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Egypt Food and Drink Report Q1 2009
Business Monitor International, Feb 2009, Pages: 59
Our Egypt Food Drink Report provides independent forecasts and competitive intelligence on Egypt's food and drink industry.
Despite the worsening global economic outlook, the Egyptian market has continued to catch the eye of foreign investors as discussed in our recently published Egypt Food & Drink Report for Q109. In August 2008, leading Saudi Arabian dairy and fruit juice company Almarai reached an acquisition agreement with Egyptian dairy and juice manufacturer International Company for Agricultural Industrialisation Projects (Beeaty). Almarai is the largest dairy company in the Gulf region by market value, and has been looking to increase its presence beyond the Gulf and throughout the Middle East region with a series of acquisitions. According to a statement by the Saudi company, it will complete the Beeaty acquisition once it has finalised all financial, technical and legal audits, as well as receiving all regulatory approvals, in a deal which is estimated to be worth US$112mn.
Also in August a group of foreign and domestic companies announced that they are planning on investing in building a new phosphate fertiliser complex in Aswan, Upper Egypt. The plant, which comes with a US$2bn price tag, should start production in 2011. The domestic companies investing in the project are Polyserve, Egyptian Financial and Industrial Company (EFIC), Abou Kir Fertilisers, Helwan Fertilisers and El-Nasr Mining Company, while Greece's Indagro and American Agirfos will also hold stakes in the new production facility. Alongside the growing demand for food commodities, there has also been a corresponding rise in the demand for fertiliser. With prices for natural gas (an essential ingredient in fertiliser production) relatively cheap in Egypt due to government subsidies, and the country's strong logistics connections, Egypt is in a very strong position to capitalise on this rising demand for fertilisers.
Nevertheless, despite these continued investments in its food industry, Egypt will continue to deal with a number of challenges. The increasing competition for agricultural commodities has come as bad news for Egypt, which is heavily dependent on food and drink imports due to its natural agricultural constraints. The government is therefore continually looking for ways to increase the country's agricultural output.
One recent attempt has involved increasing potato production, with the government having announced plans to increase potato output by 60% over the next ten years, as it looks to increase both consumption and export sales. With the price of a number of key food crops such as rice, wheat and corn having risen dramatically over the past year, experts have started to advocate potatoes as an alternative crop. Yet even with increasing crop output, Egypt still continues to battle food price inflation. As this report went to press, the consumer price index (CPI) was at 21.5%, interest rates were spiking and the stock market was down nearly 50% year-to-date: clearly, the economic outlook is not as stellar as it once was, and this could well feed through into a more negative picture for both the political scene and the business environment. With the economic conditions likely to worsen, and the population increasingly critical of the government, there is a real risk of unrest.
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