The Lebanese Wine Industry

8/2/2019 The Lebanese Wine Industry

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I. Introduction to marketing:

1- What is marketing:

Marketing is a total system of business activities designed to plan, price, promote

and distribute want-satisfying products to target markets to achieve organizational

objectives.

This definition has two significant implications:

A- The entire system of business activities should be customer oriented:

While marketers see themselves as selling products; customers see themselves as

buying value or solutions to their problems. The customers are interested in the total

costs of obtaining, using and disposing a certain product.

In order to succeed, marketers must present a certain product or service by defining a

solution to problems that a large group of customers do face.

B- Marketing should start with an idea about a want-satisfying product and should

not end until the customers wants are completely satisfied which will result in an

exchange between two parties as minimum (Company-Customer):

In order to prepare for a successful negotiation; a marketer must understand the

target market’s needs, wants and demands. Needs are basic human requirements (Theneed for food, water, vehicle …). Those needs become wants when they are directed to

specific objects that might satisfy the need (Ex: I need a vehicle and I want a

Mitsubishi Montero…). At this step, marketers have to orient the vision of customers

to a certain product or service in order to capture his attention and make the product as

the customer’s best choice. In the end comes the demand, it occurs when the

customers is ready to buy a certain object.

The main goal of marketing is to attract new customers by promising superior value and

keeping and growing current customers by delivering satisfaction.

Marketing today must be understood in the new sense of “satisfying customer needs” by

understanding the customer so well, and make a certain product or service fits him and

sells itself.



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2- The marketing mix:

The marketing mix is a set of controllable tactical marketing toold that a firm can

do to influence the demand for its products. The possibilities can be collected into four

groups of variables known as the “four Ps”:

Product – Price – Place – Promotion.

Figure 1 – shows the particular marketing tools under each “P”

Figure 1:

However, there is another concern that holds that the “four Ps” concept takes the sellers

view of the market, not the buyer’s view. From the buyers view point; the “four Ps”

might be better described as the “four Cs”:

Customer solution – Customer cost – Convenience - Communication

Table 1 – shows the relation between the “Four Ps” and the “Four Cs”

Place

Channels

Coverage

Assortments

Locations

Inventory

Transportation

Logistics

Price

List price

Discounts

Allowances

Payment period

Credit terms

Promotion

Advertising

Personal selling

Sales promotion

Public relations

Place

Channels

Coverage

Assortments

Locations

Inventory

Transportation

Logistics

Target

Customers

Intended

positioning



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Table 1:

Buyers view point Customers view point

4 Ps 4 Cs

Product Customer solution

Price Customer costPlace Convenience

Promotion Communication

II. Situational analysis:

1- The dynamic marketing environment:

Any organization must identify and then respond to numerous environmental

forces. Some of those forces are external to the firm, while others come from within.Many of those forces influence what can and should be done in the area of marketing.

Environmental monitoring also called environmental scanning and it is presented by the

following process:

a- Gathering information regarding a company’s external environment.

b- Analyzing the information found.

c- Forecasting the impact of whatever trends the analysis suggests.

Figure 2 – shows the process of the environmental scanning.

Figure 2:

An organization operates within an external environment that cannot be controlled.

The marketing environment consists of actors and forces outside marketing that

affect the marketing’s management ability to build and maintain successful relationships

with target customers. It offers both opportunities and threats to a certain company or

establishment and is characterized by a rapid change.

The environment is made up of both microenvironment and macroenvironment.

Gathering

information.

Analyzing the

information.

Forecasting the impact of whatever

trends the analysis suggests.



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A- The company’s microenvironment:

The microenvironment consists of actors close to the company that affect its ability

to serve its customers; these actors are: the company (market), suppliers, marketing

intermediaries, customer markets, competitors and publics.

Three important environmental forces are external to an organization and affect its

marketing activities. These are the firm’s market, suppliers, and marketing

intermediaries. And they represent the primary micro environmental forces for a

company.

Marketing success requires building relationships with other company departments,

suppliers, and marketing intermediaries.

We note other micro environmental forces, such as: customers, competitors and publics.

a- The market:

The market is what marketing is all about, and the process of reaching and serving

it profitably is not so easy.

The market should be the focus of all marketing decisions in an organization.

The market is defined as a place where buyers and sellers meet goods or services which

are offered for sale, and transfers of ownership occur. But to precise more, a market is

also defined as people or organizations with needs to satisfy, money to spend, andwillingness to spend it.

In marketing, three specific factors need to be considered:

- People or organizations with needs.

- Their purchasing power, and

- Their buying behavior.



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b- Suppliers:

A firm’s suppliers are a vital part of its marketing environment. A business cannot

sell a product without being able to make it or buy it.

The suppliers provide the resources needed by the company to produce its goods orservices.

Marketing managers must always watch supply availability, supply shortages or delays,

and everything that is related to the suppliers and that might present a problem in the

market.

Most marketers today treat their suppliers as partners in creating and delivering customer

value because the suppliers role is essential in many industries and companies, and it can

be a factor that helps a company to reach its specified objectives; for ex: improving a

certain product quality is related to improving or gathering high quality resources from

suppliers.

c- Marketing intermediaries:

The marketing intermediaries are the firms that help the company to promote, sell

and distribute its goods to final buyers; they include resellers, physical distribution firms,

marketing service agencies, and financial intermediaries. These firms operate between a

company and its markets, and between a company and its suppliers; they are part of the

channels of distribution.

In some cases, it may be more efficient for a company not to use marketing

intermediaries. A producer can deal directly with its suppliers or sell directly to its

customers.

Marketing intermediaries are specialists in their respective fields. They often do a better

job at a lower cost than the marketing organization can do by itself due to their

specialization and wide experience in the marketing and distribution domains.



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B- The company’s macro environment:

The macro environment consists of the larger societal forces that affect the

microenvironment. These forces are: demographic, economic, natural, technological,

political and cultural forces.

There are six major forces in a company’s macro environment that could have an

influence on any organization’s marketing opportunities and activities. These forces are:

- a- Demographics - d- Social and cultural forces

- b- Economic Environment - e- Political legal forces

- c- Competition - f- Technology

These forces are largely uncontrollable by a company’s management, but a company may

be able to influence its external environment to some extent.

a- Demographics:

Demographics refer to the study of human populations in terms of size, density,

location, age, gender, race, occupation and other statistics.

The demography environment is of major interest to markets, because it involves people

and people make up markets. And we note also that a company could take demographic

factors into consideration while segmenting the market.

b- Economic environment:

The economic environment is a significant force that affects the marketing

activities of just about any organization. A market requires a purchasing power as well as

people. A marketing program is affected especially by such economic factors as the

current and anticipated stage of the business cycle, as well as inflation and interest rates.

c- Competition:

To be successful, a company must provide greater customer value and satisfaction

than its competitors do. Marketers must gain strategic advantage by positioning their

offerings strongly against competitor’s offerings in the mind of consumers.



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d- Social and cultural forces:

The cultural environment is made up of institutions and other forces that affect a

society’s values, perceptions, preferences, and behaviors. People grow up in a particular

society that shapes their basic beliefs and values. Those values and beliefs cannot be

broken, and they affect the marketing decision making.

e- Political legal forces:

Marketing decisions are strongly affected by developments in the political

environment. The political environment consists of laws, government agencies, and

pressure groups that influence or limit various organizations and individuals in a given

society.

f- Technology:

The technological environment consists of forces that create new technologies,

creating new product and market opportunities. It is the most dramatic force that has

released many technological products like laptops, airplanes, and electronic

machines…The technological environment changes rapidly and such technological

improvements may present opportunities to some companies, and threats to the others.



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2- SWOT Analysis:

SWOT analysis is the activity by which a company identifies and evaluates its

most significant strengths, weaknesses, opportunities and threats. It provides a good

overview of whether a company’s overall situation is healthy or unhealthy.

- Resource Strength: is something that a company is good at doing or an

attribute that enhances its competitiveness.

- Resource Weakness: is something a company lacks or does poorly or a

condition that puts it at a disadvantage in the marketplace.

- Market Opportunity: is a big factor in shaping a company’s strategy

- External Threat: is a factor that comes from outside environment of a

company, and has a negative influence.

An organization, and in order to fulfill its mission successfully; it should:

- Capitalize on its key strength.

- Overcome its major weaknesses.

- Avoid significant threats.

- Take advantage of the most promising opportunities.

Strengths and weaknesses often originate from inside the organization while the

opportunities and threats originate from the outside environment.



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III. Marketing Warfare:

Marketing warfare is an attempt to apply successful military strategy to marketing

situation. According to Al Ries and Jack Trout, marketing is war and the marketing

concept’s customer -oriented philosophy is inadequate and should be replaced by the

competitor oriented concept.

Marketing was compared to a football game in which a team should focus its efforts on

outwitting, outflanking, and over-powering the other side in order to win the game, or

else they would be blocked.

Successful companies today are competitor-oriented. This orientation makes them

capable of meeting customers’ demands better than any other company in their field. By

adapting military strategies to their operations, companies can gain and press home

strong competitive advantages over all the other companies in their industry.

Strategic planning will become more and more important. Companies will have to learn

how to attack and to flank their competition, how to defend their positions, and how and

when to wage guerrilla warfare. They will need better intelligence on how to anticipate

competitive moves.

1- The Principle of force:

The principle of force is better explained by Al Ries and Jack Trout when they

affirmed that it’s easier to get in the top than to get there. Once at the top, a company can

use the power of its leadership to stay there.

All other things equal, an army with a larger number of troops has an advantage over

smaller armies. When several companies enter a new market, the one with the larger sales

force is likely to become the leader. The larger a company has the resources to outnumber

smaller competitors, it can advertise more, perform more research and development, and

open more sales outlets in order to focus on continuous improvements and wide

availability of its products.

Smaller companies must recognize the principle of force and attempt to win the battle by

crafting and executing a superior strategy, not by using simple strategies that allows the

company just to exist without trying to advance in the market.

It is not necessary to win the battle by recruiting superior employees or developing a

superior product, Ries and Trout argue that to win the battle, a firm must successfully

execute a superior strategy.



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2- Types of warfare:

Ries and Trout discussed four strategies for fighting in a marketing war:

a- Defensive warfare.

b-

Offensive warfare.c- Flanking warfare.

d- Guerrilla warfare.

As a general rule for an industry, the leader company in the market should be using

defensive warfare strategies, the second 2 companies (nos. 2 & 3) should be using

offensive warfare strategies, the next three companies should flank and the rest of the

industry should use guerrilla warfare techniques.

a- Defensive warfare:

A defensive strategy is appropriate for the market leader. Ries and Trout outline

three basic principles of defensive marketing warfare:

- Defensive strategies should only be pursued by the market leader:

It is self-defeating for a firm to pretend that it is the market leader for the purpose

strategy selection. The market leader is the firm who has attained that position in the

mind of the consumer.

- Attacking yourself with new products or services that improve existingofferings :

Introducing new products that are better than the existing ones preempts similar

moves by the competition. Even if the introduced product has fewer profit margins and

may reduce short-term profits, it accomplishes the more important long-term goal of

protecting the firm’s market share.

- Strong moves by competitors should never be ignored, but blocked:

Competitor’s moves should always be blocked in order to maintain in the same

place as leader and with the same market share.



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b- Offensive warfare:

An offensive strategy is appropriate for a firm that is number 2 or possibly

number 3 in the market. Ries and Trout outline three basic principles of offensive

marketing warfare:

- Companies that rank no 2 & 3 must focus on the leader’s strength:

To attack a competitor in an industry segment, a company must have to come up

with what its strength and weak points are. Once it knows its strength, it comes easy to

attack the competitors based on that main strength. And the main strength of the leader

should be attacked by the 2 following companies.

- The challenger should find a weakness in the leader’s strength and attack at

that point alone:

Competitors must attack the leader at his weaknesses and strength and fight themin order to advance and take the leader’s position in the market.

- The challenger should attack a point alone and not engage in a broad attack:

If a new entrant wants to compete a leader, it should first attack on the

geographical areas where the leader hasn’t entered or has a least penetration. This policy

shows how it is comfortable to fight against a leader. But in response to that attack, the

leader would strengthen those areas first where the least penetration has been done.

c- Flanking warfare:

A flanking attack is not a direct attack on the leader, but rather an attack in an area

where the leader has not established a strong position. The objective of any good flanking

move is to bleed the leader’s market share.

Ries and Trout present the following three flanking principles:

- A flanking move is best made in an uncontested area:

A good flanking move means introducing a new product or service in an areawhich is uncontested by the market leader or any other major competitors. The move

should be done in a new category where the direct competition with the leader or the

major competitors does not exit, and the company should be the first to target the new

segment.



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- A flanking move should have an element of surprise:

Surprise is important to prevent the leader from using its enormous resources to

counter the move before it gains momentum.

-

The pursuit is as critical as the attack itself:

The firm should follow-through and focus on solidifying its position once I is

established before competitors launch competing products. Management should turn its

attention to the products that are not performing well rather than strengthening the

position of the winners. If the firm does not have the resources to strengthen its newly

won position, then perhaps it should have used a guerrilla strategy instead of a flanking

one.

According to Ries and Trout, flanking attacks generally take one of several formats:

1- Lower Price: Price lowering is an important factor in attacking the market leaderby winning a large market share. But usually leaders are better users of this

element because they can employ economies of scale.

2- High Price: In almost every category there is a high priced product which

represents the high quality. So making a high price flanking move is a good

strategy because most people equate price with quality.

3- Small size: Many companies are introducing smaller, more compact, and usually

more innovative product offerings. This flanking move has worked numerous

times historically (Ex: Sony, Beetle …).

4- Larger than life size: A competitor can differentiate his products or services by

making them larger than anybody else’s. This flanking move has also been proved

successfully in a number of situations (Ex: Prince Tennis rackets).

5- A new distribution channel: By marketing through sales channels, no one else has

ever tried, you can establish a market segment and dominate it (Ex: Timexdistributed its watches in drugstores).

6- A new product format: You can establish a market segment by introducing

innovation to an existing product or service (Ex: Close-Up was the first gel

toothpaste and Soft-soap was the first liquid soap).



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d- Guerrilla warfare:

Guerrilla marketing differs from a flanking campaign in that the guerrilla move is

relatively small and differs significantly from the leader’s position. Guerrilla marketing is

appropriate for companies that, relative to the competition, are too small to launch

offensive or flanking moves. Guerrilla warfare does not require huge amounts of moneyresources.

Ries and Trout list the following three principles of guerrilla marketing warfare:

- Identify a segment that is small enough to defend:

A firm should identify a small segment in which it could become a leader. The

scope can be limited geographically, demographically, by industry, or by price.

- Never start to act like a market leader:

No matter how successful a firm becomes, it should not act like a leader. Because

some firms who got successful in using guerrilla marketing strategies began to act like a

leader by building larger building, and many other decisions that has increased their

overhead costs.

- Be prepared to move out of segment at any time:

If the market takes a negative turn, the firm using a guerrilla strategy should exist

quickly in order to prevent wasting resources.



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IV. The Lebanese wine industry:

Lebanon is one of the oldest sites of wine production in the world, its wine

industry may be small, but it is achieving global recognition. The wine industry is

growing well in Lebanon. Although Lebanon doesn’t produce a lot of wine, international

experts hold that Lebanon is the region’s best in high regard and rarity.

The annual production amount is about 6 million bottles. Most of the vineyards and

wineries are situated in the Bekaa valley, a valley that is capable of production and that

runs 75 miles through mountains at an average of height of 914 meters above the sea

level, where the grapes receive an abundance of sunshine in the summer and rain in the

winter.

Some medical researches made conclusions that red wine contains a substance that

delivers great health benefits.

Today two of the largest and most successful wineries in Lebanon that will be described

and analyzed later on are Chateau Ksara and Chateau Kefraya; both are situated in the

Bekaa valley and have met successful stories that are increasing in the Lebanese markets

and abroad.

Chateau Ksara is the oldest and the biggest wine industry that began life in 1857 when

the Jesuit Brothers have inherited and began farming. And Chateau Kefraya was created

by its founder, chairman and chief executive Michel de Bustros in 1951, and is

considered as the second big wine company.

Both Chateau Ksara and Chateau Kefraya produce more than 3 million bottles of wineeach year and are seeking to boost sales abroad.



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1- Chateau KSARA:

A- History:

Chateau Ksara lies near Baalbeck in the heart of the Bekaa. It began life in 1857,

when Jesuit brothers inherited and began farming a 25 ha plot of land to produceLebanon’s first non-sweet red wine. In doing so, they laid the foundations of Lebanon’s

modern wine industry.

In particular, they pioneered the introduction of high-quality vines in Lebanon.

KSARA's natural wine cellar was a grotto discovered by the Romans who created solidunderground rooms and dug several narrow tunnels from the cave into the surroundingchalk. These tunnels were enlarged to their present size during World War I when theJesuit Fathers sought to alleviate famine in Lebanon by creating employment.

Over one hundred men toiled with picks and shovels for four years to complete anunderground network of tunnels stretching for almost two kilometers. The temperature inthe tunnels is ideal for wine, varying throughout the year from 11 to 13ºC.

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 1million bottles annually and representing 85% of Lebanese production. When then orderto sell came through, the winery was sold to be considered as a limited liability companyfor $3.2 million in 1973.

At the end of World War I, France was mandated to govern Lebanon. Its military and

administrative machine moved in, bringing with it thousands of French soldiers and civilservants, for whom wine was an integral part of their culture. Ksara was in a position tosupply Lebanon’s new administrators and by the time the French left in 1946, Lebanon

had embraced the Francophone experience with a passion that can still be felt today.During the next 30 years, Ksara maintained its position as Lebanon’s most popular wine

as Lebanon grew into a cosmopolitan and convivial hub, where western tastes wereeagerly adopted.

When the guns fell silent in 1990 after the Israeli invasions took place, Ksara had lost asignificant chunk of its local market share. But it was exporting over 15-20% of itsproduction abroad, mainly to France. Zafer Chaoui, who was appointed chairman in

1991, had a vision and that same year the flamboyant businessman, backed by anaggressive board of directors, appointed a new Managing Director and made more fundsavailable. He did not know it then but he had set in motion of one of the most remarkablecorporate turnarounds in Lebanese business history.

Today, KSARA produces wines with strong personalities, achieving a rare condition of dry fruitiness, delicacy and robustness. And it is in its 150th anniversary.



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According to the ISO international certification; Chateau Ksara is certified ISO9001:2000 for its wine and arak production, viticulture, national and export sales.

B- Mission and vision:

Chateau Ksara focuses on continuous improvements of the wines; and isdeveloping new brands as soon as they are discovered and tested, to satisfy the needs of different types of consumers in many geographical areas. By that; Ksara is seeking tostrengthen its position in the local and overseas markets.

C- Products:

Chateau KSARA produces different types of wines, under 6 wine, arak andbrandy categories; we note:

1- Red Wine:Le Souverain - Prieuré Ksara - Réserve du Couvent - Château Ksara Red -Cabernet-Sauvignon - Cuvée du Troisième Millénaire - Cuvée de Printemps

2- White Wine:Blanc de l'Observatoire - Château Blanc de Blancs - Chardonnay

3- Rose Wine:

Rosé de Ksara – Sunset - Gris de Gris

4- Sweet and Fortified Wines:Moscatel – Late Harvest – Fortified Wine

5- Arak:Ksarak – Arak

6- Brandy:Vieille Eau de Vie



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D- Management and Sales:

Four known families are the owners of Chateau Ksara. Kassar and Chaoui are themajor shareholders owning 37% of shares each. Mr Zaher Chaoui is the current generalpresident of Ksara.

According to an interview made with Rania Chammas (responsible of public relations)and Bernard Beyrouthy (Junior Oenologist) on 5 May 2005, it has been mentioned thefollowing:

Chateau Ksara cultivated 300 ha of vines, it used to export wine firstly for over 311Lebanese restaurants situated in France, and then it has exported a part of its productionto Syria, Europe, USA and some Arabic countries.

Today Ksara is present in Africa, Australia, Austria, Bahrain, Belgium, Brazil,Cambodia, Canada, Cyprus, Czech republic, Denmark, Dominican republic, Finland,

France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Jordan, Malta, Poland,Spain, Sweden, Switzerland, Syria, The Netherlands, UAE, United Kingdom, USA andof course in its country of origin, Lebanon.

In 2003, Ksara has received over 70.000 visitors, produced more than 1.6 million bottlesof wine, and had over 75 permanent employees.

In 2004, Ksara has increased its production to 2 million bottles of wine, and has alsoincreased the number of employees to be 85.

It has been mentioned also that Ksara has used the services of many seasonal workers in

different years, who where engages in collecting the grapes. And that its wine productionis increasing of over 10 to 15 % every year.

Ksara remains one of the major and biggest wineries in lebanon, producing over 70% of all the country’s production.

Chart 1 – Illustrates Ksara’s wine bottle production for the years 2003 and 2004.

Chart1:

0

1

2

3

2003 2004

Ksara's wine bottle production (Millions)

Production (Millions)



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2- Chateau Kefraya:

A- History:

Chateau Kefraya is situated in the heart of the Bekaa Valley where the climate

includes 300 days of sunshine and some 1200 mm of average annual rainfall. The area’scomponents make it ideal for grapes cultivation.

Chateau Kefraya has extended its land of 300 acres on the foothills of Mount Barouk.And it was first created by its founder, chairmen, and chief executive Michel de Bustrosin 1951.

It continued to grow vines and produce wine despite being under siege and bombardmentthroughout the civil war that occurred between 1075 and 1990. De Bustros had toaccompany the wine containers by boat from the south of the country to Beirut, a 24 hour journey, because the roads were impassable.

Since then, Chateau Kefraya has established itself as a key winemaker in Lebanon andabroad, becoming available nationwide in Lebanon and exported to 35 countriesworldwide. Although 70% of Chateau Kefraya's wines are red, the estate has beenproducing white, rosé, sweet wines and Arack for many years now.

The red wines, created from five varieties of grapes, provide a unique taste and acomplex aromatic bouquet that is ever-changing with the aging of the respective labelsand vintages.

Since its establishment as a premier wine producer in Lebanon, Chateau Kefraya has

gained international praise from Europe, North America, and Asia. To create the mostperfect blend of flavors and tastes, Chateau Kefraya's founder, President and Chairman,Mr. Michel de Bustros, has brought to Kefraya the classical and noble French vinesCabernet-Sauvignon, Grenache and Syrah.

According to the ISO international certification; Chateau Kefraya is certified ISO9002:1994 and ISO 9001:2000 for its wine and arak production, viticulture, national andexport sales.

B- Mission and vision:

Chateau Kefraya and since 1979, the founder, president, and chairman Michel De

Bustros has oriented his vision to make a production of quality. In order to reach the

strategy of producing wines of quality, De Bustros has recruited a French oenologist who

was specialized in supervising the wine production process and making some

technological researches to ameliorate the production process and the wine quality.



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C- Products:

Chateau Kefraya produces different types of wines under 5 wine and arak

categories; we note:

1-

White Wine:a- Vins de plaisir:

La dame blanche du chateau kefraya 2008 – La dame blannche du chateau

kefaya 2007.

b- Vins de fetes :

Le blanc de blancs du château kefraya 2007 – Le blanc de blancs du château

kefraya 2007

c- Vins de prestinge :

Casta Diva 2004 – Vissi D’arte 2006

2- Rose Winea- Vins de plaisir :

La rosee du château kefraya 2008 – La rosee du château kefraya 2007

b- Vins de fetes :

Myst de château kefryaya 2008 – Myst de château kefraya 2007

3- Red Wine

a- Vins de plaisir :

Les breteches du château kefraya 2006 – Lea breteches du château kefraya

2007

b- Vins de fetes :

Le château kefraya 2002 – Le château kefraya 2003 – Le château kefraya

2004

c- Vins de prestige :

Le comte de M 2003 – Le comte de M 2004

d- Vin primeur :

Le kefraya nouveau 2008

4- Sweet Wines :

a-

Vins de charme :Lacrima D’oro – Le nectar de kefraya

5- Arak :

a- L’anis en folie :

L’arak de château kefraya.



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D- Management and Sales :

Château Kefraya is a Lebanese society that is owned by three partners, the

Lebanese durze leader Walid Junblat, Michel de Bustros, and the rest of shares are owned

by Fatahl family that is well known in the Lebanese commerce domain. Mr Michel de

Bustros is the current general president of Kefraya.

According to an interview made with Dalia Younes (Oenologist) on 28 April 2005, it has

been mentioned the following:

The vines that Kefraya used to collect are of over 300 ha. Due to their increasing

production, they also used to buy vines from people who used to cultivate them in

kefraya.

In 2000, Kefraya has produced over 1.5 million bottle of wine. And as a result of

exporting 40 % of this production, Kefraya has generated over 8250 millions of LL.

In 2004, Kefraya kept producing 1.5 million bottles of wine, and the number of itspermanent employees is over 75.

We note that 40 % of Kefraya’s production is exported abroad to many Arabic, European

and American countries. And it is also meeting success in the Lebanese market.

Kefraya considered as the second big wine producer in Lebanon.

Chart 2 – Illustrates Kefraya’s wine bottle production for the years 2000 and 2004

Chart 2:

0

0.5

1

1.5

2

2000 2004

Kefraya's wine bottle production (Millions)

Production (Millions)



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V. Companies situational analysis:

1- Companies SWOT analysis:

By analyzing and evaluating the most significant strengths, weaknesses,

opportunities and threats for the both companies Ksara and Kefraya, we can report thefollowing:

A- Chateau Ksara:

a- Strengths:

- Strong brand name, image and company reputation:

Ksara is a strong brand name that has a well known image and a good reputation in

the Lebanese market and abroad, because it is the oldest high quality wine industry createdin Lebanon in 1858 and the most popular.

- Wide geographic coverage:

Ksara started to export wine firstly for over 311 Lebanese restaurants situated inFrance, and then it has exported a part of its production to Syria, Europe, USA and someArabic countries. Today Ksara is present in more than 32 countries like France, Italy,UAE, Denmark, and USA …

- Diversification:

Ksara focuses on research and development in order to create new types of winesto satisfy the needs and wants of the majority of customers and present them totalsatisfaction. It offers currently 17 different types of wines, and it has entered into brandyand arack productions.

- High demand on Ksara’s wine products:

Ksara has increased its wine production from 1.6 million bottles to 2 millionbottles between the years 2003 and 2004 due to the increasing demand on its productsthat is increasing for over 15 % per year.



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b- Weaknesses:

- Lacks in advertisement:

Ksara’s main weakness is that it does not invest much in advertisements in order

to keep reminding the consumers about its existence. It has its own old image and doesnot have many advertisements on TV’s, billboards, magazines …

- Behind rivals in E-commerce capabilities:

Due to the technological advances, many companies offer now internet shoppingfrom their own website. Ksara has developed its online shopping in UK and USA, butshould develop the same step in Lebanon, because more and more Lebanese prefer toshop from the internet.

c- Opportunities:

- Expand the company’s product line to meet a broader range of customer needs:

Ksara has the opportunity to profit from entering into the production of other

products that are produced from vines, in order to create a wide range of products that

generates from the vines field and appear to meet a broader range of customer needs. By

that, Ksara would be the customer’s first choice when he needs any of the vines high

quality products.

- Expanding into new geographic markets:

Ksara could benefit from introducing wine products to countries where people

haven’t heard about it; by that it could gain a high market share and profits in order to

strengthen its position in different countries that are known as major wine producers like

France.

- Online sales:

Ksara could benefit from investing more in online sales, because due totechnological advances, more customers prefer the internet shopping to buy online from

the company itself. It should develop online sales in more countries like France and many

other European and Arabic countries.



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- Create a channel of distribution in many countries abroad:

Ksara should start investing in being physically available in different countries

abroad that has a large demand on its products and then create its own distribution

channel.

d- Threats:

- Low governmental support:

One of the main forces that affect the industry is the low support provided by the

government. The government should decrease the taxes from important industries like the

wines industry in order to encourage it to reach global markets and to invest the taxes cash

in improving its position abroad.

- Increasing competition that may squeeze profit margins:

Ksara has too much competitors in Lebanon and abroad. So it shares the wine market

share among its rivals (Kefraya, Musar, Fakra…). Ksara should pay an important attention

to prevent its rivals to squeeze its profit margins.

B- Chateau Kefraya:

a- Strengths:

- Strong advertising and promotions:

Kefraya’s major strength is the use of advertisements and different types of

promotions to build a good image in the mind of consumers and to encourage customers to

purchase its products

- Wine festival:

Kefraya possess a restaurant in which a wine festival is organized every year, and

wine products are introduced to the public.

- Wide geographic coverage:

Kefraya is working hardly on its geographic coverage, and is now present in

different countries across the world.



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b- Weaknesses:

- Loss in the market share:

As the production numbers shows, Kefraya’s yearly wine production remained

stabilized. It kept 1.5 million bottles in the years 2000 and 2004 while other competitors

are growing their market share.

c- Opportunities:

- Expand the company’s product line to meet a broader range of customer needs:

As the case of Ksara, Kefraya could also benefit from expanding its product line tomeet more consumer segments and different needs.

- Online sales:

Kefraya could also benefit from investing more in online sales, because due to

technological advances, more customers prefer the internet shopping to buy online from

the company itself.

- Create a channel of distribution in many countries abroad :

Kefraya should create a strong self owned channel of distribution to serve manycustomers in Lebanon and abroad.

d- Threats:

- Low governmental support:

It is a factor that affects many companies in different industries. Low governmental

supports could influence the company negatively and could result in high prices, and loss

of the market share and the company may meet later bankruptcy, because it will not beable to compete abroad with high prices.

- Increasing competition that may squeeze profit margins:

Also like the case of Ksara, Kefraya should pay attention to prevent its profit

margins from decreasing due to the strong competition in the wine field.



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VI. Recommendations:

By taking into consideration Ksara’s production, size, number of employees, brand

name, wide geographic coverage and diversification, it appears that it dominates theLebanese market and should be considered as a market Leader. And by taking into

consideration also Kefraya’s same factors, we note that it ranks the second Place after

Ksara.

In being considered as a market Leader, Ksara should use a defensive warfare marketing

strategy. It should create more differentiated products, even if the introduced product has

fewer profit margins and may reduce short-term profits, because this step accomplishes

the more important long-term goal of protecting the firm’s market share.

Also Ksara currently must block strong competitors moves, it must compete Kefraya by

creating successful strong advertisements and promotions that boosts its sales and image

positively.

According to the situation of Kefraya, and as being considered as a follower, it should use

an offensive warfare marketing strategy. Kefraya should reply to the leader Ksara by

searching for some points of weakness in its strength and attack them and it should try not

to engage in a broad attack, because the use of a broad attack is risky.

After all, we would like to note that both companies are somehow similar, few are the

characteristics differentiate them from each other and that decide the rankings. But in the

end, those companies have to work hardly to Capitalize on their key strength, overcome

their major weaknesses, avoid significant threats, and take advantage to the most

promising opportunities that allow them to improve their situation in the market by

gaining market shares.



VII. References:

Authors:

Mr. Philip Kotler and Mr. Kevin Lane Keller.Book title: Marketing Management (Twelfth Edition).

Mr. Michael J. Etzel, Mr. Bruce J. Walker, and Mr. William J. Stanton.Book title: Marketing (International Edition).

Mr. Philip Kotler, and Mr. Gary Armstrong.

Book title: Principles of Marketing (Eleventh Edition).

Cites:

http://www.lebwine.com/

http://www.chateaukefraya.com/

http://www.ksara.com.lb/

http://www.discoverlebanon.com/en/panoramic_views/bekaa/zahle/chateau-ksara2.php

http://www.discoverlebanon.com/en/panoramic_views/wines-of-lebanon.php

http://www.quickmba.com/marketing/ries-trout/marketing-warfare/

Products:

Ksara wine bottle

Kefraya wine bottle























Documents

The Lebanese Wine Industry