for our brands,” says Roy Diab, marketing manager for Fawaz Holdings. Diab explains that brands that are marketed successfully in the on-trade sector eventually become popular and more consumed off-trade, and, as such, the on-trade sector is an important marketing tool for distributors.

While summer 2017 may have been a good season for the on-trade sector, some spirit distributors believe that the political uncertainties of November 2017 (the resignation and susequent return of PM Saad Hariri) put a stopper in the drinks on-trade market and led to a slight downturn in December’s performance. “In the on-trade, we were depending on end-of-year sales, and those were not as good as expected because tourists didn’t come to Lebanon for New Year’s,” says Ziad Nacouzi, head of the spirits distribution division at Neo Comet KFF Food and Beverage.   

Gabriel Bocti’s Ghosn explains that the length of Lebanon’s tourism season—which used to be the whole month of December for end-of-year festivities, and July and August for the summer—is becoming shorter and shorter, which means the periods of high-frequency alcohol consumption are becoming narrower.

Vincenti also complains about the seasonality in on-trade due to low domestic consumption. “The HORECA performance is very much linked to the seasonality and festive timings, because it relies on expats and Arab tourists who are still not coming [to Lebanon] in big volumes, except for [during the] holidays,” he says, using an acronym for the food-service industry. “Domestic consumption spending is too small and doesn’t even cover 30 percent of the HORECA potential considering the number of venues in Lebanon and the number of people who go out.”

Price wars

Although distributors agree that December was a good month for the off-trade sector—largely driven by holiday gifting and increasingly lavish home celebrations—they say that the dwindling purchasing power among average consumers has become an issue. “Lebanese are still struggling with their purchasing power, the perfect example being when there were a lot of price cuts on alcohol in supermarkets in December,” says Samer Nassar, head of marketing at Diageo. “People are either moving to the more accessible categories as compared to the standard, or going to premium, but standard is still the biggest category.”

Indeed, starting in mid-November 2017, alcohol consumers were bombarded with text messages promoting major retailers’ promotions on all varieties of alcohol. Supermarket aisles were crowded with significant discounts on many alcohol brands and holiday promotions, such as free glasses with every bottle purchased. Major retailers were competing to provide the most attractive deals on alcohol, which would lure consumers into their spaces and get them buying.

For Diab, the problem with these price wars is that they negatively impact a premium brand’s perception. “The issue is that price reflects image, value, and position in the market, so when the price of a premium brand starts fluctuating downward in the market, questions may arise among consumers on the legitimacy and authenticity of the product from one end, as well as the image perception from the other end,” he says, explaining that since Fawaz Holdings has good relationships with these retailers, they usually reach an agreement to restrict the price cuts.

Ongoing trends

Trends in spirits consumption among Lebanese consumers did not change much in 2017. “A trend is not a fashion or a fad, and it lasts for a while—for almost 10 years. So today, we’re still in this trend of premierization, crafts, and cocktails,” explains Massoud.

Indeed, all the distributors Executive spoke to said they continued to see growth in their premium or high-end brands across all categories. Nacouzi says he saw an increase in sales of 10 percent and above in his company’s premium whiskies portfolio, mentioning that it recently released Dewar’s 25 into the market—priced at $225 a bottle—to positive feedback from consumers.

Likewise, despite an overall stagnation in the standard vodka category, the high end has been doing well. “Although consumption of regular vodka has slowed down, super-premium vodka continues to grow ,and Grey Goose saw a 20 percent increase,” says Nacouzi, explaining that since vodka is associated with partying, its growth is related to the new high-end bars and clubs that opened this summer.

Like Nacouzi, Diab says Absolut Vodka saw 8 percent growth compared with 2016—lead by an increase in off-trade consumption following two major holiday engagements for the brand in 2017—which, he says, is a significant increase given it already has a large volume base.

Of gins and single malts

The trend of gin consumption also continued through 2017. “Although it remains a small segment of the spirits industry, contributing less than 1 percent of its total value, it’s definitely the fastest growing,” says Diageo’s Nassar.

Speaking for Bocti, which distributes Hendrick’s gin, Ghosn says bottles of gin are now being offered on tables in nightclubs (for consumers to drink with their mixer of choice), while Fawaz Holdings’ Diab says gin consumption is still going strong both on- and off-trade.

“Beefeater, our core gin brand, is still doing strong in the on-trade and is growing in the off-trade because home consumption is increasing. People are growing more accustomed to creating their own cocktails at home or getting bar catering for their private events,” he explains, adding that super-premium gin is also growing solidly. Monkey 47, a super-premium gin made with 47 botanicals, is doing so well, Diab says, that Fawaz Holdings had to revise and increase the volume allocation for Lebanon twice in 2017.

Likewise, single malt whiskies are increasingly popular, and Nacouzi says his sales in that category have increased by 25 percent in 2017. Vincenti explains that the strength of the single malt whisky trend is in its value. “I would say the total single malt consumption in Lebanon increased by 30 to 40 percent [since the trend started in 2015], and it’s still driving the whisky category upwards in volume to some extent, but more importantly, in value. To give you a small example, in 2017, we sold five bottles of Bowmore 50 Year Old for $20,000 for each bottle [in our retail showcase store. The Cask and Barrel], which would have never been possible three years ago. This shows that there is a serious single malt fan base developing in Lebanon,” he says, adding his company has a waiting list on limited edition bottles.

Sparkling is better

Meanwhile, a new trend of prosecco consumption emerged in 2017. “Women primarily drive this category in both the on-trade and off-trade segments. Today, on the supermarket shelf you can find a large number of prosecco brands, while three years ago, you would only have seen a few brands,” says Diab.

The distributors Executive spoke to tried to explain prosecco’s rising allure. “Prosecco was growing slightly in 2016, but exploded in 2017.  It’s a global trend that we’re following. It’s also smooth to drink, and the price compared to champagne is also attractive. There is a difference between a bottle of champagne sold for between $40 and $60, and a bottle of prosecco, which you can find for $10 to $12. There’s a big three-digit growth in some cases in this category,” says Ghosn.

Massoud explains that while champagne has always been an occasional drink in Lebanon and mainly associated with celebrations, prosecco is today more accessible and regularly served in bars and clubs.

Livia Bergmeijer | Executive

Who’s drinking?

Distributors agree that these trends are driven by well-traveled Lebanese in their mid-20s and above, who are social media savvy. “The new generation and young drinkers have more curiosity and are more exposed to social media, and so you feel they want different drinks than the older generation used to consume. With them, it’s more about the experience and the journey. When we introduce niche new brands to the market, there is curiosity from the consumer where before we were met with resistance,” explains Ghosn.

To Nacouzi, this means less volume, but more value. “People are upgrading what they drink: Instead of going out every night they go out less, but consume higher-quality, and hence, more expensive alcohol. It’s also a sign of prestige to bring premium alcohol to a party or to a house party one is catering. Also, some on-trade outlets use the premium brands as their go-to pouring [brand] to distinguish themselves from the competition,” says Nacouzi.

Distributors also give credit to their own marketing efforts which, they say, support these trends and sustain them through a variety of events, including tastings for consumers, training for bar staff, and social media campaigns. “We’re very dedicated and aggressive in events, visibility in the trade, in promotions, and a lot of tastings across the whole market. All our competitors are also doing this, and we have common platforms like the Whiskey Live event or dedicated platforms like Malt Gallery. We’re all working on further exposing these brands to the consumers,” says Ghosn.

All in all, 2017 was another good year for Lebanon’s spirits importers and brand owners, and while concerns over the increased end price of imported alcohol, and the low purchasing power of the domestic market continue to worry those in the industry, it looks like 2018 will be another good year for spirits. 

 

Nabila Rahhal

Nabila is Executive's hospitality, tourism and retail editor. She also covers other topics she's interested in such as education and mental health. Prior to joining Executive, she worked as a teacher for eight years in Beirut. Nabila holds a Masters in Educational Psychology from the American University of Beirut.

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