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Although Egypt remains placed fifth in the Q110 Food & Drink Business Environment Ratings for the Middle East, out of eight key markets, its potential as the most promising regional fast-moving consumer goods (FMCG) market is unmatched. Unlike our low-key outlook for the majority of states in the Middle East, Egypt is forecast to enjoy strong food consumption growth through to 2014 (of 39% in local currency terms), which reinforces its appeal to investors seeking to launch products in an emerging market with high volume potential. While regional companies will probably continue to be the biggest investors in Egypt, the country's trade agreements with markets across the Middle East and sub-Saharan Africa and impending preferential access to the European Union (EU) could bring a number of nonregional investors into play.
Over the long term, the likely spread of mass grocery retail (MGR) beyond obvious urban centres and greater investment into the country's food processing sector will contribute to a more dynamic food consumption growth outlook. Although per capita consumption will remain low in comparison with some other Middle Eastern markets for the foreseeable future, this should provide a point of entry for discount players, such as Germany's Metro. In fact, Metro recently revealing that it will establish 12 of its cash & carry outlets (under the Makro banner) in Egypt by 2012. French hypermarket operator Carrefour, which has a considerable local experience, has also announced expansion in the country, as we expect the hypermarket format to post the strongest five-year growth within the MGR industry.
Meanwhile, both regional and local food and drinks industry investors continue to show considerable interest in Egypt. For example, in November 2009, having already spent big in 2009, the ambitious Saudi dairy giant Almarai set its sights on taking a 50% share of the promising Egyptian dairy market by 2013. Earlier in 2009, Almarai acquired leading domestic dairy company International Company for Agro- Industrial Projects (Beyti), through its regional International Dairy and Juice Ltd (IDJ) joint venture (JV) with PepsiCo. Around the same time, Egypt's state-owned Food Industries Holding Company (FIHC) announced plans to invest EGP483mn (US$88mn) during FY09/10, mostly in the sugar industry. However, not all food and drinks sectors show promise. According to reports in local newspapers Business Today, the crackdown on pig farms that followed the outbreak of swine flu has decimated the industry. In fact, pork is not likely to be widely available for at least three years to come, as most of the 500,000 animals have been slaughtered to stop the spread of the virus. Similarly, given Islam being the prevailing religion, Egypt's alcoholic drinks industry, in common with the wider middle east region, will continue to lack dynamism. To a large degree, the industry has to rely on niche domestic pockets and tourism, which has in 2009 been negatively impacted by the economic crisis. Therefore, between 2009 and 2014, the report expects alcoholic drinks volume sales to increase by just 3.72%, while value sales are forecast to grow by a modest 13.6% in local currency.
Egypt Food and Drink Report Q1 2010: http://www.companiesandmarkets.com/r.ashx?id=RDU91B258193303&prk=ed6616528505ac598a12cda97a4a53d0
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