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Egypt Food and Drink Report Q3 2007
Business Monitor International, Oct 2007, Pages: 63
The Egypt Food Drink Report provides independent forecasts and competitive intelligence on Egypts food and drink industry.
With the opening of the fourth Carrefour outlet imminent, Egypt’s mass grocery retail (MGR) sector continues to mature. Egypt’s MGR sector is forecast to experience dramatic growth over the next five years, as we expect sales to grow by 109.8% to reach US$6.44bn in 2011, with the hypermarket and discount formats continuing to contribute most significantly to this enormous growth forecast. Feeding this growth will of course be the country’s overall economic development. Economic targets look set to be outperformed, inflation is on its way down, sky-high business confidence is boosting both foreign direct and portfolio investment and interest rates should start falling from the end of this year. The political situation is also more stable than it was this time a year ago, with the clout of the Muslim Brotherhood having been diminished by a combination of financial measures, constitutional reforms and police crackdowns.
Together, these factors are converging to create a more attractive business environment, thus encouraging the expansion activities of both domestic and international operators. Both international operators, such as Carrefour and Spinneys, and local operators, such as Metro and Hyper One, can be expected to continue to develop in order to profit from this current economic situation. The expansion of market leader Metro, owned by Mansour Group, into the discount sector through its Kheer Zaman banner will provide a further boost to sales through this format. In fact, it is the expansion of the discount model that will enable retailers to capture a new group of consumers who were previously shut off from modern retailing due to price restrictions. Therefore, despite the lower prices in these outlets, their selling power should still be considerable due to the greater number of consumers they can attract. In fact, it is the discount and cash-and-carry formats that present the best opportunities for growth in countries such as Egypt where the vast majority of consumers have low disposable incomes.
However, the convenience store sector also demonstrates good long-term growth opportunities, as discussed in our new retail regional overview. It is the ability to expand into previously untapped areas and harness the spending power of modern, female consumers that will be one of the main drivers of growth in the convenience sector. While national interest in modern retailing grows, convenience operators will be able to take these modern features, such as an ambient shopping environment and long opening hours, and extend them into small neighbourhoods and communities where there is not the necessary room for a larger format. Although the pockets of wealth in the country are still small enough that convenience stores will not yet take off on a large-scale, this is nevertheless a sub-sector that is displaying good potential.
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