Wine Industry

AMERICAN UNIVERSITY OF BEIRUT

SULIMAN S.OLAYAN SCHOOL OF BUSINESS

BUSS 249

STRATEGIC MANAGEMENT

DR.YUSUF SIDANI

INDUSTRY ANALYSIS

WINE INDUSTRY IN LEBANON

PRESENTED BY

NADINE BARAKAT

YASMINE ASHOUR

MOHAMMAD EL BEITAM

MOHAMMAD SALTAJI

ALI KHALIFEH

NOVEMBER 24TH, 2005

Executive summary

The following project goes deep to explain the current situation of the Lebanese wine industry. It begins by giving a brief introduction about the current economic situation in the country. Then it gives a detailed explanation the industry economic situation and of the rival forces (Rivals, Supplier bargaining power, Buyers bargaining power, substitutes, new entrants), its effect on the industry, and the amount of risk it contains. The second part of the project explains the driving forces of the industry and their effect on reshaping the industry and market.

The third part of the industry analysis project explains the different producer's positions in the industry and the process of predicting their next strategic move.

The last part of this project explains the key factors needed for success and the assessment of the industry to conclude if it is considered attractive or not.

Wine Industry in Lebanon

Outline

Executive Summary 2

I- Brief History about the industry 4

II- Overview of the macro environment 4

A- General Economic conditions 4

B- Population Demographics 5

C- Societal values and lifestyles 5

III- Economic features of the industry 5

IV- Nature and strength of porters' competitive forces 8

A- Rivalry among sellers 8

B- Potential entry of new competitors 11

C- Competitive pressures of substitutes products 12

D- Supplier bargaining power 13

E- Buyer bargaining power 14

F- Collective strength of the five competitive forces 14

V- Driving forces 15

A- Identifying the driving forces 15

B- Assessing their impact 17

VI- Diagnosing the market positions of rivals 17

VII- Predicting next strategic moves of rivals 17

VIII- Key success factors. 17

IX- Deciding Whether the industry presents an Attractive opportunity 18

X - References 20

If there is one product made in Lebanon that is indisputably of international standard, it's wine.

At a time of recession, when many industries in Lebanon are struggling, the wine business is in good health and in process of increasing output.

Wine is one of the few products, which Lebanon exports in greater quantities than it imports.

I-A brief history about the industry:

In Bekaa Valley, on a high plateau, stands the Roman God of wine where the ruins of the temple of Bacchus lie. In 1857, French Jesuit missionaries built a convent, and the production of wine started on a scale that satisfies their own needs as well as sales. They ran the vineyard until 1973 when it was bought as a big investment that costing $5million including equipment and general outfit. Forty percent of the total production was exported, according to Mr. Zafer Chaoui, one of the owners who became chairman of what is now Chateau Ksara.

At that point in time, they used to target Lebanese consumers living abroad. Recently, they integrated non-traditional wine markets.

In Ksara&s caves, more than 2 million bottles are maturing together with some that date back to the Ottoman era. The first International wine fair in Bristol, Britain introduced Lebanese wine abroad, it was in 1979.

In the South of Bekaa, lies Chateau Kefraya that was established in the 1950s by Michel de Bustros. He imported varieties of grapes and planted them along 300 hectares. This crop was sold and another winery was built in 1978. In 1996, a successful product, "Comte de M", was released and won accolades from wine critics. Other Kefraya wines won prices at different international wine exhibitions. In 1988, three shareholding partners joined. Kefraya and Ksara became the top wine producers in Lebanon.

II- Overview of the macro environment:

A- General Economic Conditions:

The recent expectations about the Lebanese economy are becoming clearer, according to the Business Monitor International. The GDP growth is expected to change from 3.5% to 3%, the Central Bank head Mr. Riad Salameh projected that the GDP growth is 2%, but recent indicators have shown some developments in the economy which made