8/19/2019 Lebanon Case Study Gt Group

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Global Tobacco – LebanonAmal Tawil

Amal Tawil, Marketing Director for Global Tobacco (GT) Lebanon sat staring at her computerscreen on a Frida afternoon! "he needed to prepare a compelling presentation for theDebenham#s Global "teering Team on Monda afternoon, and she did not know where to

start! The Global "teering Team had in$ited her to come and e%plain the declining market$olumes, political instabilit, and illicit imports for cheaper Debenham that were a&ectingher business# performance! 'lla oslo$, Debenham#s egional Marketing manager, did notget in$ol$ed as he wanted to keep apart from Lebanon#s failures! 't did not help either thatafter her return from maternit lea$e last ear, she had found a poor product relaunch ofDebenham, to a blend that she belie$ed was not right for the Lebanese consumer! "heneeded help! This could be an opportunit to ask for it! *ut what e%actl was she after+ hoshould she be asking for help+

The market

Lebanon was a small et signi-cant market in the Africa, Middle .ast and Turke (AM.T)group within GT! 't had been the second largest pro-t maker in the egion for the Group

between /01234222 but now has down to 5

th

, behind large $olume subsidiaries such as"outh Africa, 6igeria, Turke, and .gpt! (Table /)! hilst Lebanon#s $olume was wa behindthese large markets, its pro-ts were high gi$en their focus on 7remium brands, out of whichDebenham and *lend, were their ke products (Table 4)! Their cheaper mid3priced products(8ohnston "pecial) and low priced range ("hukran and amisse) had ne$er taken o& in thepast, but were slowl gaining $olume in rural areas!

"ince after the war in the /002#s, the Lebanese consumer had switched to 7remiumproducts! 't is belie$ed that their care3free attitude had been dri$en b their desire to en9othe best things in life, e$er moment of their life! Their penchant for branded, high :ualitproducts, had made them the trendiest people across the Middle .ast! 't was belie$ed thatwhate$er products were rele$ant in Lebanon, would e$entuall become successfulelsewhere! As such, Debenham, *lend and ;owbo Gringo, all e:uall shared the market!<owe$er, *lend and ;owbo Gringo were able to sustain their $olume share, whilst a declinehad been obser$ed in Debenham!

 The 7remium segment share had been taking a downward turn latel! The ci$il unrest andrecent bombings, had a&ected the purchasing power of the Lebanese consumer! This wasobser$ed also in other product categories, such as clothing, food and be$erages, and

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toiletries, where people were returning back to basics! 'n=ation was no forecasted to end upa >?@, higher than forecasted for the ear, which was originall /B! <er ;o7lan 42/5re:uirements, set at the start of the ear, had been a&ected b this -gure, as despite her$olume targets were set -%ed, she would need to make up the pro-t gap due to in=ationthrough higher sales or a consumer price increase!

Lastl, the ar had made the border#s more porous! ;heaper illicit product was nowa$ailable from .gpt! 't was estimated that the illicit trade now accounted for /5 of thetotal market (up from 5 twel$e months ago)C 7articularl, illicit (non dut paid) Debenham3.gpt was found one3price point below the local Debenham! And unfortunatel, it seemedthat Lebanese consumer#s also preferred the old Debenham#s blend found in the illicitproduct from .gpt! The ;orporate A&airs team had liaised with the Go$ernment#s ;ustomand "ecurit teams, and had estimated that closing the borders completel to illicit productwould re:uire an in$estment of /million G*7!

The Debenham blend relaunch in 2013Amal#s -rst pro9ect after returning from maternit lea$e, was to continue the blend relaunche&orts for Debenham! During her maternit, "haun Tullidge had co$ered her role andcon$inced the General Management that the new "* code M@5 was signi-cantl better

than the e%isting original blend of */4! Debenham was relaunched in 8anuar#/? with thenew cheaper blend based on the results of :uantitati$e ;onsumer 7roduct Test (;7T)!esults showed a directional (not signi-cant) win of M@5 $s */4 (Table ?)C <owe$er, toppledwith the cheaper product cost for M@5, it con$inced e$erone of the mo$e!

En the back of the relaunch#s earl success, b March#/5 "haun Tullidge was promoted toegional Debenham#s Director estern3.astern .urope and ussia (.A)! ussia had beenthe second market to launch M@5! Amal returned to her post and implemented a

communication campaign showcasing Debenham#s prestige and ?2 ears of high :ualit!'nstead, a team of hostesses and brand representati$es had been sent to liaise withconsumers for ? months! ?22 resources were deploed for three months at a total cost ofG*7/million! 't had been decided not to communicate to the consumer on the productchange, as it was considered that the change had been minimal! During the -rst threemonths of the launch, pipeline was -lled as customers took ad$antage of the strongdiscounted introductor pricing! <owe$er, once the promotions -nished, purchases hadstarted to settle and e$entuall start a downward trend (Table 4)! .$en though Amal hadtransferred mone from *lend#s budget to continue with an additional 43month discount forDebenham costing G*7/22k, customers did not bu the new product, claiming that theirsales to consumers had been soft! ;ustomers indicated consumers did not like the newtaste, and that e$en illicit brands were as good as Lebanese Debenham!

.$en though consumer research had been discontinued across the world dri$en b a cost3cutting e%ercise, Amal had gathered through market $isits and :ualitati$e feedback, that the

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new product had been to blame! ;onsumers had noticed that a something was di&erent withtheir product! The ha$e changed DebenhamC 'ts not m usual anmoreHC ' ha$e tried the.gptian Debenham, and its now better than LebaneseHC h bu the Lebanese if the:ualit has changed+C At least the .gptians can continue to keep good :ualitH! ith theprice of one Lebanese Debenham, ' can bu two .gptian#sI Ene for me, one for m friendH!ith consumer#s lower disposable income because of the war, cheaper :ualit products

were a welcome respite!

As all Lebanese product was manufactured in Turke and imported into Lebanon, a lot ofstock with the new blend was a$ailable as -nished product! The total estimated cost at Turke#s and Lebanese GT warehouses amounted to G*7522kC 7roduct at holesale andetail amounted to G*7?22k and if it was decided to change the blend again, therecollection e&orts of the old product would amount to G*7422k! 'n addition, as the TurkishFactor was bus manufacturing for other markets, the new product would onl be a$ailablein3market in 0 months time!

Competitionhile all this was happening, ;owbo Gringo had seiJed the opportunit, and had launcheda communication campaign ;owbo Gringo, the taste and :ualit that ou can trustH! The

had hired 522 promoters to aid holesalers and etailers to sell! 'nstant free3with3purchasepriJes were gi$en to small retailers and consumers during their annual Legendar ;ountrFesti$alH with good results! This annual e$ent had alwas impacted Debenham sales, butthis ear, it had hit particularl hard! The estimated cost for this ear#s e$ent, was G*7522,>?2 abo$e the e&orts for the pre$ious ears!

*lend was GT3Lebanon#s second most pro-table brand! Despite not being one of GT3Global#ske brand, it had managed to sustain the Lebanese operation! *lend was one of the fewbrands that had managed to mo$e from a Mid3priced brand, to a 7remium brand within a/2ear period! This through consistent :ualit and communication! <owe$er this ear, atotal of G*7@22k from *lend#s promotional and ad$ertising#s budget had been transferredinto Debenham#s ccle plan (Table 5)! *lend#s annual promotion of the Trance Music Festi$aland promoter#s acti$it had been cancelled to support the global brand! Despite, *lend hadmanaged to maintain its sales, but customers were starting to complain to Amal on the lackof support!

'llicit imports had alwas been an issue for Lebanon! <owe$er, after the recent citbombings, illicit trade in cigarettes had increase signi-cantl! .astern .agle, 6igerian;owbo Gringo and .gptian Debenham were the main illicit products found, especiall inthe border cities! .gptian Debenhams had increased its distribution into the larger cities,behind the e&orts of one particular distributor! Farid orad9i, an .gptian3Lebanese, ranFarid .nterprisesH, and was linked to illicit trade in se$eral industries such as alcohol andtobacco, but also had a reputable business in sugar products! Amal belie$ed that a legal.gptian subsidiar for Farid .nterprisesH, was purchasing stock from GT3.gpt, andshipping it into Lebanon! <a$ing Legal action started against Farid .nterprises would be

length and costl! As Farid orad9i was related to the "rian Go$ernment and had strongconnections in Lebanese politics, an action had to be threaded carefull! G*7/million wasre:uired, but unfortunatel, belie$ed that the results would onl be obser$ed in /4monthstime!

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The pitch.After two ear#s of poor performance, she needed to turn around the situation to maintainher 9ob! Another ear not achie$ing her targets (Table B) for another ear would set hercareer at GT back! 6e%t week#s meeting was crucial! "hould she focus on re:uesting $olume

relief, higher marketing budget or help for the ;orporate a&airs team+ <ow to present acompelling case for Lebanon and Debenham#s when the countr was in such turmoil+ <ow tocon$e the main issues without angering her egional Manager and "haun Tullidge who hadlaunched the new blend+ as it time to hang the glo$es and dedicate herself to famil life+