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LEISURE

Global F&B companies eye Egypt

Global F&B companies eye Egypt

It is re-establishing itself as the standout growth market for consumer companies in the MENA region

Suparna Goswami Bhattacharya

October 7, 2015: Egypt, which has attracted the attention of the world with its New Suez Canal, is making headway in another sector as well — the busy food and beverage industry. It is attracting not only startups but also global firms keen to cash in on the ongoing consumer boom. 

The country is re-establishing its position as the standout growth market for consumer companies in the Middle East and North Africa (MENA) region. Buoyed by stable political situation and pace in real GDP growth, food and drink companies are actively pursuing expansion in Egypt. Last year, the Coca-Cola Company announced that it will invest $500mn to increase production capacity for the sizeable domestic population and also to develop Egypt's role as a regional hub for MENA.

Saudi Arabia's Aujan Coca-Cola Beverages Company announced in February that it plans to spend $100mn to build a fruit juice factory, which is expected to be ready between 2016 and 2017. Additionally, Egypt Bottling Company (PepsiCo) registered investments of $270mn in 2014, with total investments over the past three years totalling $600mn. 

Tarek Tawfik, Deputy Chairman of Egyptian Federation of Industries, says, “Egypt has a population of 87 million. Hence, it is not surprising that the F&B industry is thriving. For a consumer industry like F&B, it is important to have a good population of people. In fact, it is, according to me, the numero uno requirement.” 

Egyptians by nature have a culture that comes together around food. “The growth in the food industry happened quite aggressively post-revolution with a lot of young entrepreneurs believing it was the fastest way to grow in Egypt. There was no hope for a lot of other businesses leading to development around entrepreneurship,” says Kaila Sedky, founder, NOLA Cupcakes. 

Little wonder that the sector is fast getting crowded. In April last year, US-based chain MOOYAH Burgers, Fries & Shakes opened its first outlet in Egypt. Additionally, there is a bidding war between Kellogg Company and UAE-based investor Abraaj for Egyptian biscuit producer Bisco Misr. 

In addition to a growing domestic demand, increase in tourism will also fuel the growth in the F&B industry. The country plans to host 1 million tourists every year from 2015. “Egypt is a big tourism hub. For the global F&B industry, this acts like perfect fodder to cater to different tastes,” says Tawfik.

About 10,000 hotel rooms will be added to the existing stock. Since there has been a mandate to concentrate on business tourism, the government is focusing on having more conferences, summits and exhibitions in Egypt. This will also lead to demand for quality eateries.

Consultants are recommending Egypt to companies eyeing the MENA region. “When companies come to me, I have no doubts in my mind that setting a base in Egypt is essential. The country is seeing growth in the F&B industry like never before. Though I will not say that the environment is ideal, but definitely efforts are being made by the government to make ‘doing business’ easier,” says Saami Al Sayed, an independent F&B and business development consultant. 

However, Mohammed Sahauddin, an independent consultant for food business in Egypt, warns startups venturing into this space not to get carried away. “One has to look at various factors before opening a business. Location is very important. Similarly, growing strategically is essential as well. F&B is a tricky business and in this age of the internet, one bad experience can do a lot of damage,” he says.

Strengths 

  • Food consumption is rising rapidly from a low base.?In trade terms, Egypt has favourable access to a number of markets within and beyond the wider Middle East
  • Well-developed tourism
  • More and more startups exploring the space. Moreover, environment for startups getting conducive 
Weakness 
  • Price-sensitive consumer base, exacerbated by wide income inequalities
  • Poor infrastructure and underdeveloped distribution channels make it difficult and costly to reach a high proportion of consumers
  • Significant scope for improvement in regulatory environment, which is considered challenging at best

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