Founded in 1937, Cortas is the oldest and largest food exporter in Lebanon. Exporting foods ranging from rose water to tahina and focusing on canned goods, Cortas and their 68 full time employees take pride in serving their customers and being an authentic Lebanese brand.
What was the problem?
Cortas asked the Business on the Frontlines team to analyze their chickpea product lines and see if sourcing chickpeas locally is feasible. The problem was multifaceted. First, there was the question of costs. In the past Cortas has bought chickpeas from Canada, the United States, and Turkey, from whoever can offer them the best price. Can Lebanese farmers compete with these prices? How does the cost of transportation influence prices and can Lebanese farmers profit from this difference? Second, the agriculture industry in Lebanon needed to be understood more fully. What are farmers currently growing? What profits are necessary for them to grow chickpeas? Are there currently any chickpea farmers in Lebanon? Finally, the price of the end product for chickpeas needed to be determined. Can Cortas charge a higher price for locally sourced chickpeas? These questions created the foundation for the Business on the Frontline’s team research before arriving in-country.
What did we do?
Before arriving in the country, our research focused on understanding the international chickpea and hummus industry, the agriculture sector in Lebanon, and Cortas’ business structure, more specifically their chickpea lines. The team’s initial hypothesis was that Lebanese farmers can produce chickpeas with enough quality and quantity to satisfy Cortas’ needs at a price point that is profitable for both the farmers and Cortas. In order for this hypothesis to be correct, we approached it in two different ways. First, determining at what price Lebanese farmers produce chickpeas at and how much Cortas is willing to pay. Second, if local Lebanese chickpeas are used in their products, what price premium can Cortas command.
In order for large scale chickpea farming in Lebanon to be successful, 4 obstacles need to be addressed. First, we calculated that over 200 hectares were needed to supply Cortas’ current demand. With the average Lebanese farm being 1.4 hectares, the team needed to explore options of cooperation among farmers or identify the large scale farmers to produce chickpeas. Second, chickpeas were currently only grown for subsistence farming resulting in chickpeas being much cheaper imported. Third, less than 5% of co-ops are currently operating in Lebanon. Fourth, the government provides less than 1% of aid to agriculture and only subsidizes wheat farming. Additionally, the team researched the international hummus and chickpea industry, quantifying the advantage of selling hummus in the fridge and determining a potential price range for hummus sales.
What was the turning point?
Upon arrival in Lebanon, the team’s assessment on the agriculture industry was just the beginning of what is occurring in the country. The team was correct in their analysis that farming is fragmented, disorganized, inefficient, and technologically challenged. Crop productivity is low and an overall distrust of co-ops exists throughout the country. The team underestimated the influence of the impact of wholesalers, currency devaluation, and imports on the agricultural industry. Wholesalers take 53% upfront from farmers, unjustly stating this is due to spoilage, inconsistent weight, and service charge. The currency devaluation has prohibited farmers from buying seeds and fertilizers, resulting in only 20% of arable land being planted this year. Additionally, the free trade agreement with other Middle Eastern countries has resulted in imported goods undercutting the market. Many farmers talked about how challenging it is to compete with Syrian goods because their farms are subsidized by the government, allowing them less costs. Overall, it is extremely difficult to be successful as a farmer.
What was the recommendation?
If profitability is the only criteria for evaluating this project, Cortas should continue sourcing chickpeas from abroad, rather than sourcing chickpeas from Lebanon. Currently, Cortas acquires quality chickpeas from one supplier at a rate that is lower than what Cortas could likely find in Lebanon. In addition to the profitability constraint, Lebanese farmers have much smaller farms and lower yields compared to farmers internationally growing chickpeas. If Cortas were to source chickpeas locally, it would need to create a cooperative for Lebanese chickpeas taking valuable time and resources that Cortas cannot afford. However, the project becomes attractive if Cortas can prove that hummus made from Lebanese chickpeas is superior in both quality and taste, and if Cortas can sell this hummus at a price premium exceeding all the incremental costs to Cortas. To prove this, Cortas must follow these steps:
Acquire the local strain of chickpeas from ICARDA
Engage 10-20 Farmers to grow chickpeas and provide data on costs, profits, yields, and best practices.
Conduct a taste test experiment to validate Lebanese chickpea superiority
Create both canned and ready-to-eat hummus
If after implementation, Cortas determines that hummus made from Lebanese chickpeas can command a price premium, Cortas should build its brand and marketing around locally-sourced Lebanese chickpeas. To develop a sustainable and self-sufficient marketplace for chickpeas in Lebanon, Cortas should form strategic partnerships with American University Beirut and ICARDA, who are both currently working on chickpea production in Lebanon. In addition, Cortas would likely need to supply funds (or identify a source of funds such as USAID) necessary for farming equipment and chickpea production. Cortas would also need to act as the driving force behind organization efforts, taking on a role similar to that of a farming cooperative.