The first half of 2020 has brought tremendous challenges to Lebanese businesses. Lebanon has suffered its worst economic and financial crisis since the civil war, resulting in recession, the plummeting of the Lebanese Pound value, and rising inflation. The situation was aggravated as the country went into complete lockdown for almost 4 months to reduce the spread of Coronavirus.
How have small businesses survived the last 6 months?
Berytech reached out to agrifood startups and small enterprises that are members of the QOOT Cluster to understand how they dealt with this snowball of challenges, getting a closer look at how they diverted their strategies and diversified their offering to survive this period and thrive in the quick-changing world order.
From improving efficiency, innovating new products, growing exports and online sales, and focusing on the community, read about how the QOOT Cluster members survived and thrived during these times of adversity.
The QOOT Cluster
QOOT was launched in 2019 as Lebanon’s first agrifood innovation cluster with the mission to help Lebanese agrifood innovators thrive. Championed by Berytech and the Kingdom of The Netherlands, the cluster brings together innovative businesses in food and agriculture while fostering collaboration, strengthening linkages, and increasing opportunities. Its purpose is to promote the sector to a new level of innovation and global recognition.
QOOT Cluster members consist of established startups, small, medium, and large enterprises dealing in food production, input supplies, processing, distribution, marketing, technology, and retail, among other verticals.
Agrifood Sector in Focus
According to the IDAL 2020 factbook, the agrifood sector was the largest contributor to the industrial sector output in 2018 accounting for 38% of industrial output and generating 2.9% of the country’s GDP.
The sector has an estimated size of US$1.6 billion with 1,245 agrifood companies constituting the largest share of total industrial firms in Lebanon – 48% of them located in Mount Lebanon Governorate. Exports of agri-food products accounted for 11.7% of total exports and 12.4% of industrial exports in 2019. Despite all external and internal challenges, agri-food exports have been growing at a compound annual growth rate of 2% since 2010, highlighting the sector’s potential and resilience.
Lebanese agrifood production is diversified with a wide range of traditional and innovative products being exported to regional and international markets. Arab countries are importing the highest share of Lebanese agri-food products, accounting for 48% of total agri-food exports in 2019 with Saudi Arabia, UAE, Qatar, Iraq, and Kuwait importing more than 35%.
As the sector faces compound challenges, agrifood entrepreneurs are capitalizing on the innovative aspect of their businesses.
Al Rifai is a roastery that traces its roots back to 1948. It has greatly innovated in its traceability system allowing it to trace back and forward every aspect of its production. Faced with the primary challenge of decreasing resources in times of economic uncertainty, Al Rifai implemented a new in-house designed software that optimizes the use of electricity and allows them to cut down their energy costs. They are now able to control all the machinery in the factory resulting not only in fuel savings but also in maintenance and optimized working hours of each of their machines. The company has implemented a ‘flip flop’ strategy to rotate employee working hours, dividing days off and unpaid leaves on all its team.
Managing financials and cash flow during the economic crisis is crucial. Go Baladi, a company that has innovated in producing a diverse range of organic goat dairy products working with local farmers to produce high-quality products from free-range goats took several initiatives and implemented a process with clear objectives and KPIs to make sure the company remains healthy. With the fluctuation of the currency and the increase in prices of packaging and maintenance, the team worked hard to minimize the immediate impact on the value received by their clients.
Anticipating hard times due to the crisis, the 209 Lebanese Wine team decided to outsource their logistics to reduce fixed costs starting at the beginning of the year. The company that has innovated in reshaping the wine retail industry, gathers more than 60 local wineries on its e-commerce platform, delivering bottles to doorsteps not only in Lebanon but around the world.
Selim Yasmine founder of 209 Lebanese wine explains that the crisis has pushed him into action even possibly having a good impact on his business: “Moving out of our rented warehouse in Hazmieh, we reduced rental and related charges, but we also gained a lot on efficiency by partnering up with Holdal logistics for storage, handling, and last-mile delivery. We streamlined the whole operations and became more efficient by giving this crucial part of our business to the expert in the field. By freeing our hands from day-to-day logistics, we were able to focus on our core business, be it brand development or new business and business partners relations. Even during the lockdown, we managed to stay operational and kept on serving our customers, and that was possible because Holdal was dealing with the sanitary measures with the utmost care and expertise. We also noticed that the lockdown had a positive impact on e-commerce sales, thus benefiting us directly, on top of the fact that the products we sell witnessed a minor price increase compared to the imported wine brands.”
Innovating New Products
Bioland is a certified group of organic farms, a food supplier and caterer making organic products more accessible to the Lebanese public. The company has innovated in creating three distillation sites in Lebanon which use steam technology in producing essential oils. During the crisis and to reduce its costs, the team directed its attention towards plants that do not require a lot of care nor expenses but at the same time have a large outcome. To maintain its quality promise, the company has slightly increased the price of its fruits and vegetables as the currency fluctuation has decreased its profit on the organic products they import to complete its product offering.
The producer of healthy alternative food items, Eshmoon Holistics, has been compelled to act on the urgency of the moment by looking into an increase in the prices of their products, but decided otherwise. The startup has innovated in using typically local carob molasses to sweeten their chocolates and desserts, creating a wide range of organic and gluten-free products.
Sticking to his philosophy in creating an accessible product, founder Samer Tutunji refused to change the price offering deciding to face the crisis by launching new innovative products in the same spirit and from the same source. He hopes to compensate for the losses imposed by inflation by expanding his client base locally and exploring international shipping. “We are confident to come out victorious!”
Limitations imposed by the currency fluctuation have provided a good opportunity for Gout Blanc to start producing new cheese types to fill the shortage on the ones that used to be imported. The company innovated in introducing two types of European goat breeds to Lebanon, giving it access to fresh goat milk yearlong. It was the first to produce spreadable goat Labneh and French goat cheese in Lebanon.
Facing the new challenge, Gout Blanc created 4 new types of cheese to diversify its offering. However, the company is tackling another serious challenge in buying feed for their animals. For that, it has dived into a project to produce feed locally as it works to supply the required land and equipment to achieve it.
Growing Exports and Online Sales
“There’s a lot of uncertainty right now, but one thing is clear: while it seems to be in the distant future, we will emerge from the crisis,” assures the co-founder of SmartGourmet Jad Atallah. The startup has designed an innovative machine that cooks raw products under vacuum inside a plastic bag. It has created a range of traditional Lebanese foods with no preservatives, achieving a long shelf life in refrigerators.
Since the beginning of the financial crisis, the SmartGourmet team worked quickly to purchase raw material from its available cash at the local banks and adjusted its distribution price list to follow the currency fluctuation. Yet, the company has materialized new export deals to bring fresh money knowing that SmartGourmet relies on export sales by 75%. As the lockdown was imposed because of the COVID-19 pandemic, the company divided its production team into groups to keep the production lines functional, while respecting the safe distancing and monitoring closely the safety process and procedures inside the factory. “We set a comprehensive and logical communications structure for our staff, customers, suppliers, and distributors with a 24-hour response readiness. The impact on SmartGourmet Lebanon was minimal,” confirms Atallah.
Hum’N Go is another startup that is putting all its eggs, or in this case hummus, in the export basket. The company has innovated a grab and go snack line with hummus and crackers. In the face of the crisis, the startup is connecting with importers, retail chains, and potential customers in the GCC. They are also researching new market trends that are valorizing healthy food and snacks that can be easily delivered to clients in the comfort of their homes. “We are also getting special interest from online stores and chains since Hum’N Go is a practical product to have on these platforms,” comments co-founder Samer Sfeir. “We need the support of Lebanese Embassies to connect us with potential customers for our Lebanese products around the world. We also need support from donors in medzo funding – between US$100k and US$300K – in grant form that can be used for operations, marketing and sales and not only machinery as export is expensive yet very rewarding on the sustainability and growth level.”
Grapeful is an agri-food startup also searching for alternatives to export its Lebanese products outside of Lebanon. The lockdown has given its founders more time to research their options. The company has innovated an all-natural grape syrup, based on the original technique of grape molasses production that it is using as a sweetener in spreads, hummus bars, and cereal bars. However, tackling a new market might require products that are better fit for their designated market. Business development includes contacts in the GCC, in the UK and the US but because the whole world is slowly emerging from lockdown, moving forward is taking time. The company is also looking for online alternatives believing that online deliveries are becoming an essential endeavor.
Focusing on the Community
Elia El Beainou – founder of Cave des Ours, launched his company in direct response to the apple crisis that faced his apple-growing community a few years back. Cave des Ours is the first apple winery and distillery in Lebanon, innovating a new method and technology in transforming apples into wine and arak. With the same communal spirit in which he launched his company, Elia decided to face the economic and health crisis the best way he knows how, by stopping his entire operation and focusing on directly supporting his community through providing assistance to people in need and supplying his community with neutral alcohol at 70° for free.
The Good Thymes has also reached out to support its community while expanding its product range. Founder Fady Aziz innovated in creating a modern brand that offers ten different thyme mixes, from the classic to the more sophisticated. He was able to take a common local ingredient and develop a story and a brand about it while creating a rural development project in his production village.
In dealing with the challenges brought forward by the economic crisis, Fady stopped the production of several of the high-cost mixes that include imported products. He also introduced a selection of mouneh produced by the women who work in the Good Thymes production facility and from producers around his village.
“The products are hand-picked and of high quality, an act in trying to help our community to sustain itself during the crisis and to offer diversity to our clients to make up the lack of the range of our original products. We’re also trying to become a one-stop shop for high-quality Lebanese products,” confirms Aziz. The startup is focusing on expanding its local presence as local shops are looking to replace missing items with local brands while strengthening its online sales to reach a worldwide audience.
With a mission to empower its members with the right environment to thrive, the QOOT Cluster team has been organizing a series of virtual learning sessions tackling the various challenges brought forward by the crisis. The sessions covered different collaboration initiatives in addition to partnerships between industry and academia. They also tackled research and development projects shedding light on consumer behavior in times of crisis.
The Cluster was created under the Agrytech Agri-Food Innovation Hub Initiative, championed by Berytech with the support of the Kingdom of The Netherlands between 2017-2019.
Under the new ACT Smart Innovation Hub initiative, also co-funded by the Dutch, Berytech aims at strengthening business advancement, economic growth and job creation in the Agri-food and Cleantech sectors in Lebanon. Through the Innovation Hub, Berytech continues its support of the QOOT Agri-Food Innovation Cluster, accompanying its members in their innovation strategies and competitiveness, ultimately leading to efficiency and quality exports from Lebanon.