If Lebanon used its natural resources to its advantage, oil could be one of its main crude exports — olive oil, that is.

With the ideal climate for olive growing and a large expatriate community that prefers bottles of oil from home, Lebanon has the potential to stake a claim alongside gourmet olive producing countries such as France, Greece and Italy.

“There have been many attempts at export but it is fair to say that for the most part, Lebanese olive oil is underappreciated abroad and has yet to attract global consumers,” says Sabina Mahfoud, author of “Green Gold — The Story of Lebanese Olive Oil.”

“If it’s well packed, pressed and bottled, Lebanese olive oil is some of the best in the world,” insists Tony Maroun, general manager of Atyab (parent company to Boulos, Al-Baraka, Family and Virgo olive oils), which has half of the market share of branded olive oil in Lebanon. Even with his company’s success, Maroun still thinks the entire industry could do better. He suggests, “Lebanon should have a national campaign. The government should have advertisements [and] international exhibitions for Lebanese olive oil.”

Poor practice, poor production

Until now, the country’s olive oil industry, estimated at $72 million per year, has been characterized by inconsistent harvest seasons, outdated technology and production methods, poor marketing and a lack of standard quality control. In addition, rural migration to Beirut has left countless olive groves abandoned.

Lebanon produces between 5,000 and 15,000 tons of olive oil annually, with last year’s harvest, running from October to November, being at the smaller end of this spectrum. The large discrepancy year-to-year is due to a belief long-held by many farmers that olive trees don’t need to be pruned, irrigated or fertilized. They are traditionally considered naturally sustaining trees that need no care. Currently, more than 90 percent of olive groves in Lebanon are rain-fed. However, many experts contend that the best way to ensure consistent crops, and therefore reliable exports, is regular irrigation and pruning.

“The more you take care of the olive tree, the more it will take care of you,” says olive producer Youssef Fares, a fifth-generation olive grower from Koura, Lebanon’s top olive-producing area.

When the harvest is low, it is not uncommon for Lebanese producers to import oil from neighboring countries and label the bottle as “Lebanese” when selling it to foreign markets. Although the practice is relatively common, some producers worry this could affect the reputation of Lebanese olive oil.

“If it’s not a good season, Lebanese producers buy from Syria and Spain. That’s business,” says Bshara Shaker, an olive oil producer in the town of Aqtanit in the Bekaa Valley.

Shaker blames Lebanese olive farmers for the country’s inconsistent olive oil seasons, and thus the reliance on foreign olive oil. “Some farmers don’t work the right way to make their olive season big,” Shaker says. “If you go to Spain, Syria or Greece, you see the difference. You need to start at the grove, and prune and irrigate.”

All producers interviewed for this article denied using foreign olive oil.

Regardless of all the challenges the industry faces, Lebanese producers and consumers both consistently claim that Lebanon has the best quality olives in the world. In a country where foreign products are generally preferred over domestic ones, olive oil is the exception. Many people claim that olive oil from their village is the best and shun buying commercial brands from supermarkets.

There are approximately 100,000 olive farmers in Lebanon; a large proportion produces olive oil only for domestic (and often just family) consumption. Lebanese can form strong attachments to their native oil; most of the customers of Lebanese olive oil abroad are from the diaspora.

Olive producer Hussein Hoteit from Nabatieyeh says olive oil from South Lebanon is some 20 percent more expensive than from other parts of the country because the area’s large community abroad creates a higher demand for oil native to the South. But even Hoteit, a longtime producer from the South, doesn’t believe there is a difference between olive oil from different parts of Lebanon.

He says it’s the method of production that determines the quality. At the olive oil mills in the Nabatieyeh area, he points out what the producers are doing correctly and incorrectly: olives should be picked from the tree, not the ground; be delivered in boxes, not bags; be processed within 24 hours of arriving at the plant and stored in stainless steel and kept cool.

Hoteit says as much as Lebanese take pride in their olive oil, there remains  a “lack of olive oil culture in Lebanon.” That is to say, many Lebanese may actually prefer lower-quality oil because they are used to the mild taste, as opposed to the strong, peppery extra virgin flavor. With this in mind, Hoteit is educating Lebanese about the difference between high and low-quality olive oil, — starting with restaurants.

“If we can convince restaurants to use the best quality olive oil, then tourists from the Gulf will notice, and they’ll buy Lebanese oil,” he says.

Currently, Gulf tourists account for the vast majority of visitors to Lebanon, but the region imports just a small amount of olive oil, most of which comes from Spain and Italy.

“The donor countries don’t help. They let Israel bomb us, and then give us free olive presses”

Unhelpful aid

Over the past several years, aid groups have worked closely with olive farmers and producers in Lebanon’s rural areas. The René Moawad Foundation, a local charity, has been supporting Lebanese olive farmers by providing up-to-date training and equipment. The foundation has promoted Lebanese olive oil at food fairs abroad, helping give the product some long-sought international recognition.

The project started in 2003, with funding from the United States Agency for International Development (USAID) and the Spanish government, which donated $2.5 million and $860 thousand, respectively.

But not everyone appreciates the effort. Randa Aractingi, who grows her olives in Hasbaya, near the United Nations’ Blue Line, says that supplying free equipment to olive oil producers creates unfair competition for entrepreneurs like her.

“Everyone around me has olive presses from USAID,” she says. “This equipment is going to people who haven’t invested time and money. It’s hard for me to compete when my neighbors are receiving this equipment for free.”

“The donor countries don’t help,” she adds. “They let Israel bomb us, and then give us free olive presses.”

Fuad Hashwa, dean of the School of Arts and Sciences at the Lebanese American University in Byblos, who has been working to manage olive oil waste water, agrees that aid projects for rural development are often counterproductive.

“They fail to sustain themselves, and then we’re back to square one,” he says. Instead, he suggests that creating community cooperatives would help sustain the local environment as well as the economy.

Cleaning the toxic olive waste water would allow farmers to have more fertile soil to grow more trees, and some of the treated waste could be sold for animal feed. Italy holds the international standard to which all olive producing countries aspire; this is where most of Lebanon’s top producers studied their trade and bought their equipment.

Although a small country such as Lebanon is unlikely to ever match the production scale of countries such as Italy, many producers see the potential in achieving a similar reputation for high quality olive oil. Aractingi adds jokingly that she sees a day when sophisticated people will say, “If you want to make tabouleh, use Hasbaya olive oil; for fatoush, use oil from Koura.”

Imagine you are the chief executive officer of a major multinational company. Your core business is selling fast-moving consumer goods with a solid majority presence in all of the world’s major markets, but opportunities for further expansion are all but exhausted.

All that remains to conquer is divided into relatively small markets, which would demand extensive investment to break into, since you have no domestic presence there and will have to start from scratch. How do you solve this problem? Simple: you study the market you are targeting, identify the main players in your sector and acquire them. Objective achieved — with the added advantage of providing you with an existing market share, a proven distribution network and local production facilities to introduce your own brands to the market.

Heineken’s takeover

This was the exact tactic employed by Heineken International, a Dutch company and one of three main players on the global beer market. After successfully applying the procedure in small European beer markets such as Greece and Cyprus, the company decided to move onto the even smaller markets in the Middle East. In 2002, Heineken acquired Al-Ahram Beverages Company (ABC) in Egypt which, conveniently having bought out its only competitor El-Gouna in 2001, controlled 100 percent of Egyptian beer production. In Jordan, the country’s only brewery is now exclusively producing Amstel.

In September of 2002, Heineken moved on to Lebanon. Already owning a 10 percent stake in Brasserie Almaza after taking over the Dutch Amstel brand, Heineken acquired another 69 percent stake in one of Lebanon’s national symbols from the quarreling al-Jabr family who founded the brewery. Not satisfied with controlling a majority share of the Lebanese market — and also Syria, which has two state-owned breweries of its own but remains Almaza’s main export market — Heineken also bought Almaza’s only competitor, Laziza, in October 2003.

Lebanon’s annual beer consumption roughly equals the total volume consumed in 10 days at the Munich Oktoberfest

Malt monopoly

Laziza was soon turned into a brand of non-alcoholic malt beverages, which are successfully exported to the Gulf Cooperation Council  market, leaving Almaza without any real competition in what is known as the “mainstream” segment of the beer market. Heineken’s own flagship brand was thereby well-placed to dominate the ‘premium’ or international segment, as it already does in other parts of the world.

Operating in this way virtually closes the market to other global players such as Carlsberg and Anheuser-Busch InBev who, unable to acquire any local producers, would be forced to either pay hefty transport and import costs, or invest heavily to set up local production from scratch.

Neither option would yield substantial returns, even over the long term, due to the negligible size of  the market: Lebanon’s annual per capita beer consumption stands at a mere five liters, as compared to an average 75 liters in Europe. To put this figure in perspective, Lebanon’s annual beer consumption roughly equals the total volume consumed in 10 days at the Munich Oktoberfest alone. The fact that a sizeable proportion of Lebanon’s population are observant Muslims of course affects this figure.

As Almaza’s Marketing Manager Naji Nakouzi explains to Executive: “There are Muslim communities here who are very religious and don’t drink, and others that are more liberal [and do drink], which is why Ramadan does have an effect on our sales.”

Haytham Nasr, a member of the Gemmayzeh Development Committee (GDC), the body of bar and restaurant owners, confirms that the fasting month almost halves the bars’ turnover.

Spirited competition

Nasr confirms that Lebanon simply does not have a beer culture like Europe or America. Beer is seen as a beach refreshment, consumed in summertime, preferably freezing cold.

“In the average bar I estimate that beer makes up 30 percent of sales, at most. Spirits, whether pure or in cocktails, are the preferred drink of the Lebanese. In many bars and clubs beer is actually priced artificially high to discourage its consumption, as spirits and cocktails offer a higher profit margin.”

Nakouzi likewise argues that Almaza’s main competitors aren’t other beer brands but spirits.

“The only way we can enhance our profit margin in Lebanon is by increasing the overall per capita beer consumption, which we try to achieve by encouraging a beer culture,” he says. “We schedule our annual marketing campaigns a little earlier every year, so that beer consumption is now starting to increase in spring, whereas previously consumption didn’t reach its seasonal level until June.”

Nakouzi argues that Almaza welcomes new competitors such as 961, since they contribute to creating a beer culture in the country.

Called 961 after Lebanon’s international dialing code, the country’s newest mainstream brewery was founded in 2006. Despite a growing market share and increasing presence in Beirut’s bars, the fledgling firm’s entire output doesn’t exceed 0.5 percent of the 190,000 hectoliters of Almaza and Laziza produced annually at the famous brewery in Jdeideh.

Competition from 961 makes it untrue to say that Heineken controls the entire beer market in Lebanon, let alone claim, as some disgruntled bar owners do, that it holds a monopoly. There is also real competition in the international market segment — notably from Diageo-owned Corona Extra.

Quality brand

A bigger worry, says Nakouzi, is that 40 percent of Lebanon’s beer market is taken up by the low-end segment of strong canned beers sold mainly in retail outlets and currently dominated by the Turkish Efes brand.

“Although Heineken is a player in that market through our Rex and Meister brands, we prefer to profile ourselves as a quality brand offering,” Nakouzi says.

A truly Lebanese taste

Mazen Hajjar, 961’s chief executive officer, is a true beer enthusiast and a tireless promoter of his creation, which he estimates now makes up to 30 percent of beer sales in bars that carry the brand.

“The important thing for me is to offer…more choice,” he affirms. “We are introducing strong dark beers, including Belgian-style trappists and white beers, the kind that you don’t drink ice-chilled on a beach, but in the cold winter months in a warm bar. It is our arrival on the market that prompted Almaza to introduce its darker Pure Malt variety.”

Hajjar says 961 is a quintessentially Lebanese product; the company persuaded Bekaa valley farmers to grow Lebanon’s first hops crop. By comparison, Fadi Hojeily, quality manager at Almaza’s highly automated computer-controlled brewery for the last 11 years, says that the company imports most of its ingredients from the Netherlands.

“Every ingredient we use has to be approved by Heineken, not only for quality purposes, but also because the ingredients affect the taste of our beer,” he says. “We import the hops, barley, yeast and maize we use.”

In fact, the only Lebanese ingredient in Almaza is the water, which is treated in the plant before being added to the brewing mixture.

The only Lebanese ingredient in Almaza is the water, which is treated at the brewery before being added to the mix

Obstacles for new products

Hajjar identifies the major obstacle facing the introduction of new beer brands as being the prevailing practices in Lebanon’s supermarkets, which are reluctant to add new products to their range.

“In other countries, supermarket chains actually employ scouts who go out and look for local and regional produce, for unique brands to give a supermarket some character that distinguishes it from its competitors,” he says. “The Lebanese retailers do the contrary: they allot disproportionate shelf space to the major established brands and make new brands pay to get their products displayed in a corner of the bottom shelf. We were lucky to have a distributor who really believed in us or we still would not have made it to the supermarkets.”

GDC’s Nasr, who in addition to running a bar, also works as a marketing manager in a food and beverages firm, confirms Hajjar’s story: “If you want to get a new product listed, you have to pay huge fees. Shelf space is expensive too, and a two week promotion campaign with an off-shelf display in the five major supermarket chains in Lebanon will easily set you back some $10,000. Taken together, these factors mean you need a serious promotion budget just to get your product placed in the supermarkets.”

None of this, however, has dampened the enthusiasm of 961’s Hajjar, who recently announced a major new financial injection for the young company, enabling it to buy a second brewhouse and add extra fermentation tanks to increase output.

“We cannot keep up with the demand,” says Hajjar. “Everything we produce is sold out as soon as it enters the market. We still have a long way to go before achieving our full potential.”