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Marketing, Processing, and the Special
Cases of Dairy Products and Horticulture
by Daniele Rama

10.1 Introduction

The Syrian agribusiness system can be broadly divided in two main components, which one could define using a terminology partly improper, as «strategic subsystem» and «non-strategic subsystem». The first term includes those supply chains (mainly cereals, tobacco, cotton, sugar, some dry legumes) for which the following characteristics, or some of them, can be found: there is a legal or de facto state monopoly in distribution (and eventually processing), or in any case the market share of state corporations is very high; prices at the different stages of the supply chain are determined ex ante; and farmers production decisions are mainly exogenous (dictated by the agricultural planning system). The second term includes all the remaining supply chains, where there is an important component of private business in purchasing, processing and trading products.

Problems affecting the two sub-systems appear to be very different. For strategic products markets, the main questions are: What are the degrees of freedom of farmers in making production/marketing decisions and what are the consequences on their welfare? How is the decision power allocated and what are the consequences on the system efficiency? And, how are consumers/taxpayers affected (subsidized/penalized) by the present institutional order? This is the subject of chapter 6.

These are not the central points for non-strategic products, where the key questions mainly concern the sustainability of the marketing system, namely: Are there suitable pre-marketing conditions for the development of an efficient supply chain (administrative environment, price control, credit system, market transparency, foreign currency access, licensing system, ...? How are vertical co-ordination mechanisms working and how can they be improved (contracts, co-operatives and farmers associations, management of wholesale markets, incentives for innovation ...)?

This chapter focuses on the latter subsystem, taking as special cases the dairy and horticultural sectors, where one can observe on the one hand the rise of new subjects and driving forces likely to characterize a freer marketing environment in the future, but on the other hand persistence of constraints and blocking forces opposing to it.

Documentation and published references on this matter are scarce in Syria. Besides the sources indicated in the references section, non-published documentation has also been used. This was collected through non-structured interviews with about 30 people, from managers and executives in the public or private sector to scientists, traders and farmers. Moreover, interviews through structured questionnaires have been conducted with all the state agricultural companies and the «joint-sector» (public-private joint ventures) companies affiliated with the Ministry of Agriculture and Agrarian Reform (MAAR), all the state food companies affiliated with the General Organization for Food Industries (GOFI), the Ministry of Industry, and some relevant state companies affiliated with the Ministry of Economy and Foreign Trade (MEFT), and with the Ministry of Supply and Internal Trade (MSIT).

10.2 The marketing environment

Several elements of the macro- and micro-environment of the Syrian marketing system are extensively treated in other chapters of this book, among others: technological development and investments in agriculture and the agro-food sector; foreign trade, exchange rates and other international arrangements; and Government agricultural planning system. Hence, two topics are specifically treated here: the demographic and food consumption patterns, and the prices regulatory system.

a) Demographic and food consumption patterns

Systematic consumption surveys are not carried out in Syria. The only available information concerning food consumption, except indirect and approximate indications coming from supply balance sheets, can be derived from surveys on consumption expenses that the Central Bureau of Statistics (CBS) realizes irregularly for the purpose of calculating retail prices indexes. The last survey has been conducted in 1994, but the results are not publicly available. So, the only available data are that of the survey of 1985/86 and its comparison with that of 1971/1972 (Table 10.1). With the limitation of being outdated, these figures, however, indicate some clear facts:

The growing consumption of dairy products is also confirmed by the analysis of supply balance sheets, which can be built for a more recent period using data from the MAAR and the Ministry of Industry. The trend in “domestic disappearance” (production + import - export) from 1988 to the end of the 1990's is positive for almost all the products analyzed in this category (liquid milk, milk powder, cheese, butter, ghee, laban, labne) except for laban, which is the most “basic food” in the group.

Table 10.1 Per capita food expenditure, by food item and households habitat, in 1971/72 and 1985/86





% on food exp.

% on total exp.


1-Cereals and by- products












3-Meat, fish and eggs






4-Dairy products






5-Oils and fats












7-Fruits and nuts






8-Sugar and sweets






9-Other food products






10-Drinks and soft drinks













1-Cereals and by- products












3-Meat, fish and eggs






4-Dairy products






5-Oils and fats












7-Fruits and nuts






8-Sugar and sweets






9-Other food products






10-Drinks and soft drinks












Source: CBS.

Other indirect considerations about consumption structure can be derived from the analysis of demographic evolution, derived from data supplied by the CBS:

b) Prices regulatory system

Up to the mid-‘80s, many agricultural products were priced at the farm level by the Supreme Agricultural Council (SAC)[78], an inter-ministerial committee chaired by the Prime Minister, which had the last responsibility for agricultural markets regulation. In fact, most of them being traded by state monopoly, the SAC simply indicated buying prices of public establishments.

At present, only cotton, tobacco and sugar markets are organized in this way; procurement, trade and processing are still under a public monopoly regime and the price, even at the farm level, is set ex ante. For other strategic products, like wheat and barley, the Council sets indicative prices, which are the prices paid by the state [(in this case, the General Establishment for Cereals Processing and Trade, (GECPT)]. As this Establishment is still the most important buyer, and it is obliged to buy unlimited quantities at the fixed price, market price is strongly influenced by the indicative price. Some traders pay a lower price, which farmers can accept only because payment conditions are better and because traders often anticipate loans to them.

Few other official prices are set at the farm level; this happens for apples and grapes, and the indicative price is the price paid by the General Organization for Fruits and Vegetables (GOFV, see paragraph 10.3g), but as this Organization has a low market share, its price has a limited influence on the market. The indicative prices for apples and market prices in the Suwaydah mohafaza in 1999, for example, show that state buyer is competitive only for lower quality products (Table 10.2). For animal products, only cow milk has an indicative price, which is the price paid by state dairies. It is a flat price, while prices paid by private processors reflect production seasonality.

Table 10.2 Prices for apples in the Suwaydah mohafaza, 1999 (SP per kg)

Extra class

1st class

2nd class

3rd class

Indicative price





Average market price





Source: author's inquiry.

At the wholesale and retail levels, price control pertains to the Price Directorate of the MSIT, except for the selling prices of state companies, which are fixed by the company or the relevant authority (see paragraphs 10.3d, e and g) by adding costs to the farm price. In the case of wheat flour, the selling price is lower than cost: this is one of the few examples of explicit consumers’ subsidy. The cost for the state establishment (including purchasing price of wheat, storage and milling costs, interests etc.) is currently equal to some SP20 per kg, while the selling price to bakeries is SP7 per kg. At the retail price, “the popular” bread (from supported flour) costs one third less than the “special” (free market) bread. Total consumption for supported bread is around 1.4 million tonnes, while for the free market it is 300 000 tonnes.

The MSIT monitors wholesale prices three times a week and retail prices once a week. On the basis of observed price, it determines a price which is supposed to represent the equilibrium between demand and supply, and this is published as maximum allowed price. The Ministry checks that this “equilibrium price” is respected, both at wholesale and semi-wholesale levels (like in Souq el Hal, see paragraph 10.3h) and in shops; any consumer can denounce abnormal prices in a shop.

In practice, the price control is more or less strict according to products; for meat, the price bulletin issued weekly by the Ministry must be exposed to the public in slaughterhouses and shops; for cheese the price control is less strict. For example, the official price of Accawi cheese in October 1999 was SP50 (unchanged for 4 years), when the current price was SP70. The official price worked mainly as “trigger price”: if a consumer complained about the price of SP70, functionaries from the Ministry would visit the retailer and check invoices (concerning cheese purchase, transportation and other expenses) in order to determine if the price applied was correct.

All pre-packed products must have the price written on the label; even promotions must be agreed with the MSIT, and a poster in the shop must announce the promotion and its duration. Generally, it is possible for processors to reach a satisfactory agreement with the Ministry about price level of a branded product (but the limitation remains on pricing flexibility). It can, however, happen that introduction of new products is discouraged by this kind of constraint. In an informal interview, an olive oil producer explained his choice to sell a new line of high standard oil only for export, without offering it on the domestic market, by the impossibility to agree on a correct price considering cost differential (added to the difficulty to convince consumers about quality difference).

10.3 The marketing actors

This section identifies the most important operators in the Syrian food chains and discusses their structure and competitive behaviours.

a) Farm structure and its evolution[79]

According to the last General Census of 1994, the total number of agricultural holdings in Syria was more than 610 000 units, in substantial increase (+ 26.3 percent) compared to the previous 1981 census. The increase is mainly due to land reclamation and agrarian reform programs, and was particularly noticeable in remote mohafazat, like Deir-ezzor (+ 42 percent), Dar’ah (+ 46 percent) and Quneitra (+93.4 percent). Meanwhile, the average size of farms remained almost stable at 85 donums (8.5 hectares), but the cultivation has been generally intensified, as the share of non-cultivated land in agricultural holdings decreased from 6.5 percent to 1.1 percent.

This intensification is confirmed by more recent data; from 1987 to 1997, uncultivated land, in farms, decreased by 7.6 percent and irrigated land increased from 12 percent to 21 percent, while fallow decreased from 28 percent to 13 percent.

Regarding size classes, 56 percent of the holdings are less then 20 donums and constitute 11 percent of the total land, but more than 18 percent of the irrigated land; in this group, irrigated land represents 37 percent of the total. On the other hand, less than 2 percent of the holdings are larger than 500 donums, with 23 percent of the total land, but the percentage of irrigated land decreased to 15 percent.

Integration of farms into cooperatives does not seem related to farm size; enrolment in cooperatives, which on average corresponds to 62 percent of farms, is higher for medium-sized farms and lower both for larger (55 percent over 300 donums) and smaller (57 percent under 10 donums) farms.

b) Agricultural co-operatives and agricultural chambers

The term “agricultural cooperatives” when applied to Syrian agriculture can be partly misleading, as these structures are different from the models known both in western agriculture and in centrally planned economies. In Syria, cooperatives are semi-public organizations of farmers, which have an essential role in the preparation and implementation of the national production plan. Although some cooperatives market part of the products of associated farmers, their main function is to provide members with the necessary inputs, through a system if in-kind and cash credit, both calculated on the basis of individual assignments in the plan. Even the minimum legal size of cooperatives, 30 members, testifies to their nature of agricultural associations rather than enterprises for marketing agricultural products.

According to the Peasant's Unions Federation (PUF) Statistical Yearbook, 5 223 cooperatives had 842 824 members in 1998, for a total area of more than 2.4 million hectares of cultivable land. These figures are somehow different from those of the General Census of 1994, where it appears that 345 090 holders, corresponding to 1 196 449 parcels, were associated with cooperatives, i.e. 62 percent of Syrian agricultural holdings and 68 percent of parcels; the total cultivable land attributed to cooperatives was 2.7 million hectares, or 59 percent of the total.

Cooperatives are vertically organized in Peasant Unions, at the district and governorate levels, up to the PUF at the national level. Both at the governorate and district levels, Peasant Unions participate in the Agricultural Affairs Council[80], while the PUF cooperates with the SAC. The structure is publicly supported in two ways: a) direct state funding, motivated by the fact that farmer unions participate in the planning process, and b) technicians paid by the state, operating into the unions. It is estimated that public support covers 80-90 percent of the cost of this structure.

Loans to member farmers are distributed through the cooperative, which makes a request to the Agricultural Cooperative Bank (ACB) for fertilizers, seeds, other inputs and cash money. Loans are distributed individually according to the size of the farm (loans in cash) and the nature of crops (loans in kind).

Concerning marketing, some cooperatives market the products of their membership, especially when selling to state processing or trading companies, but they seldom operate in the free market. In the majority of cases, however, farmers sell individually, including sometimes to state companies (for instance the General Organization of Cotton Ginning and Marketing (GOCGM) buys part of the raw material from cooperatives and part from individual farmers). For strategic products, peasants unions have a greater role in marketing, and also have a voice in price fixing, in cooperation with MAAR and MSIT.

A project was initiated in 1998 to build 24 new cooperatives specialized in marketing agricultural products, one for crops and one for animal products in each governorate (except urban Damascus). By 2001, only a few of them were active on the market (as an example, one had associated 45 apple producers in the Suwaydah governorate). Only a limited number of farmers had joined as of 2001 because of mistrust towards such public sector organizations. The cooperatives pay farmers 25 percent in advance and the remainder when the product is sold, while middlemen pay cash. Other marketing cooperatives are starting activity in Tartous and Lattakia, mainly for oranges.

Agricultural Chambers are, to some extent, an alternative to cooperatives, as they represent individual farmers not affiliated to cooperatives; a farmer can be a member of both kinds of organizations, but this happens as exceptional cases. The first agricultural chamber was founded in Damascus in 1882 as Chamber of Commerce and Agriculture. In 1930, Commerce and Agriculture became two separate chambers. Nowadays, agricultural chambers are established in each governorate and in urban Damascus (14 chambers altogether, with presently some 300 000 participant farmers). The Syrian Federation of Agricultural Chambers was founded in 1990. Funding comes from membership fees (SP300 per year) and from charges for direct services to farms (milling olives, oranges certifications, etc).

In order to differentiate their role from that of other organizations acting in the same domain, agricultural chambers are seeking to concentrate their action in economic and marketing fields. In the case of olive mills, for instance, the chamber gives interests-free loans to farmers who agree to bring their olives to the chamber's mill. There exist projects at the level of each chamber for olive mills, storehouses, refrigerating units, etc., and an annual prize is awarded to the best project. The agricultural chambers also provide other services to the membership: (i) to organize the participation of farmers in international exhibitions (especially in France, Germany and Italy); (ii) to organize each year in Syria an agricultural exhibition, in different locations of the country; (iii) to sponsor scientific seminars, with international consultants, and scientific research programs; and (iv) to offer scholarships in Syrian universities.

c) State agricultural companies

Seven agricultural establishments are affiliated to the Directorate for the Economic Sector, MAAR: three of them are agricultural input producers, while four are independent agriculture production units (Table 10.3). These companies employ almost 14 000 people, their aggregate turnover in 1998 was SP12 102 million, and their contribution to Syrian agricultural production was 5 to 7 percent. They were established in the 1970s, with the exception of the General Establishment for State Farms (established in 1985).

Table 10.3 State agricultural companies affiliated to MAAR



Main products

General Establishment for Agricultural Mechanization


Mechanization services

General Organization for Seed Multiplication



General Establishment for Fodder



General Establishment for Cattle


Milk, beef, calves

General Establishment for Fish

Jabla (Lattakia)


General Establishment for State Farms



General Establishment for Poultry



The integration of the State Agricultural Companies in Syrian agriculture is very low, as in general they simply entertain market exchange relations, selling inputs to farmers, or act as completely independent entities. Only the Establishment for Mechanization, which develops new products and offers to farmers rented services which otherwise would probably not be available, can be considered a development factor for the whole sector (this Establishment spends about 0.3 percent of turnover in communication activities). To a lesser extent, this is also true for the GOSM (e.g. it produces virus free potato seeds).

Annual production plans are submitted to the approval of the government (see Box 10.1) and investment plans are decided by a separate Investment Committee (of which some establishment directors are members). However, in the future, state companies will have greater power on management decisions, as a new “Management by Objectives” practice, currently under trial at some food industry establishments, will be implemented.

Box 10. 1 The General Organization for Poultry (GOP)

GOP is an independent company affiliated with the Directorate of Economic Sector, MAAR. Established in 1974, GOP has 11 branches, all in different governorates (nine from the beginning and two added in later years). The company is now only barely subsidized by the Government. It received financial support during its first ten years, and presently only benefits from special credit conditions with ACB.

GOP produces table eggs, broilers, chicks for broilers and chicks for layers. Three branches have hatching units. Annual production is around 300 million eggs, 3-4 thousand tonnes of broilers, 10 million chicks for broilers and 4 million for layers. The market share of GOP is 15 percent for broilers, 20 percent for table eggs, 30 percent for layer chicks and 40 percent for broiler chicks.

The annual planning procedure takes two months. A meeting of the board of directors with the MAAR gives broad indications for each branch. to prepare a draft plan. Individual plans, after consolidation and examination by the company board, are submitted to the ministries of Agriculture, of Economy and Foreign Trade and of Finance. Each branch receives resources according to the plan and must comply with its objectives with a tolerance of 15 percent. Product portfolio composition can be adjusted on the basis of gains and losses in each line.

The company sells both to retailers and collective customers (hospitals, army, and schools). Prices are determined, normally every three months, by the Ministry of Supply and Internal Trade in consultation with the MAAR; the company can adjust these prices according to the market situation.

Some branches have sales networks with refrigerated trucks. Part of the production is also exported, but this is outside the plan; this enables getting hard currencies and disposing of surpluses. For example, GOP sold products to Lebanon for three years after the war was ended. As Lebanon became self-sufficient, such sales were terminated.

The State Agricultural Companies do not entertain any direct or indirect sales network. Products are sold to the market or to the public sector directly by company branches. Promotional activity is almost absent. The only two companies that practise advertising do not devote to it more than 0.2-0.3 percent of their turnover. Research and Development (R&D) and products innovation are also practically non-existent.

Exports are very limited. Only two establishments sell abroad between 1 percent and 2 percent of their production, but without continuity, as export is simply considered a way to dispose of surpluses or to get hard currency; target markets are generally Arab countries in the region.

d) State food companies

The GOFI, a corporation which is part of the Ministry of Industry, affiliates 22 food companies, corresponding to 27 factories, in several industries. GOFI processes fruits and vegetables, oil, dairy, biscuits and pasta, dried onions, sugar and sweets, water, beer and spirits. All the companies have been established (or nationalized, if they existed previously) in the 1960s or 1970s. Up to 1991, GOFI companies had a monopoly situation (de jure or de facto) in many food processing industries (see Box 10. 2).

The state food companies employ on average 230 people (minimum 77, maximum 1 238); their total turnover amounts to SP4 847 million. It is not possible to calculate their market share, either on aggregate or by industry, because total industry values are not known. As examples of their share in processing capacity, state companies in 1997 accounted for 53 percent of the tomato paste market and 65 percent of the yogurt (laban and labne) market; two years earlier, the corresponding shares were 65 percent and 87 percent.

A common opinion is held within the management of these companies (as well as in GOFI) that the quality of their products is excellent, higher than that in the private sector, thanks to more controls on products specifications (which also means higher costs). But, according to the same sources, Syrian consumers do not perceive these differences and are not “product loyal”, the market is taken as completely competitive and transparent, without any special product differentiation, so that competition is only based on price, leading to a market equilibrium determined by the demand side much more than by the supply side. This however appears to be only partly true, as private companies often increase their market share through non-price competition.

Consequently, these companies do not invest in market development: two of them only have introduced new products during the past five years; one only has conducted promotional activities other than participating in exhibitions and in the common GOFI advertising. For all of them, the main customer is the public sector (collective consumers -e.g. army etc.- and state marketing departments).

Almost half of the state food companies market some products abroad, but only three of them reach 10 percent of turnover as exports. They all operate through public establishments (like GEZA) or by spot contracts, and cash payment or letter of credit are required. The only promotional activity on foreign markets is a film produced by the General Organization covering all the state companies.

Box 10.2 Al Shark Company for Food Products

Al Shark company, based in Aleppo, has two separate branches operating as almost independent companies. One branch, established in 1952, produces beer, biscuits and chocolate; the other one, established in 1958, processes milk.

The Dairy branch

All the milk is supplied by farmers’ cooperatives or by one station of the General Establishment for Cattle. Total milk intake is about 10 000 tonnes per year, or 30 tonnes per day, fluctuating from 25 tonnes in winter to 35 in summer; accordingly, in some periods, the branch processes milk even if at a loss, due to cheese market instability. On average, 50-55 percent of the milk is sterilized and 45-50 percent processed.

The main products are sterilized milk (about 5 000 tonnes), laban (1 600 tonnes), labne (50 tonnes), cheese (200 tonnes: accawi, hallum, mlallalah, cashcawan, processed cheese), fat products (250 tonnes: Chantilly cream and ghee). In 1998, the brand name was changed to Sharbakh (“Prestige”). Recently, the production of cheddar and mozzarella was initiated (as an experiment with a restaurant). The introduction of ayran (liquid yogurt) was planned by 2000.

The annual plan sets the quantity of milk used by products family (liquid milk, yogurt, cheese) while production is adjusted within each product family (from one cheese to another one, etc.) according to the market situation. Ghee is either imported from Denmark and simply canned (however the market is very competitive) or directly produced (of very high quality, this is a high profit product).

Processed cheese is also profitable and has a stable market. The company acts as a price follower: French brand processed cheese is sold at SP55 per 180 grams jar, while the local cheese is sold at SP25 per 250 grams jar. As the demand is gradually increasing, the production follows.

The company tried Tetrapack packaging, but the cost (SP15 per 150 grams pack) was too high. The estimated cost of SP21 per pack of 1 kg is about six times that of similar packaging in Western Europe. Recent new products for the company are cashcawan and processed cheese, while cheddar and mozzarella are also new for the Syrian market. Examples of innovations have been mlallalah with fennel, which met great success as an innovation into tradition, and processed cheese with red pepper and with mint, which did not succeed.

The Chocolate-biscuit-beer branch

This branch has three separate production lines: chocolate, biscuits and beer, but the first line is not active. The total turnover is about SP180 million.

The beer line processes 1 300 tonnes of malt annually (the other beer producing establishment, Barada in Damascus, processes about 1 000 tonnes of malt). All inputs except hops (France and Germany) are produced domestically. The demand is very high: 96 percent of the production plan is implemented and the profit rate exceeds 16 percent. A hundred workers are employed in this line, receiving incentives on salary. The beer is distributed through three establishments affiliated to the Ministry of Supply and Internal Trade, which sell to hotels, restaurants, etc.

In the biscuits line, the situation is much worse. The plant employs high technology: an automatic oven, of 20 meters length, was imported from The Netherlands in 1995. The processing capacity is one tonne per hour, but only 30 percent of the plan is implemented. The demand is weak: this is attributed to economic recession and lack of purchasing power for luxury food such as biscuits. In fact, the company has been negatively affected by investment Law No. 10/1991, under which many medium-small companies have been established and sell at a lower price. The classic production is petit beurre, an excellent quality product. New products, such as wafer, soft biscuits, crackers, and cream filled biscuits are being tried, but suffer from quality and packaging problems.

All the raw material for biscuits is available locally, except for fat (imported mainly from Malaysia). One hundred and forty workers are employed in this line (down from 200). A human resources management problem is that workers in the biscuits line do not receive incentives, and get lower salaries than beer workers.

The cost of flour creates a disadvantage with regards to foreign producers (SP22 per kg in Syria, SP9 in Turkey). Some private mills sell cheaper (SP15). The selling price of biscuits, SP46 per kg, is in-line cost SP35, plus SP8 for packaging and SP3 for wages. Actually, the line is not profitable, and the cost can only be reduced through size increase. The break-even point is estimated at 2 500 tonnes per year, against 1 200 tonnes presently (the capacity of the new oven, operating eight hours per six days per 50 weeks is 2 400 tonnes; nearly 5 000 tonnes could be reached through shifts).

In 1998, the biscuits have lost SP6.8 million, beer generated SP30 million profit, and the company profit resulted at SP23 million. In 1999, the projected profit was SP30 million, coming from an increase in beer profit and a reduction in biscuits losses to SP3 million, due to lower costs of several inputs: sugar, fat, flour.

The company is looking for new markets for biscuits. In the past, biscuits were exported to Rumania and FSU. Presently some exports are taking place to the neighbouring countries, like Jordan, at the price of the Syrian domestic market. Exports to Europe have never been tried.

The promotion investment for both branches, only half a million SP (0.125 percent of the aggregate turnover), is principally used for participation in exhibitions. This budget is decided by GOFI.

In fact, management decisions for the state food companies are even more centralized than for the state agricultural companies. Not only is investment policy decided by the General Organization, but even short-term marketing decisions, like promotion expenditure or discounts to traders, are centralized.

e) Private food companies

If available documentation for state companies is scarce, there is nearly none for the private companies, which are absent from official statistics and do not have special obligations like publicly available balance sheets or production declarations. As a matter of fact, there were no private companies in most Syrian industries until 1991, apart from small, handicraft-like enterprises (Box 10.3), and they are still legally excluded from certain industries such as cotton, tobacco, sugar or beer. Even in direct interviews, these companies are more reluctant than state companies to supply quantitative information. As a consequence, the only available figures are contained in company licenses, which specify the authorized products, the theoretical production capacity and raw material consumption[81], and partially those from projects approved under Law No. 10/1991.

Box 10. 3 Bakri Kaakeh Sons Co.

The company existed for about 50 years, but the present modern plant dates from the mid-1990's. The only products, sold under the commercial brand “Dolls”, are flavoured ice-cream and yogurt (both laban and labne). The company was about to start the production of biscuits, initially as an ingredient for internal use (ice-cream), and possibly later on as an independent product. The theoretical processing capacity, 25-30 tonnes of milk per day, was temporarily limited to 15 tonnes, because some components had not been delivered by the company supplying the plant.

The turnover is around US$6 000 per day, with a medium term objective of 12 000-15 000. Fifty to sixty workers are employed in the plant, which is highly automated.

Actual milk intake is about 11-12 tonnes per day, supplied by four to five middlemen, who in turn buy from 500-700 farmers, not known directly to the company. Controls on milk relate to fat and protein contents, density, acidity, presence of heath shocks, total bacteria count, colibacteria, and antibiotics. Fruits for flavours are imported under sugar from Italy, France and Switzerland.

The present production per day is six to seven tonnes of laban and labne, and seven to eight tonnes of ice-cream. Flavoured laban and labne are sold only in the Aleppo area, due to limitation in production, through a chain of supermarkets belonging to the same family. There are no direct competitors, except the traditional sector (which does not produce flavoured products), thanks to protection against imports and, for the moment, the absence of multinationals in this sector. Bakri Kaakeh Sons is the second ice-cream producer in Syria. It distributes its products all over the country by 12 refrigerated trucks. Apart from Aleppo, where the family supermarkets absorb almost 20 percent of the company's ice-cream sales, in every other town an important supermarket acts as the exclusive agent. The export market, mainly in the Gulf area, is a medium term objective, for which ISO 9002 certification is being prepared.


New products are frequently developed. Even though Syrian consumers are rather conservative, it is estimated that if 20 percent of Syrians bought one jar weekly (250 grams) of flavoured laban or labne, there would be a market of 850 tonnes per week, double the present sales. For the year 2000, the launch of frozen yogurt, a completely new product for the country, is planned. R&D is completely internal and no specific costs can be accounted. Promotion is not needed, as demand exceeds supply. The only promotional activity is the distribution of posters in the retailing shops.

According to information supplied by the Investment Office at the Council of Ministers, 257 food sector projects were approved under Law 10/1991 up to June 1999, of which 58 correspond to new companies registered at the Ministry of Industry; 83 percent of these new companies have more than 10 employees; 26 percent of the new companies have partly or totally foreign capital (Table 10.4). These are often innovative and dynamic enterprises (see following cases). Beyond these structured companies, there is a swarm of medium-small private firms, especially in traditional industries like bakery, sweets, oil and beverage, which are intermediate between the market leaders and the traditional “informal” business.

Table 10.4 Companies in the agro-food industry in Syria - private sector


Number of companies

Production capacity (thousands of tonnes of raw material)


of which: established under Law 10/91


of which:

hiring > 10 employees

having partial or total foreign capital

Cereals processing

2 005




1 954

Fruits and vegetables processing






Meat and processed meat












Sugar and sweets






Oils, fats and animal feedstuffs






Alcoholic beverages






Non-alcoholic beverages











10 495

An examination of the four market leaders in each industry reveals that even the major private companies are much smaller than state food companies; with few exceptions, the number of employees does not reach 50. It is likely that many firms are still under their optimal size, as 75 percent of them were established after 1990. Licensing or franchising contracts with foreign companies are very unusual; only one company in the oil industry and a few in the non-alcoholic beverages industry have recourse to these practices.

Despite their generally limited size and recent establishment, private food companies are very active on the export market. They even have a dominant position in some key industries, such as processed fruits and vegetables, dairy products and sweets (Table 10.5).

Table 10.5 Syrian agro-food private sector and foreign markets


Exported product (tonnes)

Main exported products

Main export markets

Private companies estimated export share

Cereals processing

1 450

Pasta and biscuits

Eastern Europe, Lebanon, Gulf


Fruits and vegetables processing

1 600

Tomato paste

Eastern Europe, Gulf



Other fruits paste

Iran, Gulf, Lebanon

2 000

Processed olive

Europe, Canada

5 200

Apricot sheets

Egypt, Gulf


Fruits concentrate

Lebanon, Gulf

Meat and processed meat


Meat processing wastes




1 160


Lebanon, Kuwait, KSA



KSA, Lebanon, Kuwait

Sugar and sweets

6 800


Eastern Europe, Lebanon, Gulf


4 700


Eastern Europe, Gulf

Oils, fats and animal feedstuffs

2 005

Olive oil

Lebanon, Gulf



Soya and corn oil


1 623

Cotton seed oil

Turkey, Switzerland, Gulf, Lebanon

Alcoholic beverages


Non-alcoholic beverages

2 056

Libya, Gulf, Lebanon



36 908

Olive oil processing waste

Jordan, Lebanon, KSA, Turkey


Source: Ministry of Industry, Private Sector Department, Agro-food Section (Export information: from the Foreign Trade Statistics 1997 - Customs - Ministry of Finance).

The evolution of the licensed production capacity for processed fruits and vegetables and for dairy products confirms the current dynamism of the private food companies sector. In all sub-sectors, the capacity is in rapid evolution, while it was often nil only some years ago (Table 10.6).

Table 10.6 Private companies licensed production capacity for some processed fruits, vegetables and dairy products (tonnes)












Tomato paste







3 250

4 771

7 351

7 487

Canned peas











Mixed canned vegetables







3 087

8 735

11 048

11 048

Apricot jam




















1 170

1 789









1 027

1 294

1 379

Source: Elaboration from figures provided by Ministry of Industry, Private Sector Department.

f) Traders

In Syria, it is relatively simple (for Syrian citizens, as internal trade is not open to foreigners) to start a trade activity. The only formality to comply with is to inscribe in a Chamber of Commerce, getting a “marketing certificate”, which mentions neither the type of traded items nor the scale (wholesale, retail) of the trading activity. Therefore, it is practically impossible to know the number of traders engaged in procurement and retail of agricultural and food products. Theoretically, they are under the control of the Department for Marketing and International Trade of the MSIT, but there is no systematic monitoring.

For an import-export activity, any individual or company (be it national or foreign) must be inscribed in a special list at the Ministry of Economy and Foreign Trade. The types of operators, whose functions and extent of activity differ according to products, include:

A typical wholesale market is Souq el Hal, the general market for fruits and vegetables established in every governorate capital. In Damascus Souq el Hal, some 400 traders operate, composed of roughly 50 percent commissioners and 50 percent wholesalers or semi-wholesalers. Ninety five percent of the traffic is wholesale trade. The Market Commission (Trade union) exerts very limited control. Access of products on the market is not monitored (neither physical control, nor traders declarations or other system). It is estimated that, during the peak season (two months in summer), 300-500 tonnes may arrive daily on the market, more than 50 percent of which is tomato. There is no publicly available information on prices, even though prices are monitored by the MSIT.

Recently, a new section has been added to the Souk el Haq for wholesale and semi-wholesale trade of meat, eggs, dairy products and fish.

Other markets are the so-called district markets, where the majority of operators are retailers. Souq Bab Seghir, in Damascus, is a semi-wholesale and retail market for cheese, meat and poultry, but other items are traded also (vegetables, spices, etc.). Some 90 percent of the shops are simply retail outfits. Wholesalers are either specialized or generic grocery traders (e.g. there are 15 cheese wholesalers, of which 6 specialized and 9 grocery traders).

g) State distribution companies

Although the retail market for food products is mainly in the hands of private firms, the state is present as well though several establishments affiliated to the MSIT. Processed foods are sold through the General Establishment for Retail, an organization established in the 1970s to become a dominant force in supplying consumers with wide consumption items (not only food). State food shops (branches of the General Establishment for Retail) are present in every Syrian town; it is estimated that their market share ranges from 5 to 10 percent.

State food shops buy only from state food companies, for whom they constitute an important marketing outlet. Compared with private supermarkets, state food shops sell at competitive prices but offer lower services, especially in terms of products portfolio and opening hours (from 9 a.m. to 2 p.m.). Fresh products are not sold in these shops. Fresh fruits and vegetables can arrive in the market through the General Organization for Fruits and Vegetables (GOFV), an establishment also created in the late 1970’s with the intent of rationalizing the procurement and distribution of fruits and vegetables on the national scale. GOFV has large scale refrigerated warehouses, sorting and packing facilities (even some mechanized facilities, but these are generally not used) and a network of retail outlets in every important city in Syria. In the mid 1980s, GOFV was putting to the market 25 percent of Syrian apples, almost 10 percent of citrus and lower percentages of other fruits. Since then, its role declined. Still, GOFV has the monopoly over imports of fruits and vegetables, e.g. apples, citrus, potatoes. GOFV buys at fixed prices, determined by the Government, and can therefore act, in principle, as an intervention agency which stabilizes markets in times of price fall. Like other State retail establishments, the GOFV is the main supplier for institutional consumers (army, hospitals, etc.). The quality of products sold in GOFV shops is generally lower than the market average; prices are determined by adding to the purchasing price operating costs and a “normal profit”.

10.4 Marketing flows and driving forces

With special reference to fresh fruits and vegetables, processed fruits and vegetables and dairy products, this section collects and summarizes the relations between the different marketing actors, discussed in the previous chapter. These relations are synthesized into flow charts where, because quantitative figures are scarce, it has not been possible to measure single flows, but simply to indicate the existing flows, those of major importance, and the existence of public supervision or control.

a) Fresh fruits and vegetables (Chart 10.1)

The upper part of chart 10.1 deals with inputs supply and has been reviewed under para. 10.3a. Cooperatives and individual farmers (not members of cooperatives) buy inputs from the public and private sectors. Private suppliers dominate for animal feeds and important actors for seeds. Producers (individual or associated) receive part of the seeds and feed, as well as mechanization services, directly from the public establishments, and fuel, fertilizers and equipment through the ACB. The only difference is that cooperatives tend to buy seeds mainly from the state company, while individual farmers deal mostly with private traders, who offer better credit conditions and have a more diffused presence in the country. cooperatives have a very limited role in marketing, because they are very small. As indicated before, new cooperatives to be engaged in marketing at the governorate level have been launched; they can sell products for fresh consumption both to Souq el Hal or to the GOFV.

Chart 1 - Flow chart for the marketing of fresh fruits and vegetables

The bulk of farmers’ production arrives in the market through the Souq el Hal, carried on small lorries which farmers generally hire. It is sold either directly to wholesalers in the market or through intermediaries. Farm size is not a discriminating factor for the choice to sell directly or to use these middlemen; it can even be easier for small farmers, who sell smaller quantities, to go directly to the market. Overall, indirect access to market probably concerns 40 percent of the total product, and possibly more when the quantity of products on the market is higher. A special category of intermediaries (who should more correctly be considered wholesalers) are the so-called “guaranteers” (damanah). The guaranteer is a local trader who buys the entire production of a farmer at a price estimated according to the overall quality of the product, the guaranteer generally sorting the product at the farm. When the purchase is before harvest, the farmer can be paid in advance. The advantages for the farmer are to prevent risks, to avoid dealing with transportation, and to sell the whole production at once. Naturally, the disadvantage is a price lower than from wholesalers.

In the case of apples and citrus, some of the product is sold fresh, on the internal market or for export, but the greater part is stored in cold storage units. Some farmers have such facilities, otherwise they use private or public cold storage plants or small units of other producers. For instance, in the Suwaydah governorate there is one public cold storage plant (with a storage capacity of 4 000 tonnes), four private storage plants (12 000 tonnes as a total) and 111 small units attached to farms.

A minor outlet for farmers is also the GOFV, which nowadays plays a minor role in this market. Occasionally, this establishment also acts as an intervention agency, when there is a market crisis, or as an insurance company which buys when the quality is very low due to bad climatic conditions and the products could not be stored.

In Souq el Hal, farmers can sell either to commissioners or to wholesalers-retailers. Normal flows are as follows:

Officially, the commission is 5 percent (maximum fixed by the MSIT), or even slightly less, but reported actual commissions range from 20 to 30 percent. Sometimes, commissioners anticipate loans to farmers, in cash or in kind (fertilizers, seeds). As a consequence, and also due to the personal knowledge and trust, a farmer usually is linked to a specific commissioner, or possibly more commissioners in separate markets. The commissioner can sell to the semi-wholesaler or to the retailer, either cash or credit (usually at one week up to one month term), depending upon the demand/supply situation (credit is more common in times of surplus). Wholesalers and commissioners are not product-specialized, as they need to operate continuously despite seasonality. However, they are often specialized by region to a varying extent, and this induces some partial product specialization.

Usually, the commissioner sorts products at least partially. For export however, a stricter sorting is necessary, undertaken finally by the exporter. The number of packers and direct exporters is uncertain (some 60-70 packers, according to one source, less than 15 according to another one). With few exceptions, they specialize in export and operate outside the Souq, preferably buying from farmers directly and only selling the below-standard quality product on the Souq. However the majority of exported flows are operated by non-specialized traders, who also sell on the domestic market. A former state export company no longer exists.

Collective consumers (army, hospitals, etc.) buy either from the state marketing company (which, occasionally according to the needs of its “institutional” customers, buys in turn from Souq el Hal) or through auctions; contractors are usually the same intermediaries who sell to the Souq. At the retail level, sales are dominated by traditional shops, often assembled in district markets; modern retail share does not exceed 10-12 percent.

b) Processed fruits and vegetables (Chart 10.2)

The upper part of chart 10.2 (marketing of processed fruits and vegetables) is identical to that for fresh products, reflecting the fact that there is no specialized marketing chain for processed fruits and vegetables.

Private processors buy indifferently from the Souq or from farmers, depending on the price, which can be lower in the Souq as the product once there must be sold, and on the availability of large quantities. For instance, tomato is commonly bought from farmers because individual parcels produce “large” quantities, while citrus is mainly bought from the Souq. Contracting in advance with farmers is sometimes practiced, but the implementation of these contracts is quite erratic. The issue of avoiding availability breaks through advance purchase is apparently not considered important. Both public and private processors can lower their activity if the price of raw material is too high.

Chart 2 - Flow chart for the marketing of processed fruits and vegetables

State processing companies buy from individual farmers to a greater extent than from the Souq or from cooperatives. They occasionally also buy from the state marketing company, when the latter has an unanticipated surplus. Public and private companies are both active in traditional products, while the private sector is dominating in modern products, such as frozen products, fruit juices, etc. For processed tomato and canned beans, private and public market shares are about equal, while for jam and marmalade the private share is around 70 percent. It must be remembered that more than 30 percent of tomato paste and 10 percent of jam and marmalade are home-made. A specific type of processor is represented by small, family handicraft processors, who specialize in traditional products such as dry apricot sheets (guamar eddeen) or raisins. They mostly buy raw agricultural products from the Souq, but sometimes also from farmers.

At the retail stage, traditional shops have the main market share for fresh products, but the relative importance of supermarkets is higher for processed products, and modern retailing probably represents the most important channel for private processors. State companies sell to state shops affiliated with the General Establishment for Retail or to ordinary marketing channels. They also happen to sell a part of their production in bulk to private companies and to catering. Collective consumers usually buy through contractors, but they also contract directly between state agencies, which are a way to access credit.

The export market is practically limited to dried fruits produced in small family units, which often export more than 30 percent of their output, and traded by private agents specialized in export. Private companies seldom sell large part of their output abroad; they sometimes export directly, without traders. Only a few state companies begin dealing with export, through auctions.

c) Dairy products (Chart 10.3)

The main characteristic of the milk and dairy industry in Syria is probably the great importance of the informal sector. The processing capacity of public and private dairies together (three state companies and 32 private dairies registered at the Ministry of Industry) covers less than 10 percent of Syrian milk. The remaining part is either processed by small handicraft cheese-makers, sold as raw milk to consumers (and eventually processed at home into laban and labne) or consumed by the family of the producer. Because of this low level of organization, the production pattern presents strong seasonality and erratic variations.

In contrast with the situation for fruits and vegetables, agricultural cooperatives are quite important in raw milk marketing (for the formal sector), especially for sheep. This is less true for the less concentrated cow milk farms, usually one to two cow farms, which are located mainly in the coastal area, in the Hama-Homs region and around Damascus.

Chart 3 - Flow chart for the marketing of dairy products

State companies buy from cooperatives through annual contracts. When state and private companies buy from individual farmers, they almost always use intermediaries, and generally do not even know the milk producers. The state farms usually sell their milk to state processing companies. Another source of raw material for private and state companies is the import of milk powder for ice-cream and yogurt.

The product mix is almost the same for private and public companies, with the exception of UHT often produced by the latter instead of traditional sterilized milk. One state company only, in business for 20 years, produces pasteurized milk in Homs for the local market. Two private companies in Homs and Aleppo started producing fruit-flavoured yogurt or milk, although the market is still very limited.

The liquid milk market is predominantly in the hands of state companies, which use the classical half-litre glass bottle. The private companies mostly use plastic bottles or sometimes brick, and due to better packaging and lower constraints on prices, they can obtain for the same product (sterilized milk) prices 60-70 percent higher than state dairies.

Cheese is produced both by private and state companies, but white cheese (accawi, hallum, mlallalah) is produced mainly by handicraft units, with high seasonality. Handicraft cheese-makers are very often also farmers; the only exceptions are in the Hama area, where cheese is most traditional and where small processing establishments not connected to farms can be found. Yellow and processed cheese is produced only by “industrial” private or state companies. Cheese production is highly seasonal both in the formal and informal sectors. Raw milk intermediaries sell also raw milk to traditional and modern shops. Modern outlets tend to represent the most important marketing channel for private milk processing companies, as is the case for processed fruits and vegetables,.

Collective consumers are mostly supplied by State dairy companies, rather than by contractors who only serve at complementing their needs. For milk as for other processed products, another outlet for state dairies is the network of state shops affiliated to the General Establishment for Retail.

The only dairy exports are limited quantities of white cheese and ghee sent to the Gulf area, predominantly by private traders; there is also some direct export from state companies.

10.5 Concluding remarks

The analysis developed in the previous sections shows that, in order to design and implement a coherent strategy for the development of Syrian agribusiness, it is necessary to solve existing internal contradictions such as, for example, between an agricultural production policy aimed at generating an exportable surplus, and the absence of an export enhancement policy; to remove the identified blocking factors, most of which outside the agricultural and food sector; and to develop some pushing factors, especially the organization of the agribusiness chain and the offer of services.

a) Horizontal and vertical organization

The lack of a horizontal organization of farmers and the poor quality of vertical coordination are among the basic questions in Syrian agricultural marketing. The only instrument for supply management is presently the annual plan, which however concerns only the production functions, keeps decision making far away from farmers and has in recent years lost part of its capacity, as a result of the gradual liberalization of agricultural marketing. Concentration of the supply is a pre-requisite for standardization and grading of the products, as well as for achieving the critical mass needed to enter foreign markets and even to differentiate products on the domestic market (through brand names, organic food labels, etc.). It will also facilitate vertical relations which, in turn, are necessary for quality management and for ensuring a proper transmission of the price signal through the marketing chain.

A starting point for this process of organization is the re-orientation of farmers cooperatives and agricultural chambers. At best, these structures offer some services which are marketing pre-requisites, at worst they are completely irrelevant for marketing. Cooperatives have not been conceived as marketing instruments, and their re-orientation will be a difficult task. Even the decision to establish 24 new marketing cooperatives, one for animal products and one for crops in each governorate except urban Damascus, is symptomatic of the bureaucratic nature of the cooperatives system. However, it is more realistic to transform these existing structures, through management re-organization, concentration and specialization, into marketing instruments than to superimpose some new network on top of the present structures.

Another important issue in the re-organization of the marketing sector is to provide a legislative framework, as well as incentives (e.g. fiscal incentives, or reduced interest on loans for specific projects), for developing integration contracts between farmers and processors. Such contracts help stabilize the market, especially once price controls are relaxed, and allow a better control on raw material quality, thus improving the competitiveness of processed products through lower processing costs and higher final quality. For fresh products in particular, restructuring the wholesale markets (Souq el Hal for fruits and vegetables) in order to improve the quality and quantity of information and to offer better services and physical infrastructure to the operators, would also be highly beneficial.

b) Services implementation

A realistic task for the public sector in agricultural marketing, rather than attempting to be a dominant actor (which is neither desirable nor easy, as the decline of the fruits and vegetables marketing company demonstrates), should be to offer the basic services necessary for the development of private marketing. This cannot be seen as an independent, self-centred business, as is now the case for state companies, but as a public investment whose return is measured in terms of public welfare.

An important service to supply to all the actors of the agro-food chain is market information. Presently, farmers make their choice of when to sell, and in which market, only on the basis of direct information from traders, who are generally interested in keeping the deal. Information on traded quantities would help wholesalers program their action and exploit market opportunities. Competition among traders and agricultural trade restructuring would be stimulated, with advantages both for producers and consumers. Another area where public services are essential for business success is export. Foreign markets information, search of potential partners, insurance on export operations risk and generic promotion are some of the needs in this area. Other more classical services need to be better coordinated and finalized, e.g. agricultural research, extension, education and training (for both the private and public sectors).

c) Removing blocking factors

The current pricing system, at production level and even more at wholesale and retail levels, is a major constraint for the development of the Syrian agro-marketing system. It has been seen that, even when official prices are not compulsory, the system strongly reduces the flexibility of the competitive behaviour of firms, it negatively affects product differentiation and it represses the rise of demand for variety coming from consumers. Liberalizing the pricing system will increase competition among firms, hence their competitiveness. Another blocking factor, of declining severity thanks to reforms already achieved, concerns exchange rate and currency access. As discussed above (see paragraph 10.2d), present constraints take foreign investors off Syria and hamper Syrian companies in their trade operations abroad.

Import restrictions are considered a protective factor for domestic industry, and indeed they are. However, they reduce the stimulus for quality and competitiveness, as shown by the comparison between Syrian and other countries’ products on foreign markets, and reduce the variety in the market, blocking the development of new potential business areas. While, in the present situation, a complete and sudden import ban removal would have destructive consequences, gradual but steady steps in this direction would benefit both Syrian industry and consumers.

d) Improvement of business environment

Ways for releasing the blocking factors for private, especially foreign, investment are often to be found rather in the removal of administrative uncertainty and the provision of guarantees for investments, than in explicit creation of incentives. This means, among other things, that a good law needs good by-laws in order to be correctly applied.

As an example, according to Law No.10/1991, foreign invested capital and resulting profits can be repatriated. How this can be done for a project generating an export flow is clear, as export sales returns will be available for repatriation. But, in the case of projects oriented only to the domestic market, how this would work is unknown as long as procedures are not defined.

It is not possible here to develop this point, but despite some 40 bilateral agreements on foreign investment protection, several areas of apparent administrative uncertantity persist. Some examples are listed below:

[78] The functions of the Supreme Agricultural Council were transferred to the Ministry of Agriculture end 2001. See note 4, Chapter 4.
[79] See also Chapter 11.
[80] The Agriculture Affairs Councils have at Mohafaza level a role similar to that of the SAC at national level.
[81] Even these figures seem not to be very accurate and often present internal inconsistency.

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