International wholesale food retailer Metro Cash & Carry to invest LE 1.2 billion in Egypt over the next three years
Traditional Egyptian wholesalers are about to face some major competition as one of the world's leading wholesale food chains makes its debut on the Egyptian market.
Metro Cash & Carry, the Germany-based international leader in self-service wholesale, announced last month that it will be adding Egypt to the list of 29 countries in which it operates.
At the World Economic Forum on the Middle East held in the Red Sea Resort of Sharm El Sheikh from May 17-20, Metro CEO Frans Muller told Business Today Egypt that the Egyptian market is an important one for his company.
"With a population of 80 million and a rapidly growing economy, Egypt offers great potential for our business-to-business self-service wholesale," says Muller. "By entering the Egyptian market we are pursuing our international expansion strategy and making an important step into the very promising high-growth region of the Middle East and North Africa," he added.
Metro Cash & Carry began its foray into the region almost 10 years ago with Morocco, where it currently has seven stores. Egypt will be the second North African market in the company's expansion.
Since the brand name Metro is already in use in Egypt by the Mansour Group for their chain of upscale supermarkets, Metro Cash & Carry will be going by the name Makro, which they already use in several European countries. They will be setting up 10 stores in Egypt in the medium term (approximately three years) with the first store set to open in Cairo by the end of 2009.
"We hope to be able to roll-out our business across the country as fast as possible," says Muller. "We will be starting out in Cairo and Alexandria but in the long term Metro Cash & Carry estimates an overall market potential for more than 20 wholesale stores in Egypt."
According to Muller, each outlet will have a footprint of approximately 7,000 square meters and offer a high-quality assortment of both food and non-food items. Each store will require a sizeable investment of LE 124 million and will provide approximately 250 new job opportunities for the local workforce.
Commenting on this significant new foreign investment in the foods sector, Egyptian Minister of Trade and Industry Rachid Mohamed Rachid said, "this is a very positive step for Egypt. We are currently in the process of modernizing our wholesale market in line with international standards. We encourage professional companies of this nature to come and enter our market. The increased competition will not only bring down prices but it will also improve service."
The Metro Cash & Carry business model is unique in Egypt. The company operates as a strictly business to business operation. Their target group includes hotels, restaurants, caterers, canteens and small to medium sized retailers, or 'mom and pop' shops that are plentiful in the local market. Customers must have a business license in order to access the Metro stores.
"Professional customers will find everything they need to run their business under one roof. A restaurant owner in Egypt, for example, will find all his purchasing needs. He can buy fresh fish and vegetables, pans for his kitchen and paper for his office," explains Muller. "Because customers can visit us as often as they like we can act as a sort of warehouse helping them to improve their cash management," he adds.
Approximately 90% of the products sold in Metro Cash & Carry's Egyptian stores will be locally sourced. In fact, investing to help upgrade the local supply chain is an integral part of the company's operations.
"We will be working extensively with local farmers to decrease waste and improve productivity. The more productive a farmer is, the better his prices are going to be. If we can help him have three harvests a year instead of two, we will. In the various countries where we operate we have long-standing partnerships with farmers where we agree to buy crops in advance," says Muller.
The company also plans to become involved with other aspects of the supply chain, such as packaging and refrigeration so that product shelf life can be extended.
Rachid pointed out that the presence of a company such as Metro Cash & Carry would also help boost Egyptian exports. Worldwide Metro stores already stock fruits and vegetables originating from Egypt through European importers, but the company's presence in Egypt will allow it to export directly from local producers and manufacturers to the network of stores in 29 countries.
By Hadia Mostafa
© Business Today Egypt 2008
