Bakers and business people are of a
similar breed. One likes to see his
bread rise, the other his profits.
Dora Mills is a company that likes to see
both. Its revenues from flour sales
increased by 11 % between l 995 and 1998,
from $4.48 million to $6.64 million, and
then dropped to $6 million last year.
“We’ve been growing steadily, not dramatically,”
says owner Arslan Sinno. He
should be grateful for that. A small player in
a sector that is dominated by big firms,
Dora Mills survives by being innovative and
versatile in a market that has seen more •
than one mill fall by the wayside.
The local milling industry is in a sorry
state, the victim of a misguided government
policy designed to help struggling farmers but
simultaneously harms an important industry.
For the last few years, the government,
through the wheat board, has forced local flour
rnills to buy a quarter of their wheat from the
local market, at about $300 per ton. That’s
more than double the price of imported
wheat, which sells for $140 per ton. This
increases the cost of producing a ton of local
flour by around $70. And, according to
millers, the local wheat is of such poor quality
that most of it can’t be used for little more
than animal feed.
“This is the only way to ensure that locally
produced wheat will be sold,” says
Nasser Saidi, minister of economy and
trade, in defense of the wheat import
restrictions. But Sinno and most millers
consider the policy to be pure folly. “The
government is penalizing local industries in
a very scandalous way,” he says. The more
wheat is subsidized, the less willing farmers
will be to switch to more profitable
crops, says Paul Mansour, owner of Crown
Flour Mills. Four years ago, local production
of wheat was 20,000 tons. This year farmers
are expected to produce 50,000 tons.
If the current policy continues, local production
could reach 100,000tons in two years
time. “The government has this ridiculous
policy of encouraging farmers in the Bekaa
to produce wheat, instead of producing
something else,” says Mansour. “This is the
worst policy anyone has ever made. The
government is ruining the milling industry.”
Adding insult to injury, there’s an additional
tax of LL 10,000 on every ton of wheat purchased
by millers to pay for the social security of bakery
employees as well as mill
workers. “I already pay
social security tax for my
65 employees. Why should
I have to pay for other people’s
employees as well?”
asks Mansour. Millers took
their case to the Shura
council, demanding that the
tax be overturned. They
won the case, but the
National Social Security • office has been slow to implement the ruling.
With such high production costs, millers
find it almost impossible to export. “We cannot
distribute to other countries,” says
Sinno. But foreign flour flows relatively
freely into Lebanon – more than $1.3 million’s
worth was imported by May of this
year. The country’s 13 flour mills already
have a production capacity three times
greater than local demand. Two mills were
recently forced to close down, while the
remaining ones are working at 30% to 50%
capacity. “We are not asking for protection,
subsidies or assistance from the government,” says Sinno.
“We just want our products to be treated like foreign products.”
Nonetheless Dora Mills, a medium-sized
enterprise operating in a market of large
established players, has been holding up relatively
well. Flour mills, such as Bakalian
and Crown, were in the market long before
Dora Mills began operations in 1960. “You
can’t compare Dora Flour Mills to us, we are
much bigger than them,” says Edmond
Costanian, financial director at Societe Industrielle du
Levant (SIDUL), better
known as Bakalian Flour
Mill. Bakalian’s revenues
were $33 million in 1999.
Mansour considers Dora
Mills to be “a hard working,
good mill, but they need to
improve their quality.”
Crown Flour Mills’
turnover is stable so far this
year at $39 million. But over the past few years it
has been increasing by 10% yearly.
“Competition is very tough, everyone tries
to find a niche market for his flour. I try to produce
a quality that will exclusively serve the
baker,” says Sinno. “We are always trying to
be a step ahead of our competition, following
trends in Europe and the US and applying
them locally.”
“They respect their customers and produce
stable flour,” says Assaad Abou Habib, general
manager of The Wooden Bakery, one of
the firm’s customers.
Not long ago, Dora Mills became the
first flour mill in the country to sell flour
in bulk, and signed
agreements with a number of bakeries.
Dora Mills would provide
the bakeries with
free flour silos in
exchange for the exclusive
right to sell them
bulk flour. Among
these clients are The
Wooden Bakery on
Zalka highway, Al
Oumarak in Khaldi,
Samarani Bakery in
Amshit and Shamsine
Bakery. “They are the only ones who have this system,” says
Abou Habib.
One factor in Dora Mills’ favor has been
the drop in wheat prices on the international
market this year. Bigger mills made
their purchases before the change in prices,
obliging some to sell their flour at a loss.
Dora Mills, by contrast, rarely purchases
large quantities of wheat at a time, so profits
remain stable.
Dora Mills is an ingenious operation.
Like bread in an oven, it is a business that
keeps on expanding even though the government
has stolen all the yeast.
