Getting a premium brand into the Lebanese market is the same as getting into a packed club at 2 a.m. on a Friday night – it's going to cost you.
To get a table at a club, you may be shelling out $600 for the night. To be the exclusive alcohol dealer to a bar or club, it can cost anywhere from $3,000 a year to $800,000 a year. The most infamous case is at Beirut's Sky Bar, which was paid $450,000 last year by alcohol brands. This year, Sky Bar was paid $800,000 in cash by a distributor and the alcohol to be provided at half price, although the bar would neither confirm nor deny these figures.
“Three years ago it was $50,000 at Sky Bar for non-exclusive rights, then competitors came to offer more,” said Nagi Hmouda, business manager at Fattal, distributor of Dewar's, Bollinger, Grey Goose, and Patron. “We corrupted the market by over-bidding. Today, anyone opening a bar thinks companies will come to pour money on them. And for some bars, if they don't get that endorsement money, they don't survive.”
Hmouda estimates that $3.5 million to $4 million is spent every year on on-trade marketing in Lebanon's $105 million wine and spirits market.
“Beirut is one of the most expensive cities in the world for on-trade marketing,” said Khalil Mansour, senior brand manager at Gabriel Bocti, distributor for Stolichnaya, William Grant brands and Laurent-Perrier. “It's a war for customers, and it has become very expensive to sustain and keep a brand,” he added.
One bar owner gave the example of a distributor offering him $60,000 to $70,000 worth of free alcohol if $250,000 was purchased – on condition of being the sole distributor.
“The industry is not giving consumers choice when only a few brands are on offer,” said Hmouda. “Exclusivity is down to being insecure about selling certain brands that are not popular.”
The exclusivity and incentive strategy has had mixed success. Distributor and brand owner Diageo, which along with Fattal handles 60 percent of the alcohol trade, owns the biggest brand in the market, Johnny Walker Scotch whisky. But it has not had the same success in distributing Smirnoff vodka, despite having one of the largest marketing budgets for a brand.
“Diageo tried to push Smirnoff at Sky Bar and they paid s**t loads, but it didn't work as people weren't into it,” said Haytham Nasser, a former marketing manager and founder of My Bar in downtown Beirut.
“The thing about Beirut is demand is driven by word of mouth and trend-setters. The key to marketing is how to get these connectors to drink your drink and make it a buzz thing. It takes maybe just 15 people to order a new vodka for it to spread and you've reached the tipping point. Until people feel the trend it won't fly. So many marketing campaigns have died a thousand deaths because they couldn't get those connectors,” he added.
The brand war is particularly intense over vodka, which accounts for 80 percent of on-trade sales at bars and clubs, while in off-trade whisky accounts for 70 percent of sales, versus 30 percent vodka.
Some five brands have 65 percent of the vodka market, dominated by Stolichnaya at 29 percent and Absolut at 23 percent. “Lebanese are into Stolichnaya and Absolut. Grey Goose is a premium brand but the price has been lowered at clubs to $160 [a bottle] to compete with Stolichnaya Gold, which goes for $140,” said Mansour.
In addition to Smirnoff, Diageo is now pushing brand Russian Standard, which has been making steady inroads into the premium segment, with around 4 percent market share.
The vodka market has doubled in the past three years to 120,000 cases (of 12 bottles each) imported every year, while 450,000 cases of whisky are imported.
“Scotch dominates with two-thirds of the market and it is very difficult to change that. Over the past 50 years in hard liquor, arak has declined in favor of Scotch, sales then stabilized, and now vodka is up,” said Hmouda. “People take vodka home now, which was not the case three or four years ago.”
Single malts, ice allowed
The whisky market has entered a mature phase, but the sector is struggling to wean Lebanese tipplers off dominant premium brands Black Label and Chivas, which are blended whiskies, to push sales of single malts.
“If people understood whisky, there would be more single malts on the market,” said Nasser.
With just a few hundred cases of single malts imported each year demand is growing slowly, encouraged by tastings and bringing brand ambassadors to inform consumers about the culture of whisky.
“We used to stock just three or four malts, but now we sell 15,” said Wadih Riachi, cellar manager at Vintage in downtown Beirut. “And before, people didn't ask for a certain label, but now are much more specific. Maybe 30 percent is driven by the label – on 18 or 25 year old whiskies – and 70 percent is pleasure.”
While whisky enthusiasts can be as pretentious as wine connoisseurs – how to store a bottle, pour a glass, the correct temperature and so on – allowances have to be made for the less initiated to start getting into single malts, such as adding ice, which is considered by aficionados as an act verging on the sacrilegious.
“When the master blender at Glenfiddich came here, he told me that if he wanted to forbid people from putting ice in their whisky, he'd lose 50 percent of his clients,” said Riachi.
With sales of single malts expected to spike in coming years, distributors are paying to get brands and deals with suppliers. “You can feel the buzz, because big distributors are competing to get better brands and better cuts of the market,” said Mansour.
The distilleries are certainly viewing Lebanon as a potentially lucrative market for single malt sales, with prices starting at $40 a bottle. Grant's, which is the fourth best-selling whisky brand in the world, is to launch its 12-year old malt this year. Out of six countries selected worldwide as launch venues, Lebanon is one of them, “because of the high ratio of leisure and upscale sales,” added Mansour.
Indeed, super premium and reserve brand alcohol sales are slated to rise over the next year.
“It is a growing niche that is estimated at 8 percent [of the market] and the projection for next year is to be higher than 10 percent,” said Sylva Yazerly Bayram, trade marketing manager at Diageo.
While super premium whiskies are relatively pricey – an 18-year old Glenfiddich single malt sells for $95 – it pales in comparison to champagne. Real champagne that is, which is only from the Champagne region of France; any other is just sparkling white wine.
In 2008, sales of champagne doubled, and demand has remained strong ever since. But the days of 12-liter bottles and 3-liter Jeroboams being ordered for the show-off value are not what they once were.
“At a club a few years ago I saw 18 Salmanazar (9-liter) bottles of champagne opened in less than an hour to impress [singer] Haifa Wehbe. And a Libyan once bought 120 bottles of champagne to cover the floor. But while the extravagant days are not over, the novelty of it is,” said Hmouda.
Nonetheless, while the club that started the mega-bottle trend, Crystal, has shut its doors, clubs like Cassino still sell Balthasar (12-liter) bottles, which go for $3,000 to $5,000 - “depending on where you're from; wealthy Gulf Arabs are charged more,” said one bar owner. And while popping bottles of champagne will always happen at clubs, 4.5 liter bottles of premium vodka are increasingly seen on tables.
Away from the strobe lights a new craze has come to town: a champagne with 24-karat gold flakes inside that, once poured, swims in the bubbles for nearly half an hour. The only copyrighted champagne from Champagne in the world with 24-karat gold, the $1,100 to $7,000 bottles of Luxor Brut, rose and vintage are stored in a bank vault until ordered and then hand delivered by a bodyguard handcuffed to a Samsonite briefcase.
Indicative of how the super premium alcohol market works, MK Holding, the exclusive distributor of Luxor in Lebanon, did not have to do any marketing to generate sales.
“We've not launched and not spoken about it, but sold 11 bottles in less than two weeks,” said Michel Khoury, managing partner of MK Holding. The first buyer was Hafia Wehbe.
With only 1,300 bottles of Luxor available a year for sale worldwide, MK Holding has been allocated 140 bottles for Lebanon. Of the vintage bottles, only 111 are produced a year, with only two to be available in Lebanon.
To ensure the brand's high profile is maintained, clients are profiled before delivery. “We don't want it getting in the wrong hands and ending up as a spraying champagne,” said Khoury.
Luxor is to officially launch in late September at an exclusive invitation only event. “I hope I'll have some bottles left for Christmas,” added Khoury.