Coffee -
Egypt- Market Report
HEADLINES
- Off -trade volume sales of coffee reach 5,400 tonnes
and E£284 million in 2009, registering 4% current volume and value growth
- Instant standard coffee is the most dynamic category,
with value sales up by 5% to reach E£101 million
- The younger generation of consumers continues to drive
growth in coffee
- Growth rates in coffee are lower in volume and value in
2009 than the review period CAGR due to continuous price reductions and
promotions aimed at higher volume sales
- Nestlé Egypt SAE leads with a 40% value share in 2009,
thanks to its continuous advertising support, although Fawzy El Banan Co
leads in volume terms (23%)
- Total volume sales will register a CAGR of 5% over the
forecast period to reach 11,000 tonnes in 2014, but retail value sales are
expected to decline by a CAGR of 1%
TRENDS
- Growth in retail volume and value sales of coffee was
lower in 2009 than the CAGR for the review period owing to declining
purchasing power and a lack of consumer confidence stemming from a poor
economic performance in Egypt. The international economic crisis impacted
negatively upon the Egyptian economy during 2009 resulting in a decline in
tourist traffic into the country and a weak market performance when
compared with 2008.
- Fresh ground coffee remained the main contributor in
volume sales with demand rising for espresso and filter coffee within
on-trade channels. Despite this, the more traditional Turkish coffee
remained the most popular form of coffee in Egypt. It is consumed mainly
among older age groups and is widely served at official ceremonies.
- Volume growth registered a slightly lower rate than the
average CAGR during the review period, whilst value growth was far below
the average CAGR during the review period. Value sales registered 4%
growth versus 8% value CAGR during the review period. This was mainly due
to companies opting to push volume sales during 2009, which led to
continuous consumer promotions and a decline in sale price.
- Instant standard coffee was the most dynamic category
in 2009 thanks to the continuous marketing support and product development
employed by Nestlé Egypt SAE. Standard instant coffee became a very
popular hot drink across upper, middle and lower socio-economic consumer
groups. The advent of the single serve sachet pack supported the
penetration of the product among lower income groups, as these consumers
cannot always afford to buy instant standard coffee in the typical 250g
packaging size. Instant coffee does not require a special machine for
preparation, which makes it easy to prepare, serve and drink regularly at home.
Nestlé Egypt SAE introduced the instant coffee single-serve sachet into
schools and universities across Cairo and Alexandria which led to a boost
in sales for standard instant coffee.
- A new concept in the distribution of coffee has been
pioneered in Egypt through other grocery retailers. These outlets are
known as specialist coffee outlets and specialise in roasting and grinding
fresh coffee beans to order. A majority of people prefer specialist coffee
shops such as Shaheen Coffee and Fawzy El Banan as these outlets are able
to provide special blends of coffee based on the degree of roasting and
through the addition of special flavours to the coffee during the roasting
process, for instance blending it with cardamom. These types of shops were
the main reason for other grocery retailers leading off-trade sales of
coffee in 2009, while supermarkets/hypermarkets maintained second position
through their strong sales of instant standard coffee.
- On-trade channels remained important to sales of coffee
in Egypt in 2009 as they represented 38% of total coffee sales. The
increasing rise in the number of elegant and attractive specialist coffee
foodservice outlets such as Starbucks, Gloria Jeans and Costa Coffee are
having a significant impact on the dynamics of the coffee category in
Egypt.
- Coffee pods remain a niche product and are limited to
consumption in offices and workplaces only. Coffee pods are perceived as
being a very innovative but expensive product with the high cost of the
machines limiting penetration to the niche, upper socio-economic class
consumer. However, the concept of coffee pods has started to appeal to a
few hotels and consumer foodservice outlets due to the presence of strong
brands such as Nespresso and Illy. These companies offered machines free
of charge to hotels against an agreed-upon yearly consumption of the
coffee pods themselves. The pods are sold at an average price of E£3 per
pod and the ready-to-drink espresso cup is sold to the hotel guest at
EUR2.00. In 2009, the 25% annual decline in the number of tourists
visiting Egypt made it difficult for operators to achieve their coffee pod
usage quotas.
COMPETITIVE LANDSCAPE
- Nestlé Egypt SAE led coffee in value terms, with a 40%
share in 2009. Its brand Nescafé is almost synonymous with instant coffee
in Egypt and appeals to a wide consumer base. Continuous advertising
campaigns targeting mainly the young generation and executive employees
positioned the brand Nescafé as a lifestyle hot drink. As it is produced
in Egypt, the price of Nescafé is not too high and is considered to be
quite reasonable across all three main socio-economic classes.
Furthermore, the sachet-for-one single serve packaging concept pushed
sales among lower income consumer groups.
- Nestlé Egypt SAE was the highest spender in hot drinks
on television advertising and other promotional activities during 2009.
Nescafé's promotional campaigns, which featured the famous red mugs with
the Nescafé logo, helped to stimulate sales by encouraging more consumers
to experiment with instant coffee. Television campaigns on local and
satellite channels contributed to the increasing popularity of the brand.
- Fawzy El Banan Co is a local brand that managed to
capture a 14% value share in 2009 due to the high quality of its products
and its strong distribution network. The low selling prices allowed Fawzy
El Banan Co to penetrate the mass segment in Egypt and achieve high volume
sales.
- Shaheen Coffee Co, another local operator, held onto
third position with a 10% value share. The manufacturer of the popular
Lebanese brand Café Najjar, Société Ets Michel Najjar, dropped from fourth
to fifth position in 2009 due to their weak sales activities and absence
of any advertising support.
- Misr Cafe Co rose from fifth to fourth position in 2009
with an 8% value share which was mainly divided equally between its two
main brands Misr Cafe and Al Masria. The company’s rise can be attributed
to the introduction of its instant coffee 2-in-1 brand Bonjourno, which
was heavily advertised on television. Bonjourno had a positive effect on
the image of the company as a whole and pushed its sales, including for
the other products within its portfolio.
- The remainder of coffee is rather fragmented amongst a
very large number of small local importers and coffee retailers. This is
unlikely to change in the short term, as Egyptians like to add different
flavours to their coffee, particularly cardamom, which means that small
specialist coffee retailers such as El Araby and El Ghoreya have an
advantage in terms of off-trade sales in Egypt.
PROSPECTS
- Healthy growth will be witnessed in coffee volume sales
during the forecast period. On-trade and off-trade sales are expected to
grow at an equal rate. The changing lifestyles of youth consumers are
driving demand for fresh coffee such as espresso and instant coffee. The
rising number of on-trade outlets, particularly with regards to new
entrants into the market, will also lead to an increase in volume sales of
coffee during the forecast period. The market for coffee remains small compared
to the size of the Egyptian population, leaving plenty of scope for
further development during the forecast period.
- Instant standard coffee will be the fastest-growing
category during the forecast period and the main contributor to value
share, as instant coffee is fast becoming a popular hot drink among the
young generation. The continued presence of Nestlé Egypt SAE along with
its marketing support and continuous product development will drive
forward the growth of instant standard coffee during the forecast period.
- 2-in-1 instant coffee is the second-most popular type
of instant coffee. This category may find it difficult to achieve
significant increases in sales as the majority of Egyptian consumers
prefer to add sugar according to their taste. 2-in-1 coffee captured a 10%
value share in 2009 while 3-in-1 managed 8% and 4-in-1 has a 1% share.
5-in-1 still did not exist in Egypt in 2009 and is not expected to be
introduced during the forecast period.
- Value sales growth is expected to slightly improve
during the forecast period than what was seen during the review period
given the continuous increase in demand of on trade and off trade
channels. On the other hand, the cost of green or raw coffee will remain
stable, continuing the trend which was seen towards the end of the review
period. This will allow for more consumers promotions to drive volume
sales during the forecast period. The international unit price of coffee
declined during 2009, thus keeping unit prices per kilogram stable in a
majority of coffee categories.
- Limited development will take place in the consumption
of coffee pods over the forecast period. These types of products will
continue to appeal only to consumers from upper socio-economic groups as
well as Western expatriates living in Egypt. Coffee machines that use
coffee pods are expected to become more widespread in households and
offices since coffee suppliers are offering the machines free of charge
against a consumption quota.
