Top priced tipples – The Lebanese drinks market

Executive magazine

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.

Glittering champagne

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.

Villas on the sea

Executive magazine

If you're investing millions of US dollars on a yacht, shelling out a couple hundred dollars for an extra pair of Sebago Docksiders is hardly a financial concern.

Leather slip-on deck shoes are the preferred form of footwear among the yachting crowd. Yet when it comes to luxury yachts, you need two pairs: one for on deck, the other dockside. The reasoning is straightforward. The fine grain, smoothly sanded wooden decks that are scrubbed down on a daily basis show up the slightest specks of non-maritime dirt. Owners who want their pricey investments kept pristine have two choices: go barefoot or it's shoe-changing time.

An ocean of choice

But if you don't want to change shoes more often than a model on a photo shoot when going from sea to shore and vice versa, then you can opt for marble over wood.

In fact, in the world of luxury yachts, any whim can be catered to. One client of Italian yacht company Benetti spent a further $4.2 million to have his $7.8 million, 93-foot yacht kitted out in marble and stone – although not so he could wander the decks of his yacht in a pair of soiled moccasins, but just because he liked marble.

“A yacht is like a floating villa, so each customer has their own demands, like aquariums, jacuzzis, helium beds, even submarines to heli-pads, and everything in-between,” said Marcello Maggi, president of sales and marketing at International Shipyards Ancona, Italy during the Beirut Boat Show 2010.

As Mustafa Chehab of Chehab Marine, representative of British made Princess yachts put it, “boats go from $160,00 to whatever figure you can think of.”

The demand for such highly specialized, and exceedingly expensive, yachts is not as high among Lebanese as in the Gulf countries, with the average price of a yacht sold in Lebanon $1 million to $2 million, according to Maggi. Ancona's yachts on the other hand start at $19 million, while Benetti's starting prices are in the millions.

The disparity in the yachting markets between Lebanon and the Gulf was exemplified at the Abu Dhabi Boat Show this year, where several “concept yachts” were launched, including the 383-foot ES117 mega-yacht designed by Lebanon's Elie Saab.

One of three Saab designed yachts, the ES117 is the height of decadence. Two private suites on two decks are for the yacht's owner, along with 10 guest suites, a swimming pool, whirlpool, theater, spa and gym. Topping it all out is a heli-pad, submarine port, space for a car and water sports area.

Sales of such concept yachts are few and far between, with big name brand Sunseeker Middle East's largest seller the 88-foot yacht out of its 43-feet to 170-feet range. Lebanon accounts for some 30 percent of the brand's regional sales, according to general manager Francesco Pitea.

Boating back to Beirut

The Gulf may boast the clientele to pay tens of millions of dollars for mega yachts, but Lebanon is still a port of call for international yacht builders, with all the major names descending on Dbayeh marina for the Beirut Boat Show, the first to be held in three years.

“Beirut is a center of gravity in the region so a good selling spot, and Lebanon is the Cote d'Azur of the Middle East,” said Maggi. “In Dubai, you sell yachts to the people of Dubai, in Qatar to Qataris, but here is for the whole Middle East,” he added.

Lebanon's growing tourism sector and geographical positioning make the country a perfect base to moor a yacht and to cruise around the Mediterranean sea. However, despite Lebanon having dozens of small and medium sized marinas – from hotel to private marinas – they lack infrastructure and facilities to cater to luxury yachters. “Lebanon needs more and bigger marinas, more prestige,” said Maggi.

This is set to change with the opening of the Beirut marina development and the Tourism Ministry pledging to back the development of new marinas, the first to be in Jounieh. “Everyone's looking forward to the opening of the Beirut marina as many marinas are partially or semi-full,” said Chehab.

With the Lebanese economy going through a boom period and expecting record numbers of tourists this year, sales of yachts have been on the up, growing by 14.5 percent in 2009 and 40 percent in the first quarter of 2010 on last year. Sales are projected to grow a further 20 percent in 2010, according to government figures.

Further driving growth is the strength of the dollar over the euro, making it a good time to place an order. “People are rushing to buy bigger boats to receive next year, so the situation is pretty good,” said Chehab.

To get a luxury yacht designed to your specifications and interior designer wants, patience is required. In the case of Benetti yachts, it is a one year wait for a 90-foot yacht, and up to three years for anything bigger, said the brand's sales manager Tomasso Bilotta. According to Chehab, yachts are then often exchanged after a year or two for a brand new model.

Sailing to greener waters

The high price tag for luxury yachts has as much to do with the materials used and high skilled labor as the technology now on board, from chart plotters to sensory lighting to entertainment systems. Benetti for instance has invested $540 million over the past 12 years to retain its classic design while keeping an eye on innovation.

The biggest trend in recent years is for displacement yachts for cruising over faster yachts. “Maybe people are more environmentally friendly, or sensitive to fuel consumption, or don't want to go fast but have comfort instead,” said Bilotta.

In line with growing environmental awareness globally, greener yachts will be the boats of the future. “Customers are asking for cleaner boats and we can't ignore the state of the world,” said Maggi. “We are using hybrid engines and developing a boat with zero emissions, which is impossible, but we're trying to get close to that. We're also trying to pollute less when we build,” he added.

Indeed, Benetti's Blue Bay yacht, which was on display at the Beirut show, has fuel tanks that hold 38,000-liters, while Saab's ES117 mega-yacht has a fuel capacity of a staggering 762,000 liters. For now at least, it seems that the traditional focus on speed, comfort and glamour is destined to prevail over environmental concerns in the world of luxury yachting.

Antiquities right of return

Commentary - Executive magazine

German Chancellor Angela Merkel eyes the 3,400-year-old bust of Queen Nefertiti at the Neues Museum in Berlin, which Egypt wants back.

I am among those fortunate enough to not only have visited the cream of the Middle East’s major historical sites — among them Persepolis, the Valley of the Kings, Palmyra and Baalbek — but also viewed antiquities taken from these places in European and American museums. Few people in Iran, Egypt, Syria and Lebanon have the same opportunity.

Though the ancient palaces and structures may remain, much of what they held is no longer on site, or even in the country. Spirited away over the past 200 odd years, many of the region’s most famous artifacts are in the West, torn from their historical and spatial context through acts of Elginism. The term — defined as cultural vandalism — was coined after the Earl of Elgin, who removed the Parthenon Marbles from Athens in the early 18th century to decorate his house in Scotland.

At the Louvre in Paris recently, I was taken aback by a huge Phoenician sarcophagus discovered in Sidon, far more imposing than any on display in Lebanon. It would be one of the centerpieces of the National Museum in Beirut, but instead is tucked into an underground gallery in one of the largest museums in the world.

I became only more indignant entering a gallery devoted to Palmyra, which shamed those in Tadmur or in Damascus. And then there was the Achaemenid exhibit containing sculptures taken from Persepolis. Why should I travel to Paris, London and numerous museums in the United States to see what should rightfully be shown in Persepolis, Palmyra or Sidon?

While I appreciate that millions of people have been able to admire the wonders of the ancient Middle East at these museums and that artifacts have been kept in safe conditions, there is a strong argument for the repatriation of relics.

Near perfect copies can be made if museums want to maintain their permanent collections or borrow items, a widespread practice. The idea that the region cannot look after its heritage properly is without merit and reeks of paternalism.

After all, the Lebanese National Museum managed to protect its collection throughout the civil war, while Syria, Egypt and Iran have all overhauled their museums. Indeed, one of the worst cases of cultural barbarism in modern history was instigated by the US-led invasion of Iraq, when the occupation forces failed to prevent the looting of what was perhaps the most significant collection of antiquities in the world at National Museum of Baghdad. There is growing momentum for artifacts to be returned to their roots, though this has been hindered by a well-meaning 1970 UNESCO convention calling for the restitution of antiquities and works of arts, but only for objects taken to other countries before that date.

The convention is one obstacle stopping the Rosetta stone, held by the British Museum for more than 200 years, or the 3,400-year-old bust of Queen Nefertiti at the Neues Museum in Berlin, from being returned to Egypt. While Lebanon has no official position on this matter, Syria, Iraq, Libya and Egypt are calling for the return of their cultural artifacts. In April, Cairo hosted a conference of 25 “countries that have suffered from theft,” as the outspoken head of Egypt’s Supreme Council of Antiquities, Zahi Hawass, put it.

“We will make life miserable for museums that refuse to repatriate,” said Hawass at the conference.

His threats have worked in the past. Last year Egypt broke off relations with the Louvre until steles stolen from a tomb in the Valley of the Kings in the 1980s were returned. Further arm-twisting came when Hawass threatened to ban French scholars from excavating in Egypt. The Louvre then capitulated.

But there are few precedents of Elginism being reversed — most pointedly exemplified by Greece’s as-yet unsuccessful 30 years spent lobbying Britain to return the “Elgin Marbles.” As Hawass suggested, cooperation between the aggrieved countries is needed to make threats effective, with countries putting together “wish lists” of what they want returned.

These wish lists deserve broad international support to allow the artifacts of human history to be seen in their proper context, rather than in foreign museums thousands of kilometers away.

PAUL COCHRANE is the Middle East correspondent for International News Services