In early July 2006, Liban Lait, Lebanon’s largest dairy farm, was witnessing an unprecedented growth spurt.
“At the beginning of July, the market was booming; we had a peak in sales that wasn’t normal. There was a 40% increase – we were expecting it to be stable at that level,” says the factory’s Sales and Marketing Manager Marc Waked.
“We were the only producers of long-life milk, fruit-flavored yogurt, desserts in cups. We had a wide range of full-fat, semi-skimmed and skimmed milk. We basically controlled the market,” recalls Waked, 39.
At that time, the factory was producing more than 80 products, ranging from fresh milk to cheeses, yogurts and desserts, and had plans for expansion and new product lines. It supplied the domestic Lebanese market and the South Lebanon-based United Interim Forces in Lebanon (UNIFIL), and exported throughout the region.
“It was a continuous expansion for us, we wanted to inject new products in the market periodically,” Waked says.
A strike at dawn
But on July 19, six pre-dawn precision-guided Israeli bombs destroyed the Bekaa-based dairy’s processing plant, causing damages upwards of $20 million and putting 300 employees out of work.
“The only reason I can think of [for the strikes] is that the Israelis knew the eventual outcome of the war; I am sure they knew. I mean, they planned it, and they knew that they would be asking for 15,000 troops to be stationed in the South,” Waked says.
Liban Lait had been the supplier of the UNIFIL troops since 2001, when they outbid a northern Israeli firm for the contract.
“Before the war, the contract was nothing, it was almost $300,000 a year, a small business. But now, with 15,000 troops stationed in the South, the contracts will be different and will amount around $2 to $3 million. The only reason I can think why the Israelis hit our plant is because they knew we were the only plant [in Lebanon] that could supply 15,000 UNIFIL troops with enough products on a daily basis,” Waked says.
“Now, if the UNIFIL wants to get fresh milk and fresh yogurt, they will have to get it from north Israel,” he observes.
Liban Lait has dropped all plans for expansion, and will transform the firm into a small unit for the time being, producing just yogurt, labneh, cheese and milk, and importing some other products— like long-life milk— from France.
“We are going to do a small production unit, basically to do labneh, laban, milk and cheese. At the first step, we are not going to rebuild the main plant. We are just doing a small unit to return to the market again,” explains Waked.
“We are going to try to be present in the market as much as we can, but it will not be like before, because we are not producing in full range. Everything will be downsized, from production to distribution to staff – the whole lot.”
Waked says the firm has no plans to return to full-capacity production unless the government pays them compensation; if it ultimately fails to do so, the decision has been taken to shut down Liban Lait altogether.
“We are hoping to get compensation and we sense that there is the will, but we are not going to rebuild if we don’t get compensations for the damage. We will close the plant, we will shut down the business and go home. It is $20 million, for a war that was started and ended with no purpose whatsoever; we were hit for no reason,” he says.
He says the firm is lobbying on different levels.
“We sent files to everyone, all ministries— agricultural, industry, finance, economy and the Central Bank, too,” he explains.
“We don’t have another choice. We will try as hard as we can to get compensations, otherwise we are not willing to inject a $20 million in capital again into a company that is only five years old and was hardly breaking even,” he says.
“We feed 2,000 cows every day, and we have nothing to sell now. If you have a downsized plant with 2,000 cows it will be operating at losses—we’re working to feed the cows, and you can’t tell the cow, “don’t eat today” or “go on a diet.” They haven’t heard of diets,” he jokes grimly.
He says that during the 34-day-long war, milk production went down from 25 liters a day on average per cow to 15-18 liters, because the cows were “sensitive to the bombardments and because they were not fed properly.”
If the plant closes, Waked says the cows will be sold, which would severely affect the agricultural sector providing cow feed. But most importantly, closure threatens to keep 300 employees out of work ahead of a cold Bekaa winter season.
“Our employees complained to the labor ministry, but what can the ministry do? It was force majeur. They did not have a case,” he says.
For this reason, Waked says the shareholders – who include his father Michel Waked, major investors like De Freij family, Mohamad Zeidan and Audi Investment, among others – are also lobbying with the private sector to get donations or subsidized loans.
Pressure on all levels
“I don’t want to say the government is not doing anything yet, because that would not be fair. I don’t know much about politics, I don’t know if [Prime Minister Fuad] Seniora or [Industry Minister Pierre] Gemayel will decide on the compensations, but we are trying on all levels,” he says.
Waked says he is optimistic.
“We know the people and we are exerting pressure; we have 300 employees on the street, a sector is waiting for us to restart. This is a factory that has a future in Lebanon. Just to say, “we are not going to compensate – manage yourselves”… does not seem possible and besides, I am sure they have money to compensate,” he says.
He explains that a possible solution might be reached through Central Bank, which could subsidize the firm’s old loan, “or wipe it out” and replace it with a new loan, instead of paying compensation.
“They may tell us, “let’s forget about the old loan,” and give us a new loan with a long-term plan until we can stand on our feet again and start making money,” Waked speculates.
Although Liban Lait will, for the time being, be reduced to a “mini-plant” slated for completion by November, Waked says he is still busy these days because “it is like somebody wiped out the whole place and we are rebuilding it.”
The business was established in 1994, but did not start production till June 2000.
“We had no experience, so it took us some time to do the feasibility study and build the plant,” explains Waked. “Now we are doing the same thing all over again, but on a smaller scale. We have the right experience, the infrastructure—but we still need the factory.”