23 Dec 2011 (92 Pages)
Includes 3 FREE Quarterly Updates.
We believe Gulf-based companies will increasingly pursue diverging core and frontier market strategies,
with companies in the UAE and Saudi Arabia uniquely placed to lead investment spending in Egypt.
Companies such as Saudi Arabia’s diversified dairy firm Almarai are increasingly growing their core
units regionally, with Egypt among the frontier market leaders. While we expect a number of nonregional
multinationals (particularly outside soft drinks) to continue to target Egypt through exports out
of their Gulf bases, with fixed asset investment continuing to rise, more companies are likely to pursue
Egypt directly. Egyptian companies should also continue to emerge strongly as domestic capital market
expansion provides the impetus for expansionary activity, with commercial loan growth anticipated
alongside greater scope for rights issues and initial public offerings.
Headline Industry Data (local currency)
2011 per capita food consumption +9.3%; forecast to 2015 +65.1%
2011 carbonated drink sales +5.6%; forecast to 2015 +56.4%
2011 mass grocery retail sales +14.9%; forecast to 2015 +251.9%
Key Company Trends
Subway To Open 90 Stores By 2017 – In July 2011, US fast-food chain Subway announced plans to
double its Egyptian store network from four to eight outlets by 2011. The decision is part of Subway’s
ambitious target to operate in 90 locations in the country by 2017. The expansion plans come despite the
popular unrest that removed Hosni Mubarak from power in February 2011, which hampered the tourism
and industrial sectors.
M&S Investing In MGR Sector – Egypt’s MGR industry has traditionally not attracted as much
investment as the food and drink segments such as dairy and soft drinks. However, over the past year or
so, investment interest has picked up, with Western European retailers increasingly interested in the
market. At the end of 2010 UK-based retailer Marks & Spencer (M&S) opened its first store in Egypt
with its franchise partner Al Futtaim and in July 2011 the head of operations for M&S at Dubai’s Al
Futtaim revealed it was planning to launch three stores in the country as part of the company’s five-year
expansion plan for the Middle East region.
Key Risks to Outlook
Regulatory Environment – Egypt’s regulatory environment remains a concern. Infrastructure continues to
misfire and internal trade systems remain weak, which contribute to Egypt being a high-cost market. For
the time being, wide income inequalities will also continue to limit the scope of return on investment.
Political Unrest – In addition, a resumption of large-scale protests on the same scale as witnessed in early
2011 would do further harm to the country’s all-important tourism sector, and hold back the economy’s
growth potential in the process.