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Egypt Food and Drink Report Q4 2011
Business Monitor International, Nov 2011, Pages: 91
Business Monitor International's Egypt Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's food and drink industry.
We believe Gulf-based companies will increasingly pursue diverging core and frontier market strategies, with companies in the UAE and Saudi Arabia uniquely placed to lead investment spending in Egypt. Companies such as Saudi Arabia’s diversified dairy firm Almarai are increasingly growing their core units regionally, with Egypt among the frontier market leaders. While we expect a number of nonregional multinationals (particularly outside soft drinks) to continue to target Egypt through exports out of their Gulf bases, with fixed asset investment continuing to rise, more companies are likely to pursue Egypt directly. Egyptian companies should also continue to emerge strongly as domestic capital market expansion provides the impetus for expansionary activity, with commercial loan growth anticipated alongside greater scope for rights issues and initial public offerings.
Headline Industry Data (local currency)
- 2011 per capita food consumption +9.3%; forecast to 2015 +65.1%
- 2011 carbonated drink sales +5.6%; forecast to 2015 +56.4%
- 2011 mass grocery retail sales +14.9%; forecast to 2015 +251.9%
Key Company Trends
Subway To Open 90 Stores By 2017 – In July 2011, US fast-food chain Subway announced plans to double its Egyptian store network from four to eight outlets by 2011. The decision is part of Subway’s ambitious target to operate in 90 locations in the country by 2017. The expansion plans come despite the popular unrest that removed Hosni Mubarak from power in February 2011, which hampered the tourism and industrial sectors.
M&S Investing In MGR Sector – Egypt’s MGR industry has traditionally not attracted as much investment as the food and drink segments such as dairy and soft drinks. However, over the past year or so, investment interest has picked up, with Western European retailers increasingly interested in the market. At the end of 2010 UK-based retailer Marks & Spencer (M&S) opened its first store in Egypt with its franchise partner Al Futtaim and in July 2011 the head of operations for M&S at Dubai’s Al Futtaim revealed it was planning to launch three stores in the country as part of the company’s five-year expansion plan for the Middle East region.
Key Risks to Outlook
Regulatory Environment – Egypt’s regulatory environment remains a concern. Infrastructure continues to misfire and internal trade systems remain weak, which contribute to Egypt being a high-cost market. For the time being, wide income inequalities will also continue to limit the scope of return on investment. Political Unrest – In addition, a resumption of large-scale protests on the same scale as witnessed in early 2011 would do further harm to the country’s all-important tourism sector, and hold back the economy’s growth potential in the process.
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