Background of 961 Beer
961 Beer: Launching a Lebanese Brewing Company
Hajjar, a 38-year-old entrepreneur, had an unorthodox background. He studied political science in Beirut and London and worked as a war photographer in Bosnia. Disillusioned, he eventually gave that up with a new perception that “no one really cares”; yet, he continued working as a journalist for the finance and business section of a Beirut newspaper. In 1997, he accepted a position in the financial sector requiring him to learn “hands-on” about investment banking, giving him wide business exposure. In 2003, while working on an aviation project, he saw a business opportunity for a low fare airline. He wrote a business plan and identified investors in the Gulf for his venture. Out of this MenaJet was born. However, the airline could only operate as a charter company — it was refused a licence to operate from Lebanon because it would
have created a strong competitor for the national airline. Hajjar later received an offer to set up a national airline, RAK, in the United Arab Emirates (UAE). He became chief executive officer (CEO) of RAK and advisor to the Crown Prince with a promising stock options package and the prospect of a five-year engagement. It was then he met Henrik, a Danish investor, with whom he discussed food. Hajjar was passionate about this topic; the Lebanese were well-known for their food and wines, although not for their beer even though the region was the cradle of beer civilization. The men discussed the possibilities of coming up with an excellent local beer that the Lebanese could be proud of and that could be placed on an international shelf with all the other prominent beers and stand out. A few weeks later, Henrik phoned and announced his interest in investing in a beer brewery in Beirut. It was early 2006 when Hajjar quit his stable and lucrative job as CEO in the UAE and returned to Beirut to an uncertain entrepreneurial future.
In 2006, when Hajjar started his business, the world beer market generated total revenue of US$294.5 billion and consumption volumes had reached a total of 123.8 billion litres, which was a growth of 2.7 per cent compared to the previous year.1 The beer market had an average growth of 2.4 per cent between 2002 and 2006.2 The global beer market segmentation overwhelmingly showed that premium and standard lager had the greatest percentage of shares with a combination of 80 per cent by value. The rest of the 20 per cent belonged to specialty beer (11 per cent), ales/stouts/bitters (7 per cent) and low or non-alcoholic beers.3 The top four largest brewing companies accounted for one-third of the world beer market share in terms of volumes produced.4 The beer industry was characterized by numerous mergers and acquisitions, which had proved to be the most efficient ways for many companies to get access to new geographic markets, especially emerging ones, and at the same time to strengthen their competitive position within the world market.5
The Lebanese market was dominated by a local company, Almaza, that was founded in 1933 and acquired by Heineken in 2002.6 For Heineken, the acquisition represented an opportunity to strengthen its position in the Middle East as Beirut was a strong exporting base to the surrounding countries. A little later in October 2003, Heineken purchased a second Lebanese brewer, which generated 75 per cent of sales based on non-alcoholic beers. With the acquisition, it was converted into a 100 per cent alcohol-free branch offering multi-flavoured beers. The alcohol-free branch also served as an important/export platform to the Gulf states where 60 million litres of non-alcoholic beer were consumed every year. The local competitor controlled 70 per cent of Lebanon’s $40 million beer market.7
1. Conduct a PEST analysis and identify key drivers that impact the industry.
2. Conduct a five forces analysis on the competitive environment surrounding 961 Beer.
3. Conduct a SWOT analysis on 961 Beer. Is the company well positioned to deal with threats as well as opportunities?
4. Evaluate Hajjar's decision to start an artisanal brewing company. Is Lebanon a good market for beer?
5. What can Hajjar do to expand the business further so as to remain competitive without compromising quality as well as the values that constitutes his 961 Beer venture?