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Feasibility Study-Honey Collection and Marketing Center 4/27/11

Etudes et Consultations Economiques s.a.r.l. 1

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY .............................................................................. 3 2 PROJECT DESCRIPTION ............................................................................ 4 3 PRODUCT STRATEGY ................................................................................ 4

3.1 PHYSICAL CHARACTERISTICS OF HONEY .................................................... 4 3.2 COMPOSITION OF HONEY .......................................................................... 5 3.3 THE PRODUCTS ........................................................................................ 5 3.4 USES OF HONEY ...................................................................................... 6 3.5 HONEY PRODUCTION PROCESS ................................................................. 6

3.5.1 Processing ...................................................................................... 7 3.5.2 Purification ...................................................................................... 7

3.6 PACKAGING.............................................................................................. 8 3.7 STORAGE................................................................................................. 9 3.8 QUALITY CONTROL.................................................................................... 9

3.8.1 Adulteration ................................................................................... 10 3.8.2 Production quality ......................................................................... 10

3.9 BEEKEEPING EQUIPMENT ........................................................................ 12 4 MARKET ANALYSIS .................................................................................. 14

4.1 SITUATION IN THE MIDDLE EAST .............................................................. 14 4.2 LEBANESE HONEY CONSUMPTION ............................................................. 15

4.2.1 Consumption Trends..................................................................... 15 4.2.2 Source of honey ............................................................................ 17 4.2.3 Consumer’s perception of honey .................................................. 17 4.2.4 Color Preference ........................................................................... 18 4.2.5 Texture preference........................................................................ 18 4.2.6 Size preference ............................................................................. 19 4.2.7 Package preference ...................................................................... 19

4.3 MAIN COMPETITION ................................................................................. 20 5 TARGET MARKET ..................................................................................... 22 6 SWOT ANALYSIS ...................................................................................... 22

6.1 STRENGTHS ........................................................................................... 22 6.2 WEAKNESSES ........................................................................................ 23 6.3 OPPORTUNITIES ..................................................................................... 24 6.4 THREATS ............................................................................................... 25

7 MARKETING PLAN .................................................................................... 26

7.1 PRICING................................................................................................. 26 7.2 SALES CHANNELS ................................................................................... 27 7.3 ADVERTISING AND PROMOTION ................................................................ 27 7.4 PUBLIC RELATIONS ................................................................................. 28



8 FINANCIAL PLAN ...................................................................................... 29

8.1 INITIAL INVESTMENT ................................................................................ 29 8.2 MAJOR ASSUMPTIONS ............................................................................. 30 8.3 PROJECTED INCOME STATEMENT............................................................. 33 8.4 PROJECTED BALANCE SHEET .................................................................. 34 8.5 PROJECTED CASH FLOWS ....................................................................... 35 8.6 RATIO ANALYSIS ..................................................................................... 35 8.7 BREAK-EVEN ANALYSIS ........................................................................... 36 8.8 SENSITIVITY ANALYSIS ............................................................................ 37

9 RECOMMENDATIONS AND KEY SUCCESS FACTORS ......................... 38 10 ECONOMIC IMPACT EVALUATION ...................................................... 38



1 Executive Summary The proposed project consists in establishing a honey collection and marketing center in Bint Jbeil caza. The center will collect honey from the beekeepers in the South region, and handle storage, packaging and marketing of the honey. Moreover, the center will sell some basic beekeeping equipments. The ICU has established a center for beekeeping services including laboratory for testing as well as honey extraction services. The center for collection and marketing complement the services provided at ICU. It will mainly use the laboratory testing services for all the honey received. The initial investment for the honey center is estimated at $68,032, which includes $16,553 in equipment and $51,479 in working capital needs (including beginning inventories). The main assumptions consider average yearly sales of 13,465 Kg, which represent around 20% of the beehives production in Bint Jbeil. The projections are taken over a period of 5 years. The honey collection center is expected to provide an average annual net profit of $15,642. It will be able to distribute dividends of $20,000 starting in year 3. The honey collection center provides an internal rate of return (IRR) of 20% and a payback period of 7.5 years. These results show that the project is feasible. A worse-case scenario was developed with the assumption of 17% of the annual beehive production processed gave an IRR of 8% and a payback period of 8.8 years. A best-case scenario based on the sale of 25% of the beehive production provided an IRR of 27% and a payback period of 4.9 years. The collection and marketing center of honey is expected to support beekeepers. In fact, it will offer 4 job opportunities and will positively influence the economic and social environment in the region. More importantly, it will entice additional persons to adopt beekeeping activities, especially when they know that all the honey produced will be marketed and sold through the center.



2 Project description The project consists in developing a honey collection, storage, packaging, and marketing center in Bint Jbeil caza. The following table gives an overview of the number of beehives, beekeepers as well as annual production of honey in Bint Jbeil

Source: Ministry of Agriculture/FAO 1999 Survey In order to compete with imported as well as other local honey products, a complete and professional process including packing, labeling, standardization, processing, storage and proper distribution to market outlets will be implemented. Furthermore, the center will sell beekeeping equipments. This service will be very helpful for beekeepers, since most of them have to go to Beirut to buy their equipment. 3 Product strategy Since the earliest days honey has been a source of food and energy. From the first food-gatherers to the ancient civilizations of the Egyptians, Greeks and Romans – records show the value of bees and their honey. 3.1 Physical Characteristics of Honey Honey is primarily of vegetable origin. Its sugars are formed by a mixture of the sun, water and carbon dioxide in the air. Freshly extracted honey is a viscous liquid. Viscosity is an important

technical parameter during honey processing, because it reduces honey flow during extraction, pumping, settling, filtration, mixing and bottling.

Another physical characteristic of practical importance is density.

Honey Data

Number of beehives 4,809

Number of beekeepers 330

Each beehive produces 14 Kg per year

Total production of beehives 67326 Kg per year



The low surface tension of honey makes it excellent humectants in

cosmetic products. Color in liquid honey varies from clear and colorless (like water) to dark

amber or black. Color varies with botanical origin, age and storage conditions, but transparency or clarity depends on the amount of suspended particles such as pollen. The most important aspect of honey color lies in its value for marketing and determination of its end use. Darker honeys are more often for industrial use, while lighter honeys are marketed for direct consumption. In many countries with a large honey market, consumer preferences are determined by the color of honey (as an indication of a preferred flavor) and thus, next to general quality determinations, color is the single most important factor determining import and wholesale prices.

Crystallization is another important characteristic for honey marketing,

though not for price determination. In temperate climates most honeys crystallize at normal storage temperatures.

3.2 Composition of Honey Honey is made up of: Natural sugars 80% (mainly laevulose, dextrose and glucose) Moisture 17% Mineral traces 3%. (Dark honeys are the richest in minerals)

3.3 The products Honey: there are several types of honey that are usually classified according to the type of food that the bees have had to produce it. Most of the honey produced around the world, and definitely all the Lebanese honey, is “poly-floral”, i.e. the bees have fed on the nectar of various types of flowers. In Lebanon, “poly-floral” honey is sometimes called “black” or “mountain honey. Beeswax: it is of high quality and is much preferred to the industrial chemical wax that does not have the same properties. It is processed and melted to produce wax sheets for beehives, or even other goods such as candles. The beeswax produced in the beehives can help the beekeeper save on maintenance costs and even generate some additional income if part of the wax is sold in a processed form. Beeswax can be used as a base in many products including lipstick, hand creams and beauty creams. Beeswax is also used for furniture polish and candles.



Pollen: it is known as "the world’s first health food" because its healing powers were first described in ancient writings as a "super food" because pollen contains nearly every known nutrient required for a balanced human diet. Royal jelly: living on a milky white glandular secretion called royal jelly, the Queen lives for 5 years! For humans, the nutrients in royal jelly supply energy, alertness, and vitality. All of the above products can be sold in their ‘natural’ state (i.e. in the state they were extracted in). However, processing and packaging can be of significant value-added, in addition to contributing to improve the products’ quality. 3.4 Uses of Honey 90% of the honey produced in the world is eaten directly as table honey. The remaining 10% is used as in ingredient in a diverse range of products. Food: Honey is a widely utilized ingredient in many recipes, baby foods, breakfast cereals (sprayed on cornflakes), meat packaging (a flavor enhancer in ham), preserves and confectionery. Cosmetics: Honey is found in many soaps, shampoos, conditioners, face and hand lotions. Alcohol: Fermenting honey produced the first intoxicating beverage. This was known as mead. The popular French liquor, Benedictine also contains honey, as do numerous Japanese wines and the Scotch whisky, Lochan Ora. Medicine: Honey is claimed to be a successful remedy for sobering drunken patients, due to its high fructose content. Honey is still sometimes used as a dressing for treating burns and open wounds, but perhaps its most prominent use in the pharmaceutical industry these days is in cough mixtures and throat lozenges. 3.5 Honey Production Process Bees collect nectar, pollen and water each day to take back to the hive so that future generations can live. The raw nectar comes from flowers. They mix this with secretions from their glands, thereby transforming it and after it is deposited in the comb, it ripens into honey. Bees need two different kinds of food. One is honey made from nectar, the sugary juice that collects in the heart of the flowers. The other comes from the



anthers of flowers, which contain small grains called pollen, which differ from flower to flower. The flowers from which the nectar is collected give the honey its flavor and color. The bees themselves are able to distinguish between the perfumes of the flowers. Hives are moved from site to site to follow the flowering of the plants. As most plants only flower for a few months of each year, some beekeepers in Bint Jbeil, move the hives to the coast during the winter months so that they can have a harvest during the spring and then take them back to the mountain for the summer season harvest. This way, they are able to take advantage from 2 harvests.

3.5.1 Processing Once the honeycomb (or cell) in the hive is capped with beeswax it can be collected by the beekeeper (Apiarist). The honeycomb is removed from the hive by the beekeeper who uses a knife (or cutter) to take the wax capping off without damaging the rest of the honeycomb. The honeycomb is then placed in an extractor. Revolving baskets spin around until the honey is released. Little damage is done to the honeycomb, which is then returned to the hive. The bees then set about removing any leftover honey plus repairing and polishing each cell in preparation for new supplies of honey. Honey is collected from the extractor and then strained to remove any leftover beeswax. Once this is done the honey can be bottled.

3.5.2 Purification The next step is the removal of any impurities such as wax particles, other debris and air bubbles incorporated during extraction. There are two practical techniques: settling and straining. The first simply consists of leaving the honey in a suitably large container, so that impurities can separate according to their specific weight, i.e. air bubbles, wax particles, insect pieces and other organic debris float to the surface while mineral and metallic particles drop to the bottom. The surface scum can be removed carefully, or honey can be drawn off near the bottom for bottling without disturbing either surface scum or bottom sediment. Settling velocity varies with particle size (the smallest settle the slowest), container size and honey viscosity, i.e. moisture content and temperature.



Straining can be used instead of, or in addition to, settling. It is more frequently used in larger processing plants, where many tons of honey are processed every day and where it is therefore inconvenient and uneconomic to immobilize honey for as long as is required for settling. Strainers can be simple metallic screens, preferably covered with a fine nylon mesh (fine nylon stockings are the best) or a nylon sack filter submerged in a tall, narrow tank. The sack-like filter can also be made of several layers of increasingly finer metal screens (perforated metal sheets). These filters have the advantage of a large filter surface that can be submerged to avoid any further inclusion of air. The finest mesh size used commonly has holes of 0.1 - 0.2 mm diameter. The temperature, for this kind of straining, must be near 30°C. Even the small buyer sometimes has to clean purchased honey, since most beekeepers do not process their honey to sufficient standards for inclusion in other products and often not even well enough for bottling for direct retail sale. Here too, it is important to proceed as soon as possible after purchase, before crystallization commences. On a small to medium scale, settling is usually the least expensive and least labor-intensive method, particularly if the honey barrels can be stored for a few days in a warm (30 – 35°C) room. It is also the technique adopted by the Lebanese beekeepers. Extracted, cleaned or purified honey is ready to be consumed directly or to be included into other products. But processing technology does not end here. Other techniques are employed to prepare a product of uniform, constant and agreeable appearance, or to prevent the only possible storage problem: fermentation. 3.6 Packaging The bottle or package should be leak-proof and airtight so as to safely contain the honey, but also present the product in an attractive form, inciting the consumer to buy it. The label, container shape or other packaging material should be chosen accordingly. Labels also have to provide all legally required information and preferably a lot number to help the producer track down any problems. Similar to all foodstuff, Lebanese regulations request the following information to be available on the label: Product and brand name Country of origin Ingredients, in descending order of proportion



Additives, if any Net content in metric units Production and expiry dates Manufacturer's and/or packer's name and address Special storage, transportation and preparation The label can be in one of the following three languages: Arabic, French or English.

For most retailing of pure honey, the preferred packing material is glass followed by plastic or, for large quantities, metal containers coated with materials appropriate for contact with acidic food. In any case, the containers have to have a secure airtight lid. Screw top lids on glass jars are the most secure. It would be good if the package choice could also consider recyclability, disposability and environment-friendly manufacturing of the packing materials. Following the European and American packing methods, some Lebanese beekeepers are using the second quality glass jars produced locally with an imported metallic cap to prevent the penetration of atmospheric humidity into honey causing its spoilage in a short period of time. Honey is offered to consumers in glass jars of different weights; however, the 1 Kg, the 500 g as well as the 150g packing are most popular. 3.7 Storage Storage rooms should have a temperature near 200C and a relative humidity of less than 65 %. Storage of honey at more than 25 0C causes quality loss with time, due to progressive chemical and enzymatic changes. Heat and sunlight (mostly the ultra violet (UV) spectrum) can destroy the quality of honey either in brief high exposure or in low-level exposure over a long period of time. 3.8 Quality control The quality control of honey has two principle purposes: to verify its genuineness i.e. to reveal possible fraud such as artificial honey, adulteration etc., and to determine its quality in respect to the needs of the processor and the market. The composition limits of the natural product are defined internationally by the



Codex Alimentarius Commission (Codex Alimentarius, 1989 and 1994), which also mentions the officially approved analytical methods.

3.8.1 Adulteration Most simple adulterations of honey can be detected if certain characteristics exceed the legal quality standards, for example by a high sucrose content (> 8%) if simple cane or beet sugars are added, or high HMF values if acid hydrolyzed corn syrup is used. Simple field methods for detection of adulteration without laboratory equipment are based on taste, viscosity (most adulterated honey is thinner, but so is honey with a high moisture content), or solubility in cold water. If a droplet of honey poured into cold water stays together without dissolving rapidly, it is most likely pure honey. This can be observed best against the light with a dark background. If the edges of the droplet or the thread start dissolving during pouring, the honey is likely to have been adulterated or has a very high water content. In any case it should be kept separate from other honey until more precise tests can be carried out.

3.8.2 Production quality Honey needs to be controlled in a laboratory, mainly to check its acidity. HPLC chromatography equipment is needed for quality control purposes. Furthermore, the parameters most frequently controlled by laboratories that receive honey for further processing are: The condition of containers, Cleanliness, The homogeneity of the shipment, Organoleptic characteristics (taste and aroma), Color, Moisture content, Degradation of honey measured by diastase and HMF content, Composition of principal sugars and microscopic examination for the

determination of botanical and geographical origin. The ICU center offers some quality control services for the area of Bint Jbeil. Nonetheless, smaller manufacturers can perform simple measurements themselves such as color, taste and moisture determinations while they mainly have to rely on the ICU laboratories for more detailed analysis.



Outline of quality control measures taken by a typical European honey processor on honey prior to processing

Parameters Control method Limits Containers Direct observation Adequate material and

conditionHomogeneity of lot Direct observation Apparent homogeneity

according to observable characteristics in whole shipment

Impurities Direct observations of honey surface in container, filtration, or polarized light test

Presence of limited impurities such as bee and wax particles

Organoleptic characteristics Organoleptic analysis on an average sample

Absence of defects such as strange odours and tastes, fermentation, overheating or otherwise unpleasant characteristics. Correspondence to samples from producers and to foreseen standards for end product classification

Colour Optical comparison with Pfund meter of according to Lovibond (Gonnet, 1986a)

Correspondence to producer sample and foreseen standards for product type (Accorti et al., 1986)

Moisture content Refractometer measurements (Codex Alimetarius, 1989)

Less than 18.0% for top grade (less than 21% max. limit)

HMF Colorimetric method (Codex Alimentarius, 1989)

Less than 10mg/kg for top grade (40mg/kg is maximum limit)

Microscopic characteristics Quantitative and qualitative pollen analysis (Louveaux et al., 1978)

Correspondence to declared botanical and geographic origin

Others Official methods According to legal limits



3.9 Beekeeping Equipment The center will be selling the following equipment: Hives at a price of 20$/hive Hives with the bees at 70$/hive

Extractors (manual) at 200$

Smokers at 10$



Cover-all and gloves at 34$



4 Market Analysis 4.1 Situation in the Middle East According to the statistics of the Arab Organization For Agricultural Development (A O A D), the production of honey in Arab countries in 1988 was 13,225 tons. According to the same statistics of the researcher, it was 27,944 tons in 1998, which represents a growth of 111%. In Arab countries, Egypt comes first with a production of 16,000 tons of honey yearly, which equals 57% of the total production in Arab countries. Second to Egypt, there is Morocco, which produces 4,500 tons of honey. The Yemen follows with 1,706 tons, followed by Tunisia with 1,445 tons. Per Capita Consumption of Honey in the Middle East Middle Eastern people are big honey consumers. According to the Food & Agricultural Organization of the United Nations, the per capita consumption in kg is as follows:

Bahrain 0.39

Egypt 0.31

Jordan 0.24

Kuwait 0.83

Lebanon 0.70

Oman 0.40

Saudi Arabia 5.40

UAE 1.50



4.2 Lebanese honey consumption

4.2.1 Consumption Trends The average monthly amount of money spent on food per family is $419.55. Of this amount, an average of $112.04 is spent on buying fruits and vegetables, $49.64 on buying cereals, $85.33 on buying dairy products, $71.22 on buying pastries, and $25.6 on buying honey.

The consumption of honey with other food items varies: 47.2% of the individuals consume fruits with honey 2.1% consume vegetables with honey 14.8% use cereals with honey 42.8% use dairy products with honey 36.8% use pastries with honey 34.4% use juices with honey 29.3% consume it alone or with bread 11.1% consume it with other food products

Food bought Monthly average amount spentFruits and vegetables $112.04Cereals $49.64Dairy products $85.33Pastries $71.22Honey $25.60Other $75.73TOTAL $419.55



Source: Economic and marketing modeling of commercial apiculture in Lebanon, Olaik Rami Salman (AUB library)

The average purchase of honey per family per year is 5.031 Kg.

47% of Lebanese families purchase less or equal to 3 Kg of honey per year

40.9% of the Lebanese families purchase between 3 Kg and 6 Kg of honey per year

12% purchase more than 6 Kg of honey per year As a result, 87.9% of the Lebanese families consume less than or equal to 6 Kg of honey annually.


Best way to consume honey

Honey&other food products

5%

Honey&juices16%

Honey& Pastries17%

Honey& Dairy Products

20%

Honey&Cereals7%

Honey&Vegetables

1%

Honey&Fruits21%

Alone or w ith bread13%

Purchase of honey per year in LebanonMore than 6Kg

12%

3Kg-6kg41%

3Kg or less47%



4.2.2 Source of honey In general, Lebanese consumers prefer local non-branded honey, bought

directly from the beekeeper. In the market, 64% are local brands while 31.5% are foreign brands.

The most preferred source of honey is the beekeeper’s house or farm,

since it is considered a trustworthy source to buy pure honey from and it is used by 67.2% of the Lebanese consumers.

4.2.3 Consumer’s perception of honey 91.9% of honey consumers consider honey as an important source of

nutrition 94.9% of honey consumers believe that honey is good for health care 89.7% of honey consumers know that honey is important for energy and

cosmetics.


How honey is perceived in Lebanon

important source of nutrition

33%

good for health care35%

important for energy and cosmetics

32%



4.2.4 Color Preference

Moreover, the majority of honey consumers tend to think that light color as well as liquid honey reflects better quality. In fact, honey’s color represents a primordial aspect for the client. Thus, lighter honey is much more demanded for commercial use than darker honey that is more often for industrial use. Moreover, color is the single most important factor determining import and wholesale prices.

25.4% of honey consumers believe that light color reflects better quality 20.1% of honey consumers believe that dark color reflects better quality 54.4% of honey consumers think that color doesn’t reflect better quality

of honey


4.2.5 Texture preference 35.2% of honey consumers believe that liquid honey reflects better quality 28.7% of honey consumers believe that crystallized honey reflects better

quality 36.7% of honey consumers believe that texture doesn’t reflect quality.

Importance of honey color

Light color25%

Dark color20%

No importance55%




4.2.6 Size preference

49.2% of Lebanese consumers prefer the 1 Kg jars whereas 47.7% prefer the 0.5 Kg jars. Size preference can be justified as most of the people choose the size that is most suitable for family consumption as well as the size that preserves the freshness of honey.

4.2.7 Package preference The preferred package for honey is the glass jar as it is chosen by 91.3% of the honey consumers whereas 6.8% select the plastic jar and 1.8% prefer other forms. Buyers justify this choice by claiming that glass jars require fewer chemicals for storage and it can highly preserve the quality and also is recyclable. Besides, honey can be seen through the glass jar, as the visual impact is very essential to the Lebanese consumer.

Texture preference

Liquid honey35%

Crystallized honey29%

No preference36%



4.3 Main competition The main honey producing countries are:

o Russia o United States of America o Argentina o Mexico o Canada o China o Germany o Hungary o Greece o Australia

Argentina is the third largest honey producer in the world, after China and the United States, and the second ranking honey exporter. Nevertheless, in the Lebanese market, imported honey products are not in a dominant position. Indeed, on the market, 64% are local brands while 31.5% are foreign brands. Moreover, statistics reveal that 39.3% of the honey consumers in Lebanon prefer local honey while 30.1% prefer imported honey. In fact, imported honey is perceived as a less natural, yet industrial product containing artificial components. Also, 67.2% of the Lebanese consumers prefer to buy honey directly from the local beekeepers. The most predominant foreign honey brand is the German “Lagnese”. 58.9% consume local honey with no brand 26.3% consume the Lagnese brand 14.7% consume other brands



Source: Economic and marketing modeling of commercial apiculture in Lebanon, Olaik Rami Salman (AUB library) Imported Honey: 400 tons Exported Honey: 40 Tons

The following table gives an idea about the different brands and the pricing of honey products (in LBP) on the Lebanese market:

Source: Compiled by ECE N/S: Not Sold As demonstrated in the above table, the majority of the honey found on the Lebanese market is local. Few exceptions include Lagnese (present in all the supermarkets) as well as the Greek brand Attiki and the French brands “Miel de Bruyere” and “Monoprix Gourmet” whose distribution channels are somehow

Aoun-Le Charcutier Spinneys Monoprix

Lagnese (1Kg) 23 625 25 675 24 990

Lagnese (250g) 6 660

Al-Chifaa (1Kg) 16 250 16 550 16 680

Al-Chifaa (250g) 9790Al-Chifaa (50g) 5495Kaddoum (1Kg) 18 300 19 900 19 900Lebanese Mountain Flower (1Kg) N/S 25 675

Jabal El Cheikh (500 g) 9995Attiki (250g) N/S N/S 9 900

Miel Bruyere (250 g) N/S N/S 6445

Monoprix Gourmet (500g) N/S N/S 8 880

Brand preference

Local honey with no brand

59%

Lagnese Brand26%

Other brands15%



limited. 5 Target market Cities and large towns that are in the vicinity of villages where there are beekeepers are usually potential markets for the beehives products. Saida, for instance, is a major market in the South of Lebanon. Bint Jbeil honey collection and marketing center will aim to supply honey to all the Lebanese regions, increasing its market coverage and distribution. To achieve this goal, the center will take advantage of the good reputation that the South enjoys in honey products. Also, the center will target large supermarkets and hypermarkets as well as mini-markets and small retailers. It will focus on increasing its presence on supermarkets and retailers shelves in order to strengthen brand recognition. Moreover, the honey collection and marketing center will place efforts in increasing coverage of restaurants and hotels, which constitute a steadily growing demand, especially during the tourism and holiday seasons. Moreover, the Bint Jbeil center will aim to export to Arab and African countries. The export strategy can be supported by the Lebanese expatriates living in various African countries. 6 SWOT Analysis 6.1 Strengths The honey collection and marketing center will offer several advantages: The area of Bint Jbeil lacks a center specialized in the collection, storage,

packaging as well as marketing of the honey products. This center will be unique in the region.

Bint Jbeil’s honey enjoys an excellent reputation. This can be a very

positive factor for the center, as people already appreciate the high quality of Bint Jbeil honey.



In addition, the following facts could be noted:

66% of the individuals consider South Lebanon the most famous honey region in Lebanon

7.4% consider East Lebanon the most famous honey region in Lebanon.

8.1% consider North Lebanon the most famous honey region in Lebanon

18.1% consider Mount Lebanon the most famous honey region in Lebanon

Source: Economic and marketing modeling of commercial apiculture in Lebanon, Olaik Rami Salman (AUB library) By selling all the needed beekeeping equipments, the center will allow

Bint Jbeil beekeepers to buy the necessary material and avoid going to Beirut each time they need beekeeping tools. Thus, the center will offer a unique opportunity to Bint Jbeil beekeepers.

6.2 Weaknesses

The activity of the center is highly seasonal which will place strains on the

profitability and cash flows of the business. However, by storing honey, the center will be able to sell all year round. Moreover, the sale of equipment would also help smooth out the seasonality factors.

Bint Jbeil habitants are used to buy their honey product directly from the

beekeepers. That’s why, the center couldn’t concentrate its activity only in Bint Jbeil, it has to target all the Lebanese market.

Most famous honey region in Lebanon

South Lebanon

67%

Mount Lebanon

18%

East Lebanon

7%

North Lebanon

8%



6.3 Opportunities The area of Bint Jbeil comprises several beekeepers who could benefit from

the collection and marketing center. In fact, such center can help a lot in promoting Bint Jbeil honey production.

The honey collection and packaging center will contribute in lifting the

standards of Lebanese honey and making it more competitive with respect to the foreign honey. Indeed, the Lebanese honey is found to be lacking the competitive edge as compared to foreign honey, starting from marketing processes like packing, labeling, standardization, processing and storage and ending with market outlets. The honey center will be responsible for providing an attractive presentation to Bint Jbeil honey so it will be able to compete with the local and imported honey.

The market lacks local beehive products that are marketed as 100% natural,

quality-controlled, non-commercial products. Such products, along with an attractive and safe packaging, as well as a targeted marketing strategy, are expected to find a market niche.

The label on the honey jar is an important requirement by honey consumers

as 87.7% of them ask for its presence. Usually, most of the consumers require the production and expiry dates on the label.

Besides the presence of the production and expiry dates as well as the net

weight and the nutritional facts on the label, consumers may be attracted by a label precising also the name of the flowers used in the production of the honey.

There are very few beehive products found on supermarket shelves that carry

a label containing information about the product (composition, nutritional facts, conservation conditions, advice as to how it can be used, etc.). One opportunity therefore lies in the fact that the market lacks domestic products that have informative labels that attract the modern consumer who is continuously seeking to know more about what he is buying.

Lebanese consumers are starting to be aware of the differentiation between

‘natural products’ and industrial products containing artificial components. The concept of organic products is progressively being introduced in the market and is getting a favorable response from the consumers, according to shop owners.

By selling the basic beekeeping equipments, the center will offer an

interesting opportunity to Bint Jbeil beekeepers.



6.4 Threats Honey production can vary significantly from one year to another. It is

estimated at 7 to 10 Kgs per average year. In a bad year, production can fall down to 2Kgs per year, whereas in a good year it can reach 25 Kgs per year.

The quantity and quality of honey produced depend on natural conditions

and diseases. Some beekeepers have lost practically all their bees in a few months due to diseases that they were not able to cure with the available medicines.

Bint Jbeil honey center can face increased competition from other regions

well known for their honey production such as Batroun or Jbeil. There are more than 50 large beekeeping businesses (300-1000

beehives) in Lebanon. Their products are mainly sold in the local market and represent significant competition for small-scale individual producers.

Competition in the market is tough for processed honey, especially foreign

competition. Indeed, the Americans and Europeans have very large-scale beekeeping businesses, huge forests, and economies of scale that reduce the price significantly.



7 Marketing Plan The honey collection and marketing center main marketing objectives involve: Marketing Bint Jbeil honey to gain market share Distributing well packaged and labeled honey to retail outlets in most cities

and towns in Lebanon. Insuring high quality products are delivered to the consumers in order to

build loyal clientele.

7.1 Pricing Pricing is an important issue in achieving sales and profitability. There are several important considerations in pricing honey. The price should be based on the cost of production. The minimum

acceptable price should cover all production, marketing, transportation and labor costs. Competitor prices are an important consideration in pricing honey for sale to consumers. However, pricing at the same level as the competitors can be dangerous if the costs of production aren't taken into consideration.

Usually, the quality of the honey in general determines the price class.

Such parameters as moisture content, cleanliness, off-flavors and

homogeneity are major considerations. Some importers require extra low HMF values for prime grades, but color though not a quality, determines the final price once the minimum quality requirements within each grade are fulfilled.

In general, light-colored honeys bring the highest price and dark ones are

most frequently used for industrial production. Although this is less the case for wax, royal jelly and pollen, competition in

honey is very tough nowadays. Prices are relatively low due to the important quantities supplied and due to the economies of scale that favor foreign competition. The price of honey selling on supermarket shelves varies between LBP20, 000 and LBP32, 000 per Kg.



Lebanese consumers tend to consider the locally available honey expensive. The suggested average price of 1 Kg jar of honey is $16.684 (LBP 25,000) 7.2 Sales channels The center will begin by marketing its products in the supermarkets and mini-markets in the South. However, it must increase its coverage to reach all the Lebanese market as in the South, people are mostly used to buy honey products directly from the beekeepers. Moreover, the center will target wholesalers as well as hotels and restaurants. It may offer small packaging for hotels to be served for breakfast and room service. Furthermore, the center could take advantage of the high concentration of Bint Jbeil people in some foreign countries to launch the export of local honey to these countries. 7.3 Advertising and promotion The honey collection and marketing center will allocate a yearly budget of 2% of revenues to marketing and advertising activities. The center will be focusing on the following promotional activities to help widen its network and enhance brand image: Organizing tasting events at major supermarkets Participating in trade fairs Planning promotion campaigns Joining industrialists association

As indicated in a previous section, most of the Lebanese consumers do not purchase honey frequently. Therefore, the marketing policies should consider increasing consumers’ awareness towards the benefits of honey.

Pricing of Honey ProductsLebanese Honey (retail sale) 15-35$Lebanese Honey( wholesale) 8-12$Pollen 15$Royal Jelly 3000$/KgQueen 15$Wax 5$



7.4 Public relations The public relations efforts will mainly rely on the following:

Develop direct contacts with all the beekeepers of the caza as well as neighboring cazas

Get in touch with the largest supermarkets in the South but also all over

the Lebanese territory.

Develop a sustained public relations effort, with key distributors in foreign countries with high concentration of Bint Jbeil people such as Dearborn, Michigan in USA, African countries and Australia.



8 Financial Plan This section details the calculations, assumptions and methodology used as a basis for the projections of the expected financial performance of the honey collection and marketing center. 8.1 Initial Investment

The above table shows the various equipments needed in the honey collection and marketing center. The total equipment cost is USD 16,553. It includes a filling machine, a truck for the distribution of honey products to the different points of sales as well as the office equipment (such as a computer, one fax…) and the office furniture (desk, chairs…). The total investment cost is evaluated at USD 68,032. This includes, besides the cost of the equipments, the working capital needs at the start of operations. Working capital needs are calculated by adding beginning inventories to expected receivables over a period of 6 months and deducting the expected payables over a period of 1 month.

Investment RequirementsDescription Quantity Unit price AmountFilling Machine 1 3,553 3,553

Truck 1 10,000 10,000

Office Furniture 1 3,000 3,000

Computer & office equipment 1 5,000 5,000

Total costs of equipments 16,553Working capital needs 51,479Total investment cost 68,032



8.2 Major assumptions The assumptions are conservative and are based on market achievable levels. The honey price and cost are shown is the following table:

The prices of beekeeping products as well as the quantity expected to be sold are show in the table below:

The packaging costs are as follows:

Beginning inventoryDescription Quantity Unit cost AmountHoney (in Kg) 1,500 $13.00 $19,500

Jars (1 Kg) 1,500 $0.22 $330

Boxes (6 kg of honey) 250 $0.11 $28

Stickers 1,500 $0.06 $90Hive 30 $14.00 $420

Hive +bees 15 $55.00 $825

Extractor-manual 10 $160.00 $1,600Smoker 25 $7.00 $175Clothes 20 $19.00 $380

Gloves 35 $6.00 $210

Total beginning inventory 22,968

Prices (in $)Wholesale price per kg 17 Cost per kg 13

Beekeeping products Quantity sold per year Prices(in$)Hive 60 $20Hive +bees 30 $70Extractor-manual 20 $200Smoker 50 $10

Coverall (includes mask) 40 $24

Gloves 70 $10

Packaging Cost in $Unit cost of 1 kg jars $0.22Unit cost of one box of 6Kg of honey $0.11Stickers (per one jar of 1Kg) $0.06



Sales assumptions According to the Ministry of Agriculture’s 1999 survey, concerning the number of beekeepers the number of beehives, as well as the production per beehive in Bint Jbeil, the total production of beehives as well as the expected honey to be sold are estimated in the table below: SALES ASSUMPTIONSNumber of beehives 4,809

Number of beekeepers 330

beehives/beekeepers 15

Each beehive produces 14 Kg per yeartotal production of beehives 67,326 Kg per year% of beehives production processed 20%honey sold 13,465 Kg / year We assumed that 20% of the production of honey in Bint Jbeil will be processed in the center. The following table shows the main assumptions for the income statement. The marketing expenses are assumed to be 2% of annual revenues. An annual increase in general expenses of 2% is taken into account for inflation factors. The maintenance expenses are taken as 2% of total fixed assets. Seasonal wages are based on 2 months of summer. An annual increase in salaries of 1% is taken.

The following table shows the balance sheet assumptions:

Income Statement Assumptions

Marketing expenses 2% of revenues

Annual increase in general expenses 2%

Maintenance expenses 2% of equipmentSeasonal wages 2 monthsAnnual increase in salaries 1% annuallyIncome Tax Rate 15%



The following table shows the depreciation rates, which are based on international accounting standards:

Staff structure

The collection, packaging and marketing center will have a staff of 4 persons.

The General Manager will be responsible of directing the team, developing new marketing strategies as well as dealing with the suppliers (i.e. beekeepers). Also, the General Manager will be in charge of the accounting operations of the center. The General Manager will have a monthly salary of 700$. To ensure the distribution and sales of the honey products, the center will need a driver/merchandiser who will have a monthly salary of $400. The center will also need a full-time worker with a monthly salary of $300. Furthermore, a seasonal worker will be hired for a period of two months with a monthly salary of $250. Thus, the center will have a total number of 4 staff members in the high season

Balance Sheet AssumptionsAccounts Receivable 2.5 months Inventories 2 months of cost of goods soldAccounts payable 1.5 months of cost of goods soldExpenses payable 20% of general expenses

DEPRECIATION RATESFurniture 7.5%Vehicles 12%Office equipment and computers 15%Fiiling machine 10%

STAFF STRUCTURENumber of Monthly Total Total Monthlyemployees Salaries salaries NSSF Transport Transport Total

Management & Sales General manager 1 700 700 151 104 104 955 Driver/merchandiser 1 400 400 86 104 104 590 Labor 1 300 300 65 104 104 469 Seasonal labor 1 250 250 TOTAL 4 1,650 1,650 301 312 2,013



with total monthly salaries of $1,650. In other seasons, the total number of employees will be 3, while the total monthly salaries will be $1,400. 8.3 Projected Income Statement The following income statement is based on the assumptions of revenues and costs described above. We assumed growth in sales of 10% in the 2nd year, 5% in the 3rd year, 3% in the 4th year, and 2% in the 5th year.

HONEY COLLECTION CENTERProjected Income Statement Year 1 Year 2 Year 3 Year 4 Year 5

Total revenuesForecasted growth per year 10% 5% 3% 2%Sales 228,908 251,799 264,389 272,321 277,767 Sales of Beekeeping Equipment 9,460 10,406 10,926 11,254 11,479 Total revenues 238,368 262,205 275,316 283,575 289,246 COGS-honey 175,048 192,552 202,180 208,245 212,410 COGS-jars 2,962 3,259 3,422 3,524 3,595 COGS-boxes 247 272 285 294 300 COGS-stickers 808 889 933 961 980 Cost of Beekeeping Equipment sold 3,610 3,971 4,170 4,295 4,381 Total cost of sales 182,675 200,942 210,989 217,319 221,665 Gross margin 55,694 61,263 64,326 66,256 67,581

Gross profit margin % 23% 23% 23% 23% 23%General & administrative expensesRental of center 1,200 1,200 1,200 1,320 1,320 Utilities:Electricity,expenses 480 490 499 509 520 Maintenance 371 378 386 394 402 Transport & vehicle expenses 8,143 8,306 8,472 8,641 8,814 Marketing Expenses 4,767 5,244 5,506 5,671 5,785 Salaries 17,550 17,726 17,903 18,082 18,263 Social Security Charges 3,612 3,648 3,685 3,721 3,759 Transport-staff 3,744 3,781 3,819 3,857 3,896 Other expenses 600 660 693 714 728 Total General & Administrative Exp 40,467 41,433 42,163 42,910 43,486 EBITDA 15,226 19,830 22,163 23,346 24,096 Depreciation expenses 2,530 2,530 2,530 2,530 2,530 Tax expenses 1,904 2,595 2,945 3,122 3,235 Net Income 10,792 14,705 16,688 17,693 18,330

Net profit Margin 5% 6% 6% 6% 6%

The income statement shows satisfactory income levels with an average net profit margin of 6%. Of course, these results will depend on excellent marketing and distribution performance of the center.



8.4 Projected Balance Sheet The balance sheet shows the projected assets and liabilities of the company.

HONEY COLLECTION CENTERProjected Balance Sheet Year 1 Year 2 Year 3 Year 4 Year 5

Cash & Equivalents 5,436 17,169 13,400 11,800 11,420Accounts Receivable 49,660 54,626 57,357 59,078 60,260Inventory 29,175 32,092 33,697 34,708 35,402Current Assets 84,271 103,887 104,454 105,585 107,082Furniture 3,000 3,000 3,000 3,000 3,000Vehicle 10,000 10,000 10,000 10,000 10,000Office equip, computers, telecom 5,000 5,000 5,000 5,000 5,000Filling machine 3,553 3,553 3,553 3,553 3,553Accumulated Depreciation 2,530 5,061 7,591 10,121 12,652Net Fixed Assets 19,023 16,492 13,962 11,432 8,902Total Assets 103,293 120,379 118,417 117,017 115,983Accounts payable 21,881 24,069 25,272 26,031 26,551Expenses payables 8,093 8,287 8,433 8,582 8,697Total Liabilities 29,974 32,356 33,705 34,613 35,248Invested Capital 62,527 62,527 62,527 62,527 62,527Retained Earnings 10,792 25,497 22,184 19,877 18,208Shareholders Equity 73,319 88,024 84,711 82,404 80,735Total Liab. & Shrholders Equity 103,293 120,379 118,417 117,017 115,983

Stat. Of Retained Earnings Year 1 Year 2 Year 3 Year 4 Year 5Begin. Retained Earnings 10,792 25,497 22,184 19,877 Net income 10,792 14,705 16,688 17,693 18,330 Dividends Paid 20,000 20,000 20,000

Ending Retained Earnings 10,792 25,497 22,184 19,877 18,208

The company is expected to start distributing dividends of $20,000 annually starting in year 3.



8.5 Projected Cash Flows The following table shows the projected cash flows of the hotel.

HONEY COLLECTION CENTERSTATEMENT OF CASH FLOWS Year 1 Year 2 Year 3 Year 4 Year 5

Net income 10,792 14,705 16,688 17,693 18,330 Adjustments to reconcile net incometo cash provided by operating activitiesDepreciation 2,530 2,530 2,530 2,530 2,530 Changes in Working Capital (48,860) (5,502) (2,986) (1,824) (1,240) Total Adjustments (46,330) (2,972) (456) 706 1,290 Cash provided by operating activities (35,538) 11,733 16,232 18,399 19,621

Cash Flow from Investing ActivitiesCapital expendituresInvestment in fixed assets (21,553) - - - - Net cash used in investing activities (21,553) - - - -

Cash flow from financing activitiesNet Investment by owners 62,527 Net borrowings & repayments of loansDividends distributed - (20,000) (20,000) (20,000) Cash provided by financing activities 62,527 0 (20,000) (20,000) (20,000)

Cash at beginning of year - 5,436 17,169 13,400 11,800 Changes in cash 5,436 11,733 (3,768) (1,601) (379) Cash at end of year 5,436 17,169 13,400 11,800 11,420

The projected cash flows show the initial net investment in fixed assets. It also shows the net invested capital by the owners. The distributed dividends are shown starting in year 3. 8.6 Ratio analysis The following table shows the main financial ratios for the honey collection and marketing center. The current ratio, which is equal to current assets divided by current liabilities, is adequate and is above 2 in all the projected years. The return on average assets grows over the years as the net income increases.



Ratio Analysis Year 1 Year 2 Year 3 Year 4 Year 5Current Ratio 2.81 3.21 3.10 3.05 3.04Return on Average Assets 10.4% 12.2% 14.1% 15.1% 15.8%Total Assets Turnover: Sales / total assets 231% 218% 232% 242% 249%

Gross Profit Margin 23% 23% 23% 23% 23%Operating Profit Margin 6% 8% 8% 8% 8%Net Profit Margin 5% 6% 6% 6% 6%

Return On Average Equity=ROE 15% 17% 20% 21% 23%Return on Investment = ROI 17% 24% 27% 28% 29%

The total assets turnover, which is sales over total assets, is very high in all the years, mainly due to the high sales revenues in comparison to limited fixed assets base. The profitability margins are satisfactory over the years. The return on average equity is around 19%. The return on investment is also around 25%, mainly due to a limited initial investment amount in comparison with the expected profitability. The internal rate of return is 20% and the payback period, which is the period necessary to pay back the investment, is 7.5 years. 8.7 Break-even analysis The following table shows the annual revenue levels needed for the honey collection and marketing center to break even. Thus, an average of $191,000 per year is a minimum level for the center to break even.

HONEY COLLECTION CENTERBREAK-EVEN ANALYSIS Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenues 238,368 262,205 275,316 283,575 289,246Total Variable Costs 182,675 200,942 210,989 217,319 221,665Total Fixed Costs 42,998 43,963 44,693 45,441 46,016

Break-even revenues 184,029 188,162 191,288 194,486 196,948



8.8 Sensitivity analysis A worse-case scenario is taken by assuming that 17% of the beehives production in Bint Jbeil caza is processed. In this case, the honey collection and marketing center will have an average profitability of $9,111 annually. The internal rate of return is 8%. The payback period is 8.8 years. A best-case scenario is developed considering that 25% of the honey production is processed. This scenario gives an average profitability of $26,527 annually. The internal rate of return is 27% and the payback period is 4.9 years.

Sensitivity Analysis Worse-case Most likely Best-case% of beehives production processed 17% 20% 25%

Average net income 9,111 15,642 26,527 Average net profit margin 4% 6% 8%

Internal rate of return 8% 20% 27%Payback period in years 8.8 years 7.5 years 4.9 years

These results show that the project is feasible, especially if it is well-managed providing quality at affordable prices and if the marketing and distribution activities are well developed.



9 Recommendations and key success factors In order to achieve satisfactory results, there are some key success factors that should be highlighted:

In order to market the honey product in and outside the country, the center should be careful to capitalize on the origin ("honey from Bint Jbeil") and the quality ("100% natural", eventually "flavored with oregano" etc.).

An informative and attractive labeling is necessary to enhance the brand

image, strengthen market penetration, and allow for exports.

It is important to point out that the area of Bint Jbeil produces large quantities of honey that are sold mainly by the beekeepers themselves (among neighbors and friends), while the rest is sold in small village shops and grocery stores. Hence, it is imperative for the center to target the whole Lebanese and even international markets.

The bet for "quality" is the main challenge for the beekeeping and honey

production business. Quality control over the production process and the honey itself are therefore a must. Price competition is tough in the market for honey (for domestic and imported products), and one way for the products to be competitive is for them to present an attractive price/quality ratio.

The center should strive to establish contacts abroad with the Lebanese

diaspora originating from Bint Jbeil and residing in Gulf countries and African countries in order to export honey products.

10 Economic Impact Evaluation The honey collection and marketing center will create 4 new jobs, thereby contributing positively to society by offering new opportunities to young Bint Jbeil citizens. Most importantly, it will encourage new beekeepers to join the business since the center will ensure the marketing and selling of the honey they will produce. The honey collection and marketing center can turn the area of Bint Jbeil into a leader in the production of high-quality honey.

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