961 Beer: Launching a Lebanese Brewing

Company

0157/53 | Hrishikesh Arjun Nair | Section C

Introduction
Mazen Hajjar had quit his lucrative job in the UAE to start the first Lebanese craft brewer,
961 Beer, in 2006. Hajjar had to overcome a difficult political environment, predatory
practises by Almaza (Lebanons largest brewer) and consumers who were reluctant to
change.
The major differentiating factor behind 961 Beer was its Lebanese touch. Right from its
name (961 was Lebanons country code) to its ingredients, there was something Lebanese
about everything. They started marketing their product on social media and used it to
interact with their customers rather than mere advertising announcements. Their
Facebook group soon had about 1,300 members. By September 2007, they had set up a bar
at Beiruts Gemmayzeh district. This bar was a big hit in a city known for its fascinating
nightlife- there were 30,000 visits in 1.5 years. Their success spread through word-ofmouth and consequently, received a lot of attention in the international press.
It connected personally with the customers who could experience change with diverse
beers. The variety only added to 961s popularity with each new beer adding to its sales
and not cannibalizing on the existing products. However, it was bleeding money as every
case cost $13.6 to make and only brought in $12.5. It hoped to increase production and
banked on economies of scale to come to its rescue.

Problem Definition
The brand had grown quite rapidly over the past few years. By February 2009, it had
reached its annual production limit of 288,000 bottles. Nobody involved with 961 Beer
would deny that its journey has been successful so far but the challenge before it now is to
leverage their success to grow the company further.

Options
1.
2.
3.
4.

Maintain status quo and consolidate the business within its Beirut bar
Concentrate efforts on optimizing the production process
Expand within the Lebanese beer market
Target the international market

Criteria of Evaluation:
1.
2.
3.
4.
5.
6.

Achieving economies of scale

Maintaining its differentiating characteristic and not compromising on its values
Expanding its reach
Immunity from political problems
Capital investment required
Time horizon of the plan

Evaluation of Options:
1. Maintain status quo and consolidate the business within its Beirut bar
This strategy would allow the brand to satisfy criterion 2. 961 Beer has created a niche for
itself within the Beirut beer market and a dedicated bar can only perpetuate the theme. It
continues to be different from the rest- simple, pure, natural and, if I may add, unsullied by
scale and size. It also requires relatively little capital investment and a shorter time
horizon. However, it fails to meet two other important criteria. As it has done nothing about
increasing production, economies of scale remains unachieved and they will continue to
bleed money at the current rate unless they change their price structure. It remains
vulnerable to losing business from political instability within the country.
2. Concentrate efforts on optimizing the production process
This option will satisfactorily meet four of the six criteria above. The major drawback with
961 Beer so far has been that Hajjar and his partners have been coming up with ad hoc
solutions for all their technical problems. This was not a big problem when the company
was growing as anything else could have been prohibitively expensive but now that it has
grown, it needs help. Hiring specialists to take care of the production side of things will go a
long way in solving their problems. Specialists can bring the unit cost of beer down from
the current level of $13.6 and simultaneously raise production levels to meet demand. Like
Option 1, this option does not compromise on its values, requires little capital investment
(certainly more than option 1 but nothing that is out of the firms reach given the current
context) and a short time horizon. It also satisfies criterion 1- achieving economies of scale.
It, however, remains vulnerable to political instability and remains restricted in its reach.
3. Expand within the Lebanese beer market
This criteria fails to satisfactorily meet five of the six criteria listed above. It fails to achieve
economies of scale and is unlikely to retain its distinctive characteristics by expanding and
remains vulnerable to political problems. It requires a lot of capital investment as
advertising beyond Beirut would require strategies different from its current direct
advertising strategy. It would also take time for the strategy to work out. The only positive
is the bigger reach that it achieves.
4. Target the international market
This is an upgrade on Option 3. It fails to achieve economies of scale, requires a lot of
capital investment and time for the strategy to play out. It is also unlikely to meet criterion
2 (i.e. not compromising on its values). It does, however, immunize 961 Beer from trouble
caused due to political instability and increases its reach. This is the most feasible option if
the political situation in Lebanon gets out of hand.

Recommendation
I recommend Option 2 as it meets most of the criteria and addresses the firms need of the
hour. It needs to bring production costs down and meet demand simultaneously, and this is
the option that would most likely meet those objectives quickly.

Action Plan
The first thing that Hajjar needs to do is separate the bar from the beer. He and his partners
should take care of the day-to-day activities of the bar and should hire specialists to
optimize the beer production process, while continuing to use traditional craft brewing
methods. He should focus on getting sales at other bars and restaurants within Beirut
because 961s own bar is unlikely to grow beyond a point. It is also likely to be more
favourably viewed by other bar owners if Hajjar doesnt aggressively promote his own bar.

Contingency Plan
If the political situation affects local demand, Hajjar should turn to the international market
as this the only option that offers him a hedge against this risk.