BUSINESS
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GRAND OPENING
Sherman
Shoes
Clearance
Center
Intifada Changes Face
Of Palestinian Industry
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FRIDAY, APRIL 6, 1990
-
or Mustafa Alami,
general manager of the
Jerusalem Cigarette
Company, the intifada has
been a mixed blessing.
Founded in 1964,
Jerusalem Cigarette is owned
by more than 5,000 share-
holders. Its brands include
Imperial, Good Luck, Aria
and Farid. Three Virginia
blend; one American variety.
With the total West Bank and
Gaza tobacco market
estimated to be 60-70 million
packs a month, the company
claims to control 65 percent of
it, about $35 million in sales.
With one hundred and seven-
ty employees, it is one of the
largest industrial companies
on the West Bank.
While Jerusalem Cigarette
has seen its sales increase 4
percent due to the rise in na-
tionalism leading to a Palesti-
nian boycott of Israeli cigaret-
tes, much of the new business
has gone to the imported U.S.
brands. Because of a reduc-
tion in duty and excise taxes
due to Israel's Free Trade
Agreement with the U.S., the
foreign brands are now only
twice as much as local
varieties, not three times.
Because of the curfews plac-
ed on West Bank towns by the
Israeli army, logistically,
distribution of Jerusalem
brands to the local population
has been the most difficult
part of the nearly two year
long uprising.
Yet Alami's biggest problem
is not rocks or curfews, but
financing. As there are few
local sources of credit
available growth must be
financed internally out of
working capital. Few foreign
Arab businessmen, he says,
would consider an investment
in such a volatile and
politically unstable region.
The company currently
uses very little locally-
produced tobacco as Alami
considers it to be of poor
quality. Major sources of
supply are Malawi and Zim-
babwe, while its American
tobacco is imported from
Universal Leaves.
Rather than compete in the
Israeli market with Dubek,
Jerusalem has embarked on
an export drive to Jordan and
Egypt, yet the effort is still
bogged down in red tape from
those two countries. Another
export direction is to the
countries in the EEC where
the company will utilize its
spare capacity to enter the
market as a low-price/
reasonable quality cigarette.
With a recent modernization
program just completed on
the primary section of his
plant, Alami boasts of having
the most technologically ad-
vanced tobacco processing
plant in the Middle East, in-
cluding Israel.
Intifada Redefines
Palestinian Beverage
Industry
The intifada has also in-
vigorated the Palestinian
beverage market.
The battle for ultimate
supremacy in this $28 million
beverage market ($15 million
is carbonated drinks) actual-
ly began in 1987 when Daniel
Aisa, a Palestinian from Bir
Zeit who now resides in Lon-
don, purchased a technology
and manufacturing license
from the Delaware-based
Club Cola and invested $1.5
million to build a production
plant in Ramallah.
The factory is now produc-
ing 600 cans each minute of
orange, cola, and lemon lime.
The firm employs 120
workers and a new production
line of two-liter containers
will soon add another 80
employees. A new line of
20-40 percent concentrated
juices and nectars products
will soon be introduced.
In 1984 Souhill Gideon, a
Palestinian entrepreneur
from Ramallah, was awarded
an RC Cola franchise. His fac-
tory employs 187 workers and
produces 33 different flavors
of carbonated and nectar
beverages.
Club and RC Cola share
roughly the same portion of
the market, although each
claim to control 60 percent of
it. Peter Houri, marketing
manager for Club, however,
admits that his company is
not making a profit, as it is
selling low (half the price of
Israeli brands) in order to
secure market share.
Both companies are doing
well in Gaza as the Seven Up
bottling plant there did not
increase its production base
because its equipment is
more than 20 years old.
Houri points out that Club
is the only company in West
Bank which has an organiza-
tional structure giving in-
dividual roles to employees as
most Palestinian-owned com-
panies are family-owned and
have very loose overall
managerial hierarchies. Club
is also unique in that almost
half of its staff are university
graduates. Even their drivers
have undergraduate degrees.
-