São Paulo – Retail trade has grown strongly in Egypt over the last few years. The information was supplied on Friday (5th) by the head of the Investment Promotion and Investor Service Department at the country’s General Authority for Investment and Free Zones (Gafi), Mohamed Rizk, during a meeting with food industry representatives at the Arab Brazilian Chamber of Commerce, in one of the last appointments of the Egyptian delegation that visited the city of São Paulo to promote investment opportunities.
“Egypt is presently one of the five leading markets in the world with regard to the opening of retail chains,” said Rizk. He mentioned large international supermarket chains operating in the country, such as the French Carrefour, the German Metro, the Dutch Makro, the Egyptian Spinneys, and the Zara clothing store chain.
According to the executive, the popularity of large retail chains in the country is a recent phenomenon, given that trade, especially food trade, is traditionally carried out by neighbourhood grocery stores. When foreign companies started becoming interested in the market, questions were even raised regarding the viability of the business, taking consumers’ habits into consideration.
He claimed, however, that the opening of hypermarkets and other large stores actually had the opposite effect. “The introduction of these chains in Cairo showed that with each new hypermarket that opens, consumption grows 15%,” he said. In his assessment, greater variety and having products on display are factors that encourage consumers to buy more.
That, however, according to Rizk, has not put an end to traditional trade. The country has approximately 300,000 small points of sale, which answer to 60% of the industry’s turnover, with supermarkets and hypermarkets answering to 40%. The large stores are mostly located in Cairo and there are some in Alexandria, but traditional establishments still prevail in the remainder of Egypt.
Industry
The executive also discussed investment opportunities in the local food industry. According to him, the country produces and exports fresh fruit and vegetables, but wants to add value to the chain by starting to export more industrialised foodstuffs. Companies represented in the meeting included Sadia and Perdigão, in addition to the Brazilian Poultry Exporters Association (Abef) and the Brazilian Food Processors Association (Abia).
Rizk suggested that Brazilian companies look into the possibility of opening industrial units in Egypt to take advantage of the country’s low production cost, the nearness to the European, Middle Eastern and African markets, and the trade agreements that the country sustains with other nations and economic blocs, in addition to the possibility of tapping into the potential of the Egyptian domestic market.
He gave the example of food manufacturing company Danone, which established itself in Egypt approximately three years ago and now has around 30% of the local yoghurt market. According to the executive, the company manufactures its products using imported milk powder, but is seeking partnerships with other companies interested in manufacturing fresh milk in the country and supplying the raw material.
Another opportunity is being offered by a local, state-owned company wiling to lease its meat processing plant, with storage capacity for 600 tonnes. According to the Egyptians, a Brazilian company could import meat from Brazil and process it at the plant. The deal would also include technology transfer.
“Now, the plan is to improve the local industry in order to supply the domestic market and then export some,” said Rizk.
Assessment
During all of last week, the members of the Egyptian mission met with representatives of the foodstuffs, auto manufacturing, medical equipment, and textile industries, in addition to paying visits to banks, private companies, sector organisations and Brazilian government organisations.
According to the vice president of Gafi, Neveen El Shafei, who headed the delegation, the trip was important in order to increase the visibility, in Brazil, of investment opportunities in Egypt. Another crucial point, according to her, was the large amount of information that the members collected on the Brazilian economy.
“The mission was very good for establishing our image and attracting the attention of Brazilian companies to investment in Egypt,” said Neveen. According to her, there were manifestations by companies interested in keeping in touch and looking deeper into the matter.
“Now that we have had this first technical mission, which had good coverage of the sectors [with a potential for business], during which we made good contacts and had good visibility, the most important thing is to follow-up [the work],” she stated. “We must maintain a continual dialogue with the organisations and companies in all of the fields that we became acquainted with,” she concluded.
*Translated by Gabriel Pomerancblum
