"Our goal from the very beginning was to produce high end vodka, a luxury brand that has superior ingredients and superior production,” says Adam Aboulhosn, General Manager and Chief Executive Officer of Middle East Beverage Company, a Lebanese startup enterprise that has produced J2 Vodka, the first Polish vodka using Lebanese mountain water.
Named after the DNA identifier connected with some of Lebanon’s ancient inhabitants, the first shipment of J2 has just entered the Lebanese market and Aboulhosn says they hope to sell 7,000 to 10,000 bottles in their first year of operation rising to 40,000 to 50,000 bottles within five years. Though that number may seem ambitious, it represents only 5 percent of the market for vodka in Lebanon, according to Aboulhosn.
Finding the right formula
J2’s journey began two years ago when Aboulhosn’s brother-in-law — who works in the wine industry in the United States — told Aboulhosn he had made some contacts in the spirits industry and was looking to create a local spirit in Lebanon. Aboulhosn, whose background is in finance, liked the idea of creating a Lebanese spirit and together they started the Middle East Beverage Company.
After assessing the potential alcohols — which included wine, whiskey and beer — the decision fell on vodka because of its relatively straightforward production process and the fact that it is the fastest growing spirit in terms of consumption in Lebanon and the rest of the world. In 2010 Lebanon imported more than 1 million liters of vodka. “This is a huge chunk and the potentials are enormous,” says Aboulhosn. “If we only manage to capture 2 percent of that market, we would still be doing well.”
A bottle of J2 will retail for somewhere between $40 to $50, less expensive than their competitors in the premium vodka market such as Grey Goose which sells at $60 or Belvedere at $90 but still a high-end price. Aboulhosn says they chose to produce a premium vodka for two reasons. “If you look at the Lebanese brands that do well, they are usually high end ones and the Lebanese have pride when it comes to brands like that,” he says, giving the examples of Lebanese fashion designers and wine producers. The other reason was that they would not have been able to compete with current low-end vodka producers when it came to the economies of scale required to make a profit.
Keen to keep the product fully Lebanese, the company first looked at producing J2 locally. However, they found that the capital investment for the factory alone would be a million dollars. That high initial investment factor, coupled with the political risks and instability in the country and the perception among focus groups that Lebanese vodka would be poorly made, pushed their decision to locate the factory elsewhere. “As a Lebanese I wanted to produce it here because I am proud of Lebanese ingenuity and production but at the end [of the day], I am not going to fight the market. I am going to change it, but not at the beginning, it is going to take time,” says Aboulhosn.
Poland was chosen as their production base because it is well known among Eastern European countries for producing the smoothest tasting vodka due to it having the right temperaments leading to the best grains for the best ethanol production, explains Aboulhosn. “The Lebanese water that is used is the mountain water that has just melted and the mineral content of that water produces great tasting vodka. But, basically, it was a [process of] trial and error finding the right formula of both,” he says, adding that the water is shipped to Poland in special perishable-goods containers.
Middle East Beverage Company has invested $500,000 into the first investment phase of J2 to create the product. That figure was raised mainly from Aboulhosn, who is a major shareholder, his brother-in-law as the second major shareholder and other small investors who are friends of the family. Aboulhosn believes they will need to invest another half a million into marketing and sales, an amount he hopes might be raised from the sales themselves or by opening the company up. The amount needed for the final investment phase, the expansion phase, will be determined by the performance of the first two phases, explains Aboulhosn.
With regards to J2 distribution in Lebanon, Aboulhosn has directly spoken to a few select bar owners who have agreed to sell the vodka and the duty free shops in the Rafic Hariri International Airport will also be selling it. Mass distribution, however, will not happen before December and will more likely be through a distributor. “As we have only one product, it doesn’t make sense for us to buy a truck and go around distributing…we simply don’t have enough products for that, so we are going to have logistics help from a local distributor,” says Aboulhosn, adding that marketing will be kept in house allowing more control over the product and its image.
Spirit of life
With 60 percent of their budget on marketing and brand recognition, Aboulhosn says they plan to grow responsibly in a sustainable manner using non-conventional methods such as social media and brand ambassadors. “We mainly want to make people aware of the brand as we believe it will attract them because it is different. It is part of the Lebanese market and attached to them,” says Aboulhosn. J2 is being branded as the Lebanese spirit captured in a bottle: “the spirit we are trying to project is that of life above all else, the idea that no matter what happens I am going to live my life to the fullest because I know that tomorrow it can all be over,” says Aboulhosn.
J2 plans to grow into the Middle East and North African markets and while Lebanese expats will obviously make up a large percentage of their clientele, Aboulhosn is also hoping to attract the emerging new generation of the Gulf middle class who enjoy socializing, going out and who may be attracted by the Lebanese spirit that J2 hopes to represent. Aboulhosn is already in negotiations in parts of the Gulf that allow alcohol sales and says they will soon be entering the market there.
Aboulhosn admits it is a challenge for entrepreneurs to operate a successful venture in Lebanon given the state of infrastructure and the bureaucratic red tape which draws out even the simplest procedures. Yet, he says patience is of the essence in Lebanon and is heartened by the enthusiastic Lebanese entrepreneurs returning to work in their country despite the obstacles. “Working here is very stressful but rewarding at the same time; it’s exciting and I hope that people are excited as well, not just about this vodka but about all Lebanese products,” he says.