Global Tobacco Lebanon

Amal Tawil

Amal Tawil, Marketing Director for Global Tobacco (GT) Lebanon sat staring at her computer
screen on a Friday afternoon. She needed to prepare a compelling presentation for the
Debenhams Global Steering Team on Monday afternoon, and she did not know where to
start. The Global Steering Team had invited her to come and explain the declining market
volumes, political instability, and illicit imports for cheaper Debenham that were affecting
her business performance. Illya Koslov, Debenhams Regional Marketing manager, did not
get involved as he wanted to keep apart from Lebanons failures. It did not help either that
after her return from maternity leave last year, she had found a poor product relaunch of
Debenham, to a blend that she believed was not right for the Lebanese consumer. She
needed help. This could be an opportunity to ask for it. But what exactly was she after? Who
should she be asking for help?
The market
Lebanon was a small yet significant market in the Africa, Middle East and Turkey (AMET)
group within GT. It had been the second largest profit maker in the Region for the Group
between 1980-2000 but now has down to 5th, behind large volume subsidiaries such as
South Africa, Nigeria, Turkey, and Egypt. (Table 1). Whilst Lebanons volume was way behind
these large markets, its profits were high given their focus on Premium brands, out of which
Debenham and Blend, were their key products (Table 2). Their cheaper mid-priced products
(Johnston Special) and low priced range (Shukran and Kamisse) had never taken off in the
past, but were slowly gaining volume in rural areas.

Since after the war in the 1990s, the Lebanese consumer had switched to Premium
products. It is believed that their care-free attitude had been driven by their desire to enjoy
the best things in life, every moment of their life. Their penchant for branded, high quality
products, had made them the trendiest people across the Middle East. It was believed that
whatever products were relevant in Lebanon, would eventually become successful
elsewhere. As such, Debenham, Blend and Cowboy Gringo, all equally shared the market.
However, Blend and Cowboy Gringo were able to sustain their volume share, whilst a decline
had been observed in Debenham.
The Premium segment share had been taking a downward turn lately. The civil unrest and
recent bombings, had affected the purchasing power of the Lebanese consumer. This was
observed also in other product categories, such as clothing, food and beverages, and

toiletries, where people were returning back to basics. Inflation was no forecasted to end up
a +34%, higher than forecasted for the year, which was originally 16%. Her CoPlan 2015
requirements, set at the start of the year, had been affected by this figure, as despite her
volume targets were set fixed, she would need to make up the profit gap due to inflation
through higher sales or a consumer price increase.
Lastly, the War had made the borders more porous. Cheaper illicit product was now
available from Egypt. It was estimated that the illicit trade now accounted for 15% of the
total market (up from 5% twelve months ago); Particularly, illicit (non duty paid) DebenhamEgypt was found one-price point below the local Debenham. And unfortunately, it seemed
that Lebanese consumers also preferred the old Debenhams blend found in the illicit
product from Egypt. The Corporate Affairs team had liaised with the Governments Custom
and Security teams, and had estimated that closing the borders completely to illicit product
would require an investment of 1million GBP.
The Debenham blend relaunch in 2013
Amals first project after returning from maternity leave, was to continue the blend relaunch
efforts for Debenham. During her maternity, Shaun Tullidge had covered her role and
convinced the General Management that the new USB code M45 was significantly better
than the existing original blend of B12. Debenham was relaunched in January13 with the
new cheaper blend based on the results of quantitative Consumer Product Test (CPT).
Results showed a directional (not significant) win of M45 vs B12 (Table 3); However, toppled
with the cheaper product cost for M45, it convinced everyone of the move.

On the back of the relaunchs early success, by March15 Shaun Tullidge was promoted to
Regional Debenhams Director Western-Eastern Europe and Russia (WEAR). Russia had been
the second market to launch M45. Amal returned to her post and implemented a
communication campaign showcasing Debenhams prestige and 30 years of high quality.
Instead, a team of hostesses and brand representatives had been sent to liaise with
consumers for 3 months. 300 resources were deployed for three months at a total cost of
GBP$1million. It had been decided not to communicate to the consumer on the product
change, as it was considered that the change had been minimal. During the first three
months of the launch, pipeline was filled as customers took advantage of the strong
discounted introductory pricing. However, once the promotions finished, purchases had
started to settle and eventually start a downward trend (Table 2). Even though Amal had
transferred money from Blends budget to continue with an additional 2-month discount for
Debenham costing GBP$100k, customers did not buy the new product, claiming that their
sales to consumers had been soft. Customers indicated consumers did not like the new
taste, and that even illicit brands were as good as Lebanese Debenham.
Even though consumer research had been discontinued across the world driven by a costcutting exercise, Amal had gathered through market visits and qualitative feedback, that the

new product had been to blame. Consumers had noticed that a something was different with
their product. They have changed Debenham; Its not my usual anymore; I have tried the
Egyptian Debenham, and its now better than Lebanese; Why buy the Lebanese if the
quality has changed?; At least the Egyptians can continue to keep good quality. With the
price of one Lebanese Debenham, I can buy two Egyptians: One for me, one for my friend.
With consumers lower disposable income because of the war, cheaper quality products
were a welcome respite.
As all Lebanese product was manufactured in Turkey and imported into Lebanon, a lot of
stock with the new blend was available as finished product. The total estimated cost at
Turkeys and Lebanese GT warehouses amounted to GBP$500k; Product at Wholesale and
Retail amounted to GBP$300k and if it was decided to change the blend again, the
recollection efforts of the old product would amount to GBP$200k. In addition, as the Turkish
Factory was busy manufacturing for other markets, the new product would only be available
in-market in 9 months time.
Competition
While all this was happening, Cowboy Gringo had seized the opportunity, and had launched
a communication campaign Cowboy Gringo, the taste and quality that you can trust. They
had hired 500 promoters to aid Wholesalers and Retailers to sell. Instant free-with-purchase
prizes were given to small retailers and consumers during their annual Legendary Country
Festival with good results. This annual event had always impacted Debenham sales, but
this year, it had hit particularly hard. The estimated cost for this years event, was GBP$500,
+30% above the efforts for the previous years.
Blend was GT-Lebanons second most profitable brand. Despite not being one of GT-Globals
key brand, it had managed to sustain the Lebanese operation. Blend was one of the few
brands that had managed to move from a Mid-priced brand, to a Premium brand within a
10year period. This through consistent quality and communication. However this year, a
total of GBP$400k from Blends promotional and advertisings budget had been transferred
into Debenhams cycle plan (Table 5). Blends annual promotion of the Trance Music Festival
and promoters activity had been cancelled to support the global brand. Despite, Blend had
managed to maintain its sales, but customers were starting to complain to Amal on the lack
of support.
Illicit imports had always been an issue for Lebanon. However, after the recent city
bombings, illicit trade in cigarettes had increase significantly. Eastern Eagle, Nigerian
Cowboy Gringo and Egyptian Debenham were the main illicit products found, especially in
the border cities. Egyptian Debenhams had increased its distribution into the larger cities,
behind the efforts of one particular distributor. Farid Koradji, an Egyptian-Lebanese, ran
Farid Enterprises, and was linked to illicit trade in several industries such as alcohol and
tobacco, but also had a reputable business in sugar products. Amal believed that a legal
Egyptian subsidiary for Farid Enterprises, was purchasing stock from GT-Egypt, and
shipping it into Lebanon. Having Legal action started against Farid Enterprises would be
lengthy and costly. As Farid Koradji was related to the Syrian Government and had strong
connections in Lebanese politics, any action had to be threaded carefully. GBP$1million was
required, but unfortunately, believed that the results would only be observed in 12months
time.

The pitch.
After two years of poor performance, she needed to turn around the situation to maintain
her job. Another year not achieving her targets (Table 6) for another year would set her
career at GT back. Next weeks meeting was crucial. Should she focus on requesting volume
relief, higher marketing budget or help for the Corporate affairs team? How to present a
compelling case for Lebanon and Debenhams when the country was in such turmoil? How to
convey the main issues without angering her Regional Manager and Shaun Tullidge who had
launched the new blend? Was it time to hang the gloves and dedicate herself to family life?