Market Overview of The Food and Beverage Industry in Egypt
Introduction
The following article will examine the PESTLE study of Egypt’s food and beverage industry, focusing on how these measurements affect enterprises. To analyze the external environment for a food and beverage business in a developing nation, in this case, Egypt, it makes sense to focus on how government laws and regulations affect a company’s sustainability. Additionally, firms seeking profitability in Egypt’s food and beverage industry must thoroughly understand the many types of political risks and how they affect their goals and requirements. With Egypt’s economy booming, we have developed an interest in the country’s alcohol business and see potential in investing in a non-alcoholic drink. While Egypt produces a considerable amount of alcohol, just a tiny percentage of Egyptians purchase or drink it. Profitability in this industry is more challenging due to religious convictions, as alcohol is only sold in hotels and resorts to 10% of Christians and visitors. There is a sizable market share of 90% of the population that would enjoy and purchase a non-alcoholic beer. Thus, this research dissects and examines Egypt’s alcohol sector to introduce a non-alcoholic beer.
Country Overview
Political situation
Since 2004, the EU-Egypt Association Agreement has been in place. It establishes a free-trade zone between the EU and Egypt by eliminating tariffs on industrial items and facilitating the flow of agricultural products. All tariffs have been removed for trading goods, services, and investments. According to the Australian Government, Egypt is ranked 110th out of 190 nations on the World Bank’s newest ease of doing business assessment (A.Gov, 2021). Compared to the rest of the Middle East, companies find it challenging to implement contracts, exchange products and services, pay levies, and register property in Egypt. In recent years, the military’s role in the economy has continued to grow, reducing private sector trade confidence. It might be difficult for foreign corporations to do business in Egypt because of its complex operating environment. On the other hand, Egypt makes it easier to secure modest financial specialists, receive credit, manage development licenses, and obtain power. The president’s and the government’s policies significantly impact risk factors. The current president of Egypt makes Egyptians’ lives difficult (World Report 2021)
Also, thousands of people’s lives are being spent in prison because of their freedom of speech (W. Report, 2021). Food and beverage firms are particularly hard hit by these difficult times. Foreign enterprises should avoid Egypt because of the overall instability risk and unpleasant occurrences, such as the military’s control over the importing and exporting of commodities and the other issues listed above. Without a sustainable relationship between the government and foreign companies, there could not be any suitable investments. For many years, sustainability in Egypt has been a big dilemma. In 2020, the country made a good move up in “Sustainable Development Report rankings,” which defiantly says that Egypt will establish a proper sustainability relationship, make foreign companies’ entry more manageable, and have a good working environment. This goal gives great hope for food and beverage businesses. In Egypt, one of the fastest-growing sectors in the food business (Nations.E., 2021).
The economic situation
The GDP per person in Egypt was last recorded at 11951.45 US dollars in 2020, when purchasing power parity was taken into account (PPP). People in Egypt have a GDP per capita that is 67% of the world’s average. Source 1: World Bank 2021
Source 1: World Bank
Global macro models and analysts’ predictions show that GDP per capita PPP in Egypt is expected to reach $12200.00 USD by the end of 2021. Long-term, our econometric models say that the GDP per capita in Egypt is expected to rise to 12200.00 USD in 2022 and 12800.00 USD in 2023, which is about the same as it is now. Source 2: World Bank 2021
Source 2: World Bank
From 1990 to 2020, GDP per capita PPP in Egypt averaged 8723.64 USD. In 2020, it reached a record high of 11951.45 USD and a record low of 6016.90 USD in 1991, when it was 6016.90 USD. This page has Egypt GDP per capita PPP – actual values, historical data, forecast, chart, statistics, economic calendar, news, and other information about the country. GDP per capita PPP in Egypt was last updated in March of 2022. You can see the values, history, and charts here. Source 3: World Bank 2021
Source 2: World Bank
Socio-demographic overview
The current population of Egypt is 105,690,718 as of Thursday, March 31, 2022, based on Worldometer elaboration of the latest United Nations data. The population density in Egypt is 103 per Km2 (266 people per mi2). Cairo, Alexandria, and Giza are the three cities with the most people (2,443,203). With a difference of 14 252 300 people in favor of rural areas, the population in rural areas is a little bigger than in cities. According to data from (worldometer.info), the median age in Egypt is 24.6 years old. This number is going up over time. Islam is a big part of Egypt’s culture, and it has a big impact on the daily lives of most people in the country. People who are Muslims are required by the Quran to pray five times a day. The exact times of each prayer are printed in the local newspaper every day. People in Egypt speak Arabic, which is the main language. Friday is holy, so no business can be done from Friday to Sunday. Business meetings are usually not private, so they have to be talked about and agreed to in advance. Egypt has a lot of people who are young and growing quickly, which makes it a good place for people to buy things. Young people are very interested in imported goods when they come on the market. European Commission (2020) says that young people will be the main force behind the Food and Beverage market. The Egyptian society is very divided, so the amount people spend on things varies based on their class and where they live. Tourists spend the most money at places where they go. Consumers in Egypt have become very loyal to their own home-grown products because of the country’s long-running political problems. People in Egypt’s lower class don’t have access to imported goods because prices have gone up and they are poor. Muslims make up about 85% to 90% of the population in Egypt, and drinking alcohol is forbidden in their religion, so it’s not safe for them to do that. However, hotels, clubs, and other places where tourists go can get a “liquor license” because of the way Egypt sells alcohol. Other 10% to 15% of the population is made up of Copts, the Christians of Egypt, who make up the rest. There are 210 days in the year when Copts don’t eat animal products from midnight until sunset because their religion doesn’t allow them to. Egyptians eat mostly starchy staples, with very little meat and very few fresh fruits and vegetables. In addition, people in Egypt don’t eat a lot of fat. Most people in Egypt don’t eat pork because Islam is the main religion there. In the Muslim area, the Quran says that pork can’t be sold. All of the other meat must also be Halal. To be halal, it must have been approved as such by an Islamic group that is approved by Egyptian government. Ramadan can be thought of as the main event for Egyptians. They have to fast all day and only eat at night after the sun goes down for Muslims. Because of this celebration, all the grocery stores and restaurants close their doors. People from other countries can only get food and alcohol at hotels.
Technological development
Expanding a business in Egypt has become more possible thanks to new technology. Especially because there are new ways to move food and drink around that are more efficient. At an event in 2013 that would change how people get around, the World Bank and the governments of Egypt’s information technology industry teamed up to make a big change. It’s called the Cairo Transport App, and it has made the roads safer and more efficient for small cars and trucks that carry valuable goods. This new idea helped the economy make more money from the food and beverage industry than ever before, with “annual food and beverage exports of $5.4 billion growing at around 10% a year.” At the FIAfrica meeting in 2020, this will be the case The country wants to do more than just improve the transportation industry. It wants e-commerce businesses to grow, which means that how food is sold and marketed through online networks will also change. During the last few years, “HelloFresh” has become one of the most popular online businesses in the world, but not in Egypt. According to UNCTAD, only about 18% of big businesses and only 3% of small businesses focus on the online market. So, the government wants to double the number of businesses that focus on the online market (UNCTAD, 2017). As a whole, Egypt shows how much they care about the food industry. They also invest in a lot of new technology to help businesses grow in their country.
Environmental factors
Egypt’s environmental problems include, but are not limited to, water scarcity, air pollution, damage to historic monuments, animal welfare problems, and problems with the way the country disposes of waste. According to arabworldbooks, the air pollution in Cairo is a big deal. A lot of the air pollution in Cairo’s downtown area is much worse than the world should expect. Egypt doesn’t get a lot of rain and its buildings are tall and narrow. This makes Cairo look like a bowl (bad ventilation and consequent trapping of pollutants). There is a lot of particulate matter in the air in Egypt. Transportation, industry, and burning waste in the open air are the main sources of the dust and small particles. Another big source of dust is wind that comes from the deserts around Egypt. Egypt is having a lot of problems with sustainability right now, including a lack of public awareness, a lack of water, and a lack of waste management. Green marketing and eco branding work well in the market, even though there is a lot of work involved in adopting responsible consumption habits and switching to natural products. Organic goods are also more expensive, but people are willing to pay more for them and have a high level of trust in labels that say “eco-friendly” (Khalil, 2020). From the facts above, it can be concluded that there is a lot of room for organic goods to be exported and made in Egypt, which is a new market.
Legal factors
In terms of legal and legal factors in Egypt, as witnessed in the past, there appears to be ongoing turmoil within the country (Abdulla, 2020). This is owing to the country’s continual battle for control between military dictatorship and democracy. As a result, the market becomes unstable as successive authorities execute or introduce new rules that affect foreign enterprises operating in Egypt. Despite the president’s introduction of a new and amended investor law in 2014, aimed at restoring Egypt’s “commercial confidence,” three large food and beverage firms (Nestle, PepsiCo, and Coca Cola) announced their intention to invest in the country within a month (Abdulla, 2020). The law includes additional investor safeguards such as investor incentives, as well as new features such as unified approval and investor sectors, to name a few. In terms of Food and Beverage, various standards/requirements must be followed in order to operate within the country. These procedures are intended to assure conformity and are administered by the General Organisation for Export and Import Control (GOEIC), a body linked with the Ministry of Trade and Industry (EuropeanUnion, 2021). Egypt buys a lot of its food from other countries. According to (European Commission, 2020) most of the food and drink that Egypt imports comes from European countries like France, Germany, and Italy. Nonetheless, US, Swiss, Thai, and Chinese exports are all on the rise. Despite the fact that most European companies have said that the registration system may provide some obstacles, primarily owing to the time-consuming procedure and associated costs, it remains a significant barrier to importing into Egypt (EuropeanUnion, 2021). As a result, investors considering investing in Egypt’s food and beverage business should consider the time required to submit the papers required to complete registration with the GOEIC (EuropeanUnion, 2021). There are two key laws that apply to the product that the investor wishes to introduce. Law No. 10 of 1966 on food control examines the sanitary requirements for protecting food from pollution and contamination (EuropeanUnion, 2021). Law No. 281 of 1994 on the prohibition of adulteration and fraud “This Law bans food fraud and imposes fines and penalties” (EuropeanUnion, 2021) [CB1]. In terms of corruption, Egypt scored 117th out of 180 nations on the Corruption Perception Index (CPI) with a score of 33%, while the average score in 2020 was 43%. (International Transparency Initiative, 2020) Leaving Egypt slightly below average, the level of corruption will be a substantial obstacle to investing and starting up in Egypt. Last year, Egypt’s Legal and Political Subindex increased by 0.056 points to 4.461, with scores of 6.504 in Judicial Independence, 4.175 in Rule of Law, 3.339 in Political Stability, and 3.826 in Control of Corruption. In suemary, there has been an improvement over prior years, and the country is showing promise and would be a good investment.
Conclusion
Finally, this PESTEL research has given us insights into the numerous factors that drive business initiatives in Egypt. When it comes to starting a firm, we’ve discovered that the political and legal spheres may be difficult to navigate. However, technological advancements and the country’s expanding infrastructure present potential for the food and beverage industry to grow further. The possibilities for creating a lucrative and locally beneficial business may be worth further research. Tourism and travel will always play an important role in Egypt’s GDP because it is such a beautiful country. As tourism grows, so will the food and beverage business, and the need for these items. As a result, Egypt is appealing to investors due to its inexpensive company start-up costs, strategic location, and availability of top-tier labor.
References
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Egypt – Trade – European Commission. (2021, April 12). Egypt – Trade – European Commission; ec.europa.eu. https://ec.europa.eu/trade/policy/countries-and-regions/countries/egypt/#:~:text=Egypt%201,agricultural%20products%20easier%20to%20trade.
Bank Group, A. D. (2019, 26 March). Egypt Economic Outlook | African Development Bank – Building today, a better Africa tomorrow. African Development Bank – Building Today, a Better Africa Tomorrow; https://www.afdb.org/en/countries/north-africa/egypt/egypt-economic-outlook
European Commission. (2021). The Food and Beverage Market Entry Handbook:
Egypt. Retrieved from https://ec.europa.eu/chafea/agri/sites/chafea/files/handbook-egypt-
2019_en.pdf
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