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.
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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 increase our expectations to 3%. The expectations for 2006 & 2007 are expected to continue at 2.5% GDP growth.
The tourism sector which is considered very sensitive to perceptions of risk is the most affected by the recent political situation in the country. According to the minister of tourism MR. Sarkis Said the tourism level has decreased by 20% from 2004. The Lebanese debt has come to about $35.6 billion which is equal to 180% of the GDP.
Although the economic situation in Lebanon has been risky lately, the expectations for an improved economy still exist.
The wine industry was affected by the recent economic conditions, but because a big portion of the industry production is exported the industry was not really affected. In addition due to the recent promotions that most of the companies have conducted led to improve the situation.
B- Population Demographics:
The industry is really affected by the country 's demographics, especially by the distribution of the religions in the country
The winery industry can be categorized into red and white wine segments. The red wine segment, measured by tonnage of varietals crushed, has grown at a compounded annual rate of 4.7% for 10 years from 1989 to 1998, and a year over year growth rate of 8.2% from 1998 to 1999. Judging by the strong growth rate experienced in the red wine segment, it is reasonable to conclude that the red wine segment is in the growth phase of the life cycle model. In addition, production of red wine varietals which are relatively unknown such as syrah and sangiovese nearly doubled in a year from 1998 to 1999. The white wine segment, however, is at the mature phase of its life cycle as the segment shrunk slightly by 0.42% from 1998 to 1999. Overall, the industry is still at the growth stage lead by growth in the red wine segment.
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The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there.
Since the late 1960’s, California wine-maker Robert Mondavi has been perceived by its stakeholders as one of the world’s most innovative and high-quality producers of fine wine. It is therefore not surprising that the company has endured great financial success; in fact, it has secured an impressive annual growth in earnings per share of ~28% over the last 8 years. Recently however, there have been many external forces that may serve to threaten the long-term profitability of the firm: sales have been decreasing over the last 6 months due to a staggering economy, Australian imports are on the rise, shrinking the size of the pie for domestic firms, and there has been an industry wide trend to consolidate; existing firms are merging and
The dynamics of the global wine industry are better understood through a brief history of wine as well as an overview of the wine making process. Some countries have longer historical and cultural ties with wine then others and that can affect the quality and perception of the product in the eyes of the consumer. Also, the conditions in which the wine grapes are raised and the processes used to make the wine can create a superior wine and therefore a competitive advantage.
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