The 2008 Egyptian market for food and drink looks lucrative for foreign investors, due to its large market size and unsaturated market. Demand for packaged and convenience foods will continue to grow due to higher levels of working women, rising disposable incomes among some consumer groups and continued health and hygiene scares. Also a reduction in tariffs has enabled manufacturers to create good quality food and drink products at reasonable prices. With a population of 77 million, Egypt is the largest market in the Arab world. This in addition to a free trade zone between all littoral Mediterranean states and the EU is expected to be in place by 2010. Egypt’s dairy sector offers strong opportunities, with per capita dairy consumption in the region low, but rising along with increased exposure. The government is also selling a number of its state-owned companies, many of which are good opportunities for foreign investors.
The tourism sector is also growing; the restaurants and hotels sector grew by 13.3% in FY 06/07 and number of visitors rose by 18.4% from last year to date. Egypt exports increased by 23.3% and food consumption is expected to increase by 29.7% over the next five years to reach $44.58 billion in 2012, while per capita food consumption will grow to $527.9. Growth will be driven by the spread of mass grocery retail outlets and exposure to Western products and consumption methods. This should drive up average consumer spending at the supermarket among middle and upper income bracket consumers.
The canned food industry is expected to grow in volume by 14.8% in the coming five-year period, while canned food is expected to increase by 109.7% to reach $174.9 million in value. The health, hygiene, origin and quality of produce are likely to remain a concern and a purchasing determinant for Egyptian consumers for many years to come. This has been prompted by the numerous hygiene food scares in Asian and Middle Eastern markets to which local consumers seem to have reacted particularly sensitively. This concern creates a host of opportunities for canned and packaged food manufacturers. Sales will increase due to a preference for pre-packaged foods, the origin of which is known. However, new products and flavors will captive more audience and will drive up value sales to a much greater extent.
Confectionery sales growth is estimated at 3.1% in terms of volume sales for Egypt’s more developed confectionery sector. This sector’s consumers are high-income bracket consumers, which in addition to increasing tourist numbers will drive up value sales due to their preference for premium and added-value confectionery products and will increase value sales growth to 29.6%.
The processed Food sector is growing and has attracted increasing investment in recent years. Around 25% of the companies are located either in Cairo or Alexandria, with key sub-sectors including flour milling, sugar milling, dairy products, vegetables and meat processing, edible oils, biscuits and confectionery and pasta and snack production. Egypt has ambitious plans to modernize its foodprocessing sector to increase its exports. Already, the free trade agreements (FTAs) with neighboring Middle Eastern countries have led to a thriving export industry for Egyptian cheese, with approximately 80,000 tons of processed cheese produced for exports.
Other reasons for processed food growth is fears from fresh meat after the H5N1 bird flu outbreak which led to the closure of 150,000 live bird vendors and called all domestically raised poultry, leaving frozen poultry as the only option for consumers. A related issue is the continual shortage of red meat due to insufficient local stock and a lack of breeding expertise; the bird flu outbreak has merely exacerbated the situation. Egypt produces approximately 520,000 tons of meat a year, of which 120,000 tons are imported red meat in the form of live cattle and frozen meat from such as Ethiopia, Sudan, India and Australia. In spite of this, there is still a chronic shortage.