Zafer Chaoui was appointed Chairman of the board of Château Ksara in 1991. During his tenure, the country’s oldest winery has gone from lame duck to Lebanon’s market leader both at home and abroad. Although wine is not Chaoui’s only business interest (he is a managing partner of the Chaoui Group of companies, which began life selling paper, board and pulp from Finland in the 30s and which is now a market leader in this field. The group’s other activities include the sales of raw materials to the pharmaceutical, food, feed and detergent industries. Zafer Chaoui is a board member of Banque Libano-Francaise and the honorary consul for Finland), he calls it, “the most beautiful part of my business life.” A businessman who normally prefers to let his results do the talking, he kindly spoke to EXECUTIVE.

E The company is embarking upon a significant expansion over the next four years. Can you outline the changes you envisage for the company and why you felt it was necessary now?

Since 1991, we have gone from a production level of 1 million bottles to a production level of 2 million bottles. This is the optimum we can do today with our current facilities. For the last three years we have sold out of our wines and have had to delay shipments. Our customers have not been happy about this. But before embarking upon any expansion program, we had to make sure that our grape partners, Mrs. Rizk, Mr. Itani and the Jesuits at Tanail, would agree to enlarge the vineyards. All this has been approved and in the coming years production will increase to 2.7 million bottles. I want to stress however, that we are not expanding to sell more but to improve quality and to sell it better locally and abroad.

E Will this gradual move to better quality see a change in pricing strategy and the streamlining of your range?

We have a good range. We will not streamline. On the contrary, we might move into niches like we did with the single varietals, the Chardonnay and Cabernet Sauvignon. We will certainly emphasize on noble grape varieties as much as we can.

E Will the increased production be used to plug gaps where demand currently exceeds demand, like with the Reserve du Couvent?

The reserve is our best seller and I don’t believe you can find a more competitive price to quality ratio anywhere in the world. The château range of wines is our flagship and I would like to see a greater concentration on premium wines. We are quality conscious but we are a company that likes to make money. We make higher margins on the premium wines.

E Lebanon is a very small producer in global terms yet its quality is not in doubt. What should be done among the producers to harness its potential?

The other [Lebanese wine] producers are our competition and healthy competition is key to success. They share our principals of professionalism and honesty and their aggressive ad policy has created greater awareness among the Lebanese population and increased local consumption from 2.5 million ten years ago to 5 million today. That said, consumption is still low by global standards and there is room for improvement. We exhibit together at international fairs because the biggest market for us is the world and as Lebanon’s production is small we can develop a niche market. Our wine sector is now used by the government as an example of a healthy local export, one that can be an ambassador for Lebanon.

E It could be argued that wine is Lebanon’s most high profile export. What are your personal feelings about the promotion of wine by the public sector?

The public sector anywhere in the world is always slower to react than the private sector. In Lebanon, it is probably slower. There is much goodwill when we speak to all the ministries individually but as our interests are spread between three ministries – those of Economy and Trade, Industry and Agriculture – this can sometimes make life difficult. But there is progress. We are working to create the National Wine Institute to make sure our wine meets the required standard and to help export our wine. Furthermore, since export levels have increased, I have noticed a bigger increase in interest from the public sector. You know it is always easy to blame the government but it has helped where it can, especially in facilitating soft loans for Lebanese industry.

E Château Ksara’s biggest export market is Syria. In light of the recent political tensions, how would you describe the commercial relationship between the two countries?

I don’t want to avoid this question. Syria is one of our main export countries. It is a huge country with untapped potential and we can see this just by looking at the many banks that have entered and are still entering the Syrian market. There is little or no wine production in Syria and we have always sold our wine there. Our sales are increasing year after year and have not been affected by any political tension.

E 2007 is the 150th anniversary of the company. How will Château Ksara be celebrating?

First of all, I want to say that I feel I am very lucky to be chairman at this time. We are making a documentary film and producing a book to commemorate the event. We are also hosting a three-day event for our foreign contacts, distributors, the press and private individuals who are close to Ksara. It will entail one full day at Ksara and other events in Lebanon. Then we will hold another event for our local customers, focusing on the tradition and modernity of Ksara.

E The company has come a long way since the early 90s. What would you say has been the main factor in the resurrection of the company’s fortunes?

The main factor has certainly been the investments that have been made in this company in a regular basis, year after year following a strategic plan that that has been fully respected.

E Can you tell us the level of investment?

Let us say that we have invested on average $500,000 every year since 1991.

E When the company decided to embark upon its expansion policy in the early 90s, the local sector was very different than it is today; Ksara was, in a way venturing into the unknown, especially in planting untested vines and buying new equipment in anticipation of greater production. What was your biggest fear during that period?

We were optimistic. You must remember that the war had just ended. We had been let down during the war by a lack of security and had lost out on many opportunities. When the war ended, we looked forward. We had great terroir, we had a strong brand and we had willingness of the board to make Château Ksara exceptional. So our fears were not professional fears. As long as the country was stable, we always knew we would succeed.

E So there were no doubts as to your strategy?

I was confident and everyday since that day my confidence increases.

E What would you say are the company’s strengths?

The name of Château Ksara, one that dates back to 1857, and one that is associated with tradition and quality. Again, I cannot overemphasize the backing of the board that is determined to invest and do the best for the company.

E Château Ksara is one Lebanon’s oldest, possibly the oldest, companies.

It is the second oldest according to the records at the chamber of industry.

E How important is this tradition in your corporate philosophy and how has the company been able to build in this tradition in terms of brand equity and market positioning?

If you want to succeed, you play on all the elements that help you achieve success. We have played on our history and we have exploited our assets, especially the fantastic [ancient Roman] caves. We have emphasized on tradition through our name and the lineage, nobility through our quality and modernity which reflects what we have done since 1991, when we transformed Ksara from an old company to one with the best equipment, best human resources, and aggressive local and international marketing.

E Has your age and your links to the Jesuit brothers ever been a negative factor in your brand positioning?

You have to transform liabilities into assets and the inherent equity in our name and heritage far outweighs any negative connotations. Today we are seen as an old company with a young spirit and this has been, especially borne out in our packaging, our labeling and in our innovative ad campaigns.

E Many of your senior managers have been with the company for many years? What is done to foster human resources development within the company and how has this been translated into performance?

Alot. Really I mean it. We have fantastic middle management with a high level of education. This is a huge asset. Furthermore, we delegate clearly specified business responsibilities as well as regularly send them, lower management, on courses, as often as three times a year, to improve their core performance and expose them to changes, developments and new techniques in the world. This is something I am very proud of. We also operate a bonus system. This makes the staff feel they are partners in the company that they have a stake. The managing director Charles Ghostine and I work hard to create the right atmosphere. People spend a lot of time at work, much more than we do at home and so the key to success is a good environment in all areas of the company. Whoever wants to work and is positive will stay with us for a long time and those who don’t want to work will leave us very quickly. I would like to add that, despite everything in 2005, we achieved better sales than 2004 and this is a huge indicator of our corporate determination.

E Your export manager started in accounting and studied wine making in France before taking up his present role. He is now a respected member of the wine community. This delegation of responsibility is rare in an Arab company, where decision making is still a very much centralized entity.

Yes, he had the chance to study Ksara in all its aspects. He discovered a love for wine and wine making during the war when our French enologist had to leave. He then went to study France and get his diploma. This is very important for an export manager. He knows the product inside out and speaks with authority and, as you say, he is a respected member in the world of wine. However, this is the exception. It is not how we do things. We can’t ask every one of our employees to go and study wine for three years. Ideally, when I look for a sales manger, I would want an aggressive businessman with a strong business degree.

E You have many business interests. You are a pharmaceutical industrialist, a paper manufacturer and a banker. What does Château Ksara mean to you?

Yes I am fortunate to have many biz interests as you say. However, Ksara is the most beautiful part of my business life. It has a touch that does not exist in other businesses and sentimentally speaking it has a special part in my heart

E Where would you like to see Château Ksara ten years from now?

As I mentioned earlier, I hope we will have reached our target for increased production. I don’t believe we can go further than [2.7 million bottles]. We will have reached a satisfactory limit whereby we will have improved quality and strengthened our position in the local and international market.

Château Ksara began life in 1857, when Jesuit brothers inherited and began farming a 25 hectare plot of land situated between Tanail and Zahleh. The brothers recognized the potential of Ksara’s terroir and convinced their superiors that it should be used to grow grapes for viniculture. They had no formal training in either viniculture or viticulture, but they were solidly educated in agriculture and the sciences and in those days that was enough. Applying what they knew, they produced Lebanon’s first “dry” red wine and in doing so, laid the foundations of Lebanon’s modern wine industry.

At the end of World War I, France was mandated to govern Lebanon and before long, its military and administrative machine moved in, bringing with it thousands of French soldiers and civil servants, for whom wine was an integral part of their diet. Ksara was in a position to supply Lebanon’s new landlords.

Pre-war years

By now, the winery had become a commercial concern. The monks had expanded their range of grapes and planted Carignan, Muscat and Ugni Blanc. The period was one of unprecedented growth for Lebanon’s little band of newly-established wine makers that included Château Musar, Vin Nakad and Domaine Des Tourelles.

By the time the French left, Lebanon had embraced the French experience with a passion that can still be felt today. Wine may still have lagged behind Arak, but its embodiment of all that that was France was enough to sustain demand. During the next 30 years, Ksara maintained its position as Lebanon’s most popular wine and as Lebanon grew into a cosmopolitan and convivial hub, where western tastes were adopted.

In 1972, the Vatican encouraged its monasteries and missions around the world to sell off any commercial activities. By then, Ksara was a profitable entity, producing over 1 million bottles annually and representing 85% of Lebanese production. When then order to sell came through, the winery was optioned to a local businessman, Jean-Pierre Sara, who, one year later, assembled a consortium of 15 investors, all of whom were convinced that the winery represented a sound investment. On August 15, 1973 the winery was sold for LL 10 million, (then $3.2 million).

Until that point Ksara had been making eight wines and liqueurs – the Vieux Millenisme, Clos St Alphonse, Ksara Rose, a Blanc de Blanc, a Vin Mousseaux (a sparkling wine), Karine and Kina and Vin D’Or. The new owners introduced the Sunset and the Reserve du Couvent. The Château wine was not introduced until the 90s.

Even though war broke out in 1975, the forward thinking Jean-Pierre Sara appointed a full time oenologist, Noel Rabaud, a Frenchman, who moved to the Bekaa with his family. Rabaud lasted a year before having to flee in 1976, when it became apparent that foreigners were at risk of being kidnapped. He would however come back three to four times a year to help with the harvest and offer technical assistance till 1993.

Growth and recovery

During the war, not one harvest was missed, even in 1982, the year of the Israeli invasion. Still, the conflict was a moveable feast, flaring up at random across the country at sporadic intervals. Not knowing where the next round of fighting would occur, meant that Ksara, like many of the other wineries, was forced to rethink its entire distribution strategy. Understandably, exporting was also difficult, but the company was able to send between 15-20% of its production abroad, mainly to France.

But the longer the war dragged on, the more the company began to feel the strain. The years 1987 to 1991 were a bleak period. When the guns fell silent, Ksara had fallen behind Château Kefraya in terms of market share and morale was at an all time low.

At the end of 1990, the board decided to appoint Charles Ghostine a lawyer and former National Liberal Party politician with formidable organizational skills. It was to prove to be an inspired move. Ghostine, with the backing of an aggressive board of directors, set about one of the most remarkable corporate turnarounds in recent times.

In the March issue of EXECUTIVE, we reported that, Lebanese wine producers exported around 2.2 million bottles of wine in 2005, a year-on-year increase of 13%.

Over the same period imports of foreign wines dropped from 977 tons in 2004 to 874 tons in 2005, a drop of 11%. The UK is once again the biggest importer of Lebanese wines, followed by France, the US and Syria. Château Ksara, Lebanon’s oldest and biggest wine producer took the lion’s share of Lebanese wine exports in 2005 with an impressive 40.5% market share of all Lebanese wines sold abroad and in doing so recorded a 16% year-on-year increase of its foreign sales. “Basically we sold 1 million bottles abroad,” said managing director Charles Ghostine, who cited Syria and the UK as the main growth markets with year-on-year growth 50% and 30% respectively. The winery’s mid priced red, Reserve de Couvent, again proved to be the motor behind the export surge making up 38% of all Ksara’s international sales.

And it is all down to one man.

Dreams

Export manager Elie Maamari is enjoying a rare moment in his Beirut office. On the wall is his winemaking degree from the University of Toulouse and his Chevalier D’Ordre du Merite Agricole from the French government for services rendered. Across from his desk is a map of the world on which Maamari has placed pins in every country where Château Ksara has a presence. “My dream is too fill as much of that map as I can. We are in 23 countries, but we should be looking to China, Taiwan and Hong Kong. Did you know that in China they planted 50,000 hectares in one year? This is out of this world!” When you stop to consider that Lebanon has at most 1,700 hectares under wine vine, it is easy to see why Maamari is in awe.

It is mid-January and he has just returned from the two-day Decanter Fine Wines show in London. “Most of the people who come to the stand they have only heard of [Château] Musar,” says the man who began his career at Ksara in the accounting department in Beirut in 1978. “They come looking for something else and they are pleasantly surprised. I tell them it’s a different process of vinification, fermentation; it’s a different wine altogether. I tell them if they are looking for Musar, they won’t find it here.” He pauses. “Don’t get me wrong, Musar is a unique wine. You won’t find a wine like it anywhere in the world.”

Maamari enjoys seeing the reaction on people’s faces when they first taste Ksara. He is supremely confident in his wines that he knows it is just a matter of spreading the word. “Mostly they were pleasantly surprised by the quality to price ratio of the Reserve du Couvent, but they were also impressed with the Château Ksara 2001 and 2002, the Cuvée Troisième Millénaire and the Chardonnay. They come to taste one or two wines and end up staying for the whole range.” He laughs. “When people stay, it’s a good sign."

In the UK, Château Ksara has proved that, like Massaya and more recently Château Kefraya, joining forces with an established distributor, in this case the House of Halgarten, is crucial to breaking into the $14 billion UK market, one that could finally establish Lebanon as the ultimate boutique producer.

And Maamari is bullish. “This year exports are beginning to show,” he beams. “Halgarten agreed to our marketing plan. I asked for 10% growth and they promised 25% and I am sure they will do it. Now we are in more than 90 English restaurants and wine bars. We are moving beyond the Lebanese restaurant sector. That said, we are present in every Lebanese restaurant in London, Oxford and Brighton. The important thing is that are they re-order and they are. We are really very optimistic.”

Restaurant trade

And he should be. Lebanese food has proved to be the best ambassador for Lebanese wine. It is the third most popular ethnic food in the UK, a position it has reached through offering vegetarian dishes in an age of healthy eating and national paranoia over the dangers of eating beef. Château Ksara is the house wine at Noura and Marroush, which has 17 restaurants in London. “Marroush takes 6,000 cases (72,000 bottles) from me each year. On each table he has a special wine list with the history of Ksara on one side and the history of Marroush on the other. All 11 of our wines are on it. Sure there is another, separate wine list, but who wants it when you have all the Ksara range.”

Maamari admits that it is slightly more difficult to break into the off-trade, although there are signs that a Lebanese wine might eventually make it onto the coveted supermarket shelves. “We are focusing on [leading UK supermarket chain] Waitrose. They like the Reserve, but it takes time, as much as two years, to get a decision. What we have on our side is that, unlike many new world countries, Lebanon does not have thousands of producers and we can offer value for money, if we can sell in the £5.99 ($10.50) range.”

Ksara’s announcement that it will increase production to 2.7 million bottles over the next four years will not have come soon enough for Maamari’s customers. “Demand is already exceeding supply and I am notifying my suppliers that I am already out of Chardonnay 2004, while this has been the case with the Reserve du Couvent for two months now.”

Currently Ksara’s fourth biggest market, Maamari believes the UK will eventually take the top slot, overtaking Syria, France and the US. “The French market is defined by the Lebanese on-trade,” he explains. “There are 122 restaurants in France and not more than 50 in the UK, but there are fewer opportunities in the off-trade. Of the other markets, Sweden is a loyal customer. “My agent orders like clockwork. He takes a container every 40 days.”

Sentimental attachment

Maamari was appointed sales manager after he spent three years in France studying wine making. He admits that he was reluctant to leave his beloved wine making (a job he had fallen into during the war when Ksara’s French wine maker was absent for long periods). “It was like changing careers, but there are choices to be made and decisions to be taken. However, one thing was certain: I was convinced by the quality of the wines and I knew we would make progress when European consumption increased. My first job was to hit the Lebanese restaurants and convince them to move away from selling cheap Bordeaux just because it came from Bordeaux.”

Spreading the gospel to those who can influence wine drinking is another challenge. Château Musar still looms large in the consciousness of many a wine critic. “It is not easy to convince the big names such as Tom Stevenson, Jancis Robinson and Oz Clarke that there are other wines than Musar, but we are getting there slowly. They have the power to sell wines. They are celebrities they have newspaper columns.”

Still the good news is that Lebanon’s strength lies in its relative rarity. Maamari admits that he had no idea how much wine the rest of the world produced until he went abroad. “It’s strength is its rarity. Halgarten finds it easier to sell Lebanese wine than Australian because there is so much competition. They consider us a jewel in their crown.”

Sitting in his office, Maamari can look back with pride on a remarkable journey in wine. “It has changed my life. And wine is a great communicator. When wine people are gathered you can sit down with someone and talk for hours about wine and then you realize you don’t even know his name. When I joined Château Ksara I could have been joining any company. Wine meant nothing to me. In fact I nearly joined Sohat. Now I am a trained oenologist and a member of the French oenologist committee and the French association of oenologists. I am also a permanent member of the OIV wine tasting board. Winemaking remains my first love. Whenever, I go to Ksara I feel sentimental. Remember, I worked there for 11 years.”