Case Study: Developing the Olive Oil Sector in Palestine by Marketing a Specialty Brand infoD v INNOVATION & ENTREPRENEURSHIP Case Study: Developing the Olive Oil Sector in Palestine by Marketing a Specialty Brand © 2018 The World Bank Group 1818 H Street NW Washington, DC 20433 Website: www.infodev.org Email: info@infodev.org Twitter: @infoDev Facebook: /infoDevWBG This work is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the donors of infoDev, the World Bank Group, its Board of Directors, or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions: This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http:// creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution: Please cite the work as follows: “Case Study: Developing the Olive Oil Sector in Palestine by Marketing a Specialty Brand.” 2018. Washington, DC: The World Bank Group. License: Creative Commons Attribution CC BY 3.0 Photo Credits: Cover Photo: Joanna Tkaczuk/AdobeStock Case Study: Developing the Olive Oil Sector in Palestine by Marketing a Specialty Brand infoD v INNOVATION & ENTREPRENEURSHIP Case Study: Developing the Olive Oil Sector in Palestine by Marketing a Specialty Brand Acknowledgements This case study was developed by the infoDev and Industry Solutions Units of the Finance, Competitiveness & Innovation Global Practice of the World Bank Group with technical support from Agland Investment Services and J.E. Austin Associates. Other contributors include the International Finance Corporation and the Agriculture Global Practice of the World Bank Group. The study team included Anupa A Pant, Blair Edward Lapres, Ellen Olafsen, Loraine Ronchi, and Peter A Cook of the Finance, Competitiveness & Innovation Global Practice, and William Mott, Martin Webber, Stephanie Haile, Madeleine Nelson, William Scott, Gareth Smail, Donald M. Taylor, and Laya Hess-Skinner of a consortium of Agland Investment Services and J.E. Austin Associates. The team received guidance from a decision review panel chaired by Ganesh Rasagam and consisting of Dietrich Fischer, Milaine Rossanaly, and Christopher Ian Brett. The paper benefited from discussions with and guidance from numerous World Bank colleagues, Bradford Roberts, Parmesh Shah, Selchuk Tanatar, Bas Rozemuller, and Sarah Ockman. This study was made possible through the support from the governments of Norway, Sweden, Finland, and the UK’s Department for International Development (DFID). Table of Contents Synopsis 1 Olive Oil Market Conditions, Challenges, and Opportunities 2 State of the Palestinian Olive Oil Industry 2 Value Chain Structure 2 Crop Production and Processing 2 Bottlers 3 Competitiveness and Opportunities 5 Supplier Development Initiatives: Objectives and Implementation 5 Phase 1 – Linkages via Trade Shows and Quality Improvements 5 Phase 2 – “Daskara,” Developing a Branded Product 7 Looking Forward: Daskara Refresh 10 Project Results 10 Business Linkages Lessons Learned 11 Lesson 1: Harness business motivations to foster sustainable linkages 11 Lesson 2: Market analysis and segmentation are critical elements of linkage facilitation 12 Lesson 3: Fostering linkages is more successful when lead firms are involved 12 Lesson 4: Development programs face project design trade-offs between sustainability and scale 12 Lesson 5: Selection criteria helps identify industry champions 12 Resources 14 1 Synopsis Introduction This case describes a relationship between a The International Finance Corporation (IFC) was involved U.S.-based lead firm, the Rogers Collection, in the Palestinian olive oil industry from 2006 to 2013 and two Palestinian small and medium through two phases of an “Advisory Services Olive Oil enterprises (SMEs) for the sale and marketing Supply Chain Development” project, which aimed to of specialty olive oil. The relationship developed improve product quality and linkages to export markets with the support of the International Finance by working directly with olive oil bottlers. Olive oil was Corporation (IFC) during Phase 2 of a two- identified by the IFC and other donors as an important phase, five-year program designed to grow economic value chain for the country with the potential exports of Palestinian olive oil. This experience to reach new export markets. Olives and olive products highlights the importance of fostering linkages contributed to 20 percent of national output and 4.6 in which both the lead firm and the SME are percent of Palestine’s gross domestic product (GDP). motivated to collaborate toward mutually Exports of olives and olive products are particularly beneficial outcomes and effectively define important because they contribute to seasonal job their roles. The case also demonstrates that generation, particularly in rural areas. Other donors commercial collaboration is not easy, and that that are focused on the value chain tend to target the new food product market offerings take time productivity and quality of primary production, as well as to establish. presses. Olive oil bottlers at the end of the value chain had largely been absent from development efforts prior to the The project, led by the IFC Sustainable IFC’s involvement. Business Advisory, carried out a series of measures to foster linkages between The IFC decided to target its efforts primarily on bottlers bottlers (agro-processors) and importers of in order to grow exports of high-quality olive oil and olive oil, and addressed capacity issues that directly impact the entire olive oil value chain. The project inhibit market access within the value chain, fit squarely within the IFC’s mandate (known as the SME particularly for SMEs. The IFC support evolved development pillar) to improve the performance of small from a “bottom-up,” SME-focused capacity and medium enterprises (SMEs) that have the potential building and market linkage project to a to compete in the global economy but lack required second phase, which focused on collaboration knowledge and skills to operate effectively. The project with a lead firm to import and market a new was structured to work through bottlers to improve quality olive oil product. The change in approach management at the level of firms and their supply chains, between phases of the project reflected and to strengthen the ability of bottlers to access export lessons learned from Phase 1, which lacked markets. Working through bottlers was expected to have a a customized market approach. The IFC demand-pull effect for high-quality olive oil throughout the project introduced market differentiation and value chain, which would effectively raise income levels for improved the professionalization of the olive farmers and presses as a result of greater exports. oil industry, resulting in greater knowledge of export markets and improved product quality In Phase 1 of the project, the IFC focused on reducing the through certifications. Evidence of a long-term, barriers to linkages by improving product quality and sustainable commercial success is not readily firm capacity. In Phase 2, the focus shifted to catalyzing apparent; however, at the writing of this market linkages. The IFC project thus evolved from a case study, the American importer remains “bottom-up,” SME-focused capacity building and market interested in continuing the commercial linkage project to a “top-down” initiative that worked relationship with its SME producers, providing closely with a lead firm to import and launch a new olive some promise for the industry.   oil product produced collaboratively by two SMEs. The budgets of the two projects were each approximately US$800,000. Project design and implementation details are discussed later in this case. 2 Olive Oil Market Palestinian olive oil incurs substantially more costs in labor, transportation, and fees, and as a result, is approximately 35 to 40 percent more expensive5 than Conditions, Turkish olive oil on grocery market shelves. As high production costs restrict the ability of Palestinian olive oil to compete on price, PalTrade, the primary Challenges, and Palestinian export association, and the Palestinian Ministry of National Economy hope to target higher- margin niche markets,6 including markets for organic Opportunities and fair trade olive oil. Value Chain Structure State of the Palestinian Olive Oil Industry Crop Production and Processing World markets for olive oil have grown rapidly, and Olive cultivation takes place over nearly 950,000 further growth is expected. During the life of the project, dunums (approximately 900 square kilometers) in olive oil prices did not change; however, prices reached the region, largely concentrated in Area C, a section a seven-year high in 2015, reaching $4,480 per metric of the West Bank that is heavily regulated by Israeli ton.1 The quantity of olive oil imports has grown slowly in authorities, which makes the movement of goods and comparison to its value. This increase in value suggests people difficult. Most trees are old and have grown a shift in demand toward higher-quality olive oils and a on family-owned plots for generations. According decline in supply due to environmental stressors. The IFC to the Palestinian Ministry of Agriculture’s National and Palestinian bottlers hoped to seize the opportunity Strategy for the Olive and Olive Oil Subsector, “olive to participate in the market for higher-value olive oil, and orchards constitute 54 percent of the total arable a series of quality improvements were necessary in order area in Palestine, and comprise 85 percent of the total to meet market expectations. fruit trees.”7 The vast majority of Palestinian olive oil, approximately Olive harvesting is conducted manually by family units 75 percent,2 is consumed domestically, with per capita in accordance with harvest times mandated by the domestic consumption averaging around 6.4 liters Palestinian Authority. Olives are then immediately per year in 2010.3 Twenty-two percent is exported to sent to one of the 279 olive presses89 in the Palestinian neighboring markets. Only 3 percent of Palestinian Territories. These presses operate independently of production is exported to premium markets outside farmers and farmer collectives, and are typically paid of the Middle East, and only about 5 percent of total in a percentage of the oil rather than a monetary fee. exports are bottled in end consumer-sized containers When bottlers do pay cash, the price range is typically (i.e., 750 milliliters, 1 liter, or 2 liters). Most exported oil determined by the Ministry of Agriculture. The olive oil is shipped in bulk containers and bottled elsewhere or industry in Palestine is fragmented and disorganized. blended with other oils.4 Bottlers either buy directly from olive presses or farmers and farmer cooperatives who press their own olives, or they employ a middleman to negotiate a price. 1 Sophie Christie, “The Cost of Olive Oil is Increasing,” Telegraph UK, January 8, 2015, accessed April 18, 2016, http://www.telegraph. co.uk/finance/personalfinance/money-saving-tips/11360643/ 5 Ministry of National Economy and International Trade Centre, 9. The-cost-of-olive-oil-is-increasing-will-stocking-up-now-save-me- 6 Ministry of National Economy and International Trade Center, 9. money.html 7 Ministry of Agriculture, 16. 2 Ministry of Agriculture, National Strategy for Olive and Olive Oil 8 Ownership of olive presses in the Palestinian Territories is not Subsector in Palestine 2014-2019 (2014), 19. regulated by the government. Some presses are owned by 3 Ibid., 21. individual farmers, and others are owned by farmer cooperatives 4 Ministry of National Economy and International Trade Centre, The and microenterprises. Bottling companies might have business State of Palestine National Export Strategy: Olive Oil Sector Export agreements with presses, though this is rare. Strategy 2014-2018, 14. 9 Ministry of Agriculture, 18. 3 FIGURE 1. AL ARD PROCESSING AND STORAGE FACILITIES In the local market, olive oil is typically sold in yearly bulk Bottlers sales from farmers and presses to consumers and local Approximately 10 olive oil bottlers account for 80 percent retailers. In urban markets like Ramallah, Bethlehem, of the bottled production in Palestine. Many of the Nablus, or Jenin, olive oil is sold in aluminum tins, bottlers also participate in other businesses, including between 300 and 500 milliliters.10 Smaller quantities olive pickling and soap making, which are complementary are typically sold in plastic bags and bought directly to oil production. Only three of these bottlers (al Ard, al from the presses or farmer cooperatives.11 These smaller Reef, and Canaan Fair Trade) have sufficient technology quantities represent some of the 75 percent of olive and business capacity to export. Al Ard and al Reef had oil that is consumed domestically. This overview is relatively new bottling equipment and were already based on studies conducted prior to the launch of the exporting prior to the IFC’s entrance to the sector. IFC’s project, but the current environment is unlikely to differ significantly, as the project did not intervene at a There is substantial debate regarding the appropriate large scale. role of the Palestinian government in the olive oil industry. The government dictates harvest times, Of the olive presses distributed throughout the various distributes information on olive oil price ranges, and Palestinian governorates, 246 are fully mechanized provides agronomists for consulting services. The presses,12 33 are half-mechanized, and there are no government’s involvement in the olive oil industry has uniform standards of quality or sanitation. The most led to some confusion regarding the division of labor modern equipment was provided through various and responsibilities between the various Palestinian donor programs. ministries. The Ministry of Health oversees certification and food safety programs during production, while the 10 Ibid., 19. Ministry of Economy oversees export, and the Ministry of 11 Ibid., 20. Agriculture establishes price ranges. The price of olive oil 12 Ibid., 18. varies depending on quality, taste, and certifications. 4 FIGURE 2. VALUE CHAIN DIAGRAM, TAKEN FROM THE STATE OF PALESTINE NATIONAL EXPORT STRATEGY: OLIVE OIL SECTOR EXPORT STRATEGY 2014-2018 Oliv Oil Oliv Oil Pr ssin nd Production M rk tin Consumption Proc ssin Activities: Activities of Private Use: • Home Pressers: • Home • Restaurants and • Land preparation hotels • Olive collection from • Gifts • Production of • Average Seedlings farmers consumption • Cultivation • Washing Bottling percapita: 6.4 • Purification Companies liters/year • Fertilization • Plowing • Pressing • Storage • Spraying • Processing • Trimming • Packing • Picking Activities of • Small Containers • Packing Processors/ • Large Containers Bottlers: (16 kg) • Sourcing Dealers • Mixing Olive • Bottling • (Small and large Production • Storage containers) • Soap • Cosmetics Export • Medicines Arab Countries • Small Containers • Large Containers Foreign Markets • Small Containers Israel • Small Containers • Large Containers 5 Competitiveness and Opportunities Supplier Development Initiatives: The olive oil industry is a highly competitive global Objectives and Implementation industry. In 2014, the International Olive Oil Council noted that production hit a 15-year low, and although the Phase 1 – Linkages via Trade Shows overall production of olive oil has decreased, more extra and Quality Improvements virgin olive oil is being produced in the Mediterranean, including more bottled and branded extra virgin olive oil.13 The primary objectives of Phase 1 of the IFC program were to: According to key stakeholders in the Palestinian Territories, Palestinian olive oil is not competitive in 1. improve the quality of olive oil produced by mainstream international markets for several reasons: bottling companies through strengthened supply chain and management processes, 2. increase exports of olive oil bottling companies • EU countries have protectionist laws pertaining to by 30 percent, and olive oil; 3. strengthen the nongovernmental support • Palestinian production costs are high relative to framework for the olive oil sector. Mediterranean competitors; and • economies of scale are not possible because of the To better adapt to local circumstances in a high-risk low and fragmented production volumes. country, the IFC contracted local organizations with the necessary capacity and reputation to coordinate The vast majority of stakeholders agree with the local resources. Accordingly, the implementation of National Export Strategy report stating that Palestinian Phase 1 was carried out by the export trade promotion olive oil should target niche markets. A handful of group PalTrade, the Palestinian Food Industries Union Palestinian bottlers already sell to niche market (PFIU), and the Palestinian Farmers Union (PFU). The segments, including Saudi Arabia, Japan, and the U.S. project was implemented over the course of two years fair trade market. between 2006 and 2008. High-quality olive oil should have a unique footprint— that is, it should stand out in taste, texture, and FIGURE 3. ORGANIZATIONAL STRUCTURE density from others. Each olive oil has different attributes, depending on its region of origination, and OF CONTRACTORS INVOLVED IN PHASE 1 pairs differently with certain foods. Palestinian olive oil has a unique taste profile and cultural story that make it attractive to high-end importers. Experts from the Rogers Collection and the Palestinian Standards Institution (the only standards and certification granting body in the West Bank) attest that the long- standing and continued practice of family harvest, the 4,000-year history of the oil in this region of the world, and the unique properties of the oil make it worthy of specialty markets. The Rogers Collection sells artisanal food products that are imported from around the world. Because the Rogers Collection selects products based on unique flavor profiles, a product’s consistency is of utmost importance. Given the current status of the Palestinian olive oil industry, however, consistency is one of the hardest characteristics to maintain. 13 Simon Field, “Olive Oil Industry Megatrends,”Olive Oil Times, June 26, 2013. 6 Bottlers were selected for participation based on their ability to grow and participate in larger markets, as determined by the following criteria: the modernity of BOX 2: EXPORT MARKETING equipment and infrastructure in facilities, the financial ACTIVITIES DURING PHASE 1 strength of firms in terms of annual revenue, and the willingness to contribute financially to the costs of the project. Nine SME bottlers were selected, representing • Conducted market research for three new export markets: the United States, United 80 percent of total bottlers. Each contributed $8,715 Kingdom, and Saudi Arabia. to the project. Ten presses were also selected to participate, but did not contribute financially. • Facilitated the participation of seven companies in two international food The majority of implementation efforts were spent exhibitions. on training and consulting sessions. The Palestinian Standards Institute provided production quality • Organized two trade missions for six assessments to eight companies, followed by quality companies to the United Kingdom and Saudi improvement programs, trainings in packaging, quality Arabia. assurance, pricing negotiations, tasting, and testing of • Delivered training on international olive oil. PFIU was involved in olive oil quality training trading practices, export preparation, and programs, business capacity building programs, procedures to 23 participants from all workforce development programs, “training of trainers” participating companies, and organized the for International Organization for Standardization following opportunities: (ISO) factory certifications, and HACCP14 training. PFIU’s training helped one company achieve HACCP • Four companies participated in a mission to Spain, a leading country in the olive certification and helped five bottlers achieve ISO22000 oil industry, to learn about recent certification. developments in the sector. • Five companies were supported in developing export promotional material. BOX 1: OVERALL IMPROVEMENTS TO THE OLIVE OIL SUPPLY CHAIN Source: IFC Completion Report, 2009 DURING PHASE 1 • Average Palestinian olive oil quality improved to 1 percent acidity from 2 The project strengthened the capacity of the percent acidity Palestinian Olive Oil Council (POOC), a nongovernmental • One press certified in HACCP membership-based organization and business federation that helps organize the Palestinian olive oil industry and • Five bottlers certified in ISO22000 facilitate the spread of knowledge and good practice • Bottlers signed 13 export contracts for among industry actors, including farmer cooperatives, $250,000 increase in exports bottling companies, and presses. Capacity building was provided in the form of training events, agricultural best practices, and pamphlets. Market linkages were spearheaded by PalTrade and PFU, a subsidiary of PFIU that focuses predominantly on facilitated primarily through the participation of bottlers farmers, facilitated farmer trainings in olive cultivation, at European trade fairs, including Anuga Foodtec sharing harvest and post-harvest techniques with more and SIAL trade fairs. Exports by eight participating than 500 farmers feeding into the supply chains of the companies increased by 35 percent ($938,000), but participating bottlers and presses. these export figures were reportedly not maintained and decreased shortly after. This failure was largely because of the high price of Palestinian olive oil compared to 14 Hazard Analysis and Critical Control Points (HACCP) European rivals. 7 The IFC calculated a positive cost-benefit ratio Development Alternatives Incorporated (DAI), a U.S.-based ($1.7 exports/$1 spent) for Phase 1 due to the sales international development consulting company, was contracts secured at European trade fairs. However, contracted by the IFC to implement the program. Though the IFC concluded that Palestinian olive oil was too the implementation experience with local partners was expensive for the mainstream Egyptian and European generally positive during Phase 1, the IFC decided to contract markets, and that greater attention to market an organization that had international ties to ensure segmentation was needed in order for bottlers to that experts could facilitate access to niche international build successful export linkages. The project was markets. As the primary implementer, DAI helped to not a success in terms of continued exports due to establish the criteria for SME selection, facilitated training these constraints, but the industry gained valuable sessions, organized a local tasting event, and provided two knowledge and became more organized, positioned for consultants specialized in the olive oil industry. future growth. Phase 1 provided a clear foundation for Phase 2: Al Ard and Al Reef, the primary participants The development approach differed significantly from in linking to specialty export markets in Phase 2, were Phase 1 because it focused on developing market linkages both certified ISO22000 and organic during Phase 1. for a small group of participants. Marketing efforts were organized around a unified brand. SME bottlers self-selected to participate based on their interest in growing exports The IFC also introduced several SME bottlers to Wadi and willingness to share costs; each participating bottler Food Company, an IFC partner and olive oil importer was required to contribute $20,000. Only two bottlers in Egypt. The IFC hoped that the Palestinian narrative participated in the Daskara consortium: al Ard and al Reef. would have a marketing advantage in the Egyptian market, similar to the Gulf markets. However, exports to Wadi did not materialize due to the high cost of AL REEF HOLDING COMPANY: Palestinian olive oil. • Private Shareholding Company • (owned by PARC, Palestine’s largest NGO) Phase 2 – “Daskara,” Developing a • Established in 1993 Branded Product • First company to achieve ISO22000 in Extra Virgin Olive Oil (EVOO0), and Organic Extra Virgin Olive Oil (OEVOO) The overall objectives of Phase 2 were to: • Three Filling Stations: Jordan Valley, Gaza, and outside of Ramallah • increase the export of Palestinian olive oil by helping • Member of the World Fair Trade Organization bottling companies adhere to international food • Selling in more than 14 countries, exporting more than 2000 tons (2008) safety requirements, • Currently exporting with Equal Exchange, 20 pallets • enhance bottlers’ access to and presence in per year international markets through a unified brand approach, and • facilitate access to finance. AL ARD PRODUCTS: The project was implemented from 2010 to 2013. Although two phases of the project had always been • Spun off of Near East Industry and Trade Company, became independent in 2008 planned, the results from Phase 1 directly informed • ISO22000 Certified (first Palestinian company ever the overall strategy for Phase 2, particularly related certified in ISO22000) Organic, ISO22000, Fair Trade to fostering market linkages. In Phase 2, the IFC certified worked with a U.S.-based importer of specialty food • Largest storage center in the Middle East products, the Rogers Collection (the lead firm), as well • Olive Oil equipment is valued at $450,000 as two Palestinian bottlers deemed financially and • Exporting EVOO to ten countries, and OEVOO to the EU, technically sound enough to export to the high-end Canada, and the United States U.S. market. The two companies were trained in a • Market Presence in Washington, DC, North Carolina, New traceability program and coached to develop a unified York City, Minneapolis, MN, Houston, Texas, Philadelphia, product and brand, called Daskara. and San Francisco 8 exported to more than 14 countries and participated in international food fairs. It has an ongoing export relationship with Equal Exchange. The IFC consultants concluded that in order for people to be paid according to industry (and Palestinian) standards for their product, a bottle should retail for approximately $20. This became the working price for ZAYT BOTTLING AND their market analysis. Market opportunities around DISTRIBUTION: the world were considered and narrowed down to the U.S. high-end market, which could sustain this desired price per bottle if the quality were sufficient. Another • No longer functioning; Company went reason for targeting the high-end market was to avoid under in 2006 (during Phase 1) direct competition with the plethora of lower-priced, • Established in 2004-2005 generic Middle Eastern olive oils traded through ethnic • Had 19-20 shareholders, raised $2 Million distribution channels, such as grocery stores that target in raised capital the Arab diaspora and Muslim community. • Originally exported to Europe and the A number of importers were considered. Rather than United States select a larger importer where Daskara could be lost among a number of products, the IFC team decided to • Worked primarily in packaging; assets select a smaller importer for which the product would be valued at $1 Million more important to its portfolio. The Rogers Collection, • Only two people employed: one is a a specialty products importer based in Portland, Maine, groundskeeper for the factory, the other was selected to form a business linkage with Palestinian is a security guard olive oil bottlers. DAI believed the company’s hands-on approach to understanding and marketing the product, as well as their reputation as industry trendsetters, would contribute to the successful launch of Palestine’s first high-end olive oil in the U.S. market. The Rogers Collection specializes in the marketing and distribution of artisanal products, such as ham, cheese, Al Ard had been trying to enter the high-end premium olive oil, and spreads, that are imported from around market (as opposed to the fair trade or organic market) the world. The company selects products primarily for and viewed the IFC project as aligned with their overall their taste profile, and then takes steps to ensure the business strategy. Al Reef was also looking for new products are the highest possible quality in their tasting export opportunities, and wanted to reach more high- categories. Central to the Rogers Collection’s business end and fair trade markets. Other companies opted model is their mission to develop relationships with both not to participate because of the steep cost sharing their product makers and clients. The company prides requirement, the perception of risk, and the potential itself on truly knowing their products, and staff travel for proprietary sales and marketing information to be worldwide in order to better understand the history and exposed. For example, a third bottling company, Zayt, process of the products they import. Rogers appreciated had expressed interest in joining the consortium, but the rich cultural history of Palestinian olive oil, and dropped out of the process because of the cost-share tastings revealed a high-quality product with a unique requirement. flavor profile. Prior to the formation of Daskara Olive Oil, al Ard exported to 10 countries and already instituted market differentiation techniques. It exported extra virgin and fair trade extra virgin olive oil to European, Asian, and North American markets, and only “zayt baladi,” its mainstream olive oil, to the Gulf markets. Al Reef 9 The U.S.-based IFC consultants, with input from the lead and was instrumental in sourcing high-quality product. firm, selected Daskara as a brand name for the olive Al Ard eventually became the point of contact for the oil, despite Palestinian objections that the word had no Daskara consortium in communications with the Rogers meaning in Arabic. The name was chosen to reflect the Collection. DAI was instrumental in helping Daskara roots linking farmers to the land, an effort to position create a tasting panel to provide third-party quality Daskara as a cultural product rather than a political certifications. The Rogers Collection led U.S. marketing product. Logo and packaging design followed, with the and product distribution efforts, with some financial final design endorsed by the lead firm and subsequently support from the IFC. the bottlers. The Daskara marketing efforts encountered an The Daskara consortium was formalized through a unanticipated challenge during Phase 2. The owner contractual agreement between the two parties, al and main point of contact at Rogers Collection, Taylor Ard and al Reef. The bottlers were to benefit equally Griffin, perished in a car crash in October 2011. Rogers’ in terms of sales revenues and ownership of the five-person team was down to four. Carrie Davenport, brand name. Theoretically, the consortium was open the general manager, was also in the crash, though she for other companies to join at a later date. Yet in did her best to continue work from her hospital bed. The practice, the relationship between the parties was tragedy restricted the company’s ability to reach its contentious. The bottlers had different objectives for expected outcomes. their participation in the IFC project: Al Ard, a private company, was focused on profit, while al Reef, a private The Rogers Collection and Daskara team (led by al Ard) holding company controlled by the nongovernmental collaborated on the launch of the olive oil product at organization Palestinian Agriculture Relief Committee, the Summer Fancy Food Show in June 2012. They held a works with farmer cooperatives on social policy and splashy and successful launch event at Rif restaurant, poverty alleviation. As a result, DAI found it necessary resulting in the export of three pallets of Daskara. to facilitate many of the negotiations and mediation The Rogers Collection sold these bottles through a sessions between the two bottlers. distributor in the Pacific Northwest to specialty retail shops in New York and Brooklyn, and to a distributor in DAI also assisted the Daskara consortium with the Los Angeles. It is important to note that all business- process of identifying mills and cooperatives that to-business details, such as price negotiations, were could provide premium oil. Al Reef had well-established handled directly between the Rogers Collection and the relationships with farmers and farmer cooperatives, Daskara consortium. FIGURE 4. TIMELINE OF DASKARA PRODUCT DAI’s Product of Ends 2010 2011 2012 2013 2014 2015 2016 2017 Consortium Formed 10 Unfortunately, the limited availability of the Rogers The Rogers Collection and al Ard have drafted an informal Collection team members hindered follow-up efforts, document outlining their goals for the partnership and reducing the impact of the product launch. The IFC’s relaunch. The Rogers Collection will assume primary support ended with the Summer Fancy Food Show responsibility for marketing and educating consumers and no additional sales were made. However, the about Daskara, including the product’s flavor profile, persistence of al Ard has resulted in the continuation cultural practices, and history, while attempting to steer of its relationship with the Rogers Collection, and the clear of the political situation. They expect Ziad Anabtawi, partners plan to relaunch Daskara in 2017. Chief Executive Officer of al Ard, to visit the United States to educate clients about the product, country, olive The IFC calculated a negative cost-benefit ratio ($0.32 oil profile, and production specifications. The trip will exports/$1 sold) for Phase 2 of the project due to limited introduce clients to the makers of the Daskara product, sales of Daskara products relative to the project cost. contributing to the Rogers Collection’s competitive Although several industry stakeholders were dismissive business model. Costs of the refresh effort will be shared of the financial benefits of Phase 2 of the project, they by the Rogers Collection and al Ard on a case-by-case were almost unanimous in their belief that the project basis. The partners also hope to receive some financial helped adjust the business practices and mindset within assistance from development organizations. Over time, the olive oil industry. According to DAI, both al Ard and the Rogers Collection believes it could purchase between al Reef now operate on a more sophisticated level, in 10 to 20 pallets per year, but progress is slow. Marketing terms of export practices and business standards, than new products requires a great deal of time and effort, they did prior to the IFC project. Although the linkage and maintaining a consistent, high-quality product is between the Rogers Collection and Daskara consortium paramount to achieving this goal. did not lead to new geographic markets for Palestine’s higher-end olive oil, the connection has the potential to open doors to new market segments within the United States for increased exports and market share. At the time of this case study’s investigation, the main importer is still in touch with the Daskara consortium Project Results and is interested in renewing imports. The IFC joined a number of donors in strengthening the Palestinian olive oil value chain at a time when global markets for olive oil demonstrated growth and Looking Forward: Daskara Refresh opportunity for product differentiation. While other The Rogers Collection and al Ard speak positively donors focused on the production and pressing of olive oil, about the future prospects for their continued the IFC focused on strengthening linkages with strategic relationship. The Daskara relaunch efforts have markets, including the following efforts: energized the primary partners. Going forward, al Reef will play a minimal role in the production of • Increasing the capacity of olive oil bottlers (processor- Daskara olive oil, limited to interactions with al Reef’s SMEs) to adopt quality control procedures farmer cooperatives. According to the renegotiated • Improving the performance of supply chains through arrangement, al Ard will now have full responsibility quality controls and implementation of traceability for the production and promotion of Daskara olive oil, programs and will receive 90 percent of the revenue gained from Daskara. Al Reef will receive the remaining 10 percent • Strengthening the first industry association, the of revenue from Daskara, but has essentially handed Palestinian Olive Oil Council branding rights to al Ard. These changes provide • Increasing access to export markets through training, Daskara the flexibility to respond more quickly and participation in trade fairs, and the creation of a new, autonomously to the importer’s suggestions. unified brand for niche U.S. markets 11 Overall, Phase 1 succeeded in raising quality standards and the heavy involvement and unclear mandate of across the industry, and Phase 2 succeeded, at least various government ministries in olive production, provisionally, in connecting SMEs to new markets. 15 harvesting, and pricing. Capacity constraints have Whether the efforts of Phase 2 will continue to provide significantly improved product quality over the course long-term, sustainable commercial relationships remains of several years, but trees are still susceptible to to be seen. Mediterranean fruit fly infestations, which negatively impact quality. Furthermore, the wide range of Though the new market linkages and sales to European, certification and quality standards demanded by Egyptian, and U.S. importers were short-lived or limited, international markets raises the cost of market entry the knowledge acquired through IFC advisory services for Palestinian SMEs, particularly when profit margins improved the professionalization of the industry, are squeezed by high production costs. increased knowledge of export markets, and positioned some bottlers for future growth— particularly al Ard and al Reef, through their linkages to niche markets. For many industry stakeholders, the key takeaway from the IFC project experience was that the future of the Palestinian olive oil industry depends on targeting Business Linkages niche markets. Though farmers and presses benefited from IFC and Lessons Learned other donor training programs in production, harvest, and traceability practices, there is no evidence to Lesson 1: Harness business suggest that the supply chain of bottlers benefited motivations to foster sustainable financially from the market linkages established in Phase 1 or 2 of the program. The additional volume of exports linkages did not significantly change the market for olive oil The endurance of the lead firm-SME relationship within Palestine, and it does not appear that a premium between the Rogers Collection and the Daskara price was paid to farmers who demonstrated high- consortium attests to the underlying desire of the quality oil, especially given the high price floor enforced partners for their collaboration to result in real benefits by the government. There was also no job creation or to their respective businesses. For the Rogers Collection, change in wages. the primary goal is to improve their competitive edge through product differentiation. Daskara is a high- Going forward, it will be critical for bottlers to develop quality and novel product to add to their collection. lasting relationships with farmers and presses to Rogers is committed to undertaking the laborious task distinguish different olive oil qualities and taste profiles, of educating clients and planning marketing events as companies tailor their products to the preferences for the launch (and sales) of the Daskara product of select niche markets. Some exporting bottlers have in exchange for what they hope will be a profitable already established lasting relationships with farmers relationship. For al Ard (the primary partner of the and farmer cooperatives. When niche markets become Daskara consortium), the primary goal is to access more established, the supply chain will enjoy greater higher-margin export markets. Al Ard is therefore benefits. committed to consistently producing a high-quality Unfortunately, constraints within the enabling product and joining Rogers in marketing efforts central environment will continue to raise the production costs to its competitive business model. The potential of Palestinian olive oil. These constraints include Israeli impact of this linkage has not yet been realized due restrictions on the movement of goods and people to to unforeseen circumstances during the initial launch and from olive production regions (manifested through period. However, the enthusiasm expressed by both checkpoints and blocked roads); Israeli taxes on exports; parties reflects a commitment to forging ahead in pursuit of a mutually beneficial relationship. 15 The IFC Results Framework for Phase 1 and Phase 2 is included in Annex 1. 12 Lesson 2: Market analysis and SMEs (bottlers) that received training and participated in European trade fairs. The IFC cost-share requirement segmentation are critical elements for participation in the project was kept low (around of linkage facilitation $8,000 per business), which enabled 80 percent of the country’s bottlers to benefit. Support to the POOC The difference in linkage outcomes between Phase 1 and also created a forum for longer-term collaboration Phase 2 of the IFC project speaks to the attention paid by among industry stakeholders, which promoted both the IFC to market segmentation, and the need to fit the the scale of the program and the sustainability of product within the segment’s cost and pricing structure. industry knowledge imparted by the project. Moving Little market analysis or strategy was conducted during into Phase 2, the relatively high IFC cost-share Phase 1, which resulted in unsustainable linkages to requirement (around $20,000 per business) reduced European and Egyptian importers largely attributable to the number of participants, and therefore the scale of the uncompetitive price of Palestinian olive oil. Applying the program, but ensured that participants were highly lessons from Phase 1, Phase 2 began with a study to invested in the project’s outcomes. Learning from the identify markets that were compatible with Palestinian discontinued business linkages with importers in Phase competitive factors. A full competitiveness assessment 1, Phase 2 emphasized the sustainability of market is essential in order to determine whether or not the linkages through targeted facilitation between qualified supply conditions are ready to meet the demands of a Palestinian bottlers and specialty product importers. high-end export market. Whether or not the program will ultimately result in long-term commercial success is a Another element that impacted scale in Phase 2 matter still to be determined. was the approach of creating a unified brand. In retrospect, the unified branding of Daskara through Lesson 3: Fostering linkages is more a “forced” consortium of disparate organizations may not have been the best approach to introduce a successful when lead firms are involved commercial product into a competitive market. The It appears that linkages between agro-processing SMEs relationship required considerable attention from project and lead firms are more sustainable when lead firms are implementers and was ultimately not sustainable. engaged early in the linkage facilitation process. In the Alternative approaches might have been more inclusive, case of creating the Daskara consortium during Phase 2, such as a Palestinian “seal” that certifies quality, the IFC team worked closely with the lead firm importer administered by a third party or associated with the to tailor developmental assistance to SME bottlers that tasting panel. Such an approach would allow companies met specific market requirements. This customized to retain their unique brands and guard proprietary approach to facilitating linkages ultimately resulted in information more closely. a more sustainable relationship, where the SME bottlers better understood the long-term investment required Lesson 5: Selection criteria helps in market promotion and quality maintenance. While a long-term commercial relationship is not yet established, identify industry champions the fact that the importer remains engaged and has a The IFC’s selection criteria in both phases reflected desire to continue involvement is likely due to the lead minimum standards that companies must demonstrate firm’s heavy involvement from the beginning. in order to participate in the linkage initiative. In Phase 1, these criteria included modern equipment Lesson 4: Development programs face and infrastructure in bottlers’ facilities, financial strength in terms of annual revenue, and a willingness project design trade-offs between to contribute financially to the costs of the project. For sustainability and scale Phase 2, bottlers self-selected to participate based on their interest in growing their exports and their ability The evolution of the project’s objectives from Phase 1 to contribute a significant cost-share contribution of to Phase 2 reflects trade-offs between sustainability $20,000. The demonstrated capability of bottlers to and scale. Phase 1 emphasized scale in terms of the grow and participate in larger markets was a useful number of beneficiaries, and the number of processing indicator for identifying industry champions. 13 West Bank/Gaza Olive Oil M&E Framework16 Output Outcome Impact Phase 1 Number of suppliers (farmers or Employees of bottling firms, Increase in percentage of exports vs. pressing mills) indicating improved work farmers, and presses; households domestic sales processes with companies (this indicator is not yet finalized) Increase in annual exports by bottle vs. bulk Number of farmers indicating Number of SME contracts signed exports increases in revenue Number of companies that have Number of companies indicating improved practically started to implement supplies of product after farmers received Total incremental sales revenues their export market strategies (e.g., training contacting clients in target markets) Number of staff indicating improved Number of companies meeting minimum Number of jobs supported skills requirements for quality certification Number of entities reporting Number of stakeholders (constituency) Percentage cost recovery of training and one- improved performance members indicating knowledge of POOC on-one consulting (productivity, accountability, role and process operations, loan terms, valuations) Number of training workshops provided Percentage cost recovery of training and one- Sales revenue (US$) by PFU (per quarter) on-one consulting Number of companies receiving quality Number of entities that implemented   assessments recommended changes Marketing and promotional tools Number of companies identifying at least 3-4 developed for micro, small, and medium   potential markets based on market research enterprise (MSMEs) Number of bottling MSMEs participating Number of companies indicating increased   in trade missions and exhibitions interaction with POOC, PFIA, PFU, or PalTrade Number of entities receiving advisory Improved levels of acidity and peroxide in   services produced olive oil Number of participants in workshops, Number of companies indicating an increase   training events, seminars, or conferences in the number of potential buyers contacted Phase 2 Number of entities receiving advisory Number of SME contracts signed Value of financing facilitated (US$) services Number of entities receiving in-depth Number of entities that implemented Number of entities accessing advisory services recommended changes investment or financing Number of participants in workshops, Number of MSMEs receiving capacity building Sales revenue (US$) training events, seminars, or conferences support 16 Indicators that aren’t directly related to the case have been removed. 14 Resources Anabtawi Group. “Al’Ard Palestinian Agri-Products: International Finance Corporation. 2010. PDS Approval Member of Anabtawi Group.” http://www.anabtawigroup. Document for West Bank Olive Oil Supply Chain Development com/etemplate.php?id=31&lid=3&lid1=27 Project # 567454. Washington, DC: International Finance Corporation. Ash, Nancy. 2012. Daskara Palaestina Prima Extra Virgin Olive Oil: Summer Fancy Food Show and Final Project Report. International Finance Corporation. 2013. Project Completion Report for Phase 2 of West Bank Olive Oil Supply Christie, Sophie. 2015. “The Cost of Olive Oil is Increasing.” Chain Development Project # 567454. Washington, DC: Telegraph UK, January 8. http://www.telegraph.co.uk/ International Finance Corporation. finance/personalfinance/money-saving-tips/11360643/The- cost-of-olive-oil-is-increasing-will-stocking-up-now-save- International Olive Oil Council. “Palestine Country me-money.html Exports.” http://www.internationaloliveoil.org/estaticos/ view/131-world-olive-oil-figures Daskara. “Daskara Palaestina Prima Extra Virgin Olive Oil.” http://daskara.com/ International Olive Oil Council. “Global Exports.” http:// www.internationaloliveoil.org/estaticos/view/131-world- Field, Simon. 2013. “Olive Oil Industry Megatrends.” Olive olive-oil-figures Oil Times, June 26. Ministry of Agriculture. National Strategy for Olive and Iber-Geo and PalTrade. 2009. Olive oil industry supply Olive Oil Subsector in Palestine, 2014-2019. / value chain project included in the IFC olive oil industry development project in the West Bank. Final Report. Ministry of National Economy and International Trade Centre. 2014. The State of Palestine National Export International Finance Corporation. 2008. PDS Approval Strategy: Olive Oil, Sector Export Strategy, 2014-2018. Document for West Bank Olive Oil Supply Chain Development Project # 539164. Washington, DC: International Finance Rogers Collection. www.therogerscollection.com Corporation. World Bank. 2006. Brief Overview of the Olive and the International Finance Corporation. 2009. Project Olive Oil Sector in the Palestinian Territories. Washington, DC: Completion Report for West Bank Olive Oil Supply World Bank. Chain Development Project # 539164. Washington, DC: International Finance Corporation. Interview List Organization Interviewee Name(s) Date of Interview Al Ard Ziad Anabtawi April 6, 2016 Al Reef Saleem Abu Ghazaleh April 5, 2016 Zidane Abu Hassan Ashraf Taha DAI-Palestine Said abu Hijleh April 4, 2016 International Finance Corporation Hazem Hanbal March 28, 2016 International Finance Corporation Selcuk Tanatar March 28, 2016 PalTrade Osama Abu Ali April 14, 2016 Palestinian Food Industries Union (PFIU) Naser Atyani April 10, 2016 Rogers Collection Carrie Davenport April 11, 2016 Strictly Olive Oil Company Nancy Ash (and Jeffers Richardson) March 23, 2016 Zayt Samir Hulileh April 10, 2016 Case Study: © 2018 The World Bank Group Developing the Olive Oil Sector in Palestine 1818 H Street NW by Marketing Washington, DC 20433 a Specialty Brand Website: www.infodev.org Email: info@infodev.org Twitter: @infoDev Facebook: /infoDevWBG infoD v INNOVATION & ENTREPRENEURSHIP