Egyptian Processed Food Sector Development Strategy - EN

Egyptian Processed Food Sector Review
Final Report
Client: Industrial Modernisation Centre - Egypt
ECORYS-NEI Macro & Sector Policies
Rotterdam, April 2005
PB/MSo/GHi/AP10041K
ECORYS-NEI P.O. Box 4175 3006 AD Rotterdam Watermanweg 44 3067 GG Rotterdam The Netherlands
T +31 10 453 88 00 F +31 10 453 07 68 E netherlands@ecorys.com W www.ecorys.nl Registration no. 24316726
Table of contents
Preface List of Abbreviations 1 Executive Summary 1.1 Egyptian Food Processing Industry in the New Global Setting 1.2 Egypts Competitive Performance in Processed food industry 1.3 Egypts Industrial Capabilities 1.3.1 Raw Material 1.3.2 Labour productivity and wages 1.3.3 SME development 1.3.4 Strategic alliance with academic and research and development institutes 1.3.5 Access to finance 1.3.6 Foreign Direct Investment (FDI) 1.3.7 Framework conditions 1.3.8 Trade positioning 1.3.9 Domestic retail market 1.4 SWOT Analysis 1.5 Sub sector Performance 1.5.1 Processed vegetables 1.5.2 Fruit juices (exotic juices) 1.5.3 Olive products 1.5.4 Cheese (white cheese) II Global Assessment 1 Introduction 2 Demand-side factors influencing global development of the FPI 2.1 Social and demographic change 2.1.1 Increased income 2.1.2 Per capita consumption 2.1.3 Urbanization 2.2 Developments in technology 2.3 Food safety and health concerns 2.4 Convenience foods 2.5 Life-style and health foods
25 27 29 29 29 30 30 31 31 32 32 33 33 34 34 35 36 36 37 38 38 39 41 43 43 43 44 46 48 49 49 50
3 Supply-side factors influencing global development of the FPI 3.1 Global sourcing of raw materials 3.2 Globalisation and the food industry 3.2.1 Food processing 3.2.2 Distribution and marketing 4 Global trade environment of the FPI 4.1 Multilateral trade agreements 4.2 Regional trade agreements 4.2.1 Common Market of Eastern and Southern Africa - COMESA 4.2.2 Euro-Mediterranean Partnership 4.2.3 Mediterranean Arab Free Trade Area - MAFTA 4.2.4 Greater Arab Free Trade Area - GAFTA 5 Global regulatory environment of the FPI 5.1 The WTO Agreement and Technical Barriers to Trade (TBT) 5.2 International coordination bodies for international standards 5.2.1 Office International des Epizooties - OIE 5.2.2 International Plant Protection Convention - IPPC 5.2.3 The Codex Alimentarius Commission - Codex 5.3 Hazard Analysis and Critical Control Point - HACCP III Local Assessment 1 General economic context 1.1 Recent macroeconomic performance 1.2 Structural policy reforms 1.3 Current structural reform policy and their impact on the Egyptian FPI 1.4 Policy reform issues under discussion by all stakeholders 2 Egyptian food processing industry - overview 2.1 Historical background 2.2 Industry structure 2.3 The informal sector 3 Egyptian food processing industry general performance 3.1 Production performance of the Egyptian FPI 3.2 Trade performance of the Egyptian FPI 3.2.1 Egyptian processed food exports and imports by product type 3.2.2 Egyptian processed food exports by region 3.2.3 Main Egyptian processed food export companies 3.2.4 Export Facilitation Programmes 3.3 Investment performance of the Egyptian FPI 3.3.1 Foreign investments in FPI 3.3.2 Foreign versus domestic investment in the Egyptian FPI 3.3.3 Structure of Investments 4 Egyptian food processing sectors with export potential
51 51 52 52 53 55 55 55 55 56 57 57 59 59 59 60 60 60 61 63 65 65 66 66 68 69 69 70 77 79 79 83 83 86 87 88 89 89 91 92 95
4.1 4.2 4.3 4.4 4.5 4.6
Frozen vegetables Tomato products Fruit juices, pulp and puree Olive oil and table olives Cheese products Dried vegetables, herbs and spices
95 99 102 106 108 112 115 115 115 116 119 119 121 121 122 123 123 125 125 128 129 129 129 130 132 135 137 137 138 139 141 145 145 146 148 150 152 153 155
5 Demand-side factors influencing development of the Egyptian FPI 5.1 Social and demographic change 5.2 Migration and access to western markets 5.3 Organisation of distribution markets 6 Supply-side factors influencing the development of the Egyptian FPI 6.1 Agricultural production 6.2 Subsidised food items 6.3 Imported food products 6.4 Imported materials for re-export 6.5 Packaging supplies 6.6 Logistics 6.7 Technology 6.8 Technical support 6.9 Access to finance 7 Egyptian trade environment of the FPI 7.1 Multilateral trade agreements (WTO) 7.2 Regional trade agreements 7.3 EU-Egypt Association Agreement 7.4 Domestic market access 7.5 Initiatives to improve customs procedures 8 Egyptian legal and regulatory environment of the FPI 8.1 Legal standards 8.2 Regulatory conformity assessment 8.3 Voluntary standards 9 Industry opinions on key constraints faced by the Egyptian FPI 10 Competitiveness opinion survey of Egyptian FPI enterprises 10.1 Introduction 10.2 Evaluation of current situation in Egypt 10.3 Evaluation of current competitiveness factors 10.4 Evaluation of future competitiveness factors and comparison with current situation 10.5 Conclusions IV Benchmarking Analysis 1 Summery of Main Findings
2 Basic Indicators 3 General overview of FPI in benchmark countries 3.1 Value-added and employment 3.2 Trade Performance Index 4 Production and productivity performance 4.1 Introduction 4.2 Processed meat, fish, fruit, vegetables, and fats 4.3 Dairy products 4.3.1 Consumption of dairy products in Mediterranean countries 5 Overview of FPI export situation 6 Export situation and position by product group 6.1 Cheese & curd 6.2 Fruit Juices 6.3 Tomato Products 6.4 Frozen Vegetables 6.5 Olive Products V General Strategy 1 Introduction 1.1 Stages in the industrial strategy process 1.2 Value chain of the Egyptian food processing industry 2 SWOT Analysis 2.1 Strengths 2.2 Weaknesses 2.3 Opportunities 2.4 Threats 3 Proposed strategic vision for Egyptian food processing industry 4 Overall Goal 5 Competitiveness and competitiveness drivers 5.1 Path way to competitiveness 5.2 The approach of the study team for development strategy proposal. 6 Proposal for Sector level strategy 6.1 Supply of raw material at desired quantity, quality and price (Driver 1) 6.1.1 Current status 6.1.2 Critical problem to be addressed: 6.1.3 Proposed activities to improve the supply of raw materials 6.2 Labour productivity and improved management (Driver 2) 6.2.1 Current situation
159 161 161 167 171 171 171 174 175 177 181 181 184 188 192 193 195 197 197 199 201 201 201 202 203 205 207 209 210 211 213 213 213 214 214 215 215
6.3
6.4
6.5
6.6
6.7
6.8
6.2.2 Critical problems to be addressed 6.2.3 Activities to improve the situation Access to finance (Driver 3) 6.3.1 Current situation 6.3.2 Critical problem to be addressed 6.3.3 Activities to improve the situation Increased supply of safe processed food to the domestic market (Driver 4) 6.4.1 Integration of micro and cottage industries (mostly informal) into the formal sector (Driver 4a) 6.4.2 Develop the domestic retail market system (driver 4b) 6.4.3 Increased role of the SME in the domestic and regional market (Driver 3) Support institutions coordination (Driver 5) 6.5.1 Current situation 6.5.2 Critical problems to be addressed 6.5.3 Activities to improve the situation Strategic alliance between university-R&D and industry (Driver 6) 6.6.1 Current situation 6.6.2 Critical problems to be addressed 6.6.3 Activities to improve the situation FDI attraction (Driver 7) 6.7.1 Current situation 6.7.2 Critical problems to be addressed 6.7.3 Activities to improve the situation Increased export performance (Driver 8) 6.8.1 Current situation 6.8.2 Critical problem to be addressed 6.8.3 Activities to improve the situation
215 216 217 217 217 217 218 218 219 220 222 222 222 222 223 223 224 224 225 225 226 226 227 227 228 228 231 249 251 251 252 252 253 254 255 256 256 257 263 263 263 264
7 Log-Frame for sector level proposed strategy VI Product Group Strategies 1 Processed Vegetables: strategy proposal for improved export performance 1.1 Background 1.2 Current situation 1.2.1 Frozen vegetables 1.2.2 Processed tomatoes 1.2.3 Strawberries 1.3 Processed Vegetables: SWOT Analysis 1.4 Critical problems to be addressed 1.5 Activities to improve the critical problems 1.6 Goals and vision 2 Olive products: strategy proposal for the improved export performance 2.1 Background 2.2 Current situation 2.3 Olive products: SWOT analysis
2.4 Critical problems to be addressed 2.5 Activities to improve the critical problems 2.6 Goals and vision 3 Fruit juices: strategy proposal for the improved export performance 3.1 Back ground 3.2 Current situation 3.3 Exotic fruit juices: SWOT analysis 3.4 Critical problems to be addressed 3.5 Activities to improve the critical problems 3.6 Goals and vision 4 Cheese products: strategy proposal for improved performance 4.1 Back ground 4.2 Current situation 4.3 Cheese production and marketing: SWOT analysis 4.4 Critical problems to be addressed 4.5 Activities to improve the critical problems 4.6 Goal and vision Egyptian Processed Food Sector Review-Annexes VII-A Global Assessment-Analysis of Main Sub-Sectors
265 265 266 271 271 272 272 273 273 274 277 277 277 278 279 280 280 283 285 287 287 287 288 288 289 290 291 291 291 292 292 293 295 295 295 296 296 297 299 299
1 Global trends in the dairy industry 1.1 Overview 1.2 Global production 1.3 Geography of dairy production 1.4 Trends in trade 1.5 The industrial structure of the dairy industry and supply chain 1.6 Key corporate players 2 Global trends in the edible oil industry 2.1 Overview 2.2 Global production 2.3 Geography of vegetable oil production 2.4 Trends in trade 2.5 The industrial structure of the vegetable oil industry and supply chain 3 Global trends in the meat and poultry (processing) industry 3.1 Overview 3.2 Global production 3.3 Economic geography of meat production 3.4 Trends in trade 3.5 The industrial structure of the meat industry and supply chain 4 Global trends in the fruit and vegetables (processing) industry 4.1 Overview
4.2 4.3 4.4 4.5 4.6
Trends in global production and geography International trade Processed fruit juices Frozen vegetables The industrial structure of the fruit and vegetable industry and supply chain
299 300 301 301 302 303 309 311 311 311 311 313 313 315 316 319 319 320 322 323 323 323 324 324 325 325 326 327 327 333 333 333 335 335 335 336 336 336 337 337 337 337
5 Supplementary Tables VII-B Sub-Sector Profiles
1 Dairy Products 1.1 Sector Overview 1.2 Production 1.2.1 Production and use of milk 1.2.2 Import situation for powdered milk 1.2.3 The dairy processing sector 1.3 Domestic Market 1.4 Export Market and performance 2 Exotic fruit juices, pulp and puree 2.1 Sector Overview 2.2 Production 2.2.1 Supply of agricultural inputs 2.2.2 Packaging range 2.2.3 Technological performance and quality 2.2.4 Business capacity 2.3 Domestic Market 2.4 Export Markets and performance 2.4.1 Distribution channels for exports 2.5 Global Trends 2.5.1 Global production and distribution 2.5.2 Export market requirements 2.5.3 Global Trade 3 Jams 3.1 Sector Overview 3.2 Production 3.2.1 Supply of agricultural inputs 3.2.2 Packaging range 3.2.3 Technological performance and quality 3.2.4 Business capacity 3.3 Domestic Market 3.4 Export Markets and performance 3.4.1 Distribution channels for exports 3.5 Global trends 3.5.1 Global production and distribution 3.5.2 Global trade
4 Frozen vegetables 4.1 Sector Overview 4.2 Production 4.2.1 Supply of agricultural inputs 4.2.2 Packaging range 4.2.3 Technological performance and quality 4.2.4 Business capacity 4.3 Domestic Market 4.4 Export Markets and performance 4.4.1 Distribution channels for exports 4.5 Global trends 4.5.1 Global production and distribution 4.5.2 Export market requirements 4.5.3 Global demand and trade 5 Tomato products 5.1 Sector Overview 5.2 Production 5.2.1 Supply of agricultural inputs 5.2.2 Packaging range 5.2.3 Technological performance and quality 5.2.4 Business capacity 5.3 Domestic Market 5.4 Export Markets and performance 5.4.1 Distribution channels for exports 5.5 Global trends 5.5.1 Global production and distribution 5.5.2 Export market requirements 6 Dried onions and other dried vegetables 6.1 Sector Overview 6.2 Production 6.2.1 Supply of agricultural inputs 6.2.2 Packaging range 6.2.3 Technological performance and quality 6.2.4 Business capacity 6.3 Domestic Market 6.4 Export Markets and performance 6.4.1 Distribution channels for exports 7 Olive oil and table olives 7.1 Sector Overview 7.2 Production 7.2.1 Supply of agricultural inputs 7.2.2 Packaging range 7.2.3 Technological performance and quality 7.2.4 Business capacity 7.3 Domestic Market
339 339 340 341 341 342 342 342 343 344 344 344 345 345 349 349 350 351 351 352 352 352 353 353 353 354 354 355 355 355 356 356 356 357 357 357 358 359 359 359 360 361 361 361 361
7.4 Export Markets and performance 7.4.1 Distribution channels for exports 7.5 Global trends 7.5.1 Global demand 7.5.2 Global production and distribution 7.5.3 Export market requirements 7.5.4 Global trade 8 Meat products 9 Poultry 10 Seafood 11 Soft drinks 12 Bottled natural and mineral water 13 Confectionery and snacks 13.1 Confectionary 13.2 Snack Foods 14 Tobacco and cigarettes 15 Sugar and molasses 16 Edible Oils VII-C Local Assessment - Supplementary Tables
362 362 362 362 363 364 365 367 369 371 373 375 377 377 377 379 381 383 385 387 399 403 405 405 405 406 408 409 410 413 415 415 416 417
1 Supplementary Tables VII-D VII-E Profile of interviewed Egyptian FPI Companies Overview of Food processing sectors in benchmark countries
1 Overview of food processing sectors in benchmark countries 1.1 Morocco 1.1.1 Dairy products 1.1.2 Fruit and vegetables 1.2 Turkey 1.2.1 Dairy Products 1.2.2 Fruits and vegetables 1.3 South Africa 1.4 Spain 1.4.1 Dairy Products 1.4.2 Fruit and vegetables 1.5 China
1.5.1 Dairy products 1.5.2 Fruit and vegetables VII-F The modern retail sector in benchmark countries
418 419 423 425 425 426 427 428 428 429 431 435
1 The modern retail sector in benchmark countries 1.1 Introduction 1.1.1 Morocco 1.1.2 Turkey 1.1.3 South Africa 1.1.4 Spain 1.1.5 China 1.2 Implications of development of the retail sector for the food processing industry VII-G Benchmarking Analysis-Supplementary Tables
Index of tables
Table 1.1 Table 2.1 Table 2.2
Global processed food trade in billions of USD Selected Middle East countries per capita GDP and forecast ($US) Average household budget shares for food as share (%) of total household budget by country income category Table 2.3 Population estimates and projections for Egypt Table 2.4 Population estimates and projections for the Near East Table 3.1 World leaders in processed food Table 3.2 Major global retailers Table 2.1 Breakdown of manufactured value added (MVA) and average annual growth rate (volume) Table 2.2 Number of companies and employees in the Egyptian Food Processing Industry, 2002 Table 2.3 Number of establishments and employees in the Egyptian Food Processing Industry, December 2004 Table 2.4 Production and investment in the Egyptian Food Processing Industry, December 2004 Table 2.5 Production and investment per employee in the Egyptian Food Processing Industry, December 2004 Table 2.6 Profile of food processing companies within the Food Commodity Council (FCC) Table 3.1 Evolution of private sector FPI companies, production, employment and costs (1997-2004) Table 3.2 Evolution of public sector FPI companies, production, employment and costs (1997-2004) Table 3.3 Evolution of total FPI companies, production, employment and costs (1997-2004) Table 3.4 Key indicators for the Egyptian food processing sector and market.(2003) Table 3.5 Leading Egyptian processed food exports by value ($US), 2002-2003 Table 3.6 Leading Egyptian processed food imports by value ($US), 2002-2003 Table 3.7 Egyptian exports and imports of processed food ranked by value of exports, 2003 Table 3.8 Egyptian Exports of fresh fruits and vegetables, 2002-2003 Table 3.9 Egyptian Exports of selected food products, 2002-2003 (thousand tons) Table 3.10 Egyptian Exports of leading Egyptian processed food companies, 2002-2003 Table 3.11 Egyptian exports of processed food by geographical region, 2002 Table 3.12 Value of exports of leading Egyptian processed food companies (Jan.Sept. 2004)
42 44 45 47 48 53 54 70 72 73 74 75 76 80 80 81 82 84 84 85 86 86 86 87 87
15
Table 3.13 Examples of foreign involvement in Egyptian FPI Table 3.14 Investment profile of the Egyptian FPI Table 3.15 Egypts imports of food processing machinery 2001-2003 ($US million). Table 4.1 Frozen vegetables - key figures, 2003 Table 4.2 Frozen vegetables: production, source and usage (2000-01) Table 4.3 Frozen vegetables: evolution of production Table 4.4 Main Egyptian frozen vegetable companies Table 4.5 Egyptian frozen vegetable exports ranked by value (2002) Table 4.6 Egyptian Frozen vegetables, main export destinations and destination share by product group, 2002 Table 4.7 Frozen vegetables: evolution of exports Table 4.8 Distribution channels for Egyptian exports of frozen vegetables Table 4.9 Tomato products key figures 2003 Table 4.10 Tomato products: production, source and usage (2000-01) Table 4.11 Tomato products: evolution of production Table 4.12 Main Egyptian producers of tomato paste (hot and cold break) Table 4.13 Distribution channels for Egyptian exports of tomato products Table 4.14 Fruit juices and concentrates - key figures, 2003 Table 4.15 Juices & syrups: production, source and usage (2000-01) Table 4.16 Evolution of production Table 4.17 Egyptian exports of fruit and vegetable juices, unfermented (HS code 2009), 2002 Table 4.18 Distribution channels for Egyptian exports of fruit juices and concentrates Table 4.19 Key players in the fruit juice and concentrates sector Table 4.20 Olive oil and olive products - key figures, 2003 Table 4.21 Main Egyptian producers of olive oil Table 4.22 Olive oil and table olives: evolution of production Table 4.23 Olive oil and table olives: evolution of exports Table 4.24 Distribution channels for Egyptian exports of fruit juices and concentrates Table 4.25 Breakdown of licensed dairy processing units by number of workers Table 4.26 Leading companies in the dairy product-processing sector Table 4.27 Dehydrated vegetables - key figures, 2003 Table 4.28 Dried onions: evolution of production Table 4.29 Dried vegetables: evolution of exports Table 4.30 Distribution channels for Egyptian exports of fruit juices and concentrates Table 5.1 Breakdown of modern food retail outlets in Egypt Table 5.2 Number of retail outlets by type in Egypt Table 6.1 Output of main agricultural products (millions of tons) Table 6.2 Output of main animal products (millions of tons) Table 6.3 Egyptian production of agricultural products and share of world and regional production Table 6.4 Subsidised food items (2004) Table 8.1 Egyptian food processors with existing HACCP (39 companies) Table 10.1 Highest scoring factors for the current situation in Egypt
90 92 93 96 96 97 97 98 98 98 99 99 100 100 101 102 103 103 104 105 105 106 107 107 107 108 108 108 110 112 113 114 114 117 117 119 119 120 121 140 147
Table 10.2 Table 10.3 Table 10.4 Table 10.5 Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 2.1 Table 2.2 Table 2.3 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 3.9 Table 3.10 Table 3.11 Table 3.12 Table 3.13 Table 3.14 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7
Lowest scoring factors for the current situation in Egypt Highest scoring factors for determining current competitiveness Lowest scoring factors for determining current competitiveness Highest scoring factors for future competitiveness and corresponding scores for current competitiveness and current situation in Egypt Processed food: trade position indicators for 2002 Exports as a share of output, % Food, beverages and tobacco, MVA per employee by sub-sector, $US Share of value added in the total value of output, % Average unit values of selected processed food exports (index, Egypt =100) Basic economic indicators for benchmark countries Basic agricultural indicators for benchmark countries Urbanisation rates in selected Mediterranean countries Food, beverages and tobacco, share in manufactured value added (MVA) and growth in value added Food, beverages and tobacco, breakdown of MVA by sub-sector, $US million Food, beverages and tobacco, breakdown of MVA by sub-sector, share of total MVA (%) Food, beverages and tobacco, breakdown of employment by subsector, thousand employees Food, beverages and tobacco, breakdown of employment by subsector, share of total employment (%) Food, beverages and tobacco, MVA per employee by sub-sector, $US Overview of the agro-food industry (1999/2000) Performance indicators for Egyptian agro-food industry The agro-food industry in Mediterranean countries (1998) Agro-food industry performance indicators in Mediterranean countries (1998) Processed food: general trade performance indicators (1998-2002) Processed food: trade position indicators for 2002 Processed food: trade position change indicators 1998 - 2002 Openness of food systems of Mediterranean countries to international trade (%) Processed meat, fish fruit, vegetables and fats: estimates of value and composition of output, $US million Processed meat, fish fruit, vegetables and fats: output and value-added per employee, $US Processed meat, fish fruit, vegetables and fats: ratio of output to apparent consumption Processed meat, fish fruit, vegetables and fats: exports as a share of output (%) Processed meat, fish fruit, vegetables and fats: imports as a share of apparent consumption (%) Dairy products: estimates of value and composition of output, $US million Dairy products: output and value-added per employee, $US
147 149 149 151 155 155 156 156 157 159 160 160 161 162 162 162 163 163 164 165 166 166 167 168 169 170 172 172 173 173 174 174 175
17
Table 4.8 Table 4.9 Table 5.1 Table 5.2 Table 5.3 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table 6.7 Table 6.8 Table 6.9 Table 6.10 Table 6.11 Table 6.12 Table 6.13 Table 6.14 Table 6.15 Table 6.16 Table 6.17 Table 6.18 Table 6.19 Table 7.1 Table 1.1 Table 1.2 Table 1.3 Table 2.1 Table 3.1 Table 3.2 Table 4.1 Table 4.2 Table 5.1 Table 5.2 Table 5.3
Dairy products: key indicators Evolution of apparent human consumption of dairy products (in equivalent raw milk) Geographical composition of processed food exports, $US million 2002. Main processed food exports by region: Egypt, Morocco, Turkey (2002) Main processed food exports by region: S. Africa, Spain, China (2002) Cheese and curd: value of exports and imports in 2002, $US million Cheese and curd: volume of exports and imports in 2002, thousand tons Cheese and curd: unit value of exports in 2002, $US per ton Saudi Arabia, imports of cheese & curd, 2002 Jordan, imports of cheese & curd, 2002 Fruit and vegetable juices: value of exports and imports in 2002, $US million Fruit and vegetable juices: volume of exports and imports in 2002, thousand tonnes Fruit Juice: unit value of exports in 2002, $US per ton Geographical composition of exports of fruit and vegetable juice nes, $US million, 2002 United States, imports of fruit & vegetable juices nes, 2002 Tomato products: value of exports and imports in 2002, $US million Tomato products: volume of exports and imports in 2002, thousand tonnes Tomato products: unit value of exports in 2002, $US per ton Frozen vegetables: value of exports and imports in 2002, $US million Frozen vegetables: volume of exports and imports in 2002, thousand tons Frozen vegetables: unit value of exports in 2002, $US per ton Olive products: value of exports and imports in 2003, $US million Olive products: volume of exports and imports in 2003, thousand tons Olive products: unit value of exports in 2003, $US per ton Overview of drivers and outputs covered by the log frame World production of milk and other dairy products (million metric tons) World cheese and curd exports (thousand metric tons) Key players in the dairy products industry World production of vegetable oil (million metric tons) World production of poultry meat (1000 tons) World production of beef and buffalo meat (1000 tons) World production of fruit (million metric tons) World production of vegetables (million metric tons) 20 largest exporters of cheese and curd by value ($US), 1998-2002 20 largest exporters of vegetable oils by value ($US), 1998-2002 20 largest exporters of non-beef and buffalo meat by value ($US), 1998-2002
175 176 178 179 180 182 182 182 183 183 185 185 186 187 188 189 189 189 192 193 193 194 194 194 231 287 289 290 292 295 296 300 300 303 304 305
Table 5.4 Table 5.5 Table 5.6 Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 2.14 Table 2.15 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 3.9 Table 4.1 Table 4.2 Table 4.3 Table 4.4
20 largest exporters of beef and buffalo meat by value ($US), 19982002 20 largest exporters of fruit and vegetable juices by value ($US), 1998-2002 20 largest exporters of chilled and frozen vegetables by value ($US), 1998-2002 Key figure 2003: Dairy products (excl. fresh and pasteurised milk) Estimated milk production 1995-2001 (thousand tons) Breakdown of dairy herds and milk production by farm type Breakdown of use of raw milk (2001) Breakdown of use of milk by process/product Breakdown of licensed dairy processing units by number of workers Leading companies in the dairy product-processing sector Key figures, 2003 Juices & syrups: production, source and usage (2000-01) Evolution of production Key players in the fruit juice and concentrates sector Egyptian proximity to state of the art business capacity Egyptian exports of fruit and vegetable juices, unfermented (HS code 2009), 2002 Distribution channels for Egyptian exports of fruit juices and concentrates World imports of traditional fruit juices World imports of special flavour fruit juices (i.e. except citrus, apple, pineapple and grape) Imports of special flavour fruit juices by region (tons thousand) Hibiscus powder imports European Union Imports of special flavour fruit juices by country (thousand tons) Consumption of fruit juice and nectars, 2002 Eastern Europe imports of special flavour fruit juices by country (thousand tons) Middle East imports of special flavour fruit juices by country (thousand tons) Key figures, 2003 Jams: production, source and usage (2000-01) Evolution of production Key players in the Egyptian Jam sector Egyptian proximity to state of the art business capacity Egyptian exports of jam (HS code 2007), 2002 Distribution channels for Egyptian exports of fruit juices and concentrates Main jam exporters, 2002 Main jam importers, 2002 Key figures, 2003 Frozen vegetables: production, source and usage (2000-01) Frozen vegetables: evolution of production Main Egyptian frozen vegetable companies
306 307 308 311 312 312 312 313 314 317 319 320 321 322 324 325 325 328 328 328 329 330 330 331 331 333 333 334 334 336 337 337 338 338 339 340 340 341
19
Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 4.12 Table 4.13 Table 4.14 Table 4.15 Table 4.16 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 7.1 Table 7.2 Table 7.3 Table 7.4 Table 7.5 Table 7.6 Table 7.7 Table 7.8 Table 7.9 Table 7.10 Table 7.11 Table 7.12 Table 7.13 Table 7.14 Table 7.15 Table 12.1 Table 13.1 Table 13.2 Table 16.1
Egyptian proximity to state of the art business capacity Egyptian frozen vegetable exports ranked by value (2002) Egyptian Frozen vegetables, main export destinations and destination share by product group, 2002 Frozen vegetables: evolution of exports Distribution channels for Egyptian exports of frozen vegetables Per capita consumption of frozen vegetables European Union (15): trade in frozen single vegetables European Union (15): trade in frozen prepared vegetables Eastern Europe: trade in frozen single vegetables Eastern Europe: trade in frozen prepared vegetables Near East: trade in frozen single vegetables Near East: trade in frozen prepared vegetables Key figures, 2003 Tomato products: production, source and usage (2000-01) Tomato products: evolution of production Main Egyptian producers of tomato paste (hot and cold break) Egyptian proximity to state of the art business capacity Distribution channels for Egyptian exports of fruit juices and concentrates Key figures, 2003 Dried onions: evolution of production Egyptian proximity to state of the art business capacity Dried vegetables: evolution of exports Distribution channels for Egyptian exports of fruit juices and concentrates Key figures, 2003 Main Egyptian producers of olive oil Olive oil and table olives: evolution of production Egyptian proximity to state of the art business capacity Olive oil and table olives: evolution of consumption Olive oil and table olives: evolution of exports Distribution channels for Egyptian exports of fruit juices and concentrates Olive oil: evolution of demand (consumption) by region/country (thousand tons) Table olives: evolution of demand (consumption) by region/country (thousand tons) Production of olive oil, 2000-2003 Production of table olives, 2000-2003 Olive oil: evolution of export by region/country (thousand tons) Table olives: evolution of exports by region/country (thousand tons) Olive oil: evolution of imports by region/country (thousand tons) Table olives: evolution of imports by region/country (thousand tons) Key players in the bottled water sector Breakdown of the Egyptian confectionary market by product (2003) Key players in the confectionary sector Key players in the oil sector
342 343 343 344 344 345 346 346 346 347 347 347 349 350 350 351 352 353 355 356 357 358 358 359 360 360 361 362 362 362 363 363 364 364 365 365 366 366 375 377 377 383
Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 1.9 Table 1.10 Table 1.11 Table 1.12 Table 1.13 Table 1.14 Table 1.15 Table 1.16 Table 1.17 Table 1.18 Table 1.19 Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 1.9 Table 1.10 Table 1.11 Table 1.12 Table 1.13 Table 1.14
Food and drinks forecast (Egypt) Available and actual capacity for the Public Sector selected product groups, 2001-2002 Available and actual capacity for the Private Sector selected product groups, 2001-2002 Egyptian trade in cheese & curd (HS code 0406) Egyptian trade in vegetables (uncooked, steamed, boiled) frozen (HS code 0710) Egyptian trade in vegetables, dried, not further prepared (HS code 0712) Egyptian trade in seed herbs and spices (HS code 0909) Egyptian trade in other spices (HS code 0910) Egyptian trade in sugar confectionary, non cocoa white chocolate (HS code 1704) Egyptian trade in Chocolate & other foods containing cocoa (HS code 1806) Egyptian trade in pasta, couscous, etc. (HS code 1902) Egyptian trade in baked bread, pastry, wafers, biscuits, etc. (HS code 1905) Egyptian trade in tomato paste (HS code 2002) Egyptian trade in pickled olives (HS code 200570) Egyptian trade in jams, jellies, marmalades, fruits & nut pastes & purees (HS code 2007) Egyptian trade in fruit and vegetable juices, not fermented or spirited (HS code 2009) Egyptian trade in extracts, essences, concentrates of tea, coffee, malt. (HS code 2101) Egyptian trade in tomato ketchup (HS code 210302) Egyptian trade in soups, broths and homogenized food preparations (HS code 2104) Production of main crops and livestock in Morocco (thousand tons) Production of fruits and vegetables in Morocco (thousand tons) Production of main crops and livestock in Turkey (thousand tons) Production of major food products (thousand tons) Production of dairy products in Turkey (1000 tons) Exports of Turkish dairy products (volume, value and unit values) Exports of Turkish fruit juices and concentrates (volume, value and unit values) Exports of Turkish tomato paste by destination (volume, value and unit values) Exports of Turkish frozen fruits and vegetables (volume, value and unit values) Exports of Turkish olive oil (volume, value and unit values) Exports of Turkish olive oil by destination (volume, value and unit values) Spanish dairy product production (thousand tons) Spanish production and consumption of fruit juices The Food Processing Industry in China
387 388 389 390 390 391 391 392 392 393 393 394 394 395 395 396 396 397 397 405 407 408 409 410 410 411 412 412 413 413 415 416 418
21
Table 1.15 Sown area and output of vegetables in China Table 1.16 Comparison of vegetable yields of selected countries (tons per ha) Table 1.1 Number of hypermarket and supermarkets in benchmark countries (2002) Table 1.2 A.T. Kearneys Global Retail Development Index 2004 Table 0.1 MOROCCO: Processed food exports, ranked by value ($US) in 2002 Table 0.2 TURKEY: Processed food exports, ranked by value ($US) in 2002 Table 0.3 SOUTH AFRICA: Processed food exports, ranked by value ($US) in 2002 Table 0.4 SPAIN: Processed food exports, ranked by value ($US) in 2002 Table 0.5 CHINA: Processed food exports, ranked by value ($US) in 2002
420 420 425 426 438 439 440 441 442
Index of figures
Figure 2.1 Figure 3.1 Figure 3.2 Figure 8.1 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6 Figure 6.7 Figure 1.1 Figure 1.2 Figure 1.3 Figure 4.1 Figure 5.1 Figure 5.2 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6 Figure 6.7 Figure 6.8
Food expenditure per capita in Egypt as per family budget LE per year (2000) Traditional Supply Chain Emergent Supply Chain Schematic representation of regulatory control of the Egyptian FPI Curd & cheese: volume of exports (tons) and unit values ($ per ton) Fruit & vegetable juice nes: volume of exports (tons) and unit values ($ per ton) Fruit & vegetable juice nes: volume of exports (share in %) and unit values ($ per ton) Prepared & preserved tomatoes: volume of exports (tons) and unit values ($ per ton) Prepared & preserved tomatoes: volume of exports (share in %) and unit values ($ per ton) Tomato ketchup and other tomato sauces: volume of exports (tons) and unit values ($ per ton) Tomato ketchup and other tomato sauces: volume of exports (share in %) and unit values ($ per ton) Stages in the industrial strategy process Schematic diagram of the Egyptian food processing value chain Pressures faced by the Egyptian food industry from the changing international situation Summary of Vision and recommended measures to be taken. Competitiveness Drivers for the Egyptian FPI Pathway to international competitiveness Summary of the strategy for the improved supply of raw material both in Quality and quantity Summary of strategy for improved labour productivity and firm level management Summary of strategy for improved access to finance for SMEs Summary of strategy for improved performance of Egyptian food processing industries in domestic market Summary of strategy for improved coordination of support institutions in the EGFPI Summary of strategy for improving the strategic relationship between EFPI the academic and research institutions Summary of strategy for the increased FDI in the Food processing and Marketing Summary of proposed strategy for increased export performance of the EFPI
46 51 52 139 183 186 187 190 190 191 191 198 199 200 208 210 210 215 216 218 222 223 225 226 229
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Figure 1.1: Figure 1.2 Figure 1.3 Figure 1.4 Figure 2.1 Figure 2.2 Figure 2.3 Figure 3.1 Figure 3.2 Figure 3.3 Figure 4.1 Figure 4.2 Figure 4.3
Processed vegetables: SWOT Frozen vegetables: domestic and export market projections Tomato paste: export and import projections Summary of proposed strategy for the improved export performance of processed vegetables Olive products: SWOT Olive products: export projections Summary of proposed strategy for improved performance of the Olive products Fruit juices: SWOT Exotic fruit juices: export projections Summary of proposed strategy for improved export performance of the exotic fruit juices sector Cheese production: SWOT Cheese: export and import projections Summary of proposed strategy for the increased export performance and improved domestic supply\for the Egyptian white cheese industry
255 258 258 259 265 267 268 273 275 275 279 281 281
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Preface
This study had been prepared for the Policy Reform Unit (PRU) of the Industrial Modernisation Centre (IMC) as one of its strategic sectoral studies in different sectors. ECORYS was commissioned by the Industrial Modernisation Centre (IMC) to conduct an extensive study of Egypts Food processing sector. ECORYS built a team of international and national consultants (economist, food technologists and sector specialists) all with extensive experience in their field of specialization. The assignment commenced in March 2004, with a 90 days period for finalizing the study. However the study took longer time than planned, due mostly to a change of team leader and local consultants upon the request of IMC. Moreover, the diversity of the sector, the existence of the cottage, informal, micro, small, medium, large and multinational companies, the complicated linkages with agriculture and the retails market system, the increasingly complicated global legal frame work and, above all, lack of reliable data and information has made this study challenging. Besides information from different international and national sources such as UNICTAD, FAO, UNIDO, CAPMAS etc. together with enterprise within the Egyptian food Processing Industry, the analysis also relied on obtaining first hand information through interviewing more than 35 food processing companies, along with a range support institutions and retailers. A Project Steering Committee, whose members were all prominent representatives of the Egyptian food processing industry besides the PRU Manager also provided valuable insights and contributions to guiding the Project Team, oversaw the project. The assessment in the study relies heavily on the information and insights obtained through this process. The team was guided by five overarching objectives:

To compile a global review of the sector such as worldwide trends in production, trade, legal and technical regulations governing the sector Analysing the current situation of the Egyptian food processing industry identifying the constraints and opportunities. Positioning of the selected Egyptian food processing sectors (product groups/ value chains) against carefully selected bench mark countries Based on the analysis on the current situation, the bench marking analysis and the global trend propose a strategy to increase the competitiveness of the Egyptian food processing industry and prepare action plan.
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This report contains the global assessment section, local assessment section; benchmarking analysis, sector level strategy and product group level strategy (for processed vegetables, cheese, olive products, and fruit juices fruit juices). The global assessment, local assessment, and benchmarking exercises (against five countries from Middle East, North Africa, South Africa, and Europe), enabled the Egyptian food processing industry to be positioned globally and regionally. In developing the sector level strategy, value chain analysis highlighted the constraints at each level of the chain in the sector. These are general issues cutting across the sector irrespective of which product group. The analysis of the constraints and opportunities (potentials) in the value chain lead the team to identification of 8 competitiveness drivers that have to be stimulated to mitigate the constraints and exploit the potential. The proposed activities/majors to be undertaken, the expected outputs and assumptions/risks associated to the activities and outputs are then presented. The relationship between the activities and outputs are then related to the objectives and goals and are summarised in a LOGFRAME (logical framework) for each of the eight identified competitiveness drivers. In the product group level strategy, value chain analysis was conducted for each product group by analysing the collected data and discussions with stakeholders and the constraints and potentials specific to the group were determined. Activities to be performed the outputs expected and the role of different stakeholders including the government is also summarized in LogFrame format for easy reference. Acknowledgements The Project Team would like to acknowledge the valuable contributions made to this study by the PRU team within IMC, the prominent private sector representatives in the Project Steering Committee and to all the representatives of the Egyptian Food Processing Sector that made them available to the project. We would also like to thank Ms. Djehan Lauwers for her unfailing backstopping support and to Mr. Francois-Xavier Pinard, the original Team Leader on the project. Thanks go also to the support of Fiani & Partners for collection of statistics and data preparation. The Project Team: Dejene Tezera Team Leader Paul Baker International Expert Morad S. Ahmed Local Expert Yehia El Samargy Local Expert
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List of Abbreviations
Acronyms ACC ALEB BRC BSE Codex CCG CAPMAS CFI COMESA: DRC EFPI EOS EU EurepGAP FAO FCC FMD FPI FTA FTC GAFI GAFTA GCC GOEIC GHP GMO GMP HACCP HEIA IMC IQF IPA IPPC ISO ITC MAFTA MALR Agricultural Commodity Council Agriculture-Led Export Businesses British Retail Consortium Bovine Spongiform Encephalothopy FAO/WHO Joint Codex Alimentarius Commission Chamber of Cereals and Grains (CCG) Central Authority for Mobilisation and Staistics Chamber of Food Industries Common Market for Eastern and Southern Africa Domestic Resource Cost(s) Egyptian Food Processing Industry Egyptian Organisation for Standards and Quality Control European Union Euro-Retailer Produce Working Group (Eurep) Good Agriculture Practices (GAP) Food and Agricultural Organisation (United Nations) Food Commodity Council Foot and Mouth Disease Food Processing Industry Free Trade Agreement Food Technology Centre General Authority for Investment and Free Zones Greater Arab Free Trade Area Gulf Cooperation Council General Organisation for Export and Import Control Good Hygiene Practices Genetically Modified Organisms Good Manufacturing Practices Hazard analysis and Critical Control Point Horticultural Export Improvement Association Industrial Modernisation Centre Individually Quick Frozen Investment Promotion Agency Secretariat of the International Plant Protection Convention International Standards Organisation International Trade Centre Mediterranean Arab Free Trade Area Ministry of Agriculture and Land Reclamation
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MENA MOFTI MOH OIE PAG PET QMS SPS TBD TBT TQM UHT USAID WTO
Middle East and North Africa Ministry of Foreign Trade and Industry Ministry of Health Office International des Epizooties Policy Advisory Group Polythene Terephthalate Quality Management Systems Sanitary and Phytosanitary To Be Determined Technical Barriers to Trade Total Quality Management Ultra-High Temperature United States Agency for International Development World Trade Organisation
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1 Executive Summary
1.1
Egyptian Food Processing Industry in the New Global Setting

The new international setting opens up many promising options for growth of food processing industries in developing countries. However, the pace of globalisation, worldwide liberalization and increased competitive pressures mean that the potential for the Egyptian food processing Industry (EFPI) can be realised only if the Egyptian government and the industry mount a coordinated strategy to tap markets and technologies, and enhance the capabilities and institutions involved in processed food manufacturing and trade. Global food processing and marketing value chains are now organised more tightly than before and entry into these chains has become an important sources of dynamic competitive advantage that is crucial for the Egyptian food processing industry. It is vital for Egypt to tap into these global value chains, both by building competitive domestic enterprises and by attracting international companies. Egyptian food processing industry has many potential advantages such as very good agroclimatic condition, low labour cost and increased availability of skilled labour, proximity to Europe and Gulf markets, and an improving business environment, which are reflected in its recent performance that has been very encouraging. Small, cottage and micro scale food processing sectors are, however, under-performing and little has been done to make them more competitive and their export performance is very low as a result. The private sector, encouraged by new developing policies, is showing-up its growth by improved export performance in the last three years. With Egypt opening up to global markets through various regional trade agreements, such as European Union and Arab and Gulf countries, there is a pressing need for a comprehensive and coherent food sector strategy.
1.2
Egypts Competitive Performance in Processed food industry

Relative to its overall land area and population size, Egypt has a low availability of arable land. In turn, this lack of arable land is reflected in a substantial negative trade balance in processed food for Egypt. Whereas the other benchmark countries1 are all net exporters of processed food (with the exception of Morocco that has a small negative trade balance).
The countries used in the benchmarking exercise are Morocco, Turkey, South Africa, Spain and China.
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Consequently, the share of Egyptian exports of processed food relative to output is the lowest among the benchmark countries for which comparable data is available. Furthermore, analysis of the main processed food segments indicates that Egypt achieves the lowest share of value added (below 20%) in the total value of output among the benchmark countries. From this breakdown, Egypts initial position on (geographical) markets with dynamic demand is found to largely account for its increase in world market share over recent years. By contrast, Egypts initial product specialisation has had a negative effect on export performance (i.e. specialisation in products with non-dynamic world demand). Further, the negative estimate for the adaptation component, suggests that Egypt has a poor performance in terms of shifting exports towards specific productcountry markets characterised by dynamic demand. With regard to the urbanisation rate, identified as one of the key factors influencing the development of the food-processing sector, Egypt is noticeable both for the low level of urbanisation compared to other Mediterranean countries and also for the low rate of increase in the share of the population in urban areas. In 1960 the share of the population living in urban areas was lower in Turkey, Tunisia and Morocco than in Egypt. These countries have, however, seen substantial increases in the rate of urbanisation, most notably in Turkey where the share has more than doubled from 31% to 73%.
1.3
1.3.1
Egypts Industrial Capabilities

Raw Material Egypt has a reasonable endowment of high-quality, indigenous raw materials (such as exotic fruits and wide variety of vegetables), which forms the basis for the important food sector. The ability of the Egyptian agriculture to provide different varieties of fruits and vegetables in the off-season is an important comparative advantage at the national level. Egypt also has a potentially highly productive agricultural base as measured by computing the domestic resource cost of production (DRCs)2. According to a USAID study, the two horticulture crops, potato and tomato, undoubtedly are representative of a wide range of vegetables and fruits, reflecting extremely high comparative advantage. Egypt has also the highest olive yields in the region, which is 6.38 ton/ha compared to a world average of 1.67 and yields for Italy and Turkey of 2.39 and 2.63 respectively. For milk production, the DRC for Egypt indicates a comparative advantage in livestock development potential, but the levels of efficiency and productivity in the sub-sector are low. There is immense scope to reduce costs of production and increase competitiveness. However, organization of milk producers groups, increased involvement of the private sector in marketing and feed distribution channels and facilities including chilling plants,
2
The ability to produce agricultural product at lower cost compared to another country: A country has a comparative advantage if DRC is less than one.
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provision of credit and advisory services to smallholders are essential to achieve such an improvement. The Egyptian perishable products sector, mainly the fruit and vegetables and the dairy sector, is constrained by a transportation and storage system that is very damaging to product quality. It is estimated that up to 40 percent of total production of highly perishable products are damaged or lost in transit and handling. According to industry sources, estimates of tomato losses run as high as 60 percent. This is the result of poor packaging, lack of cold chain facilities, rough transport, and multiple handling. The impact of this on the food industries is inconsistent and poor quality supply. The impact on consumers is higher retail prices and lower quality than would be the case with proper post-harvest handling.
1.3.2
Labour productivity and wages Manufacturing wages in Egypt are among the lowest in the region and the second lowest average labour costs per worker and average value-added per worker in manufacturing from the bench marked countries. Combined with the basic skills and experience of the industrial labour force, this can be an important competitive advantage in the long term. However, exploiting this advantage requires high levels of labour productivity. Egypt appears to have one the lowest labour and firm productivity levels in the region. This reflects many factors: low capital to labour ratios and a lower level of technology, lower technical competence, insufficient training and weak marketing and management skills in many manufacturing firms. Strengthening and properly funding the training and human resources department of the MOFTI in order to coordinate the activities of training and improving labour productivity is crucial. This unit should conduct researches and assessment on the productivity of labour in the food sector and provide the outcomes of the studies to the policy makers and the industries periodically.
1.3.3
SME development A key feature of the Egyptian food industry is the existence of a dual market structure. The sector is characterised by a small number of large firms that operate over multiple products sectors for local and export market (examples are fruit juices, frozen vegetables, and pasteurised milk). Alongside these larger enterprises, there is a large number of SMEs (small and medium sized enterprises) that should focus on niche products for regional and local markets. It is estimated that more than 87% of the food processing industries in the formal sector are either small scale or medium scale. This figure is similar to that of European countries, where the SMEs contribute to the production of more than 80% of processed food. The focus of the strategy for the development of small and medium scale food processors should be to: build support industry services aligned to the production requirements of larger enterprises, increase the competitiveness of the domestic market, increase the diversification and specialization of the industrial base, take advantage of niche market, and accelerate adaptation to changing market demands through technical support and provision of long term finance.
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1.3.4
Strategic alliance with academic and research and development institutes Industrial competitiveness depends on the intensity and effectiveness of efforts to absorb, adapt and improve upon imported technology and research and development (R&D). The Egyptian food processing enterprises, with the exception of few multinational companies, give very little emphasis for product innovation and increasing productivity. The high failure rates of new food products make this form of innovation a very high risk activity for individual businesses. Overall, the academic institutions are not well linked to research and development efforts to support innovation and new product development in the food-processing sector. Exceptions to this general rule are the National Research Centre (Cairo), which started contract research and is serving 45 enterprises, and The Food Technology Centre (FTC), which is being linked to IMC to serve the EGFPI and provides training on HACCP, ISO, GMP and GAP. Building such linkages requires not only that government ensures that R&D institutes and universities have the resources available to provide such services but, also, that they are provided in a manner in which they can meet the needs of industry. A mechanism must be created whereby R&D breakthroughs can be rapidly filtered through the value chain of the Egyptian food-processing sector in areas such as: product innovation, process innovation, packaging innovation and transport and logistics innovation. This can be achieved by establish incentives system to research centres to pro-actively contribute and disseminate information and encourage and support contract research activities between the industry and the research centres and universities.
1.3.5
Access to finance Long-term industrial finance for the private sector in Egypt needs to be improved. Credit to the industrial sector as a whole from the specialised banks is very low. Venture capital and similar facilities for technology promotion are at a rudimentary stage. These deficiencies constitute fundamental constraints to the growth and upgrading of the private food processing and marketing sector. A financial system that collects, allocates and supervises the use of investment resources is crucial. On the other side, there is lack of information and knowledge from the food industries side about how to access finance for technology improvement, expansion and for working capital. There is an encouraging development regarding the provision long-term finance to food processing industries. In January 2005 the government has announced the establishment of a 50 million fund, mainly to support and upgrade agro-food processing operations in Egypt and increase exports of processed foods. A proper training and technical assistance for the food processing industry, especially SMEs, in the preparation of business plans as required by the banks, provision of long term grant/ long-term loan with moderate interest rate, and setting up a micro-finance scheme for the micro and cottage industries (which are mostly operating in the informal sector) are vital for the adoption and adaptation of appropriate technologies and, hence, raising competitiveness.
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1.3.6
Foreign Direct Investment (FDI) The role of FDI in industrial growth and competitiveness is growing. Trans-national corporations (TNCs) account today for a large share of world trade, and tapping into their production and sourcing networks is increasingly important for promoting export activity. TNCs are the main source of innovation and technology transfer today, and many technologies are not available without direct participation by their affiliates. They also transfer the modern skills and organisational techniques that enterprises need to compete internationally. Egypt could take advantage of its highly trained manpower, relatively developed infrastructure, highly productive agriculture, and proximity to highly attractive processed food market of the Middle East and North African countries and to Europe, in order to attract big global players in the food processing and marketing business (including retail distribution) to locate their head quarters for their regional operations in Egypt. It is recommended that Egypt should strengthen GAFI to Market Egypt as a most suitable place for investment in processed food and as a head quarter location of multinationals in the food sector for their regional office for Africa and Middle East. Among the activities that should be a focus for GAFI are: updating potential\investors about developments regarding the continuous improvement of the business environment in Egypt, assisting professional associations to organize workshops and study tours in Europe and North America to encourage the formation of partnerships with multinationals, creation of a web site for the food-processing sector promoting the potential of Egypt.
1.3.7
Framework conditions The recent macroeconomic performance of Egypt has generally been encouraging and, in particular, export revenues have been boosted due to the competitiveness enhancing effects of the depreciation of the Egyptian Pound after it was allowed to float in January 2003. The EFPI was one sector that benefited from this effect, with exports rising sharply in 2003/2004, although there is already evidence that some of this effect is beginning to wear off. At the same time, the Egyptian government has initiated structural policy reforms, including reforms to customs duties, tariffs and procedures, measures to enhance flexibility of the labour market, income and corporate tax reforms, and unifying laws on SMEs. These structural reforms go hand-in-hand with policy initiatives to meet WTO agreements and greater trade openness through regional and bi-lateral trade agreements (including the Egypt-EU Association Agreement that came into effect in January 2004). In many respects, the above reforms together with proposed new government initiatives and legislations address several of the key constraints identified by the EFPI as handicaps to competitiveness. These included the high levels of corporate and income taxes, the imposition of sales taxes on food items and on machinery and equipment, the high levels of duties on imported ingredients to the food industry and the burdensome and inefficient
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customs procedures. Though it is perhaps too early to measure the impact of these reforms, the consensus view is that they represent positive changes for the development of the EFPI. Yet, at the same time, more liberalisation of the trade regime and domestic market reforms will raise competition and confront Egyptian enterprises with an even more urgent need to improve their competitiveness.
1.3.8
Trade positioning As the benchmarking exercise undertaken for the study has demonstrated, the EPFI still has some way to go before it can catch up with both leading regional players and world leaders in the sector (see for example the sub-section labour productivity and wages, above) . The trade data analysis of the unit values of exports for key processed food product-groups indicate that Egypt is positioned very much as a low cost/quality supplier for cheese products, mixed frozen vegetables, olive oil, olive products and preserved tomatoes. By contrast, Egypt is a high cost/quality supplier of fruit juices, frozen vegetables (especially potatoes and other vegetables), and tomato ketchup and other tomato sauces. Overall, Egypts strategy should be to seek to maintain its quality advantage in (relatively) high unit value exports, while seeking to raise the unit values (quality) of products for which Egypt is a low cost/quality supplier.
1.3.9
Domestic retail market Development of the modern retail sector plays a central role in determining the pattern of development of the food-processing sector. International experience shows that the shift towards buyer-driven food supply chains, in which retailers retain a dominant position, is one of the key factors pushing greater concentration in the food sector. At the same time, expansion of international/modern food retailers provides the driving force for improving cost/price competitiveness and product quality and service in the foodprocessing sector. In many developing countries, the arrival and expansion of international retailers implies that the conditions that suppliers may already face in export markets become part and parcel of the domestic scene. Whereas local producers may have had some protection from competition in the local market, expansion of international retailing combined with liberalisation means that this protection can rapidly disappear. In short, the challenges of competition in the domestic market will become as acute as those faced in export markets. In terms of the number of super- and hypermarkets, the retail sector, in Egypt is lagging behind many of those in competitor countries and this is an impediment for development of the food-processing sector. On the one hand, it implies that food processors serving the domestic market must operate via inefficient traditional distribution channels. On the other hand, it reduces the pressure for improvements in the quality and safety of products that are required by modern/international retailers (serving the domestic market) and, in turn, means that it is less likely that producers will be familiar with (and thus attain) the standards required in export markets.
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1.4
SWOT Analysis
The key elements of the SWOT (strengths, weaknesses, opportunities, threats) analysis are as follows: Strengths: Capability of Egyptian agriculture to produce different varieties of fruits and vegetables in different seasons all year round. Industry has had a proven track record of export performance, especially the fruit and vegetable sub-sector in the last three years Key geographical location; proximity to Gulf Arab countries and Europe; two to three days and less than a week to reach the Gulf and European sea ports respectively. Low labour cost compared to regional and developed counties, and increased availability of skilled labour. Direct sea and air shipping services to Europe for enhanced export performance. Improved quality and HACCP system in the food industries in the last four years; Increasingly improving business environment such as tax incentives to exporters and investors, improved customs regulations etc. Issuance of the new unified food law will facilitate and clarify the misunderstanding between traders, processors and food law enforcement agencies; also the establishment of a new National Food Authority. Weaknesses: Due to the inability of the majority of companies to invest in research there is a low level of innovation within the sector and, therefore, a lack of new products. The agriculture system is underdeveloped and fragmented, and the use of local raw materials on a commercial scale is hampered by an inconsistent supply of raw material to the industries due in part to the lack of contract farming and a very weak relation between growers and processors. Poor logistics such as cold store chains, refrigerated transport system, and air cargo space, combined with a lack of knowledge of the post harvest handling of perishable products from the farm to factory to ports, and consequently high post harvest losses. The majority of the companies operating in the sector are classified as micro, small and medium sized. These enterprises are not organized and therefore cannot benefit from economies of scale and export marketing. Weak domestic market and under developed distribution channels, such as supermarkets and hypermarkets. Administrative and bureaucratic burdens (especially lack of transparency in the customs regulations in imported items) and a very long clearing time required due to all the bureaucratic requirements placed on companies, which has made enterprises/industry segments relying on the imported inputs uncompetitive. Opportunities: High potential to attract foreign direct investments in food processing sector and to become a regional hub for multinationals for their regional offices in marketing, R&D and operation in the Middle East.
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Scope for the introduction of enabling structures, such as cooperatives and contract farming, which could allow small-scale farmers to serve the European markets (especially on the fruit and vegetable sector). Increased marketing opportunities through the new preferential access agreements with the Arab countries and other regional markets. There is a considerable potential for increased product development by complementing the range of products already established. In fruit and vegetable sector, there is an evident demand for frozen, pureed and canned products. There is a huge and expanding market in Europe for organic products that creates opportunities for Egyptian producers. A massive growth in supermarket own label market segment - estimated at present to be 20% of the super market trade in Europe - provides an opportunity for the Egyptian processors (especially those in fruit and vegetable sector).
Threats: More globally, the competitive threat from other developing countries, especially China and India is increasing as they restructure their industries and institutions. Political instability in the region constitutes a serious threat, particularly for attracting FDI and tapping into global value chains.
1.5
1.5.1
Sub sector Performance

Processed vegetables Egypts export of processed vegetables has shown an average increase of 5.3 % (from 92 to 145 million US$ between 1998 and 2003) and Egypt ranks 26th in global processed vegetable export. With respect to growth rate, it stands 17th in the world and 3rd in the region behind Jordan and Iran. The domestic market is also growing at more than 20% a year. The increased global supply of processed vegetables together with importers quality requirements will also raise the need to produce and deliver product that meets buyer specifications. Many of the quality and cost issues that are, and will be, important are affected by policies, regulations, and actions of the government of Egypt. A major quality constraint is the lack of adequate post-harvest facilities (including cooling and packing sheds, refrigerated transport, and cold storage). In this respect, improvements have been made: large growers and exporters are establishing their own facilities and acquiring refrigerated trucks, and the establishment of the new cold store at the Cairo airport terminal and outsourcing the management of this cold store to HEIA (Horticultural Export Improvement Association) provides a very good example of the facilitation role the government can play. The private exporters and processors are asking for increased availability of desert land ear-marked for export horticultural products (fresh and processed). Provision of the land to exporters, together with integrating small holders into the supply chain through
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contract farming and development of the out-growers schemes, will be crucial to meet the challenges ahead. If the critical constraints listed in the report are addressed properly and coherently by industry, the government, and professional associations, with support from university and research & development centres, then the export performance of the Egyptian fruit and vegetable sector can reach more than 2.4 billion USD a year by 2020. Egypt grows more than 5 million tons of tomatoes, with yields and overall production volumes increasing due to the introduction of new varieties. Almost all domestic production of tomatoes is consumed fresh and Egypt imported more than 220 tons of processed tomatoes (mainly in the form of paste) in 2003. The production and processing of tomatoes has been considerably hampered by high post harvest losses amounting to 50 to 60 percent of production; these losses stem from damage or loss in transit and handling due to poor packaging, lack of cold chain facilities, rough transport, and multiple handling. Among the processed vegetables tomato processing was selected for focused study due to its untapped potential in export market and is considered suitable for attracting investors (both in agricultural production and processing for export). If the increase in agricultural production of tomato, and reduction in post harvest losses is achieved by implementing the recommended activities in the report, Egyptian tomato paste exports will be in a position to take over the place of its main regional competitor, Turkey, by 2012 and become regional leader in the tomato market in the Middle East.
1.5.2
Fruit juices (exotic juices) Exports of the category fruit juices nes (all fruit juices excluding apple, citrus juices, grape, lemon, orange, pineapple, plum, mango, tangerine, which mainly covers the exotic fruit juice sector) has grown from 713,000 USD in 1998 to 13.5 million USD in 2003. Similarly, mango juice exports from Egypt have more than tripled from 1.9 million US dollars to 6.5 million US dollars in 5 years. Success in the export of exotic fruit juice from Egypt started by exporting small-glass packed mango and guava juices to Egyptian expatriates in North America and Middle East. The US market now absorbs more than 65% of Egyptian exotic fruit exports. With improvement in agricultural supply and development of new products (different kinds of fruit juices, fortification with minerals etc.) Egypt can expand its export market of exotic fruit juices to 730 million USD by 2020 and become the lead exporter in the region . Since Hibiscus tea is already becoming popular in Europe, there is high potential for new products such as Hibiscus ice tea. The industry in collaboration with the R&D centres and universities should explore this opportunity.
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1.5.3
Olive products Egypt is ranked number 8 in the top olive producers worldwide, with production of 318,000 metric tons in 2002. The area harvested and the level of production showed a very rapid increase over the last five years and is expected to increase further in the next few years. Expansion of the harvested area is expected to position Egypt as the third most important olives producing country in the world by the year 2010. If the recommendations outlined in the report are addressed properly, the export performance of the Egyptian olive oil industry could reach 90 million USD and the table olives sector can increase to over 135 million dollars by 2020.
1.5.4
Cheese (white cheese) Total milk production within Egypt is estimated to be 3.8 million tons in 2002, and the total cattle population at around. 7.3 million, and 8.2 million sheep and goats (SHOAT). Despite high number sheep and goats compared to cattle (cows and buffalos), the supply of milk comes exclusively from the cattle, indicating opportunities to use sheep and goat milk for specialized cheese production. The productivity of milk in Egypt is low; between 300 and 500 kg per cow per annum. The few industrial segments involved in dairy processing are forced to import dried skim milk, and Egypts imports of dried skimmed milk (DSM) attained a value of more than 42 million USD in 2003 and are not showing any decline. The main reason for limited supply of milk is small fragmented dairy farming and lack of organization of milk collecting units. Since the study of the dairy farming sector is beyond the scope of this study, the study team cannot enter deeply into the problems facing the sector; rather we will concentrate on the potential of the cheese processing and marketing sector. Despite the fact that it has the worlds largest cheese processing factory, Egypt is still a net importer of cheese. Egypts export of cheese (whole cow milk cheese) reached a record level of 11.6 million dollars in 2003, with imports of 15.6 million USD worth of similar cheese. However, there was a considerable decline in imported cheese in 2003 (the lowest level in the last 8 years). By 1) improving the supply of milk in quality and in quantity through encouraging the establishment of milk producer groups; 2) clustering of small milk processors (cheese makers) to collectively use raw material, packaging facilities, and to assist them in finding assured market outlets through contracting with retailers and exporters; and 3) by developing a marketing strategy focused on maintaining the Egyptian share of the Arabian market and aggressively marketing to European and North American markets, then white cheese exports from Egypt could reach 450 million dollars while decreasing imports to 1.5 million dollars by 2020.
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II
Global Assessment
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1 Introduction
Agricultural commodities and processed food products have long been traded internationally. The trade takes three different forms: Bulk commodities agricultural products such as grains and oilseeds); processed intermediate products (such as skim milk powder, bulk cheese and boned meat), fresh horticultural products; Processed consumer goods (such as beverages, small goods, biscuits, and confectionery). The composition of the world trade however, has changed significantly in recent years. International trade in processed consumer goods has increased rapidly, while the proportion of bulk agricultural commodity trade has declined. Recent figures show that trade in processed food products has increased to 75 per cent of global agricultural trade in 2002, from 50 per cent in 1985 and is growing very fast (FAO-STAT). Due to this increase in demand for processed food, the food-processing sector has become one of the fastest growing manufacturing sectors in both developed and developing world. A number of forces in both developing and developed countries are driving these changes, particularly income growth. Wealthier consumers, especially in developed countries, seek out the variety of high-value food imports. High value food products are non-bulk commodities that either require special handling, such as fresh produce, or are processed, which adds substantial value beyond the farm level. This global assessment will deal only with the processed intermediate and consumer goods since the bulk trade will be agricultural commodities trade, which is out of the scope of this study. According to United Nations (UN) trade data, high-value food imports increased in the 1990s not only in developed countries but also in developing countries. For example, from 1994 to 1999 the value of Egypts processed food imports increased 51 percent to $689 million. However, despite trade growth in developing countries, the much larger volume of processed food trade among developed countries has primarily accounted for the shift in world agricultural trade from grains to high-value food products. Semi processed products, such as vegetable oils, oilseed meals, and flours, has kept pace with world agricultural trade and maintained its share of world trade. The fresh horticultural products group represents the smallest of these aggregate categories and its 12-percent share of world agricultural trade has remained almost unchanged during the past 20 years (FAO-STAT). The perishable nature of fresh horticultural products constrains trade, although technological advances to extend shelf life have enhanced the potential for increased produce trade.
Egyptian Processed Food Sector Review 41
Growth in two-way trade of high value food products that is, the same country exports and imports products within the same industry has also helped increase in trade without growth in consumption. For example, the United States exports higher valued beef to Japan while at the same time it imports a greater volume of lower valued beef from New Zealand or Brazil. The major processed foods traded in world markets are meat products, vegetable oils, dairy products and grain products. Error! Reference source not found. shows world trade in processed food and beverages totalled USD 492 billion in 2001, comprising USD 246 billion in imports and USD 246 billion in exports. This represents a decline compared to 1997, when world trade totalled USD527 billion. Egypts processed food export has increased from 223 million USD to 280 million USD between 1998 and 2002. In contrary the processed food imports has decreased from 1.7 billion USD to 1.3 billion USD and as a result Egypts total processed food trade has decreased steadily from 1998 until 2001 and has reached 1.56 billion in 2002. An examination of Egypts share of global processed food shows that it is relatively small player with around 0.3% of global trade in processed food.
Table 1.1 Global processed food trade in billions of USD Indicators World imports World exports Total world trade Egypt imports Egypt exports Total Egypt trade Egypt % total trade 1997 259.1 267.4 526.5 n.a. n.a. n.a. 0.36 1998 258.9 258.8 517.7 1.7 0.223 1.881 0.37 1999 252.8 249.2 502 1.7 0.184 1.861 0.34 2000 239.9 237.4 477.3 1.4 0.232 1.647 0.29 2001 246.1 245.5 491.6 1.2 0.244 1.417 1.3 0.280 1.554 2002 2003
UNCTAD, USDA-ERS and consultants calculation
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2 Demand-side factors influencing global development of the FPI
2.1
Social and demographic change

The size of a population and its distribution by age group are factors that affect food consumption patterns. Income and income distribution, however, are considered as leading factors in most economic analyses owing to their quantitative features. The ratio of male to female, the number of family members, female employment, and the Degree of urbanization are also important variables that may influence food consumption patterns. An increase in the ratio of female participation in economic activity is also an important factor. Although it is still low in developing countries, more and more women are participating in the labour market, which increases the demand for processed convenience food.
2.1.1
Increased income Rising incomes and their impact on levels of food consumption have been one of the most important determinants in explaining shifts in global food demand and trade. Real income, as measured by gross per capita national product (GNP), grew on average by almost 100 percent globally during the last four decades (World Bank report 2002). The rate of income growth among low-income countries (221 percent between 1960 and 1998) has generally surpassed that for higher income countries. The World Bank defines low-income countries as those with 1998 GNP per capita below $760, middle-income countries as those with 1998 GNP per capita between $760 and $9,360, and high-income countries as those with 1998 GNP per capita above $9,360. Countries in the low- and middle-income groups are generally considered to be developing countries.
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Table 2.1
Selected Middle East countries per capita GDP and forecast ($US) Country 1997 Syria Egypt Jordan Iraq Turkey Lebanon Saudi Arabia Bahrain Israel Kuwait 890 1200 1590 1850 3180 3360 8110 9890 16710 19600 2000 950 1490 1720 1850 3080 4010 8120 10760 16710 17900 2001 1040 1530 1750 1850 2530 4010 8460 11130 16120 18270 Year 2003 1078 1671 1900 1944 2658 41470 8923 11762 17173 18785 2008 1178 2082 2334 2199 3007 4512 10194 13504 19715 20137 2013 1288 2595 2867 2488 3403 4909 11647 15503 22634 21587
Source: World Bank national accounts data
Income growth in wealthier countries has less impact on expenditures for food and agricultural products per se compared with less well-off countries. This leads to market saturation and search for new markets by global manufacturers. The new developing markets with rising incomes are future market places for processed food. However, higher incomes can drive increased demand for food with certain characteristics: safer, higher quality, more healthy, or produced in ways believed to be more beneficial to the environment. In developing countries, the rise in income as seen in the last 20 years will definitely increase the processed food consumption, which in turn will increase demand for processed food.
Implication of rising income for Egypts food processing industry According to the World Bank forecast, per capita GDP of Egypt will increase by 25% between 2003 and 2008 (Table 2.1) and the population will reach 82 million. The combination (increase in income and population) will increase the demand for processed food considerably. This opens opportunities and challenges for Egyptian food processing and marketing industry, since the Egyptian food-processing sector can increase the capacity without fear of market saturation in the near future, while the challenge is facing competition from globalised food trade.
The increase in income in developed markets increases the demand for the functional (nutraceutical) and organic (biological food). This also opens an opportunity for the Egyptian food-processing sector as it can capitalize on its natural environment, cheaper labour and favourable agro-climatic situation to produce functional and organic food for the European, regional and North American markets.
2.1.2
Per capita consumption Per capita food availability (measure of food consumption across countries is the supply, or the availability, of food in a market) on a global basis has increased from about 2,300 calories per day in 1961 to almost 2,920 in 2001. In addition to changes in food
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availability, the basic sources of calories have changed, with animal and horticultural products accounting for a growing share of total calories consumed. Shifts in food consumption patterns tend to vary among countries based on the level of economic development. In high-income countries, per capita consumption (as indicated by food availability) of both cereals and roots and tubers decreased between 1961 and 1998, while that of meat and poultry increased substantially. (FAO-STAT) Differences in food availability between developed and developing countries are also reflected in their respective household food budget shares. Households in low-income countries spend on average 47 percent of their total budget on food compared with households in high-income countries that on average spend only about 13 percent on food. Staple food products, such as cereals, fats and oils, and fruits and vegetables, account for larger share of the total food budget in low-income countries than in higher income countries. Meat and dairy budget shares are greater for high-income countries (see Table 2.2). How countries respond to rises and falls in income helps policymakers assess future food needs, trade, and demand for associated transportation and infrastructure facilities. The income elasticity for food, which is a measure of the responsiveness of the quantity of food demanded to a change in income, is higher for poorer countries. Thus, when incomes fall by 1 percent in both low- and high-income countries, poorer countries make bigger cutbacks (in percentage terms) in food expenditures than wealthier countries. These cutbacks, however, are not implemented evenly across the different food groups. To meet their basic food needs, low-income countries make smaller expenditure reductions in staple food consumption, such as cereals, and larger cuts in higher value food.
Table 2.2 Average household budget shares for food as share (%) of total household budget by country income category Country category Consumption category Food as share of household budget Food groups as share of food budget Cereals Meat Fish Dairy Oils and fats Fruit and vegetable Other foods Source: ERS/USDA 2001 28 18 5 9 7 23 11 20 22 5 13 5 21 13 16 25 6 14 4 20 15 low income 47 middle income 29 high income 13
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Implications for Egypts food processing industry of shifts in per capita income and resulting changes in consumption patterns Egypt with per capita GDP 1671 USD falls in the category of middle-income countries and spends an average of 29 % of the household income on food. Per capita expenditure on food in Egypt is shown below. As can be seen from Figure 2.1,as the family income increases, the increase in consumption of soft drinks, fruit and vegetable and meat products is pronounced. The fruit and vegetable industry has to coordinate with the farmers to satisfy the increasing demand in fruit and vegetable as the family income increases. The development of poultry and livestock farms and the associated processing and packaging industry has also an opportunity to capture this increase in demand.
Figure 2.1
Food expenditure per capita in Egypt as per family budget LE per year (2000)
10 000
1 000
100
Food & D rinks C ereals & Starchy Processed V egetable & Fruits Milk & D airy Products O ils and O il B y-Products Sugar & C onfectionery Products: processedMeat & Fish Soft drinks
10
1
-1000 1000200030004000500060007000800010000120001400016000180002000030000400005000070000100000-
Fam ily budget LE per year
Source: Study team based on Family Budget Survey
2.1.3
Urbanization Widespread growth in urbanization has also helped shape global food preferences in recent decades. Urban areas have more effective marketing facilities and a greater supply of products from domestic and foreign producers. Urban areas are also centres of economic opportunity and have a greater percentage of women working outside of the home. Increased opportunity cost of womens time increases the demand for nontraditional fast food in many countries. With increases in income levels in urban areas, consumption of more expensive sources of nutrients, such as meat, fruit, and vegetables, increases, while the consumption of lower cost staples, such as roots and tubers, decreases. FAO reports significant increases in meat and produce consumption among urban areas of several developing countries.
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Also, dual-income households (occurring mainly in urban areas) have less time for cooking, resulting in increased preferences for more highly processed, and convenience foods. In the future, urbanization will primarily affect developing countries. Assuming the 1990s rates of growth continue, the urban populations in developing countries will double to nearly 4 billion by 2020. Therefore, the effect of urbanization on future food consumption changes will be most evident among developing countries including Egypt.
Implications for Egypts food processing industry of urbanisation According to the estimation of FAO the urban population in Egypt will reach 47 million by 2020, which will be about 48% of the total population (Table 2.3). Urbanization over the next century will chiefly be a phenomenon in the developing countries. So, at the outset, more and more food will be consumed as income and population increases. But after the population arrived at the saturation point (due to increase in income and food availability) consumption patterns will shift from quantity to food quality. This requires a responsive processed food processing and marketing suited to the eating habit of the Egyptian population.
The changes mentioned in the beginning of this section brought about by urbanization can significantly affect the Egyptian food supply, markets, and trade. More and more super and hypermarkets will be established which require supplies from industries specially packed and convenience foods among others fresh fruit and vegetables and meat and poultry.
In the Near East region the urban population will be around 63 % of the total forecast population of 530 million by 2020 (Table 2.4). This population, with growth in income, will definitely shift to processed and convenience food consumption. Thus, apart from satisfying the local demand, Egypt - as the largest country in the Arab world and extensive trade with Middle East and North Africa countries - has great potential for the export of convenience food.
Table 2.3
Population estimates and projections for Egypt 1995 Total (1000) Males (1000) Females (1000) Rural (1000) Urban (1000) Source FAO-STAT 61,638 30,807 30,831 35,057 26,581 2000 67,784 33,833 33,951 38,856 28,927 2005 74,878 37,373 37,506 42,706 32,173 2010 82,590 41,224 41,366 46,254 36,336 2015 89,996 44,904 45,092 48,817 41,179 2020 96,852 48,298 48,553 50,144 46,708
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Table 2.4
Population estimates and projections for the Near East 1995 Total (1000) Males (1000) Females (1000) Rural (1000) Urban (1000) Source FAO-STAT 326,350 166,954 159,397 150,242 176,106 2000 361,942 184,621 177,316 159,709 202,232
2005 402,263 204,894 197,371 170,598 231,668
2010 445,036 226,386 218,649 181,192 263,846
2015 487,775 247,891 239,883 189,487 298,283
2020 529,503 268,834 260,667 195,726 333,775
2.2
Developments in technology
Advances in transportation technology have helped increase global trade of high-value food products. Packaging innovations, fruit and vegetable coatings, bioengineering, and other techniques that reduce deterioration of food products have helped extend the marketing reach of perishable products. Perishable products can now be shipped thousands of miles at lower costs with no substantial loss in freshness and quality. Lower transportation costs have a similar effect on trade as tariff cuts: they reduce transaction costs, or the wedge between the product price in the exporting and importing countries, thus stimulating trade. However, although new developments in ocean shipping have reduced shipping costs and made it possible to preserve the quality of perishable products, trans-ocean transportation costs are still higher for many perishable products than for raw agricultural products, such as grain, or non-perishable products, such as nuts and raisins Innovation in technology is advancing at higher pace to meet increasing consumer demands, while maintaining price competitiveness. Tens of thousands of packaged food products that are currently in supermarket were the results of innovation in the last 10 years. Technology in some instances has also negative impact in the development of processed food technology. Events over genetically modified foods in US and outbreaks of Bovine Spongiform Encephalothopy (BSE) and Foot and Mouth Disease, in Europe, have demonstrated an emerging crisis of confidence among global consumers due to advances in technology and farming systems geared mainly in to increase farm outputs. This generates a number of niche market opportunities for developing countries to capitalise on their production of safe food from a clean environment and inputs. Marketing this position through the use of eco-labelling, organic certification or GM-free assurances requires the use of effective supply chain management systems. Egyptian food processing sector has a great potential in this aspect if the sector invests in up-to-date quality improvement, application of HACCP, certification for organic food and traceability.
3 Cyprus, Egypt, Gaza Strip (Palestine), Iran, Jordan, Lebanon, Libyan Arab Jamahiriya, Palestine-Occupied Tr. Syrian Arab Republic, Turkey, Yemen
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2.3
Food safety and health concerns

Along with growing urbanization and the associated increases in levels of information dissemination and education, health concerns have become an increasingly important factor in consumers food preferences in recent years. Due to the recognition that, awareness and attitudes toward health issues affect consumers consumption decisions, various world wide public and private campaigns seek to inform consumers of health benefits associated with different food products. Their recommendations include: reducing the intake of fats and increasing consumption of fruits and vegetables intake. Accordingly, demand for functional and health food has changed considerably in recent years. For example, in developed countries, due to health concerns, red meats share has decreased while poultrys share increased. Similarly, per capita fruit and vegetable consumption is increasing. Major food safety incidents in recent years have resulted in lasting changes in consumer perceptions and food purchasing patterns in certain developed countries. For example, the 1996 announcement in Great Britain of a possible link between bovine spongiform encephalopathy (BSE), or mad cow disease, in cattle and a new strain of CreutzfeldtJakob Disease in humans led to dramatic declines in beef consumption in Europe, particularly in the United Kingdom. This incident also resulted in import bans on British beef and products by trading partners, leading to significant economic losses for associated industries. Concerns over food quality and safety and increased international trade have led to the growth of quality assurance schemes that provide technical requirements for production and processing and provide inspection and monitoring to assure compliance. Consumers in wealthier countries with more information about food safety risks tend to demand more stringent food safety standards on both domestically produced and imported food and are also willing to pay more for these standards. In developing countries the cost of the quality assurance system, the non-functional food laws, the lack of training in the food law enforcement agencies and lack of technology for testing food quality attributes has made the implementation of quality control and food safety measures for local consumption difficult. The increased international processed food trade (at the expense of the bulk export) poses developing and emerging economies with the challenge of complying with the safety requirements and demand of the consumers in another part of the world. Countries with export potential have started changing very fast in the way they process produce, transport and trade by applying effective quality, safety and labelling and tracing systems.
2.4
Convenience foods
In developed and developing economies, consumers are demanding convenience at nearly any cost. An increase in urbanisation, availability of refrigerators and heating appliances,
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and the lack of womens time for food preparation is leading to increased demand for and trade in convenience foods. The trend toward more highly finished products is continuing. This benefits the food processing industry. Changing consumption patterns are reflected, for instance, in frozen food sales, which are increasing faster than overall food sales. The most significant increase was for processed chicken pieces, which became the largest single frozen product in the consumer market. The sharp rise in consumption of poultry pieces, ready-to-heat meals, French fries, bakery products, meat balls, hamburgers, and snacks is an example of how convenience and availability are factors that play a major role in consumers food choices.
2.5
Life-style and health foods

The rise of organic foods is another example of heightened consumer interest in particular food attributes due to mainly the awareness of the health risks associated to food consumption and increased income in developed economies. Consequently, worldwide markets for organic foods are expanding, with annual growth rates of 15-30 percent in Europe, the United States, and Japan for more than 5 years.
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3 Supply-side factors influencing global development of the FPI
The global food product system has undergone significant and accelerating change in recent years, fuelled by the removal of barriers to the flow of information, capital services and goods, driven by rapid technological advancements in transport, financial services, telecommunications and computer technology. As urbanisation and industrialisation progresses, food consumption is increasingly divorced from the source of production of the raw material or the transformation to a consumer product. These developments imply that historical comparative advantages such as cheap labour, favourable climate, large consumer market alone will not be sufficient to sustain competitiveness onshore in meeting import competition, or offshore in capturing new opportunities in export markets. While global economic and trade developments present opportunities for the Egyptian food industry, they will increasingly test its competitiveness.
3.1
Global sourcing of raw materials

The tendency in sourcing raw material has shifted from the traditional supply chain, in which the wholesalers have played an important role in the trade (see Figure 3.1), to one dominated by large supermarkets and large food processors. The traditional wholesale system, where farmers sell their products to intermediaries and they in turn supply to the processors, is found to be inadequate due to inconsistent quality, poor sanitation and unreliable quantities.
Figure 3.1
Traditional Supply Chain
Farmers
Wholesale Selfdistribution
Retail Store
First line handler
Food Manufacturers
Wholesale Servicedistribution Food Service
Consumer
Ingredient flavour companies
Demand Chain
Supply Chain
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The new supply chain is based in building new links between distribution centres, large food processors and farmers (dairy and fruit and vegetable). The latter link is established in contract buying and farming to meet quality equivalent to export standards (see Figure 3.2). The new developing supply chain organization guarantees the safety & and quality of raw materials and products. It also provides consistent and homogeneous raw material source globally and continuous supply of raw materials and processed food through all seasons.
Figure 3.2 Emergent Supply Chain
Retail Store
Agricultural Production
Food Manufacturers
Food Service
Consumer
Capture Value
Create Value
In this developing system the losers are mainly regional wholesalers, small farmers and small-scale food processors. The winners are the consumers who will eventually get lower prices, different variety, safer food and convenience food. The multi-national companies cut costs, get access to foreign market and to remote areas and are the ultimate winners.
3.2
3.2.1
Globalisation and the food industry

Food processing Globalisation allows firms to treat whole regions, or the whole world, as one market. This supports the global sourcing of inputs and the manufacturing and marketing of products at very large scale and highly competitive cost. In addition to these cost reductions, international expansion through Greenfield investments, mergers or acquisitions provides new growth opportunities for processors faced with mature and low growth domestic markets in developed countries. International businesses are restructuring and extending their operations on global lines, and shifting their operations globally to centralise elements of the organisation (e.g. marketing, R&D or procurement) in locations that demonstrate some competitive advantage. As a result the trend now is rationalizing and restructuring to reduce costs, to improve economies of scale and to innovate in product, processes and packaging and marketing to compete with the very large global players.
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Table 3.1
World leaders in processed food Company Nestle Philip Morris conAgra Foods Pepsi co Unilever Coca Cola Cargill Diageo Mars Archer Daniel Midland Home country Switzerland United States United States United States UK/NL United States United States UK United States United States
Source: National Gradate School of Management, Innovation in the Global Food Industry, 2001
A large part of rationalization and restructuring is achieved through foreign direct investment by big trans-national companies in own facilities or joint ventures with local companies. This direct investment facilitates the flow of management expertise and technology transfers that generate positive spillovers for the local small and medium scale food processing industry. It is for these reasons that national governments around the world are competing for a share of this investment. Egypt could take advantage of its highly trained manpower, relatively developed infrastructure and proximity to highly attractive processed food market of the middle east, north African countries to attract big global players in food processing and marketing business as their head quarters for their regional operations.
3.2.2
Distribution and marketing The share of the super and hypermarkets in the retail trade is increasing radically. This can be clearly seen in the developing economies such as South America where the supermarket share of the retail sales has gone up from 20% in 1990 to 60% in 2002 (this figure is about 72% in the U.S.4) (USDA) This growth of retail sales in food products is a result of Direct Foreign Investment by Multinational supermarket giants such as Ahold, Wal-Mart and Carrefour. The determinants of the rise of supermarkets and supply chain as mentioned before are urbanization, rising incomes, increase in number of women working outside home, increase in home refrigeration facilities, relaxing trade regulations and cheaper imports. Like the multinational processors, the major international retailers are building long term global supply chain relationships with a select number of suppliers. This gaining exclusive supply agreements, is a form of vertical integration that allows retailers to maximise their returns from efficiency improvements along the chain.
Source: USDA
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Table 3.2
Major global retailers Retailer Home % of sales outside home base WAL MART CARREFOUR CASINO AHOLD METRO COSTCO ALDI TESCO TENGELMAN DEHAIZE US France France NL Germany US Germany UK Germany Belgium 14 38 19 75 39 22 33 10 51 80 3989 9600 5423 7853 2114 313 5556 821 6689 2360 Number of stores Number of countries in which present 10 28 11 27 21 7 11 10 11 11 Sales in 2001 (Million Euro) 208,533 64,802 65,345 52,471 43,804 34,644 30,013 29,752 27,300 18,206
Source: IDG Global Retail Index, IDG Online
The continuous increase in concentration of capital in food processing and trade has led to increasing mergers and acquisitions between global giants. The mergers of Carrefour and Promodes, and Wal-Mart and Asda, have created the two largest global retailers. If the current trend continues, it is likely that within the near future a handful of global retailers will control the majority of global retail food sales. The trend is clearer when we look at the globalisation of food retail in the developing economies such as China and Latin America.
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4 Global trade environment of the FPI
4.1
Multilateral trade agreements

The basic principles of the WTO agreements are:
Trade without discrimination: This implies that the a country should neither discriminate between its trading partners (giving them equally most favourednation or MFN status), nor should it discriminate between its own and foreign products, services or nationals (the so called national treatment principle); Trade barriers among nations should be agreed to through negotiations: Foreign companies, investors and governments should be confident that trade barriers (including tariffs and non-tariff barriers) should not be raised arbitrarily; tariff rates and market-opening commitments are bound in the WTO; More competitive trade; discouraging unfair practices such as export subsidies and dumping products at below cost to gain market share.
Less developed countries are generally permitted greater flexibility in the implementation of WTO rules: longer time to adjust, greater flexibility, and special privileges. The flexibility of these agreements is demonstrated by the possibility of countries to set up a free trade agreement that applies only to goods traded within the group - discriminating against goods from outside. A country can raise barriers against products that are considered to be traded unfairly from specific countries. And in services, countries are allowed, in limited circumstances, to discriminate. But the agreements only permit these exceptions under strict conditions. 147 countries have joined the WTO at this point. Egypt is one of these countries and is implementing its commitments under the WTO. Egypt actively participated in the Uruguay Round negotiations and is a founding member of the WTO. Since then, Egypt has followed a steady plan to meet its WTO commitments. It has removed most non-tariff barriers, decreased tariffs, liberalized foreign investment policies, and privatised public sector companies. Egypt has also liberalized the foreign exchange market, which has helped to boost its exports in the processed food sector.
4.2
4.2.1
Regional trade agreements

Common Market of Eastern and Southern Africa - COMESA COMESA was established in 1980, and Egypt joined in 1988. COMESA has membership of 21 countries in eastern and central and southern Africa market with target population 390 million people (48% of the total African population of 813 million). COMESAs
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approach towards a more integrated economy is based on the removal of physical, technical, fiscal and monetary barriers to intra-regional trade and all commercial exchanges in a progressive fashion through the following stages of integration: A Preferential Trade Area (PTA) with lower tariffs applied to intra-regional trade originating in member countries than to extra-regional trade. A Free Trade Area (FTA) in which no tariffs are levied on goods from other member States while each member nation applies its own regime of tariffs to goods imported from outside the region. A Customs Union (CU) involving free trade among the member nation but with a Common External Tariff (CET) by which every member nation applies the same tariffs on goods from outside the region. A Common Market (CM) with free movement of capital and labour and greater harmonisation of trade, exchange rate, fiscal and monetary policies and internal exchange rate stability and full internal convertibility. Egypt, the largest economy in the agreement, has the advantage of possessing the strategic location, human capital and infrastructure necessary to allow trans-national firms access to the COMESA market through a variety of joint ventures. The enormous potential of the COMESA market should prove highly attractive to transnational corporations. By establishing branches in Egypt, they will be able to benefit from the customs exemptions granted to COMESA member nations. Thus, for example, it would be possible to use foreign direct investments in Egypt as an advanced industrial centre within COMESA so as to establish a manufacturing centre that targets the COMESA countries. Egypt can also be the centre of trade for products for re-exports to other countries in the association.
4.2.2
Euro-Mediterranean Partnership One of the regions key free trade agreements (FTAs) is the Euro-Mediterranean Partnership, the pact between the EU and Morocco, Algeria, Tunisia Egypt, Israel, Jordan, the Palestinian Authority, Lebanon, Syria, Turkey, and the new EU Member States of Cyprus and Malta. Under objectives defined at the 1995 Barcelona Conference, this agreement targets the establishment of the Euro-Mediterranean Free Trade Area by 2010. At the same time, tariff barriers are being progressively dismantled. These two actions will have a direct impact on the private sector in the Mediterranean region, and modernisation and economic reforms will be needed at all levels in order to meet the challenges of a more open and more competitive business environment. This free-trade area will link together the EU Member States and the 12 Mediterranean Partners. Eventually the free trade zone should include some 40 States and 600-800 million consumers. The Egypt-European Union Association Agreement has come into effect on 1st of January 2004. This agreement specifies the tariffs import duties from Egypt to European Union and the other way around. According to this protocol import duties for processed food items originating from Egypt such as dairy products, sweet corn products, further processed edible oils and fats, pure fructose, prepared potato products etc will be
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imported into EU without duty payment. Some other products can be imported with reduced tariff and specified quota. With this agreement, Egypt has gone a step forward in joining one of the biggest trading areas in the world with some privileges and challenges. All the technical trade rules will be according to the WTO agreements, to which Egypt is a signatory.
4.2.3
Mediterranean Arab Free Trade Area - MAFTA Four countries in the Euro-Med Partnership, Jordan, Egypt, Morocco and Tunisia, have also set up the Mediterranean Arab Free Trade Area (MAFTA). The four MAFTA members will introduce and apply rules on trade competition and the prevention of monopolies and have agreed on the formation of a ministerial committee to ensure implementation of the MAFTA agreement. It is assumed that MAFTAs moves towards establishing a free trade bloc are a side benefit of the Barcelona process and will further reinforce the Euro-Mediterranean FTA.
4.2.4
Greater Arab Free Trade Area - GAFTA Aside from the EU and WTO free trade pacts, FTAs within the Arab region are also gathering momentum. The Greater Arab Free Trade Area (GAFTA) is an Arab League initiative that aims to revive previously unsuccessful attempts at regional integration. The establishment of free trade area (GAFTA) is set for 2005-2006. The GAFTA agreement is to reduce customs on trade among members by 50%, 60% and finally to 80% in 2004, with zero tariffs by 2005. This agreement will benefits Egyptian food processing sector if the comparative advantages of Egypt such as low labour cost, developed agricultural production systems and skilled manpower compared to oil rich Arab countries with limited agricultural and food processing industries.
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5 Global regulatory environment of the FPI
5.1
The WTO Agreement and Technical Barriers to Trade (TBT)

The 1978 Tokyo Round GATT negotiations recognized the following technical barriers for trade: Sanitary and Phytosanitary (SPS) regulation to protect human, animal and plant life and health, specific regulations which address microbial contamination of food, or set allowable levels of pesticide or veterinary drug residues, or identify permitted food additives. Some packaging and labelling requirements, if directly related to the safety of the food. Consumer measures: regulations that impact labelling and packaging, rules pertaining to pesticide residues, nutritional content and contamination. Trade measures Shipping and financial documents, standards of product identity and standards of measurements. The agreement covered technical requirements among others, affecting food safety and animal and plant health measures, including pesticide residue limits, inspection requirements and labelling. However, due to the possibility that food safety and animal and plant health measures could potentially be easily manipulated to restrict trade, the 1994 Uruguay Round separated these measures from TBT and placed them under the Agreement on SPS Measures. Separating SPS from TBT allowed the WTO to make guidelines clearer and regulations more transparent for both TBT and SPS. Therefore, the role of TBT has been reduced to cover specifically Consumer Measures and Trade Measures.
5.2
International coordination bodies for international standards

The trade in processed food is subject to both the TBT and the SPS agreements. The SPS Agreement encourages but does not require countries to harmonize their SPS measures, to the greatest extent possible, by basing their health measures on relevant international standards. Harmonization is intended to reduce unnecessary variances between countries' technical standards; differences which can often be the source of trade friction. The SPS Agreement recognizes three international standard setting bodies as the official entities for developing health- related standards, guidelines and recommendations: OIE: The Office International des Epizooties; IPPC: The Secretariat of the International Plant Protection Convention; Codex: The FAO/WHO Joint Codex Alimentarius Commission.
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5.2.1
Office International des Epizooties - OIE The Office International des Epizooties (OIE), also known as the World Animal Health Organization, has as its mission to facilitate intergovernmental cooperation to prevent the spread of contagious diseases in animals between countries. The OIE is now comprised of 127 member countries and its membership is expected to increase in the future. The OIE maintains a worldwide animal disease reporting system and recommends sanitary regulations, testing, quarantine, and health certification procedures to encourage world trade while minimizing the risk of spreading livestock and poultry diseases.
5.2.2
International Plant Protection Convention - IPPC The Secretariat of the International Plant Protection Convention (IPPC) is based in the headquarters of the United Nations' Food and Agriculture Organization (FAO). The purpose of the IPPC is to secure common and effective action to prevent the spread and introduction of pests and diseases in plants and plant products and to promote measures for their control.
5.2.3
The Codex Alimentarius Commission - Codex The FAO and the United Nations World Health Organization (WHO) created the FAO/WHO Joint Codex Alimentarius Commission in 1962. Codex is the major international mechanism for encouraging fair trade in food while promoting the health and economic interests of consumers, through the development of food standards, codes of practice and other guidelines. Member countries are invited to accept Codex standards and to embody them in national law. Member countries can review and provide comments at several stages of the development process of a Codex standard. Codex Codes of Practice and Guidelines are advisory instruments and are sent to governments as recommendations. Apart from SPS requirements, increased global and domestic trade in processed food and consumer demand for improved food quality has also led public and private sectors to develop and implement mandatory and voluntary quality control, management, and assurance schemes. Quality assurance schemes develop standards for the production, processing, and transport of food and may include standards for environmental management practices. Western European countries employ certification systems that guarantee the traceability of fresh and processed food back to the originating animal and farm. Companies around the world are responding by implementing food safety management systems to ensure the production of safe food and reduce the risk of loosing their trading partners.
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5.3
Hazard Analysis and Critical Control Point - HACCP

Major food safety incidents in recent years are such as FMD, BSE and dioxin in beverages (Belgium) has led to changes in consumer perception of food safety and has increased the need for more stringent quality control and food safety measures by both government agencies and manufacturers. This has strengthened the requirement for implementation of HACCP measures in almost all consumer food-processing companies in Europe and as much as possible work on traceability of the products. Food safety risks, defined as they relate to human health5, covering well-established and perceived impacts from sources including: (1) microbial pathogens; (2) residues from pesticides, food additives, livestock drugs, and growth hormones; (3) environmental toxins such as heavy metals; (4) persistent organic pollutants; (5) unconventional agents such as prions associated with bovine spongiform encephalopathy (BSE) or mad cow disease in cattle; (6) zoonotic diseases that can be transmitted through food from animals to humans ; and (7) foods produced or processed with practices perceived to involve risks, such as irradiation need to be given extreme attention and products must be tested before they are marketed. Multinational companies have been effectively forced to implement HACCP, not only in their manufacturing system but also in the supply, transport storage and distribution centres. This implies that most food industries involved in the supply chain of the food processing and marketing chain need to adopt the system if they want to remain in the global food trading system. The implementation of HACCP requires laboratories and trained personnel to test the above-mentioned risks in the raw material and processed food. Consumers in the developed world are willing to pay for the costs associated with the implementation of the HACCP system. The domestic industries are mostly disadvantaged since they can not bear extra costs for the food safety measures and mostly are not supported by the governments.
Among food safety hazards, human health risks are highest from food borne pathogens such as Campylobacter and Salmonella, originating from meat, fish and poultry products. The export of meat products requires the most stringent control system followed by the milk and milk products.
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III Local Assessment
63
1 General economic context
1.1
Recent macroeconomic performance

In fiscal year 2004, the Egyptian economy grew faster than in the previous years. The most recent data show a real GDP growth rate of 4.2 percent for the first half of fiscal year 2004 (July-December 2003) compared to a growth rate of 3.1 percent in the same period of the previous year. This faster growth was mainly the result of a more favourable external environment. A pick up in global economic growth helped raise demand for Egypts exports and sent more tourists to Egypt. After a decline in arrivals during the build up to the Iraq war and the war itself, there was a sharp recovery in tourism arrivals, which reached record levels in the first half of fiscal year 2004. Egyptian tourism may have benefited from a reluctance of many Westerners to travel to Asia because of the SARS outbreak and a larger inflow of Gulf Arabs who have become reluctant to travel to the West after the terrorist attack of September 11th. Export revenues were further raised as a result of an increase in international oil prices. Export revenues were furthermore boosted by an increase in competitiveness due to the depreciation of the currency after it was allowed to float in January 2003. This floatation of the currency had resulted in a depreciation of 30 percent. After the floatation of the currency, it has been fully liberalised. At least, this is the case since Decree 506, which introduced a surrender requirement on foreign exchange earnings (75 percent of export revenues) was challenged in the Courts and subsequently cancelled at the end of 2004. Since the beginning of 2004, the government has been pursuing a more active monetary policy, raising interest rates on government paper in order to mop up excess liquidity and to reduce the pressure on the exchange rate. Earlier the government was reluctant to do so out of fear that higher interest rates would stifle investment. As a consequence of the tighter monetary policy, the monetary target (10 percent M2 growth in fiscal year 2003) set by the government in agreement with the IMF could actually be achieved. The depreciation had, however, an adverse effect on inflation. The CPI increased by 5.5 percent in fiscal year 2003. This measure captures only part of the actual increases in prices as the basket of goods included in the CPI includes a large share of price-controlled goods. Over the same period, the wholesale price index (WPI) increased by 16 percent. The acceleration in growth has also been insufficient to create employment for all of the new labour force entrants. The unemployment rate increased from 9 to 9.9 percent by the end of 2003. A major challenge for the Egyptian economy remains the creation of jobs for 600,000 new job seekers every year.
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1.2
Structural policy reforms

The policy initiatives seeking to achieve structural reforms have remained modest. Positive initiatives include a tariff reform for apparel to meet WTO requirements, eliminating specific tariffs and reducing tariff rates on a range of items. As import tariffs on inputs were reduced simultaneously, the measures did not affect the effective protection of the sector significantly. However, further reforms in customs duties, involving a reduction and narrowing of the range of tariffs are planned. Losses in revenues are planned to be compensated by a small increase in the general sales (GST) by one or two percent. In the area of trade the government has concluded bilateral trade agreements with several countries (Syria, Jordan, Morocco, Tunisia, Lebanon, Libya)6. The trade provisions of the Egypt-EU Association Agreement have come into effect from January 2004. A new labour law (No. 12) issued in April 2003 introduced greater flexibility in the operation of the labour market. Planned structural policy reforms include reducing income taxes, and the introduction of a law on SMEs unifying all SME related legislation and facilitating the issuing of business licenses to SMEs. It is also planned to extend credit to SMEs, including start-ups by university graduates, at subsidized interest rates. International experience with subsidized interest shows, however, that these are not always very effective and often characterised by a high incidence of non-performing loans, which would add to the already high burden of non-performing loans of Egyptian banks. The government is also seeking to revive the stalled privatisation programme offering additional companies for privatisation and facilitating the process of privatisation. A scheme is being developed to restructure the debt of public enterprises by creating a holding company, which would issue bonds in exchange for the loans of public enterprises
1.3
Current structural reform policy and their impact on the Egyptian FPI
Egypt's present government team is launching an extensive structural policy reform program, long awaited by the industrial and business community at large in the country. Among the key reforms impacting on the EFPI, are: Tax and investment incentives A new income and corporate tax structure, with a maximum rate of 20%, combined with the cancellation of all other tax incentives, a factor that will influence the geographical spread of factories. The new Tax Law currently being debated in the Parliament is expected to have a positive effect on EFPI with 2 main aspects: Reduction of income tax, allowing more spending by individuals and families benefiting from rise in income.
Bilateral trade agreements with Italy, Brazil and China are yet to be ratified and made operational.
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Reduction of corporate tax to a maximum of 20% will allow new investments to go into EFPI which is more profitable now.
Existing investors are worried though from some articles in the new Tax Law that will have a negative effect on their investments in New Industrial Zones since it cancels the Tax exemptions / holidays of 5 to 10 years under the new law7. It is not yet clear now how the Tax Law will be after the parliament debate in April 2005, but many new investors would rethink about establishing their factories in new industrial areas if it looses tax holidays and advantages in the new law as they will be faced with the cost of transporting raw materials, packaging, labour and finished products, specially with new price increase of Diesel fuel (50%). Therefore, the Ministry of Housing and New Land has reduced the land cost in New industrial Cities by 30% for housing building sites and by 40% for Industrial and Services sites also a reduction of 5% in administration fees. This is supposed to offset the expected decline in moving to New Industrial Cities if it looses the 10 years Tax holiday if the new Tax Law is ratified by the parliament, in its existing draft.
Amendments to Sales Tax Law are being prepared which when ratified by the parliament will entail the following: Cancel Sales Tax of 10% on all types of bread (not the subsidized type only). Reduce Sales Tax on sale of used equipment to 30%. Cancelling of Sales Tax on production Machinery, equipment & its parts and deduction of previously charged Sales Tax from the general Tax file of the establishment. Simplification of customs duties with a reduction to only 6 categories, and reducing duties on imported food industry supplies to 5%. Egyptian food-processing companies have voiced objections to the introduction of a new fund for training and rehabilitation of labour to be financed from a 2% tax on net corporate income.
Trade agreements The signature of the "QIZ / Qualified Industrial Zones" with the USA, based on a minimum 11.7% Israeli origin component is expected to boost the exports and foreign investments in 5 major industries, of which the food processing is one.
The coming into force of the free customs area in the whole Arab region from January 1st, 2005, together with the EU free trade agreement in operation since January 2004 in addition to the "COMESA" (Common Market for Eastern and Southern Africa) free zone trade. The MAFTA AGADIR agreement which will go into effect on January 1st, 2005 is a free trade agreement between Egypt, Tunisia, Morocco and Jordan, which are all
Tax exemption holidays are available for 20 years but apply only to remote areas that, due to logistical problems, are not of interest to the food processing sector.
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connected with partnership agreements with EU which allows free movement of ingredients, raw materials and semi finished products between these 4 countries to go into further processing of finished products acceptable for export to EU with Certificates of Origin from any of the 4 members.
1.4
Policy reform issues under discussion by all stakeholders

Shortcomings of Arab trade agreements: The food processors and exporters complain that Egypt is the only country that has respected Arab Free Trade agreement, imposing Zero tariff on imported of foods from Arab countries, while food exported from Egypt to countries of Arab Free trade agreement face higher import tariffs. Allocation of Land for export crops farming: Due to the fragmented agricultural system and supply of raw quality raw material, and lack of traceability in the food chain. Egyptian export oriented food industries face extensive competition from the region. They believe that increased availability of land for commercial farming, will improve the quality, traceability and consistency of their raw material supply and hence their competitiveness by meeting the international regulations such as Eure-Gap, HACCP and traceability. They are persistently asking policy reform on the provision of land for export oriented food industries Increasing of funds for export subsidy: The food processors and exporters think that the projected export subsidy fund to be made available by the government 800 LE is to small and are asking an increase to 150 LE Establishing of a unified Food control authority: The other major issue raised by the food processors, exporters and importers is the existence more than 12 public institutes involved in the food quality control and import and export activities. The different government bodies have different working guidelines and some times contradictory regulations have greatly affected the export and import performance of the industries. The EFPI is asking for a unified one stop public office to deal with the government regulations. Training of personnel of this public office on the regulations and clarifying the laws and regulations is considered as top priority. Setting up of an Export Crisis bureau at the Minister's Cabinet: The Egyptian food processing industries are also asking for the establishment of an export crisis office in the Ministry of Foreign Trade and Industry to solve urgent export problems that need the involvement of the government. Setting up an updated and accurate Data base for Egyptian Food exports/imports: lack of reliable trade data on the performance of the Egyptian food processing industry in domestic, regional and global markets has hampered efforts of strategic planning of the EFPI. There is little historical and current data on the performance of the EFPI and if available is inconsistent with the data collected by international organizations such as UNCTAD, FAO, UNIDO etc.. The EFPI representatives feel that though, this study has compiled a huge amount of data, effort must be made to update collected data at least every two years and the performance of EFPI in relation to the bench marking countries and its main competitors.
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2 Egyptian food processing industry - overview
2.1
Historical background
Food processing is among the oldest industries in the Egyptian economy. The FPI as well as many other industries suffered from the impact of nationalization that, since the beginning of the seventies, led to a dramatic deterioration not only in terms of profitability and management structure but in the (poor) quality of their end product as well. Government protection of the sector, through reducing food imports and sometimes even banning certain food products often appeared only to boost the problem. Twenty years ago, with the introduction of Egypts reform policy, many international players entered the market, whether through direct investments or through partnerships with local investors tempted by reasonable investment incentives as well as a growing local market. Among the key players that entered the Egyptian market were, Nestle, Cadbury, Kraft, Hero and many more. Today, with the globalisation of the world economy, there is an even bigger challenge, the need to expand to foreign market has been a necessity for the industrys survival. Consumers on the other hand are now increasingly aware of quality, safety and packaging of the product, nevertheless, with the social development that we have been witnessing in the world, people now rely more and more on processed food, rather then fresh agricultural products. Key historical policy initiatives influencing development of the Egyptian Food Processing Industry
1960 Nasser's Nationalisation of Private food plants, consolidation into major Public sector holding companies (Kaha, Edfina, Misr Milk, Bisco Misr, El Nasr Dehydration) 1974 1979 Sadat's Economic Open Door Policy New Investment Law: tax exemption, free zones, no confiscation of assets, repatriating profits overseas 1980 1988 1989 1990 1999 2000 2002 2003 New Industrial Cities (10th Ramadan,6 October, Sadat City, Borg El Arab) Amendment to Investment Law Privatisation Program launched Export Drive ALEB-USAID project providing technical support to the food-processing sector Industry Modernisation Programme Launched (IMC, BRC's) EOS (Egyptain Standards authority) role is strengthened, standards connected to CODEX GAFIs facilities further strengthened
th
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2.2
Industry structure
While Egypt is home to the first food processing activities in history with the production of beer and baked products since the time of the Pharaohs; it is today a net importer of food commodities. However, the Egyptian food processing industry (EFPI) accounts for 17.1% of manufactured value added (MVA) in 2002, up from 12.6 percent in 1992 (Table 2.1). The average annual growth of value added during this period was 7%, making food processing one of the leading growth sectors in Egypt. Compared to the average for the Middle East region, the share of the food process sector in MVA in Egypt was below the regional average of 20.2%, but its rate of growth in Egypt exceeded the regional average of 4.2%
Table 2.1
Breakdown of manufactured value added (MVA) and average annual growth rate (volume) Egypt Share of MVA ISIC 31 Sector Food, beverages and tobacco Textiles, 32 33 34 footwear Wood products including furniture Paper, printing and publishing Chemicals, petroleum, rubber and plastic 35 36 37 products Non-metallic mineral products Basic metals Metal 38 39 products, incl. machinery and 17.5 0.2 100.0 21.5 0.3 100.0 6.9 11.0 16.1 0.3 100.0 17.6 0.3 100.0 3.8 6.2 29.6 15.9 6.3 23.1 17.1 8.4 1.2 5.1 7.5 24.2 13.6 4.3 21.4 14.3 5.6 1.2 2.7 5.4 wearing apparel, leather and 10.4 0.6 6.9 7.5 0.4 4.7 0.6 0.1 2.8 14.5 3.4 4.4 13.6 3.0 4.1 1.7 -0.3 3.3 1992 12.6 2002 17.1 Growth 92-02 % 7.0 1992 19.2 2002 20.2 N. Africa Region Share of MVA Growth 92-02 % 4.2
equipment Other manufacturing industries Total of above
North Africa Region: Algeria, Egypt, Libya, Morocco, Sudan, Tunisia. Source: UNIDO
In developing an overall profile of Egyptian FPI companies, the picture varies according to the sources used and, in particular, depending on the various organisations representing the sector. The latest economic census published by CAPMAS in October 2002 (see Table 2.2), indicates a total number of 37,772 EFPI companies representing 296 state owned companies, 4,602 in the private sector with more than 10 employees, and 32,874 in the private sector below 10 employees. These represent a total of 313,269 labour force. More recent data, from the Ministry of Foreign Trade and Industry General Organisation for Industry (GOFI), for December 20048 indicate a total number of 5,277
8
According to the General Organisation for Industry, these data covers all registered food processing companies; it is a requirement to provide information in order for firms to obtain their industrial registration. Thus, differences between these
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establishments, with a total employment of 231,580 (see Table 2.3). The same data source, also indicates that the total value of production of the Egyptian FPI amounts to L.E. 46.8 billion, and investments of L.E. 28.7 billion (see Table 2.4). Based on the same data, Table 2.5, provides estimates of the value of production and investment per employee. Looking across product sub-sectors, relative average production per employee and investment per employee correspond to a priori expectations given differences in typical capital intensities (i.e. high production/investment per employee in more capital intensive activities such as grain milling, sugar refining, oil and fats). It is noticeable, also, when comparing across ownership types that within a product sub-sector average production per employee and investment per employee is typically lowest in the public sector. Overall, this would suggest that, for a given sub-sector, public sector enterprises have lower labour productivity than their private (and investment) sector counterparts and engage in significantly less investment.
data and those from the economic census are accounted for by micro and very small companies that may not be registered with GOFI, some traders that may include themselves in the sector for the census but not under GOFI, and the informal sector (see Section 2.3).
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Table 2.2
Number of companies and employees in the Egyptian Food Processing Industry, 2002
Number of companies State Owned Private Sector >10 employees Meat products Fish products Fruits vegetables canned, dehydrated Edible oils & fats Dairy products Cereals & grains processed Starch products Animal feed Bakery products Sugar refineries Cocoa, chocolate & confectionary Pasta Other products Alcoholic drinks Malt & beer drinks Soft drinks & * 6 296 18 24 4,602 17 29 32,874 35 59 37,772 * 12,511 67,404 13,751 3,739 144,196 51 111 101,669 13,802 16,361 313,269 food 11 2 * 209 2 1 574 2 2 794 6 3 1,763 629 * 10,113 79 545 1,980 6 4 13,856 714 549 1 7 98 75 901 68 1,000 150 277 844 7,294 2,941 3,164 345 10,735 4,130 & its * 8 125 9 2 47 3,827 2 37 326 14,355 18 39 381 18,307 29 * 723 3,224 13,101 1,390 4,069 59,351 1,844 110 806 61,049 55 1,500 5,598 123,624 15,000 90 120 13,321 13,531 15,554 10,377 26,131 52,062 frozen, 5 21 6 61 19 51 494 123 2,469 560 163 2,526 671 16,574 1,006 9,762 6,094 5,905 1,543 412 5,481 11,976 23,080 12,392 & 3 2 36 10 < 10 employees 100 38 139 50 182 345 Total Number of Employees State Owned Private Sector >10 employees 5,686 1,256 < 10 employees 308 113 6,176 1,714 Total
bottled water Tobacco products TOTAL
Source: CAPMAS (October 2002)
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Table 2.3
Number of establishments and employees in the Egyptian Food Processing Industry, December 2004
Number of establishments Public Sector Slaughter processing Packing, preservation & processing of fish Packing preservation vegetables, cereals Oil and fats Dairy products Milling and grain 134 10 182 10 553 193 1,937 33 7 5 21 1 694 208 2,140 44 10,215 1,386 4,831 11,986 13,303 9,742 35,794 3,365 670 841 1,458 14 24,188 11,969 42,083 15,365 fruits & of & 14 22 4 225 84 321 16 5 14 255 111 339 3,170 13,605 944 16,916 5,735 10,395 1,981 1,246 2,156 22,067 20,586 13,495 8 66 1 75 520 1,298 150 1,968 and meat 199 9 208 11,123 629 11,752 Private Sector Investment Sector Total Number of Employees Public Sector Private Sector Investment Sector Total
processing Animal feed Bakery products Sugar Confectionary, chocolate and cacao Food n.e.s. Alcoholic beverage distilled Wine production Brewery and other processing -
485
496
1,653
13,922
1,075
16,650
537
18
555
14,310
1,734
16,044
1 -
2 4
3 4
528 -
28 170
556 170
alcoholic beverages Beverages alcoholic) water Tobacco TOTAL and (nonsoda
12
13
2,843
1,000
3,843
6 393
34 74 4,759
18 125
52 80 5,277
11,768 60,606
9,308 3,872 152,124
5,896 18,850
15,204 15,640 231,580
Source: Ministry of Foreign Trade and Industry General Organisation for Industry
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Table 2.4
Production and investment in the Egyptian Food Processing Industry, December 2004
Value of production (L.E. million) Public Sector Slaughter processing Packing, preservation & processing of fish Packing preservation vegetables, cereals Oil and fats Dairy products Milling and grain 2,132 131 418 1,274 5,412 3,693 2,193 1,605 815 171 71 8 8,359 3,995 2,682 2,887 711 85 227 1,477 2,906 1,545 1,840 1,510 547 61 175 3 4,164 1,691 2,242 2,990 fruits & of & 437 1,715 73 2,671 3,101 1,813 437 604 611 3,545 5,420 2,497 401 1,697 37 1,559 1,364 1,190 300 342 367 2,260 3,403 1,594 49 333 4 386 39 107 10 156 and meat 2,461 110 2,571 1,527 90 1,617 Private Sector Investment Sector Total Investment cost (L.E. million) Public Sector Private Sector Investment Sector Total
processing Animal feed Bakery products Sugar Confectionary, chocolate and cacao Food n.e.s. Alcoholic beverage distilled Wine production Brewery and other processing -
32
660
143
835
29
752
106
887
5,337
591
5,928
1,476
670
2,146
33 -
4 24
37 24
24 -
5 120
29 120
667
144
811
378
99
477
0 4,383 10,677
1,744 129 31,847
614 4,323
2,358 4,512 46,847
0 3,077 7,804
1,377 58 17,714
414 3,184
1,791 3,135 28,702
Source: Ministry of Foreign Trade and Industry General Organisation for Industry
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Table 2.5
Production and investment per employee in the Egyptian Food Processing Industry, December 2004
Value of production (L.E. thousand per employee) Public Sector Slaughter processing Packing, preservation & processing of fish Packing & preservation of vegetables, fruits & cereals Oil and fats Dairy products Milling processing Animal feed Bakery products Sugar Confectionary, chocolate and cacao Food processing - n.e.s. Alcoholic distilled Wine production Brewery and other 235 144 211 133 99 124 beverage 63 143 141 67 141 45 179 706 52 706 19 47 373 133 341 50 369 18 54 103 99 386 53 134 and grain 209 95 87 106 407 379 61 477 1216 203 49 571 346 334 64 188 70 61 47 123 218 159 51 449 816 73 120 214 172 141 53 195 138 126 77 158 541 174 221 485 283 161 263 185 126 125 39 92 238 114 151 274 170 102 165 118 94 257 27 196 75 82 67 79 and meat 221 175 219 137 143 138 Private Sector Investment Sector Total Investment cost (L.E. thousand per employee) Public Sector Private Sector Investment Sector Total
372 176
187 33 209
104 229
155 288 202
261 129
148 15 116
70 169
118 200 124
Source: Authors calculations based on Ministry of Foreign Trade and Industry General Organisation for Industry
However, the professional organizations representing the sector shed a different light on its structure. These are: 1. The Chamber of Food Industries (CFI); 2. The Chamber of Cereals and Grains (CCG); 3. The Food Commodity Council (FCC). The 3 organizations report to the Ministry of Foreign Trade and Industry, although such relation may evolve in the coming future. It should be noted that the present multiplicity of professional organizations in the EFPI as well as the other sectors of the economy is due to historical reasons, and the present
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government is keen on streamlining these organizations to allow the development of the industry. The Chamber of Food Industries represents, according to data provided by the Chamber (2003), 1970 licensed processors, providing 5% of GNP and representing L.E. 30 billion investments. The members are grouped into 9 sections as follows: Milk and Dairy Products; Edible Oil and by-products; Drinks and bottled water and fruit juices; Fruit and Vegetables products; Sugar, Confectionary and Chocolates; Meat, Poultry and Fish products; Specialty Food and Food Additives; Packaging and other food products; Tobacco products. It should be noted that by-law, all industrial companies are supposed to register at their respective chamber, if having a capital of L.E.5000 or a number of employees of 25 or more. The Chamber of Cereals and Grains was created as a separate structure in the fifties to allow the coordination of flour subsidies. It represents 13000 companies spread over 3 sections as follows: Wheat Milling and Bakeries; Rice Hulling; Pasta Producers. The Food Commodity Council (FCC) was formed in 1995 as a semi-public / semi-private body (within 17 different commodity councils) to regroup all EFPI exporting companies and sectors. It represents to date 206 companies distributed over 9 sections as shown in Table 2.6.
Table 2.6 Profile of food processing companies within the Food Commodity Council (FCC) Sections A. Processors and Exporters Frozen Vegetables and Fruits Chocolate and Confectionary Dairy products Fruits and Concentrates Food preparations Essential Oils Olive products and Oil Dehydrated products (including spices) Multiple products B. Exporters only Grand Total Source: FCC, November 2004 No. of Companies 136 20 17 14 16 18 15 12 9 15 70 206
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Within the Egyptian FPI, the number of companies that can be considered internationally competitive in the sense of being effectively engaged in export activities and/or attaining international standards of production is, according to the assessment of the study team, in the region of 100. This international segment of the FPI accounts for around 45 thousand employees.
2.3
The informal sector

The informal food manufacturing and packaging sector in Egypt is sometimes put at 80% of total food production in Egypt. However, interviewees from the EFPI are of the opinion that the informal food sector is of little effect on export markets of EFPI (which is the main concern of this study) but does pose unfair competition on legitimate FP in the local market. When the study team interviewed EOS (Dr. Mahmoud Eisa) they stated that EOS has surveyed this informal sector in 5 areas in Egypt and that it has been found to have very little effect on the export business of the food processing sector as it mostly concentrated on street vendor selling prepared meal and that it created a lot of jobs and purchase of raw materials / ingredients / packaging also provided low cost meals to workers and students early in the morning (going to school and work) due to absence of low cost catering. The main worries concerning this sector are related to low health and hygiene aspects as well as loss of tax income. Many interviewed confectionery (specially Halawa), snacks and dairy processors have, however, complained bitterly of the unfair competition of the informal food preparation outlets and drew our attention to the negative effect of bad publicity on Egyptian foods in general due to frequent food poisoning cases; the Ministry of Health estimates that the number of such case reached 50 000 in Egypt in 2003. Attempts to lure the informal sector to new industrial areas where they can enjoy a 10 year tax holiday has failed as they mostly work with unregistered labour (to avoid the 26% social security tax) and with substandard food preparation and ingredients, which will not pass legislations, as well as frequent infringements on brands/trade names and recipes copied from legitimate food processors. One factor that may encourage informal food preparations plants to emerge into the open and to operate legitimately may be the lure of the increase in consumer spending being directed towards modern retail outlets and supermarkets. It has been suggested that this development may convince some of the informal processors to turn legitimate in order to gain access into supermarkets and hence earn higher profits. The effect of the new Food Law, currently being drafted on Informal sector, remains to be seen.
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3 Egyptian food processing industry general performance
3.1
Production performance of the Egyptian FPI

During the 1990s the FPI in Egypt underwent a period of privatisation. At the same time, the first major investments by multinationals started; for example, Heinz (USA) in tomato products, and Farm Frites (Netherlands) in frozen potatoes. The period of the 1990s was marked by a period of apparent instability in production trends, with some product groups suffering from declining production levels and rising imports (e.g. canned vegetables, jams), while others saw regularly increasing production levels (e.g. fruit juices, dried onions, frozen vegetables). Since 1999/2000, most product groups have seen production volumes increasing (4-10% p.a.), a strengthening of export performance and, for those segments for which Egypt possesses a domestic production capacity, declining imports. Table 3.1 to Table 3.3, provide an indication of the evolution of the number of companies, employment, production, and labour costs in the Egyptian food-processing sector, by private sector, public sector and combined total9. Between 1997 and 2004, the number of private sector FPI companies increased by 16 percent to 4,759, and employment by 28 percent to 152 thousand. At the same time, the number of public sector companies and employment fell steadily between 1997 and 2001, by 27% and 38% respectively. The data, however, indicate an increase in the number of public sector companies and employment between 2001 and 2004; it is unclear if this is due to a change in classification but, at the same time, may reflect the separation of public sector enterprises into smaller companies to facilitate privatisation10 and government policies that raised employment in public sector companies11. Overall, the data indicate that employment in the food-processing sector (public plus private sector) increase by 6 percent to 212.7 thousand between 1997 and 2004, while the number of companies increased by 629 to 5,152. The data on values of production is somewhat difficult to interpret due to the fact that values are in current prices and do not allow for changes in inflation. In particular, it is striking that between 2001 and 2004 the data indicate a dramatic increase in the value of
9
10 11
Data for the private sector are by calendar year, while data for the public sector are by fiscal year. For the combined total the data are added without taking this difference into account. An example is Kaha, which has been separated into 6 separate companies. The Government is committed to hire a number of recent graduates into the public sector.
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production; production in the public sector doubled, while that of private sector companies increase by 220%. Comparing between the private and public sector, it is also noticeable that production per employee has risen more sharply in the private sector than in the public sector and, moreover, that by 2004 average production per employee in the private sector exceeded that in the public sector. At the same time, for the years for which data are available, average labour costs per employee in the public sector were substantially higher than in the private sector. Correspondingly, employment costs relative to the value of production were also higher in the public sector than in the private sector.
Table 3.1 Evolution of private sector FPI companies, production, employment and costs (1997-2004) 1997 Number of companies Number of employees Value of production (L.E. million) Annual labour cost (L.E. million) Production per employee (L.E. thousand) Labour cost per employee (L.E. thousand) Labour cost as a share of production (%) Source: CAPMAS and Authors calculations 5.9% 5.9% 5.7% 6.8% 6.0% 4.66 4.89 5.90 6.54 6.08 78.5 83.5 103.6 95.7 101.8 209.3 4,106 119,125 9,351 555 1998 4,380 141,810 11,836 694 1999 4,496 149,343 15,479 881 2000 4,579 140,388 13,435 918 2001 4,604 142,632 14,522 867 2004 4,759 152,124 31,847
Table 3.2
Evolution of public sector FPI companies, production, employment and costs (1997-2004) 1997/98 Number of companies Number of employees Value of production (L.E. million) Annual labour cost (L.E. million) Production per employee (L.E. thousand) Labour cost per employee (L.E. thousand) Labour cost as a share of production (%) Source: CAPMAS and Authors calculations 7.4% 7.2% 8.8% 8.8% 8.5% 6.9 7.3 7.8 8.4 8.9 92.3 101.3 88.2 95.0 104.6 176.2 389 81,414 7,513 559 1998/99 331 64,403 6,527 472 1999/00 303 60,094 5,303 467 2000/01 290 54,893 5,217 461 2001/02 285 50,785 5,314 454 2004 393 60,606 10,677
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Table 3.3
Evolution of total FPI companies, production, employment and costs (1997-2004) 1997 Number of companies Number of employees Value of production (L.E. million) Annual labour cost (L.E. million) Production per employee (L.E. thousand) Labour cost per employee (L.E. thousand) Labour cost as a share of production (%) Source: CAPMAS and Authors calculations 6.6% 6.3% 6.5% 7.4% 6.7% 5.6 5.7 6.4 7.1 6.8 84.1 89.0 99.2 95.5 102.6 199.9 4,495 200,539 16,864 1,114 1998 4,711 206,213 18,363 1,166 1999 4,799 209,437 20,782 1,348 2000 4,869 195,281 18,652 1,379 2001 4,889 193,417 19,836 1,321 2004 5,152 212,730 42,524
Table 3.4 provides an overview of the study teams estimates of the domestic market, production and export size of main sub-sectors of the Egyptian food-processing sector. The underlying information is drawn from a range of sources, including official statistics and information from interviews with food processing companies. It is intended to give a snap-shot of the current situation (largely drawn from data for 2003) of the foodprocessing sector. Estimates may differ from official data due to information obtained from the sector (companies and industry bodies).
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Table 3.4
Key indicators for the Egyptian food processing sector and market.(2003) Domestic Units Dairy Products (excl. liquid milk) - Cheese thousand tons thousand tons L.E. (million) $US (million) Edible Oil & Ghee thousand tons L.E. (million) $US Olive Oil thousand tons L.E. (million) $US (million) Soft Drinks million litres L.E. (million) $US Bottled water million litres L.E. (million) $US Fruit Juice & Concentrates thousand tons L.E. (million) $US (million) Jams thousand tons L.E. (million) $US (million) Frozen Vegetables thousand tons L.E. (million) $US (million) Dehydrated Vegetables thousand tons L.E. (million) $US (million) Tomato products thousand tons L.E. (million) $US (million) Table Olives Herbs & spices thousand tons thousand tons L.E. (million) $US (million) Confectionary
Exports: sugar conf., chocolate, biscuits, halawa, tehin
Market 430
Production 500-800 425
Exports 13.5 80 13
1100
150
7 24 4
5 90 15
1600 1700 283 200 200 33 61 180 31 18-20 90 15 24 85 14 0.5 80 255 43 38 195 33 49 170 28 13.5 120 20 20 105 18 190 150 18 105 18 160 6 1 22 88 13 20 110 18 25 90 15 12 125 20 3-3.5 35 6 80 45 216 36 2200 367 360 60 150 25 Included with potato chips 126 21 14 2 20 3
L.E. (million) $US L.E. (million) $US L.E. (million) $US

12
Potato Chips Extruded corn puffs Source: Study team estimates
12
A variety of sources have been used to develop this overview table. These include CAPMAS, MOFTI, international organisations (e.g. FAO and sector specific organisations), together with estimates provided during interviews with representatives of Egyptian food-processing companies, and ALEB project (USAID) representatives.
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3.2
3.2.1
Trade performance of the Egyptian FPI

Egyptian processed food exports and imports by product type Data from the MOFTI database permit an analysis of the structure of Egyptian processed food exports. The data (see Table 3.5 and Table 3.7) show that the current strengths of Egyptian FPI exports are in: Dried vegetables, which is known to be mainly dried onions; Frozen vegetables; Fruit juices; Herbs & spices; Cheese and curd. Major import categories (see Table 3.6 and Table 3.7) include edible oils, dairy products and prepared fish. In 2003, due in a large part to the devaluation of the Egyptian pound, it is estimated that exports of key processed food sectors increased by 25% (in $US terms) compared to 2002. Export growth is currently thought to be running at 15-20%. It appears that the devaluation permitted Egyptian food processing countries to capitalise on the investments made in promoting their exports. Furthermore, for products that are essentially traded as commodities on world markets (e.g. fruit concentrates, tomato concentrates), the devaluation has had the immediate effect of making Egyptian products competitive at world market prices. Available data, together with interviews with food processing companies have indicated that among these categories, exports of cheese, fruit juices, and herbs & spices have benefited strongly from the effects of the devaluation of the Egyptian Pound. By contrast, products that are more highly associated with Egyptian ethnic origin (e.g. halawa, tehina, pickles, domiaty cheese, date jam) have seen little increase in activity; this may be attributed to the fact that the market for these types of (higher valueadded) products is more structured and less sensitive to price changes. At the same time, the devaluation has revealed constraints on the domestic supply side, both in terms of agricultural produce (the competitiveness of Egyptian fresh food exports has also been enhanced by devaluation) and in other inputs such as glass packaging, for example.
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Table 3.5
Leading Egyptian processed food exports by value ($US), 2002-2003 $US thousand Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 HS Code 712 710 2009 406 904-910 2005 1704 2104 1905 2106 2202 811 2001 1512 1509 Product Description Dried vegetables Frozen vegetables Fruit juices Cheese and curd Herbs and spices Prepared or preserved veg. nes - not frozen Sugar confectionary Soups etc. Biscuits etc. Food preparations nes Beverages (non-alcoholic) Frozen fruit and nuts Pickles Sunflower, safflower and cotton-seed oil Olive oil 2002 17,551 20,006 7,823 8,000 5,751 7,316 4,906 1,296 2,179 2,281 818 1,594 1,900 1,139 322 2003 21,049 15,902 13,442 11,821 12,714 8,701 4,505 3,451 2,073 1,819 3,356 1,964 1,791 1,389 2,327 % change 19.9 -20.5 71.8 47.8 121.1 18.9 -8.2 166.3 -4.9 -20.3 310.5 23.2 -5.8 21.9 622.9
Source: Authors calculations based on MOFTI data
Table 3.6
Leading Egyptian processed food imports by value ($US), 2002-2003 $US thousand Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 HS Code 1507 405 402 1512 1604 406 1511 2106 904-910 1806 2007 1602 2008 1704 813 Product Description Soya-bean oil Butter etc. Milk and cream Sunflower, safflower and cotton-seed oil Prepared or preserved fish Cheese and curd Palm oil Food preparations nes Herbs and spices Chocolate etc. Jams etc. Prepared or preserved meat Preserved fruits Sugar confectionary Dried fruit 2002 77,382 65,801 35,102 18,142 28,578 22,944 63,353 28,339 16,147 7,778 6,309 4,845 2,437 2,500 2,737 2003 56,914 57,764 43,080 69,828 29,749 17,981 6,106 11,359 11,848 7,430 5,461 2,750 2,758 2,004 1,906 % change -26.5 -12.2 22.7 284.9 4.1 -21.6 -90.4 -59.9 -26.6 -4.5 -13.4 -43.2 13.2 -19.8 -30.4
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Table 3.7
Egyptian exports and imports of processed food ranked by value of exports, 2003 $US thousand Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Code 712 710 2009 904-910 406 2005 1704 2104 2202 1507 1509 1905 811 2106 2001 1512 2201 2004 402 2101 2007 812 1902 1806 1602 1604 1513 405 1511 2008 2103 2105 1904 2002 813 1601 2006 403 1605 Total Product Description Dried vegetables Frozen vegetables Fruit juices Herbs and spices Cheese and curd Prepared or preserved veg. nes - not frozen Sugar confectionary Soups etc. Beverages (non-alcoholic) Soya-bean oil Olive oil Biscuits etc. Frozen fruit and nuts Food preparations nes Pickles Sunflower, safflower and cotton-seed oil Mineral Water Prepared or preserved veg nes - incl. frozen Milk and cream Coffee & tea extracts Jams etc. Other preserved fruit and nuts Pasta and couscous Chocolate etc. Prepared or preserved meat Prepared or preserved fish Coconut and palm-seed oil Butter etc. Palm oil Preserved fruits nes Sauces etc. Ice cream Breakfast cereals Prepared or preserved tomatoes Dried fruit Sausages etc. Sugar preserved fruit & nuts Buttermilk and yoghurt Prepared or preserved seafood Total (of the above) Exports 21,049 15,902 13,442 12,714 11,821 8,701 4,505 3,451 3,356 2,541 2,327 2,073 1,964 1,819 1,791 1,389 1,331 1,291 1,090 989 763 572 515 407 290 196 139 114 103 59 55 49 36 28 26 15 3 2 0 116,917 Imports 154 4 1,216 11,848 17,981 638 2,004 109 269 56,914 354 1,133 84 11,359 413 69,828 87 123 43,080 729 5,461 337 619 7,430 2,750 29,749 595 57,764 6,106 2,758 600 756 745 206 1,906 0 39 47 6 336,199 Balance 20,895 15,898 12,226 866 -6,160 8,063 2,501 3,342 3,086 -54,373 1,973 940 1,880 -9,540 1,378 -68,439 1,244 1,168 -41,990 260 -4,697 235 -105 -7,024 -2,460 -29,553 -455 -57,650 -6,003 -2,699 -545 -707 -708 -178 -1,880 15 -36 -45 -6 -219,283
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Effect of the devaluation on Egyptian food exports Table 3.8 illustrates the impact of the devaluation of the Egyptian Pound on exports of fresh fruits and vegetables. Similarly, MOFTI data from a survey of main food exporting companies (see Table 3.10) indicates that exports rose by 25% in dollar terms (66% in LE).
Table 3.8 Egyptian Exports of fresh fruits and vegetables, 2002-2003 2002 Volume (tons) Value, LE Value, $US Source: CAPMAS 1 508 541 2 852 325 631 046 2003 1 809 040 4 638 243 776 528 Variation (%) 19.9 62.6 23.1
Table 3.9
Egyptian Exports of selected food products, 2002-2003 (thousand tons) 2002 Dairy products Fresh potatoes Fresh citrus Fresh onions Source: Ministry of Agriculture 6.8 229 128 293 2003 13.4 296 166 320 Variation (%) 97 29 30 9
Table 3.10
Egyptian Exports of leading Egyptian processed food companies, 2002-2003 2002 Value, LE million Value, $US million Source: MOFTI 767.7 170.6 2003 1275.1 213.4 Variation (%) 66.1 25.1
3.2.2
Egyptian processed food exports by region Table 3.11 provides a breakdown of Egyptian processed food exports by geographical region. The data used for this analysis are drawn from the ITC COMTRADE database, which reveals some important differences from the MOFTI data described above13. The data reveal that the Gulf region14 is the main market for Egyptian FPI exports, accounting for 45% of total FPI exports. The European Union (EU15) is the second largest market, followed by Northern Africa and the Americas (essentially the USA).
13
14
Egypt does not report trade data to the COMTRADE database and, accordingly, data for Egypt are mirror estimates from information on exports to / imports from Egypt provided by reporting countries. In addition to discrepancies arising from different methodologies used in calculating trade flows, the practice of non-transparent reporting followed by many exporters in Egypt (in a preventative effort towards customs and tax bureaucracy) raises questions as to the reliability of available trade data. It is hoped that new economic reforms should help to reduce such practices by Egyptian exporters. Together with the countries of south eastern rim of the Mediterranean.
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Table 3.11
Egyptian exports of processed food by geographical region, 2002 Value Region Gulf & S.E. Mediterranean N. & N.E Africa W., Central & S Africa European Union (15+) Other Europe Cent. & E. Europe Former Soviet Union Central Asia America Far East & Oceania Not allocated Total (of the above) Source: Authors calculations based on Comtrade $US thousand 68,572 19,907 1,841 26,536 187 4,205 1,977 0 19,610 9,230 226 152,291 Share 45.0% 13.1% 1.2% 17.4% 0.1% 2.8% 1.3% 0.0% 12.9% 6.1% 0.1% 100.0%
3.2.3
Main Egyptian processed food export companies As indicated from companies and professional organizations sources, the number of Egyptian food processing companies exporting sizeable quantities does not exceed 100; these companies are generally members of both "Chamber of Food Industries" and "Food Commodity Council / FCC". For the first 3 quarters of 2004 (January to September), the FCC reported that 75 companies had total exports of US$ 185.4 million, of which the 11 companies shown in Table 3.12 totalled 61.61% of this value.
Table 3.12
Value of exports of leading Egyptian processed food companies (Jan.-Sept. 2004) Company Sector Exports ($US million) 1 2 3 4 5 6 7 8 9 10 11 Total of above Total Source: FCC Farm Frites Faragalla Juhayna Bel Egypt Cadbury Enjoy Greenland Nestl Egypt Montana / United Food Ind. Spice Land Misr Caf Dehydrated products Instant drinks Frozen vegetables Frozen vegetables and juices Juices and dairy Cheese Confectionary Juices and dairy Cheese Multiple products 18.68 14.96 14.75 13.74 9.45 9.35 9.31 8.77 5.65 4.81 4.74 114.21 185.4
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Several senior managers interviewed from these companies have indicated that they have recently implemented sizable additional investments in their operations, to meet the export markets requirements, such as L.E. 70 million at Farm Frites, and L.E. 40 million at Enjoy.
3.2.4
Export Facilitation Programmes In June 2002, a new export promotion regulation was issued (Export Promotion No. 155). It primarily includes establishing an Export Promotion and Development Fund (EDFP); although it is not clear what are the specific functions of the Fund and how it will promote exports. It aimed at streamlining administrative procedures and to provide credit facilities to export orientated industries. It has been criticised by business groups as not going far enough; it did not contain the expected tax-breaks for exporters, and they point to the fact that the creation of another government agency and more legislation may not be the solutions to overcoming Egypts trade problems15. The Export Guarantee Company of Egypt provided guarantees for 80-85% of the value of exports against the risk of un-secure payment terms at a cost of 4% of the transaction value. Some exporters, however, have complained that the services of the company are insufficient. A further initiative has been to expand the existing duty drawback system16 to domestic suppliers who sell their products domestically to local exporters to an increased number of products. It is not clear to what extent companies are aware of the expansion and the degree of usage. Reduction of import duties should, however, reduce the importance of the drawback system. Several institutional initiatives should be mentioned : The Egyptian Exporters Association (Expolink) provides assistance to private Egyptian firms to expand their exports activities through direct marketing assistance, including the provision of market information and materials and advocacy for export policy and regulatory improvements. In addition to export marketing, Expolink provides firm-level and industry-level technical assistance and development assistance. The USAID's program "Aleb" completed in 2004, and the EU initiative with the MOFTI, through the IMC program providing on one hand a fund for the export oriented companies, as well as technical and promotion assistance.
15 16
Source: US Department of Trade. See Section 6.4.
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3.3
3.3.1
Investment performance of the Egyptian FPI

Foreign investments in FPI17 Total foreign direct investment in 2003 in Egypt amounted to US$ 320 million versus US$ 647 million in 2002 and US$ 1235 million in 2000 according to the General Authority for Free zones and Investment (GAFI)18. The reduction can be partially attributed to the 9/11 effect, although the share of Egypt in attracting FDI has also fallen (6th position behind Saudi Arabia, Sudan, Algeria, Lebanon and the UAE). At a recently held Investment Conference, the Ministry of Investment -which supervises GAFI - has committed itself to increase the level of FDI in 2005 to twice the average value of FDI's to Egypt during the past 4 years. High volumes and growth of demand in the domestic market have attracted multinational investments in the Egyptian food-processing sector. Since 1999 the value of the top 20 alliances, mergers and acquisitions between Egyptian and foreign multinationals amounted to LE 1760 million. The analysis of the main multinationals and non-Egyptian investment pattern in the EFPI, indicate that Arab investors tend to invest in green field operations (e.g. "Kharafi Group" (Americana), Ajwaa S.A.) whereas non-Arab investors and especially multinationals tend to favour acquisitions thus securing market shares at the outset (e.g. Kraft Foods, Heineken, Cadbury, Nestle). In many cases, the approach of multinational companies has been to buy into existing Egyptian success stories; often these are companies that have already mimicked the products and/or production methods of multinationals19. For companies from the Gulf region, investments have often been made in businesses that are complimentary to their existing portfolio. This conglomerate building provides a mechanism to secure increased volumes for the conglomerate as the whole so as to offset investments and make savings through more efficient logistics and commercial costs. In some cases, investments in the FPI are also indirectly linked to investments in the tourism sector (hotels) that provide a market for processed food products.
17
18
19
It should be noted that a major effort is being made to streamline the national accounting procedures for monitoring foreign investments. Actual investment figures are thought to be above the figures stated. In 2003, under a Prime Ministers decree (Decree No. 611 amending the Investment Guarantees and Incentives Law No 8/1997), the General Authority for Free zones and Investment (GAFI) was made the one authority responsible for investor incentives and guarantees. The same amendment granted tax exemptions for R&D, and exemption of capital equipment from sales tax and notarisation fees. For example .the Rachid Groups success with mimicking Dr.Oetker (Germany) and Palsgaard (Denmark) in dry mixed desserts. Three Rachid Group factories (Lipton Tea packing, tomato paste, and dry blends/mix for poultry bouillon soup cubes and coatings) were taken over by Lever Group, and are still marketed under the Fine Foods brand name of Rachid. Further Rachid maintains joint ventures to produce Dreem (dry mix deserts), Meshreq (Milkana processed cheese, in association with Bonne Grain France) and Prince Biscuits (in association with Danone).
89
Table 3.13
Examples of foreign involvement in Egyptian FPI International Company Cadbury Best foods / Unilever Bongrain Migob / Ajwaa Tasty Foods (PepsiCo) Ajwaa Heineken Hero Kraft Foods (Altria Group ) Unilever / Lever Mashreq Co. Danone Cadbury Schweppes Americana Rachid/Meshreq SONUT Greenland Biscuits Beverages Dairy & juices 2003 2003 2004 Fine Foods Dry foods, tea 2003
20
Egyptian Company Bim Bim El Rasheedy Rachid/Meshreq Safola Oil Chipsy Basmah Alahram beverages Vitrac Family Nutrition
Sector Confectionary Confectionary Processed Cheese Edible oil Potato chips Frozen veg. & valueadded chicken parts Alcoholic beverages Jams Biscuits
Date 1997 2000 2000 2001 2001 2002 2002 2002 2003
Comments Majority stake sold back to Rasheedy
Several leading international companies have set-up or bought operations in Egypt: In the early 1990s, Heinz (tomato products) and Farm Frites (potato products) were among the first wave of investments21; these investment were linked closely to Egypts advantages for agricultural production of their key inputs. The operations of Nestle in Egypt reflect a policy of external growth via the development of new markets. It is now able to exercise considerable control over the ice-cream business, has a strong commitment in the (fresh) dairy sector, and involvement in pet food and baby food. Americana (Kuwait Food Co.), with a strong presence in the Gulf region, is closely involved with the food service sector22. Within Egypt it has built up a network of powerful processing units: frozen potatoes (Farm Frites), tomato products etc. (Heinz), canned vegetables (California Garden), canned meats (Beefy), and poultry processing (Cairo Poultry-KoKi). Cadbury brand was introduced into Egypt in 1991 and has established its presence through the takeover of the long established Bimbim company. Kraft Foods purchased the domestic snack food manufacturer Family Nutrition, extending its range of products beyond fruit juices (Tang brand) and chocolate. Family Nutrition has a 30% share of the Egyptian biscuit market and a 40% share of the cake market23.
20 21 22
23
Formerly Philip Morris Group Both of these investments were undertaken in association with Americana (Kuwait Food Co.) Leading international brands in which Americana has investments/franchises include: Kentucky Fried Chicken, Hardees, PizzaHut and Baskin Robbins. In addition, the company launched its own brand Chicken Tikka. The company also exports to, among others, Libya, Saudi Arabia, Israel, USA, Australia and Hungary.
90
Foreign FPI companies attitudes to investing in Egypt On the basis of interviews with foreign FPI companies operating in the country, Egypt is seen as an attractive location since it has a relatively stable environment with low labour costs. As such, not only are there opportunities in the domestic market but also Egypt can serve as a platform for exports to the immediate geographical region. Some companies also point to the fact that entry into the domestic market can be achieved with a relatively limited range of products, provided that (mass) production is efficiently managed. With regard to the domestic market, many companies pursue a strategy aimed at sales growth and achieving market share: securing healthy profit margins particularly in the current economic climate - is less important in the short-run than achieving sales volumes. In the longer run, with its rapidly growing population, Egypt is seen as having immense market potential. Moreover, currency devaluation has reduced the costs of acquiring Egyptian companies and further reduced (in international terms) the cost of production facilities.
At the same time, companies consider that it is a difficult market in which to operate: The domestic market is extremely price sensitive. Introduction of improved technology that may increase costs (and hence prices) is risky since any price increase can result in sharp falls in sales volumes. As a consequence, new technologies may not be introduced. It also provides an additional reason for (major) companies to seek to ensure 15-20% of production goes to export in order to provide a buffer against domestic market sales volatility . The under-development of the retail distribution sector and, with a few exceptions, the wholesale sector creates inefficiencies that raise costs and hinder marketing efforts. Firms encounter numerous difficulties (administrative, logistics etc.) in the supply of imported materials and equipment, alongside the high costs of import taxes and duties. Adoption of new (internationally accepted) standards can be problematic in the face of opposition from local companies wishing to maintain existing local standards. The working of the judicial system, under which managers can be personally (and rapidly) sanctioned, is also sometimes seen to be a dissuasive factor for direct investment and management by foreign companies. This has resulted in companies being pushed towards strategic alliances with Egyptian firms and/or pursuing licensing and franchising arrangements.
24
3.3.2
Foreign versus domestic investment in the Egyptian FPI Based on the analysis of GAFI figures, the overall share of foreign (including Arab) investments in the EFPI amounted to 28.29% over the last 10 years (based on capital issued value), as seen in Table 3.14.
24
The devaluation of the Egyptian pound has raised the cost of imported raw materials, including packaging. For small snack items that are frequently priced at 50 piastres, for example, and for which there is virtually no scope to alter prices, companies are unable to pass on to consumers the increase in costs of imported materials with the exception of reducing the size/weight of their products.
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Table 3.14
Investment profile of the Egyptian FPI Companies (number) Issued Capital (L.E. million) 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Up to 30/11/04 Total 7 15 25 51 49 54 43 37 35 47 84 447 14.4 234.1 156.8 428.3 522 214.9 107.3 359.8 54.2 144.9 569.3 2806 23.4 535.5 234.6 675.1 886.8 316.9 191.4 632.7 104.1 215.9 1209.6 5026 715 1968 6896 4572 2416 3297 2388 2358 2707 2387 5476 35180 98.6% 50.7% 94.6% 72.7% 19.2% 98.6% 50.3% 96.6% 91.9% 90.2% 92.3% 71.7% 0.0% 31.2% 0.0% 24.3% 80.1% 1.4% 40.4% 2.2% 3.7% 7.3% 6.3% 24.9% 1.4% 18.1% 5.5% 3.0% 0.7% 0.0% 9.2% 1.2% 4.4% 2.5% 1.4% 3.4% Investments (L.E. million) Employees (number) Share of issued capital Egypt Arab Other
Source: GAFI (December 2004)
3.3.3
Structure of Investments Table 3.15 shows the value of Egyptian imports of food processing equipment. The data indicate a downward trend in the overall value of imports over the last three years of available data, a continuation of a trend observed since the mid-1990s25.
25
Egyptian imports peaked in 1996 at a total of $US 49 million for the categories shown.
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Table 3.15
Egypts imports of food processing machinery 2001-2003 ($US million). HS code 84150 Refrigerators, freezers chests, cabinets, show cases. Presses, crushers, etc. for wine, fruit juices 8435 843860 850940 842122 842230 843810 843820 841720 840410 841940 843710 beverages. Machinery to prepare fruits, nuts & vegetables. Domestic food grinders, mixers, juice extractors. Filtering, purifying machinery for beverages.. Machinery to fill, close, aerates bottles & containers. Bakery & pasta making machinery. Machinery for confectionery & chocolates manufacture. Bakery ovens etc. non-electric. Auxiliary plant for steam / vapour generating boilers. Machinery for distilling or rectifying plants. Machines to clean, grade seeds, grains & dry legume. Total of above Source: CAPMAS & 0.75 0.29 3.15 0.22 11.83 3.36 0.86 3.41 0.01 0.28 3.64 31.96 0.29 0.13 3.85 0.01 6.28 1.98 0.77 2.39 0.02 0.20 7.05 26.23 0.29 0.13 2.74 0.09 6.99 4.91 1.72 1.55 0.01 0.17 2.46 22.24 0.44 0.18 3.25 0.11 8.37 3.42 1.12 2.45 0.01 0.22 4.38 26.81 2% 1% 12% 0% 31% 13% 4% 9% 0% 1% 16% 100% 4.16 3.25 1.18 2001 2002 2003 Average 2001-2003 2.86 11%
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4 Egyptian food processing sectors with export potential
The previous sections examined the general production and trade performance of the Egyptian FPI. In this section, we examine 6 main sub-segments of the Egyptian FPI considered to have the highest export potential; these sectors, with the exception of dehydrated vegetables, are also the subject of the international benchmarking exercise undertaken as part of this study. Additional details on these groups, together with other key sectors are provide in the Supplementary Report: sub-sector profiles. The 6 sectors covered are: Frozen Vegetables; Tomato products; Juices and Concentrates; Olive oil and products; Cheeses; Dehydrated vegetables and herbs.
4.1
Frozen vegetables
Overview The origins of the frozen vegetables sector goes back some 15 years, when the Egyptian Armed Forces constructed freezing lines set in reclaimed land. These production facilities stimulated the development of frozen vegetables exports and still play a role today, as there are still companies marketing their production26. Egypt is not yet fully at the stage of specialisation and industrialisation of horticultural production processing. In most countries, the development of this processing has been organised around a nucleus of specialised farms, something that has started in Egypt but the development of which needs to continue to be favoured. Currently, the range of Egyptian products is not structured in such away that it corresponds to the demands of many foreign markets. Nonetheless, it has succeeded for some ethnic markets and for customised/specialised labour intensive vegetables (e.g. turned vegetables lgumes tournes). Though a rather strong characterisation, the traditional approach has been to run freezing lines to process whatever vegetable, fruit and meats are available so as to maintain capacity utilisation rather than to seek specialisation. Increased specialisation should
26
Also about 15 years ago, Sonac was the first citrus and potato packing station to move into freezing vegetables and for export to Saudi Arabia (Abbar & Zaini)
95
move the industry towards a position in which it can develop a clear market strategy and in turn for the processing industry to pull agricultural production rather than the opposite way round, which is the current norm.
Table 4.1 Frozen vegetables - key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Value 24 14 49 29 25 15 4 10
Table 4.2
Frozen vegetables: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % % Value 131.7 39.9 44.0 91 94 85 23.4 0.4 -1.9 18.9 211 2 58
Production Around ten main private companies largely undertake production of frozen vegetables (see Table 4.4). In addition, army run factories commonly process frozen vegetables for private brands. Of the private companies some are specialised vegetables producers whilst others (mainly jam/fruit processors) process small quantities (a few hundred tons) of vegetables to increase capacity utilisations of their freeing lines. Among specialised producers, a number of companies (e.g. Givrex) have developed higher value-added products through additional processing before freezing (e.g. turned vegetables, artichoke parts etc.). FarmFrites, specialised in French fries (85% of production), has aggressively entered the frozen vegetables sector. As part of the Americana Group it has access to a relatively secure captive market of food service operations, which is an advantage for planning its production strategies. Faragalla is enlarging its freezing capacity, together with
96 Egyptian Processed Food Sector Review
investment in marketing capacities and diversification of product range, in order to increase exports. El Aguizy, a leading fresh vegetable exporter, is also investing in Individually Quick Frozen (IQF) freezing.
Table 4.3 Frozen vegetables: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value Source: Study team estimates based on CAPMAS and industry sources 1000 tons L.E. mil. 26.0 98 43.8 143 40.0 131 49.0 170 52.0 184 92-00 a.a.g.r. (%) 7 5 00-03 a.a.g.r. (%) 4 6
Table 4.4
Main Egyptian frozen vegetable companies Company Production (2002-2003) Thousand tons Montana FarmFrites (Americana) Basmah Faragalla Sonac AGA Cold Alex Givrex 12-17 9 6 5 4 4 3 2
Export performance A breakdown of Egyptian frozen vegetables exports by type is shown in Table 4.5, together with the main export destinations for each product in Table 4.6. The dominance of the category frozen vegetables nes complicates the analysis of the main markets by product type, although this may also correspond to the dynamic development of customised frozen vegetables: prepared artichokes for Greece and France, and okra for the USA. The main markets are Saudi Arabia (a third of total exports of frozen vegetables), USA, Greece and France. To the extent that the data reveals a complete picture of Egyptian exports, it is noticeable that with the exception of frozen vegetables nes, exports are highly concentrated in a few markets.
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Table 4.5
Egyptian frozen vegetable exports ranked by value (2002) HS Code Product Group Value $US thousands 71080 71090 71022 71010 71030 71029 71021 71040 Frozen Vegetables nes Frozen mixed vegetables Frozen beans Frozen potatoes Frozen spinach Frozen leguminous veg nes Frozen peas Frozen sweet corn Total of above Unallocated 710 Source: ICT Total 8,418 1,621 1,505 770 577 496 470 43 13,900 105 14,005 Share of total (%) 60.6 11.7 10.8 5.5 4.2 3.6 3.4 0.3 100.0
Table 4.6
Egyptian Frozen vegetables, main export destinations and destination share by product group, 2002 HS Code 71080 Frozen Vegetables nes 71090 Frozen mixed veg. 71022 Frozen beans 71010 Frozen potatoes 71030 Frozen spinach 71029 Frozen leguminous veg 71021 Frozen peas 71040 Frozen sweet corn 710 Total Saudi Arabia Israel Saudi Arabia 74 100 33 USA 14 Greece 11 France 10 Qatar 11 Israel 7 Ireland 4 Saudi Arabia USA Saudi Arabia Saudi Arabia Saudi Arabia 80 49 60 56 68 Qatar Saudi Arabia Qatar Germany Israel 10 Jordan 41 Israel 40 27 Canada 14 France 11 Sweden 8 Sweden 2 6 2 USA 5 Canada 2 4 Greece 19 France 16 Saudi Arabia 15 USA 13 Product Group Largest market (%) 2 largest
nd
(%) 3 largest
rd
(%) 4 largest (%)
th
Source: ICT
Table 4.7
Frozen vegetables: evolution of exports Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value Total Value 1000 tons L.E. mil. $US 8.0 23 6.9. 17.1 49.5 13.4 23.4 44.1 9.8 25.0 89.6 15.0 27.0 96.8 16.2 92-00 a.a.g.r. (%) 10 10 9 00-03 a.a.g.r. (%) 13 22 4
Source: Study team estimates based on CAPMAS, ITC and industry sources
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Distribution channels for exports The main distribution channels for Egyptian exports of frozen vegetables are described in Table 4.8.
Table 4.8 Distribution channels for Egyptian exports of frozen vegetables Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Yes (exports to France, Saudi Arabia) Yes (USA, Greece) Yes (USA) No
4.2
Tomato products
Sector Overview Egypt produces around 5 million tons of fresh tomatoes per year. The public sector took the lead in the development of processing capacity (e.g. Kaha), and over the last decade capacity has been increased through private sector investments, both for the production of tomato concentrates and for pastes, sauces and ketchup. In 1990, Heinz began operating in the country (in partnership with Americana) and promoted the cultivation of industrial varieties of tomatoes (i.e. with higher brix dry matter more suited to industrial processing)27. The Heinz brand claims to have a 90% share of the domestic market but newcomers (e.g. Faragalla and Frosty) have entered the market. Also, challenges are coming from abroad (e.g. Oman).
Table 4.9
Tomato products key figures 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Value 20 11 18 18 3.5 6 n.a. >10
27
Heinz began production using imported tomato paste but has gradually replaced this with locally produced tomatoes. Heinz now claims a 90% share of Egyptian market for tomato ketchup. Furthermore, 30% of Heinz production goes for export.
99
Table 4.10
Tomato products: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate
28
Value 101.1 17.9 47.5 38 89 41 0.2 1.0 -0.2 18.9 95 5 1
L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % %
Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations
Production Egypt produces around 18 thousand tons of tomato products (paste) per year. This is a limited figure when one considers that total production of the Mediterranean area is around 1 million tons29. Furthermore, Egyptian production is being challenged by the expansion of Chinese production, and the supply of low cost tomato paste from this country is one reason claimed for low capacity utilisation rates in Egypt30. Both cold break and hot break (up to 36 brix) tomato paste are produced. More generally, however, the product range of Egyptian companies remains, for the moment, quite limited; particularly when compared to ranges available in main export markets.
Table 4.11 Tomato products: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 5.5 18.3 89.6 17.9 101.1 18.0 105 92-00 a.a.g.r. (%) 16 00-03 a.a.g.r. (%) -1 5
Source: Study team estimates based on CAPMAS and industry sources
28
29
30
The data from CAPMAS indicate a significant increase in available capacity between 1999/00 and 2000/01 for both the private sector (from 14.6 to 19.5 thousand tons) and more importantly for the public sector (3.7 to 28.0 thousand tons). These increases result in a drop in capacity utilisation rates from 100% to 81% for the private sector and to 7% (!) for the public sector. EU-Mediterranean countries dominate this production, but around 30% comes from non-EU countries: Turkey 16%, Tunisia 7%. See footnote 28.
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The main companies in the sector are shown in Table 4.1231. Heinz is investing in new capacity in order to enlarge its product range and to increase production for exports32. Faragalla is, also, broadening its product range for export markets and is beginning to develop on the domestic market.
Table 4.12 Main Egyptian producers of tomato paste (hot and cold break) Company Production capacity (tons per day) Kaha Faragallah Paste & Juice Foodico Heinz / Americana Tamaget Other Factories: Edfina Alsohagy Fibco Frostie 100 80 70 50 600 450 300 200 100 (+new factory 300) 200
Export Markets and performance Official data on exports of tomato products do not provide a clear picture of the export situation. To date there has been hardly any exports of tomato pastes. For other tomatobased products, these are considered to be food preparations and are not separately identified. On the basis of company interviews, the estimated volume of exports is put at around 3 to 3.5 thousand tons ($US 6 million). The main target for exports is the Gulf Region and N. Africa; for, example Heinz claims that 35% of its Egyptian production goes to the Gulf region33. Moreover, it appears that the companies products are competing well against products form Asia (esp. China) in the Gulf region. Distribution channels for exports The main distribution channels for tomato products are described Table 4.13.
31
32
33
These companies are involved in the production of tomato paste, but many more companies are engaged in tomato processing (e.g sauces.) As yet, it is not clear what is the impact of the devaluation of the Egyptian Pound on the competitiveness of Egyptian tomato products. The partnership with Americana, which markets products under its own brand and supplies to its network of fast-food companies, helps provide a continuous flow of production. It may be noted that, despite the fact that Turkey is a far more important exporter of tomato products, the export performance of Heinz-Egypt compares favourably with that of Heinz-Turkey. This may reflect good competitiveness of Egyptian production and/or the relative specialisation of Heinz-Egypts production that forces it towards exporting.
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Table 4.13
Distribution channels for Egyptian exports of tomato products Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Food service Own import company Comments No Yes Yes (e.g. Saudi Arabia, Africa) Limited (e.g. Heinz to Saudi Arabia, Kuwait, UAE Limited (e.g. Heinz-Americana) No
4.3
Fruit juices, pulp and puree

Overview The fruit juice industry originates from the processing of surplus fruits, as is the case with jam production34. During the 1990s the development of the Egyptian fruit juice industry was promoted through investments in UHT carton packaging lines. A consequence of the move towards solution-packaging factories has been the close integration of the dairy and fruit processing sectors, even though some successful fruit specialist still remain. Buying (on lease) such lines, companies sought to achieve higher capacity utilisation rates by processing both fruit juices and milk35. In fact, since the Egyptian market for liquid milk is relatively small, most producers have run their investments largely for the processing and packaging of fruit juices. Alongside this development, some fruit juice producers continued to maintain (existing) glass-packaging lines, whilst others did not switch to cartons at all. Domestic demand for juices is mainly for pocket money small pack or bottle sizes. On the export side, fruit juices packed in UHT cartons is to all intents a commodity product, alongside which a higher-value added chilled fruit juice in carton segment is developing. Exports in small glass bottles represent the traditional high quality exotic offer. Increased understanding of export market requirements, combined with seller and buyer recognition of the specific quality of Egyptian mango and guava juices, has encouraged many producers to become involved in the production and export of concentrates. Nonetheless, the major players dominate the global market for concentrates, and Egyptian potential in this segment would appear to be limited to a minor specialised producer. Despite severe competition from countries such as Brazil and India, the recent devaluation of the Egyptian Pound has, nonetheless, opened up market opportunities for Egyptian exports. Notably, devaluation has enabled the export of low-price, low-quality Egyptian fruit concentrates.
34
35
Some successful jam manufacturers also produce quality juices. Historically these quality exotic juices have been packed in (small size) glass bottles. Looking to further improve utilisation of packaging lines, several few companies started to pack soft feta cheese in the same aseptic cartons. With little domestic demand for this product-packaging combination, all these companies sort to develop export opportunities. The most successful channelled their products on the ethnic-expatriate markets, in the USA for example. Through this type of market opening, the sector leaders have also recently managed to develop exports of UHT milk.
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Table 4.14
Fruit juices and concentrates - key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Value 61 30.6 80 42.8 22 13.6 4 20
Table 4.15
Juices & syrups: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % % Value 198 47.9 62.7 76 74 61 1.4 6.5 -1.7 44.5 108 3 14
Production There are 3 basic forms of processing: 1. Direct processing and bottling of pure fruit juices; 2. Freezing and storage, either for further processing (e.g. jams) or export 3. Processing as concentrate, permitting storage of up to 1 year36. In addition, a few Egyptian companies (e.g. Nile Pulp) have invested in the production of higher quality fruit pulps37.
36
37
Concentrates may subsequently be converted back to juice if the quality is good enough. In the case of concentrates made from poor quality fruit, these may be marketed in the nectar category (i.e. with added sugar). Further, some Egyptian concentrates is known to pass via specialized re-treatment units, typically located in Israel and Cyprus, from which it eventually finds itself back on the market as fruit juice. Such high quality production requires closer integration with the supply of fruits (agriculture) in order to assure the quality of supplied materials.
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Table 4.16
Evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Juices & syrups Concentrate Total Value 1000 tons 1000 tons L.E. mil. 30.0 n.a. n.a. 81.9 11.5 350 47.9 13.0 198 51.0 15.0 210 58.0 22.0 256 60.0 26.0 285 92-00 a.a.g.r. (%) 13 00-03 a.a.g.r. (%) -11 24 -10
The industry consists of around about 20 main production units, of which 10 have UHT Tetra packaging lines (9 of the 10 are located in dairies). As noted above, development of the domestic market for UHT milk has proved to be a relative failure and this has pushed the development of fruit juice processing. The fact that enterprises have been tied in to their investment in packaging lines38 has influenced the sectors development and strategies. Basically, when faced by the quasimonopoly of carton pack suppliers39, enterprises over invested in capacity given the relatively weak (low income) domestic market, in which alternative sources of fresh milk and juices are available. This has forced companies with UHT carton packaging facilities to adapt their behaviour: Two traditional market leaders (Juhayna, Enjoy) have nicely positioned themselves on the ethnic export market, giving a much lower priority to development of the domestic market; A more recent entrant (Faragalla) has adopted an aggressive export marketing of its own wide range of branded juices and other processed foods, aimed at the general as opposed to ethnic market; Another company has focussed on supplying the retail distribution sector in Egypt and Europe with distributors ownbrand juices. Despite the success of such strategies, the fundamental weakness of Egyptian production remains the relatively low volumes of fruit being processed relative to major producers. In a global market characterised by high-volume low-cost production, the need for Egyptian companies to cover the (fixed) costs of investments in packaging technology running at low capacity and/or low volumes implies higher production costs and, hence, poor competitiveness. Export Markets and performance Egyptian success in the USA, and elsewhere, has been achieved through the initial development of juices sold in small glass bottles and targeted at the ethnic market. With the development of carton-packaged juices, Egyptian companies have widened their target markets, with success in some specific areas.
38
39
It is a typical strategy of the market leader Tetrapack to lease equipment (new or re-engineered) and provide training and incentives for launch campaigns, provided the company purchase paper for at least 1 year and signs an after sales agreement. A criticism made during the company interviews was that packaging equipment/material suppliers provided enterprises with over optimistic evaluations of the market for carton packaged milk and juices.
104
According to data from the ITC Trademap database (see Table 4.17), Egyptian exports of fruit juices in 2002 are estimated at a value of $US 8 million. The main export market is the USA with a share of 64% of the value of exports. Some ways behind are: Saudi Arabia, Jordan, Italy and Canada40. From interviews conducted by the study team, however, it appears there is a significant underestimate of the value of exports of fruit juices and concentrates. For 2003, industry estimates indicate export volumes of around 11 thousand tons for each of the categories fruit juices and fruit concentrates. Further, the underlying trend is of a 15% increase per annum in the volume of packaged juice exports and an additional 1,500 tons per year of fruit concentrates. It appears that the devaluation of Egyptian Pound in 2003 had a positive impact on export sales41, particularly for concentrates.
Table 4.17 Egyptian exports of fruit and vegetable juices, unfermented (HS code 2009), 2002 Importing country Total USA Saudi Arabia Jordan Italy Canada Source: ITC Value $US thousand 8,032 5,117 889 477 448 401 Share % 100 64 11 6 6 5 Volume Tons 1,213 894 1,075 428 Share % Unit value $ per ton 733 534 417 937
Distribution channels for exports The main distribution channels for juices and concentrates are described in Table 4.18.
Table 4.18 Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Yes, for fruit concentrates Main export channel, also for co-packing of retail distributor own brands Yes, for ethnic distribution channels Yes, but mainly via traders No
40
41
With some companies targeting their marketing efforts towards Europe, the Baltic States and other E. European regions (Russia), the share of the USA is expected to fall. Companies with only glass bottling packaging lines have been hampered in taking advantage of devaluation because of the shortage of supplies of locally produced glass bottles.
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Table 4.19
Key players in the fruit juice and concentrates sector Juices: Juhayna Enjoy Faragallah Greenland Domty Edafco [other active companies are Vitrac, Halwani, Comby, El Horreya] Concentrates: El Marwah (Juhayna) Faragallah Nile Fruits Foodico P&J Kaha Comby Hansa Foods Edfina
4.4
Olive oil and table olives

Production Seven main companies dominate Egyptian production (see Table 4.21). Leading firms in the sector offer a broad range of products: all qualities of olive oils and many forms of table olives (further processed and marketed on the domestic market and in the Gulf region). The biggest producer of table olives in Egypt is Dr. Olive (Zagazig), with an annual production of about 10 thousand tons (of which 3,000 tons are exported to Libya and the Gulf states). It is followed by Wadi Foods, Hi Tadi and El Samahy. Beyond this there are numerous smaller traditional pickling plants producing around 100 thousand tons per year. The only top notch producer of quality table olives in Egypt is Egyptian Canning Co. (Americana), which produces 1000 tons of top quality canned and in glass jar table olives for export to N. America and Australia, with local consumption of 2-300 tons by American Pizza Hut franchises and fast food chains.
106
Table 4.20
Olive oil and olive products - key figures, 2003 Value Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number 6 5 5 80 8 160 Olive Oil 3.5 Table Olives 190
Table 4.21
Main Egyptian producers of olive oil Company Share of Egyptian exports of olive products (%) Mina Oils Dr. Olive El Salheiyah Wadi Foods NSPO EMCO Janaclis 50-60 15 13 7 6 5 4
Table 4.22
Olive oil and table olives: evolution of production

Units 1991/92 1999/00 2000/01 2001/02 2002/03 prov. 2003/04 prov. 91/9299/00 a.a.g.r. (%) 99/0002/03 a.a.g.r. (%)
Table olives Olive oil
1000 tons 1000 tons
38.5 1.1
85.0 3.8
70.0 -
135.0 -
160.0 8.0 -
10 17
23 28
Source: Study team estimates for olive oil, International Olive Oil Council for table olives
Export Markets and performance Italy is the most important export destination for Egyptian olive oil, reflecting the integration of a few Egyptian producers/exporters into the Italian global olive oil marketing industry. Other companies (e.g. Mina Oils, Dr. Olivee and Wadi Foods) have developed their export sales independently, focussing on the Gulf, USA and France.
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Table 4.23
Olive oil and table olives: evolution of exports Units 1992 2000 2001 2002 2003 2004 forecast Table olives Olive oil 1000 tons. 1000 tons 9.0 1.1 10.0 3.6 12.0 3.8 25.0 4.0 80.0 5.0 55.0 5.5 92-00 a.a.g.r. (%) 1 16 00-03 a.a.g.r. (%) 100 12
Distribution channels for exports The main distribution channels for olive oil and olives are described in Table 4.24.
Table 4.24 Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Most exports Yes Yes No
4.5
Cheese products
Dairy processing sector According to data from CAPMAS there were 3334 licensed dairy processing units in 1997; of these, some 95 percent had 5 or less workers (see Table 2.25). The majority of units process less than 1 ton of milk per day and there are very few units processing more than 10 tons of milk per day during the peak season (December-April); most processing units work only during the first 6 months of the year, producing soft and hard cheese and, when the price is low enough, butter and ghee.
Table 4.25
Breakdown of licensed dairy processing units by number of workers Number of workers Number of processing units Comparative importance (%) 1-5 6 10 11 15 16 20 21 25 26 30 31 40 41 50 51 100 101 500 Total Source: CAPMAS, June 1997 3190 57 21 20 10 6 4 11 12 3 3334 95.68 1.71 0.63 0.60 0.30 0.18 0.12 0.33 0.36 0.09 100.00
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There are around 25 companies involved in the industrial processing and packaging of dairy products. Of these, only 14 companies are members of the Dairy Industry Development Association (DIDA) and about 7 or 8 can be considered as significant players (see Table 4.26, at the end of this sub-section). Most production of these companies use fresh milk, as recombining (use of skimmed milk powder) remains unimportant due to its higher cost. Overall the private commercial sector (basically members of the DIDA) account for around 15 percent of production of dairy products. They have, however, made significant progress since the early 1980s and taken market share away from the public sector company, Misr Milk and Food Company, whose output has fallen to an estimated 10 percent of total supply. The commercial sector, both private and public factories, has significant over capacity. Their total capacity is estimated at 1.9 million tons of dairy products per year, although actual yearly production is only around 500-800 thousand tons. Furthermore, it appears that progress towards changing Egyptian consumers preferences from fresh to processed products is slow; this could seriously impede further development of the private industrial sector. At the same time, although strong urban demand provides a firm basis for modern large-scale producers to expand commercial production, factors such as high capital and material costs and limited purchasing power are expected to be major constraints on production. More generally, the constraints facing the dairy industry in Egypt include: Production of unclean milk in some dairy farms makes it difficult to use such milk to process end products with a high good quality. The difficulty of obtaining high-quality raw milk with a reasonable price. Lack of milk testing laboratories services for both dairy farms and plants. Lack of consumer awareness regarding the hazards of using unprocessed milk leaves the peddlers unchecked and limits both the demand and price of processed milk. Unfair competition between the imported dairy products (which are subsidized) and the local producers who pay high customs fare for the imported raw materials and/or equipment. Poor handling of dairy products during storage, shipping and distribution cause quick deterioration and/or low quality end product. This in turn gives the consumer a bad impression about these products. Most dairy processing units are still utilizing old techniques for manufacturing and packaging. Also, they put limited investment in marketing and branding. The lack of coordination between the dairy producers and processors makes it difficult to establish a National Dairy Association/Board, which can play a significant role to develop the industry within Egypt. Cheese production Total cheese production in Egypt is estimated to be around 425 thousand tons. The most important category is Feta cheese (est. 320 thousand tons in 2002), about 70 percent of which is produced in small unlicensed factories. The rest is Romano cheese (est. 65 thousand tons in 2002) and processed cheese (est. 40 thousand tons in 2002). In addition, there is a small but growing production of mozzarella cheese and a very small amount of
109
blue and cheddar cheese. In recent years the public sector market share has diminished drastically to almost insignificant levels42. Butter and ghee Egypt produces only a very small quantity of butter on a commercial scale (est. 10 thousand tons)43. The absence of a significant domestic butter industry is due to several factors, the most important being the lack of adequate refrigeration throughout the country, which makes the conversion of butter-to-butter oil and ghee necessary. Also there is an increasing trend toward the use of palm oil in ghee rather than butter44. Milk Powder Egypt does not have a significant milk powder production. Imported non-fat dry milk (NFDM) and whey powder are used mainly for the production of feta cheese, yoghurt and ice cream. Small quantities are also used in the production of chocolate and pastries. Export Market and performance Egypts exports of dairy products increased dramatically in 2003, up from 6.8 thousand tons in 2002 to 13.4 thousand tons (+97%); with the value rising from L.E. 42.2 million to L.E. 87.3 million (+107%).
Table 4.26 Leading companies in the dairy product-processing sector Company Leading products Main export locations (*=export product) 1 Juhayna
UHT Milk* Yoghurt Drinking Yoghurt Juice* USA, Italy, Germany, Switzerland, Netherlands Jordan, Libya Mauritania USA UK, Greece, Netherlands Saudi Arabia, Kuwait, UAE, Libya, (plus 15 other Arab countries)
Output 2003 equivalent fresh milk input in tons 180000
Number employees
of
750
Greenland (Americana Group)
Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese* UHT Milk* Juice*
144000
600
Domty (Candia)
Feta Cheese* Domiati Cheese* Mozzarella* Processed Cheese Drinking Yoghurt UHT Milk* Juice*
Qatar, Bahrain, Saudi Arabia, UAE France, Italy, Switzerland, Germany, Sweden, Canada, USA
72000
300
Enjoy
Set Yoghurt Drinking Yoghurt UHT Milk* Juice*
USA, UK, Netherlands, Sweden, Italy, Libya, Lebanon, Palestine
60000
250
42 43 44
Source: Egypt Dairy and Products Annual 2003, USDA Foreign Agricultural Service, GAIN Report, September 2003. Most butter production is for farmers home consumption with a small amount going to sale at local markets. Ibid, footnote 42.
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Company
Leading products Main export locations (*=export product)
Output 2003 equivalent fresh milk input in tons
Number employees
of
Nestle
Ice cream Set Yoghurt Drinking Dry blends* Baby foods*
Ethiopia, Sudan
60000
250
Siclam
Set Yoghurt Drinking Yoghurt Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese* UHT Milk* Juice*
Italy, Netherlands Jordan, Lebanon, Palestine, Kuwait, Saudi Arabia
60000
250
Faragallah
Processed Cheese* UHT Milk* Juice*
USA, Canada Europe Australia, New Zealand Jordan, Saudi Arabia, Morocco, GCC, Libya Other Africa
54000
200
Arab (Lactalise)
Dairy Feta Cheese* Domiati Cheese*

Hard Cheese* Processed Cheese*
Iraq,
Libya,
Saudi
Arabia,
36000
200
Kuwait, UAE, Qatar, Bahrain, Oman, Jordan, Yemen
El Misrieen
Set Yoghurt Drinking Yoghurt Feta Cheese* Domiati Cheese* Juice*
Saudi Jordan
Arabia,
Kuwait,
UAE,
180000
200
Qatar, Bahrain, Oman, Libya,
10 Katilo
Yoghurt Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese*
Saudi Arabia, Jordan, Kuwait, UAE, Qatar, Bahrain, Oman USA
180000
200
11 Edafco (Viva)
UHT Milk* Juice*
Libya Germany, Italy, Sweden, Austria, UK Mauritius USA
180000
200
12 IGI Interagro (ex Dallah) 13 Bell Egypt
Set Yoghurt Drinking Yoghurt UHT Milk* Processed Cheese* Saudi Arabia, Jordan, Kuwait, UAE, Qatar, Bahrain, Oman USA
180000
200
180000
200
14 Misr Milk &Food Set Yoghurt Company

Feta Cheese Domiati Cheese Hard Cheese Processed Cheese* Pasteurised milk UHT Milk
Saudi Oman
Arabia,
Jordan,
Iraq,
180000
200
Kuwait, UAE, Qatar, Bahrain,
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Company
Leading products Main export locations (*=export product)
Number employees
of
15 Oburland
Feta Cheese Domiati Cheese Processed Cheese* Emulsifiers/stabilizers
Libya
180000
200
16 Egyptian Danish Ice Cream* (Iceman) 17 Hawaii Total Source: Study Team estimate
Ice lollys Ice Cream*
50
200
50 782200
200
4.6
Dried vegetables, herbs and spices

Production In 1953 the first dehydrating unit was set up by foreign investors in the city of Port Said. This investment set out the path for future growth markets: industrial ingredients for products such as soups and sauces, and for the fast food business. In the 1960s, processing of dried onions started south of Cairo and later 3 factories were set up in Alexandria and the Delta area. Currently there are 8 dehydration units located in the geographical triangle of El Menia Port Said Alexandria; with average distances between supplying farms and dehydration units of around 50 km45.
Table 4.27
Dehydrated vegetables - key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Export data refer to dried vegetables Source: Study Team estimates Persons (1000) Number 13.5 20.0 12.1 17.7 1.2 8 Value 0.3
The main dehydrated vegetables produced in Egypt are onions, leeks and garlic, along with Molokhiyah46. The main dehydrated herbs and spices produced in Egypt are basil, cumin seed, thyme, fennel, caraway, chamomile and mint leaf.
45 46
Some onions are supplied, however, from more distant farms. A green leafed plant, indigenous to Egypt, and popular in the Japanese market.
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Key players in the sector include: Giza National Dehydration (Kato group), which has maintained strong links to MacCormik (world leader in spices); El Nanaeiah (Gharieb group), which has strong ties to Germany; New Benisuef (El Shenawi group), which has 3 dehydration lines and operates freely on the market; El Nasr Dehydration, former public enterprise that encountered difficulties after privatisation but is now performing well under new ownership; El Tanbouli in association with Kato has set up a new line in Beni Sueff. In addition, Agro Green and AgroMisr, operating smaller units are, nonetheless, active in the sector. Further, Sekem, is the Egyptian leader in the organic segment. The value of production is not available from any known source, but its evolution has largely followed the success of Egyptian exports (annual increase in the region of 1,000 to 1,500 tons).
Table 4.28 Dried onions: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 9.2 10.5 12.0 13.5 14.0 92-00 a.a.g.r. (%) 00-03 a.a.g.r. (%) 14
Source: Study team estimates based on industry sources
Export Markets and performance Europe is the main market for Egyptian exports of dried onions, with 90% of Egyptian exports going to Germany, the Netherlands and the United Kingdom47. The United Kingdom still maintains strong links to commonwealth countries and tends to import high quality products that are either destined for domestic distribution or further processing. The Netherlands and Germany import both for further processing and for re-export, either within the EU or beyond. The price for the EU market is formed in Hamburg/Hanover. Currently, Egyptian producers receive a fair price for the production. Improvements in the quality of production that has come on stream in early 2004 should enable a 10% increase in value (e.g. $US 1,800 per ton for kibbled grade, $US 2,000 per to for fine powder)
47
Egypt exports 7-10,000 tons of dehydrated vegetables to the EU (largely as an ingredient for soups and sauces). The EU duty free quota has been increased from 7 to 16 thousand tons per annum. Egypt is unlikely to reach this level in the near future due to the high price obtained for fresh onion exports in 2004.
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Table 4.29
Dried vegetables: evolution of exports Units 1996 2000 2001 2002 2003 2004 forecast Volume Total Value Total Value 1000 tons L.E. mil. $US 9.2 55.9 16.1 10.9 60.9 16.5 12.8 73.4 16.3 12.1 105.8 17.7 14 120 20 96-00 a.a.g.r. (%) 4 2 0 00-03 a.a.g.r. (%) 4 20 2
Table 4.30 Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Producer partnerships Own import company Comments Starting for high grade products Control virtually all export volumes Not applicable No No
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5 Demand-side factors influencing development of the Egyptian FPI
5.1
Social and demographic change

The growth of the Egyptian population implies an annual increase of over a million persons. Of the total population, however, the vast majority do not as yet represent a significant market for the FPI, since their purchasing power remains low. With the exception of small volume purchases of a limited range of products from the majority of the population, the main target groups of the FPI can be characterised crudely as follows: 2.5 million upper-income consumers; 10 million low to middle-income consumers; Tourists, equivalent on an annual basis to approximately 145 thousand additional consumers. It can also be noted that higher income consumers are often able to employ domestic staff to purchase and prepare fresh foods, hence limiting their impact on the demand for processed foods. Nonetheless, despite the limited size of the market, as represented by consumers able to afford purchases of processed food products, the changes in Egyptian society are supporting changes in the food processing sector, for example: The growth of the urban population; Improvements in education levels of younger people and, in-turn, higher income levels is a stimulus to the development of the FPI; A greater number of females engaged in the workforce, together with their developing of greater autonomy and scope for personal time-management raises demand for more convenience foods. Overall, opinions from the retail distribution sector suggest that they are convinced that there is significant potential in Egypt for the development of processed/convenience food market.
5.2
Migration and access to western markets

Arab immigration to western countries has resulted in the development of a natural market for ethnic foods. However, to access these markets, exporters need to ensure that their products comply with local environmental, health and safety standards while, at the same time, retaining the original characteristics sought after by immigrant consumers. One advantage that Egyptian processed food exports possess is the brand loyalty to Egyptian products of ethnic consumers in markets in the EU, North America and
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Australia-New Zealand. This goes hand in hand with full compliance to Halal requirements, and in certain certified factories to kosher requirements. Although, immigrant populations can provide an entry point to foreign markets, one key for success is to expand the market to a broader range of consumers. This implies meeting the consumer preferences of western consumers and adapting to their changing tastes and demands. Although there are exceptions, it remains the case that there has so far been a failure to convert imported ethnic food, from Egypt and Arab countries more generally, into a mass consumption product.
5.3
Organisation of distribution markets

Egyptian consumers are increasingly becoming aware of the quality and variety of consumer-orientated products. As a result, Egyptian consumers buying habits are changing dramatically. In the past, most Egyptian consumers used to buy products, such as meat, fresh fruits and vegetables from small neighbourhood shops. However, with the increasing number of supermarkets and hypermarkets in Cairo and Alexandria and services offered in one place, many middle to high-income consumers have started to purchase most of their requirements from supermarkets48. What may be termed the modern retail sector is in relative infancy in Egypt; in 1999, Metro opened its first supermarket in Cairo and now has 30 outlets. Moreover, the experience of Sainsburys revealed some of the pitfalls for foreign distributors entering the Egyptian market; the company invested heavily in setting up a network of modern supermarkets but was ultimately discouraged by the apparent discontent directed at the companies operations. Nonetheless, the example given by Sainsburys and other companies that followed demonstrated the way forward: well designed shops and an attitude that recognised the consumer as the central element of the distribution service.
48
Source: USDA Foreign Agricultural Service, GAIN Report Egypt Exporter Guide 2003.
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Table 5.1
Breakdown of modern food retail outlets in Egypt Ownership Size Category Total Number of Outlets (estimate 2003) Egyptian Supermarket (> 15 outlets) Egyptian Supermarket (5-15 outlets) 30 Ragab & Sons (13) Fathallah (8) Zahran (5) Egyptian Supermarket (2-5 outlets) 20 AbuZekri(4) Seoudi (3) Oscar (2) El Hawari (1 super + 1 hyper planned) Egyptian Foreign Hypermarket Hard Discount Supermarket Foreign Hypermarkets 2 Carrefour (France) 4 5 Alfa (4 hyper + 1 super) Shoprite (5) 30 Companies (number of outlets 2002/2003) Metro
Source: Study team estimates
Table 5.2
Number of retail outlets by type in Egypt 1998 1999 2000 2001 2002 Change 1998-2002 Supermarkets Hypermarkets Convenience stores Source: Euromonitor Data 2003 325 2 245 360 2 250 390 2 280 437 3 324 493 6 372 +168 +4 +127
The lessons learnt by Egyptian distributors from the Sainsbury experience, as reflected in interviews with Egyptian retail distribution companies, has brought greater understanding of the rules of competition in a modern retail sector and what this may mean in the future. Examples include: The importance of investing in modern shop outlets and putting an end to distributing via low quality premises; The importance and means of attracting customers through marketing49; Recognition of the possibilities of grouping orders to manufacturers, especially with regard to non food products. At the same time, it remains the case that certain practices still remain in place that would not be generally accepted by most modern retailers, for example: Retailers are predominately supplied directly by suppliers from their factories and using the suppliers own transport. In some cases, this results in several deliveries being made during the same day; Ordering of goods is not centralised, with each shop outlet sending in separate orders to suppliers50.
49
For example this may cover promoting frozen food as being as good as fresh. Also, Metro is now distributing a leaflet aimed at informing consumers on products, prices, and giving consumer advice.
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Further dynamic development of the modern retail distribution can be foreseen. Carrefour, for example, is preparing for further development and should further introduce the rules and practices of modern distribution to the Egyptian food retail sector. The company has begun cooperating with a few companies to raise volumes through multiple branding: producer brand, retail brand (distributors own label), and first price brand (i.e. lowest price). On the basis of a more global view of the development of the modern retail sector, further change in Egypt is to be expected. The hypermarket format appears to be leading development in many new (low income) markets but, at the same time, the hard discount format has had some interesting successes. In South Africa, for example, processed food is affordable to about half the population and the modern retail sector now accounts for about 80% of sales to this segment of the population. From the perspective of the FPI, such a development has important implications for development strategies, since hard discount retailers in particular demand low prices and, hence, high performance processing.
50
This is explained by retail distributors as being due to the high variability of demand which makes individual ordering necessary to avoid holding excess stock or losses from unsold products.
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6 Supply-side factors influencing the development of the Egyptian FPI
6.1
Agricultural production
The agricultural sector accounts for 20 percent of Egypts GNP, 34% of the workforce and contributes 20% of exports. The area under cultivation has risen steadily from 6 million feddans51 to 8 million feddans due to continuous development and reclamation of new land, together with protection of agricultural plots from use for construction of housing. Increased land under cultivation, combined with the pursuit of liberal agricultural policies and support from research centres in the introduction of new varieties has enabled a dramatic increase in agricultural output (see Table 6.1 and Table 6.2).
Table 6.1
Output of main agricultural products (millions of tons) 1999 Wheat Rice Corn Sugar Cane Sugar Beet Vegetables Fruits Source: MALR and ACC 2.00 2.44 3.35 8.70 1.98 8.00 2.60 2004 est. 6.62 5.70 6.60 15.26 3.20 15.40 7.50 Change 331% 234% 197% 175% 162% 193% 288%
Table 6.2
Output of main animal products (millions of tons) 1999 Milk Beef Poultry Eggs Fish 1. Billions of eggs
1
2004 est. 4.0 0.545 0.700 7.0 0.750
Change 211% 173% 167% 219% 268%
1.9 0.315 0.420 3.2 0.280
Source: MALR and ACC
51
1 feddan = 4200 square meters.
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FAO estimates of the volume of production illustrate the position of Egyptian production in global and regional terms (Table 6.3). According to these data, Egypt accounts for less than 2% of world production for all of the categories covered. Nonetheless, the importance of Egypt in terms of production in the Near East is more evident, particularly for production of dairy products, beef and buffalo meat, poultry meat, vegetables and fruit.
Table 6.3 Egyptian production of agricultural products and share of world and regional production Egyptian Production (million tons) 1998 Vegetable oils Dairy Total Meat - Beef and buffalo meat - Poultry Meat - Sheep and goat meat Vegetables (incl. Melons) Fruit (excl. melons) Vegetable oils: 1998=1999 Source: FAO 0.133 1.037 1.254 0.518 0.535 0.095 12.503 6.347 2002 0.185 1.190 1.442 0.554 0.652 0.108 14.115 7.408 Egyptian share of production, 2002 (%) World 0.18 1.68 0.58 0.90 0.88 0.91 1.73 1.55 Near East 9.4 39.0 18.9 28.7 18.9 5.7 20.9 18.0
The most notable factor limiting further agricultural development in Egypt is the availability of water. Estimates of available water resources suggest that they are sufficient to provided irrigation for 11 million feddans of agricultural land, a figure that Egypt is expected to reach by 2007. At the same time, agri-food policies in Egypt must meet the challenges of a steadily increasing population; annual population growth is expected to be 2.2%. Increasing demand will require agricultural output to increase by 4.1% per annum in order to keep pace with the growing population. From the perspective of the FPI, the development of new lands has brought an additional benefit beyond the increase in supply of fresh agricultural produce. Hand in hand with the development of new lands has been the organisation of agricultural production in larger farms. Improved management control over these farms, compared to smaller producers, facilitates cooperation between food processors and agricultural producers, since these farms are able to offer better guarantees over volumes, prices and quality. Nonetheless, the share of managed farms remains small52 and contract farming is the exception rather than the rule. Consequently, most agricultural raw materials used by the FPI are still purchased on a spot basis (i.e. at the time of harvesting / delivery to the market, rather than under pre-arranged supply contracts), which is an obstacle in meeting traceability demands. The new Minister of Trade and Industry has asked the Ministry of Agriculture and Land Reclamation (MALAR) to allocate one million feddans for farming of export agri-foods
52
Such farms are estimated to account, for example, for only 2.5-3% of exported volumes of agricultural products.
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in 2005 to meet export market demands with a goal to increase agri-food exports (Fresh and processed) from the current level of LE 1 billion to a targeted LE 5 billion LE. The fact that most Egyptian food processing companies are SMEs, without the size to exercise control over their agricultural inputs (either through contract farming or own production of crops) means that they must rely on what the agricultural sector delivers. The agricultural sector, in turn, is characterised by small-scale producers. Overall, this makes it difficult to put in place the requisite quality control mechanisms required for export and by modern retail distributors, and ultimately final consumers.
6.2
Subsidised food items

Egypt subsidises a number of basic food items; the total level of food subsidies is L.E. 4.4 billion, plus a further L.E. 5.8 billions for Baladi Bread and L.E. 1.9 billion for flour bread.
Table 6.4
Subsidised food items (2004) Subsidy L.E. million Baladi bread (82%) Flour bread (72%) Edible Oil Lentils Vegetable Ghee Beans Rice Pasta Tea Other (Sugar,etc) Source: Ministry of Supply 5,800 1,900 540 540 480 450 360 360 96 2.820
6.3
Imported food products

For a description of the rules governing the importation of food products, see Section 7.4. For data on the main Egyptian imports of processed food, see Section 3.2 (see Table 3.6 and Table 3.7). Major import categories of processed food include edible oils, dairy products and prepared fish53. FPI segments and specific market segments reliant on imported processed food include: The production of sweets and confectionary products depends heavily on imported sugar, cocoa, beans, oils, fats, coconut milk, nuts and dried fruits.
53
The Egyptian FPI relies heavily upon a wide variety of imported raw materials. Among the most important categories are: frozen beef, wheat (for milling into flour for bakery products), corn (for corn puff snacks etc.), edible oils, butter & ghee, cheddar cheese, skimmed milk powder/casemate (for the dairy industry), herring and salmon (for local smoking), mackerel and sardines (for local canning), sugar, cocoa-chocolate-gums (for the confectionery industry).
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The production of several varieties of soft drinks is based on imported ingredients. Hotels & catering: among products imported for hotels are: high quality beef54, seafood (lobster & soft crabs), sauces, canned vegetables and fruits, Tex Mex products and beef liver.
In addition, the Egyptian FPI is reliant on imported ingredients such as: flavourings, colourings, emulsifiers, preservatives and pectin, as well as imported packaging materials (see Section 6.5)
6.4
Imported materials for re-export

According to Egyptian law, import taxes are not paid on materials for re-export purposes. Under temporary admission rules, basic materials and intermediate goods imported for manufacture, as well as production requirements of exported goods, are temporarily exempted from customs and other fees. The temporary exemption is issued in return for an insurance deposit (guarantee) with the due customs and fees value. In addition, these good and materials are exempted from import rules listed in the import and export law. Importers can use these good for other purposes after paying due customs fees, plus an extra tax of 2% for each month. Under the drawback system, customs and service fees on foreign materials used in manufacturing local exported goods are refunded provided that they get transferred to a free zone area, are re-exported, or sold to tax-free outlets within a period of 2-years from release date (renewable), by a Finance Ministers decree. Value of customs partial exemption is immediately refunded if sales are made to tax-reduced outlets. Because of significant delays in the operation of the reimbursement process under the drawback system, and the fact that many components and ingredients go into exported finished products for which the share of import duties and sales tax cannot be calculated accurately, the Egyptian government introduced a new Export Subsidy system in 2001 by which exporters could be reimbursed according to specified rates for some industries. In the case of processed food exports, the rate of reimbursement is 8-9% of the value of the goods exported55. Although the reimbursement system was supposed to reduce delays, food-processing companies still complain that it can take up to 8 months to receive payment. Nonetheless, this Export Subsidy system, combined with the effects of the devaluation of the Egyptian Pound has provided a positive incentive for exporters. The latest reports from MOFTI indicate that these export subsidies will continue and increase to LE 800 million in 2004/05(an increase of 150 million LE over the 2003/04 budget)
54
55
The volume of beef imported by the hotel sector could increase substantially if government requirements are simplified and the 7% fat content requirement for imported beef is abolished. Under Decree 506 the reimbursement of costs of imported materials (reimbursed on export) was conditional upon surrendering 75% of foreign exchange earnings at the official exchange rate. This Decree was cancelled at the end of 2004.
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6.5
Packaging supplies
The Egyptian market for foils, paper and plastic packaging is well supplied, although most of these forms of packaging are imported. A more pressing area of concern for the FPI is packaging for liquid products: Although glass bottles and jars are very commonly used in Egypt, FPI companies complain that there is insufficient volume and flexibility in supply, and that local producers are reluctant to invest in quality improvements and new mould. Consequently, companies exporters in particular have resorted to relying on imported glass packaging to assure flexibility and quality. For carton packaging, TetraLaval controls a large segment of the market with rolls being supplied from Saudi Arabia and India56. To keep this type of packaging down to competitive prices requires large production volumes, which the Egyptian market has found difficulty in providing. As a result, this form of packaging has often proved too expensive for low value products aimed at the mass market. At the same time import duties remain high (23%), and the same applies on imported foil for processed cheese packaging (Alcan foil) and aseptic Scholle bags for fruit pulp and puree packing. As for carton, PET packaging requires large-scale production to keep down costs, especially for improved technological application requiring also UHT sterilisation. PET does have the advantage that printing is more flexible and can be undertaken locally, which is not the case for carton. A few projects are being developed: Candia is using PET in licensed dairy plant for bottled milk, and Nestle is producing liquid yoghurt in PET bottles. Also, there is pressure from foreign markets for PET packaging of fruit juices57. The problems of obtaining sufficient supplies of packaging were highlighted by the increase in demand that resulted after devaluation of the Egyptian Pound. The size of the increase in export demand came as surprise to both producers and the local glass industry, the latter being unable to meet demand in 2004. Exporters, especially of fruit juices, reliant on glass bottles have encountered severe difficulties obtaining sufficient supply. Many companies had either to rely on imported glass packaging, change to alternative materials (laminates, Doy packs, Tetrapack, cans), or reduce production58.
6.6
Logistics
As concerns domestic (inland) logistics, the general picture is that the transport structures and organisation of logistics fall short of meeting the (desired) requirements of the FPI. Taxes on imports of trucks and other vehicles, which are seen as a means of protecting local assembly units using older lines, are a dissuasive factor for upgrading the stock of
56
57
58
The estimated demand for the Egyptian market for Tetrapak cartons is 800 million units per year. To set up local production it is believed that the market must exceed 1 billion units. The Seclam factory in Alexandria (Mansour Group) was the first Egyptian company to package juice in PET, under the brand name YES. They were followed by the Superfoods factory, also in Alexandria (Naggar Group), marketing under the OK brand name. A group of Egyptian food companies are considering the possibility of buying a French or Spanish glass plant and moving it to Egypt, where available sand, labour, and subsidised fuel make it feasible to undertake production.
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commercial vehicles. Despite the recent reduction of import duties on trucks, the condition of importing same year (i.e. new) models remains an obstacle in way of upgrading transport fleets in Egypt. With respect to the cold storage logistics chains, this seems to be underdeveloped given the needs of the FPI: insufficient availability of refrigerated trucks and limited investment in cold storage warehousing except for potatoes. As concerns international logistics, projects are underway to renew and upgrade the port infrastructure. The cost of international (container) transport is however seen by companies to be a pressing problem. A specific example is the costs of logistics towards Saudi Arabia, which are said to be high because of agreement(s) with Jordan; shipments by sea are, however, developing. If the political situation improves, Egypt could have short-term opportunities to increase exports to Israel, Iraq and the Palestinian Authority, due to their geographical proximity and the fact that overland trucking to these markets would be cheaper and faster from Egypt than from many regional competing suppliers. Container shipments towards Europe largely rely on a few regular lines operating for the export of fresh agricultural produce. With regard to reefer containers, due to the uneven nature of volumes being exported, shippers do not consider Egypt to be important market able to provide significant and reasonably predictable volumes; Egyptian exporters are said to be unable to provide any sort of forecast for short and medium-term requirements. At the same time, there is an incentive for shipping companies to encourage the development of container volumes out of Egypt. Currently, cargoes are frequently unloaded in Egypt from ships en route to Asia and so it would make sense to increase container traffic out of Egypt destined to Asian markets. Some Turkish exports are, in fact, using Egyptian ports as a transfer location for these types of shipments. Furthermore a new terminal for reefer trucks is being established in Badr City (50 Km east of Cairo). The terminal should provide capacity for 250 trucks that are used in overland export of fresh and frozen foods to Arab and Gulf markets. Egypt Air has practiced a monopoly over air-cargo transport for along time, allowing foreign carriers only to carry exports in the cargo space of passenger planes and refusing to allow licences for dedicated air-cargo airliners to operate from Egypt, or making the licence difficult and expensive. The increase in Egyptian agri-exports have exposed this monopoly to be inadequate to do the job and due to continued pressures from, for example, ACC, HEIA, USAID, a perishable terminal was established in Cairo airport managed by Lufthansa to keep the cold chain unbroken. Further, continued pressure is being exerted on Egypt Air to reduce airfreight rates (currently about 1 USD/Kg to northern EU) and to allow more air-cargo operators to work in Egypt.
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6.7
Technology
In general terms, the Egyptian FPI has made progress towards improving the level of technology. Support from foreign donors and agencies have been important in this respect. Particularly in the segment of 1st-processing of agricultural products, many improvements have been generated via ALEB/USAID technical assistance linked to investment loans59. For 2nd-processing companies, they appear to have been less able to access technical assistance and have generally undertaken investments directly with international equipment suppliers. Bar coding and traceability As of January 1st 2005, the EU is imposing stricter controls on traceability of food products (fresh and processed) imported into the EU. One of the elements of a successful traceability system is bar-coding, which was started in Egypt some 6 years ago by Egyptian Article Numbering (EAN)60 and to date around one thousand Egyptian companies have subscribed to bar-coding. A co-operation between EAN and the Egyptian Export and Import Control Authority (MOFTI) is promoting a cheap subscription to Egyptian companies and, under a grant from UNIDO, is offering free training and part subsidy for subscription to bar-coding systems for food processors interested in exporting products to the EU and North America.
6.8
Technical support
Chemical and micro-biological testing There are 18 technical laboratories and research centres in Egypt. The most notable laboratories and R&D centres providing services to the Food Processing industry such as: 1. Food Technology Research Institute (FTRI) Dokki, Giza 2. High Institute of Public Health Alexandria (supported by ALEB/USAID) 3. Nutrition Institute Cairo 4. Pesticide Residue Laboratory (MALR) - Dokki, Giza 5. Mubaraks Scientific Research City Alexandria These centres are able to provide technical support to food processors in the form of chemical and micro-biology tests: Analysis of water, fat, protein and carbohydrate content in food and ingredients; Analysis of heavy metals and pesticide residue; Microbiology tests.
59 The Agriculture- Led Export Business (ALEB) - USAID: ALEB provides assistance in utilizing market information, integrating food processing technologies and standards, enhancing marketing and business skills, strengthening associations and service firms, and initiating strategic alliance opportunities. 60 EAN is a member of the international system for numbering, bar coding and electronic data exchange that evolved from the earlier American UPC system. More than 100 countries are part of the system, which provided for effective supply chain management and has developed into the industry standard.
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Accreditation In April 2003, IMC embarked on a laboratory-upgrading programme to assist Egyptian testing and calibration laboratories to achieve international accreditation61. The notion of accreditation is however relatively new to Egypt (only over last couple of years). As part of an ongoing programme the Egyptian Accreditation Council (EAC) is being strengthened, with aim that it should itself obtain international accreditation. Other Agricultural Genetic Engineering Research Institute (AGERI). Established in 1989 under the auspices of the Ministry of agriculture and Land Reclamation, AGERI62 in partnership with several American universities has been researching bio pesticides and an elite variety of crops that are thought to be resistant to environmental pests63,64. Egyptian Centre for Measuring Organic Products, is a private company certified by the EU to test organic products and grant manufacturers certificates that are accepted by the EU. The Horticultural Export Improvement Association (HEIA) promotes the expansion of sustainable exports of Horticulture crops through accessing modern production technology, state- of- the-art post-harvest practices, and market information. HEIA is strengthening institutional capacity through networking, quality certification, product technology adaptation, outreach and publications. HEIA completed a cold storage facility at Cairo Airport that began operation in 2003.
61 62 63
64
To date 18 laboratories have been upgraded, of which 7 are operating in the food sector. Originally called the National agricultural Engineering Laboratory (NAGEL). Source: United Nations (2001), Economic and Social Commission for Western Asia, the Impact of Environmental regulation on Production and Export in the Food Processing, Garment and Pharmaceuticals Industries in Selected ESCWA countries E/ESCWA/ED/2001/14. The issue of what crop varieties are GMOs is important. European resistance to the use of GMOs and food products derived from GMOs, together with negative attitudes in some Gulf States (e.g. Saudi Arabia), mean that Egyptian exports could be restricted via controls on GMO content. Potentially this could have dramatic affects on the Egyptian agricultural and agro-food industry.
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Egyptian FPI views on the services and role of research centres and laboratories
65
Underlying issues that have been raised during interviews with food processing companies concerning the services of research centres and laboratories revolve around: High costs of analysis; Long waiting periods to receive results; Inaccuracy of results; Non-accreditation of laboratories; R&D areas are not sufficiently related to requirements of the Egyptian FPI.
In the view of food processing companies, the main services they require to be supplied by the research and testing milieu are: Participation in solving technical problems together with development of new products and packaging; Affordable costs of analysis (chemical and micro-biological); Faster and more accurate results; Accreditation; Confidentiality; Specifically, in the area of agricultural research, the Egyptian FPI is looking to the Agricultural Research Centre (which draws on resources of both the Ministry of Agriculture, especially for applied research, and the academic expertise of Cairo University), for research in areas such as: Varietal research (e.g. new processing varieties of tomatoes and potatoes); Aflatoxin reduction in grains and peanuts, especially proper pesticide use; Training in Good Agricultural Practices (GAP), especially Eurogap requirements and traceability of foods from farms to meet EU requirements. At the same time, research centres and laboratories counter with their own requirements from food processors, these include: Greater input in defining the types of problems faced by the FPI in areas such as: production, packaging, and environmental control; Funding for R&D; Accuracy in sample taking; Active participation in training sessions/programmes arranged by research centres etc.
There are, however, some examples of changes in the research and testing environment that are viewed positively: The National Research Centre (Cairo) is changing its status into an investment establishment offering paid-for R&D services to the Egyptian FPI. In 2003/2004 these services yielded L.E. 13.5 million in income and the number of businesses utilising the services of NRC has reached 45. The Food Technology Centre (FTC) is being linked to IMC to attempt to upgrade its services and ensure that it delivers maximum benefits to the FPI. FTC has an ambitious range of services that they will seek to provided when they have moved to new headquarters in Alfayum in 2006. The services will include: sensory evaluation, environmental testing, packaging testing, upgrading of traditional products (e.g. black honey). Further, a special unit at FTC is pursuing ALEB project
65
During the course of the study, the following R&D centres and laboratories have been interviewed: H.I.P.H. Alexandria University Central laboratory for food and animal feed Dokki Agricultural Research Central Laboratory of Pesticide Residue Dokki Mubaraks Scientific Research City Borg El Arab FTRI Cairo FTC Cairo Dairy Training Centre Alexandria Export & Import Control Laboratory Dekhila, Alexandria
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goals and is training Egyptian FPI staff on HACCP, ISO, GMP, through a Spanish grant. The general plan of the Ministry of Higher Education and Scientific Research stresses the strengthening of links with the private sector. IMC is funding the accreditation of 17 testing laboratories (see Section 6.8)
Among the key areas where support for local sources of innovations in food processing technology are required are: Cold pasteurisation (irradiation of food to reduce biological hazards), which is especially required in for herbs, seeds and spices due to the high microbiological loads from sun drying in the fields. Research in this area is being undertaken in co-operation with the Ministry of Power (Nasr City); Spray drying, for milk and flavours processing; Freeze drying, for vegetable to extend shelf lives and reduce wastage; Artificial sweeteners, for production of low calorie beverages and dietary foods; Emulsifiers production technology / Enzyme research, for the dairy sector; Wet extraction process, for soy and other leguminous proteins; GMO issues and effects; Continuous agitating sterilisation, for canned foods; Flexible packaging developments (retort pouches, aseptic packs, O barriers, biodegradable and recyclable packaging); Plastic containers development (nested & stackable pallets and box pallets).
2
6.9
Access to finance
The current commercial (LE) loan rate prevails for larger companies. International Donor loans are available at lower rates; these tend to be earmarked for SMEs seeking to purchase machinery, equipment and raw materials. From interviews with FPI, criticisms have been raised of the handling of donor loans by state owned banks and the Egyptian Industrial Development Bank (EIDB). These relate, for example, to the charging of higher interest rates than those at which the donor loans are obtained, reduction in the period of grace for repayments, and shortening of the repayment period. In January 2005 Ministry of Fiance and Ministry of Investment in Egypt announced the establishment of a 50 million fund, named the Horus Fund For Agrofood Industries Finance Support. The fund will be managed by Hermes Investment Portfolio Management, Rabo Investment and a French investment bank Prime Group. The fund will mainly offer financial support to upgrade Agrofood processing operations in Egypt and increase exports of processed foods. The Fund will increase to 100 million Euros by 2006. IMC has a 2.5 million share in the fund.
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7 Egyptian trade environment of the FPI
In 1990, the Economic Reform Programme set out a programme of liberalising trade policy. This programme, which makes customs duties the main instruments of trade policy while non-tariff barriers are to be phased out, is continuing. However, despite the commitment to trade liberalisation, measures to combat Egypts long-standing deficit have continued to take the form of administrative guidance and creeping importresistance. The national export strategy was designed by the government in 2001 as a policy platform to enhance Egypts presence on the international marketplace. However, this was still coupled with an import-substitution mood66.
7.1
Multilateral trade agreements (WTO)67

An overview of multilateral trade agreements is provided in the Global Assessment. Egypt actively participated in the Uruguay Round negotiations and its subsequent rounds (Egypt is a founding member of the WTO). Since then, Egypt has followed a steady plan to meet its WTO commitments. It has removed most non-tariff barriers, decreased tariffs, liberalised foreign investment policies, and privatised public sector companies. Egypt has also liberalised the foreign exchange market, which has helped to boost its exports in the processed food sector.
7.2
Regional trade agreements

COMESA (Common Market of Eastern and Southern Africa)68 Egypt as the largest economy within COMESA has the advantage of possessing the strategic location, human capital and infrastructure necessary to allow trans-national firms access to the COMESA market through a variety of joint ventures. The enormous potential of the COMESA market should prove highly attractive to transnational corporations. By establishing branches in Egypt, they will be able to benefit from the customs exemptions granted to COMESA member nations. Thus, for example, it would be possible to use foreign direct investments in Egypt as an advanced industrial centre within COMESA to establish manufacturing centre that target the COMESA
66
67 68
Source: European Commission, Market Access Sectoral and Trade Barriers Database, http://mkaccdb.eu.int/cgibin/stb/mkstb.pl. An overview of multilateral trade agreements is provided in the Global Assessment. An overview of COMESA is provided in the Global Assessment Report.
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countries. Egypt can also be the centre of trade for the products for re-exports to other countries in the association. MAFTA (Mediterranean Arab Free Trade Area)69 The MAFTA AGADIR agreement which went into effect on 1st January 2005 is a free trade agreement between Egypt, Tunisia, Morocco and Jordan, which are all connected with partnership agreements with the EU, that allows free movement of ingredients, raw materials and semi-finished products for further processing into finished products acceptable for export to the EU in accordance with country of origin requirements from any of the 4 member countries. GAFTA (Greater Arab Free Trade Area)70 Aside from the EU and WTO free trade pacts, FTAs within the Arab region are also gathering momentum. The Greater Arab Free Trade Area (GAFTA) is an Arab League initiative that aims to revive previously unsuccessful attempts at regional integration. The establishment of free trade area (GAFTA) is set for 2005-2006. The GAFTA agreement is to reduce customs on trade among members by 50%, 60% and finally to 80% in 2004, with zero tariffs by 2005. This agreement will benefit Egyptian food processing sector given the comparative advantages of Egypt (e.g. low labour cost, developed agricultural production systems and skilled man power) compared to oil rich Arab countries with limited agricultural and food processing industries. The Egyptian FPI has, however, expressed concerns about the competitiveness effects of certain advantages given to other Arab food processors; for example: free land, cheap power, no value added taxes, low other taxes, low import duties on ingredients and packaging, and low interest rates on loans. In addition, there is a worry about the possible abuse of certificates of origin, particularly with regard to cheap Asian products being labelled as Arab for re-exports to Egypt71. MEDA (Euro-Mediterranean Agreement)72 Egypt is the leading recipient among the Mediterranean partners in terms of total funds received from the MEDA programme with objectives among others to promote the effective implementation of the Association Agreement, primarily by helping Egyptian companies and institutions meet the challenge of increasingly competitive internal and external markets.
7.3
EU-Egypt Association Agreement

Following the Barcelona Declaration Egypt signed a partnership agreement with the European Union in 2001 covering co-operation in economic, social, and political issues and stipulating the progressive establishment, during a transition period of twelve years,
69 70 71
72
An overview of MAFTA is provided in the Global Assessment Report. An overview of GAFTA is provided in the Global Assessment Report. A mechanism for studying such misuse is being created by the Arab League (source: Arab League, Economics Dept., press release). An overview of MEDA is provided in the Global Assessment Report.
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of a free trade area (FTA) between Egypt and EU member states. The agreement will permit Egypt to join the Euro-Mediterranean free-trade zone. Under the agreement, import tariffs on most products - including agricultural products - will be cut substantially, or eliminated over a period of 12-15 years. Both Egyptian and European exporters of agricultural and food products are expected to gain substantially from the agreement. The Association Agreement between the EU and Egypt came into effect on 1st of January 2004. This agreement specifies the tariffs on exports from Egypt to European Union and vice-versa. According to this protocol import duties for processed food items originating from Egypt such as dairy products, sweet corn products, further processed edible oils and fats, pure fructose, prepared potato products etc will be imported to EU without duty payment. Some other products can be imported with reduced tariff and specified quota. With this agreement, Egypt has gone a step forward in joining one of the biggest trading areas in the world with some privileges and challenges. All the technical trade rules will be according to the WTO agreements to which Egypt is a signatory. To foster a more efficient and transparent business environment, several legislative adjustments have been made in areas such as sales tax, investment promotion, securities, insurance, financial leasing, mortgage, money laundering, export promotion, and intellectual property rights. The majority of these focused on the legal changes necessary to accede and comply with the WTO and enhance the readiness of the economy for globalisation. In the last decade Egypt's economy has grown by almost 5% and output per capita Increased by almost 3% per annum. GNP exceeded Euro l00 billion for the first time In 2000 with an output per capita of about Euro 1,500. Egypt's development strategy is to accelerate the rate of growth to 7,6% (from its current 3.2%), to double real GDP per capita and to drastically reduce unemployment, which is about 10%. In this process of integration into the world economy Egypt cannot simply respond passively to increased competitive pressures, but has to define and implement winning strategies for its industry. Achievements of Egyptian industry to date, though considerable, are not enough as the economy compares unfavourably against that of the EU. However, it does offer advantages in terms of the skills of its human resource, natural resources, geographic location, and political and social stability. SPS restrictions on EU imports of Egyptian food products It should be noted that all animal proteins (meat, poultry, fish and dairy) are on the EUs restricted lists of imports due to requirements to meet special protocols for SPS (Sanitary and Phytosanitary) controls. Currently, only fresh sea-fish (not farmed) can be exported to the EU, and only from 2 EU approved factories.
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7.4
Domestic market access

Tariffs and duties Following tariff reductions in 1998, current maximum MFN (Most Favoured Nation) tariff rates do not exceed 30% but there are important exceptions, some of which relate to food (and related) products:73,74 Beverage and spirits: beer (1200%), wines (600-3000%) and spirits (up to 3000%). There is a tariff discount for beverages imported with a licence from the Ministry of Tourism to be sold in hotels and restaurants; Raw and manufactured tobacco: 85%. In addition to import tariffs, Egypt also applies75: Sales tax of 10% on all imports including machinery for production (Capital goods).
Latest import duty reductions to assist local food manufacturing industries In December 2004, Egyptian customs authorities announced the approval of further reductions on import duties of ingredients, raw materials and packaging. For imported materials and ingredients for food manufacturing the maximum duty was set at 5% on CIF value. Examples of reductions in duty rates are: Cheddar Cheese (20Kg pack minimum), reduced from 12% to 5%; Starch, reduced from 12% to 5%; Cacao grains, reduced from 5% to 2%; Cacao paste, reduced from 12% to 5%; Several preparations and ingredients, reduced from 22% to 12%; Aseptic bags for packing fruit pulp and concentrates, reduced from 12% to 5%.
The poultry industry also got a boost, with a reduction of the duty on imported poultry feed to 2%. These reductions in import duties translate into cost reductions of between 3-7 % on average and will contribute positively to an increase in competitiveness of EFPI.
Non tariff barriers (NTB) Registration, documents and customs procedures: the border clearance system is seen by exporters in to Egypt and Egyptian importers as being complex, time-consuming, cumbersome and subject to frequent modification. Complaints have included: Sampling procedures undertaken by several government bodies and sequentially leading to goods being blocked at ports. Although a one-stop shop system has been introduced76, under supervision from General Organisation for Import and Export Control, the overall policy towards simplification and facilitation can be offset by
73
74
75
In addition, it has been noted that dairy, poultry and food preparations are among the product groups for which there is a concentration of Egyptian bound tariff violations (Source: ibid, footnote66) Egypt also applied a tariff rate of 80% on imported poultry. This was reduced in 2004 to 5% (CIF) on imported live poultry and 32% on frozen poultry and parts. Similarly, the tariff rate on Feta Cheese, which stood at 30%, was reduced to 5% (Ministerial decree no. 300/2004). Previously, Egyptian customs applied customs surcharges of 2-3%, plus a service charge of 1%. These charges were cancelled under Ministerial regulation no. 1230 (September 2004), which also reduced the number of customs categories from 42 to only 6, as part of ongoing structural reforms (see Section 1.3). See Section 7.5.
76
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product specific measures whose conformity to SPS and TBT rules are, in the words of the European Commission, questionable77. Non-uniform and discretionary application by customs officials of valuation of imports (see below: Tariff valuation procedures). Direct shipment requirements78 (i.e. from the country of production) for imports cause problems for companies importing to Egypt when their distribution networks mean that goods would normally pass via a third country79.
Tariff valuation procedures According to non-Egyptian trade information sources , under-invoicing is prevalent in Egypt as a means of tax avoidance. This has led the Customs Authority to adopt a tough policy on commercial invoices. Tariff valuation is based either on the world price list received annually from foreign producers/ distributors, or if that is not available, they take the highest price available in the local market. In cases where customs officials suspect under-invoicing they usually add from 10 to 30% (called an improvement percentage) to the invoice value. Importers have the right to take legal action against the Customs Authorities in the event of a dispute, including arbitration that takes 15 days or more. During this time, the shipments are withheld and the importer has to pay fees as deposit until arbitration is over.
80
Suspicions of under-invoicing can be raised by legitimate business practices, for example when businesses provide low-priced introductory samples that are later followed by larger quantities at higher prices. Or, alternatively, in the reverse situation when a high price is charged for small initial shipments and a subsequent quantity discount offered on a larger shipment. In other instances, when a new product is introduced at below the prevailing price or comes from a cheaper source than previously, then the Customs Authorities may contest the valuation.
Import prohibitions: a list of products whose importation is subject to conditional prohibition (the prohibited imports list) was introduced in 1986. With respect to food and processed food items: Following the dioxin crisis, Egypt introduced a ban on a wide range of EU food imports in 1999. Although the ban was lifted in 2000, except for animal feed, compulsory random dioxin tests is carried out for various imported foodstuffs81. In response to the BSE crisis, a ban was introduced on the import of live cattle and related meat products from the EU. The ban still applies, with the exception of Ireland and the Netherlands. Frozen cow meat may be imported from those EU states that have taken veterinary measures as set out in the decree 2720/01. Import quotas: with respect to food products: Import quotas exist on the importation of sugar for the domestic processing of pharmaceuticals and beverages, two industries severely affected by increased tariffs
77 78
79 80 81
Source: European Commission, ibid footnote66 Decree 619/98 (November 1998), introduced direct shipment requirements for a wide range of consumer goods and made obligatory the legislation of certificates of origin. The decree was modified in November 1999 by effectively excluding multinational companies from direct shipment requirements. Meat and poultry products must be shipped directly from the country of origin. Source: US Department of Trade Compulsory testing is required in the absence of a recognised test results issued by an EU testing house. Such test can be carried out only by one central laboratory at a cost of LE 5000, and a rarely available in less than 2 weeks.
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and high customs valuation placed on sugar in 1999 following the disruptions to the sugar market82. Standards and other technical requirements83: with respect to food products: Egyptian standards are at variance with international standards for a range of food products84. Complaints have been raised that lacks of transparency and arbitrary decisions have caused problems for imports of processed foods. Extremely strict labelling requirements exist, particularly for meat. Poultry and meat products must be packed in sealed bags and labelled (in Arabic and eventually in another language) both outside and inside, showing: Country of origin Name of product Name of slaughter house Slaughter date Name and address of importer Name of the Quarter85 supervising the slaughter procedure, according to Sharia. For foodstuffs, products must be labelled, in Arabic and another language, showing Country of origin Commodity name, grade and kind Name of importer and address Production date, expiration date Mode of production for products to be prepared before utilisation Components included and proportions thereof Mode of preservation and storing conditions Net gross weight according to type of commodity Additives, preservatives or upgrading materials Importers of animal products are required to provide: Islamic Slaughter Certificate; Veterinary certificate confirming country of origin and that any animal used in the making of the product was examined before and after slaughter, and is free from contagious disease; Certificate of origin showing: name of exporting country, number of parcels, type of meat, date of inspection, product and expiration dates, name of exporter, port of entry, name of consignee. For frozen meat, a further certificate, confirming that the temperature of 18Co was maintained before export and that each piece was wrapped in accordance with accepted international standards.
82
83
The import price/value remains higher than international market price for non-quota imports of sugar. Domestic production of sugar is heavily subsidised. Egyptian standards are designed and implemented by the Egyptian Standards Authority and the General Organisation for Export and Import Control (GOEIC), see Section 1. and Section 7.5 For example, Egypt requires that imported beef consumption should have less than 7% fat, a level not usually obtained. For frozen beef for direct consumption the fat content should be less than 7%, and have an expiration date of 9 months from slaughter. For frozen beef for further processing the fat content level is less than 20% and the expiration period 6 months. The Quarter must be approved by the Egyptian Commercial Office in the country of origin.
84
85
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A maximum validity period is imposed for all foodstuffs eligible for sale in Egypt. If only one half of the validity period is remaining then the foodstuff should not be permitted for human consumption.
7.5
Initiatives to improve customs procedures

In 1999 the Egyptian Government established a register of trustworthy importers/exporters, who proved reliable in trading products in conformity with Egyptian specifications. Inclusion in the register, held by GOIEC, entitles speedier external controls on product quality based on declarations of the producer/importers. While random checks will continue to be carried out the deregulatory nature of the measure is likely to streamline customs procedures. Presidential Decree No 106 (April 2000) transferred the administrative authority of food inspection to Egyptian Standards Organisation and the General Organisation for Export and Import Control (GOEIC). This initiative simplified a system under which as many as four separate ministries86 were entitled to draw samples from products for testing. Exporters (and importers) to Egypt have in the past complained heavily about testing procedures in Egypt under which separate ministries may require different tests, resulting in supplementary delays and costs: delays at point of entry, taking of large sample for testing, charges for laboratory tests, storage and penalty charges etc.; there are also cases where goods have deteriorated following excessive delays and then been denied entry87. Article 1 of Decree No 106 specifies that inspection of all exports and imports that are subject to control procedures should be conducted solely under GOEIC supervision; further, the concerned authorities shall conduct the process simultaneously. Similarly, GOEIC was made the sole authority to which certificates required for imported food products need to be submitted88. In July 2001 the Egyptian Customs Authority officially announced beginning implementation of the invoice-or transaction value based procedures in accordance with the WTO valuation agreement. The system is not yet being implemented. (see Section 7.4 Non Tariff Barriers for more comments on valuation procedures)
86
87 88
Radiation Department of the Ministry of energy and Electricity; Ministry of Health; Ministry of Agriculture (Veterinary Office); Ministry of Supply (Import and Export Control). Source: United Nations, ibid footnote 63. at the same time, GOEIC will not issue a release certificate unless all authorities (e.g. Ministry of Health, Ministry of Agriculture etc.) approve the consignment.
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8 Egyptian legal and regulatory environment of the FPI
8.1
Legal standards
Egyptian standards are designed and implemented by 2 organisations: Egyptian Organisation for Standardisation and Quality Control (EOS); General Organisation for Export and Import Control (GOEIC). The former has to enforce requirements and standards for imported and domestic products; the latter inspects imported and exported goods. Most Egyptian standards on foods are mandatory, especially technical standards that relate to health and safety. However, some mandatory standards relating to quality aspects move beyond restrictions imposed for health and safety reasons (e.g. fat content in meat or brix on fruit juice). It is questionable whether such standards need to be mandatory, and could not be replaced by voluntary industry standards. Under the Quality Control Plan (Presidential Decree 42/2003) Egyptian standards are to be harmonised towards international standards (for food: CODEX). IMC, contracted EOS to update the some 3400 identified standards and upgrading them to a high level of conformity with international standards where necessary. This programme of updating existing standards is being implemented over the next 2 years these standards and the intention is that those for food should be harmonised by the end of 2004. In 2005, another project will finance the placing EOS standards on a website. The upgrading of EOS compulsory food standards (195 standards) was declared to be completed on Dec. 1st 2004. Those 195 standards were given priority since they directly affect consumer health & food safety in addition to the fact that the updating of these standards is expected to have a positive effect on increasing exports of value added foods, which will now be compatible with Codex Alimentarius and EU import standards. Eighteen specialized committees were formed, each comprising 15 experts: Chamber of Food Industries, ministries and regulatory authorities, food processing companies, universities and research centres and also Consumer protection agencies. The main targets of the updating are: 1. Enable exported Egyptian processed foods to be compatible with world market demands and at same time to be competitive with imported foods in the local market. 2. Permit processors to be innovative and to develop new products to satisfy export demand without compromising food quality & safety aspects and without being restricted with other unrelated aspects such as Salt & Sugar content or flavours, provided it is permitted for food use and is declared on the label to protect consumers rights.
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3. Defining the basic prerequisites for food quality, safety and environmental aspects and clarifying which conditions of violations are punishable by law and which that are not. The new context will be explained in new Ministerial decrees which are currently being formulated by the Minister of Foreign Trade and Industry (MFTI) and will be issued soon89. Egyptian authorities recognise foreign standards only when there is no Egyptian standard for the goods or products concerned. Thus all manufacturers and importers are required to abide by Egyptian product standards. In cases where no mandatory standards exist, the following standards may be acceptable90: Egyptian Product Standards (voluntary); International Standards (ISO/IEC); European Standards (EN), or in the absence of EN standards, British (BN), German (DIN) and French (NF) standards may be applied; American Standards (ANS); Japanese Standards; CODEX. EOS has set up a language unit that specialises in translating international standards into Arabic and domestic standards into English, French, and German. The standards are published in Arabic and the original language. In case of dispute, it would appear that the original language prevails.
8.2
Regulatory conformity assessment

As noted above GOIEC has responsibility for supervising inspection of imported and exported goods. EOS has responsibility for checks on factories to make sure that systems are in place to meet (Egyptian) standards. According to IMC, about 650 factories have been identified in the food sector that should apply existing/new standards. Further, IMC will finance projects to do gap analysis to check if a factory has appropriate quality systems to apply relevant standards. Where minor problems are identified EOS will provide assistance. Where major problems are identified, EOS contacts IMC who will recruit a consultant to assist in dealing with the problem. Egyptian food manufacturing companies, whether they produce for the domestic and/or export market, are subject to spot checks by officials from the Ministries of Health, Ministry for Agriculture, Ministry of Supply and the Industry Control and Chemical Administration of the Ministry of Industry.
89 90
Source: MFTI and EOS (December 2004). In the absence of an Egyptian or international standard, authorities will often refer to the Analysis Certificate accompanying the product.
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Figure 8.1
Schematic representation of regulatory control of the Egyptian FPI

Ministry of Foreign Trade and Industry (MOFTI)
Foreign Trade
Industry
General Organisation for Export & Import Control (GOEIC) Control of imports and exports for compliance to EOS; Collection of samples for testing
Chemical Authority Control of laboratories for testing
Egyptian Organisation for Standardisation and Quality Control (EOS) Issue of standards, Control of laboratories for testing
Industrial Control Authority Inspection of factories for compliance with EOS standards, Collection of samples for testing
Ministry of Supply and Internal Trade Inspection of markets and retailers, sample collection for check on commercial fraud, shelf life, weight, labelling compliance
Ministry of Power and Energy Inspection of imports (radiation control)
Ministry of Health
Food Control Authority Inspection of factories for compliance with food health laws and decrees. Control of imported foods at port of entry (sample collection)
Note: Additional controls are undertaken by: Ministry of Social Insurance (w orkers coverage), Ministry of Labour (w orkers' disputes), Ministry of Finance (sales tax, corporate tax, customs), and Ministry of Interior (civil defence, fire dept.)
8.3
Voluntary standards
Although regulatory agencies in developed countries do not formally require foreign exporters to be HACCP91- or ISO92-certified, governments and importers alike definitely recommend the application of a recognised, rigorous and systematic quality control system during production. Many established producers in Egypt have attempted to adopt HACCP and are aware of its ability to detect contamination at many production stages93. IMC and UNIDO, as well as other donors, have offered financial support to upgrade Egyptian food processors and fresh produce packers to HACCP standard by bearing 85% of the cost of consultation and training. However, only 30 processors out of 300 listed (10%) have applied.
91 92 93
Hazard Analysis and Critical Control Point. International Organization for Standardization. Source: United Nations, ibid footnote 63
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Table 8.1
Egyptian food processors with existing HACCP (39 companies) Americana (Egyptian Canning Co.) Basma Blue Nile Daltex Imbasco Co. Domty Halibo Dreem Egyptian Canning Company El Farasha Pasta El Misrieen El Salheya New Salheya Olive Enjoy Faragalla Farm Frites Fine Foods Golden State Foods G.S.F Green Land for Dairy Products Green Valley H.A. Sultan Farm Co. Ltd Halwani Brothers Herrawi Group Froca, Misr for Rice and Herrawi Source: ALEB and Study Team Heinz Imtenan for Trading and Exporting International Aromatics Koki (Cairo Poultry) MAFA Maghraby MAFA Organic Mass Food Temmys Nutssy Meshreq Misr Caf Co. Nestle Egypt Co Nile Fruit-Pulp Roasty Seclam Dairy Processing Sekem ISIS Hator Libra Shinnawy SONAC SONUT - Schweppes Spice Land Unifood Vitrac
The study team estimates the number of Egyptian food-processing companies that have introduced HACCP systems in various degrees of implementation but are awaiting certification audits to be around 100 companies.
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9 Industry opinions on key constraints faced by the Egyptian FPI
This analysis presents the issues identified through interviews and discussions with the selected sample of EFPI companies. The main burdens affecting Egyptian food processing companies are summarised in the following box.
Tax Burdens:

10% Sales Tax on all imported ingredients and raw materials (except fresh foods, fresh and locally procured milk and honey); 10% Sales Tax on imported and locally made production lines and machinery; 45% Corporation Tax; 38% Tax on food export subsidy. 15-17% interest rate on commercial loans; 100% coverage of L/C (letter of credit) value in advance to purchase imported materials or machinery; Instability of foreign exchange rate / unavailability of foreign currency. Multiplicity of regulatory agencies, inspection authorities etc. requiring multi-sampling Labour Law (new fund); Export revenue exchange law cancelled end of 2004; Social security penalties and expenses. Expensive port fees, clearance delays, demurrage expenses; High rates for transport (air, sea and land especially for reefers); Unreliable local trucking (frequent loss of cargo). Cost of utilities (power, land, water and fuel); Cost of export marketing (fairs and exhibitions); Technical Barriers to Trade in EU and other markets requiring expensive certification (Euro GAP, ISO, HACCP, BRC, traceability, bar coding etc.); Cost of certifying import documents from Egyptian Embassies abroad; High costs of analysis and testing in R&D/Testing centres and labs in Egypt; Cost of getting accurate and dependable data and statistics required for planning and strategy etc.; Cost of resources (raw material prices increased by an average 18% in the last year following devaluation).
Financial Burdens:
Legislative Burdens:
Logistical Burdens:
Other Burdens:
Among the demands, and issues raised by Egyptian FPI companies, the following may be highlighted:
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Subsidies and Duties 38% Tax on export Subsidy should be cancelled. Export subsidy on Citrus was cancelled. Truck import Tariff has been reduced from 40% to 5% on CIF value to support fleet upgrading through import of new trucks, however the import condition of same year make (no used trucks are allowed for import) prevails, which makes truck dealers import cut down truck bodies, cabins, chassis & Engines, then re-assemble it in country which results in a Frankenstein fleets of trucks that are often out of service and for which it is often extremely difficult to obtain spare parts.
Furthermore, the new cabinet has raised the subsidized prices of Diesel fuel for 0.40 LE/litres to 0.60 LE/litres (a 50% increase) which translates to a 30% increase in trucking rates between farms & factories and between factories & ports also between packaging plants & processors. In addition, the increasing cost of potable water (increased by 40% in November 2004) has also raised cost to the Egyptian FPI, for which water is a key ingredient in food processing (i.e. beverages, dairy and juice manufacturing). National Social Insurance Authority (NSIA) In addition to the general bureaucracy, excessive paper work and delays in getting workers registered in NSIA, the majority of EFPI interviewed admitted that they do not register all the workers they employ to avoid paying out dues & penalties for late subscriptions, for example the penalty for late remittance of monthly subscriptions has been raised (unconstitutionally) to 3% interest per month which translates into 36% per annum and when compounded reached 45-50%. The legal Authority of the NSIA inspectors allows them to raid plants anytime to count workers (including temporary Labour & trainees) and crosscheck them with records and decide penalties. Legislations Establishing an Egyptian Organization or Committee similar to the European Food Safety Commission or the US FDA, comprising all Egyptian legislators (EOS, Health, Agric., Food Supply, Export as well as Reps. Of Food Chambers and private biz) abiding to Codex standard and guided by a Unified Food Law (currently under study by IMC & CFI), benefiting from both EU & US experience. Training EFPI needs training on all aspects of: Food Processing; Quality Management Program (ISO, TQM, QMS); Food Safety Programs (HACCP / GMP / GHP / PEST CONTROL / BAR CODING etc); Traceability; Bioterrorism Law (US); Packaging; Labelling; Euro Gap; Post Harvest; BRC;
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Logistics; Cold Chain; Cost Control; Export Documentation; Warehouse Management systems; Inventory Management systems; Order Management systems; Transport Management; Freight & Fleet Management; Work Load & Labour Management; Customer satisfaction.
Many of these training programs are on going with support from various donors (USAID IMC/EU GTZ JAICA DANIDA) but needs to be continued due to seasonal workforce nature of Agrifood Sector.
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10 Competitiveness opinion survey of Egyptian FPI enterprises
10.1
Introduction
Under the local assessment component of the study, local food process companies have been requested to complete a questionnaire relating to various factors that influence their competitiveness. This questionnaire was developed in the initial phase of the project and covers the following main themes: Human Resources; Labour market conditions; Training and technical support; Technology; Company Operations; Market Access (domestic); Market Access (international); Transport infrastructure; Industrial Infrastructure; Administrative (legal & regulatory) environment. The questionnaire, completed by a senior company manager, asks enterprises to give their opinions for each factor (with a ranking from 1 to 5) on: 1. The current situation in Egypt as it affects companies within their sector, using a score of: 1 (poor) to 5 (excellent) 2. The importance at the current time of the factor in determining or influencing the competitiveness of companies within their sector, using a score of: 1 (not important) to 5 (extremely important) 3. The importance in the future94 of the factor in determining or influencing the competitiveness of companies within their sector, using a score of 1 (not important) to 5 (critical). In total, completed questionnaires were provided by 13 enterprises. The survey was carried out in April-May 2004. The distribution by sector of these companies is as follows:
94
Taking into account likely changes in the business environment (e.g. trade liberalisation and market openness, changing customer demands, etc.).
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Sector Processed (canned, bottled) fruit and vegetables Frozen fruit and vegetables Processed fruit & vegetables (not frozen) Dairy products and juices Olive oil Other edible oils Breakfast cereals Ethnic products Food conglomerate Total
Number of companies 2 2 1 1 2 1 1 1 2 13
10.2
Evaluation of current situation in Egypt

Table 10.1 and Table 10.2 show those factors for which, on the basis of the opinions of the surveyed companies, obtain the highest and lowest average scores. With regard to the factors obtaining the highest average scores, the following features stand out: Companies express a high opinion with regard to the quality of Egyptian products and to the technological level of production compared to standards in the region (Gulf States, Turkey). To a slightly lesser extent, the quality of products compared to world standards also obtains a good average score. The situation with regard to the availability of labour, both unskilled and at management-administrative level (and to a lesser extent, engineers, scientific and technical workers) does not appear to be a problem. While the situation with regard to labour relations (strikes) is also ranked highly. Company attitudes to and level of health & safety standards are rated very highly. With regard to the factors obtaining the lowest average scores, the following features stand out: The situation with regard to technological aspects is ranked consistently as being poor, not only as concerns availability of finance for new technological investments but also with respect to technical co-operation issues and access to technical and research centres. The administrative burden, and the efficiency of public administrations and procedures stand out as being a key concern. This is reinforced by factors specifically related to import activities and customs. The situation with regard to maritime and air freight costs also appears to be a problem. Also, within Egypt, the situation regarding costs of transport and quality of the transport infrastructure obtains only a low average score.
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Table 10.1
Highest scoring factors for the current situation in Egypt Rank

1 1 3 3 5 6 7 8 8 8 11 12 13 13 15 15 15 18 18 18
Factor
The level of health and safety standards observed by companies The attitude of companies to improving health and safety standards The rate of strikes and labour disputes The quality of products produced compared to standards in the Gulf States The quality of products produced compared to standards in Turkey The availability and quality of un-skilled workers The technological level of production compared to standards in the Gulf States Labour productivity, compared to standards in the Gulf States The attitude of companies to marketing Availability of locally producer (Egyptian) raw & primary materials The technological level of production compared to standards in Turkey The quality of products produced compared to world standards The use of new communication in company operations and management systems. Growth in demand for the sectors products (within Egypt) The availability and quality of management and administrative employees Relations and interactions with retail distributors Relations and interaction with wholesale distributors The availability of engineers, scientific and technical workers The level and quality of training support provided by outside organisations Development of accessing new customers/new market segments (within Egypt)
Score
4.2 4.2 4.1 4.1 4.0 3.7 3.6 3.4 3.4 3.4 3.4 3.3 3.3 3.3 3.2 3.2 3.2 3.1 3.1 3.1
Number of obs.
13 13 13 13 11 13 13 13 13 13 11 12 13 13 13 13 13 13 13 13
Source: Authors calculations based on questionnaire results for Egyptian FPI enterprises
Table 10.2
Lowest scoring factors for the current situation in Egypt Rank

1 1 1 1 5 6 6 8 8 8 11 12 12 14 15 16 16 18 19 20 1.
1
Factor
The efficiency of public administrations The speed and efficiency of customs procedures The level of technical cooperation and collaboration between industry and public and private organisations The level of technical cooperation and collaboration between firms The cost of air freight transport The burden of administrative procedures on domestic activities The cost of maritime freight transport The burden of administrative procedures on investment activities The cost of import duties The availability of finance to invest in technological improvement The burden of administrative procedures on import and export activities The availability of technical centres, and support for research & development Employment Regulations (hiring & firing regulations, contracts of employment) The attitude of public administrations to higher education and training The cost of transport (within Egypt) The quality of the transport infrastructure (within Egypt) The rate of absenteeism Relations and interactions with export traders operating in the sector The level and quality of staff training provided by companies Labour productivity, compared to world best standards
Score
1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2 1.2 1.2 1.3 1.4 1.4 1.6 1.8 2.2 2.2 2.2 2.3 2.3
Number of obs.
13 13 13 13 12 13 13 13 13 13 13 13 13 13 13 13 13 13 13 12
Inverse ranking
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10.3
Evaluation of current competitiveness factors

Table 10.3 and Table 10.4 show, respectively, those factors receiving the highest and lowest average scores for their importance in determining or influencing the current competitiveness of firms in the food-processing sector. Overall, in the opinion of the surveyed Egyptian companies, the key factors influencing the competitiveness of Egyptian products/producers relate to the availability of raw materials, product quality, and markets access. This is demonstrated by the factors obtaining the highest average scores, for which the following features may be noted: Unsurprisingly, the factor receiving the highest average score for determining current competitiveness is the availability of local raw materials. Equally, the quality of Egyptian products compared to the standards of regional producers and world standards is important for determining the competitiveness of Egyptian producers. Costs of maritime and air freight transport are both considered to be important in determining current competitiveness. In terms of labour costs and availability, although this is not regarded as an important factor with respect to un-skilled labour, Egyptian food processing companies appear to consider the cost of skilled workers (engineers, scientific, technical, administrative and management workers) as an important factor determining their competitiveness. The attitude of companies to health and safety standards, together with their observance of these standards, is considered as important determinant of competitiveness95. With regard to the factors obtaining the lowest average scores, the following features stand out: Technological cooperation and collaboration, together with public sector support to promote technological improvement are not seen to be important factors influencing current competitiveness. This result appears to be driven by the fact that enterprises consider that the current situation for these technological factors is very poor in Egypt (see previous section) rather than the fact that they are not per se important for competitiveness. Similarly, the quality and availability of specialist support services, and of technical centres and support for research and development are have low average scores for their impact in determining current competitiveness. Labour market conditions (labour relations, employment regulations etc.) do not appear to be important factors influencing competitiveness of food processing companies.
95
This finding appears to stem from two main reasons: First, the ability to gain access to some markets that place a high priority of food safety, is conditional on enterprises investing in appropriate measures (HACCP, BRC, EuroGap, etc.). In turn, an enterprise may be able to invest more securely in new production lines, for example, if it is sure that appropriate certification will enable it to enter markets and hence increase production (export) volumes. Secondly, the need to upgrade facilities to comply with HACCP, or other quality control systems/standards, translates into higher initial costs that affect competitiveness.
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Table 10.3
Highest scoring factors for determining current competitiveness Rank

1 2 3 3 5 6 7 8 9 10 11 11 13 14 14 16 17 18 18 20
Factor
Availability of locally produced (Egyptian) raw & primary materials The attitude of companies to improving health and safety standards The level of health and safety standards observed by companies The cost of maritime freight transport The availability of finance to invest in technological improvement The cost of air freight transport The cost of import duties The quality of products produced compared to standards in the Gulf States The quality of products produced compared to world standards The quality of products produced compared to standards in Turkey Possibility to export: the ease with which companies can gain access to customers in markets in neighbouring countries Possibility to export: the ease with which companies can gain access to customers in international markets The attitude of companies to marketing The technological level of production compared to world standards The availability, quality and level of interaction with packaging suppliers Labour productivity, compared to world best standards The quality of the maritime transport infrastructure The cost of engineers, scientific and technical workers The use of new communication in company operations and management systems. The cost of management and administrative employees
Score
4.2 4.1 4.0 4.0 3.9 3.8 3.8 3.7 3.7 3.5 3.5 3.5 3.4 3.4 3.4 3.4 3.3 3.3 3.3 3.2
Number of obs.
13 13 13 13 13 12 13 13 12 11 13 13 12 13 13 11 12 13 13 13
Table 10.4
Lowest scoring factors for determining current competitiveness Rank

1 2 3 4 5 5 5 8 8 10 10 10 13 14 15 16 17 18 19 20 1.
1
Factor
The level of support from the public sector to promote technological improvement The level of technical cooperation and collaboration between firms The rate of strikes and labour disputes The level of technical cooperation and collaboration between industry and public and private organisations Labour relations (co-operation between employers and employees) Employment Regulations (hiring & firing regulations, contracts of employment) The availability and quality of un-skilled workers The quality and availability of specialists support services The availability of technical centres, and support for research & development Relations and interaction with wholesale distributors Relations and interactions with retail distributors The attitude of public administrations to higher education and training The rate of absenteeism The level and quality of staff training provided by companies The attitude of companies to using outside specialists support services Labour productivity, compared to standards in Turkey The quality of the transport infrastructure (within Egypt) The quality and availability of marketing expertise The efficiency of public administrations Labour productivity, compared to standards in the Gulf States
Score
1.5 1.6 1.7 1.9 2.3 2.3 2.3 2.4 2.4 2.5 2.5 2.5 2.5 2.6 2.7 2.7 2.8 2.8 2.8 2.9
Number of obs.
13 13 13 13 13 13 13 13 13 13 13 13 13 13 13 10 13 12 13 11
Inverse ranking
149
10.4
Evaluation of future competitiveness factors and comparison with current situation

Table 10.5 shows the highest scoring factors in terms of their importance for determining or influencing future competitiveness. Also shown is the corresponding score for the current situation. From the table, the following features stand out:
Among the factors identified as being important for determining future competitiveness those for which the current situation in Egypt is viewed as being particularly poor (i.e. average score less than 2) and that, therefore, may present a serious handicap to the future competitiveness of Egypts FPI are: The cost of maritime freight transport and the cost of air freight transport; The availability of finance to invest in technological improvements; The cost of import duties96 and the burden of administrative procedures on import and export activities. Other factors viewed as important for future competitiveness, for which the current situation although not poor is not particularly favourable (i.e. average score above 2 but less than 3) are: The technological level of production compared to world (best) standards; Ease of access to neighbouring and international markets; The cost of management, administrative employees and engineers, scientific and technical workers; The quality of the maritime transport infrastructure; Labour productivity, compared to world best standards; The availability, quality and level of interaction with equipment suppliers. Among the factors identified as being important for determining future competitiveness, those for which the current situation in Egypt is viewed as being particularly good (i.e. average score above 4) and that, therefore, may provide a source of competitive strength for Egypts FPI are: The level of health and safety standards observed by companies, together with the attitude of companies to improving health and safety standards; The quality of products produced by Egyptian companies relative to those in neighbouring countries (e.g. Gulf States and Turkey). Other factors viewed as important for future competitiveness, for which the current situation although not particularly good is favourable (i.e. average score above 3 but less than 4 are: The availability of locally produced raw and primary materials; The quality of products compared to world (best) standards; The availability of engineers, scientific and technical workers, and the availability of management and administrative employees; The use of new communication technologies in company operations and management systems; The attitude of companies to marketing..
It should be noted that the survey was carried out before the recent changes to import duties.
96
150
Table 10.5
Highest scoring factors for future competitiveness and corresponding scores for current competitiveness and current situation in Egypt Future Rank
1 2 3 3 3 6 7 8 9 10 11 12 12 14 14 16 16 18 19 19 19 22 23 24 24
1
Current Situation
1.2 3.4 1.2 4.2 4.2 1.1 1.2 4.1 3.3 2.8 4.0 2.8 2.8 3.1 3.0 3.3 3.4 2.8 3.2 2.8 2.5 2.3 3.0 2.8 1.3 4.2 4.2 4.1 4.1 4.1 3.8 3.8 3.7 3.7 3.6 3.5 3.5 3.5 3.5 3.5 3.4 3.4 3.4 3.3 3.3 3.3 3.3 3.3 3.2 3.2
Number of obs.
13 13 13 13 13 12 13 13 12 12 11 13 13 13 13 12 12 13 13 13 13 10 12 13 13
Factor
The cost of maritime freight transport Availability of locally producer (Egyptian) raw & primary materials The availability of finance to invest in technological improvement The level of health and safety standards observed by companies The attitude of companies to improving health and safety standards The cost of air freight transport The cost of import duties The quality of products produced compared to standards in the Gulf States The quality of products produced compared to world standards The technological level of production compared to world standards The quality of products produced compared to standards in Turkey Possibility to export: the ease with which companies can gain access to customers in markets in neighbouring countries Possibility to export: the ease with which companies can gain access to customers in international markets The availability of engineers, scientific and technical workers The availability, quality and level of interaction with packaging suppliers The use of new communication technologies in company operations and management systems. The attitude of companies to marketing The cost of management and administrative employees The availability and quality of management and administrative employees The cost of engineers, scientific and technical workers The quality of the maritime transport infrastructure Labour productivity, compared to world best standards The attitude of companies to innovation and product development The availability, quality and level of interaction with equipment suppliers The burden of administrative procedures on import and export activities
Competitiveness
151
10.5
Conclusions
Overall, although it is necessary to recognise the small sample of enterprises covered, a reasonably consistent picture emerges nonetheless with regard to the current situation in Egypt and competitiveness factors. On the one hand, Egyptian food processing companies consider themselves to be well placed in terms of the quality of their products vis--vis those of competitors in the region (and to a lesser extent world standards). Moreover, the availability of key skilled workers does not appear to be a problem; although there is some concern over labour costs for these workers. On the other hand, there appears to be a perception that enterprises are handicapped by inadequacies in the supporting environment in which they operate. In this respect, certain specific cost items such as maritime and air transport, together with import and export duties and procedures can be identified as important constraints. Accordingly, the recent actions by the government to reduce customs duties and steps to improve administrative efficiency should be viewed positively. A further area that should be of concern to public policy makers, however, is that of technical support and cooperation. In an environment in which innovation is a key mechanism for achieving competitive advantage and from escaping from the inevitable downward price pressure of low value-added product segments, it is striking that all aspects of technical/technological cooperation and collaboration and support score very lowly with regard to the current situation in Egypt. It appears that the absence of technical networks is such that Egyptian food processing companies do not even consider that they are important for determining their current or future competitiveness. Yet, given an industrial structure characterised by small and medium-sized enterprises, such networks would normally be considered as important for both process and product innovation. It is equally noticeable that, whereas technical networks are not considered important, the availability of finance to invest in technological improvements is both identified as one of the most important factors for future (and current) competitiveness, and is also one of the factors for which the situation in Egypt is particularly poor. Taken together, these findings suggests that Egyptian companies recognise the need for investments in technological improvement, but that this is very much at an individual company level, rather than part of a industry-wide strategy of technological development.
152
IV
Benchmarking Analysis
153
1 Summery of Main Findings
This document provides an assessment of the situation of the Egyptian Food Processing Industry (FPI) relative to 5 countries: Morocco, Turkey, South Africa, Spain and China. Specific attention is given to the following product groups: cheese, fruit juices, processed vegetables (for which tomato products and frozen vegetables are covered), and olive products. The choice of benchmark countries and product groups was made in consultation with the Project Steering Committee. With regard to the choice of benchmark countries, the following comments may be made: Morocco and Turkey represent regional competitors from the MENA region. South Africa, likewise, is the major FPI competitor in sub-Saharan Africa. China, with its grow position in global food trade, represents a major competitor and potential threat in global markets. Spain, can be considered as an international role model. The following main findings can be drawn from the analysis: 1. Relative to its overall land area and population size, Egypt has a much lower availability of arable land. In turn, this lack of arable land is reflected in a substantial negative trade balance in processed food for Egypt, whereas the other benchmark countries are all net exporters of processed food (with the exception of Morocco that has a small negative trade balance). Consequently, the share of Egyptian exports of processed food relative to output is the lowest among the benchmark countries for which comparable data is available.
Table 1.1 Processed food: trade position indicators for 2002 Egypt Value of exports ($ million) Value of net exports ($ million) Per capita exports ($/inhabitant) Share in world markets 190 -1,043 2.8 0.08% Morocco 465 -44 16.4 0.19% Turkey 1,555 572 23.4 0.63% S. Africa 1,020 242 156.8 0.41% Spain 8,426 159 212.6 3.39% China 7,522 3,685 5.9 3.03%
Source: ITC calculations based on COMTRADE of UNSD
Table 1.2
Exports as a share of output, % Egypt 1998 Processed meat, fish, fruit, vegetables and fats Dairy products Source: UNIDO 3.3% 1.1% Morocco 2001 25.9% 3.9% Turkey 2000 22.4% 2.9% S. Africa 1999 N.A. N.A. Spain 2000 25.1% 8.2% China 2001 N.A. N.A.
155
2. Despite the relative low level of exports of the Egyptian processed food industry, it occupies a slightly more important position (in terms of its share of manufactured value added - MVA) in the overall manufacturing sector than is the case for the other benchmark countries. Furthermore it has been characterised by the second strongest growth, after China, among these countries both in terms of value added and increase in its share of world export markets. 3. The relatively strong growth performance of the food-processing sector comes, however, from a position of relative weakness compared to the other benchmark countries. Available comparable data, strongly suggests that the performance of the Egyptian FPI in terms of indicators such as output per worker and value added per worker is a long way short of that obtained elsewhere97. Even when compared to a country such as Morocco, which has an overall level of economic development similar (or below) that of Egypt this remains noticeably to be the case.
Table 1.3 Food, beverages and tobacco, MVA per employee by sub-sector, $US Egypt 1998 Total Total (excluding tobacco) Source: Authors calculations based on UNIDO 5,000 5,210 Morocco 2001 25,640 16,330 Turkey 2000 34,910 32,300 S. Africa 1999 26,510 N.A. Spain 2000 37,050 36,280 China 2001 9,600 7,000
4. Furthermore, analysis of the main processed food segments98 indicates that Egypt achieves the lowest share of value added (below 20%) in the total value of output among the benchmark countries.
Table 1.4 Share of value added in the total value of output, % Egypt 1998 Processed meat, fish, fruit, vegetables and fats Dairy products
Notes: 1. China, data refer to all food processing, except beverages and tobacco
Morocco 2001 24% 26%
Turkey 2000 31% 40%
S. Africa 1999 N.A. N.A.
Spain 2000 17%
China 2001 24%
16% 19%
20%
Source: Authors calculations based on UNIDO
5. ITC calculations based on the COMTRADE database, and covering the period 1998-2002, provide a breakdown of the relative change of world market share of processed food exports for each of the benchmark countries. From this breakdown, Egypts initial position on (geographical) markets with dynamic
97
98
To some extent the low level of value added and the low share of output destined to export are most probably related.Typically, the greater the extent to which domestic production is destined to export markets then the closer value-added per employee measured in international currency terms (i.e. $ denominated) will be to international levels. With only a small share of exports in production, value added and output per employee in the Egyptian FPI will be more closely related to the (low) overall levels in the domestic market The UNIDO data used for this analysis covers 2 broad segments: (1) processed meat, fish, fruit, vegetables and fats; (2) dairy products.
demand is found to largely account for its increase in world market share. By contrast, Egypts initial product specialisation has had a negative effect on export performance (i.e. specialisation in products with non-dynamic world demand). Further, the negative estimate for the adaptation component, suggests that Egypt has a poor performance in terms of shifting exports towards specific productcountry markets characterised by dynamic demand. 6. Analysis of unit values of exports enables some analysis of the positioning of Egyptian exports on world markets. On the one hand, high unit values relative to competing (benchmark) countries are indicative of a quality premium for Egyptian exports and, at the same time, a potential risk of competition from lower cost suppliers. On the other hand, low unit values are indicative of a quality shortfall and, at the same time, a potential opportunity to compete as a low cost supplier. Overall, the probable strategy should be to seek to maintain Egypts quality advantage in (relatively) high unit value exports, while seeking to raise the unit values (quality) of products for which Egypt is a low cost/quality supplier. Analysis of COMTRADE data indicate that Egypt is positioned very much as a low cost/quality supplier for cheese products, mixed frozen vegetables, olive oil, olive products and preserved tomatoes. By contrast, Egypt is a high cost/quality supplier of fruit juices99, frozen vegetables (especially potatoes and other vegetables), and tomato ketchup and other tomato sauces.
Table 1.5 Average unit values of selected processed food exports (index, Egypt =100) HS Code 0406 2009 200980 200290 Cheese & curd Fruit Juice - Fruit & veg. juice nes Tomatoes, prepared or preserved (other) 210320 Tomato ketchup and other tomato sauces 0710 071010 071022 071080 071090 1509 200570 Frozen vegetables - Potatoes - Beans - Other vegetables - Mixed vegetables Olive Oil Olives prepared or preserved 100 100 100 100 100 100 100 100 78 91 61 139 78 171 117 137 47 68 24 85 48 181 111 108 55 75 69 91 62 117 299 203 74 99 52 116 75 237 136 151 62 112 87 73 79 238 268 100 408 105 120 138 85 Egypt 100 100 100 Morocco 151 116 Turkey 174 90 90 S. Africa 151 90 84 Spain 187 85 122 China 176 84 136
Source: Authors calculations based on COMTRADE
99
Although this is less so the case for the main Egyptian export category of fruit and vegetable juices nes (HS code 200980)
157
2 Basic Indicators
Table 2.1 provides some basic information on population and national income for each of the benchmark countries, together with labour costs and value added estimates for manufacturing. It can be noted that among the benchmark countries: Egypt has the second lowest average labour costs per worker in manufacturing and average value-added per worker in manufacturing. If gross national income per capita is taken to be an indicator of economy wide productivity100, then it is striking that manufacturing productivity (value added per worker) relative to average economy wide productivity101 is much greater in Morocco, Turkey and South Africa, than for Egypt. Turkey, in particular stands out, as average value added per worker in manufacturing is 13 times greater than gross national income per capita.
Table 2.1 Basic economic indicators for benchmark countries Egypt Population (millions) Gross national income ($US billion) Gross national income per capita ($US) PPP gross national income ($US billion) PPP gross national income per capita ($US) 65 99.6 1,530 232 3,560 Morocco 29 34.7 1,190 102 3,500 Turkey 66 167.3 2,530 386 5,830 S. Africa 43 121.9 2,820 472 10,910 Spain 41 588.0 14,300 816 19,860 China 1,272 1,132.2 890 5,027 3,950
Labour cost per worker in manufacturing ($ per year) Value added per worker in manufacturing ($ per year) 5,976 9,089 32,961 16,612 47,016 2,885 1,863 3,391 7,958 8,475 19,329 729
Ratio of labour cost per worker in manufacturing to gross national income per capita Ratio of value added per worker in manufacturing to gross national income per capita
1.22
2.85
3.15
3.01
1.35
0.82
3.91
7.64
13.03
5.89
3.29
3.24
Source: World Bank: World Development Indicators 2003 and authors calculations
100
101
Caution should be exercised in making this interpretation since a correct estimate of average labour productivity should adjust for the proportion of the working population within the total population. As shown by the ratio of value added per worker in manufacturing to gross national income per capita.
159
Table 2.2 shows some basic indicators related to the availability of agricultural land and agricultural productivity. What is most evident is that Egypts situation with respect to the availability of arable land relative to population size, for which Egypt has only 0.05 hectares of arable land per capita. This is half of the figure for China and one sixth to one eighth of the figure for the other benchmark countries.
Table 2.2 Basic agricultural indicators for benchmark countries Egypt Land Area (thousand sq. km) Arable land (% of land area) Permanent cropland (% of land area) Irrigated land (% of cropland) Arable land hectares per capita Agricultural productivity (US$ constant 1995) 1,324 1,512 1,852 3,837 22,088 334 995 2.8 0.5 100.0 0.05 Morocco 446 19.6 2.2 13.2 0.31 Turkey 770 31.4 3.3 16.7 0.38 S. Africa 1,221 12.1 0.8 8.9 0.35 Spain 499 26.7 9.8 19.9 0.34 China 9,327 13.3 1.2 39.6 0.10
Source: World Bank: World Development Indicators 2003
Table 2.3 provides information on the urbanisation rate, identified as one of the key factors influencing the development of the food-processing sector, in selected Mediterranean countries. Egypt is noticeable both for the low level of urbanisation compared to other Mediterranean countries and also for the low rate of increase in the share of the population in urban areas. In 1960 the share of the population living in urban areas was lower in Turkey, Tunisia and Morocco than in Egypt. These countries have, however, seen substantial increases in the rate of urbanisation, most notably in Turkey where the share has more than doubled from 31% to 73%.
Table 2.3 Urbanisation rates in selected Mediterranean countries Urbanisation rate (% of the population) 1960 Spain France Turkey Tunisia Morocco Egypt Portugal Source: Mdagri (2000)
102
Percentage change in urbanisation rate 35 19 135 73 80 18 68
1998 77 75 73 64 54 45 37
57 63 31 37 30 38 22
102
As reported in M. Padillla, G. Ghersi Le march international du lait et des produits latiers in Options Mditerranennes, Sr. B / no 32, 2001 Les filires et marchs du lait drivs en Mditerrane.
3 General overview of FPI in benchmark countries
3.1
Value-added and employment

Table 3.1 shows the share of the food, beverages and tobacco sector in total manufactured value added for each of the benchmark countries, together with average annual growth rates in value added for the period 1992-2002. The food-processing sector in Egypt has the highest share in manufactured value added among the benchmark countries103 and fastest growth during the period 1992-2002.
Table 3.1
Food, beverages and tobacco, share in manufactured value added (MVA) and growth in value added Egypt Share in manufactured value added, 2002, (%) Average annual growth rate, 1992-2002, % Source: UNIDO 17.1 7.0 Morocco 16.7 3.6 Turkey 15.8 3.5 S. Africa 15.9 0.4 Spain 16.5 1.5 China N.A. N.A.
Table 3.2 and Table 3.3 provide a breakdown of manufactured value added (MVA) by sub-sector of the food-processing sector. Among the benchmark countries, Egypt is shown to have the smallest food-processing sector in terms of total MVA104. In terms of the composition of MVA by sub-sector, the share of the dairy sector is lowest and that of other food products is highest in Egypt when compared to the other benchmark countries. Table 3.4 and Table 3.5 provide a breakdown of employment by sub-sector of the foodprocessing sector. Despite having lower value added, the level of employment in food processing in Egypt is greater than in Morocco, Turkey and South Africa. In terms of the composition of employment by sub-sector, the share of the processed meat, fish, fruit, vegetables, and fats and the share of the dairy sector are lowest in Egypt, while the share of employment in other food products is highest in Egypt when compared to the other benchmark countries.
103 104
Date for china are not available. Allowance should be made for differences in the year of available data. The size of the food processing sector (measured by MVA) of Egypt is probably on a par with that of Morocco; although, at the same time, the population of Morocco is less than half that of Egypt and its gross national income is approximately only one third of that of Egypt.
161
Table 3.2
Food, beverages and tobacco, breakdown of MVA by sub-sector, $US million Egypt 1998 Processed meat, fish, fruit, vegetables, fats Dairy products Grain mill products; starches; animal feeds Other food products Beverages Tobacco products Total of above Notes: 1. Egypt, data for tobacco products refers to 1997 248 63 151 496 204 41 1,203 Morocco 2001 302 138 183 155 228 635 1,641 Turkey 2000 1,621 412 526 1,552 879 1,837 1,063 6,053 2,773 543 12,991 13,206 37,842 S. Africa 1999 644 292 N.A. N.A. Spain 2000 3,540 1,252 976 3,519 3,161 7,763 16,873 China 2001
Source: UNIDO
Table 3.3
Food, beverages and tobacco, breakdown of MVA by sub-sector, share of total MVA (%) Egypt 1998 Processed meat, fish, fruit, vegetables, fats Dairy products Grain mill products; starches; animal feeds Other food products Beverages Tobacco products Total of above Notes: 1. Egypt, data for tobacco products refers to 1997 20.6% 5.2% 12.6% 41.2% 17.0% 3.4% 100.0% Morocco 2001 18.4% 8.4% 11.2% 9.4% 13.9% 38.7% 100.0% Turkey 2000 26.8% 6.8% 8.7% 25.6% 14.5% 66.2% 17.6% 100.0% 100.0% 4.2% 100.0% 34.9% 100.0% S. Africa 1999 23.2% 10.5% N.A. N.A. Spain 2000 27.2% 9.6% 7.5% 27.1% 24.3% 20.5% 44.6% China 2001
Table 3.4
Food, beverages and tobacco, breakdown of employment by sub-sector, thousand employees Egypt 1998 Processed meat, fish, fruit, vegetables, fats Dairy products Grain mill products; starches; animal feeds Other food products Beverages Tobacco products Total of above Source: UNIDO 43.8 8.1 37.0 114.1 20.2 17.4 240.7 Morocco 2001 20.9 8.7 19.2 8.5 4.3 2.4 64.0 Turkey 2000 53.5 8.5 15.4 66.0 11.1 18.9 173.4 S. Africa 2001 55.1 20.9 27.4 53.4 26.5 2.1 185.4 Spain 2000 125.7 25.9 20.5 127.7 43.3 7.5 350.6 950.0 247.0 3941.1 2570.0 China 2001
Table 3.5
Food, beverages and tobacco, breakdown of employment by sub-sector, share of total employment (%) Egypt 1998 Processed meat, fish, fruit, vegetables, fats Dairy products Grain mill products; starches; animal feeds Other food products Beverages Tobacco products Total of above 18.2% 3.4% 15.4% 47.4% 8.4% 7.2% 100.0% Morocco 2001 32.7% 13.6% 30.0% 13.3% 6.7% 3.8% 100.0% Turkey 2000 30.9% 4.9% 8.9% 38.1% 6.4% 10.9% 100.0% S. Africa 2001 29.7% 11.3% 14.8% 28.8% 14.3% 1.1% 100.0% Spain 2000 35.9% 7.4% 5.8% 36.4% 12.4% 2.1% 100.0% 24.1% 6.3% 100.0% 65.2% China 2001
From the data available in the preceding tables it is possible to estimate the average MVA per employee; this provides a basic indicator of productivity per employee. As shown in Table 3.6, with the exception of China for certain sub-sectors, estimated productivity in the food processing sector in Egypt is systematically below that of the other benchmark countries. Even allowing for differences in the years of available data across countries, Egypts performance in terms of value added per employee appears to be poor; for example, one can ask why a country such as Morocco with average per capita income below that of Egypt is able to achieve levels of MVA per employee that are 2 to 3 times (or even more) higher than those achieved by Egypt?
Table 3.6 Food, beverages and tobacco, MVA per employee by sub-sector, $US Egypt 1998 Processed meat, fish, fruit, vegetables, fats Dairy products Grain mill products; starches; animal feeds Other food products Beverages Tobacco products Total of above Total of above (excluding tobacco) Notes: 1. Egypt, data for tobacco products refers to 1997 5,660 7,780 4,080 4,350 10,100 2,360 5,000 5,210 Morocco 2001 14,450 15,860 9,530 18,240 53,020 264,580 25,640 16,330 Turkey 2000 30,300 48,470 34,160 23,520 79,190 64,230 56,240 34,910 32,300 26,510 N.A. 72,400 37,050 36,280 53,470 9,600 7,000 S. Africa 1999 11,690 13,970 N.A. N.A. Spain 2000 28,160 48,340 47,610 27,560 73,000 8,170 6,570 China 2001
163
The agro-food sector in Egypt: analysis of local data (CAPMAS) CAPMAS data for 1999/2000 indicate that there are 301 units, agro-food enterprises, employing a workforce of 64 thousand (excluding beverages and tobacco), as shown in Table 3.7. From these data it is possible to calculate performance indicators that may be used for comparison with the figures obtained from UNIDO data described earlier in this section. As shown in Table 3.8, the average value of production per employee for the agro-food industry is $US 25 thousand and the average value-added per employee is $US 3.4 thousand; this latter figure may be compared to the figure of approximately $US 5 thousand calculated using UNIDO data.
All in all, the data do not suggest a situation that is very different from the analysis undertaken using UNIDO data. In fact, they suggest that the relative performance of the agro-food sector in Egypt may be even worse than described earlier, since value-added per employee is found to be even lower on the basis of the CAPMAS data.
At the same time, the data indicate a low share of value added in total production, a feature that will be examined in Section 4 of this report. The data indicate that the average share of value-added in production is only 13%. For the sub-sector processed meat, fish, vegetables and fats this figure is only 11% and for dairy products 22%
105
Table 3.7
Overview of the agro-food industry (1999/2000)
106
Units Number Processed meat, fish, fruit, vegetables, fats - Meat Industry - Fish Industry - Processed vegetables - Oils and fats Dairy products Grain mill products, starches, animal feed - Mill products - Animal feed Other food products - Bread, pastry, biscuits - Sugar - Cacao, chocolate - Other Total of above Source: CAPMAS
107
Employment Thousand 18.8 1.6 0.3 0.8 16.1 1.4 16.5 15.3 1.1 27.5 4.5 14.7 1.1 7.1 64.1
Production $US million 491.3 16.8 4.0 12.3 458.2 17.6 552.4 507.3 45.1 562.2 32.2 466.3 8.1 55.5 1623.5
Value Added $US million 53.1 -4.0 1.3 1.8 54.1 3.8 34.0 31.7 2.4 126.6 3.7 89.9 -0.4 33.4 217.6
36 4 2 7 23 7 104 94 10 154 129 10 2 13 301
and authors calculations
105 106 107
These may be compared, respectively, to figures of 16% and 19% as described in Section 4. Local currency converted to $US using exchange rate $US1 = L.E. 3.446 As reported in CIHEAM (2004): Agri.Med, Egypt, Annual Report 2004.
Table 3.8
Performance indicators for Egyptian agro-food industry Production/Emp $US Processed meat, fish, fruit, vegetables, fats - Meat Industry - Fish Industry - Processed vegetables - Oils and fats Dairy products Grain mill products, starches, animal feed - Mill products - Animal feed Other food products - Bread, pastry, biscuits - Sugar - Cacao, chocolate - Other Total of above Source: Authors calculations based on CAPMAS
108
VA/Emp $US
VA/Production %
26,196 10,365 12,950 16,080 28,530 12,752 33,553 33,106 39,548 20,456 7,120 31,776 7,115 7,774 25,335
2,833 -2,488 4,159 2,308 3,370 2,757 2,068 2,068 2,060 4,607 815 6,126 -332 4,675 3,395
11% -24% 32% 14% 12% 22% 6% 6% 5% 23% 11% 19% -5% 60% 13%
Egypts position in the Mediterranean agro-food industry Analysis undertaken by CIHEAM

109
shows the relative position of Egypt within the Mediterranean agro-
food industry. As shown in Table 3.9, among southern-Mediterranean countries, Egypt has the third largest agro-food sector in terms of production and value added, after Turkey and Israel. At the same time, when measured by employment, Egypt has the largest agro-food industry.
Constructing indicators of the performance of the agro-food sector, Egypt is very poorly positioned when compared to other Mediterranean countries. As shown in Table 3.10, in terms of labour productivity (whether measured as production per employee or value-added per employee), Egypt is ranked in last position among the 11 southern-Mediterranean countries. Further, when looking at the rate of value added generated per unit of production (in value terms), Egypt at 20% is ranked second lowest among the 11 southern-Mediterranean countries.
108 109
As reported in CIHEAM (2004): Agri.Med, Egypt, Annual Report 2004. CIHEAM (Centre International de Hautes Etudes Agronomiques Mditerranennes), Agri.Med Annual Report 2004.
165
Table 3.9
The agro-food industry in Mediterranean countries (1998) Production $ million Turkey Israel Egypt Morocco Tunisia Algeria Syria Lebanon Cyprus Jordan Malta Total of above France Italy Spain Portugal Greece Total of above Total all countries 13000 7000 6000 4600 3100 3000 1800 1500 550 550 240 41340 120000 90000 61000 9500 6000 286500 327840 % 31.4% 16.9% 14.5% 11.1% 7.5% 7.3% 4.4% 3.6% 1.3% 1.3% 0.6% 100.0% 41.9% 31.4% 21.3% 3.3% 2.1% 100.0% Value added $ million 3400 1800 1200 950 500 800 400 350 200 120 70 9790 33700 20000 17000 1500 1800 74000 83790 % 34.7% 18.4% 12.3% 9.7% 5.1% 8.2% 4.1% 3.6% 2.0% 1.2% 0.7% 100.0% 45.5% 27.0% 23.0% 2.0% 2.4% 100.0% Employment Thousand 136 50 200 92 34 90 24 15 8 16 3 668 450 270 290 87 49 1146 1842 % 20.4% 7.5% 29.9% 13.8% 5.1% 13.5% 3.6% 2.2% 1.2% 2.4% 0.4% 100.0% 39.3% 23.6% 25.3% 7.6% 4.3% 100.0%
Source: CIHEAM (2004), based on UNIDO, World Bank and CIAA data, and authors own calculations
Table 3.10
Agro-food industry performance indicators in Mediterranean countries (1998) Productivity 1 Production/Emp $ thousand Turkey Israel Egypt Morocco Tunisia Algeria Syria Lebanon Cyprus Jordan Malta Total of above France Italy Spain Portugal Greece Total of above Total all countries 95.6 140.0 30.0 50.0 91.2 33.3 75.0 100.0 68.8 34.4 80.0 61.9 266.7 333.3 210.3 109.2 122.4 250.0 178.0 2 1 3 5 4 Rank 3 1 11 8 4 10 6 2 7 9 5 Productivity 2 VA/Emp $ thousand 25.0 36.0 6.0 10.3 14.7 8.9 16.7 23.3 25.0 7.5 23.3 14.7 74.9 74.1 58.6 17.2 36.7 64.6 45.5 1 2 3 5 4 Rank 2 1 11 8 7 9 6 4 2 10 4 VA rate VA/Production % 26% 26% 20% 21% 16% 27% 22% 23% 36% 22% 29% 24% 28% 22% 28% 16% 30% 26% 26% 2 4 3 5 1 Rank 4 5 10 9 11 3 7 6 1 8 2
Source: CIHEAM (2004), based on UNIDO, World Bank and CIAA data, and authors own calculations
3.2
Trade Performance Index

Table 3.11, provides information from ITC analysis of the COMTRADE database of the general trade performance in processed food for the benchmark countries. Overall, these show a positive performance of Egyptian processed food exports. After China, Egypt showed the strongest growth among the benchmark countries over the period 1998-2002 both in absolute terms and on a per capita basis. The relative unit value of exports is also calculated to be high (2.4), with only Morocco (4.4) having a higher calculated average unit value relative to the world average. At the same time, whereas relative unit values of processed food exports are calculated to have been increasing for the other benchmark countries, for Egypt it fell (-5%) over the period 1998-2002.
Table 3.11
Processed food: general trade performance indicators (1998-2002) Egypt Value of exports ($ million) Trend of exports (98-02) p.a. Share in national export Share in national import Average annual change in per capita exports Relative unit value (world average =1) Average annual change in relative unit value Notes: 1. 2. 3. Data in red (right hand sub-columns) indicates rank out of 144 reporting countries S. Africa data are for the South Africa Customs Union (South Africa, Botswana, Namibia, Lesotho and Swaziland) Relative unit value: unit value (value divided by quantity) of country relative to world unit value Source: ITC calculations based on COMTRADE of UNSD 190 13% 49 3% 9% 8% 32 2.4 -5% Morocco 465 3% 90 6% 5% 3% 61 4.4 13% Turkey 1,555 3% 4% 2% -5% 123 1.2 5% 94 S. Africa 1,020 7% 62 4% 4% -1% 54 Spain 8,426 5% 81 7% 5% 3% 63 1.5 3% China 7,522 22% 31 2% 1% 9% 30 1.1 3%
Table 3.12 provides information from ITC analysis of the COMTRADE database of the general trade position in processed food for the benchmark countries. These indicators tend to mitigate the encouraging trade performance indicators given above. On the one hand, Egypt is the only benchmark country with a strongly negative trade balance in processed foods, it has the lowest per capita value of food exports and a meagre share in world markets110. In terms of product diversification, the measures used by ITC indicate that Egypt has a more diversified range of processed food exports than either South Africa111 or Morocco112, but is less diversified than Spain, Turkey or China. In terms of market diversification, Turkey stands out as having the greatest level of geographical diversification of processed food exports. By contrast, China has very low market
110
111
This situation is, of course, not surprising given the limited availability of agricultural land hence agricultural produce per capita of Egypt compared to the other benchmark countries. For South Africa, this partly reflects the high shares of preserved fruits and fruit juices in total processed food exports (see Table 0.3). For Morocco, this partly reflects the high shares of prepared or preserved fish and of prepared or preserved vegetables in total processed food exports (see Table 0.1).
112
167
diversification, which reflects the very high proportion on Chinese processed food exports that are destined to the Japanese market113. The overall indicator (ranking) of the general trade position for processed food, Egypt is ranked lowest amongst the benchmark countries; Egypt is ranked in 82nd position out of a total of 144 countries. By contrast, Spain is the highest ranked country (8th position), followed by Turkey (15th), South Africa (21st) and China (23rd).
Table 3.12 Processed food: trade position indicators for 2002 Egypt Value of net exports ($ million) Per capita exports ($/inhabitant) Share in world market Product diversification (Number of equivalent products) Product spread (concentration) Market diversification (Number of equivalent markets) Market spread (concentration) Overall Current (2002) Index Notes: 1. 2. 3. 4. 5. 6. Data in red (right hand sub-columns) indicates rank out of 144 reporting countries S. Africa data are for the South Africa Customs Union (South Africa, Botswana, Namibia, Lesotho and Swaziland) Product diversification: number of export products of equal size that would lead to the observed concentration of exports Product spread: concentration of products by value (weighted standard error) Market diversification: number of export markets of equal size that would lead to the observed concentration of exports Market spread: concentration of markets by value (weighted standard error Source: ITC calculations based on COMTRADE of UNSD 11 -1,043 135 2.8 124 0.08% 16 Morocco -44 69 16.4 91 Turkey 572 17 23.4 84 S. Africa 242 22 156.8 33 Spain 159 31 212.6 25 China 3,685 7
5.9 111 10 7 5 5 80 35 23
77 0.19% 54 0.63% 30 0.41% 40 3.39% 31 39 26 51 82 11 53 66 7 55 61 57 23 28 11 14 3 3 15 8 67 42 11 25 46 21
9 3.03% 34
27 12 7 11 28 19 8
Table 3.13 provides information from ITC analysis of the COMTRADE database of the change in the trade positions in processed food for the benchmark countries between 1998 and 2002. Overall, Egypt is ranked in 2nd position out of 144 countries covered by the analysis, ahead of China (9th position). These two countries are ranked someway ahead of the other benchmark countries. The strong overall score of Egypt reflect the strong increase in Egypts world market share, bettered only by China, and its high ranking in terms of changes in product and market diversification and spread. The COMTRADE analysis provides a breakdown of the relative change of world market share into 4 component parts114. From this breakdown, Egypts initial position on (geographical) markets with dynamic demand is found to largely account for its increase
113 114
See Table 0.5. These are: (1) Competitiveness effect gain in market share due to increased competitiveness (gain in market share in destination markets times the initial share of partner country imports in world imports); (2) initial geographical specialisation benefit associated with initial export position on dynamic partner country (import) markets; (3) initial product specialisation benefit associated with initial export specialisation in products characterised by dynamic demand; and (4) adaptation to changes in world demand change in share of exporting country in specific product-country markets multiplied by the change in the specific product-country market in world change.
in world market share. By contrast, Egypts initial product specialisation has had a negative effect on export performance (i.e. specialisation in products with non-dynamic world demand). Further, the negative estimate for the adaptation component, suggests that Egypt has a poor performance in terms of shifting exports towards specific productcountry markets characterised by dynamic demand.
Table 3.13 Processed food: trade position change indicators 1998 - 2002 Egypt
Relative change of world market share (% p.a.) - Competitiveness effect (% p.a.) - Initial geographical specialisation (% p.a.) - Initial product specialisation (% p.a.) - Adaptation (% p.a.) Trend of import coverage by exports Matching with dynamics of world demand Change in product diversification Change in product spread Change in market diversification Change in market spread Overall (1998 - 2002) Index Notes: 1. 2. Data in red (right hand sub-columns) indicates rank out of 144 reporting countries S. Africa data are for the South Africa Customs Union (South Africa, Botswana, Namibia, Lesotho and Swaziland) 3.90 1.84 9.10 59 17
Morocco
1.37 1.89 41.50
Turkey
-6.79
S. Africa
N.A. 0.46 74
Spain
1.89 2.15 0.11 54
China
8.34 4.80 32 96 42 10 32 29 33 29 101 99 9
57 -4.30 128 5 0.42 76
81 -0.52 72 53 86 56 90 90 121 117 110 2.67 1.40 9%
-4.36 114 -36.06 141 -3.56 109 -2.91 102 -0.06 -2.67 12% 92 28 23 24 24 24 21 2 -5.97 117 -1% 89 55 64 64 37 40 57 0.64 -1% 17 81 88 70 68 57 61 95 3% 62 50 49 49 117 115 91 -0.31 -1%
Source: ITC calculations based on COMTRADE of UNSD
169
Openness of Mediterranean agricultural systems to international trade An analysis of the degree of commercial integration into the world economy of Mediterranean countries is presented in CIHEAM (2004) (X + M ) / VA where:
f f aipc f 116 115
. The degree of integration is measured using the following coefficient:
X = food exports
f aipc
M = food imports VA = value added of the agro-industrial production complex (agriculture and agro-food
industry) A coefficient of 100 (or above) is considered to represent a relatively open economy.
Among Mediterranean countries, only 5 attain or are close to a ratio of 100: Jordan, Cyprus, Malta, Portugal and France. Egypt ranks in 13th place among the 14 countries presented, with not only a low aggregate level of integration but with a negative trade balance (as reflected in the relative size of X / VA
aipc f f aipc
compared to M / VA
). What is also notable is that the data suggest that among the countries
shown, Egypt together with Syria are the only countries for which integration has actually diminished over the last decade (as indicated by the negative variation between 1991 and 2000). These data suggest that Egypt is failing to participate in the globalisation of agro-food markets.
Table 3.14
Openness of food systems of Mediterranean countries to international trade (%) (X + M ) / VA

f f aipc
Variation* 91-00 73 8 7 73 18 25 42 12 5 -16 -44 27
X / VA
aipc
M / VA
aipc
average 99-01 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Jordan Cyprus Malta Portugal France Spain Italy Greece Morocco Algeria Tunisia Syria Egypt Turkey
f
average 99-01 83 50 22 26 57 45 30 22 22 1 17 8 2 15
average 99-01 229 97 119 74 42 41 42 31 21 42 21 14 20 7
312 147 140 100 99 86 73 53 43 43 38 22 22 22

f aipc
*Note: Variation of the ratio (X + M ) / VA
between averages 1990-92 and 1999-2001
Source: CIHEAM (2004), based on World Bank, WDI, 2003
115 116
CIHEAM (Centre International de Hautes Etudes Agronomiques Mditerranennes), Agri.Med Annual Report 2004. Food understood to include the following sections of the Standard International Trade Classification (SITC): Section 0 (food and live animals), section 1 (beverages and tobacco), Section 4 (animal and vegetable oils) and division 22 (oilseeds and oleaginous fruits).
4 Production and productivity performance
4.1
Introduction
UNIDO data provide one of the few sources of readily available and reasonably comparable data on the production performance of the food-processing sector. These data are described and analysed in this section with the aim of providing an overview of the general relative performance of the Egyptian food-processing sector relative to the other benchmark countries. The data permit two main segments of the food processing sector relevant to this study to be separately identified: (1) Processed meat, fish, vegetable and fats; (2) Dairy products. The reader should be aware that differences in the years of available data, differences in classification systems, and the sensitivity of (dollar measured) data to exchange rate variations imply that caution should be exercised in making comparisons across countries.
4.2
Processed meat, fish, fruit, vegetables, and fats

Table 4.1 and Table 4.2 provide details of the output and value added of the main processed food segment (meat, fish, fruit, vegetables and fats) in aggregate and on a per employee basis. These data enable some comparison of the relative production and productivity performance across the benchmark countries. If we look at the share of production costs and value added in the total value of output (Table 4.1), the first noticeable feature of the data is that Egypt is shown to have the lowest share of value added (16 percent) in total output117. This figure may be compared to shares of 24 percent for Morocco and China, and 31 percent for Turkey. The conclusion to be drawn from this is that, with the exception of Spain, Egypt achieves a much lower rate of value-added per unit of output than the other benchmark countries. The ratio of value-added to output provides one basic measure of productivity, and in this respect the productivity performance of Egypt is seen to be poor when compared to its main potential competitors among the benchmark countries. Value-added may be broken down into two components: first, a wage component reflecting the costs of labour and, secondly, a non-wage component reflecting essentially profits and taxes. For Egypt, the wage component accounts for 31 percent of value-added, a figure that can be considered to be reasonable when compared to Morocco and Spain. However, it is Turkey that stands out as its wage component accounts for only 18 percent of value added. For Turkey, the combined high share of value added in output and the
117
Data for South Africa is not available.
171
low share of labour costs in value added indicates a far higher level of relative profitability than is achieved by the other benchmark countries.
Table 4.1 Processed meat, fish fruit, vegetables and fats: estimates of value and composition of output, $US million Egypt 1998 Value of output Of which: - Production costs etc. - Value added Of which - Wages component - Non-wage component Notes: 1. 2. 3. China, data refer to all food processing, except beverages and tobacco Production costs etc. refers to the non-value added component of total output Non-wage component refers to non-wage component of value added (i.e. profits, taxes etc.) 77 31% 171 69% 112 37% 292 18% N.A. N.A. 1,699 48% 1,841 52% 1,302 84% 248 16% 956 76% 3,608 69% 302 24% 1,621 31% N.A 644 17,284 83% 53,431 76% 3,540 17% 16,873 24% 1,550 Morocco 2001 1,258 Turkey 2000 5,229 S. Africa 1999 N.A. Spain 2000 20,824 China 2001 70,304
190 63% 1,329 82%
Source: UNIDO and Authors calculations
When measured on a per employee basis (Table 4.2), it appears that Egypt achieves much lower rates of output and value added per employee than the other benchmark countries except China118. To some extent this reflects lower labour costs (wage component), but nonetheless Egypt achieves a much lower non-wage component of value-added per employee than the other benchmark countries for which data are available.
Table 4.2 Processed meat, fish fruit, vegetables and fats: output and value-added per employee, $US Egypt 1998 Output per employee Value added per employee Of which - Wages component - Non-wage component Notes: 1. 2. China, data refer to all food processing, except beverages and tobacco South Africa, wage component refers to average wages per employee in 2001 1,740 3,920 5,380 9,070 5,420 24,890 4,590 13,500 14,660 N.A. N.A. 35,360 5,660 Morocco 2001 60,240 14,450 Turkey 2000 97,740 30,310 S. Africa 1999 N.A. 11,380 Spain 2000 165,660 28,160 China 2001 27,360 6,570
Source: Authors estimates and calculations based on UNIDO
Table 4.3, Table 4.4 and Table 4.5 provide an overview by sub-segment of the consumption, production and trade position of Egypt and three of the benchmark countries119. In terms of the ratio of output to apparent consumption (Table 4.3), Egyptian production covers a lower proportion of domestic demand (apparent consumption) than is achieved by the other countries. Further, only the sub-segment processing and
118 119
Data for China refer to all food processing. Allowance should be made for differences in the year of data across countries. Data are not available for South Africa and China.
preserving of fruit and vegetables achieves a level of domestic output that exceeds domestic demand.
Table 4.3 Processed meat, fish fruit, vegetables and fats: ratio of output to apparent consumption Egypt 1998 Processing & preserving of meat Processing & preserving of fish Processing & preserving of fruit & vegetables Vegetable and animal oils & fats Total of above Notes: 1. ISIC codes may vary across countries 0.42 0.11 1.11 0.63 0.59 Morocco 2000 N.A. 1.89 1.44 0.76 1.14 Turkey 1997 0.68 1.39 1.68 0.90 0.96 Spain 2000 1.05 0.62 1.25 1.11 1.02
Given the above, it is not altogether surprising that Egypt only achieves a very low level of exports measured as a share of output (Table 4.4). The data show that only 3.3 percent of Egyptian production goes to exports, whereas the other countries achieve export levels of around one-quarter of total production.
Table 4.4 Processed meat, fish fruit, vegetables and fats: exports as a share of output (%) Egypt 1998 Processing & preserving of meat Processing & preserving of fish Processing & preserving of fruit & vegetables Vegetable and animal oils & fats Total of above Notes: 1. ISIC codes may vary across countries 1.7 5.9 18.2 0.6 3.3 Morocco 2000 N.A. 47.6 33.1 1.9 25.9 Turkey 1997 5.9 29.4 42.7 17.9 22.4 Spain 2000 13.4 61.5 33.5 29.1 25.1
Egypt is also far more reliant on imports of processed meat, fish, fruit & vegetables and fats than the other benchmark countries for which data are available. With the exception of imports of fruits and vegetables for Spain, Egypt has the highest ratio of imports to apparent consumption for each of the sub-segments (Table 4.5).
173
Table 4.5
Processed meat, fish fruit, vegetables and fats: imports as a share of apparent consumption (%) Egypt 1998 Processing & preserving of meat Processing & preserving of fish Processing & preserving of fruit & vegetables Vegetable and animal oils & fats Total of above Notes: 1. ISIC codes may vary across countries 58.6 89.9 8.9 37.5 42.5 Morocco 2000 N.A. 0.9 3.4 25.6 15.6 Turkey 1997 35.8 2.0 3.4 26.2 25.2 Spain 2000 9.1 76.0 17.0 21.6 23.6
4.3
Dairy products
Table 4.6 and Table 4.7 provide details of the output and value added of the dairy products segment in aggregate and on a per employee basis. The general picture for the dairy products segment is quite similar to the one presented in the preceding section. Egypt achieves a lower share of value-added to output than the other benchmark countries but has a low wage component in value added, though greater than Turkey. On a per employee basis, except in relation to China, Egypt achieves a lower level of output and value added, similarly Egypt is shown as having a low level of wages (wages component) and non-wage component per employee. Once again, Turkey stands out in terms of its productivity and profitability.
Table 4.6
Dairy products: estimates of value and composition of output, $US million Egypt 1998 Value of output Of which: - Production costs etc. - Value added Of which - Wages component - Non-wage component Notes: 1. 2. 3. China, data refer to all food processing, except beverages and tobacco Production costs etc. refers to the non-value added component of total output Non-wage component refers to non-wage component of value added (i.e. profits, taxes etc.) 13 21% 50 79% 54 39% 84 61% 62 15% 350 85% N.A. N.A. 513 41% 739 59% 269 81% 393 74% 63 19% 138 26% 618 60% 412 40% N.A. 292 5,008 80% 1,252 20% 53,431 76% 16,873 24% 332 Morocco 2001 531 Turkey 2000 1,030 S. Africa 1999 N.A. Spain 2000 6,260 China 2001 70,304
Source: UNIDO and Authors calculations
Table 4.7
Dairy products: output and value-added per employee, $US Egypt 1998 Output per employee Value added per employee Of which - Wages component - Non-wage component Notes: 1. 2. China, data refer to all food processing, except beverages and tobacco South Africa, wage component refers to average wages per employee in 2001 1,660 6,090 6,160 9,710 7,050 41,430 7,470 19,950 28,350 N.A. N.A. 41,050 7,750 Morocco 2001 60,900 15,870 Turkey 2000 121,180 48,480 S. Africa 1999 N.A. 12,570 Spain 2000 241,410 48,300 China 2001 27,360 6,570
Table 4.8 provide an overview of the consumption, production and trade position of Egypt and three of the benchmark countries120. Whereas domestic production for the three other countries covers over 90 percent of demand (apparent consumption), Egypt achieves only 70 percent coverage. Further Egypt has the lowest share of exports to output and the highest share of imports to demand (apparent consumption).
Table 4.8 Dairy products: key indicators Egypt 1998 Ratio of output to apparent consumption Exports as a share of output (%) Imports as a share of apparent consumption (%) Notes: 1. ISIC codes may vary across countries 0.69 1.1 31.8 Morocco 2000 0.91 3.9 12.4 Turkey 1997 0.98 2.9 4.7 Spain 2000 0.93 8.2 14.9
Source: UNIDO
4.3.1
Consumption of dairy products in Mediterranean countries Table 4.9 shows data on the consumption and production per capita of dairy products in selected Mediterranean countries. In general, the data show a modest increase in per capita demand in northern Mediterranean countries and a modest decrease in southern Mediterranean countries. At the same time, there has been an increase in production per capita in southern Mediterranean countries, and a mixed picture in northern Mediterranean countries. Despite an improvement in the ratio of output to apparent consumption, Egypt remains the country with the lowest share of apparent consumption met through domestic production (63%).
120
Data are not available for South Africa and China.
175
Table 4.9
Evolution of apparent human consumption of dairy products (in equivalent raw milk) Consumption kg/hab Production of milk kg/hab Ratio of output to apparent consumption 1988 France Portugal Spain Turkey Tunisia Egypt Morocco Source: CNIEL/FAO 419 132 147 197 82 95 69
121
1998 404 168 189 172 80 84 64
1988 486 147 166 183 49 41 41
1998 434 194 168 156 75 53 41
1988 1.16 1.11 1.13 0.93 0.60 0.43 0.59
1998 1.07 1.15 0.89 0.91 0.94 0.63 0.64
121
As reported in M. Padillla, G. Ghersi Le march international du lait et des produits latiers in Options Mditerranennes, Sr. B / no 32, 2001 Les filires et marchs du lait drivs en Mditerrane.
5 Overview of FPI export situation
In this section we give an overview of the general export position in processed food for the benchmark countries. The data are drawn from the ITC COMTRADE database and refer to 2002. It should be noted that Egypt does not provide data to the COMTRADE database and, accordingly, data for Egypt are mirror data reported by importing countries. Table 5.1 provides details of the level of processed food exports by geographical area, while Table 5.2 and Table 5.3 show the main product categories exported to the main geographical markets122. Overall, the geographical composition of food exports for each country reflects to a greater or lesser extent the importance for each country of exports to the respective neighbouring countries/region. For Egypt, for example, 45 percent of its processed food exports are destined to the Gulf Region and S.E. Mediterranean. At the same time, in value terms, Turkey, Spain and even China export more to this region than Egypt. If we consider the level and share of exports going to the most economically developed regions of Europe and America, it is noticeable that a lower share of Egypts total processed food exports are destined to the EU that any of the other countries except China; though Chinas exports to the EU dwarf those of Egypt in value terms. By contrast, Egypt has the highest proportion of its total processed food exports going to the North American market, although because of the low overall value of Egyptian exports all of the other countries have a higher value of processed food exports to North America. The data shown in Table 5.1, further support the analysis of the trade position indicators of market diversification shown earlier in Table 3.12. In particular they demonstrate the geographical spread achieved by Turkey, which manages not only to achieve high exports to the European Union (15 members) and America but also has relatively important shares of exports going to Central and Eastern Europe, the former Soviet Union and Central Asia. Table 5.2 and Table 5.3 show the main products exported to key geographical markets. Taking the European Union as an example, the data indicate a lack of product diversification of Egyptian exports: the leading 4 product categories account for 85 percent of Egypts exports to the EU, whereas for Turkey they account for only 56 percent, 61 percent for China, and 74 percent for South Africa. Egypts position in the Americas is somewhat better, with a more balanced composition and lower concentration
122
The tables cover exports of processed food products for 39 product categories. The products covered can be seen in Error! Reference source not found. to Table 0.5, which show more detailed information by product category for each of the benchmark countries.
177
of its leading export product categories. By contrast Morocco and South Africa exports of processed food are more concentrated with the top four product categories accounting respectively for 94 percent and 87 percent of processed food exports. The tables can also be used to identify important product categories for which the benchmark countries are in competition with Egypt in particular geographical markets. For example, the Gulf & S.E. Mediterranean region is an important market for exports of Cheese & curd for Egypt, Morocco and Turkey, while America is an important market for fruit juices for Egypt, South Africa and China.
Table 5.1 Geographical composition of processed food exports, $US million 2002. Egypt
Gulf & S.E. Med - Gulf States - S.E. Mediterranean N & N.E. Africa - N . Africa - N.E. Africa W., Cent. & Southern Africa - N. W. Africa - E. Africa - S. Africa European Union (15+) - EU Mediterranean - EU Continental - EU Scandinavian - EU non-Cont. Other Europe Central & E. Europe Former Soviet Union Central Asia Americas - N. America & Mexico - Cent. America & Caribbean - S. America Far East & Oceania - S. & S.E. Asia - Japan, Taiwan & Korea - China, H.K., Mongolia - Australia, N.Z. & Pacific Free Zones Not allocated Total (of the above) 68.6 64.1 4.4 19.9 17.4 2.5 1.8 0.1 0.7 1.1 26.5 8.7 13.1 0.9 3.9 0.2 4.2 2.0 0.0 19.6 19.0 0.1 0.5 9.2 1.2 7.3 0.2 0.6 0.0 0.2 45.0% 42.1% 2.9% 13.1% 11.4% 1.6% 1.2% 0.0% 0.4% 0.7%
Morocco
45.2 38.3 7.0 22.7 21.7 1.0 81.2 66.0 4.9 10.2 9.3% 7.9% 1.4% 4.7% 4.5% 0.2% 16.8% 13.6% 1.0% 2.1% 54.9% 37.5% 13.3% 0.7% 3.4% 0.6% 0.6% 0.1% 0.0% 11.4% 10.9% 0.3% 0.3% 1.5% 0.1% 0.9% 0.0% 0.4% 0.0% 0.1%
Turkey
160.2 111.4 48.8 29.9 25.6 4.2 24.0 18.2 0.2 5.5 585.5 159.0 319.9 25.6 81.1 15.2 94.0 46.5 40.6 130.3 114.0 4.8 11.6 72.6 15.2 35.2 3.9 18.4 55.4 4.6 12.7% 8.9% 3.9% 2.4% 2.0% 0.3%
S. Africa
29.8 17.5 12.3 1.9 1.0 0.9 6.1% 3.6% 2.5% 0.4% 0.2% 0.2% 38.5% 5.3% 4.4% 28.9%
Spain
165.1 81.8 83.3 113.2 112.2 0.9 100.0 84.9 0.7 14.4 2.9% 1.5% 1.5% 2.0% 2.0% 0.0% 1.8% 1.5% 0.0% 0.3% 72.4% 51.9% 12.7% 1.5% 6.3% 1.2% 2.1% 1.7% 0.1% 12.2% 10.1% 0.9% 1.2%
China
88.9 75.6 13.2 7.6 5.5 2.1 18.2 7.4 0.2 10.5 558.6 207.7 278.5 16.4 56.1 8.6 32.8 107.9 12.0 804.8 789.5 4.2 11.1 1.4% 1.2% 0.2% 0.1% 0.1% 0.0% 0.3% 0.1% 0.0% 0.2% 8.9% 3.3% 4.5% 0.3% 0.9% 0.1% 0.5% 1.7% 0.2% 12.9% 12.6% 0.1% 0.2% 73.8% 5.8% 52.8% 13.6% 1.5% 0.0% 0.0%
1.9% 186.4 1.4% 25.5 0.0% 21.2 0.4% 139.6 46.5% 120.7 12.6% 21.7 25.4% 57.8 2.0% 2.8 6.4% 38.4 1.2% 7.5% 3.7% 3.2% 10.4% 9.1% 0.4% 0.9% 5.8% 1.2% 2.8% 0.3% 1.5% 4.4% 0.4% 9.5 1.5 2.4 0.0 61.7 56.0 1.9 3.8 67.2 11.0 36.3 9.0 10.9 0.0 2.7
17.4% 265.8 5.7% 181.6 8.6% 64.5 0.6% 3.2 2.5% 16.5 0.1% 2.8% 1.3% 0.0% 12.9% 12.5% 0.1% 0.3% 6.1% 0.8% 4.8% 0.1% 0.4% 0.0% 0.1% 2.8 2.8 0.6 0.1 55.4 52.7 1.4 1.2 7.1 0.4 4.5 0.2 2.0 0.0 0.4
24.9% 4,062.0 4.5% 2,909.5 11.9% 713.8 0.6% 81.9 7.9% 354.8 2.0% 0.3% 0.5% 0.0% 12.8% 11.6% 0.4% 0.8% 13.9% 2.3% 7.5% 1.9% 2.3% 0.0% 0.6% 67.8 119.8 96.0 5.6 682.8 566.1 50.4 66.3 195.0 25.8 92.9 8.6 67.7 0.0 3.3
3.5% 4,615.3 0.5% 363.7 1.7% 3,305.7 0.2% 853.5 1.2% 92.4 0.0% 0.1% 0.0 1.6
152.3 100.0% 484.1 100.0% 1,258.9 100.0% 483.9 100.0% 5,610.5 100.0% 6,256.5 100.0%
Table 5.2
Main processed food exports by region: Egypt, Morocco, Turkey (2002) Region
Gulf & S.E. Med. HS 2106 406 710 2004
Egypt
Product Food preparations nes Cheese and curd Frozen vegetables Prepared or preserved veg nes - incl. frozen Total of above Food preparations nes Herbs and spices Coffee & tea extracts Milk and cream Share 28% 19% 10% 9% HS 406 1604 1507 2101
Morocco
Product Cheese and curd Prepared or preserved fish Soya-bean oil Coffee & tea extracts Total of above Prepared or preserved veg. nes - not frozen Coffee & tea extracts Cheese and curd Food preparations nes Total of above Prepared or preserved fish Prepared or preserved veg. nes - not frozen Frozen fruit and nuts Preserved fruits nes Total of above Prepared or preserved veg. nes - not frozen Prepared or preserved fish Dried vegetables Pickles Total of above Prepared or preserved fish Herbs and spices Prepared or preserved tomatoes Dried vegetables Total of above Share 52% 42% 2% 2% HS 1905 1806 1704 406
Turkey
Product Biscuits etc. Chocolate etc. Sugar confectionary Cheese and curd Total of above Biscuits etc. Share 22% 13% 11% 11%
N. & N.E Africa
2106
65% 74%
2005
97% 24%
1905
57% 26%
904910 2101 402
13% 2% 2%
2101 406 2106
21% 17% 11%
1704 1806 2002
Sugar confectionary Chocolate etc. Prepared or preserved tomatoes Total of above Preserved fruits nes Pickles
17% 16% 13%
European Union (15+)
712 710
Total of above Dried vegetables Frozen vegetables Herbs and spices Beverages (nonalcoholic) Total of above Fruit juices
91% 52% 15%
1604 2005
74% 53% 19%
2008 2001
71% 27% 12%
904910 2202
11% 7% 85% 28%
811 2008
6% 5% 84% 42%
813 2007
Dried fruit Jams etc. Total of above Dried fruit
10% 5% 56% 26%
Americas
2009
2005
813
904910 710 712
Herbs and spices Frozen vegetables Dried vegetables Total of above Jams etc.
23% 12% 7% 71% 30%
1604 712 2001
38% 11% 2% 94% 37%
904910 1509 2008
Herbs and spices Olive oil Preserved fruits nes Total of above Prepared or preserved tomatoes Dried fruit Herbs and spices Preserved fruits nes Total of above
18% 10% 8% 63% 38%
Far East & Oceania
2007
1604
2002
2101 904910 712
Coffee & tea extracts Herbs and spices
28% 13%
904910 2002
35% 23%
813 904910 2008
16% 14%
Dried vegetables Total of above
12% 84%
712
3% 98%
6% 74%
179
Table 5.3
Main processed food exports by region: S. Africa, Spain, China (2002) Region
Gulf & S.E. Med HS 1806
S. Africa
Product Chocolate etc. Share 35% HS 2005
Spain
Product Prepared or preserved veg. nes - not frozen Soya-bean oil Olive oil Sugar confectionary Total of above 1507 Soya-bean oil Share 15% HS 2002
China
Product Prepared or preserved tomatoes Herbs and spices Milk and cream Preserved fruits nes Total of above 904910 2008 2002 Herbs and spices Preserved fruits nes Prepared or preserved tomatoes Pasta and couscous Total of above Prepared or preserved veg. nes - not frozen Prepared or preserved tomatoes Preserved fruits nes Dried vegetables Total of above 1605 Prepared or preserved seafood Preserved fruits nes Fruit juices Dried vegetables Total of above 1604 1602 1605 Prepared or preserved fish Prepared or preserved meat Prepared or preserved seafood Preserved fruits nes Total of above Share 22%
2009 2008 2106
Fruit juices Preserved fruits nes Food preparations nes Total of above Food preparations nes Fruit juices Chocolate etc.
17% 16% 15%
1507 1509 1704
14% 11% 10%
904910 402 2008
16% 16% 14%
83% 24%
51% 27%
67% 38%
N. & N.E Africa
2106
2009 1806
23% 13%
1604 402
Prepared or preserved fish Milk and cream
14% 8%
22% 18%
2202
European Union (15+)
2008
Beverages (non-alcoholic) Total of above Preserved fruits nes Fruit juices
12% 72% 44%
2106
Food preparations nes Total of above Olive oil
7% 56% 25%
1902
6% 85% 21%
1509
2005
2009
19%
1604
Prepared or preserved fish Fruit juices Biscuits etc. Total of above
7%
2002
16%
406 904910
Americas
2009
Cheese and curd Herbs and spices Total of above Fruit juices
7% 5% 74% 45%
2009 1905
7% 6% 45% 38%
2008 712
14% 10% 61% 40%
2005
2008 904910 402
Far East & Oceania
2008 2009 1605
Preserved fruits nes Herbs and spices Milk and cream Total of above Preserved fruits nes Fruit juices Prepared or preserved seafood Dried fruit Total of above
33% 5% 4% 87% 46% 24% 5%
1509 1704 2008
Prepared or preserved veg. nes - not frozen Olive oil Sugar confectionary Preserved fruits nes Total of above Olive oil Sugar confectionary Prepared or preserved veg. nes - not frozen Fruit juices Total of above
19% 8% 5% 69% 44% 18% 9%
2008 2009 712
12% 9% 6% 68% 18% 14% 9%
1509 1704 2005
813
4% 79%
2009
7% 78%
2008
7% 48%
6 Export situation and position by product group
6.1
Cheese & curd

This section provides an analysis of trade in cheese and curd products (HS code 0406) for the benchmark countries. The main focus of the analysis is on unit values, as these provides an indication of the positioning of Egyptian exports in terms of cost/quality relative to the other benchmark countries. Table 6.1 and Table 6.2 show the value and volume of cheese exports for the benchmark countries, with a breakdown by type of cheese. Table 6.3 shows the average unit values for each of the benchmark countries. Figure 6.1 provides a plot of the (cumulative) volume of exports against unit values. Each data point represents the volume of exports and average unit value to an individual country/market, with the data for each benchmark country ordered from highest to lowest unit value, moving from left to right; for Egypt, for example, the highest unit value is $US 2,500 (with a volume of approximately 1 thousand tonnes), and the lowest unit value is roughly $US 1,300 (with a volume of approximately 6 thousand tonnes)123. In a sense, the plotted lines for each country can be interpreted as a pseudo-demand curve for the countries exports, mapping demand (cumulative quantity) against price (unit value). What is immediately striking is the low unit value of Egypts cheese exports when compared to the other benchmark countries; with the exception of the category Cheese nes124 (HS 040690) for China, which is not a major exporter. Both in terms of average values (Table 6.3) and as shown by the pseudo-demand curve (Figure 6.1)125, the unit values of Egypts exports are systematically below those of the other countries126. On the one hand, this points to the price competitiveness of Egyptian exports of cheese products. On the other, it tends to suggest that Egyptian exports are of a lower quality than those of the other benchmark countries. On key markets for Egyptian cheese exports, namely Saudi Arabia and Jordan, for which Morocco is also a key supplier (see Table 6.4 and Table 6.5), it is striking that the unit values of Moroccan exports of cheese products are double those achieved by Egypt. Overall, the data tend to suggest that there is considerable scope for Egypt to increase the
123 124 125
These are the exports to Saudi Arabia shown in Table 6.4. Not elsewhere specified. Spain is not shown in Figure 6.1 as the volume of its exports dwarf those of the other countries shown. China is not shown as it is not an important exporter of cheese products. Average unit values of Morocco and South Africa are some 50 percent higher, and Turkey some 75 percent higher than those of Egypt
126
181
quality (unit value) of its exports of cheese and/or to increase the volume of exports by positioning itself as a low cost supplier. However, given Egypts structural trade imbalance in dairy products, it would seem logical to focus on raising the quality of its exports of cheese.
Table 6.1 Cheese and curd: value of exports and imports in 2002, $US million Egypt Exp 0406 040610 Total Fresh Grated or 040620 040630 040640 040690 powdered Processed Blue-veined Cheese nes 0.1 7.4 0.0 5.3 0.5 3.5 1.9 28.9 32.0 0.0 0.1 0.6 0.1 9.8 14.9 4.8 0.5 0.7 0.2 5.3 0.0 0.3 3.0 0.7 4.5 0.3 3.2 2.7 13.2 1.3 96.9 28.0 41.0 30.7 300.7 0.0 0.4 1.3 0.0 3.2 13.1 0.4 Imp 35.5 0.7 Morocco Exp 32.1 Imp 11.1 0.5 Turkey Exp 19.7 0.1 Imp 8.7 2.0 S. Africa Exp 10.5 7.1 Imp 8.9 0.2 Spain Exp 147.1 33.0 Imp 456.5 56.1 China Exp 1.6 1.6 Imp 5.7 0.8
Source: COMTRADE
Table 6.2
Cheese and curd: volume of exports and imports in 2002, thousand tons Egypt HS code 0406 040610 040620 040630 040640 040690 Total Fresh Grated or powdered Processed Blue-veined Cheese nes Exp 8.7 0.2 0.0 4.8 0.0 3.7 Imp 16.1 0.3 0.1 0.9 0.5 14.2 Morocco Exp 14.1 14.1 0.0 Imp 4.4 0.2 0.0 0.2 0.0 4.0 Turkey Exp 7.5 0.0 5.6 1.9 Imp 4.4 1.8 0.1 0.1 0.1 2.3 S. Africa Exp 4.6 3.0 0.0 0.1 1.5 Imp 3.1 0.0 0.2 2.0 0.1 0.9 Spain Exp 52.2 15.8 0.8 4.3 0.2 31.1 Imp 145.1 24.9 8.0 15.0 9.1 88.1 China Exp 0.6 0.6 0.0 Imp 2.5 0.3 0.1 0.5 0.0 1.6
Source: COMTRADE
Table 6.3
Cheese and curd: unit value of exports in 2002, $US per ton Egypt 0406 040610 040620 040630 040640 040690 Total Fresh Grated or powdered Processed Blue-veined Cheese nes 1,508 1,581 1,767 1,548 1,091 1,449 Morocco 2,270 2,270 2,438 Turkey 2,622 2,032 2,674 2,477 S. Africa 2,281 2,386 2,875 2,846 2,028 Spain 2,821 2,081 3,641 3,041 8,263 3,120 China 2,647 2,709 1,200
Source: COMTRADE
Figure 6.1
Curd & cheese: volume of exports (tons) and unit values ($ per ton)
5000
4500
4000
3500
Unit value ($)
3000
2500
2000
1500
1000
500
0 0 2 4 6 8 10 12 14 16
Cumulative quantity of total exports (thousand tons)
Egypt
Morocco
Turkey
S. Africa
Table 6.4
Saudi Arabia, imports of cheese & curd, 2002 Import trend Share in Imported value, US$ Exporter World Morocco Egypt Turkey Spain Source: COMTRADE thousand 211,770 8,576 7,627 345 23 Saudi Arabias imports, % 100 4 4 0 0 Imported quantity, tonnes 75,360 3,100 5,964 214 3 Unit value (US$/unit) 2,810 2,766 1,279 1,612 7,667 in value between 1998-2002, %, p.a. 3 16 64 56 -59 Import trend in quantity between 1998-2002, %, p.a. 4 9 32 82 -72
Table 6.5
Jordan, imports of cheese & curd, 2002 Import trend Share in Imported value, US$ Exporter World Morocco Egypt Turkey Source: COMTRADE thousand 23,658 4,618 2,803 126 Saudi Arabias imports, % 100 20 12 1 Imported quantity, tonnes 9,630 1,346 1,606 48 Unit value (US$/unit) 2,457 3,431 1,745 2,625 in value between 1998-2002, %, p.a. 5 48 Import trend in quantity between 1998-2002, %, p.a. 9 66 -
183
6.2
Fruit Juices
This section provides an analysis of trade in fruit juices (HS code 2009) for the benchmark countries. The main focus of the analysis is on unit values, as these provides an indication of the positioning of Egyptian exports in terms of cost/quality relative to the other benchmark countries, Table 6.6 and Table 6.7 show the value and volume of fruit juice exports for the benchmark countries, with a breakdown by type of juice. Table 6.8 shows the average unit values for each of the benchmark countries. Figure 6.2 provides a plot of the (cumulative) volume of exports against unit values for the subcategory fruit and vegetable juice nes (HS 200980)127, which is the main export category for Egypt. Figure 6.3 is based on the same data as Figure 6.2, but rather than plotting the absolute quantity of exports, the cumulative share of total export volumes is shown128. With regard to the main fruit juice export category for Egypt, fruit and vegetable juice nes, Egypt is positioned in terms of unit values in a mid-way point, with higher average unit values than Turkey and South Africa, but lower than those for Spain and China. In fact, it appears that Egypt has been quite successful in achieving a premium price for its exports of this juice category. The most important market for Egyptian exports of fruit juice is the Americas (see Table 6.9), essentially the USA, which accounts for threequarters of Egypts exports. As shown in Table 6.10, Egypt is the largest supplier amongst the benchmark countries to the USA of this juice category, and only Spain with a much smaller level of exports achieves a higher average value. At the same time, the data indicate the rapid increase in the value of Chinas exports to the USA, which are estimated to have increased by 165 percent per annum over the period 1998-2002. Given that the average unit value of US imports from China is only 40 percent of that of Egypt, it suggests that Chinese exports may represent a considerable competitive threat to Egyptian fruit juice exports.
127 128
This covers exotic fruit juices. Morocco is not included as it is not a major exporter of this product category.
Table 6.6
Fruit and vegetable juices: value of exports and imports in 2002, $US million Egypt Exp
2009 200911 200919 200920 Total Orange juice Orange juice nes Grapefruit juice Citrus fruit juice 200930 200940 200950 200960 200970 nes Pineapple juice Tomato juice Grape juice Apple juice Fruit & veg. juice 200980 200990 nes Mixtures of juices 7.02 0.33 0.12 0.08 0.91 0.62 10.39 0.81 0.29 0.49 19.95 24.26 1.63 0.07 15.67 45.91 10.43 14.73 18.65 1.46 2.72 1.21 0.16 0.04 0.07 0.01 0.01 0.30 0.23 0.02 0.15 0.19 0.05 0.04 0.61 0.48 0.05 0.45 0.62 22.27 0.43 0.20 0.03 1.22 6.15 0.02 9.44 7.61 0.02 0.06 0.02 0.38 1.87 27.92 5.49 1.26 79.54 17.35 5.06 21.44 4.09 1.67 6.82 0.29 2.08 0.39 173.07 0.34 0.16 0.11 4.79 0.37 8.03 0.06 0.34 0.02
Morocco Exp
6.80 3.51 3.18 0.07
Turkey Exp
36.25 0.15 1.02 0.02
S. Africa Exp
92.03 13.12 2.59 7.67
Spain Exp
321.99 14.91 108.29 5.64
China Exp
199.31 2.48 0.70 0.19
Imp
0.99 0.03 0.07 0.02
Imp
3.63 0.97 0.08 0.02
Imp
5.38 2.04 1.49 0.43
Imp
4.11 0.03 0.03 0.00
Imp
133.97 26.96 38.14 4.64
Imp
55.45 43.24 1.92 0.59
Source: COMTRADE
Table 6.7
Fruit and vegetable juices: volume of exports and imports in 2002, thousand tonnes Egypt Exp
2009 Total
Morocco
Turkey Exp
55.02
S. Africa Exp
140.64
Spain Exp
518.42
China Exp
323.35
Imp Exp Imp

1.08 8.03 7.88
Imp
3.97
Imp
5.20
Imp
160.35
Imp
47.30
10.87 4.73 6.14 0.04 0.65 0.00 0.20 0.01 -
- tonnes - cubic meters

200911 Orange juice 200919 Orange juice nes 200920 Grapefruit juice 200930 Citrus fruit juice nes 200940 Pineapple juice 200950 Tomato juice 200960 Grape juice 200970 Apple juice
0.03 0.07 0.04 0.08 0.03 0.03 0.30 0.23
2.89 5.00 0.05 0.04 -
0.84 0.20 0.03 0.17 0.50 0.08 0.05 0.58
0.21 2.22 0.02 0.82 0.12 0.73 0.98 32.71
1.43 0.90 0.25 0.22 0.18 0.58
12.41 4.59 9.74 1.72 8.23 0.03 13.64 10.91
0.02 0.06 0.00 0.02 0.12 0.05 0.84 3.19
30.31 210.13 7.55 44.88 8.21 2.76 103.89 24.53
24.13 55.99 7.57 6.55 21.76 5.58 1.58 12.14
2.32 0.82 0.17 0.41 2.31 0.27 296.57
34.69 2.43 0.46 0.38 0.21 0.25 4.04 0.57
Fruit & veg. juice

200980 nes
9.44 3.44 6.01 0.53 0.40 0.13
0.11
3.80
15.55
0.14
31.97
0.78
17.33
13.88
18.55
3.16
- tonnes - cubic meters

200990 Mixtures of juices
0.12
1.63
1.67
0.26
47.40
0.13
68.83
11.18
1.93
1.11
- tonnes - cubic meters Notes: 1.
For Egypt, selected export data (mirror estimates) are reported in cubic meters. Where this occurs separate figures are given. Aggregate figures are estimated assuming 1 cubic meter = 1 ton.
Source: COMTRADE and authors calculations
185
Table 6.8
Fruit Juice: unit value of exports in 2002, $US per ton Egypt 2009 Total - tonnes - cubic meters 200911 200919 200920 200930 200940 200950 200960 200970 200980 Orange juice Orange juice nes Grapefruit juice Citrus fruit juice nes Pineapple juice Tomato juice Grape juice Apple juice Fruit & veg. juice nes - tonnes - cubic meters 200990 Mixtures of juices - tonnes - cubic meters 741 570 839 619 548 838 483 512 667 755 730 590 839 1,730 523 4,250 787 4,375 1,214 636 1,327 465 704 459 1600 589 395 611 636 681 668 1,058 565 787 708 747 676 692 698 624 492 515 747 622 669 458 766 707 904 1,443 584 1,005 1,068 848 1,130 718 901 Morocco 847 Turkey 659 S. Africa 654 Spain 621 China 616
Notes: 1. For Egypt, selected export data (mirror estimates) are reported in cubic meters. Where this occurs separate figures are given. Aggregate figures are estimated assuming 1 cubic meter = 1 ton.
Figure 6.2
1600
Fruit & vegetable juice nes: volume of exports (tons) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34
Egypt
Spain
Turkey
S. Africa
China
Figure 6.3
1600
Fruit & vegetable juice nes: volume of exports (share in %) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0% 20% 40% 60% 80% 100%
Cumulative share of total export volume
Egypt
Spain
Turkey
S. Africa
China
Table 6.9
Geographical composition of exports of fruit and vegetable juice nes, $US million, 2002 Egypt Gulf & S.E. Med N. & N.E Africa W., Central & S Africa European Union (15+) Other Europe Cent. & E. Europe Former Soviet Union Central Asia America Far East & Oceania Total 0.59 5.41 0.02 8.4% 77.0% 0.3% 4.85 0.09 0.44 0.82 2.30 0.37 0.15 46.7% 0.9% 4.3% 7.9% 22.2% 3.6% 1.4% 2.48 0.15 8.77 3.94 12.5% 0.8% 44.0% 19.7% 14.27 0.08 0.36 0.25 0.18 91.1% 0.5% 2.3% 1.6% 1.2% 1.84 0.06 0.13 2.96 13.31 9.9% 0.3% 0.7% 15.9% 71.4% 0.16 2.3% 0.03 0.3% 3.72 18.6% 0.11 0.7% 0.16 0.9% 0.81 0.02 11.5% 0.3% Turkey 1.05 0.06 10.1% 0.6% S. Africa 0.79 0.05 4.0% 0.3% Spain 0.08 0.16 0.5% 1.0% China 0.14 0.00 0.8% 0.0%
7.02 100.0%
10.39 100.0%
19.95 100.0%
15.67 100.0%
18.65 100.0%
187
Table 6.10
United States, imports of fruit & vegetable juices nes, 2002 Import trend Imported Imported value, US$ Exporter World Egypt China South Africa Turkey Spain Source: COMTRADE thousand 107,677 5,017 3,096 2,803 319 166 Share in USAs imports, % 100 5 3 3 0 0 quantity, cubic meters 228,957 5,976 9,710 5,717 449 169 Unit value (US$/unit) 470 840 319 490 710 982 in value between 1998-2002, %, p.a. 4 26 165 0 -6 -19 Import trend in quantity between 1998-2002, %, p.a. N.A. N.A. N.A. N.A. N.A. N.A.
6.3
Tomato Products
This section provides an analysis of trade in tomato-based products. The analysis covers 3 product categories: (1) prepared or preserved tomatoes whole or in pieces (HS code 200210); (2) prepared or preserved tomatoes other (HS code 200290); and (3) tomato ketchup and other tomato sauces (HS code 210320). The main focus of the analysis is on unit values, as these provide an indication of the positioning of Egyptian exports in terms of cost/quality relative to the other benchmark countries. It should be noted, however, that the recorded value and volume of Egypts exports of the prepared or preserved categories of tomato products is very small and so it is difficult to be certain to what extent the position and potential of Egypt can be evaluated from the available data. Table 6.11 and Table 6.12 show the value and volume of tomato product exports for the benchmark countries. Table 6.13 shows the average unit values for each of the benchmark countries. Figure 6.4 provides a plot of the (cumulative) volume of exports of prepared and preserved tomato products (HS 2002). Figure 6.5 is based on the same data as Figure 6.4, but rather than plotting the absolute quantity of exports, the cumulative share of total export volumes is shown129. Figure 6.6 provides a plot of the (cumulative) volume of exports of tomato ketchup and other tomato sauces (HS 210320). Figure 6.7 is based on the same data as Figure 6.6 but rather than plotting the absolute quantity of exports, the cumulative share of total export volumes is shown130. The recorded volume of Egyptian exports of prepared tomatoes is low (see Table 6.12 and Figure 6.4), but when the cumulative share of exports is plotted against unit values, the general pattern is similar to that shown for the other benchmark countries (Figure 6.5). Prepared or preserved tomatoes are basically a standard commodity with only limited variation across countries in unit values of exports.
129 130
Morocco is not included as it has recorded unit values far beyond those recorded for the other countries. Morocco is not included as it is not a major exporter of this product category.
The situation for tomato ketchup and other tomato sauces is somewhat different, with the data suggesting that Egypt achieves the highest unit values among the benchmark countries for its exports of this product category.
Table 6.11 Tomato products: value of exports and imports in 2002, $US million Egypt Exp
N.A. 200210 Tomato products Tomatoes, prepared or preserved (whole or pieces) 200290 Tomatoes, prepared or preserved (other) 210320 Tomato ketchup and other tomato sauces 1.95 0.12 0.04 0.50 2.64 0.19 0.54 0.62 58.71 10.93 1.97 2.61 0.13 1.33 3.96 0.24 77.30 0.75 0.78 0.67 113.64 11.40 188.62 0.93 2.12 0.03
Morocco Exp
4.07 0.08
Turkey Exp
92.24 12.31
S. Africa Exp
1.79 0.48
Spain Exp
197.16 24.81
China Exp
191.44 0.85
Imp
1.53 0.08
Imp
0.86 0.12
Imp
0.94 -
Imp
2.73 1.43
Imp
23.00 0.67
Imp
3.66 0.13
Table 6.12
Tomato products: volume of exports and imports in 2002, thousand tonnes Egypt Exp
N.A. 200210 Tomato products Tomatoes, prepared or preserved (whole or pieces) 200290 Tomatoes, prepared or preserved (other) 210320 Tomato ketchup and other tomato sauces 1.44 0.09 0.04 0.49 4.14 0.24 0.72 1.36 58.19 8.21 2.34 2.01 0.22 1.94 1.63 0.19 124.22 0.86 1.09 1.01 138.49 17.72 373.42 2.11 1.70 0.04
Morocco Exp
1.68 0.01
Turkey Exp
153.26 24.90
S. Africa Exp
2.22 0.41
Spain Exp
264.23 67.54
China Exp
377.83 2.07
Imp
2.20 0.17
Imp
0.89 0.21
Imp
1.10 -
Imp
6.39 4.02
Imp
27.07 1.14
Imp
4.40 0.28
Table 6.13
Tomato products: unit value of exports in 2002, $US per ton S. Egypt
200210 Tomatoes, prepared or preserved (whole or pieces) 200290 210320 Tomatoes, prepared or preserved (other) Tomato ketchup and other tomato sauces
Morocco
Turkey
Africa
Spain
China
714 594 1,361
6,818 2,426 1,056
494 622 638
1,161 713 747
367 821 1,009
411 505 843
189
Figure 6.4
1600
Prepared & preserved tomatoes: volume of exports (tons) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0 50 100 150 200 250 300 350 400
Egypt
Spain
Turkey
S. Africa
China
Figure 6.5
1600
Prepared & preserved tomatoes: volume of exports (share in %) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0% 20% 40% 60% 80% 100%
Egypt
Spain
Turkey
S. Africa
China
Figure 6.6
1600
Tomato ketchup and other tomato sauces: volume of exports (tons) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Cumulative quantity of total exports (thousand tons) Egypt Turkey S. Africa China
Figure 6.7
1600
Tomato ketchup and other tomato sauces: volume of exports (share in %) and unit values ($ per ton)
1400
1200
Unit value ($)
1000
800
600
400
200
0 0% 20% 40% 60% 80% 100%
Egypt
Spain
Turkey
S. Africa
China
191
6.4
Frozen Vegetables
This section provides an analysis of trade in frozen vegetables (HS code 0710) for the benchmark countries. The main focus of the analysis is on unit values, as these provides an indication of the positioning of Egyptian exports in terms of cost/quality relative to the other benchmark countries, Table 6.14 and Table 6.15 show the value and volume of frozen vegetable exports for the benchmark countries, with a breakdown by type of vegetable. Table 6.16 shows the average unit values for each of the benchmark countries. In terms of relative unit values, the position of Egypt is variable depending on the category of vegetable. Average unit values of Egyptian exports are relatively high (compared to the other benchmark countries) for frozen potatoes and other vegetables but low for spinach and mixed vegetables and other leguminous vegetables. For beans, Morocco and Spain have higher unit vales but China achieves lower unit values. Overall, Egypt achieves the second highest average unit value for frozen vegetables amongst the benchmark countries. China, has the highest average unit value, which is almost certainly a reflection of the high value/cost of frozen vegetables in its principal export market, namely Japan.
Table 6.14
Frozen vegetables: value of exports and imports in 2002, $US million Egypt Exp
0710 071010 071021 071022 071029 Frozen vegetables Potatoes Peas Beans Other leguminous vegetables 071030 071040 071080 071090 Spinach Sweetcorn Other vegetables Mixed vegetables 0.58 0.04 8.42 1.62 0.02 1.17 0.81 0.28 0.09 27.10 0.02 0.66 0.15 0.16 3.76 0.53 0.30 0.39 0.64 7.87 6.41 141.49 4.16 1.92 2.34 28.68 4.92 17.00 0.96 161.72 32.17 6.44 0.49 0.04 14.01 0.77 0.47 1.51 0.50
Morocco Exp
5.41 0.13 3.03 -
Turkey Exp
27.81 0.04 0.28 0.23 0.04
S. Africa Exp
5.40 0.82 0.07 0.01 0.05
Spain Exp
176.36 6.05 4.70 3.98 1.70
China Exp
299.02 0.88 2.66 7.22 76.42
Imp
0.03 -
Imp
0.04 0.03 -
Imp
0.90 0.08 -
Imp
2.32 0.73 0.19 0.07
Imp
100.68 41.85 10.70 7.73 2.54
Imp
11.05 0.07 1.46 0.05 2.49
Table 6.15
Frozen vegetables: volume of exports and imports in 2002, thousand tons Egypt Exp
0710 071010 071021 071022 071029 Frozen vegetables Potatoes Peas Beans Other leguminous vegetables 071030 071040 071080 Spinach Sweetcorn Other vegetables 0.96 N.A.. 6.66 0.02 2.65 0.93 0.13 0.00 51.01 0.94 0.13 0.47 5.53 0.37 0.79 12.18 8.93 171.38 3.12 6.41 33.99 22.65 1.65 186.07 7.07 0.57 0.06 16.25 1.18 0.64 2.29 0.78
Morocco Exp
7.60 0.32 3.33 -
Turkey Exp
52.41 0.24 0.55 0.41 0.04
S. Africa Exp
9.18 1.83 0.27 0.02 0.05
Spain Exp
229.09 17.86 7.38 5.21 2.27
China Exp
341.29 1.57 2.85 15.02 81.37
Imp
0.04 -
Imp
0.14 0.13 -
Imp
1.26 0.19 -
Imp
4.17 1.12 0.41 0.15
Imp
159.67 72.51 19.99 15.18 2.80
Imp
16.09 0.04 2.06 0.06 6.24
071090 Mixed vegetables 3.60 - 0.36 0.03 - 1.00 1.33 3.90 5.69 30.11 Notes: 1. For Egypt, no export volume data are given for exports to Israel. Hence the volume of exports are underestimated.
Table 6.16
Frozen vegetables: unit value of exports in 2002, $US per ton Egypt
0710 071010 071021 071022 071029 071030 071040 071080 Frozen vegetables Potatoes Peas Beans Other leguminous vegetables Spinach Sweetcorn Other vegetables
Morocco 713 397 0 910 0 0 443 863
Turkey 531 156 508 556 932 722 0 531
S. Africa 589 448 270 600 904 0 331 680
Spain 770 339 637 765 751 646 718 826
China 876 564 933 480 939 750 582 869 1,069
781 651 689 657 545 600 0 1,100
450 769 815 528 1,068 071090 Mixed vegetables Notes: 1. For Egypt, unit values are estimated excluding exports to Israel, for which no export volumes are given. Source: COMTRADE and authors calculations
6.5
Olive Products
This section provides an analysis of trade in olive products for the benchmark countries. The analysis covers 4 product categories: (1) virgin olive oil (HS code 150910); (2) other olive oil (HS code 150990; (3) prepared or preserved olives (HS code 200570); and (4) provisionally prepared or preserved olives not fit for immediate consumption (HS code 071120). The main focus of the analysis is on unit values, as these provide an indication of the positioning of Egyptian exports in terms of cost/quality relative to the other benchmark countries, Table 6.17 and Table 6.18 show the value and volume of olive product exports for the benchmark countries. Table 6.19 shows the average unit values for each of the benchmark countries. With regard to the unit values of export, the most obvious feature of the data is that Egypt systematically has the lowest unit values among the benchmark countries.
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Table 6.17
Olive products: value of exports and imports in 2003, $US million Egypt Exp
Olive products - total 5.6
Morocco Exp
81.8
Turkey Exp
206.8
S. Africa Exp
0.9
Spain Exp
1,905.5
China Exp
0.2
Imp
0.5
Imp
20.4
Imp
2.1
Imp
11.1
Imp
97.0
Imp
2.3
1509 150910 150990
Olive Oil - Virgin oil - Other oil,
1.7 1.6 0.0
0.3 0.2 0.2
7.0 5.8 1.2
20.4 13.8 6.6
162.0 96.0 66.0
1.9 1.9 -
0.7 0.3 0.4
10.4 6.9 3.5
1,403.4 1,128.7 274.7
92.4 66.1 26.3
0.2 0.2
2.0 1.0 0.9
200570
Olives prepared or preserved
3.4
0.2
74.8
0.0
44.8
0.2
0.1
0.6
472.2
4.0
0.1
071120
Olives provisionally preserved
0.5
0.1
0.0
0.0
0.1
0.1
30.0
0.6
0.2
Table 6.18
Olive products: volume of exports and imports in 2003, thousand tons Egypt Exp
Olive products - total 3.94
Morocco Exp
55.39
Turkey Exp
115.03
S. Africa Exp
0.20
Spain Exp
860.28
China Exp
0.03
Imp
0.17
Imp
10.58
Imp
1.24
Imp
3.99
Imp
48.79
Imp
0.92
1509 150910 150990
Olive Oil - Virgin oil - Other oil,
0.56 0.54 0.02
0.10 0.05 0.05
3.07 2.52 0.55
10.53 7.32 3.21
75.19 42.98 32.21
1.11 1.11 -
0.12 0.06 0.07
3.49 2.12 1.37
532.01 433.42 98.59
43.25 32.01 11.24
0.03 0.03
0.76 0.36 0.40
200570
Olives prepared or preserved 2.81 0.07 52.25 0.02 39.82 0.13 0.05 0.38 299.25 3.67 0.05
071120
Olives provisionally preserved 0.58 0.07 0.02 0.02 0.03 0.12 29.01 1.87 0.10
Notes: 1. For Egypt, no export volume data are given for exports to Israel. Hence the volume of exports is underestimated.
Table 6.19
Olive products: unit value of exports in 2003, $US per ton Egypt
1509 150910 150990 Olive Oil - Virgin oil - Other oil,
Morocco 2,280 2,281 2,270
Turkey 2,155 2,234 2,049
S. Africa 5,813 6,036 5,632
Spain 2,638 2,604 2,786
China 5,207 5,207
1,941 1,947 1,733
200570 071120 Notes: 2.
Olives prepared or preserved Olives provisionally preserved
1,046 894
1,431 1,014
1,125 1,313
2,128 2,188
1,578 1,034
For Egypt, unit values are estimated excluding exports to Israel, for which no export volumes are given.
V General Strategy
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1 Introduction
The Egyptian food processing industry has the underlying strengths and capabilities to succeed in the competitive environment that it will confront when it enters into Arab free trade agreements. But, it is less prepared to compete in global markets where it will face full competition from developed countries. Yet, it is global competitiveness that will provide the ultimate test of its ability to increase export earnings and also to use resources productively in domestic and regional markets. A competitive food processing industry is one that, by definition, is efficient in terms of providing products of good quality and low prices with the minimal use of inputs, capital and labour. It is also one that is able to raise productivity in line with changing technologies. Competitiveness must be the final objective of the Egyptian food processing industry. This chapter provides a strategy for the Egyptian food-processing sector. While exhaustive analysis cannot be done due to lack of reliable data for a detailed action plan, the information collected by the study team about the current situation of the Egyptian food processing industry is enough to start with broad policy initiatives.
Time is of the essence in strategy for the food processing industry in the current setting of intensifying competition and rapid technical change, and delay will impose additional costs. Mounting strategy for the food processing industry is very demanding on the government. It calls for a coherent vision and consistent inter-agency coordination. It also calls for considerable building of consensus among the major stakeholders (enterprises, employees, associations, ministries and institutions).
1.1
Stages in the industrial strategy process

The development of industrial strategies in general and of food industries in particular involves five main steps (Figure 1.1). The first stage is a detailed assessment of the industrial sector and main sub-sectors. This involves evaluating industrial performance in domestic and export markets and the main drivers of performance. During the study, the team has, whenever possible used quantitative measurements and benchmarks against selected countries within the region (Morocco, Turkey), other developing countries that are likely to offer direct competition to Egypt (South Africa, China), and more advanced countries that serve as role models (Spain).
197
The second stage is consensus building among the stakeholders, identifying the critical problems and defining the vision and objectives. The study team in consultation with stakeholders in the industry developed a proposal for the national strategic vision for the food-processing sector. In the proposal, the overall goals that the government needs to define for short and long-term implementation and how to strengthen or create the capabilities to reach those goals are outlined. The third stage is designing policies and programmes. The fourth is the implementation of these policies and programmes. The fifth is monitoring the progress of the strategy, assessing their success and adjusting them as necessary. The third, fourth and fifth stages will be implemented (if the proposal is agreed on) by the government (IMC or the MOFTI, in collaboration with all stake holders). The study of the Egyptian food-processing sector shows a complex set of interrelated opportunities and constraints, some of which apply to all economic activities, while others are more specific to the manufacturing sector. Since some issues are specific to food processing, a sector-focused approach does provide a basis upon which to move forward, rather than being overwhelmed by the magnitude of needs at the national manufacturing level.
Figure 1.1 Stages in the industrial strategy process
2. Building Strategic Vision and Consensus 1. Assessment of performance and drivers 3. Design Action Programs and
Policies
5. Monitoring
4. Implement Action Programs and Policies
For this reason four product groups within the food processing sector (namely, fruit juices, processed vegetables, cheese and olive products) were selected for further in depth analysis and formulation of the development strategy proposal, while the cross cutting issues that are relevant for the food-processing sector are described in general.
In arriving at the above mentioned selection of product groups for further analysis, the study team set out some criteria for selection. Broadly speaking the criteria were based on the performance and potential of the products in the domestic, regional and international markets, the level of compliance of the product to international standards, the competitive advantage of the product/product-group, the supply of raw materials, level of value addition etc. The range of selection criteria were presented to the Project Steering Committee and approved prior to the in-depth analysis of each selected product/productgroup.
1.2
Value chain of the Egyptian food processing industry

Generic value chain of the Egyptian food processing and market chain can be presented schematically, as shown in Figure 1.2 As can be seen from the schematic diagram, there are many different entities involved in the value chain of Egyptian food processing industries from the farmers to the consumers. Therefore, a meaningful partnership, network and coordination between producers, processors, retailers, and support industries such as packaging and transport companies must be established to maximise the economic benefit to all partners. This strategic network, between numbers of independent business organizations within the value chain, should have a shared vision and common goals.
Figure 1.2
Schematic diagram of the Egyptian food processing value chain

Domestic supply of Raw materials Restaurants bulk consumers Food industry
FOOD
WHOLE
S U P L Y
Collection wholesale trade
SALE
FOOOD RETAIL SALE
D E M A N D
Private consumption
Import Exports
The Egyptian food processing industries are under great pressure from the changing situation in the global environment, probably more than any sector in the manufacturing industry. The four most important conditions that create pressure on the Egyptian industry can be schematically presented as in figure 1.3
199
Figure 1.3
Pressures faced by the Egyptian food industry from the changing international situation
Internationalization of markets
Increased competition Integration and globalization of markets
changes in food trade

concentration of market centralized global sourcing growing private labels
Egyptian food processing industry Harmonization of laws food laws

Trnasporation laws, environmental law tax laws. product liability laws
changes in food demand

attitudes and behaviours of consumers desire for diversity development of new products
2 SWOT Analysis
The strengths, weaknesses, opportunities and threats of the Egyptian food processing industry that are mainly based on the local conditions are presented below.
2.1
Strengths

Capability of Egyptian agriculture to produce different varieties of fruits and vegetables in different seasons all year round. The ability to utilize indigenous inputs in order to produce innovative speciality products for local and regional markets. Access to packaging materials at competitive prices domestically (but may be of low quality). Industry has had a proven track record of export performance, especially the fruit and vegetable sub-sector. Key geographical location; proximity to Gulf Arab countries and Europe; two to three days and less than a week to reach the Gulf and European sea ports respectively. Low labour cost compared to regional and developed countries, and increased availability of skilled labour. Direct sea and air shipping services to Europe for enhanced export performance. A growing tourism industry. Improved quality and HACCP system in the food industries in the last four years has reduced trade barriers in the trade of fruit and vegetables while some improvement is required in the dairy, meat and fish sector. Increasingly improving business environment such as tax incentives to exporters and investors, improved customs regulations etc. Issuance of the new unified food law will facilitate and clarify the misunderstanding between traders, processors and food law enforcement agencies; also the establishment of a new National Food Authority.
2.2
Weaknesses
Due to the inability of the majority of companies to invest in research and development, there is a low level of innovation within the sector and therefore a lack of new products. The agriculture system is underdeveloped, fragmented and the use of local raw materials on a commercial scale is hampered by an inconsistent supply of raw material to the industries due to the lack of contract farming and the often very weak relations between the growers and processors.
201
Poor logistics such as cold store chains, refrigerated transport system, and air cargo space, lack of knowledge of the post harvest handling of perishable products from the farm to factory to ports, and consequently high post harvest losses. Traditional management system in many of small and medium food industries inhibits new products and new market requirements. The majority of the companies operating in the sector are classified as micro, small and medium sized, these industries are not organized and therefore can not benefit from economies of scale and export marketing. Weak domestic market and under developed distribution channels, such as supermarkets and hypermarkets. Slow technological development due to difficulties of access to and high cost of capital; also poor relations with R & D Centres. Administrative and bureaucratic burdens (especially lack of transparency in the customs regulations in imported items) and a very long clearing time required due to bureaucracy has made the industries relying on the imported inputs uncompetitive.
2.3
Opportunities
High potential to attract foreign direct investments in food processing sector and to become a regional hub for multinationals for their regional offices in marketing, R&D and operation in the Middle East. Scope for the introduction of enabling structures, such as cooperatives and contract farming, which could allow the small scale farmers to serve the European markets (especially on the fruit and vegetable sector). A huge potential derived from the growing distribution channels, such as local supermarkets chains, which can serve in the marketing of speciality products from small and medium scale factories for niche products and ready to cook food. Increased marketing opportunities through the new preferential access agreements with the Arab countries and other regional markets. There is a considerable potential for the increased product development by complementing the range of products already established. In fruit and vegetable sector, there is an evident demand for frozen, pureed and canned products. There is a high potential to attract multinationals in the food sector, with Egypt serving as their regional hub and operation centre, in addition to their direct investment. There is a huge and expanding market in Europe for organic products that creates opportunities for Egyptian producers. A massive growth in supermarket own label market segment - estimated at present to be 20% of the super market trade in Europe - provides an opportunity for the Egyptian processors (especially those in fruit and vegetable sector).
2.4
Threats
In the long run, there will be an erosion of the Egyptian domestic and export markets by multinationals who posses large economies of scale and the ability to support expensive advertising (promotion) campaigns. Delay in the implementation of international specifications and requirements in food safety and traceability, such as HACCP and EurepGap, will hamper the export performance of the food-processing industries. Regional instability may affect FDI and the export performance of Egyptian FPI in the region
203
3 Proposed strategic vision for Egyptian food processing industry
There are many ways to formulate strategy and vision for the sector. The final choice in a country should reflect the level of industrial development, the trade situation, the resource base, the level of development of markets and institutions, the structure of ownership (public, private and foreign) and the ability of the government to mount industrial policy. Industrial strategy must start with the building block of industry: the individual enterprise. During the meetings with the managers within food industries, the study team learned that industrialists, in general, point out that most of the problems faced by the sector result from a failure of the government to coordinate activities and create suitable business environment. However, the study team believes that while the government can support and assist the enterprises within the sector, it cannot reach inside each enterprise and direct its actions. What it can and should do is to provide the conditions that encourage and support enterprises in investing in capabilities. This means setting the right signals for it to respond to (creating the demand) and supporting the markets and institutions for information, skills, technology, finance, infrastructure, supplies and so on, that it needs (strengthening the supply). No enterprise builds capabilities on its own each operates in a dense cluster of interactions with other firms, markets, institutions and government departments. Each industrial cluster is different from others, with its own particular needs for market incentives, factor inputs and institutions. This is why many industrial strategies are formulated and implemented at the cluster level.
205
Based on the assessment of the study team and discussion with stakeholders the strategic development of the Egyptian processed food industry is built on a threetiered vision as follows:-
Vision one To make the Micro, Small, Medium food processing Enterprises (MSME) operating in the sector competitive in the domestic market, profitable and compliant to international food handling requirement to provide safe and processed food for the domestic and regional market To make the cottage, Micro, Small and Medium scale food processing and marketing enterprises in the sector operate in a healthy, sustainable and competitive way such that international health and food standards are met and sound business management practices are implemented using up-to-date information and management techniques, by supporting and encouraging them in the form of access to finance, training in management and technology, and enforcing stricter food safety laws. Vision two To make Egypt the regional leader in the production and marketing of processed food in the Middle East in 2009 To take the industry to the next level of industrial development by encouraging potential leaders to build on such competitive strengths as favourable agro-climatic conditions, proximity and cultural ties to the region, and highly skilled manpower, while eliminating such weaknesses as low product innovation, marketing strategy, under-developed value chain and management with aim of being leader in production and marketing of fresh and high value added processed food to the Middle East and North Africa. Vision three To make Egypt the winter garden of Europe and North America by supplying fresh, frozen and processed fruit and vegetables all round the year in sustainable way by developing forward and backward linkages and doubling the export to EU and North America by 2010 To improve the supply chain of the fruit and vegetables sector, reduce the post harvest losses through reform in the commercialisation of agriculture, improved transport and cold storage facilities and acquisition of technology, and a developed marketing strategy to supply the traditional and exotic fruits and vegetables to Europe and North America.
4 Overall Goal
The broad objectives of the indigenous Egyptian food-processing sector are proposed as follows (and should be agreed upon by stake-holders and IMC, PSC etc.):
To improve the supply of raw materials of appropriate quality and in sufficient quantities through efficient policy in the utilization of natural resources such as land and water, and improved post harvest handling of raw materials. To improve labour productivity and management efficiency through continuous training of the labour force and business development and operational management. To facilitate easy access to capital finance and working capital for Micro, Small and Medium scale Enterprises (MSME) involved in food processing and marketing, through commercial and development banks. Attract foreign direct investment through creating a better investment environment than its competitors in the Middle East, and through aggressive marketing of Egypt as a regional hub for trans-national corporations. To minimize the huge processed food trade deficit by increased domestic supply of safe processed food from micro and cottage industries and the informal sector through incentives, training and legislation. To develop modern domestic retail system through incentives and training of the existing (traditional) food outlets, and legislation and enforcement of food distribution and marketing laws. To assist small and medium scale enterprises to increase the role they play in domestic and regional markets through provision of support to develop niche markets, cooperation with larger industry and improving the efficiency and quality of their products. To increase the export performance of the Egyptian food processing industry by strengthening its marketing strategy, improving infrastructure and cold store facilities, and improving the efficiency and cost of the air and sea cargo transport. To improve the coordination of the activities of professional and public institutions supporting the food processing sector through establishing a coordination body, and defining tasks to avoid duplication of activities and saving resources. To build strong strategic relationships between universities, research institutes and the food processing industry so as to facilitate the smooth transfer of technology and provision of young trained workers, and focused to the need of the Egyptian food processing industry To improve the value chain network in the sector through establishing a network of businesses associated with food processing marketing and logistics, including producers, processors, retailers, and support institutions for each product group.
These are broad objectives that it may be difficult to pursue in a coherent manner. For practical and operational purposes, it is useful to narrow down the above goals into one
Egyptian Processed Food Sector Review 207
objective that captures most of the desired elements: raise the competitiveness of Egyptian Food processing industrial enterprises by improving their productivity and promoting diversification into more complex activities to improve the domestic supply and export performance. This would promote growth, exports, technological upgrading, employment and other spillovers.
Figure 4.1 Summary of Vision and recommended measures to be taken.
Vision
Competitive SME in domestic and regional market within 5 to 10 years
techniques
Measures
Meeting international food / health standards Develop sound business management Support through access to finance, training, and enforcement of stricter food safety laws
Building on competitive strengths: e.g. favorable agro-climatic conditions, proximity
Regional leader in production of processed food within 10 to 15 years
& cultural ties, labour availability Elimination of weaknesses: e.g. low product development, marketing strategy, underdeveloped value chain and management
Improve supply chain of fruit and vegetables
Fully integrated exporter of fruit and vegetable products to Gulf, Europe and N. America Sustained Export Growth
sector to reduce post-harvest losses by greater commercialisation of agriculture and improved logistics and technology Development of coordinated marketing strategy to supply processed foods to the Gulf, Europe and N. America
5 Competitiveness and competitiveness drivers
Since most of the development of strategy revolves around competitiveness, we believe it is appropriate to outline our understanding of the concept of competitiveness and competitiveness drivers as applied to this study. This will help the understanding of the approach used by the study team to develop a strategy. There has been an explosion of interest in the concept of competitiveness in the past decade but there is also considerable confusion in the usage of this term. This causes problems for policymakers because of inconsistencies of approach and recommendations. Competitiveness can be defined in different ways depending on the level or context considered. At the country level competitiveness is defined as ability of a nation to meet the test of free international markets while expanding real incomes at home At the industry level: collective capacity of the stake holders to anticipate, cause or exploit changes in products, processes, the enabling environment, and the marketplace At the firm level it is defined as: ability to protect and expand market share while maintaining an acceptable return on investment. (Porter, 1990) Analyses of competitiveness are broken down into two main groups i) Analyses of competitive performance which measures profitability, growth, market share, trade, etc (ii) Analyses of competitive potential which is concerned with explaining why performance is good or bad. We have identified 8 major competitiveness drivers for the Egyptian food processing industry and these are listed below. Competitiveness drivers of Egyptian food processing industry Driver 1 Supply of raw material at desired quantity, quality and price Driver 2 labour productivity and improved management Driver 3 Access to finance Driver 4 Increased supply of processed food to the domestic market 4a. Integration of micro and cottage industries mostly informal (into the formal sector) 4b. develop the domestic retail market system 4c. Increased role of the SME in the domestic and regional market Driver 5 Support institutions coordination Driver 6 Strategic alliance between university R&D and industry Driver 7 FDI attraction Driver 8 Increased export performance
209
Diagrammatically this can be represented as follows:

Figure 5.1 Competitiveness Drivers for the Egyptian FPI
Raw material Labour productivity Support institutions
FDI Access to finance

Increased competitiveness of the Egyptian food processing industry
Domestic market MCI, Retail-market, SME
Value chain network
Export
Alliance R&D
with
Univ.
&
5.1
Path way to competitiveness

As mentioned above, the main theme for development of a strategy in the Egyptian food sector is improved competitiveness. The pathway for improved competitiveness is shown in Figure 5.2
Figure 5.2
Pathway to international competitiveness
Competitiveness
Pathway to international trade competitiveness
T rade Framework
FTA s
National Policies
P ro -e xpo rt B ia s , S e c to ra l S uppo rt, o pe nne s s
Enabling Environment
B usiness, legal, regulato ry
Industry Organization
Size, structure, co o peratio n, perfo rmance
Enterprise Productivity
Strategy, M anagement, Inno vatio n Human reso urces o rganizatio n
Raw Material Supply
A vailability, quality, P rice/co st, Organizatio n Transpo rt
The steps in the pathway can be stimulated by activating the development drivers mentioned above. A proper study of the drivers and their impact on the development of the sector could lead to formulation of a national food sector policy. Implementation of this national sector-based policy and favourable global trade environment will lead to global competitiveness. Due to the continuously changing nature of the industry, constraints and opportunities exist at all times in each step in the pathway. That means that development interventions are also needed at each and every step, Interventions that are limited to a single step, or particular elements in a given step, will have limited impact because the rest of the pathway remains unchanged and could offset the effects of change. All interventions should be designed with a view toward upgrading the competitiveness of the food sector as whole, rather than a certain sub-sector or institution, and requires a strong coordination of the activities of the government and the industry. It is also wise to remember that since competing countries and industries are involved in essentially the same process, the need to upgrade the competitiveness and revision of the strategy never ends.
5.2
The approach of the study team for development strategy proposal.

Sector level Based on the global assessment and local assessment, and benchmarking exercises, the Egyptian food processing industry was positioned against the selected benchmark countries, mainly based on its trade performance as this is the only available way to measure its competitiveness. The global value chain analysis of the sector highlighted the constraints at each level of the chain in the sector. These are general issues cutting across the sector irrespective of which product group. The analysis of the constraints and opportunities (potentials) in the value chain lead to identification of the competitiveness drivers that have to be stimulated to mitigate the constraints and exploit the potential of the Egyptian FPI. The proposed activities/measures to be undertaken, and the expected outputs associated to the activities are presented. The relationship between the activities and outputs will be related to the objectives, and goals (improved competitiveness of the Egyptian food processing industry) are summarised in a LOGFRAME (logical framework). Product group level Value chain analysis was conducted for each product group by analysing the collected data and discussion with stakeholders. The constraints and potentials specific to the product were determined at each value chain. The constraints and potentials will then be linked to listed competitiveness drivers. Activities to be performed the outputs expected and the role of stakeholders will then be summarized in the LOGFRAME for easy reference.
211
6 Proposal for Sector level strategy
6.1
6.1.1
Supply of raw material at desired quantity, quality and price (Driver 1)

Current status Egypt has a reasonable endowment of high-quality, indigenous raw materials (such as exotic fruits and wide variety of vegetables), which forms the basis for the important food sector. The ability of the Egyptian agriculture to provide different varieties of fruits and vegetables in off-season is an important comparative advantage at the national level. Egypt also has highly potentially productive agricultural base as measured by computing the domestic resource cost of production (DRCs). A country has a comparative advantage if the DRC is less than one. According to the USAID study, the two horticulture crops, potato and tomato, undoubtedly are representative of a wide range of vegetables and fruits, reflecting extremely high comparative advantage. Egypt has also the highest olive yields in the region, which is 6.38 ton/ha compared to a world average of 1.67 and yields for Italy and Turkey of 2.39 and 2.63 respectively131. Hence, the future is bright for major expansion in these commodities as the proportion of area planted to potato and tomato is only 15 percent, and for olives only 0.6%, of the total cropped area under vegetables and orchards. For milk production, although a DRC of one or less indicates a comparative advantage in livestock development potential, the levels of efficiency and productivity in the subsector are low. There is immense scope to reduce costs of production and increase competitiveness. However, organization of milk producers groups, increased involvement of the private sector in marketing and feed distribution channels and facilities including chilling plants, provision of credit and advisory services to smallholders are essential to achieve such an improvement. Lack of a policy focus on the productivity and competitiveness of smallholders is a serious shortcoming. It requires that small farmers should get extensive technical assistance, form a viable producers association, be provided with intensive extension services and training, and be linked to the larger commercial farms as out growers so as to meet market standards, increasing productivity, create value-added opportunities, and so enhance the overall competitiveness of farms. There is a slow but steady growth of commercial farms (in the desert areas) that are directly connected to the processing industries. The government is encouraging the
131
ALEB 2003.
213
establishment of commercial farms by allocating lands for export related crops. The lack of farm insurances and credit facilities for commercial farming are, however, amongst the problems emphasized by industrialists. The Egyptian perishable products sector, mainly the fruit and vegetables and the dairy sector, is constrained by a transportation and storage system that is very damaging to product quality. It is estimated that up to 40 percent of total production of highly perishable products are damaged or lost in transit and handling. According to industry sources, estimates of tomato losses run as high as 60 percent. This is the result of poor packaging, lack of cold chain facilities, rough transport, and multiple handling. The impact of this on the food industries is inconsistent and poor quality supply. The impact on consumers is higher retail prices and lower quality than would be the case with proper post-harvest handling.
6.1.2
Critical problem to be addressed:

Fragmented agriculture system dominated by small holders. Very high post harvest losses (especially in fruit and vegetable sub-sector). Inconsistent supply of raw material in terms of quality and quantity.
6.1.3
Proposed activities to improve the supply of raw materials It is beyond the scope of this study to analyse the constraints faced in the agriculture sector and recommend improvements. But, since the supply of raw material of appropriate quality and quantity is the critical stage in the supply chain, and has huge impact on the performance of the food processing industry, the team recommends the following: Establishment of an industry-agriculture policy advisory group composed of MOFTI, MALR, food processing sector specialists, farmers association, professional associations, agricultural academic institutions, research and extension institutes etc. The advisory group will reflect on the constraints faced in supply of raw material to the industry and recommend/assist in the formulation of policy guidelines to address the issues mentioned above. Increased involvement of the private sector should be encouraged in the transportation and cooling/packaging shades to reduce post harvest loss in product and quality. Extensive training in post harvest handling of perishable items to the people involved in the supply chain. Create enabling environment to attract foreign and domestic investors in commercial modern farms. Encourage and organize contract farming practices between the industries and smallholder farmers. Please refer to the logical framework (activity 1.1).
Figure 6.1
Summary of the strategy for the improved supply of raw material both in Quality and quantity
Strategy 1: Raw material supply Objective Critical problem Improved supply of raw materials Fragmented agricultural system, with high post-harvest losses, and inconsistent supply Activities Advisory group to develop policy guidelines to remove constraints to agricultural supply Develop solutions to improve post-harvest handling and maintaining product quality Training in post-harvest handling throughout supply chain Develop enabling environment to attract domestic and foreign investment in commercial farming Encourage organisation of contract farming
Outputs Success indicators
Better policy for efficient use of resources Policy guidelines announced and implemented
6.2
6.2.1
Labour productivity and improved management (Driver 2)

Current situation The Egyptian food-processing sector as described in the local assessment part of this report has an estimated 313,000 employees of whom more than 250,000 are employed by micro and small-scale food processors. At the same time Egypt has the largest agro-food industry in terms of employment in the region, the second lowest average labour costs per worker in the manufacturing sector and lowest labour productivity. This is not surprising since the majority of the labour force is employed by small scale enterprises which cannot invest in proper incentive systems, proper systems for staff recruitment, training and employee development policy. Nevertheless, bigger companies and multinationals such as FarmFrites offer very competitive compensation packages, with a proper system in place for staff recruitment, training and development. There is also a lack of modern management system in the public and private sector to meet the current intensive competition in global and regional markets.
6.2.2
Critical problems to be addressed

Low labour productivity. Low level of human resources management. Underdeveloped and unfocused (to the sector) vocational training system.
215
6.2.3
Activities to improve the situation
The first step for improving the situation is for industrialists to recognize (especially the small and medium scale food industries) the low productivity of their labour force, agree on the need for improvement through training and incentives. To this end, the Ministry of Foreign Trade and Industry should organize awareness workshops to the management of food industries on the need for improving the labour productivity, followed by the training needs assessment. Since it is impossible for each individual small and medium scale food enterprise to have a training and human resources development unit to deal with low labour productivity, it is imperative to support the establishment of private human resources development and training consultancy companies and institutes that can provide common service in training needs assessment, preparation and conducting tailormade and product specific trainings for multiple companies. Strengthening and properly funding the training and human resources department of the MOFTI to coordinate the activities of training and improving labour productivity is also crucial. This unit should conduct researches and assessment on the productivity of labour in the food sector and provide the outcomes of the studies to key stakeholders (e.g. policy makers and representatives of the food processing industry). It is now common practice that leading industries with best practices in each subsector commercialise their success story by using their facilities and systems to provide the basis for training centre(s) for newly established industries and newly recruited employees engaged in similar practices/activities. The MOFTI can encourage and license leading and best performing industries in each sector to certify and encourage carrying out training activities.
Figure 6.2
Summary of strategy for improved labour productivity and firm level management
Strategy 2: Labour productivity Objective Critical problem Improved labour productivity Low labour productivity, lack of modern management systems, underdeveloped and unfocussed vocational training Activities Awareness program to highlight productivity problems and encourage EFPI companies to promote training etc. Develop capacity for training needs assessment and tailored training programs Strengthen public sector capacity to undertake productivity analysis and coordinate actions towards improving productivity Promote best practice and within industry cooperation on
Outputs Success indicators
Trained, motivated and productive labour force in EFPI Increase in labour productivity (compared to benchmark countries / competitors)
6.3
6.3.1
Access to finance (Driver 3)

Current situation The availability and cost of capital are critical components of competitiveness. During the interviews conducted with the Egyptian food processing industries, the situation with regard to availability of finance for new technological investments and working capital is considered as one of the main problems. The management of the food industries complained that the commercial financing costs are high due to high interest rates. In January 2005 the government has announced the establishment of a 50 million fund, aimed mainly to provide support and upgrade agro-food processing operations in Egypt and increase exports of processed foods. The Fund will increase to 100 million Euros by 2006. International Donor loans are available at lower rates earmarked for SMEs seeking to purchase machinery, equipment and raw materials. Long-term industrial finance for the private sector in Egypt needs to be improved. Credit to the industrial sector as a whole from the specialised banks is very low. Venture capital and similar facilities for technology promotion are at a rudimentary stage. These deficiencies constitute fundamental constraints to the growth and upgrading of the private food processing and marketing sector. A financial system that collects, allocates and supervises the use of investment resources is crucial. On the other side, there is lack of information and knowledge on the food industries side about how to access finance for technology improvement, expansion and for working capital.
6.3.2
Critical problem to be addressed

Lack of capital finance and credit for working capital, especially for the small and medium scale food processors. Lack of information on how to access finance.
6.3.3
Proper training and technical assistance in preparation of business plans, as required by the banks, is essential. The Ministry of Foreign Trade and Industry, using its small and medium scale industries development unit and encouraging the private consultancy and business management companies, can assist the food industries in preparation of business plans. MOFTI in collaboration with sector-based associations can coordinate with development banks and international NGOs to provide a grant/ long-term loan with moderate interest rate. The MOFTI in collaboration with the development banks can set up a micro-finance scheme for the micro and cottage industries which are mostly operating in the
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informal sector to develop their business by adapting appropriate technology, acquiring production premises and training of their personnel.
Figure 6.3 Summary of strategy for improved access to finance for SMEs
Strategy 3: Access to finance Objective Critical problem Improved access to finance for SMEs Lack of finance for capital and technology investments and lack of information on access to capital Activities Outputs Training and technical assistance for the preparation of business plans designed to secure bank financing Coordination and development of loan facilities for capital investments and modernisation Creation of micro-finance schemes for micro / cottage
Increased access of EFPI enterprises to finance for technology and working capital
Success indicators
Level of finance made available to EFPI enterprises
6.4
Increased supply of safe processed food to the domestic market (Driver 4)

Driver 4 has three parts that contribute to the increased supply of safe food to the domestic market these are 4a. Integration of micro and cottage industries mostly (informal) into the formal sector. 4b Development of the domestic retail market system. 4c. Increased role of SMEs in the domestic and regional market.
6.4.1
Integration of micro and cottage industries (mostly informal) into the (Driver 4a)
formal sector
Current situation Micro-enterprises in the informal sector (irrespective of their area of specialization) are the incubators for industrialisation. In most developing countries such as Egypt, outside of agriculture, most poor people depend on the informal sector for their livelihood. The production and marketing of food by the informal micro and cottage industries and street vendors in Egypt is estimated to contribute to more than 70% of the processed food 132 production and more than 80 % of the employment in the food sector . The government has, however, tried to create an environment favourable to the development of these micro enterprises by providing free zone and industrial cities with
132
Personal communication with senior national consultant (There is no systematic study to substantiate this information).
incentives such as tax holidays and modest land lease fee. But, there has rarely ever been any provision of financial assistance (of any form) and training to these enterprises. Due to the above, the informal sector continues to produce unregulated and unsafe processed food to the population, which could create a high financial loss to the health system. In addition, since the informal food processing industries neither pay taxes nor have costs related to food safety, quality and packaging, their products are of lower quality and cost and compete with the formal sector unfairly and hamper the development of the food processing industry. There are also planned structural policy reforms that include reduction of income taxes and extended credit services to SMEs, including start-ups by university graduates, at subsidized interest rates The Ministry of Foreign Trade and Industry ought to harness the dynamism and enthusiasm of the informal sector by removing the impediments to growth and provide an environment that is both supportive of micro and cottage industries development and trading activities. While effort must be exerted to formalize the informal sector, the new entry to the informal sector must be discouraged through legislation. In this regard, specific recommendations for activities to be undertaken are as follows: Activities to improve the situation Recognition of the informal sector as a policy focus. Design an appropriate policy in allocation of factory premises and adequate infrastructure, especially with respect to the provision of water, energy and roads for the informal sector wanting to register and work in the formal sector. Whenever possible, cluster a number of cottage and micro-industries in joint ventures to use common facilities and marketing structure. Extensive extension and advisory work is required for clustering to take place. Identify, register, and license all the micro and cottage industries including the informal sector. Facilitate access to finance through normal commercial banks, donor supported concession lending, venture capital funding etc. Provide technical advice through national business organizations such as Chamber of Food Industries (CFI) Conduct awareness campaigns and training in legislation in food safety and public health. Creation of appropriate food safety legislation and policies, and putting the necessary structures in place that will facilitate the implementation. The legal framework such as food traders and processors licensing, town planning, public health etc. should be streamlined and coordinated in order not to hamper the development of the informal sector.
6.4.2
Develop the domestic retail market system (driver 4b) Current situation The population bulge, the rise in female participation rates in the labour force, the rise in dual-income families, and growth in disposable incomes are all factors that have resulted
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in a "cash-rich, time-poor" consumer, and contributed to the rise of the processed food sector. The retail sector is developing in Egypt very slowly. Retailers could provide a very interesting niche markets. Small, niche companies could get shelf space to new products that are aimed at a narrow but growing demographic or lifestyle segment. (Sekem organic food producer is a good example). In Germany the retail sector dominated by 10 biggest retailers control more than 90% of processed food sales. The total number of retail outlets decreased from 161,359 to 74,577 from 1960 to 1997 and 85% of these outlets are self-service. In South Africa 55% of the food trade is controlled by the hyper and supermarkets (by 2752 supermarkets and 333 hypermarkets). In South America the super and hypermarkets were contributing only 20% of the sales in 1990. In 2002 the share of the super and hypermarkets rose to 60% and is increasing. Egypt with only 493 supermarkets and 6 hypermarkets - which is 0.76 and 0.1 per million inhabitants respectively - has a long way to go in this sector.
Critical problem to be addressed Under developed retail market system
Activities to improve the situation Identify and register all food distribution and market channels including groceries Organize awareness campaigns in post production handling and marketing of processed food to all shop owners Introduce laws for food distribution and handling of processed food, and protection of public health Assist registered groceries, shops, and processed food traders in establishing /expanding their food section through access to finance, training, and technical advice License shops complying to the set of official standards as official distribution centres for processed food Conduct awareness campaigns on public health issues and encourage the general public to buy from licensed shops
6.4.3
Increased role of the SME in the domestic and regional market (Driver 3) Current situation The feature of the Egyptian food industry is the existence of a dual market structure. The sector is characterised by a small number of large firms that operate over multiple product sectors for local and export market (examples are fruit juices, frozen, vegetables, and pasteurised milk). There is large number of SMEs (small and medium sized enterprises) that should focus on niche products for regional and local markets. It is
estimated that more than 87% of the food processing industries in the formal sector are either small scale or medium scale. This figure is similar to that of European countries where the SMEs contribute to the production of more than 80% of processed food. The main objectives of the focus on the small and medium scale food processors would be to: build support industry services for the larger industries production requirements; increase the competitiveness of the domestic market; increase the diversification and specialization of the industrial base; take advantage of niche market, and accelerate adaptation to changing market demands.
Critical problems to be addressed Weak marketing strategy, weak product innovation capability due to lack of finance, weak linkages to larger industries.
Activities to improve the situation Raising awareness of all stakeholders: the management of the small and medium and large industries, professional associations, government and other stakeholders on the important role of the SME to the Egyptian food processing industry. Assist the SMEs and larger industries in reaching commercial agreements for the supply of services and goods. Assist the SMEs in gaining access to capital finance and or joint-ventures with larger companies and retailers. Formation of commodity/service based associations for collective activities to reduce costs such as (contract research, collective storage, purchasing). Establish mechanism of providing market information to all small and medium scale food processors through their associations.
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Figure 6.4
Summary of strategy for improved performance of Egyptian food processing industries in domestic market
Strategy 4: Domestic market Objective Increase domestic supply of safe processed food from micro and cottage industries and develop a sustainable retail market structure Critical problem Underdeveloped retail food market Large unregulated informal sector Poor intra-industry linkages between small and larger EFPI enterprises
Activities
Creation of business environment and support structures to encourage enterprises to join the formal sector Promotion of clustering of micro-small enterprises around common facilities and marketing activities Promote awareness of food related public health issues and encourage consumers to used licensed shops Develop collective approaches to reduce costs and raise innovation Assistance to SMEs in developing linkages (supplier role) to larger enterprises and retailers
Outputs
Upgrading of micro-small enterprises and their integration into formal sector. Development of more modern and safety conscious retail food sector. Better integration and collaboration of enterprises within EFPI
Success indicators
Reduction in the size of the informal sector. Improved public health safety in food chain.
6.5
6.5.1
Support institutions coordination (Driver 5)

Current situation The study team has noticed that there is much duplication and lack of coordination of activities among the support institutions such as Chamber of Food Industries (CFI), Chamber of Cereals and Grains (CCG), Food Commodity Council (FCC) and Horticultural export improvement Association (HEIA). Though there are intentions of cooperation and signing of memorandums a clear structural and strategic cooperation and division of tasks is absent. This leads to fragmentation and diffusion of efforts across the industry. Thus, it is recommended that a study should be done with the aim of rationalization and streamlining of their activities.
6.5.2
Critical problems to be addressed Lack of coordination of key professional institutions serving the sector.
6.5.3
Hosting a symposium or related event where all stakeholders can interact and contribute their perception of the sector.
Establish a central board/federation of food producers, processors and traders, which will discuss the sectors needs and chart/propose the way forward for the sector. Encourage all members to sign and respect memorandum of understanding for cooperation. Establish a central database for the most recent information on markets, trends, prices and technological developments in the sector that could be accessed by all members. Publish newsletters/bulletins to disseminate information on export/import data, market prices, position of Egypt in relation to competing countries etc. Organise trade fares, exhibitions, study tours and participation in international trade fares.
Figure 6.5
Summary of strategy for improved coordination of support institutions in the EGFPI
Strategy 5: Support institutions Objective Improved organisation and coordination of stakeholder and support institutions connected to the EFPI and food supply chain Critical problem Activities Lack of coordination among key institutions serving and supporting the development of EFPI Symposium of stakeholders to develop common perception of sub-sector and strategy to enhance support structures Establish and/or strengthen sector and sub-sector associations of players in the value chain Dissemination of information relevant to the positioning and situation of the EFPI (e.g. international trade information, market prices, position of Egypt relative to competitors) Outputs Establish national coordination body for stakeholders and support institutions involved in food processing and food marketing sectors Coordination body for the activities of the associations and institutes. Greater coordination of support institutions (e.g. universities, research institutes, government ministries) Success indicators National coordination body (board) for food processing and marketing established. Increase in stakeholder support to the EFPI
6.6
6.6.1
Strategic alliance between university-R&D and industry (Driver 6)

Current situation In response to the pressures of globalisation, the food sector products often have to compete in a liberalized world market and be competitive against international food products promoted in the domestic market. The key success factor can be exploiting innovation and harnessing creativity in order to find viable niches. Finding and keeping niches on the international market can be achieved to a great extent by scientific progress and technology innovations, and updated research and development breakthroughs. The Egyptian food processing industries, with the exception of few multinational companies, give very little emphasis for product innovation and increasing
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productivity. The high failure rates of new food products make this form of innovation very high risk for individual businesses. In Egypt, knowledge and human capital are strong but unfocused. Overall, the academic institutions are not well linked to research and development efforts to support innovation and new product development in the food processing sector. Exceptions to this general rule are the National Research Centre (Cairo), which started contract research and is serving 45 industries, and The Food Technology Centre (FTC), which is being linked to IMC to serve the EGFPI and provides training on HACCP, ISO, GMP and GAP. The food processors interviewed also complained that the graduates from universities lack practical knowledge required by the industries. The low level of contract research and weak linkage between the food industry and R&D and academic institutes is understandable, since the provision of effective research services involves high fixed costs and is human capital intensive. Building such linkages requires not only ensuring that government ensures that R&D institutes and universities have the resources available to provide such services but, also, that they are provided in a manner in which they can meet the needs of industry. A mechanism must be created whereby R&D breakthroughs can be rapidly filtered through the value chain of the Egyptian food-processing sector in the following areas: product innovation, including new products and ingredients. process innovation, dealing with cost reduction or efficiency improvement through new equipment and process applications. packaging innovation, including the packing material itself and the process of packaging the product. transport and logistics innovation, often covering the distribution method and critical time for delivery.
6.6.2
Critical problems to be addressed Weak linkage between research and development efforts in the universities and R&D institutes and the requirements of EFPI; Strong human capital but not focused to the needs of EFPI.
6.6.3

Identify universities with the capability to form strategic partnership with industry and discuss the modalities of cooperation. Assist universities to create internship programmes to link students to the FPI. Establish incentives to research centres to pro-actively contribute and disseminate information to the sector. Encourage and support contract research activities between the industry and the research centres and universities.
Figure 6.6
Summary of strategy for improving the strategic relationship between EFPI the academic and research institutions
Strategy 6: Strategic relations Objective To build sustainable and strong strategic relationships between the EFPI and universities and other research institutes Critical problem Activities Weak linkages between R&D institutions and EFPI (research capacity not orientated towards needs of EFPI) Identification and promotion of possibilities for strategic partnerships between research institutions and industry Outputs Development of internship programmes Encourage research centres to pro-actively disseminate information to the EFPI Encourage contract research activities
Improved transfer of technology from research institutions to industry. Universities and research institutes deliver properly trained (specialised) manpower to EFPI
Success indicators
Number of research findings commercialised by EFPI. Number of trained personnel in the food sector
6.7
6.7.1
FDI attraction (Driver 7)

Current situation Exports and competitiveness depend increasingly on effective participation in global value chains and Foreign Direct Investment (FDI) is today the most important way for countries to plug into such global chains. FDI also offers other benefits. It is the main conduit of international technology transfer, and its importance is growing apace as innovation becomes important. Moreover, technology transfer via FDI comes as a package of skills, support, operating know-how and finance. The success stories in export and domestic market of joint ventures such as FarmFrites, Heineken/Alahram beverages, Hero/Vitrac, Americana/Greenland are good examples. The study team could not find the FDI inflow in value terms for the food sector from any official source. But, the total foreign direct investment in 2003 in Egypt amounted to US$ 320 sharply declining from US$ 647 million in 2002 and US$ 1235 million in 2000 according to the General Authority for Free zones and Investment (GAFI). There is a commitment from the Ministry of Investment to double the level of investment, based on the average value of last 4 years FDI, in 2005. Egypt could take advantage of its highly trained manpower, relatively developed infrastructure, a highly productive agriculture and proximity to highly attractive processed food market of the Middle East and North African countries and to Europe in attracting big global players in the food processing and marketing business to locate their head quarters for their regional operations in Egypt.
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6.7.2
Critical problems to be addressed Low level of foreign direct investment (FDI) in the food processing sector
6.7.3
GAFI (and/or a dedicated IPA) can play an important role in Marketing Egypt as a most suitable place for the investment in processed food and as head quarter of the multinationals in the food sector and as their regional office for Africa and Middle East133. Update potential\investors about developments regarding the continuous improvement of the business environment in Egypt Assist professional associations to organize workshops and study tours for the management of food industries in Europe and North America to encourage the formation of partnerships with multinationals Create a web site for the food-processing sector promoting the potential of Egypt in agriculture (especially in fruit and vegetables and dairy industries), its low labour cost and the proximity to Middle East and Europe.
Figure 6.7
Summary of strategy for the increased FDI in the Food processing and Marketing
Strategy 7: FDI Attraction Objective To increase foreign direct investment flows into the EFPI orientated towards export activities Critical problem Activities Strengthen promotion of Egypt as a location for investment in food processing and regional headquarter location for Middle East and Africa Encourage the creation of partnerships and joint-ventures between EFPI and multinational food companies Implement supporting measures to ensure that Egypt offers a highly attractive environment for FDI Very low level of FDI into the EFPI
Outputs
Increased flow of FDI into the EFPI and greater integration of EFPI into global FPI. Spill-overs from FDI to domestic sector. Increased export capacity.
Success indicators
Volume of FDI and number of regional offices of TNCs food processors located in Egypt
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GAFI is the only current IPA.
6.8
6.8.1
Increased export performance (Driver 8)

Current situation Despite very small per capita arable land, Egypt has highly productive agriculture, as measured by domestic resource cost of production (DRCs). It also has a comparative advantage with regard to its peripheral location (Europe and the Gulf countries), lower energy and transport costs in relation to most emerging markets. Egypts products can reach most of the European markets in less than one week and the GCC in less than 4 days. This peripheral advantage is crucial for export performance as the transport costs of food items especially the fresh perishable products contribute substantial amount (up to 50%) of the delivery costs. Nevertheless the export performance of the Egyptian food processing industry is characterized by high trade deficit in processed food trade (more than 1 billion USD in 2003). Its low share of export per output ratio compared to benchmark countries also indicates the potential for the SMEs to increase their export to the region, and the high demand in the domestic market. One of the challenges in the international food trade is international food safety regulation and mandatory approach to ensure the quality and safety of traded food. These regulations are becoming more sophisticated and stringent by the day. If the Egyptian food sector does not act in time to comply with international regulations, it can easily find itself excluded from international markets. Concepts such as HACCP, traceability and EureGap should be introduced in practically all sectors of food processing and trade. These require a greater level of involvement of government institutions throughout the supply/value chain. Competitiveness also rests on superior marketing capability. Branding is a widely used strategy in the food industry that requires substantial economies of scale, which the Egyptian food processing industry is lacking. While the bigger enterprises continue to provide relatively high priced branded products, there are alternatives to the high-cost, mass-produced, branded product strategy for the smaller and micro enterprises. Niches are opening up in areas such as organic food, health foods, regional specialities, supply of chilled foods and delicatessen products for the retail trade and export in the region, and the supply of fully or partially prepared products for the catering trade (especially hotels and tourist catering services). As we mentioned earlier, the Egyptian food-processing sector is fragmented and mostly small or medium scale. The smaller enterprises need to cooperate (and compete) to remain internationally competitive. Possible cooperation could include the vertical integration of the value chain, developing a joint marketing strategy, joint contract research etc. Appropriate packaging, in terms of technology (provide longer shelf life for the products) and in terms of design (to attract consumers), is crucial for the export market. Though the food industries did not face any significant problems regarding packaging material, the
227
price of imported packaging is mentioned as a problem. A cooperation of the food industries with the growing packaging sector is imperative.
6.8.2
Critical problem to be addressed

Inconsistent supply of raw materials in terms of quality and quantity. Weak marketing strategy. Lack of proper infrastructure such as cold stores chains from the farm to the port. Weak product quality and food safety requirements.
6.8.3

Certification of products according to the requirements of international trade, such as EurepGap, HACCP etc. Organize/strengthen commodity based export association(s) for collective lobbying for policy reforms for improving the business environment, access to land for commercial farms, conduct trade negotiations and agreements for different markets etc., collective bargaining for imported inputs, and collective bargaining of export prices. Establish quick and reliable market information system and dissemination system to the members of the association. Collective sea and air cargo space utilization for transporting of products for export. Collective establishing /utilization of facilities such as cold store. Common marketing campaigns such as an Internet site for the marketing of Egyptian products. Establishing/financing joint research projects such as preservation of perishable products, appropriate packaging etc. to the benefit of all exporters.
Figure 6.8
Summary of proposed strategy for increased export performance of the EFPI
Strategy 8: Export performance Objective Critical problem To increase processed food supply to international markets Weak marketing strategy Lack of proper infrastructure (e.g. cold storage chain) Weak product quality and safety systems and standards Activities Strengthen supply of raw materials Encourage collective procurement and marketing actions Establish accessible, up-to-date market information systems Investment in infrastructure and promotion of collective utilisation of resources Strengthen certification of products conforming to international standards Joint research to improve export potential (e.g. product preservation, packaging) Outputs Better informed and targeted marketing activities. Increased proportion of products complying to export market requirements. Improved infrastructure for domestic supply chain Success indicators Export performance of EFPI
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7 Log-Frame for sector level proposed strategy
Table 7.1
Overview of drivers and outputs covered by the log frame Driver 1 Raw Material Supply Output 1.1 Output 1.2 Driver 2 Better policy for efficient use of natural resources Reduced post harvest losses of agricultural/raw materials
Labour Productivity and Management Output 2.1 Output 2..2 Trained, motivated and productive labour force Trained business development managers
Driver 3
Access to Finance Output 3.1 Output 3.2 Increased access to finance for technology and working capital Increased knowledge of access to finance
Driver 4 Driver 4a
Increased supply of safe processed food to the domestic market Integration of micro and cottage industries into the formal sector Reduced negative food trade balance through development of Output 4.1 micro, small and medium scale food processors
Driver 4b
Development of the domestic retail market system Output 4.2 Development of domestic retail system
Driver 4c
Increased role of SMEs in the domestic and regional market EFPI's position strengthened in product groups with presence of Output 4.3 SMEs
Driver 8
Export Performance Output 8.1 Increased export of processed food
Driver 5
Support institutions coordination Output 5 Establishment of coordination body/board
Driver 6
Strategic Alliance between university R&D and industry Output 6 Technology transfer and trained (graduate) manpower
Driver 7
FDI attraction Output 7 Increased inflow of FDI into EFPI
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Summary of the proposed strategy for increased competitiveness of EFPI--- Improvement of raw material supply, labour productivity and access to finance
GOAL(S) Improved supply of raw material, increased labour productivity and improved access to capital finance for the Egyptian food processing sector
The objective for factor conditions
To Improve availability of raw material, to increase labour productivity, to improve access to capital cost (lending)
Driver 1 Immediate objective Improved supply of raw material Critical problem addressed Fragmented agriculture system, very high post harvest losses (specially in fruit and vegetable subsector) Outputs 1.1 Better policy for efficient use of natural resources (land/water) 1.2 improved post harvest handling of raw materials Reduced post harvest losses (quality and quantity) Success indicators Policy guideline announced
Driver 2 Immediate objective Critical problem addressed Low productivity of labour Unskilled labour Lack of trained business managers Improved labour productivity
Driver 3 Immediate objective Critical problem addressed Improved access to finance Lack of finance for capital/technology Lack of information on access to finance
Outputs 2.1 Trained and motivated, productive labour force in the sector 2.2 trained business development managers
Success indicators Increased productivity
Outputs 3.1 increased availability of capital finance
Success indicators Amount of finance made available to the industries
Trained efficient managers
3.2 Increased knowledge of application to finance (borrowing)
Number of the MSME applying for lending
233
Driver 1
Outputs and activities for increased competitiveness of EFPI improvement of raw material supply
IMMEDIATE OBJECTIVE OUTPUT 1.1
Improved supply of raw material Better policy for efficient use of natural resources (land/water) Success indicator(s) Policy guideline announced , Party responsible Duration Start (YY,MM) Endt (YY,MM) TBD Establishment of the PAG Draft policy guide line prepared The first workshop TBD TBD organized for all stakeholders IMC/ MALR TBD TBD Policy document prepared Issuance of policy IMC IMC/MALR TBD TBD guidelines in official channels IMC MALR TBD TBD Implementation Support institutions Support institutions Milestones Related activities
Activities for output 1.1
Implementing inst/industry
establish and industry-agriculture policy advisory group formulate a policy proposal acceptable to all parties organize a workshop to sensitise the stake holders Propose the policy guidelines to the policy making body Follow-up of the announcement of the policy guide lines Follow up the implementation of the policy guidelines
IMC Policy advisory group Policy advisory group
IMC, MALR
TBD
Policy advisory group
TBD
TBD
Policy advisory group
Advisory group
Driver 1
Out puts and activities for increased competitiveness of EFPI----- Improved supply of raw material
IMMEDIATE OBJECTIVE OUTPUT 1.2
Improved supply of raw material Reduced post harvest losses of agricultural\raw materials (especially perishable products) Success indicator(s) Post harvest losses are minimized to acceptable level Party responsible Duration Start (YY,MM) End (YY,MM) Strategic alliance with the R&D TBD TBD Identification of appropriate technology Conducting of training in PH handling Incentive to the potential IMC/MOFTI Government IMC/MOFTI/MOA TBD TBD TBD TBD entrepreneurs announced Food transportation act announced Creating enabling environment Strategic alliance with the R&D and University and MOA MOFTI Support to SMEs and University Milestones Related activities
Selection and introduction of appropriate technology for production and post harvest handling Extensive training to the farmers on the post harvest handling of crops Encouraging the private (SME) for the handling and distribution of produce Introduction of legislation on the domestic distribution system for perishable agricultural products Reduction of import tariffs on imported on cold chain equipment and refrigerated truck Introduction of varieties that with stand poor post harvest handling Encourage SMEs to establish cooling /packing shades and transport companies
R&D institutes Private sector
MOA/MOFTI
Extension services
MOA
TBD
TBD
Private sector SME
Government R&D institutes Private sector GAFI
IMC/MOFTI/MOA
TBD
TBD
Law announced
FDI attraction
IMC/MOFTI/MOA
TBD
TBD
New varieties selected
Strategic alliance with the R&D and University
Financial/grant made IMC/MOFTI TBD TBD available to potential investors
Creating enabling environment
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Driver 2
Outputs and activities for increased competitiveness of EFPI improve labour productivity Improved labour productivity Critical Problem Low productivity of labour, low level of human resources management, Lack of training & vocational training system,
IMMEDIATE OBJECTIVE
OUTPUT 2.1
Trained, motivated and productive labour force in the sector Success indicator(s) Increased labour productivity Implementing inst/industry Party responsible Duration Start (YY,MM) End (YY,MM) Training Needs Milestones Related activities
Organize sensitizing workshops to the management of the food industries on the need for training
IMC/ MOFTI/ CFI
IMC
TBD
TBD
Assessment (TNA) report presented to the authorities
MSME development
Conduct training needs assessment
IMC/ MOFTI / CFI/ Companies
MOFTI
TBD
TBD
TNA prepared
MSME development
Support the establishment of private human resources development and training consultancy companies and institutes
MOFTI/IMC
MOFTI
TBD
TBD
Financial and other resources are made available
Enabling business environment
Establish/strengthen a human resources development and training unit in the ministry of foreign trade and industry Develop a curriculum for the food industries personnel in collaboration with leading industries and other stake holders Develop a training manual for important subject s in the food industry such as HACCP, GMP, Productivity, quality etc Conduct training of trainers from each industry Conduct training (on job training )
MOFTI
MOFTI
TBD
TBD
MOFTI-TU
TBD
TBD
Curriculum developed
Support institutions
MOFTI-TU Consultants Private consultancy Trained trainers
MOFT-TU
TBD
TBD
Manual prepared
MOFT-TU
TBD TBD
TBD TBD
Training organized Trainers trained
Industry Best practice industries
Analyse the impact of training and adapt the training methodology and content accordingly
MOFTI-TU, Private consultancy companies and other training institutes
MOFT/ CFI/ Companies
TBD
TBD
Support to SMEs
Driver 2
Outputs and activities for increased competitiveness of EFPI improve labour productivity Improved access to finance
Immediate objective
OUTPUT 2.2
Trained business development managers Success indicator(s) Improved industrial\management system in all food processing industries Party responsible Duration Start (YY,MM) End (YY,MM) TBD IMC IMC.MOFTI TBD Management training centre established TBD Training Needs Assessment conducted TBD TBD Manual developed Management training programmes announced TBD TBD SME development Support institutions Can be combined with other sectors management training activities SME development Milestones Related activities
Establish industrial management centre and management consultancy services (private)
Conduct training needs assessment
MOFTI Management training centre Management training centre Management training centre / CFI
MOFTI
TBD
Develop a training manual Training the management of the industries regularly Evaluate the training performance
MOFTI
MOFTI
TBD
TBD
MOFTI
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Driver 3
Outputs and activities for increased competitiveness of EFPI-------- Access to finance To improve access to finance for SMEs Critical Problem Lack of finance for capital/technology and lack of information to access capital
IMMEDIATE OBJECTIVE
OUTPUT 3.1 and 3.2
Increased access of businesses to finance for technology and working capital
Success indicator(s) Activities for output 3.1 Implementing inst/industry
Amount of finance made available to the industries
Party responsible
Duration Start (Year month) End (year month) TBD
Milestones
Related activities
Training the management of SME in accessing finance Provide credit facilities and finance to SMEs with moderate interest rate Provide micro finance facilities to support the micro and cottage industries (usually informal) to develop their business through revolving fund
Banks, consultancy companies Development banks / Specialised Funds / SFD MOFTI/IMC Banks/international NGOs
IMC
TBD
Training organized
Improving labour productivity
IMC
TBD
TBD
Fund allocated for financing food industries
Increased domestic supply of processed food
IMC/MOFTI
TBD
TBD
Micro finance fund allocated
Increased domestic supply of processed food
Summary of the proposed strategy for increased competitiveness of EFPI------- Increased supply of processed food in domestic regional and intl markets
GOAL(S) Improved competitiveness of the Egyptian food processing sector in global, regional and domestic markets
Objectives
To increase supply of processed food to domestic market, to become the dominant player in the regional processed food exports, increased export of processed food to international market
Driver 4 a/b Immediate objective To increase domestic supply of safe processed food from micro and cottage industries and develop sustainable retail market structure Critical problem addressed Weak and disorganized MSM scale food processors Under developed retail market system
Driver 4c Immediate objective To make the Egyptian small and medium scale for processing industry play important role in domestic and regional market Critical problem addressed Weak marketing strategy Weak product innovation capability and interaction with the larger industry
Driver 8 Immediate objective To increase processed food supply to international market
Critical problem addressed
Weak marketing strategy Lack of proper infrastructure such as cold stores chains from the farm to the port Weak product quality and food safety requirements
Outputs Minimized food trade balance (-ve) at national level by import substitution through developed MSMEs in the food sector Developed domestic retails system (supermarkets)
Success indicators % decrease in ve trade balance
Outputs The Egyptian food processing industries became regional players in selected product groups such as dairy products, fruit and vegetables, olive products
Success indicators % Increase in the export performance
Outputs Increased export of processed food to European and north American markets
Success indicators % Increase in the export performance
Number of new supermarkets established
Egyptian food processors Develop and maintain market niches based on product specialization and quality for the region
Number of new products marketed
Improved cold storage and transport facilities
Number / capacity of cold stores established
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Driver 4a
Outputs and activities for increased competitiveness of EFPI ---------Domestic supply of safe processed food To increase domestic supply of processed food and to develop sustainable retail market structure Critical Problem Weak and disorganized MSM scale food processors, Under developed retail market system
IMMEDIATE OBJECTIVE
OUTPUT 4.1
Minimized food negative trade balance at national level by import substitution through developed Micro, Small and Medium sized food processors in the food sector Success indicator(s) Increased supply of processed food in domestic market Duration Related activities Milestones Start YY,MM End YY,MM Census of the micro and MOFTI IMC TBD TBD small processors available per region per product group TBD MOFTI Banks and NGOs TBD Fund/grant made available TBD Technical advice provided TBD TBD Media and schools used for campaigns TBD TBD Associations formed Strategic alliance with R&D and University Support institutions Support associations Access to finance Support institutions Party responsible
Identify, register and license all the micro, small and medium scale food processors in the country (including the informal sector) Facilitate access to finance through normal commercial banks, donor supported concession lending , venture capital funding Provide technical advice through national business organizations such as CFI, HEIA, etc Conduct awareness campaigns and training in legislation in food safety and public health Assist the MSM food processors in forming associations and help them in clustering Assisting enterprises to access to technology through joint ventures and partnerships Develop integrated training courses that are skill based and market/product oriented MOFTI/ CFI/ IMC MOFTI TBD
ESO/ MOFTI/ CFI
MOFTI
MOFTI Business assistance centres Training centres
IMC
TBD IMC/MOFTI MOFTI TBD
TBD SME clustered and grow TBD Training conducted
Access to finance
Strategic alliance with R&D and University
Driver 4b
Outputs and activities for increased competitiveness of EFPI ---------retail market development To develop sustainable domestic retail market structure Critical Problem Under developed retail market system
IMMEDIATE OBJECTIVE
OUTPUT 4.2
Developed domestic retail system (supermarkets etc.) Success indicator(s) Number of retail shops established fulfilling the requirement Implementing inst/industry Party responsible Duration Start YY,MM End (YY,MM) TBD All food retail shops identified and registered Domestic supply of food out put 4a Domestic supply of food out put 4a Law introduced after discussion with all stakeholders Standard design and facilities TBD TBD for the food marketing shops set and agreed MOT ?? MOH MOFTI TBD TBD All official food distribution shops are licensed A regular radio and television TBD TBD programme organized to increase the awareness Support institutions MSME development Raw material (out put 1.1) Access to finance Milestones Related activities
Identify and register all food distribution and market channels including groceries Organize awareness campaigns in post production handling and marketing of processed food to all shop owners Introduce law for food distribution an handling of processed food and protection of public health Assist the registered groceries, shops, and processed food traders in establishing /expanding their food section through acces to fianance, training, and technical advice License the shops complying to the set standards as official distribution centres for processed food Conduct awareness campaigns to the public on the public health issues and inform them to buy from licensed shops
MoH/ Licensing authority, MOFTI
MOFTI
TBD
MOH,
TBD
TBD
MOFTI/ IMC
IMC
TBD
TBD
MOFTI / MOH/ IMC
IMC
MOH
MOFTI
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Driver 4c
Outputs and activities for increased competitiveness of EFPI--------increased role of SMEs in domestic and regional\ markets To make the Egyptian small and medium scale for processing industry play important role in domestic and regional market, through import substitution and niche marketing Critical Problem Weak marketing strategy, Weak product innovation capability and interaction with the larger industry
IMMEDIATE OBJECTIVE
OUTPUT 4.3
The Egyptian food processing industries became regional players in selected product groups such as dairy products, fruit and vegetables, olive products Success indicator(s) % Increase in the export performance Party responsible Duration tart (YY,MM) End ((YY,MM) Sensitizing TBD TBD workshops/symposiums organized IMC/MOFTI TBD TBD MoU and contracts signed SME development Support institutions MSME development Milestones Related activities
Sensitizing the management of the SMEs and the large enterprises on the important role of the SME Assist the SMEs and larger enterprises in reaching agreements for the supply of services and goods Assist SMEs in access to capital finance and or joint ventures with larger companies and retailers Formation of commodity/service based associations for collective activities to reduce costs such as (contract research, collective storage, purchasing ) Establish mechanism of providing market information to all SMI
IMC/ MOFTI/ Industry Associations SMES/ Large enterprises and MNCs Development banks /IMC/ MOFTI
MOFTI
IMC/MOFTI TBD TBD
Finance/fund/grant made available
Access to finance
Industry Associations/ R&D and University
MOFTI/IMC
Value chain established
TBD
TBD
Industry Associations
IMC at the beginning / Industry Associations
TBD
TBD
MIS established/bulletins published
Driver 8
Outputs and activities for increased competitiveness of EFPI ---------Increased export performance To increase processed food export through improvement of quality and food safety, introduction of new products, and develop superior marketing capability Critical Problem Weak marketing strategy, Lack of proper infrastructure such as cold stores chains from the farm to the port Weak product quality and food safety requirements
IMMEDIATE OBJECTIVE
OUTPUT 8
Increased export of processed food Success indicator(s) Increased export of processed food to European and North American markets, Improved cold storage and transport facilities
Activities for output 8
Party responsible
Duration Start (YY,M M) End (YY,MM)
Milestones
Related activities
Certification of the products for the requirements of international trade such as EurepGap, HACCP etc.. Organize commodity based export association for collective lobbying for policy reforms, collective bargaining for imported inputs, collective bargaining of export prices Establish Quick and reliable market information collecting and dissemination system to the members of the association Collective sea and air cargo space utilization for transporting of products for export
Companies/ farms/ laboratories (certified) Companies/ Exporters
Industries/farms/M OALR/MOFTI MOFTI/Association s
TBD
TBD
All export industries and most suppliers to domestic market certified Export associations for each product
Training
TBD
TBD
group established
MOFTI
TBD
TBD
Printed and electronic information made available regularly to members Common export cargo space
Associations /EPA/MOFTI/airsea cargo companies TBD TBD
negotiated
Collective establishing /utilization of facilities such as cold store
Industry Associations/ Companies
Associations/MOFT I associations
TBD
TBD
Common cold stores utilized
Common marketing campaigns such as webpage for the marketing of Egyptian products Establishing/financing joint research projects to the benefit of all exporters.
Associations
TBD
TBD
Egyptian Web page for business matching launched Joint research project contracted
Associations/ R&D/ Universities
Associations/ University
TBD
TBD
Strategic alliance with Universities and R&D inst
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Summary of the proposed strategy for increased competitiveness of EFPI--------- Improvement of alliances and coordination among stake holders
GOAL(S) To promote sustainable alliances with all stakeholders and support institution of the EGFPI to promote increased performance in international and domestic market objective To improve the organization ad coordination of the stake holders in the food supply chain
Driver 5 Immediate objective To improve the coordination of the activities of institutions supporting the sector
Driver 6 Immediate objective To build sustainable and strong strategic relationships between the universities and research institutes and the EFPI
Driver 7 Immediate objective To increase the foreign direct investment flow in the food processing and export
Lack of coordination of key institutions serving the sector
Not linked research and development efforts to the EFPI, Strong human capital but not focused to the needs of EFPI
Very low inflow of FDI to food processing sector
Outputs A coordination body for the activities of the associations and institutes established and become operational The number of associations /universities/ministries/res earch institutes increased
Success indicators National board for the food processing and marketing established
Outputs Improved transfer of technology from research to industry
Success indicators Number of research finding commercialised
Outputs Increased flow of FDI in the food processing for export
Success indicators Value and number of FDI inflow to Egypt
Number of stake holders supporting the sector increased
Properly trained (specialized) manpower provided to the EGFPI from research centres and university
No of trained personnel in the food sector
Increased number of multinationals make Egypt their hub for regional operations
Number of regional offices of multinational companies in the food sector in Egypt
Driver 5
Outputs and activities for increased competitiveness of EFPI--------increased coordination of stake holders To improve the coordination of the activities of institutions supporting the sector Critical Problem Lack of coordination of key institutions serving the sector
IMMEDIATE OBJECTIVE
OUTPUT 5
A coordination body for the activities of the associations and institutes established and become operational Success indicator(s) Centralized body for representing the food sector established and become operational Party responsible Duration Start (YY,MM) End (YY,MM)) Work shop organized IMC/MOFTI IMC TBD TBD Sensitizing Milestones Related activities
Hosting a symposium or related event where all stake holders can interact and contribute their perception of the sector Establish a central board of food producers, processors and traders which will discuss the sector needs and chart/propose the way forward for the sector Encourage all members to develop memorandum of understanding Board Board TBD TBD Stakeholders IMC/ MOFTI TBD TBD
Establishment of food board
Memorandum of between associations understanding signed
Strategic alliance with R&D and University
Establish a central database which could be accessed by all members Publish newsletters/bulletins to disseminate information on export/import data, market prices, position of Egypt in relation to it competing countries etc Organize trade fares, exhibitions, study tours and participation in international trade fares
Board
Board
TBD
TBD
Database established and accessed by members Information disseminated
Information dissemination
SME development
Board
Board
TBD
TBD
Joint trade fares and study Board Associations TBD TBD tours organized
FDI attraction
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Driver 6
Outputs and activities for increased competitiveness of EFPI--------strategic alliance between university/R&D institutes and Industry To build sustainable and strong strategic relationships between the universities and research institutes and the EFPI
IMMEDIATE OBJECTIVE
Critical Problem
Not linked research and development efforts to the EFPI, Strong human capital but not focused to the needs of EFPI
OUTPUT 6
Improved transfer of technology from research to industry. Properly trained (specialized) manpower provided to the EGFPI from universities Success indicator(s)
Party responsible
Duration Start (YY,MM) End (YY,MM)
Milestones
Related activities
Identify universities with the capability to form strategic partnership with industry Discuss the modalities of cooperation
Industry / IMC
IMC TBD TBD
Universities identified
Activities to all sector (industry wide)
Industry / IMC
IMC
TBD
TBD
Agreement of cooperation signed Fund made available for Board for coordination of activities of the sector
Assist universities to create internship programmes to link students to the FPI
Universities
Government / IMC TBD TBD
linking university and industry the programme
Establish incentives to the research centres to pro-actively contribute and disseminate information to the sector Encourage and support contract research activities between the industry and the research centres and universities
Universities
Government / Ministry of Higher Education TBD TBD
Fund made available for basic research
Export activities
Universities / Industry
Government TBD TBD
Contract research agreements signed
Export product development /research
Driver 7
Outputs and activities for increased competitiveness of EFPI--------FDI attraction To increase the foreign direct investment flow in food processing sector for export Critical Problem Low level Foreign Direct investment in the food processing sector
IMMEDIATE OBJECTIVE
OUTPUT 7
Increased inflow of FDI to food industry Success indicator(s) Number and value of FDI in food processing sector Party responsible Duration Start (Year month) End (year month) Investment promotion IMC/MOFTI IMC TBD TBD agency established/strengthened Changes in business environment made available GAFI/ IPA IMC TBD TBD to international investors Export promotion campaigns through electronic media Institutional capacity building at state level Milestones Related activities
Strengthen/establish a strong investment promotion authority (possibly at ministerial level) IPA/GAFI Update the potential\investors in the development regarding the continuous improvement of the business environment in Egypt
Assist professional associations to organize workshops and study tours for the management of the food industries in Europe middle and North America to form partnerships with multinationals GAFI/ IPA GAFI/IPA TBD TBD
Business men in the food sector participated in international partnership meetings and conferences
Support institutions activities
Create a web site for the food processing sector promoting the potential of Egypt in agriculture especially in fruit and vegetables and dairy industries, the low labour cost and the proximity to Middle East and Europe GAFI/ IPA GAFI/IPA TBD TBD
Website launched
Export promotion
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VI Product Group Strategies
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1 Processed Vegetables: strategy proposal for improved export performance
This section discusses the global trends in fruit and vegetable processing, the current Egyptian situation for fruit and vegetable processing and marketing, SWOT analysis, the critical problems to be addressed, the activities to be carried out to improve the critical situation, and expected outputs. Finally, the expected performance of the sector in the coming 10 to 15 years is projected. Due to the similarities of problems faced and the similarities of opportunities, the presented SWOT analysis covers all horticultural products (processed vegetables and fruit juices in general). However, whenever it is appropriate, SWOT analysis specific for the products is also presented. Tomato paste and Strawberry are discussed in detail due to their high un-tapped potential. While investment opportunities for both products are presented, the future performance projection is made only for tomato products.
1.1
Background
As demand for convenience food increases globally, the utilization and trade of processed, frozen and preserved vegetables will grow at a higher pace than it does presently. Choice, cost, quality (including taste, appearance and texture), safety, convenience, availability, service, novelty and continuity of supply will remain the predominant driving factors that determine competitiveness within the processed vegetable sector. There will be greatly increased competition within domestic and export markets from overseas, particularly India and China. China has become the largest producer of vegetables and is expected to become the number one exporter of processed vegetables by 2006. The present export focus of China is mainly on Asian markets but China will soon become a truly global player by increasing its market share to Europe and the Middle East. The access of companies operating in the supply chain to an efficient supply of high quality information about the latest production techniques and new materials world-wide will also be vital to the sectors future export competitiveness.
Egyptian Processed Food Sector Review _Product-group strategies
251
The growth and concentration of retailers and catering companies will continue at the expense of the wholesale markets and there will be further concentration and rationalization of companies in the sector. For processed fruit and vegetables important factors will be pre- and post-harvest quality, together with the physical and chemical characteristics that affect processing procedures. The new cost-effective methods of dehydrating fruit and vegetables will take advantage of improved fresh quality and will reduce transport costs. There will be a wider range of freezedried products. Short and long term storage will remain important for potatoes, fruit and root vegetables. Moreover, there is likely to be an increase in legislation driven by consumer pressure (e.g. on environmental issues such as effluent and waste packaging disposal and the use of recyclable packaging, on the hidden costs of transporting goods long distances, on health and safety and on providing more product information). The influence of these kinds of legislations in Egyptian export markets such as Europe and North America will have far-reaching effects on agricultural and industrial activities in Egypt and, accordingly, preparedness for potential new legislative measures will be imperative.
1.2
1.2.1
Current situation
Frozen vegetables Egypts export of processed vegetables has shown an average increase of 5.3 % (from 92 to 145 million US$ between 1998 and 2003) and Egypt ranks 26th in global processed vegetable export. With respect to growth rate, it stands 17th in the world and 3rd in the region behind Jordan and Iran. The domestic market is also growing at more than 20% a year. Egypts achievements in frozen vegetable exports are attributable to the creative dynamic private sector operators that, despite a fragmented traditional-based agricultural (smallholder farms account for more than 85% of horticultural production), are pulling the agriculture sector forward. The main players in the export of processed vegetables are Montana, Farmfrites/Americana, Basmah, Faragallah, Sonac, AGA, ColdAlex and Givrex with total export share of more than 80%. With increasing global supply, delivered (CIF) costs are becoming a significant driver for the improved export performance for the sector and for continuation of Egypts gains in market share. The increase in supply, together with importers quality requirements, will also increase the need to produce and deliver product that meets buyer specifications. Many of the quality and cost issues that are and will be important are affected by policies, regulations, and actions of the government of Egypt. A major quality constraint is the lack of adequate post-harvest facilities (including cooling and packing sheds, refrigerated transport, and cold storage). In this respect, improvements
252
have been made: large growers and exporters are establishing their own facilities and acquiring refrigerated trucks, and the establishment of the new cold store at the Cairo airport terminal and outsourcing the management of this cold store to HEIA (Horticultural Export Improvement Association) provides a very good example of the facilitation role the government can play. The availability of refrigerated containers has increased significantly in recent years, and regulations have been changed to facilitate their use and movement. However, increasing production and export volumes will require more investment in support facilities. Particular challenges will be faced in extending these facilities to small and medium-sized holders growing areas. According to the leading exporters in the sector, only less than 20 % of the vegetables processed come from commercialised farms. The rest comes from the fragmented smallholders farms with their associated problems such as low quality and inconsistency of supply. The private exporters and processors are asking for increased availability of desert land earmarked for export horticultural products (fresh and processed). Provision of the land to exporters, together with integrating small holders into the supply chain through contract farming and development of the out-growers schemes, will be crucial to meet the challenges ahead. Although the new tariff levied on imported refrigerated trucks - which are badly needed for fresh transport - has been reduced to 5 percent from 40, the law does not allow for the import of older trucks. This situation still poses a problem to small-scale entrepreneurs who would like to invest in the post-harvest and production transport business. Besides this, commercial financing costs are high (commercial interest rates at are 15 percent minimum) and small enterprises face difficulties in access to finance. Professional associations, such as HEIA, are providing technical expertise and training in packing and shipping, organizing business tours and collective attendance in international fares. This is a very encouraging development that should be supported.
1.2.2
Processed tomatoes Egypt grows more than 5 million tons of tomatoes, with yields and overall production volumes increasing due to the introduction of new varieties. Almost all domestic production of tomatoes is consumed fresh and Egypt imported more than 220 tons of processed tomatoes (mainly in the form of paste) in 2003. The production and processing of tomatoes has been considerably hampered by high post harvest losses amounting to 50 to 60 percent of production; these losses stem from damage or
253
loss in transit and handling due to poor packaging, lack of cold chain facilities, rough transport, and multiple handling. If only half of tomato production is processed to paste, Egypt could produce more than 357,000 tons of tomato paste per annum. The technology for the production of tomato paste is inexpensive and relatively simple. Moreover, even this investment can be further reduced if tomato paste production is integrated to fruit juice production lines (e.g. by adding canning and hot-break stages to existing fruit juice factories that typically have unused capacities). The growing sourcing of bulk tomato paste from low cost suppliers (e.g. India and China) by supermarkets and hypermarkets in Europe for their private label products has contributed to European tomato paste processors closing down or moving their production (farms) and processing facilities to emerging economies. With the improvement in aseptic and bulk transport, more and more factories will move their activities to the countries that have comparative advantages in growing and processing of tomatoes. Egypt has a unique opportunity to attract these investors for the domestic, Middle East and European markets.
1.2.3
Strawberries Egypt exported 6,300 metric tons of strawberries in 2002. According the report of USAID it is projected that the demand for strawberries in EU and Gulf countries will increase significantly over the next 10 years to reach 67,500 metric tons. As new industrial varieties are introduced, and the ability to produce significant amounts of competitively priced strawberry is raised, the resulting projection of exports of Egyptian strawberries is that they will reach 16,900 tons in 2007 and 21,100 tons in 2012. According to the leading exporters of strawberries, the main challenge for Egyptian exports of strawberries to Europe is to raise the volume of strawberries that exporters can supply. European importers are looking for high volume and constant supply, which the Egyptian exporters have difficulty in achieving. More than 70% of strawberries destined for export come from small and medium size farmers, and meeting the increasingly stringent quality assurance requirements (e.g. EurepGap) is proving to be too costly or risky to justify sourcing supplies from smallholder producers. It is also the case that, in some cases, strawberries exported from Egypt to Europe end up in China and India (where energy is cheaper) for further processing using high technology freeze dying and are then re-exported to Europe for specialized food applications. Due to its proximity to Europe and the Gulf, higher agricultural productivity potential and lower labour cost, Egypt is in a better position than many Far East countries to attract investment in the processing of strawberries. This unique competitive advantage of Egypt should be exploited relentlessly to attract foreign FDI (both in joint venture or greenfield) by the government and the food processing industry.
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1.3
Processed Vegetables: SWOT Analysis

The strengths, weaknesses, opportunities and threats (SWOT) for the Egyptian processed vegetable sector are shown in Figure 1.1.
Figure 1.1:
Processed vegetables: SWOT Strengths: Highly favourable agro-climatic conditions for horticulture Off-season production opportunities for some products Diverse geo-climatic zones to produce late and early maturing varieties for year round supply (e.g. tomato) Absolute advantages in indigenous vegetables (e.g. Molokhia) High number of Egyptian expatriates in the Middle East makes introduction of products easier Cheap and abundant labour with basic skills Strong base in technical subjects Good basic infrastructure Attractive FDI environment for fruit and vegetable exports Improving food quality and safety situation Close cultural ties to the high value Gulf countries market Opportunities: Potential for export-oriented FDI in vegetables processing such as tomato, potato, strawberry and artichoke Potential for domestic market oriented FDI High opportunity for improving productivity High number of expatriate Egyptians to promote the products in the Middle East Growing urban population (health conscious, rising income and time poor) Proximity to markets in Middle East and Europe Easier access to Arab markets Potential advantage in labour-intensive manufactures Threats: Regional political uncertainties Growing competition from other low wage countries Lack of coherent strategy Competition from cheaper production of processed vegetables from, for example, China and India in Middle East / Gulf markets Weaknesses: Inconsistent supply of raw material (quality and quantity) due to fragmented small holders farms (up to 85%) Low level of certification of farms for EureGap and traceability Very high post harvest losses (up to 60%) Low capacity utilization Low level of quality control and food safety system in several factories (domestic market oriented) High cost of freezing equipment (and lack of finance) Lack of cold chain and refrigerated truck Lack of regular air and sea cargo shipping Lack of market information system Under developed retail market system High cost of delivery to domestic market Low level of research in developing new varieties Low labour productivity, due to obsolete machinery, and poor management Lack of innovative activity Lack of modern marketing skills Weak institutional support for technology, marketing and skill development Lack of competitive benchmarking with in domestic industries and against competitors Lack of cooperation and sharing information among the exporters Unnecessary competition of exporters among them selves during the window season (ex. Molokhia) when Egypt has unique advantages Lack of collective export strategy Low level of promotion of Egypts potential for foreign investors in vegetable processing
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1.4

The critical problems facing the processed vegetable sector include: Low stage of primary production: Egyptian vegetable farms are characterized by smallscale holding and low level of integration with commercial farms and the processing industry. Lack of quality control during pre- and post-harvest production, combined with a lack of sufficient cold stores and proper training, has led the unacceptably high losses (up to 60 % in case tomato and more than 40% for other vegetables) and un-quantifiable loss in quality of the raw material, which has consequences in quality of product and the competitiveness of the processing industry Low capacity utilization: most of the factories work below their designed capacity due to lack of raw material, working capital and proper production planning competency. Lower level of quality and food safety standards: although a lot of effort in the form of technical assistance has been exerted by the government (including IMC) and professional associations, only a few exporters have been certified for HACCP and food safety. The situation is even worse at the farms level where very few small-scale farms have been certified for EureGap and traceability. Lack of aggressive marketing strategy: the export potential of Egypt in processed vegetables is not fully exploited due to low marketing strategy at the firm level. There is a general lack of information in the trends, prices and opportunities in different parts of the world. There is also a lack of common facilities/services for exporters to reduce their marketing costs and reach potential importers. There is low level of utilization of the Internet. Lack of information in new investment opportunities for foreign and domestic investors: the potential for investment in production and processing of different vegetables are not explored and communicated to potential investors. Lack of insurance facilities for agricultural activities has discouraged potential investors; being afraid of the risk, most investors invest in low risk activities such as trading. High credit interest rate.
1.5
Activities to improve the critical problems

The main activities that need to be undertaken are: Increase the provision of land available to commercial vegetable farms engaged in (or intend to engage in) activities aimed at export. Increase support to small-scale vegetable farmers, and introduce and/or increase contract farming between industries/commercial farms and small holders. Improve pre- and post-harvest quality of raw vegetables by proper training to commercial farms and technical assistance to small-scale farmers. Reduce post-harvest losses by improving the cold chain, handling and transportation of raw materials through incentive to small-scale entrepreneurs to invest in this activity (e.g. by reduction of taxes on refrigerated trucks and cold store facilities).
256
Develop new varieties of vegetables (better yield/shelf life/consistent size, early and late maturing etc.). Support, through training and technical advice, to small holders in meeting current food safety legislations (e.g. EureGap) for export market. Support firms within the industry to improve their quality control, HACCP and traceability capabilities so as to meet international standards (e.g. through training, technical advise and financial support). Increasing capacity utilization of food processors through improved logistics, production and planning. Strengthen/establish frozen vegetables export association including small and large processors/exporters (ExpoLink). Develop a coordinated and well-targeted strategy for the fruit and vegetables sector by benchmarking Egypt against its regional and global competitors. Collect and disseminate global and regional market trends for each product to the members and develop joint strategy. Conduct pre-feasibility studies in potential investment areas in the fruit and vegetable sector. Promote studies of these investment opportunities through printed and electronic media, and through the embassies of Egypt abroad.
1.6
Goals and vision

Vision -To increase the export of frozen vegetables by 4 fold in 2010 -To be self sufficient in tomato paste by 2009 and export 357,000 tons by 2010
If the above mentioned critical conditions are addressed properly and the proposed activities mentioned below are carried out coherently by the industry, the government, and supporting and professional associations, then the export performance of the processed vegetable sector can be raised so as to reach a level of more than a billion US dollars a year by 2020. The projection of the future performance of the industry was calculated based on the 1998 to 2003 export data (FAO, Comtrade). The projections, shown in Figure 1.2 assume an underlying growth rate for the value of domestic production of 25% per annum. For exports, a growth rate of 30% per annum is assumed for the period 2005 to 2010, a growth rate of 10% thereafter.
257
Figure 1.2
Frozen vegetables: domestic and export market projections
Projected resultant growth of egyptian frozen vegetable industry (2005-2020)
mi lli on s of US D
4000 3500 3000 2500 2000 1500 1000 500 0 2005

38
250 domestic export
1077
353 116
927 1494
2406
2010
2015
2020
Among the processed vegetables tomato processing was selected for focused study due to its untapped potential in export market and is considered suitable for attracting investors (both in agricultural production and processing for export). If the increase in agricultural production of tomato, and reduction in post harvest losses is achieved by implementing the recommended activities above, Egyptian tomato paste exports will be in a position to take over the place of its main regional competitor, Turkey, by 2012 and become regional leader in the tomato market in the Middle East.
Figure 1.3 Tomato paste: export and import projections
Projection of the Export Performance Tomato paste production (2005-2020)
1000000
Export Import
T n o to a p ste o s f m to a
10000 35,280 189,744 472,145 602,589
100
145 47 16 1 2005 2010 2015 2020
ex port grow th 40% (2005-2010), 20% (2010-2015), 5% (2015-2020) Import decline 20%(2005-2015), 10%(2015-20200
258
Figure 1.4 Summary of proposed strategy for the improved export performance of processed vegetables
Current situation High post-harvest losses (60% tomato, 40% other fruit and vegetables 85% of horticulture production by small holders Low capacity utilisation (average 70%) Lack of cold store, refrigerated truck, Lower safety standards and traceability Weak marketing strategy Poor transport infrastructure and equipment
Present position of Egypt Egypt is well positioned in potatoes, beans and other frozen vegetables Domestic market growth more than 20% p.a. 3rd in the region (Jordan, Iran) 17th in the world (35% increase in 5 years) Creative dynamic private sector pushing the sector forward
Focus Earmark land for horticulture exports Integrate small holders to supply chain (contract farming) Assist small scale transport companies in the distribution of raw material and finished products Stronger association (market info, collective marketing strategy) Compete and cooperate (in off season )
Target Increase domestic market by 25% per year Become lead regional exporter by 2010 Increase export to EU and N. America
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GOAL(S)
Increased and sustainable export performance of the Egyptian frozen fruit and vegetable industry to the Middle East, Europe and North America
Immediate objective Critical problem addressed
To increase the current export of Egyptian frozen fruit vegetables 4 fold by 2010 Low stage of primary production, low capacity utilization and lower level of quality and food safety, lack of aggressive marketing strategy, lack of information in new investment opportunities for foreign and domestic investors
Outputs 1 Improved primary (agricultural) production 2 Improved capacity utilization and quality and safety standards to meet the requirements of international legislations 3 Coordinated marketing strategy developed 4 information studies made available in new areas of investment in the sector Activities for output 1
Success indicators % increase of agricultural production in vegetables targeted for export market % increase in capacity utilization, number of enterprises and farms complying to international food safety and traceability legislations
% increase in export performance of Egypt in comparison with its regional and global competitors Amount of investment in the processed vegetable sector
Success indicators
Party responsible
Duration Start (YY,MM) End (YY,MM) Related activities Raw material supply
Increase the provision of land to commercial vegetable farms engaged or intending to engage in exporting Increase support to small holders, clustering and contract farming between enterprises/commercial farms and small holders Improve pre- and post-harvest quality of raw vegetables Reduce post harvest losses by improving the cold chain, handling and transportation of raw materials
Number of hectares of land made available for commercial farms
Government
TBD
TBD
Number of small holders organized, number of contract farms signed Amount of vegetable rejected by processing industry Post harvest losses reduced from ca 50% to acceptable level by 2010
MALR/farms/enterprises/government
TBD
TBD
Improved farm structure SME development Raw material supply and SME
Farms/ transport companies / enterprises Farms/wholesalers/enterprises /professional associations
TBD
TBD
TBD
TBD
260 Egyptian Processed Food Sector Review _Product-group strategies
GOAL(S)
Increased and sustainable export performance of the Egyptian frozen fruit and vegetable industry to the Middle East, Europe and North America development
Develop new varieties of vegetables for (better yield/shelf life/consistent size, early and late maturing) etc. Activities for output 2 Support the small holders in meeting the current food safety legislations (such as EureGap) for export market through training and technical advise Support to enterprises to improve their quality control, HACCP and traceability capabilities to meet international standards, through training, technical advise and financial support Increasing capacity utilization of processors through improved logistics, production planning etc. Activities for output 3 Strengthen/establish frozen vegetables export association including small and large processors/exporters (ExpoLink) Develop a coordinated and well targeted strategy for the fruit and vegetables sector by bench marking Egypt against its regional and global competitors Collect and disseminate global and regional market trends for each product to the members and develop joint strategy
Number of new varieties developed and their impact in the export performance
R&D institutes/ universities/ industry
TBD
TBD
Strategic alliance
TBD Number of small holders farms certified for EureGap and traceability
TBD Raw material supply
IMC/ MOFTI
TBD
TBD
Number of frozen vegetable processors certified for EureGap and traceability
IMC/ ESO/ MOFTI/ Associations
TBD
TBD
SME development
Capacity utilization in % of individual enterprises and at national level
Enterprises
TBD TBD
TBD TBD
Firm structure
Number of members of the export association
Industry/exporters
TBD
TBD
Strategy developed for all potential products
Industry associations
TBD
TBD
Export promotion
Amount and quality of information distributed
Industry associations
TBD
TBD
Associations
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GOAL(S)
Increased and sustainable export performance of the Egyptian frozen fruit and vegetable industry to the Middle East, Europe and North America
Activities for output 4 Conduct pre-feasibility studies in potential investment areas in the fruit and vegetable sector Promote studies on investment opportunities through printed and electronic media, through the embassies of Egypt abroad, Number of pre-feasibility studies made available Number of potential investors to whom the studies are communicated
262 Egyptian Processed Food Sector Review _Product-group strategies
2 Olive products: strategy proposal for the improved export performance
2.1
Background
Olive oil production has normally been concentrated in the Mediterranean basin countries: Spain, Portugal, Italy, Greece, Turkey, Tunisia and Morocco. These seven countries alone account for 90% of world production. The total world production of raw olives reached 16 million tons in 2003. The main consuming countries are also the main olive oil producers. The European Union accounts for 71% of world consumption. Mediterranean basin countries represent 77% of world consumption. The main producing countries are also the main exporting countries. Once again, the Mediterranean basin countries contribute to more than 95% of total world exports.
2.2
Current situation
Egypt is ranked number 8 in the top olive producers worldwide, with production of 318,000 metric tons in 2002. The area harvested and the level of production showed a very rapid increase over the last five years and is expected to increase further in the next few years. Expansion of the harvested area is expected to position Egypt as the third most important olive producing country in the world by the year 2010134. This projection is based on the expected increase of land devoted to olive production in Toshka and Owniet, and the tendency for producers/commercial farms to grow new superior varieties (e.g. manzanilla). Within Egypt, 7 firms dominate the production of olive oil and table olives; the largest Mina Oils contributes more than 50% of Egyptian olive products export. The total production of table olives in Egypt is estimated as 160,000 tons, and the estimate for the olive oil is around 8,000 tons. Dr. Olive is the leading exporter and importer of the table olives with production of more than 10,000 tons of table olives (30% of it exported to Libya). In terms of top-quality production and exports, Egypt Canning Company (Americana Group), produces 1000 tons of
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Table olives situation outlook, D. Anderson et al 2003 (aleb)
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top quality canned and glass jar table olives for export mainly to America and Australia. Demand from Pizza hut and other fast food outlets in Egypt is growing and they consume more than 300 tons of table olives. The study team estimates approximately 70% of production of raw olives goes to table olive preparation and 30% to oil crushing. In Turkey, 70% goes to oil crushing and rest goes to table olive production, which is advantageous in terms of value addition and spillover effects. Egyptian exports of olive oil has increased tremendously in 2003 reaching 2.3 million USD, for a volume of 1,312 tons, compared to 322,000 USD (212 tons) in the previous year (which itself had been a record level). Egypt also imported 252 tons of oil (USD 353,000) in 2003, compared to imports of 603 tons (USD 316,000) in 2002. This illustrates the strong positive Egyptian trade balance (more than 1 million USD in 2003) in olive oil trade. The export of table olives were about 3,000 tons in 2003 compared to 2,200 tons in the previous year, earning 1.4 and 2.1 million USD respectively in 2002 and 2003. These trade figures show that Egypts market share is still low compared to the bench marking countries such as Spain and Morocco both leading countries in the world market. The above analysis shows that Egypts olive industry is oriented towards the production of table olives mainly for the local consumption. The processing of table olives is dominated by the traditional methods and equipment and needs to be modernized to respond to the production of olives that will increase dramatically in the coming five years.
2.3
Olive products: SWOT analysis

Due to the fact that olive is in the category of (horticultural crop), many of the factors for the SWOT analysis for olive products replicates those covered in the SWOT analysis for the fruit and vegetables sector (Section 1.3). The reader is advised to refer to SWOT of fruit and vegetables for the general points. Figure 2.1 shows factors specific to olive products.
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Figure 2.1
Olive products: SWOT Strengths: Increased production of olives Improved varieties and increased number of commercialised farms Increased land availability for new farms Very high demand in domestic and intl markets Opportunities: Increased number of fast food chains that use table olives as an ingredient Very high potential for the oil production Increased demand of olive oil and table\olives in the global and gulf markets Proximity to gulf markets than major producers and exporters like Morocco and Spain Room for improvement in quality and increase the unit value Threats: Increased dominance of Tunisia, Morocco and Turkey in the regional market Weaknesses: Low unit value (quality) for export products Low level of technology in both olive oil and table olive Low marketing strategy (usually exported to Spain for re-export) Table olives domestic market oriented Low level of olive oil utilization by Egyptian consumers Lack of high quality bottles in the domestic market Lack of marketing of Egyptian brand olive oil (can be marketed as desert olives)
2.4
Low level of processing technology: Low level of technology in processing and packaging is common in the sector. This is one reason for the relatively low unit value (i.e. low quality) of Egyptian olive products in export markets. Low value export through third country: Most of the Egyptian table olive products are exported to Spain and Italy at lower prices and end up in the developed markets (USA and Europe) after further processing. Egypt looses value in the chain and needs to develop a better marketing strategy. Domestic market oriented sector: The table olives sector is very much focused on low value domestic market. This has an impact on the quality production and hence the development of the sector. High price of imported bottles for packaging: Olive oil requires a high quality specialized bottles for packaging. The domestic glass-factories cannot provide the required quality and imported bottles are expensive. These could be a reason for low development of export oriented olive oil production the country. Low level of marketing strategy
2.5
Encourage increased investment in technology both in table olives and olive oil sector: despite a high supply of the olives, the processing and export of the both oil and table
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olives is not well developed. The professional associations and IMC/MOFTI should support training in table olives and olive oil production to move the low value production up to a high quality Egyptian brand for exporting. Targeting North American market and by-passing third country exports: as a shift from re-export oriented marketing through Italy and Spain, Egypt should now target the end users directly by maintaining its position in the Gulf market and directly exporting to the United States. While Egyptian exporters are targeting the final high value markets in America and Europe (Egyptian export to USA increased more than 100 fold in 2003 from the level of 2002), the processors should work very hard to improve their quality and shift to more value added products in terms of finishing and packaging. By doing this, and improving the marketing strategy, Egyptian olive products can be marketed as high quality natural products grown in none intensive agricultural practices contrary to Spanish and Italian olives. Shift from domestic focus to export focus: while maintaining the domestic market, there is a need to shift the focus from domestic production to export. The upgrading of the small scale and traditional processors and exporters through better access to finance, training and clustering is required to improve quality and participate in the export market. Collective ordering and strategic relationship between olive and packaging industry: in order to guarantee the supply of high quality glass bottles required for olive oil and table olives, a strong strategic relationship must be established. Collective ordering and procurement of these glass bottles will trigger new investment in the packaging sector. Aggressive marketing: in five years from now, Egyptian olive production will take up third place behind Spain and Italy. This would probably be followed by high production of both table olives and olive oil. The marketing of these products should be highly coordinated and sophisticated to penetrate and maintain the US market both in price and quality competitiveness.
Please refer to the LogFrame for olive products for the outputs related to the activities.
2.6
Goals and vision

Vision To increase Egyptian olive oil exports to USD 90 million and table olive exports to USD 135 million by 2020
If the above critical conditions are addressed properly and the proposed activities mentioned are carried out coherently by industry, the government, and other support institutions, then the export performance of the Egyptian olive oil industry can reach 90 million USD and the table olives sector can increase to over 135 million dollars by 2020.
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Figure 2.2
Olive products: export projections

projection of olive products export (2005-2020) in millions of dollars
160 135.6 120 table olives olive oil 80 54.5 40 21.9 4.1 0 2005 2010 2015 2020 3.9 14.6 36.3 90.4
Table Olives 40% (2005-2010) and 20% (2010-2020)
Olive Oil 30%(2005-2010) and 20%(2010-2020)
At the moment Egypt stands number 4 among the 6 benchmarked countries; effectively in the lowest position since neither South Africa nor China have any significant olive production. If coordinated effort is exerted, especially on an aggressive marketing strategy and investment in new technology, Egypt could climb up to 3rd position (i.e. ahead of Morocco and just behind Turkey and Spain) by 2020.
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Figure 2.3
Summary of proposed strategy for improved performance of the Olive products
Current constraints Low level of value addition (70% table olive and 30% oil) Domestic market oriented Low level production technology High price of imported bottles Low value re-export orientated marketing Spain exports Egyptian products at double price
Present Position of Egypt Egypt ranked 8 in the world (raw olives) Will become 3rd in olive production in 2010 Unit value of Egyptian exports is half of that of benchmark countries Estimated 70% of production goes to low value added table olives for local consumption Turkey, 70% goes to olive oil Strong export growth
Focus Training in oil processing Targeting the USA and EU market (by-pass Spain and Italy) Shift focus from domestic to export while maintaining domestic supply Develop strategic relationship with packaging industry (bottles)
Target Move from low cost to high value exporter Egypt, ranked just behind Spain and Turkey by 2015
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GOAL(S)
Increased and sustainable growth of the Egyptian Olive products sector in domestic and international markets.
To increase the export of olive oil to 36.3 million and table olives to 54.5 million dollars by 2015 Low level of processing technology, low value export through the third country, domestic market oriented sector, high price of imported bottles for packaging, lack of marketing strategy (especially in marketing olive products from Egypt)
Outputs 1 Improved processing technology 2 increased value addition for export to final destination 3 Changed focus from domestic to export market 4 Reduced cost of packaging 5 aggressive marketing of Egyptian olive products Activities for output
Success indicators Amount and number of investments in the sector % increase of the value of olive products export from Egypt, % increase in the amount of export to final destination
% increase in amount of export in value and volume % reduction of packaging material % increase in export to new markets
Success indicators
Party responsible
Duration Start (YY,MM) Start (YY,MM) TBD Related activities Driver3
Encourage increased investment in technology both in table olives and olive oil sector Encourage increased investment in technology both in table olives and olive oil sector Targeting North American market, by-pass third country export system, aggressive marketing Shift from domestic focus to export focus Collective ordering and strategic relationship between olive and packaging industry
Number of new investments and expansions in the sector Amount of new investment in technology % increase in direct trading (mainly trading with USA) Number of new SMEs involved in export Amount of bottles sourced from local glass factories
Government/ MFTI/IMC
TBD
Investors/enterprises /MOFTI/ banks
TBD
TBD
Driver 3
Associations/ enterprises Enterprises / Industry associations/ Government Enterprises / Industry associations
TBD
TBD
Driver 8
TBD
TBD
Driver 4c
TBD
TBD
Driver 5
269
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3 Fruit juices: strategy proposal for the improved export performance
As in the previous section, the present situation of the Egyptian fruit juices sector, constraints and activities to be performed to improve the situation and achieve the projected goals are proposed. Due to the large number of products in the sector, projections and specific goals to be achieved are presented only for the exotic fruit segment due to its relatively high export potential.
3.1
Back ground
Citrus fruits processing accounts for approximately one third of the total citrus fruit production. More than 80% of it is orange processing, mostly for orange juice production. The major feature of the world market for orange juice is the geographical concentration of production. There are only two main players: the State of Florida in the United States and the State of Sao Paulo in Brazil. Production of orange juice between these two players makes up roughly 85 percent of the world market. The major difference between them is that Brazil exports 99 percent of its production while 90 percent of Floridas production is consumed domestically and only 10 percent is exported. International trade in orange juice takes place in the form of frozen concentrated orange juice (FCOJ), in order to reduce the volume used, so that storage and transportation costs are lower The European Union is the largest importer of orange juice, accounting for over 80% of world orange juice imports. Most of imports by the EU and Japan come from Brazil. In North America, the United States and Canada consume mainly orange juice from Florida, while a small quantity of imports comes from Brazil. A remarkable increase in the consumption of exotic fruit juices, such as mangoes, papaya and avocados has been seen in Europe and America during the last decade. In search of more value added, major importers in the Netherlands, Belgium and Germany are now promoting previously less known exotics like mangoes in the form of cocktails in small packages to introduce them to consumers.
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Though there is potential for Egypt to export citrus fruit juices to European markets, it faces a considerable pressure from Brazil, European-Mediterranean countries and Israel, which all have enormous economies of scale. Egypt should give more attention on citrus fruit production for the domestic market, which still has very low per capita consumption compared to developed countries (20-40 litre/capita compared with less than 5 litre/capita in Egypt) and on exotic fruits for export market. For this reason this report focuses in exotic fruits where Egypt has a comparative advantage.
3.2
Current situation
Egypts export of fruit juices and concentrates amounted 80,000 tons (43 million USD) and exotic juices export were 22,000 tons (13 million) USD in 2003. These exports consist mainly of exotic fruit juices, and Egyptian export in citrus juices is insignificant in the global market. The focus in the development of strategy proposal will be focused on the exotic fruits such as mango and guava Exports of the category fruit juices nes (all fruit juices excluding apple, citrus juices, grape, lemon, orange, pineapple, plum, mango, tangerine) has grown from 713,000 USD in 1998 to 13.5 million USD in 2003. Similarly, mango juice export from Egypt has more than tripled from 1.9 million US dollars to 6.5 million US dollars in 5 years. The success in the exotic fruit juice export from Egypt started by exporting small-glass packed mango and guava juices to Egyptian expatriates in North America and Middle East. The US market now absorbs more than 65% of Egyptian exotic fruit exports. The main players in the exotic fruit juice export market are Johayna and Enjoy.
3.3
Exotic fruit juices: SWOT analysis

The strengths, opportunities and weakness for most fruit and vegetables (horticultural products) are in most cases similar and are addressed in the processed vegetables sector (see Section 1.3). Only strengths, weaknesses and opportunities specific to exotic fruit juices are listed in Figure 3.1.
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Figure 3.1
Fruit juices: SWOT Strengths: High agricultural potential for developing exotic fruits Egyptian products already introduced in North American markets Higher unit value of Egyptian exports of exotic juices Opportunities: High demand for private labels in exotic fruits in Europe Wide opportunities for new product development (mixes, new exotic fruits) High number of expatriate to promote Egyptian products in Middle East and Europe Growing global demand for exotic fruit Threats: Growing competition from tropical countries Lack of coherent strategy Weaknesses: Low volume of fruits for processing and inefficient supply system through collectors/Kelelas Few industries in the business; low capacity utilization Low level of certification of farms for EureGap and traceability High cost of Tetrapak equipment (and shortage of glass bottles) Low level of product development Low level of marketing (through specially private labels); Lack of market information system
3.4

Low stage of primary production: As in the vegetables sub-sector, the exotic fruit farms are fragmented and are not integrated well into the value chain. Few players in the export market: The production and export of the exotic fruit juices sector is dominated by few companies and this poses risks of slow development due to lack of competition. High price of packaging material (Tetrapak) and lack of coordination and collective bargaining for the purchase of packing material, for example with dairy industry Low level of product diversification and development. Lack of marketing strategy especially in private labels: the exotic juices are in high demand in the European and USA market and there is a very high potential for production of different packs and mixes of juices through private labelling. There is very little effort to tap this market.
3.5
Encourage investment in exotic fruits farming for processing and export through the provision of land at reasonable cost and through the availability of long-term credit. This is especially important since it takes from 4-8 years for optimum production of exotic fruit trees, which discourages new investors due to uncertainty in the future performance of the products. The fresh produce export sector usually produces different sizes, which do not comply with the European uniform size requirements. Such reject fruits,
273
mangoes for example, can be processed to fruit juices. Cooperation among the fresh exporters and export processors becomes imperative Encourage new investment in the exotic fruits processing for exporting, especially in fruit juices factories requiring only slight modification of existing production lines. The export associations should take a lead in coordinating collective bargaining and purchase of packing material. The dairy and juice industries, the main users of the Tetrapak packaging system, can benefit from this. In some cases it could be difficult for small processors to have their own packaging lines, in which case the establishment of private packing companies to serve multiple processors could decrease the cost pf production (to these companies) and thus increase competitiveness. Though there is a wide scope for product development (different kinds of fruit juices, fortification with minerals etc.) there is a little effort being made in this area. Egypt can play an important role in marketing of Hibiscus juice. Since Hibiscus tea is already becoming popular in Europe, there is high potential for new products such as Hibiscus ice tea. The industry in collaboration with the R&D centres and universities should explore this opportunity. With demand for the exotic and tropical fruit juices and mixes rising in Europe, there is an opportunity for Egyptian exotic fruits factories to produce private label products to European wholesalers and distributors that are currently not being tapped into. Enterprises and industry associations should developed a strategy to increase exports of private label products to European supermarkets.
Please refer to the LogFrame for exotic Juices for the outputs related to the activities.
3.6
Goals and vision

Vision To increase the export of exotic fruit juices to 730 million USD by 2020 and become the lead exporter in the region
If the above mentioned critical conditions are addressed properly and the proposed activities mentioned below are carried out coherently by the industry, government, the professional associations, and with support from university and research and development centres, then the export performance of the Egyptian exotic fruit juices sector can reach more 730 million US dollars a year by 2015. At the moment Egypt stands number 4 among the 5 benchmarked courtiers just above Morocco. If coordinated effort is exerted, especially in supply of raw material and aggressive marketing, it could take the position of Turkey by 2010, and those of China and Spain by 2015, placing it in the lead position among the benchmark countries.
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Figure 3.2
Exotic fruit juices: export projections

projection of export performance of Exotic fruits for BM countires in millions $
800
2005 2010 2015 609
732
600
400
348 271
200
104 71 0 0
164 133 44 25
168 136 104 40 64 103
0
Morocco S.A China Egypt Spain Turkey Projection based at EG 40%, ch 30%, m or 20%,SA Spain, Tr 10%
The export projection is made based on the historical performance of the bench marked countries from 1994 to 2003. However, the capacities of the benchmark countries (except Egypt) to produce the required raw material were not taken into consideration. It is assumed that their agriculture sector will be in a position to satisfy the raw material at the growth rate the processing and export sector requires.
Figure 3.3 Summary of proposed strategy for improved export performance of the exotic fruit juices sector
Current constraint 85% of horticultural production from smallholders Lack of cold storage infrastructure and refrigerated trucks High cost of packaging materials Limited product development
Present Position of Egypt Strong export growth (e.g. tripling of mango juice exports) Well positioned in exotic/mixed juices
Focus Encourage investment in exotic fruits farming (long maturity period) Integrate small holders to supply chain (contract farming) Strong R&D support for new cocktails and products (e.g. karkadeh/hibiscus juice) Industry association (market info, collective marketing strategy)
Target
Maintain high export growth rate (40%) through new products / mixes and private labels
275
GOAL(S)
Increased and sustainable export performance of the Egyptian exotic juices
To increase the export of exotic juices to 732 million dollars by 2015 Low stage of primary production, few players in the export market, high price of packaging material, low level of product diversification and development, low level of product diversification and development
Outputs 1 Improved primary (agricultural) production 2 Increased number of processors and exporters 3 Lower packaging cost through collective packaging and procurement 4 New products developed /diversified through innovation 5 Lack of marketing strategy for private labels Activities for output 1
Success indicators % increase of supply of exotic fruits for processing number of new industries and packers involved in the exotic fruit juices export % reduction in packaging costs
Number of new products developed and marketed Number (and value) of contracts signed for supply in private labels Success indicators Party responsible Duration Start (YY,MM) Start (YY,MM) Raw material supply (Driver 1) Related activities
Increase the provision of land to the commercial exotic fruit farms (for export) and increase support to small holders Encourage investment in the existing fruit juice factories or new factories for processing the exotic juices
Number of hectares of land made available for commercial farms. Number of small holders organized Amount and number of investments in the sector Number of enterprises collectively acquired the Enterprises /MOFTI/ Industry associations Industry Associations / Enterprises Industry / University/ R&D institutes Industry/associations TBD TBD Government/ MALAR/ TBD TBD
Driver 3
Collective bargaining and procurement of packing material.
packing material amount of packing material procured collectively
TBD
TBD
Association (Driver 5)
Increase development of new products/product mixes Export promotion through private labels
Number of new products launched Number of contracts for private label export
TBD TBD
TBD TBD
Driver 6 Driver 8
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4 Cheese products: strategy proposal for improved performance
4.1
Back ground
The dairy industry is one of the most important components of the world food system, and is undergoing dramatic change at the current time. Currently processes of change are being driven by a wide range of forces including shifts in the regulatory environment for dairy production and trade, technological changes in the production of milk and milk-products, rapidly shifting consumption trends, and the restructuring of trans-national corporate strategies with regard to this sector. Several key inter-related developments have encouraged changes in the distribution of power within dairy supply chains. Concentration in the retail sector has evoked significant changes to the purchase patterns of dairy products. In the case of liquid milk, the relatively fragmented arrangements of local distribution that traditionally have characterized the industry have given way to retail sales in supermarkets and franchised convenience stores. Some 95% of world dairy production is consumed in the country of origin: exports comprise just 5% of world dairy industry output. Cheese is a key commodity in these developments, because of its role in pizzas and pastabased cuisines. The global growth of franchised pizza outlets is a significant contributor to demand for cheese in non-traditional dairy markets. The export of cheese (all kinds) has grown from 3 million tons to 3.5 million tons between 1998 and 2002. According to FAO data, Egypts export in cheese has increased from 1.4 million dollars to 11.8 million dollars between 1996 and 2003, a remarkable performance.
4.2
Current situation
Total milk production within Egypt is estimated to be 3.8 million tons in 2002 and the total cattle population at around. 7.3 million, and 8.2 million sheep and goats (SHOAT). Despite high number sheep and goats compared to cattle (cows and buffalos), the supply of milk comes exclusively from cattle, indicating opportunities to use sheep and goat milk for specialized cheese production. The productivity of milk in Egypt is low; between 300 and 500 kg per cow per annum.
Egyptian Processed Food Sector Review _Product-group strategies 277
The Egyptian dairy farms are characterized by small-scale mixed farms that contribute 90% of milking animals (72% of milk production), while commercial farms contribute only to 3% of dairy herd (7% of the milk production). From the total milk produced, only 35% goes to milk processing industries while the rest 65% is either consumed locally or for nursing calves. Due to this, the few industrial segments involved in dairy processing are forced to import dried skim milk, and Egypts import of dried skimmed milk (DSM) attained a value of more than 42 million USD in 2003 and is not showing any decline. The main reason for limited supply of milk is small fragmented dairy farming and lack of organization of milk collecting units. Only the Greenland milk processing company has milk-collecting centres. Since the study of the dairy farming sector is beyond the scope of this study, the study team cannot enter deeply into the problems facing the sector; rather we will concentrate on the potential of the cheese processing and marketing sector. Though Egypt has the worlds largest cheese processing factory (Greenland dairy industry), it is still a net importer of cheese. Egypts export of cheese (whole cow milk cheese) reached a record level of 11.6 million dollars in 2003, with imports of 15.6 million USD worth of similar cheese. However, there was a considerable decline in imported cheese in 2003 (the lowest level in the last 8 years). The dairy processing sector in Egypt is dominated by micro enterprises employing less than 5 people. These factories account for more than 95% of the enterprises operating in the sector and their relative importance makes the improvement of hygiene and food safety extremely difficult, if not impossible.
4.3
Cheese production and marketing: SWOT analysis

Most of the general SWOT analysis for the cheese sector (such as labour productivity, quality and food safety, business environment, support from institutions and alliance with the universities and R&D institutes etc.) is included in Section 1.3 of this report and, therefore, we will focus only SWOT specific to this cheese-processing sector.
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Figure 4.1
Cheese production: SWOT Strengths: Increased demand for Egyptian cheese in the Middle East High potential for developing new products based on traditional cheese processing techniques. New investments in the sector are emerging (e.g. Americana) Opportunities: Increasing fast food chains that use cheese as ingredient Increased interest in the Goat milk cheese in European population Developing retail sector for domestic consumption Historical cheese processing culture which can be converted to modern cheese making Knowledge of the taste of Arab consumers Threats: Growing investment of Arab countries (e.g. Saudi Arabia) in dairy processing Weaknesses: Very high trade deficit in the sector Low quality of milk supplied by the farmers High cost of imported dry milk High cost of packaging material (Tetrapak) High tax levied on the imported DSM and packaging material Low level\of marketing outside Arab countries Low level of product development Lack of marketing of the Egyptian brand Highly fragmented sector with out specialization
4.4
Lack of supply of good quality milk in sufficient quantity: except in the case of a handful of big enterprises, fresh milk is collected from small farms by wholesalers. Middlemen in some concentrated areas perform assembly functions through village collection points. Due to unavailability of milk quality testing methods and equipments, the quality of milk supplied is usually poor and this has impacted on the quality of dairy products and hence the competitiveness of enterprises and the industry as a whole. Highly fragmented sector without specialization: the dairy-processing sector has more than 3,000 processors (only registered processors; the number of informal sector could not be quantified) including cheese making. Due to their small size, the implementation of any quality and food safety regulations is impossible. They also lack specialization, as cheese making is not their core business. High price of imported DSM: since imported DSM is becoming a reliable source of raw material for feta cheese making (the most important cheese production in Egypt), the competitiveness of the feta cheese making factories is jeopardized by the high cost of DSM and packaging material. The devaluation of Egyptian pounds has aggravated the problem further. Low level of marketing compared to European cheese makers: due to its fragmented nature, the Egyptian cheese industry does not have capability to market its products in Europe and North America. Its European competitors are increasing their market share in the Arab world through aggressive marketing, better packaging and continuous
279
improvement in the quality of their products. These developments pose a threat to the new enterprises engaged in the export market.
4.5
Improve the supply of milk in quality in quantity: encourage the establishment of milk producers groups and assist them in establishing milk collecting and cooling centres, encourage contract supply of milk (milk producers groups and industries). Clustering of small and micro processors: clustering of small milk processors (cheese makers) to collectively use raw material, packaging facilities, and to assist them in finding assured market outlets through contracting with retailers and exporters. New strategy: in the short-term revision of the tax laws for the export industries, while designing the strategy to improve the supply of local fresh milk. Low level of marketing compared to European cheese makers: Egyptian cheese is popular, especially in the Arab world, and a continuous marketing strategy should be developed to maintain Egypts share of the Arabian market; while an aggressive strategy must be developed to European and North American market.
Please refer to the LogFrame for cheese products for the outputs related to the activities.
4.6
Goal and vision

Vision To Increase cow milk cheese export from Egypt to more than 450 million dollars and decrease the import to 1.5 million dollars by 2020
If the critical conditions are addressed properly and the proposed activities mentioned are carried out coherently by all stakeholders, then the export performance of the Egyptian cow milk cheese can increase to over 456 million dollars by 2020. Also the import of the same kind of cheese could decline from15.6 million dollars of 2003 value to 1.5 million dollars.
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Figure 4.2 Cheese: export and import projections

proje ction of the perform ance of Egyptian cow m ilk chee s e in international m arke t in Millions of USD
1,000,000
im port export 73,748
456,630 183,509
100,000 10,000 1,000 100 10 1
19,863
9,998 3,276 1 ,935 1 ,497
2005
2010
2015
2020
e xport growth rate 30% (2005-2010), 20% (2010-20150, 10% (2015-2020)

im port decline rate 20% (2005-2010), 10% (2010-20150, 5% (2015-2020)
Figure 4.3
Summary of proposed strategy for the increased export performance and improved domestic supply\for the Egyptian white cheese industry
Current constraints 80% of raw milk from small farmers Low productivity (300-500 lt. per annum per cow) Rising imports of powdered milk ($US 42 million in 2003) 95% of cheese comes from micro enterprises and informal sector High tax in imported packaging material Increased competition from the European countries
Present Position of Egypt Lowest positioned exporter among benchmark countries Largest cheese processing factory in the region Egypt is a net importer of cheese ($US 11.6 million exports, $US 15.6 million imports) Imports declining (2003 lowest in 8 years) Private sector being pushed forward by sector leaders (e.g. Americana) Strong competition in Middle East from European suppliers
Focus Establish milk producers groups and link to industry through contracts Clustering Small and micro-processors (cooperatives) Assist small scale transport/distribution companies in the collection of milk and marketing cheese Industry association (market info, collective marketing strategy)
Target Maintain and strengthen position of exports to Arab markets Increase exports to EU and N. America Increase quality (unit value) Decrease trade deficit by 20% per year till 2010
281
GOAL(S) Immediate objective Critical problem addressed
Increased and sustainable growth of the Egyptian cheese processing sector in the export market To increase the export of white cheese export half a billion dollars Lack of supply of good quality milk in sufficient quantity, highly fragmented sector with out specialization, high price of imported DSM and imported packaging, low level of marketing compared to European cheese makers ,
Outputs 1 improved milk supply quality and quantity 2 increased supply of cheese to domestic and export market 3 increased utilization of locally produced fresh milk 4 increased export of Egyptian white cheese Activities for output
Success indicators Amount milk supplied, % of reject by the industry % increase of the value of cheese product export from Egypt, % increase in the amount of export to final destination
Amount of fresh milk used in cheese making % increase in export to new and existing markets Success indicators Party responsible Duration Start (YY,MM) Start (YY,MM) Related activities
1 Encourage establishment of the milk producers groups: establishing milk collecting and cooling centres, encourage contract supply of milk (milk producers groups and industries) 2 Clustering of the small milk processors (cheese makers) to collectively use raw material, packaging facilities and assist them in finding assured market outlet through contracting with retailers and exporters 3 A short term revision of the tax laws for the export enterprises, while designing a strategy to improve the supply of local fresh milk 4 Develop aggressive marketing strategy to maintain Egypts share of the Arabian market, while an aggressive strategy must developed to European and North American market.
Number of milk producers group established, number of milk collecting centres established Number of milk producers signed contract with processors
MALR, industry associations, enterprises TBD TBD Driver 4c, 3
Number of clusters established Number of small processors joined the clusters
MALR, industry associations, enterprises TBD TBD Driver 4c,3,
The revision of tax announced Strategy document prepared and agreed Amount of DSM replace by fresh milk
Government/ enterprises
TBD
TBD
Driver 4
Strategy developed and implemented
Enterprises / Industry associations
TBD
TBD
driver 8
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Egyptian Processed Food Sector ReviewAnnexes
283
VII-A Global Assessment-Analysis of Main Sub-Sectors
285
1 Global trends in the dairy industry
1.1
Overview
The dairy industry is one of the most important components of the world food system, and is undergoing dramatic change at the current time. Currently processes of change are being driven by a wide range of forces including shifts to the regulatory environment for dairy production and trade, technological changes to the production of milk and milkproducts, rapidly shifting consumption trends, and the restructuring of trans-national corporate strategies with regard to this sector.
1.2
Global production
In 2003 the world produced at least 63 million tonnes of dairy products. European union (15) is the highest producer with 23.3 million tons in 2003, an increase of 3.6% from 22.5 million tons in 1998 (Table 1.1). Affluent nations consume larger per capita amounts of dairy products than do poorer nations. However, food habits also influence the consumption of dairy products, meaning that nations with comparable per capita incomes may exhibit dramatically different dairy consumption levels. Within the developed world, European consumption levels greatly exceed those in North America. Higher levels of dairy consumption levels of Europeans compared to North Americans can be explained largely through the dietary significance of cheeses, yoghurts and other processed dairy products, particularly within central and northern Europe. In contrast, Japanese consumption of dairy products remains low. Although Japanese per capita incomes are comparable with those of many nations in Europe, dairy consumption is extremely low. The consumption of fresh milk is also reported to be low in Egypt.
Table 1.1
World production of milk and other dairy products (million metric tons) Country / Region World Egypt European Union (15) Near East East Europe Africa (SSA) Asia Source: FAO 1998 63.53 1.04 22.49 2.80 3.33 0.48 8.85 1999 64.91 1.12 22.62 2.94 3.27 0.54 9.18 2000 66.48 1.12 22.88 2.99 3.27 0.55 9.75 2001 68.23 1.16 23.23 3.06 3.38 0.57 10.49 2002 70.65 1.19 23.38 3.05 3.47 0.57 11.09 2003 70.29 1.19 23.31 3.07 3.40 0.57 11.33
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1.3
Geography of dairy production

There are strong constraints to the trade of milk and dairy products, owing to their perishable nature and relative bulkiness. This is particularly true for liquid milk. Hence, although some areas are suited well to dairy production and traditionally have developed specialist dairy processing expertise, the industry as a whole has remained relatively geographically dispersed. The demands of satisfying urban needs for liquid milk have tended to encourage a proliferation of dairy producers proximate to urban centres and their proximity to major cities has allowed them to continue to play an important role in the industry with regard to the supply of liquid milk. Technological and market changes however are causing rapid shifts to these geographical patterns. On the one hand, improved transportation has allowed urban markets for liquid milk to be satisfied by more distant dairy regions. On the other hand, liquid milk markets in Western nations are fragmenting due to increased consumption of Ultra-High Temperature (UHT) milk, the use of new packaging technologies, and the replacement of full cream milk with specialist milk types. In a more general sense, the dairy industry in any case is being restructured via breeding programs and improved feeding regimes that are producing higher yields per cow.
1.4
Trends in trade
Some 95% of world dairy production is consumed in the country of origin: exports comprise just 5% of world dairy industry output. More liberalized global trading conditions brought about free trade agreements will increase the volume of dairy products traded internationally, but the pace of this growth will be gradual rather than dramatic. It is also likely that the majority of dairy demand in the key consumption areas of Europe and North America will continue to be sourced from internal production. Obviously this is truer of perishable products such as liquid milk and yoghurt, than it is of cheese and skim milk powder. Cheese is a key commodity in these developments, because of its role in pizzas and pastabased cuisines. The global growth of franchised pizza outlets is a significant contributor to demand for cheese in non-traditional dairy markets. The export of cheese (all kinds) has grown from 3 million tons to 3.5 million tons between 1998 and 2002135. According to FAO data, Egypts export in cheese has more than doubled from 2.1 thousand tons to 5.4 thousand tons in the same interval of time.
135
For more detailed data on the leading exporters of cheese products, see Table 5.1.
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Table 1.2
World cheese and curd exports (thousand metric tons) Country / Region World - Egypt - Turkey European Union (15) Near East Africa (SSA) Latin America & Caribbean - USA Source: FAO 1998 3001.4 2.1 4.3 2196.5 15.3 11.3 43.2 40.6 1999 3054.0 5.2 4.7 2208.5 16.8 14.7 57.5 43.1 2000 3306.6 2.1 4.8 2392.2 19.2 13.8 66.8 49.9 2001 3439.6 2.1 4.7 2484.9 19.2 14.8 59.4 54.0 2002 3449.4 5.4 7.1 2473.3 29.4 26.0 65.7 55.6
1.5
The industrial structure of the dairy industry and supply chain

Dairy farmers are highly dependent upon having a local processing facility to buy their product, because milk rapidly deteriorates prior to processing. Traditionally this has encouraged the development of cooperatives in the dairy sector. Cooperatives emerged worldwide in this industry as a means to alleviate the vulnerability of dairy farmers. By pooling their resources and operating their own collectively owned dairy-processing factory, dairy farmers are able to minimize their market risk. Hence, by becoming members of a local cooperative, dairy farmers have been able to ensure an outlet for their highly perishable product. The emergence of cooperatives in the dairy sector was associated also with local control and local identity. In eras when transport was uncertain and costly, it became imperative to locate cooperatively owned dairy factories central within farming communities. Changes to technologies and transport over time are changing these patterns. These days milk is transported up-to 900 km from the farm to the processing industry. The expansion of the food service industry is best seen through the emergence of global fast food chains over the past two decades. Dairy products are key ingredients to pizzas, in particular. Pizza Hut (global sales US$5 billion) and Dominos Pizza (global sales US$3.2 billion) play a major role in encouraging standardization of product (pizza cheeses) and through their buying power, place downwards leverage on dairy producers pricing. Other industries making significant use of dairy products as food ingredients, such as ice cream and confectionery, also have witnessed considerable industrial concentration over recent years through the trans-national strategies of large corporations.
289
1.6
Key corporate players

Nestle and Unilever, in particular, have engaged in aggressive merger and acquisition behaviour since 1990, with the net result of dramatically rationalizing key components of the global food industry. These developments pose major challenges to the dairy industry.
Table 1.3
Key players in the dairy products industry TNC Turnover (US$ billion) (2001) Nestle Dairy Farmers of America Danone Phillip Morris (Kraft) Parmalat Suiza Foods Aria Foods Lactalis Campina Melkunie Snow Brand Source: Rabobank 2002 6.4 6.3 6.1 6.0 5.3 5.1 4.9 4.7 12.9 7.4 Unilever Friesland Coberco Dairy Foods Bongrain Land OLakes Meiji Milk Dean Foods Morinaga Sodiaal Dairy Crest Nordmilch 3.7 3.3 3.2 3.0 2.9 2.8 2.5 2.4 TNC Turnover (US$ billion) (2001) 4.5 4.3
290
2 Global trends in the edible oil industry
2.1
Overview
The edible oil industry as one of the major food systems is undergoing complex developments with respect to genetic modification, and production of functional foods. The vegetable oil market is also much correlated to the protein meal market as both are largely co-products of oil seeds. The supply and demand conditions in one market directly affect the other. The meal market in turn is related to another important industry, that of poultry, meat and fish. Developments in technology and increasing recognition of the value of several components of pressed oil have allowed the utilization and marketing of these products in health food stores or drug stores. Increasingly, it is likely that these molecules will be incorporated into functional foods or so-called designer foods. An increasing number of countries, both developed as well as developing, are introducing policies that encourage the production of bio-diesel from oil crops for (i) bio-fuels are an environmentally friendly alternative to mineral oil;(ii) bio-fuels from oil-crops offer new market outlets for products for saturated markets; and (iii) reducing dependency on imported petroleum.
2.2
Global production
In 2003 the world production of edible oils reached 105 million tons from 92 million in 1998 (a 15% increase). Asia and Latin American emerging economies recorded the highest growth of 27% and 14% respectively between 1999 and 2003. According to FAO agricultural commodity projections the global food consumption of oils and fats is expected to slow down during 2004-2005 mainly due to saturation in demand in developed countries. However, the consumption in developing countries is expected to grow steadily mainly as a result of faster expansion of GDP. Also, the competitiveness of the developing countries in this sector will increase due to strengthening of environmental regulations and aggregated pollution control costs of cultivation and processing, which that will have marked increase of production costs of the major oil producers (USA, Brazil and Argentina).
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Table 2.1
World production of vegetable oil (million metric tons) Country / Region World - Egypt European Union (15) Near East Eastern Europe Africa (SSA) Asia Latin America Source: FAO 1999 90.61 0.13 10.98 1.64 1.83 4.12 44.28 13.21 2000 94.86 0.14 11.13 1.98 1.61 4.14 47.95 12.98 2001 97.70 0.17 11.66 1.58 1.66 4.23 50.51 12.97 2002 100.26 0.18 10.54 1.96 1.64 4.47 52.95 14.06 2003 105.51 0.18 11.18 1.89 1.48 4.56 56.42 15.15
2.3
Geography of vegetable oil production

Most of the vegetable oil raw materials (oilseeds and tree crops) are produced in tropical and Mediterranean climates. Soya in USA and Latin America, palm oil in South East Asia and Africa and olive oil in the Middle East and North Africa. There are less constraints to the trade of vegetable oils, since they are less perishable compared to fruit, vegetable, dairy, meat, milk and fish. The fact that vegetable oil does not require specialized logistics and cold chain facilities, has allowed the sourcing of the raw material and semi-processed product world wide with out significant problems. The main constraint in trade of edible oils is the genetic modification of oil seeds at farm level to increase productivity. GMO soy oil and meal is an example. European farmers and consumers have forged an alliance against genetically engineered soy. The soybean industry reacted with the introduction of the Identity-Preserved (IP) by which suppliers guarantee that their products are GMO-free. The GMO issue resulted in the replacement of some Soya ingredients with other materials, some of which are synthetic and have lower functionality.
2.4
Trends in trade
Over two thirds of vegetable oils produced are consumed in the regions they were produced (FAO-stat). The import market for vegetable oils is much more dispersed than the export market. In the export market the top 3 world exporters usually accounted for around 60% of total world exports (FAO). Though the diversity in oilseeds sources is high, soybean and palm oil remain as the main oilseeds products that dominate the world market While use of export subsidization schemes remained limited, exports have been promoted by a variety of other incentives. European Unions export subsidization schemes for rapeseed, olive oil and US subsidy to butter/butter-oil are examples of trade incentives from developed countries. The three largest exporters of vegetable oil are USA Brazil, and Argentina with 6, 3 and 1 billion USD respectively. The main export product is Soybean oil. The South East Asian
292
countries such as Malaysian and Indonesia are leading exporters of palm oil. The Mediterranean regions such as France, Spain and Italy are the leaders in the olive oil production and export. According to FAO data, Egypts export of the vegetable oil remained relatively constant between 4.2 and 4.7 million USD from 1999 to 2001 and increased significantly to 8.9 million USD in 2002. China, Japan and the Netherlands are the largest importers with 1.9, 2.6 and 1.4 billions of USD respectively.
2.5
The industrial structure of the vegetable oil industry and supply chain
The oil seeds industry is characterized by large and well-established commercial farmers. In the majority of cases the farms are mono-crop with production facilities (at least for the first production of crude oil) in the farms, due to the different specific technologies required for each oilseeds processing and hence the sourcing of the raw material. The soybean processing facility, for example, is vertically integrated to ensure the integrity and quality of their soybean and edible oil products. The industry employes its own farmers who grow the seeds and then deliver them to drier locations where the seeds are dried and stored. The seeds are then transported to industries own crushing facility where the oil is extracted, refined, and processed. Once this is done, they package and distribute the products to their customers directly. The similar examples of these structures are palm oil industries in Malaysia and Indonesia. The other characteristics of this industry are more extended and sophisticated downstream processing (value addition) for both and non-food application. The main non-food products from vegetable oil are fatty acids for soap manufacture, mono-glycerines as emulsifiers, ingredients for cosmetic industry, raw material for the plastic industry. The competitiveness of the edible oil industry is very much linked to the degree of value addition the factory undertakes to produce specialized products. Most of the vegetable oil in the world market is exported as crude oil, which is used for various purposes. Cargill, Unilever, Archer Daniels Midland Company (ADM) and Riceland Inc. dominate more than 30 % of the total vegetable oil market.
293
3 Global trends in the meat and poultry (processing) industry
3.1
Overview
The meat industry has changed dramatically in recent years. Most notable is the changing structure of the broiler and beef sectors. Changes in consumer demand caused by convenience and perceived health concerns have likely contributed to the recent structural transformations within the meat industry. Firms have become larger and fewer in all types of processing and packing. Not only has the market share for large firms increased, but also the relationships between processors and producers have become closer. This has occurred either through contractual agreements or actual integration (ownership) by the processor.
3.2
Global production
In 2003 the world production of meat (all kinds excluding fish) amounted 62 million tons with an increase of 4 million tons from 1998. Latin American countries produced 14.8 million tons followed by USA 11.9 million tons. Brazil and Argentina are the main producers of meat in the region. The meat consumption is nearly saturated in the developed world and increasing in the developing countries. FAO estimates of Egypts production of different kinds of meat is shown in Table 3.1 and Table 3.2. The poultry meat production has shown increases from 535 thousand tons in 1998 to 652 thousand tons while the increase in beef and buffalo meat has shown modest increase from 518 to 557 thousand tons. The relatively smaller size of the Egyptian the oil extraction factories and the negative trade balance in cereals will make the development of the feed industry and, hence, the development in the meat sector difficult.
Table 3.1
World production of poultry meat (1000 tons) Country / Region World - Egypt European Union (15) Near East Africa (SSA) Latin America & Caribbean - USA - Turkey Source: FAO 1998 62,400 535 8,893 2,903 2,763 15,178 10,583 510 1999 65,334 588 8,721 3,121 2,934 16,039 11,692 615 2000 69,156 619 8,801 3,380 3,086 16,416 12,590 661 2001 71,644 643 9,076 3,505 3,202 16,761 13,319 631 2002 74,377 652 8,977 3,456 3,282 17,268 14,374 711 2003 75,823 652 8,801 3,424 3,300 17,468 14,999 627
295
Table 3.2
World production of beef and buffalo meat (1000 tons) Country / Region World - Egypt European Union (15) Near East Africa (SSA) Latin America & Caribbean - USA - Turkey Source: FAO 12,756 11,803 364 13,583 12,123 355 13,801 12,298 359 13,838 11,842 334 14,478 12,288 329 14,874 11,906 386 1998 58,160 518 7,654 1,918 3,952 1999 59,262 510 7,680 1,853 4,052 2000 59,833 544 7,446 1,872 4,273 2001 59,160 550 7,360 1,843 4,239 2002 61,193 554 7,558 1,927 4,355 2003 62,104 557 7,472 1,980 4,376
3.3
Economic geography of meat production

The trade of meat (especially beef) has been greatly hampered by the outbreak of meat born diseases such as unconventional bovine spongiform encephalopathy (BSE) and veterinary drug residues in cattle and Evian flu in poultry. The meat and poultry industry was relatively geographically dispersed till recently. Most developing countries were consuming locally produced meat and meat products. Developments in refrigerated sea and air transport and cold chains in developing countries, increasing globalisation of the food services chains such as MacDonalds and Burger King and increased trade liberalization has contributed to the fast growing international trade in meat products. The increase in meat production is directly related to the amount of excess cereals a country produces. The Latin American countries especially Brazil have the fastest growing soybean and maize agriculture mainly due to the application of biotechnology and commercialisation of its agriculture in the last ten years In general the meat industry has increased it productivity through intensive livestock farming and improved feed preparations.
3.4
Trends in trade
The outbreak of BSE, increasing attention on the animal welfare in the developed world, and the associated decrease in consumption of the animal products in affluent markets will have a negative impact in the global market trend. Nonetheless, poultry meat trade is expected to increase as the roasted frozen poultry meat is preferred as ready to eat convenience food in developing and developed markets. The USA, Australia, Netherlands New Zealand and Brazil are the main exporters of meat (processed and fresh). Japan, USA and Italy are the largest importers. The fact that USA is the highest importer and exporter shows the trend in USA meat industry characterized
296
by sourcing lower quality meat from Latin America and exporting it to Japan after processing. Egypts export beef has declined from 0.7 to 0.4 million USD between 1998 and 2002 (see Table 5.3 and Table 5.4). Its exports of non-beef meat (mainly poultry) have also declined from 1.6 to 1.3 million USD. The decline in exports is probably due to more stringent food safety requirements of European Union, which was the main destination for Egyptian export.
3.5
The industrial structure of the meat industry and supply chain

Changes in consumer demand caused by convenience and perceived health concerns have likely contributed to the recent structural transformations within the meat industry. Firms have become larger and fewer in all types of meatpacking. Not only has the market share for large firms increased, but also the relationships between processors and producers have become closer through contractual agreements or actual integration (ownership) by the processors. Vertical integration or coordination has been the primary method used by processors to increase efficiency in livestock marketing channels in the form of packer/processor feeding of livestock in packer-owned facilities or on a contract basis or purchasing livestock under exclusive marketing/purchasing agreements. Especially in broiler complexes, the industry is integrating the feed processing the production, processing, and marketing activities needed for raising the birds and bring a final product to the consumer. This has enabled the industry to meet the current requirements in traceability and food safety requirements at low costs. Because of the health concerns associated with beef born diseases like BSE, and preference to lean meat, the beef market in the developing countries might lose market share to poultry and pork. If the total demand for meat stabilizes or lessens over time, then real beef prices will decline to compete with other meats. This keeps continued pressure on the beef industry to reduce costs.
297
4 Global trends in the fruit and vegetables (processing) industry
4.1
Overview
The global fresh fruit and vegetable marketing system is increasingly focused on adding value and decreasing costs by streamlining distribution and understanding customer needs. In the developing economies of Asia, Latin America and elsewhere supermarket chains are capturing a growing share of the consumers and competing effectively with traditional fresh produce marketing channels. The consumption of fruit and vegetables has steadily increased in the recent years mainly due to change in the attitude of consumers towards healthy food. The health authorities are advising the people to reduce their cereal, meat and fat consumption and to consume more and more fruit and vegetables. This shift in the consumption pattern in the developed countries and the increase in the income in the developing countries has increased the demand and supply of the fruit and vegetables. The trend in fruit marketing is geared towards value addition in the form of canning, preservation, freezing while in addition to processes mentioned above fresh cut, salad greens and ready packages for consumption for vegetables
4.2
Trends in global production and geography

Global fruit and vegetable production grew from 1.08 billion metric tons in 1998 to 1.32 billion metric tons in 2003 a 23% increase (FAO). Fruit production showed modest increase from 438.8 million tons to 480.3 million between 1998 and 2003. Vegetables grew more rapidly than fruit with an increase of 32 % from 640.3 to 842.2 million tons from 1998 to 2003. While total fruit and vegetable production grew by 47 percent between 1990 and 2002, population only increased 18 percent. Consequently, per capita supply or availability expanded from 155 to 193 kg in the last twelve years. Chinas role in both vegetable and fruit area and production grew rapidly over the last decade. In 2003, Chinas share of world fruit and vegetable production was 15 percent and 49 percent, respectively. With yields above the world average China is set to surpass a fifty percent share of global vegetable production in coming years.
299
Table 4.1
World production of fruit (million metric tons) Country / Region World - Egypt European Union (15) Near East Eastern Europe Latin America - China - India - USA - Turkey Source: FAO 1998 438.8 6.3 53.0 38.2 10.5 90.4 56.7 44.3 31.5 10.5 1999 459.2 6.8 59.0 38.9 9.7 97.0 64.8 45.3 28.1 10.6 2000 471.7 7.0 59.7 40.0 10.8 97.5 64.5 44.3 32.8 10.9 2001 472.2 7.4 56.2 41.0 11.4 96.8 68.9 45.0 30.1 10.7 2002 477.9 7.4 54.3 41.1 10.0 97.0 72.0 46.0 30.3 10.6 2003 480.3 7.4 54.3 41.6 12.3 97.8 72.2 45.9 29.1 11.2
Table 4.2
World production of vegetables (million metric tons) Country / Region World - Egypt European Union (15) Near East Eastern Europe Latin America - China - India - USA - Turkey Source: FAO 1998 640.3 12.5 54.0 63.2 18.3 30.9 251.4 63.8 34.4 23.4 1999 695.1 14.0 56.5 66.3 18.0 33.6 280.2 71.0 38.9 24.7 2000 745.6 15.0 56.5 66.6 16.2 33.7 328.8 72.3 38.4 24.6 2001 776.4 14.1 54.5 63.6 16.6 34.4 356.5 78.5 36.1 24.2 2002 815.6 14.1 52.9 67.7 15.8 35.8 389.2 79.3 38.2 25.8 2003 842.2 14.1 53.7 65.6 16.6 36.8 410.9 81.9 37.0 25.7
4.3
International trade
Generally speaking, no country produces all of the fresh fruits and vegetables it requires in every week of the year, creating the opportunity for trade. Seasonality in the production and consumption of perishable commodities, due to natural climatic conditions, causes much horticultural trade to be contra seasonal, such as the shipment of Southern Hemisphere grapes, stone fruits, and avocados to North America and Europe in order to meet consumer demand during the Northern Hemispheres winter, when domestic supplies are low. At the moment, varieties (whether marketed on a branded basis or not) are being consistently provided from multiple locations in both the northern and southern hemispheres. Over the next decade the rapid evolution of supermarkets should induce more direct linkages between suppliers and customers, gradually eroding the dominant role of traditional wholesalers and wet markets, following the trend occurring in the latter half of the 20th century in the U.S. and Europe.
300
4.4
Processed fruit juices

The major feature of the world market of fruit juices is the geographical concentration of production. The two main players in the production of fruit juices are Latin America and USA. The export of fruit juice from these two continents amounts to 35 percent of the world market. The major player in juice export is Brazil, which has a share of 20 percent of world export. International trade in fruit juice takes place in the form of frozen concentrated fruit juice (FCFJ), in order to reduce the volume used, so that storage and transportation costs are lower. The European Union is by far the largest importer of fruit juices, accounting for over 63 of world fruit juice imports. Southern Hemisphere countries, (developing countries) and Australia are increasing their presence in international trade by providing off-season fruits to the North. This has been favoured by the improvements in storage and transportation technologies. According to FAO data, fruit juices exports from Egypt have shown a significant increase (nearly 40 %) from 2.1 million USD to 7.9 million USD between 1998 and 2002. China more than doubled it exports from 88 to 199 million USD between 1998 and 2002136.
4.5
Frozen vegetables
Health, taste, and convenience are the factors driving the increased consumption of vegetables, in particular frozen vegetables. Consumers are eating more nutrient-dense vegetables, such as broccoli, bell peppers, carrots, and tomatoes. New convenience packaging has made consuming vegetables easier. Pre-packaged, peeled, mixed bagged in small portions are ready-to-eat or ready to add to fast meals. Tomatoes have become popular again as an ingredient in many tomato-based ethnic foods. Many new exotic produce items, such as specialty lettuces and peppers are expanding. These trends reflect consumers' changing demand for vegetables. The Netherlands and Spain are the largest exporters of the frozen fruit and vegetables. Together, they export around 6.2 billion USD worth of frozen vegetables. Egypts export performance in frozen vegetables in the last 5 years is also remarkable. According to FAO data, Egypts exports increased from 92.4 to 113.7 million USD between 1998 and 2002137. The main importers of the frozen vegetables are USA and Germany importing frozen vegetables of value 3.4 and 3.2 billion USD respectively.
136 137
For more detailed data on the leading exporters of fruit juices, see Table 5.5 For more detailed data on the leading exporters of chilled and frozen vegetables, see Table 5.6
301
4.6
The industrial structure of the fruit and vegetable industry and supply chain
Due to increased trade of fresh fruit and vegetables and their perishable nature, the supply chain of the sector has changed dramatically in the last decades. The traditional supply chain in which wholesalers collect the fruit and vegetable and supply it to the retail market has been found inefficient, inconsistent and non-traceable. The stringent quality and safety standards required to win the confidence of the consumers (specially the fresh fruit and vegetable) has forced the retailers to supply the fresh products through a minimum number of reliable sources and using their own brand. This requires larger well-managed commercial farms or smaller out grower farmers closely under close supervision of the retailer (distributor). In this case small farmers are provided quality seeds, agricultural inputs and technical and extension services by the manufacturers and retailers. In return the farmers provide the raw materials for further processing and own label packaging at predetermined price. This is a win-win situation where the manufacturers or distributors get raw material of desired quality and quantity while the farmers are assured market outlet for their products. In some cases grower-shippers are forming strategic alliances with firms in distant parts of the globe to structure year-round supply chains.
302
5 Supplementary Tables
Table 5.1
20 largest exporters of cheese and curd by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 43 Growth 36 39 35 33 25 30 27 32 42 29 28 9 18 11 26 34 49 13 38 19 7
1
Value ($US million) Average annual Country France Netherlands Germany Denmark Italy New Zealand Australia Belgium Switzerland Ireland U. Kingdom Austria USA Spain Finland Greece Canada Lithuania Norway Poland Egypt 345.5 309.4 207.0 133.2 117.0 94.9 101.2 96.4 100.7 70.4 78.8 69.0 3.5 1998 2015.0 1892.6 1668.1 949.0 791.5 520.1 427.5 1999 1952.2 1662.2 1505.1 916.1 821.0 509.8 462.6 418.8 340.1 290.9 217.1 153.0 130.1 111.5 79.1 89.7 88.7 50.0 74.8 52.4 10.0 2000 1822.8 1509.7 1395.1 858.1 801.4 495.8 525.6 385.0 287.1 265.4 192.9 157.4 138.4 101.0 100.1 82.9 69.5 72.4 69.7 54.7 2.3 2001 1773.6 1700.3 1672.8 872.6 882.4 606.2 506.8 424.7 296.7 345.8 210.7 206.2 162.0 126.4 113.6 93.3 70.5 86.4 65.1 86.2 2.2 2002 1866.9 1703.5 1554.1 921.5 940.8 545.4 489.6 428.7 305.5 336.0 227.2 232.4 160.4 147.1 120.1 89.8 63.3 103.5 71.5 88.1 8.0 growth rate (%) -1.9 -2.6 -1.8 -0.7 4.4 1.2 3.4 0.8 -3.0 2.1 2.4 14.9 8.2 11.6 4.4 -1.7 -11.0 10.1 -2.4 6.3 23.2
1) Ranking in terms of average annual growth rate (among the 50 largest world exporters) Source: Authors calculations based on ITS data
303
Table 5.2
20 largest exporters of vegetable oils by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 49 Growth 18 13 38 16 39 10 11 33 31 15 17 7 49 37 3 50 29 26 1 36 30
1
Value ($US million) Average annual Country USA Brazil Canada Argentina France China Australia Paraguay Netherlands Germany India Hungary Ukraine Sudan Czech Rep Russian Fed Romania Belgium Greece United Kingdom Egypt 17.4 78.5 10.7 1998 5315.0 2176.7 1467.4 1038.9 946.9 274.0 262.9 442.5 422.0 184.2 104.2 66.5 208.3 109.5 25.7 242.1 39.9 1999 4928.7 1594.3 1153.9 859.4 641.5 355.6 486.2 312.5 295.6 258.1 168.3 73.4 106.4 58.3 90.6 67.0 99.6 45.6 32.5 71.0 4.2 2000 5670.9 2189.4 1064.8 1002.1 557.9 396.2 406.7 289.2 281.8 144.7 203.3 99.2 148.4 136.1 87.4 187.2 36.7 40.4 26.7 14.4 4.7 2001 5801.8 2730.6 1037.6 1388.5 432.7 413.0 372.4 364.0 345.9 236.2 179.0 82.5 113.2 102.4 82.6 45.6 45.0 48.6 29.9 6.9 4.2 2002 6026.7 3036.9 867.6 1280.2 522.7 427.5 402.1 350.0 351.4 245.3 123.0 134.2 24.5 72.2 75.1 22.8 33.6 43.4 53.8 52.1 8.9 growth rate (%) 3.2 8.7 -12.3 5.4 -13.8 11.8 11.2 -5.7 -4.5 7.4 4.2 19.2 -41.4 -9.9 30.7 -44.6 -4.2 -1.6 32.7 -9.7 -4.4
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Table 5.3
20 largest exporters of non-beef and buffalo meat by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 76 Growth 31 29 24 35 17 6 10 9 20 14 44 15 33 28 30 12 25 11 18 16 1
Value ($US million) Average annual Country USA Netherlands Denmark France Belgium Brazil Germany Canada New Zealand Australia United Kingdom Spain China Hungary Ireland Thailand Italy Austria Poland Mexico Egypt 960.8 799.8 781.7 942.7 625.4 1017.3 578.2 756.2 511.1 443.9 425.8 325.6 164.3 159.8 130.6 1.6 1998 3529.6 2312.1 2252.9 2216.6 1999 3216.8 2396.9 2253.8 1988.3 1299.0 1076.6 964.9 895.3 947.0 696.1 850.1 647.4 662.5 461.4 489.7 435.9 313.5 180.8 178.9 138.6 0.8 2000 3673.8 2404.1 2310.0 2053.4 1473.3 1092.8 840.0 1190.2 981.8 803.8 758.2 725.4 724.6 462.9 485.9 427.7 261.8 197.7 172.3 177.8 1.2 2001 4029.6 2408.9 2721.6 1963.5 1771.2 1803.6 1226.9 1451.8 1075.6 923.1 430.4 944.5 820.4 550.5 526.7 596.2 342.8 255.6 200.4 194.7 1.2 355.8 274.1 208.3 187.8 1.3 2002 3205.5 2230.9 2493.0 1825.5 1643.6 1964.9 1412.4 1390.7 1200.3 943.2 543.9 870.7 658.5 524.0 419.3 growth rate (%) -2.4 -0.9 2.6 -4.7 8.2 19.6 15.3 15.5 6.2 10.8 -14.5 10.8 -3.4 0.6 -1.4 11.9 2.2 13.6 6.9 9.5 -5.4
305
Table 5.4
20 largest exporters of beef and buffalo meat by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 81 Growth 20 17 32 9 22 28 39 16 2 19 35 37 34 10 36 30 14 29 23 5 1
Value ($US million) Average annual Country USA Australia Netherlands Canada Germany Ireland France New Zealand Brazil Belgium Argentina Uruguay Spain India Denmark Italy Ukraine Austria Paraguay Nicaragua Egypt 480.9 388.1 338.7 164.3 343.0 210.3 155.8 185.2 65.9 37.6 0.7 1998 2251.3 1792.8 1345.7 789.1 1033.1 930.3 1039.7 609.5 276.6 1999 2596.8 1948.4 1398.8 1020.9 1098.0 1142.6 1041.7 631.6 443.8 340.2 530.9 324.9 348.7 162.9 291.9 217.8 157.4 185.5 33.4 41.8 0.5 2000 3036.4 2066.6 1179.5 1159.7 846.7 875.9 771.5 695.9 503.3 317.5 497.7 357.1 292.6 305.6 274.2 207.4 179.3 135.8 70.3 52.2 0.4 2001 2549.8 2313.4 792.1 1321.9 997.4 589.8 387.7 737.6 738.8 285.8 113.7 208.3 198.4 242.6 182.4 140.8 154.1 135.4 76.0 65.3 0.3 2002 2488.4 2250.0 1127.3 1304.4 1116.8 817.3 622.5 782.8 776.3 367.5 346.3 251.2 247.4 268.5 228.1 179.3 201.6 158.1 71.0 81.4 0.4 growth rate (%) 2.5 5.8 -4.3 13.4 2.0 -3.2 -12.0 6.5 29.4 2.6 -7.9 -10.3 -7.6 13.1 -9.7 -3.9 6.7 -3.9 1.9 21.3 -16.8
306
Table 5.5
20 largest exporters of fruit and vegetable juices by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 62 Growth 36 26 32 22 18 25 15 24 33 5 29 8 42 13 28 11 38 35 41 20 1
Value ($US million) Average annual Country Brazil USA Belgium Germany Netherlands Italy Spain Austria Argentina China France Poland Mexico Thailand South Africa Chile Hungary Israel Cuba Philippines Egypt 50.2 2.1 50.0 83.2 71.5 83.2 60.3 60.4 58.8 41.9 2.8 503.1 427.9 304.8 246.9 154.3 142.8 88.3 132.9 108.9 176.6 87.2 1998 1305.5 653.6 1999 1290.1 731.2 587.8 550.1 557.5 316.1 268.2 165.9 181.9 114.5 163.8 102.1 135.9 133.9 2000 1090.2 697.6 490.5 524.1 517.8 324.1 253.2 172.4 153.4 142.8 157.2 138.3 140.9 109.8 92.5 72.5 67.8 62.0 76.0 54.2 3.6 2001 880.1 648.7 487.0 541.0 469.1 302.0 247.1 162.9 156.1 179.2 107.5 156.6 90.3 109.2 75.8 92.5 57.1 54.5 49.5 67.5 4.9 55.4 7.9 92.0 72.6 65.7 60.5 2002 1096.0 658.1 550.8 542.7 505.2 317.3 322.0 160.8 129.3 199.3 127.4 190.3 104.3 growth rate (%) -4.3 0.2 -2.1 1.9 4.2 1.0 6.9 1.0 -2.5 22.6 -1.0 15.0 -12.3 7.8 -0.2 9.8 -5.7 -4.1 -8.2 2.5 39.7
307
Table 5.6
20 largest exporters of chilled and frozen vegetables by value ($US), 1998-2002 Rank Exports 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 26 Growth 23 20 25 32 14 33 29 16 26 13 11 37 43 40 49 8 30 10 39 21 17
1
Value ($US million) Average annual Country Netherlands Spain Mexico USA China France Belgium Canada Italy Germany Australia Thailand Turkey United Kingdom Argentina India Morocco Poland New Zealand Israel Egypt 860.7 756.4 405.3 286.6 381.8 388.5 265.6 455.3 144.1 209.0 176.9 193.2 138.1 92.4 1998 2824.8 2677.5 2031.7 1644.4 1233.5 1286.9 1999 2872.2 2648.6 2016.7 1579.4 1260.8 1302.1 1243.8 978.4 772.0 458.9 313.5 446.9 268.9 282.6 265.0 197.5 248.2 177.4 204.1 153.6 80.4 2000 2708.9 2432.7 2164.3 1691.5 1265.4 1072.8 1089.0 1076.9 684.5 364.9 388.3 304.8 258.2 228.2 204.1 244.7 170.3 164.4 170.1 148.2 82.0 2001 2725.8 2743.0 2321.3 1654.6 1485.7 1109.6 1200.6 1187.9 797.1 488.8 407.8 381.5 370.0 214.1 228.6 222.0 178.1 221.8 184.3 167.9 85.5 307.5 264.1 180.4 234.8 218.1 251.7 192.4 155.2 113.7 2002 3126.8 3068.5 2228.7 1700.5 1625.2 1312.2 1308.4 1091.4 818.9 536.1 386.2 growth rate (%) 2.6 3.5 2.3 0.8 7.1 0.5 1.7 6.1 2.0 7.2 7.7 0.0 -5.7 -0.1 -20.7 13.0 1.1 9.2 -0.1 3.0 5.3
308
VII-B Sub-Sector Profiles
309
1 Dairy Products
1.1
Table 1.1
Sector Overview
Key figure 2003: Dairy products (excl. fresh and pasteurised milk) Indicator Unit Processed milk (UHT & flavoured) Domestic Consumption Production Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study team estimates Persons (1000) Number 8 13.4 14.6 60 425 60 430 Yoghurt Cheese
1.2
1.2.1
Production
Production and use of milk Milk production has increased rapidly during the second half of the 1990s, to reach a level of around 3.8 million tons in 2001138 (see Table 1.2). In addition there is a small amount of production of goat and sheep milk but this is estimated at less than 1 percent of total milk production. The vast majority of milking animals and milk production is in the hands of small-scale farms (see Table 1.3).
138
Estimated milk production for 2003 is also at around 3.8 million tons, and it appears that after a period of growth production has stabilised at around this figure.
311
Table 1.2
Estimated milk production 1995-2001 (thousand tons) Type Cow milk Buffalo milk Total Source: CAPMAS 1995 754 1308 2062 2001 1618 2213 3831 Change (%) 115 69 86
Table 1.3
Breakdown of dairy herds and milk production by farm type Type Part of total dairy herd (%) Small scale mixed farms Flying herds Commercial farms Source: DIDA 90 7 3 Part of total milk production (%) 72 21 7
Average output of milk per animal is low (510 kg per annum for buffalo and 305kg for cow milk) which can be attributed to: Poor control of animal feed consumption139; Lack of storage for animal feed and wastage of other foodstuffs; High sterility levels; Production wastage at the farm. Of the total production of milk, some 65 percent is actually consumed at the point of production, either for feeding calves, own/family use by the producer, or for domestic processing. The surplus is sold to processing units, both private sector dairy plants and to the business sector (see Table 1.4). The approximate breakdown of the use of fresh milk by process/product is shown in Table 1.5.
Table 1.4 Breakdown of use of raw milk (2001) % Consumed at the production location Nursing calves Family use Domestic processing 20 15 30 65
Sub-total Surplus for marketing Private and investment sectors Business sector
30 5 35 100
Sub-total Total Source: Study team estimates
139
During the winter season, when supply of grass (clover) is abundant, animals can consume up to 5 times the necessary volume.
312
Table 1.5
Breakdown of use of milk by process/product % UHT and pasteurised milk Fresh (cooled but mostly un-pasteurised)* Cheese-making Other (cream, yoghurt, calf-feed etc.) Total * Peddled and sold daily in shops Source: Study team estimates 6 26 49 39 100
Although, increasing demand (see Section 1.3) provides an incentive for increased milk production, dairy producers face major constraints: Limited suitable land for pasture: there are no permanent pastures so animals are fed in confinement. Shortages of quality feed and forage. High capital and input costs Lack of agricultural equipment and low-education levels.
1.2.2
Import situation for powdered milk Dairy processors have increasingly relied on local production of inputs rather than imports due to the governments 3-year safeguard duty on milk powder imports, which expired in September 2004. Despite the discontinuation of the safeguard duty, the devaluation of the Egyptian Pound has raised the cost of imported milk powder making it more expensive relative to local products140. Egypt imports around 20 thousand tons of skimmed milk per annum, from the EU, USA and New Zealand.
1.2.3
The dairy processing sector According to data from CAPMAS there were 3334 licensed dairy processing units in 1997; of these, some 95 percent had 5 or less workers (see Table 4.25). The majority of units process less than 1 ton of milk per day and there are very few units processing more than 10 tons of milk per day during the peak season (December-April); most processing units work only during the first 6 months of the year, producing soft and hard cheese and, when the price is low enough, butter and ghee.
140
Source:Egypt Dairy and Products Annual 2003, USDA Foreign Agricultural Service, GAIN Report, September 2003.
313
Table 1.6
Breakdown of licensed dairy processing units by number of workers Number of workers Number of processing units Comparative importance (%) 1-5 6 10 11 15 16 20 21 25 26 30 31 40 41 50 51 100 101 500 Total Source: CAPMAS, June 1997 3190 57 21 20 10 6 4 11 12 3 3334 95.68 1.71 0.63 0.60 0.30 0.18 0.12 0.33 0.36 0.09 100.00
There are around 25 companies involved in the industrial processing and packaging of dairy products. Of these, only 14 companies are members of the Dairy Industry Development Association (DIDA) and about 7 or 8 can be considered as significant players (see Table 1.7, at the end of this Section). Most production of these companies use fresh milk, as recombining (use of skimmed milk powder) remains unimportant due to its higher cost. Overall the private commercial sector (basically members of the DIDA) account for around 15 percent of production of dairy products. They have, however, made significant progress since the early 1980s and taken market share away from the public sector company, Misr Milk and Food Company, whose output has fallen to an estimated 10 percent of total supply. The commercial sector, both private and public factories, has significant over capacity. Their total capacity is estimated at 1.9 million tons of dairy products per year, although actual yearly production is only around 500-800 thousand tons. Furthermore, it appears that progress towards changing Egyptian consumers preferences from fresh to processed products is slow; this could seriously impede further development of the private industrial sector. At the same time, although strong urban demand provides a firm basis for modern large-scale producers to expand commercial production, factors such as high capital and material costs and limited purchasing power are expected to be major constraints on production. More generally, the constraints facing the dairy industry in Egypt include: Production of unclean milk in some dairy farms makes it difficult to use such milk to process end products with a high good quality. The difficulty of obtaining high-quality raw milk with a reasonable price. Lack of milk testing laboratories services for both dairy farms and plants. Lack of consumer awareness regarding the hazards of using unprocessed milk leaves the peddlers unchecked and limits both the demand and price of processed milk.
314
Unfair competition between the imported dairy products (which are subsidized) and the local producers who pay high customs fare for the imported raw materials and/or equipment. Poor handling of dairy products during storage, shipping and distribution cause quick deterioration and/or low quality end product. This in turn gives the consumer a bad impression about these products. Most dairy processing units are still utilizing old techniques for manufacturing and packaging. Also, they put limited investment in marketing and branding. The lack of coordination between the dairy producers and processors makes it difficult to establish a National Dairy Association/Board, which can play a significant role to develop the industry within Egypt.
Cheese production Total cheese production in Egypt is estimated to be around 425 thousand tons. The most important category is Feta cheese (est. 320 thousand tons in 2002), about 70 percent of which is produced in small unlicensed factories. The rest is Romano cheese (est. 65 thousand tons in 2002) and processed cheese (est. 40 thousand tons in 2002). In addition, there is a small but growing production of mozzarella cheese and a very small amount of blue and cheddar cheese. In recent years the public sector market share has diminished drastically to almost insignificant levels141. Butter and ghee Egypt produces only a very small quantity of butter on a commercial scale (est. 10 thousand tons)142. The absence of a significant domestic butter industry is due to several factors, the most important being the lack of adequate refrigeration throughout the country, which makes the conversion of butter-to-butter oil and ghee necessary. Also there is an increasing trend toward the use of palm oil in ghee rather than butter143. Milk Powder Egypt does not have a significant milk powder production. Imported non-fat dry milk (NFDM) and whey powder are used mainly for the production of feta cheese, yoghurt and ice cream. Small quantities are also used in the production of chocolate and pastries.
1.3
Domestic Market
Traditionally Egyptians are not heavy consumers of liquid milk in spite of the widespread availability of fresh milk. The recommended daily requirements of dairy products as a liquid milk shouldnt less than 250 g (about 90 kg/year), while the average of per capita consumption of dairy products now is about 54 kg/year. The gap between the local production and the recommended consumption is about 40% of the current production. Most of the available raw milk continues to be processed and consumed in the form of cheese and other processed dairy products. It is well known that all raw and loose milk sold is raw (without any heat treatment) and unpackaged.
141 142 143
Ibid, footnote 140. Most butter production is for farmers home consumption with a small amount going to sale at local markets. Ibid, footnote 140.
315
Egyptian consumers of all classes have a preference for buffalo's milk. This has a stronger taste, higher fat content, is white in appearance, and provide a thick layer of cream after it has been boiled and then cooled. At least 70 percent of liquid milk sold loose is buffalo's milk. It is frequently mixed with low quantities of cow's milk (5-15%) by milk peddlers. However, only cow's milk is used to supply of pasteurised milk, mainly because it is less expensive but also because it is more suitable for industrial production. Strong urban demand for milk and other dairy products provides an incentive for small farmers to increase their supply and to pay more attention to marketing. It also underpins increased production of large-scale commercial producers and is a stimulus for them to improve their production. Total cheese consumption is estimated to be in the region of 430 thousand tons; per capita consumption is about 6 kilograms per annum. There is a small amount of imported fancy cheeses (est. 320 tons in 2002), although imported products are likely to suffer from the recent rise in import duty and the pending expiry date legislation which should affect imports of processed cheese and cheese in Tetra Pak packaging. The rising number of fast food restaurants operating in Egypt is spurring growing demand for cheddar and mozzarella cheese.
1.4
Export Market and performance

Egypts exports of dairy products increased dramatically in 2003, up from 6.8 thousand tons in 2002 to 13.4 thousand tons (+97%); with the value rising from L.E. 42.2 million to L.E. 87.3 million (+107%).
316
Table 1.7
Leading companies in the dairy product-processing sector Company Leading products (*=export product) Main export locations Output 2003 equivalent fresh milk input in tons 1 Juhayna UHT Milk* Yoghurt Drinking Yoghurt Juice* 2 Greenland (Americana Group) Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese* UHT Milk* Juice* 3 Domty (Candia) Feta Cheese* Domiati Cheese* Mozzarella* Processed Cheese Drinking Yoghurt UHT Milk* Juice* 4 Enjoy Set Yoghurt Drinking Yoghurt UHT Milk* Juice* 5 Nestle Ice cream Set Yoghurt Drinking Dry blends* Baby foods* 6 Siclam Set Yoghurt Drinking Yoghurt Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese* UHT Milk* Juice* 7 Faragallah Processed Cheese* UHT Milk* Juice* USA, Canada Europe Australia, New Zealand Jordan, Saudi Arabia, Morocco, GCC, Libya Other Africa 8 Arab Dairy (Lactalise) Feta Cheese* Domiati Cheese* Iraq, Libya, Saudi Arabia, Kuwait, UAE, Qatar, 36000 200 54000 200 Italy, Netherlands Jordan, Lebanon, Palestine, Kuwait, Saudi Arabia 60000 250 USA, UK, Netherlands, Sweden, Italy, Libya, Lebanon, Palestine Ethiopia, Sudan 60000 250 60000 250 Qatar, Bahrain, Saudi Arabia, UAE France, Italy, Switzerland, Germany, Sweden, Canada, USA 72000 300 USA, Italy, Germany, Switzerland, Netherlands Jordan, Libya Mauritania USA UK, Greece, Netherlands Saudi Arabia, Kuwait, UAE, Libya, (plus 15 other Arab countries) 144000 600 180000 750 Number of employees
317
Company
Leading products (*=export product)
Main export locations
Number of employees
Hard Cheese* Processed Cheese* 9 El Misrieen Set Yoghurt Drinking Yoghurt Feta Cheese* Domiati Cheese* Juice* 10 Katilo Yoghurt Feta Cheese* Domiati Cheese* Hard Cheese* Processed Cheese* 11 Edafco (Viva) UHT Milk* Juice*
Bahrain, Oman, Jordan, Yemen Saudi Arabia, Kuwait, UAE, Qatar, Bahrain, Oman, Libya, Jordan 180000 200
Saudi Arabia , Jordan, Kuwait, UAE, Qatar, Bahrain, Oman USA
180000
200
Libya Germany, Italy, Sweden, Austria, UK Mauritius USA
180000
200
12 IGI Interagro (ex Dallah)
Set Yoghurt Drinking Yoghurt UHT Milk*
180000
200
13 Bell Egypt
Processed Cheese*
Saudi Arabia, Jordan, Kuwait, UAE, Qatar, Bahrain, Oman USA
180000
200
14 Misr Milk &Food Company
Set Yoghurt Feta Cheese Domiati Cheese Hard Cheese Processed Cheese* Pasteurised milk UHT Milk
Saudi Arabia, Jordan, Iraq, Kuwait, UAE, Qatar, Bahrain, Oman
180000
200
15 Oburland
Feta Cheese Domiati Cheese Processed Cheese* Emulsifiers/stabilizers
Libya
180000
200
16 Egyptian Danish Ice Cream* (Iceman) 17 Hawaii Total Ice lollys Ice Cream*
50
200
50 782200
200
318
2 Exotic fruit juices, pulp and puree
2.1
Table 2.1
Sector Overview
Key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Value 61 30.6 80 42.8 22 13.6 4 20
The fruit juice industry originates from the processing of surplus fruits, as is the case with jam production144. During the 1990s the development of the Egyptian fruit juice industry was promoted through investments in UHT carton packaging lines. A consequence of the move towards solution-packaging factories has been the close integration of the dairy and fruit processing sectors, even though some successful fruit specialist still remain. Buying (on lease) such lines, companies sought to achieve higher capacity utilisation rates by processing both fruit juices and milk145. In fact, since the Egyptian market for liquid milk is relatively small, most producers have run their investments largely for the processing and packaging of fruit juices. Alongside this development, some fruit juice producers continued to maintain (existing) glass-packaging lines, whilst others did not switch to cartons at all. Domestic demand for juices is mainly for pocket money small pack or bottle sizes. On the export side, fruit juices packed in UHT cartons is to all intents a commodity product, alongside which a higher-value added chilled fruit juice in carton segment is developing. Exports in small glass bottles represent the traditional high quality exotic offer. Increased understanding of export market requirements, combined with seller and buyer recognition of the specific quality of Egyptian mango and guava juices, has encouraged
144
145
Some successful jam manufacturers also produce quality juices. Historically these quality exotic juices have been packed in (small size) glass bottles. Looking to further improve utilisation of packaging lines, several few companies started to pack soft feta cheese in the same aseptic cartons. With little domestic demand for this product-packaging combination, all these companies sort to develop export opportunities. The most successful channelled their products on the ethnic-expatriate markets, in the USA for example. Through this type of market opening, the sector leaders have also recently managed to develop exports of UHT milk.
319
many producers to become involved in the production and export of concentrates. Nonetheless, the major players dominate the global market for concentrates, and Egyptian potential in this segment would appear to be limited to a minor specialised producer. Despite severe competition from countries such as Brazil and India, the recent devaluation of the Egyptian Pound has, nonetheless, opened up market opportunities for Egyptian exports. Notably, devaluation has enabled the export of low-price, low-quality Egyptian fruit concentrates.
Table 2.2 Juices & syrups: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % % Value 198 47.9 62.7 76 74 61 1.4 6.5 -1.7 44.5 108 3 14
2.2
Production
There are 3 basic forms of processing: 4. Direct processing and bottling of pure fruit juices; 5. Freezing and storage, either for further processing (e.g. jams) or export 6. Processing as concentrate, permitting storage of up to 1 year146. In addition, a few Egyptian companies (e.g. Nile Pulp) have invested in the production of higher quality fruit pulps147.
146
147
Concentrates may subsequently be converted back to juice if the quality is good enough. In the case of concentrates made from poor quality fruit, these may be marketed in the nectar category (i.e. with added sugar). Further, some Egyptian concentrates is known to pass via specialized re-treatment units, typically located in Israel and Cyprus, from which it eventually finds itself back on the market as fruit juice. Such high quality production requires closer integration with the supply of fruits (agriculture) in order to assure the quality of supplied materials.
320
Table 2.3
Evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Juices & syrups Concentrate Total Value 1000 tons 1000 tons L.E. mil. 30.0 n.a. n.a. 81.9 11.5 350 47.9 13.0 198 51.0 15.0 210 58.0 22.0 256 60.0 26.0 285 92-00 a.a.g.r. (%) 13 00-03 a.a.g.r. (%) -11 24 -10
The industry consists of around about 20 main production units, of which 10 have UHT Tetra packaging lines (9 of the 10 are located in dairies). As noted above, development of the domestic market for UHT milk has proved to be a relative failure and this has pushed the development of fruit juice processing. The fact that enterprises have been tied in to their investment in packaging lines148 has influenced the sectors development and strategies. Basically, when faced by the quasimonopoly of carton pack suppliers149, enterprises over invested in capacity given the relatively weak (low income) domestic market, in which alternative sources of fresh milk and juices are available. This has forced companies with UHT carton packaging facilities to adapt their behaviour: Two traditional market leaders (Juhayna, Enjoy) have nicely positioned themselves on the ethnic export market, giving a much lower priority to development of the domestic market; A more recent entrant (Faragalla) has adopted an aggressive export marketing of its own wide range of branded juices and other processed foods, aimed at the general as opposed to ethnic market; Another company has focussed on supplying the retail distribution sector in Egypt and Europe with distributors ownbrand juices. Despite the success of such strategies, the fundamental weakness of Egyptian production remains the relatively low volumes of fruit being processed relative to major producers. In a global market characterised by high-volume low-cost production, the need for Egyptian companies to cover the (fixed) costs of investments in packaging technology running at low capacity and/or low volumes implies higher production costs and, hence, poor competitiveness.
148
149
It is a typical strategy of the market leader Tetrapack to lease equipment (new or re-engineered) and provide training and incentives for launch campaigns, provided the company purchase paper for at least 1 year and signs an after sales agreement. A criticism made during the company interviews was that packaging equipment/material suppliers provided enterprises with over optimistic evaluations of the market for carton packaged milk and juices.
321
Table 2.4
Key players in the fruit juice and concentrates sector Juices: Juhayna Enjoy Faragallah Greenland Domty Edafco [other active companies are Vitrac, Halwani, Comby, El Horreya] Concentrates: El Marwah (Juhayna) Faragallah Nile Fruits Foodico P&J Kaha Comby Hansa Foods Edfina
2.2.1
Supply of agricultural inputs Egypt is not an important player in the global market for citrus fruits; rather it is positioned as a supplier of exotic juices, mainly mango and guava. Nonetheless, a wide variety of fruit juices are available on the domestic market, these include citrus, exotic and other juices such as apple. Fruits are purchased at the peak of the growing season; delivery to the factory is often organised by collectors (i.e. kellelas). Though the collection system has proved in the past to be a relatively efficient mechanism of ensuring supply of fruits given the often small-scale nature of fruit production, it is questionable whether it is suitable for meeting modern requirements especially for high quality production destined for exports for which guarantees of quality and (international) industry standards are necessary. As such, evolution of this system may be necessary as part of the development of a long-term strategy for investment in fruit production and processing. Moreover, logistics between fruit orchards and processing units is extremely poor (e.g. use of small trucks and vans and absence of cooling during transport). The recent devaluation of the Egyptian Pound has provided a boost across the board to the processing of all fruit types. However, lack of flexibility to respond to increased demand from the processing industry has been revealed, and limited supply capacity has meant that increased demand cannot be met without significant price increases, particularly for mangoes.
322
2.2.2
Packaging range For the export market, juices are usually supplied in 1-litre UHT cartons or, in the case of exotic juices often in (small) glass bottles. The latter is often essential to permit consumers to view the product, unless it can be sold under a well-known and clearly identifiable brand label. For the domestic market, smaller sizes are more prevalent (200-250ml) reflecting the pocket money purchase of fruit drinks. Although it is not possible to get accurate data on sales by packaging size, information from companies suggests that the share of small cartons could be as high as 90% of domestic sales of carton packaged juices. It has not been possible to establish the volume or market share of juice sold in glass bottles, but it is thought to be rather low. This segment is primarily the domain of more established (traditional) juice makers such as Halwani, Vitrac and El Horriea. One problem facing the industry is a shortage of glass bottles.
2.2.3
Technological performance and quality The technological level of Egyptian production has improved over recent years to achieve a fairly good standard. The promotion of HACCP and ISO management systems by the government and through technical assistance provided by donors has also helped to improve quality. Nonetheless, still more needs to be done to encourage the uptake of such systems. Exposure to export markets has shown that companies can access markets by actively promoting Egyptian taste and quality. Nonetheless, to continue to increase sales, companies have realised the need for product development: freshness of juices is a must, but formulation of new recipes is also a means of sales development. In general, product standards and quality are important throughout the global fruit juice processing industry and even producers in developed country markets have failed where they have been unable to offer required guarantees of product standards and quality. Increasingly, consumer expectations (freshness, taste, health etc.) are driving industry requirements, though this goes hand in hand with the intensive development of new products.
2.2.4
Business capacity The extent to which Egyptian production currently fulfils some of the main criteria consistent with (international) state of the art business capacity are summarised in Table 2.5.
323
Table 2.5
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity New product development Flexibility and service standards Business acumen and self image Comments Not yet. More to be done to guarantee quality and quantity (e.g. shift to contract farming) Yes, but more to be done to prove to export client/consumers Yes Limited, at a relatively early stage Not yet at levels to be expected for success on export markets Producers have strong self image but
2.3
Domestic Market
The domestic market for processed fruit juices is evaluated through interviews and research to be approximately 50 thousand tons, with an additional 11 thousand tons of concentrates. On the assumption that the potential market for processed fruit juices (i.e. consumers with sufficient purchasing power) is around 10 million inhabitants, this represents an average consumption of 5 litres per capita150 as compared to Western European levels of between 20 to 40 litres per capita. In addition to regular packaged juices, about 3 years ago Daltex (a potato and citrus packing company) built a fresh juice plant and marketed fresh orange juice in plastic jerry cans to hotels and restaurants.
2.4
Export Markets and performance

Egyptian success in the USA, and elsewhere, has been achieved through the initial development of juices sold in small glass bottles and targeted at the ethnic market. With the development of carton-packaged juices, Egyptian companies have widened their target markets, with success in some specific areas. According to data from the ITC Trademap database (see Table 4.17), Egyptian exports of fruit juices in 2002 are estimated at a value of $US 8 million. The main export market is the USA with a share of 64% of the value of exports. Some ways behind are: Saudi Arabia, Jordan, Italy and Canada151. From interviews conducted by the study team, however, it appears there is a significant underestimate of the value of exports of fruit juices and concentrates. For 2003, industry estimates indicate export volumes of around 11 thousand tons for each of the categories fruit juices and fruit concentrates. Further, the underlying trend is of a 15% increase per annum in the volume of packaged juice exports and an additional 1,500 tons per year of
150 151
At the same time, freshly squeezed fruit juice stalls are prevalent in Egypt. With some companies targeting their marketing efforts towards Europe, the Baltic States and other E. European regions (Russia), the share of the USA is expected to fall.
324
fruit concentrates. It appears that the devaluation of Egyptian Pound in 2003 had a positive impact on export sales152, particularly for concentrates.
Table 2.6 Egyptian exports of fruit and vegetable juices, unfermented (HS code 2009), 2002 Importing country Total USA Saudi Arabia Jordan Italy Canada Source: ITC Value $US thousand 8,032 5,117 889 477 448 401 Share % 100 64 11 6 6 5 Volume Tons 1,213 894 1,075 428 Share % Unit value $ per ton 733 534 417 937
2.4.1
Table 2.7
Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Yes, for fruit concentrates Main export channel, also for co-packing of retail distributor own brands Yes, for ethnic distribution channels Yes, but mainly via traders No
2.5
Global Trends
The market for fruit juice is split into three main segments: 1. Pure (100%) juice, directly made from fruit and pulp without additives. 2. Juice from concentrates (80% of water removed) to which water is added in production units close to the consuming market place, and with the possible addition of allowed aromas and sugar in controlled quantities. 3. Nectar, for which water and sugar are added to the fruit juice. Studies of consumption habits show that the proportion of consumption of 100% juice is increasing, particularly in Europe, Asia, Africa and the Middle East. Nonetheless, there is considerable variation across regions and counties in consumer attitudes to the various juice segments; as is, also, the case with regard to new product development, product branding and distribution.
152
Companies with only glass bottling packaging lines have been hampered in taking advantage of devaluation because of the shortage of supplies of locally produced glass bottles.
325
Fruit juices benefit from a positive image based on their naturalness and vitamin content, which is of increasing importance in more developed markets such as the European Union. Also, generally speaking there is an increasing demand for not from concentrate (NFC) products. Traditional flavours, such as orange and apple, are declining in market share at the expense of innovative flavours: fruit combinations and colours, such as red fruits. Consumers are attracted by more exotic fruit juices, exceptional varieties, new tastes and new fruit mixes. Moreover, functional drinks such as juices and nectars with added vitamins and calcium are becoming more popular. On top of these shifts in consumer preferences, consumers are also looking for other requirements, giving importance to: taste quality of products, packaging and fair agriculture in the production and purchase of fruits. Hand in hand with these changes in consumer preferences, juice processors are trying to innovate and increase value added through the development of new products. It is estimated that in Europe in 2003, innovative products represented 14% of the sales of multinational brands153. These developments offer market opportunities for (developing) countries producing exotic fruits and in the production of organically grown products.
2.5.1
Global production and distribution In developed markets the fruit juice-processing sector is dominated by multinational154 and distributor own brands. In Europe, retail distributors own brands accounted for over half of the market but have seen their share slip back to 40-45%. In a mature market, having become heavily involved in the juice business, distributors have seen their market position weakened by an increasing and cheap supply of traded juices. Lacking specialisation and technical know how of the market and production, they have abandoned products with low volumes (e.g. single fruit tropical juices) and retained only suppliers able to offer strong guarantees on quality and standards. The fruit juice industry is very much linked to the variety of local fruit production. Nonetheless, countries such as the Netherlands, Belgium and Germany have developed powerful fruit juice processing industries based upon the imports of fresh fruits that are crushed locally into juices. In Eastern Europe local companies still dominate the local market. In Poland, long known as a major producer of apple juice and concentrates, producers have broadened their offer to the domestic market and is developing sales of branded products to the Russian market. In several other East European countries there is a strong and renewed juice industry
153
154
For example: Tropicana has started new cocktails of tropical fruits such as mango-orange and mango-almond; Eckes Granini is supplying 100% multi-fruit juices and cocktails with orange, passion fruit and mango; Teissere, with its Etnobar range, has launched Africa, a cocktail with orange, banana and hibiscus; in France, Eckes Granini has started light fruit juices with the brands Joker Affinit and Pampryl a range of juices marketed for their cosmetic properties (e.g. fruits de la vitalit, for skin beauty, memory help and vitality) containing kiwi, banana, mango, and wild rose. For example, in the European market: Eckes Granini (Granini, Hohes C, Joker, Ra, Frucht Tiger, La Bamba ) Pepsico (Tropicana, Looza, Copella, FruiVita) Cadbury Schweppes (Motts, Pampryl, Oasis, Banga ) Coca Cola (Minute Maid)
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where, as is the case in Egypt, over capacity in carton packaging lines and a limited market for UHT milk has pushed the development of fruit juice processing. This has resulted in a concentration of the dairy and fruit juice industry. This is less so the case in Russia where geographically the market remains concentrated around the major markets (Moscow, St Petersburg) and the juice industry relies heavily on imports of juice concentrates. In the Mediterranean area juice production has historically developed around the processing of citrus fruits155. Spain has had a very dynamic development, though this has been curtailed somewhat by the arrival of new suppliers (e.g. Brazil); Turkey has also developed citrus fruit processing as is the case for Cyprus156.
2.5.2
Export market requirements To be successful on export markets, exporters need to be able to fulfil the basic (but essential) requirements concerning volume and quality of products. Importers, particularly in developed markets, will demand evidence that suppliers have invested in both these directions. In those markets that have seen a saturation of demand for retail distributors own brands, there may now be opportunities for producers own brands to reassert themselves where they are able to supply products meeting customer expectations. However, optimisation of logistics and economies of scale from large production are pushing towards greater integration of fruit juice and soft drink supply. In the Egyptian case, responding to export market requirements may necessitate supplying a broad(er) range of products to achieve necessary volume levels. In turn, in addition to the traditional supply of mango, pineapple, hibiscus etc., Egyptian exporters may need to look towards opportunities to source juices and concentrates of fruits that cannot be met from local fruit supplies and thus be in a position to offer a wide and flexible range of products.
2.5.3
Global Trade Increasing global demand for fruit juices has underpinned a steady increase in world trade. Increasing supply has resulted in falling unit prices for most categories of traditional fruit juices (see Table 2.8). So called non-traditional juices is one of the fastest growing segments in both volume and value terms (see Table 2.9)
155
156
The study team has not focussed on the citrus fruit segment, since the development potential for Egypt in this segment is limited. See footnote 36.
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Table 2.8
World imports of traditional fruit juices Unit 1992 1997 2002 1992-97 a.a.g.r. (%) Orange Juice Quantity Value Unit value Apple Juice Quantity Value Unit value Pineapple Juice Quantity Value Unit value Grape Juice Quantity Value Unit value Grapefruit Juice Quantity Value Unit value Tons thousand $US million $/kg 173 216 1.25 230 189 0.82 295 293 0.99 5.9 -2.6 -8.1 5.1 9.2 3.8 Tons thousand $US million $/kg 593 363 0.61 717 458 0.64 674 343 0.51 3.9 4.7 1.0 -1.2 -5.6 -4.4 Tons thousand $US million $/kg 544 319 0.59 548 357 0.65 680 388 0.57 0.2 2.3 2.0 4.4 1.7 -2.6 Tons thousand $US million $/kg 784 1,131 1.44 1,097 1,178 1.07 2,500 980 0.39 6.9 0.8 -5.8 17.9 -3.9 -18.3 Tons thousand $US million $/kg 2,309 2,845 1.23 2,847 2,659 0.93 3,529 2,951 0.84 4.3 -1.3 -5.4 4.4 2.1 -2.0 1997-02 a.a.g.r. (%)
Source: FAO & study team
Table 2.9
World imports of special flavour fruit juices (i.e. except citrus, apple, pineapple and grape) Unit 1992 1997 2002 1992-97 a.a.g.r. (%) Special Juices Quantity Value Unit value Tons thousand $US million $/kg 744 845 1.14 996 1,096 1.10 1,607 1,437 0.89 6.0 5.3 -0.6 10.0 5.6 -4.1 1997-02 a.a.g.r. (%)
Table 2.10
Imports of special flavour fruit juices by region (tons thousand) 1992 1997 2002 1992-97 a.a.g.r. (%) European Union (15) Middle East Eastern Europe 54.8 24.4 84.4 46.7 131.1 69.1 9.0 13.9 9.2 8.1 0.46 0.35 197.7 317.6 565.1 10.0 1997-02 a.a.g.r. (%) 12.20 Quantity per capita 2002 (kg/capita) 1.50
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Hibiscus juice Hibiscus flowers can be used to prepare tea, juice and jam. Hibiscus is well known as an ingredient in tea preparations (e.g. France, UK, Germany). Further, hibiscus decoctions are also processed into extracts and syrups; hibiscus syrup is mainly drunk in northern and western Africa but is also used in some juice cocktails in Europe. The main producers are China, Thailand, Sudan and Mexico though Sudan and Thailand are most respected for the quality of their product. Smaller suppliers of dried hibiscus flowers include: Senegal, Tanzania, Egypt and, perhaps in the future, Mali. As a consequence of the embargo on Sudan, Egypt has achieved some penetration of the US market by replacing Sudans market share. The USA and Germany are the worlds largest importers of hibiscus. The UK is also important consumer market, but imports already processed hibiscus (tea) from Germany.
Table 2.11 Hibiscus powder imports 1993 USA Tons 1000 $US million Germany Tons 1000 million Source: US Trade, Eurostat 22.9 53.3 1994 2.9 8.7 25.3 54.6 1995 4.0 13.4 29.6 69.0 1996 4.4 15.7 29.2 69.4 1997 5.1 17.7 33.9 89.7 1998 5.2 22.4
European Union (15) The main importers of special flavour fruit juices, and fruit juices in general, in the European Union (15) are France, Germany, Belgium and the Netherlands (see Table 2.12). There is however an important re-export activity for countries such as the Netherlands, Belgium and Germany. There is a large processing activity concentrated in Germany, which has the highest per capita consumption of fruit juices (see Table 2.13), and several juice producers are also located in the United Kingdom. The Netherlands, by virtue of its position as a key entry point for goods into the EU, is a major supplier of juices and concentrates to the EU (15) market.
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Table 2.12
European Union Imports of special flavour fruit juices by country (thousand tons) 1992 1997 2002 1992-97 a.a.g.r. (%) France Germany Belgium/Lux Netherlands UK Italy Portugal Sweden Spain Denmark Austria Ireland Greece Finland TOTAL 46.2 47.9 13.2 22.7 18.4 14.9 3.4 8.6 7.9 4.5 4.4 1.6 2.8 1.1 197.7 75.9 59.6 28.7 23.1 30.8 21.0 17.7 14.6 13.5 8.7 14.1 3.1 4.0 2.9 317.6 116.0 88.3 74.1 57.3 50.0 42.6 25.9 25.6 22.5 20.8 19.5 9.9 6.5 6.0 565.1 10.4 4.5 16.8 0.3 10.9 7.1 38.7 11.2 11.2 13.9 26.4 13.5 7.5 20.9 10.0 1997-02 a.a.g.r. (%) 8.9 8.2 20.9 19.9 10.2 15.2 7.9 11.8 10.8 19.2 6.7 26.6 10.2 15.6 12.2 Quantity per capita 2002 (kg/capita) 1.94 1.08 7,34 3.58 0.84 0.74 2.58 3.13 0.56 3.9 2.41 2.56 0.61 1.16 1.5
Table 2.13
Consumption of fruit juice and nectars, 2002 Litres per capita Germany Austria Finland Denmark Netherlands Sweden Spain France United Kingdom European Union (15) Source: VIGEF 40.2 32.0 32.0 25.3 24.4 23.7 22.0 21.7 21.0 24.2
Eastern Europe Eastern Europe has seen a rapid growth in sales of fruit juices, which increased by 64% between 1998 and 2003 compared to growth of only 18% over the same period for carbonated drinks. Pure (100%) juice is generally perceived as the healthiest option and accounts for greatest volume of sales throughout the region. Nonetheless, nectars have shown the fastest growth, which may be attributable to their lower cost corresponding to lower income levels in the region - and possibilities for combining flavours and fruit varieties. Eastern Europe has a long tradition of producing excellent quality apple and red fruit juices. Even though global soft drink leaders are setting up operations in the region, the market remains dominated by local players. These local suppliers will source from throughout the world so long as they can obtain the required quality-cost combination.
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Nonetheless, large volume imports are likely to remain mainly for cheaper products that correspond to the purchasing capacity of the majority of consumers.
Table 2.14 Eastern Europe imports of special flavour fruit juices by country (thousand tons) 1992 1997 2002 1992-97 a.a.g.r. (%) Albania Ukraine Czech Republic Poland Romania Bosnia Slovakia Hungary Croatia Serbia Slovenia Bulgaria TOTAL 0.0 1.6 0.0 0.3 10.2 0.5 0.0 1.6 6.9 0.3 2.0 1.0 24.4 1.2 13.9 4.5 4.8 0.6 4.3 2.6 2.4 7.0 2.3 1.4 1.8 46.7 21.0 18.8 8.0 6.9 3.9 2.1 1.8 1.8 1.5 1.3 1.3 0.6 69.1 8.6 0.2 48.1 -7.8 11.4 13.9 69.6 -43.0 57.1 54.1 1997-02 a.a.g.r. (%) 78.5 6.2 12.1 7.5 45.2 -13.0 -7.3 -5.6 -26.3 -10.6 -1.5 -19.1 8.1 Quantity per capita 2002 (kg/capita) 6.63 0.39 0.78 0.18 0.18 0.52 0.33 0.18 0.32 0.12 0.63 0.08 0.35
Middle East Saudi Arabia, Oman, Qatar and Bahrain are the largest importers of special flavour fruit juices in the region, though on a per capita basis Qatar and Bahrain are some way ahead of the other two countries.
Table 2.15 Middle East imports of special flavour fruit juices by country (thousand tons) 1992 1997 2002 1992-97 a.a.g.r. (%) Saudi Arabia Oman Qatar Bahrain United Arab Emirates Palestine Jordan Syria Kuwait Libya Lebanon Turkey Egypt Cyprus TOTAL 6.7 0.0 0.8 0.3 13.8 1.0 3.0 0.1 1.0 0.3 54.8 9.5 3.0 3.2 0.2 19.4 0.1 0.7 4.1 0.4 0.2 84.4 6.8 5.6 4.0 2.9 2.6 2.0 0.7 0.4 0.3 0.2 131.1 30.3 -7.3 7.0 -39.8 -24.6 102.4 -18.0 -10.6 9.0 7.3 -6.4 13.3 4.9 74.1 -33.2 90.5 -0.9 -37.1 -7.2 9.1 9.2 0.31 0.35 2.51 1.63 0.78 0.17 1.28 0.36 0.19 0.01 13.5 2.9 3.4 8.0 28.4 2.2 6.5 6.5 59.3 20.2 13.4 12.7 16.0 -5.5 13.6 -4.0 1997-02 a.a.g.r. (%) 15.9 56.3 15.8 14.3 Quantity per capita 2002 (kg/capita) 2.73 7.46 23.00 19.15
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3 Jams
3.1
Table 3.1
Sector Overview
Key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (Key players) Source: Study Team estimates Persons (1000) Number Value 18 14.6 38 32.6 20 18.0 5 9
Table 3.2
Jams: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % % Value 88 17.9 40.9 44 72 34 0.5 0.1 -1.5 19.0 94 1 3
3.2
Production
The Egyptian production of jam was in decline during the 1990s, but has been revitalised by private sector development of exports (Table 3.3). Nonetheless substantial capacity in the public sector is not being utilised (Table 3.2).
333
Table 3.3
Evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 30.0 n.a. 23.9 121 17.9 88 38.0 195 40.0 206 92-00 a.a.g.r. (%) -3 00-03 a.a.g.r. (%) 17 17
Egyptian jam recipes are traditionally based on fruit and sugar (cane). Diet jams have begun to appear. Fruits are purchased during high season, collected, sorted and washed. They are then either processed into fruit juices157 or jams. Some factories will freeze fruit and process them during the low season. Nine main enterprises have been identified, representing a total production of around 37 thousand tons in 2003. In addition, a few smaller companies produce around 1 thousand tons. Two public companies158 have significant capacities but with reduced production. Vitrac is a recognised success story, with a product range including jams, juices and syrups. The company pioneered the export of own label to France and particularly Japan where it accounts for 30% of jam imports. In 2002 Vitrac was sold to the Swiss company Hero159. Halwani Brothers is a subsidiary of the Saudi company of the same name160. The companys product range includes processed fruits (jams, juices, filled biscuits) together with frozen processed meats and vegetables. Its own brand labels have been successful in the USA (ethnic Arab market). Superfoods-Naggar, has a similar profile to Halwani Brothers but with a broader product range161. Kato (NFC) exports mainly to Australia, USA and Africa.
Table 3.4 Key players in the Egyptian Jam sector Production 2003 1000 tons Vitrac (Hero Group) Faragallah Halwani Brothers NFC (Kato Group) Aga Kaha Super foods (Naggar) 26 15 3 1.5 3 6 2.5
157 158
See Section 1. Edfina with production of 1500 tons (against capacity of 5000 tons); Kaha has 1000 tons of capacity that is currently not operational. See footnote163 The company was formed by Syrian-Lebanese entrepreneurs. Products include jams, fruit pulps and drinks (PET packaged), tomato paste, corned beef and processed chicken, sausage meat, frozen processed meat and ready meals.
159 160 161
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3.2.1
Supply of agricultural inputs The range of products reflects the local supply of fruits: figs, pineapple, apple, mango, strawberries, apricots, peaches, guavas, dates etc. The demand for suitable strawberries (i.e. right shape, unit weight, colour) is increasing and pushing for developments in the range of varieties available. The acquisition of Vitrac by Hero has encouraged diversification of sourcing to incorporate the use of imported fruits. Fruits are purchased at the peak of the growing season; delivery to the factory is often organised by traders (i.e. kellalas). Some companies (e.g. Vitrac) contract with farms/orchards directly for the supply of quality fruits and traceability requirements will require firms to increasingly purchase from organised (larger) farms. Larger factories freeze excess fruits for processing in the low season. The devaluation of the Egyptian Pound has provided an accelerator for jam exports. In turn it has meant that jam producers have been in a position to purchase fruits not only at peak season (when prices are lowest). At the same time, the continued enhanced competitiveness of Egyptian fruits (via devaluation) may place jam producers in competition with exporters for local supplies of frozen fruits.
3.2.2
Packaging range The standard packaging range for the domestic market is in glass containers (450 g, 900g)162 and plastic portions for restaurants and hotels. Faragella has also introduced 4kg pails for hotels (also available in supermarkets). Metal tins are normally 800 g.
3.2.3
Technological performance and quality The performance of the Egyptian jam making industry could be raised by the development of fruit freezing (in progress) and introduction of better quality management (e.g. in washing of fruits to retain their quality/value). Introduction of improved technology, products (e.g. diet) and ingredients/additives (e.g. pectin) should improve performance. The purchase of Vitrac by Hero (CH)163 in 2002 demonstrates the effort needed to modernise Egyptian companies. The Swiss firm immediately changed the management, set higher productivity targets and reduced personnel, introduced technological changes, and developed the importation of raw materials during the low season.
162 163
Also smaller size 230g and 380g. The arrival of Hero should benefit the Egyptian FPI as a whole. The company is a leading multinational in the jams and bakery ingredients sector and should bring with it expertise (particularly in ingredients and food additives).
335
3.2.4
Table 3.5
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity New product development Flexibility and service standards Yes, Egyptian fruits and flavours Yes Limited, at a relatively early stage Not yet at levels to be expected for success on export markets Business acumen and self image Yes, good Comments (Information unavailable)
3.3
Domestic Market
The domestic market for jams is estimated at around 18 to 20 thousand tonnes per annum. The overall position of Egyptian producers on the domestic market has suffered from the reduction of production by Edfina and Kaha, but has been stimulated by the expansion of the product range of companies such as Vitrac and the entry of relative newcomers such as Faragalla. The catering market is important but it has not been possible to estimate the relative size of this segment. It has also not been possible to estimate the volume of processed fruits, including jams, being sold for industrial ingredients (e.g. to biscuit production and dairy industry).
3.4

The development of Egyptian exports has been led by the private sector. Sales of jams were traditionally made to Africa, the USA, and Australia in response to demand from ethnic Arab populations. The almost accidental success in the Japanese market came about in response to a local Japanese entrepreneur importing jams produced by Vitrac, with packaging and marketing adapted to the Japanese market. Egypt has positioned itself on the Japanese market using own (producer) brands, in the USA with producer/ ethnic branding and private (distributor) labels, and in Europe largely with private labels. The export data available from the ITC database indicate export sales of only 4 thousand tons with a value $US 4.4 million in 2002 (see Table 3.6). This is considerably below the
336
figures estimated for 2003 on the basis of company interviews, which suggest exports of around 20 thousand tons with a value in the region of $US 18 million.
Table 3.6 Egyptian exports of jam (HS code 2007), 2002 Importing country Total Japan USA Saudi Arabia Tunisia Australia Source: ITC Value $US thousand 4,369 2,735 1,049 339 118 53 Share % 100 63 24 8 3 1 Volume Tons 4,052 2,243 1,138 414 103 67 Share % 100 55 28 10 3 2 Unit value $ per ton 1,078 1,219 922 819 1,146 791
3.4.1
Table 3.7
Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Not yet Yes, for smaller and African markets Yes (e.g. USA, Australia, France) No
3.5
3.5.1
Global trends
Global production and distribution The increasing concentration of modern retail distribution in most of the main markets is pushing the jam industry towards greater concentration. Essentially, large producers are the only ones able to provide sufficient support to marketing their own branded products. An alternative strategy of producing private label (i.e. distributor brands) is possible but also requires sufficient capacity to meet the standards and quality requirements of distributors who normally favour larger companies.
3.5.2
Global trade The leading jam exporters are shown in Table 3.8, which demonstrates the importance of European companies in global trade, alongside other important players such as USA, Turkey and a number of South American countries. To be part of the club of main
337
exporters implies export volumes in excess of 30 thousand tons. Egypt, with exports of around 20 thousand tons164 and growing, is moving towards this level.
Table 3.8 Main jam exporters, 2002 Value of exports $US million World estimation France Italy Belgium Germany Denmark USA Turkey Netherlands Costa Rica Spain United Kingdom Poland Chile China Source: ITC database 898.5 130.9 69.1 68.5 63.8 47.8 42.2 39.2 36.1 34.9 31.9 31.1 27.5 26.7 18.8 21.9 857 Volume of exports Thousand tons 784.4 58.0 60.5 47.1 55.2 35.5 33.7 22.9 46.4 69.3 33.1 13.0 21.6 Unit value $US / ton 1,145 2,255 1,144 1,452 1,157 1,348 1,251 1,712 777 503 964 2,396 1,274 Share of world exports % 100 14 7 7 7 5 4 4 4 3 3 3 3 2 2
Table 3.9
Main jam importers, 2002 Value of imports $US million World estimation Germany United Kingdom France USA Russian Federation Japan Netherlands Belgium Italy Canada Sweden Australia Mexico Saudi Arabia Source: ITC database 789.9 80.9 66.8 63.3 60.7 45.1 34.8 33.3 33.0 27.4 20.7 19.3 15.5 14.6 14.3 Volume of imports Thousand tons 73.4 39.2 58.4 43.9 86.6 13.9 35.4 21.4 18.0 17.0 13.9 10.6 47.6 14.8 Unit value $US / ton 1,103 1,705 1,084 1,381 521 2,510 940 1,540 1,522 1,219 1,388 1,468 307 969 Share of world imports % 100 10 8 8 7 5 4 4 4 3 2 2 1 1 1
164
See section 3.4.
338
4 Frozen vegetables
4.1
Table 4.1
Sector Overview
Key figures, 2003 Indicator Domestic Consumption Production Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Unit Value 24 14 49 29 25 15 4 10
The origins of the frozen vegetables sector goes back some 15 years, when the Egyptian Armed Forces constructed freezing lines set in reclaimed land. These production facilities stimulated the development of frozen vegetables exports and still play a role today, as there are still companies marketing their production165. Egypt is not yet fully at the stage of specialisation and industrialisation of horticultural production processing. In most countries, the development of this processing has been organised around a nucleus of specialised farms, something that has started in Egypt but the development of which needs to continue to be favoured. Currently, the range of Egyptian products is not structured in such away that it corresponds to the demands of many foreign markets. Nonetheless, it has succeeded for some ethnic markets and for customised/specialised labour intensive vegetables (e.g. turned vegetables legumes tournees). Though a rather strong characterisation, the traditional approach has been to run freezing lines to process whatever vegetable, fruit and meats are available so as to maintain capacity utilisation rather than to seek specialisation. Increased specialisation should move the industry towards a position in which it can develop a clear market strategy and in turn for the processing industry to pull agricultural production rather than the opposite way round, which is the current norm.
165
Also about 15 years ago, Sonac was the first citrus and potato packing station to move into freezing vegetables and for export to Saudi Arabia (Abbar & Zaini)
339
Table 4.2
Frozen vegetables: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % % Value 131.7 39.9 44.0 91 94 85 23.4 0.4 -1.9 18.9 211 2 58
4.2
Production
Around ten main private companies largely undertake production of frozen vegetables (see Table 4.4). In addition, army run factories commonly process frozen vegetables for private brands. Of the private companies some are specialised vegetables producers whilst others (mainly jam/fruit processors) process small quantities (a few hundred tons) of vegetables to increase capacity utilisations of their freeing lines. Among specialised producers, a number of companies (e.g. Givrex) have developed higher value-added products through additional processing before freezing (e.g. turned vegetables, artichoke parts etc.). FarmFrites, specialised in French fries (85% of production) has aggressively entered the frozen vegetables sector. As part of the Americana Group it has access to a relatively secure captive market of food service operations, which is an advantage for planning its production strategies. Faragalla is enlarging its freezing capacity, together with investment in marketing capacities and diversification of product range, in order to increase exports. El Aguizy, a leading fresh vegetable exporter, is also investing in IQF freezing.
Table 4.3
Frozen vegetables: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 26.0 98 43.8 143 40.0 131 49.0 170 52.0 184 92-00 a.a.g.r. (%) 7 5 00-03 a.a.g.r. (%) 4 6
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Table 4.4
Main Egyptian frozen vegetable companies Company Production (2002-2003) Thousand tons Montana FarmFrites (Americana) Basmah Faragalla Sonac AGA Cold Alex Givrex 12-17 9 6 5 4 4 3 2
4.2.1
Supply of agricultural inputs The main frozen vegetable is the traditional Egyptian Molokhia, however in response to market demand the Egyptian supply has been broadened to include: okra, artichoke, peas, French beans, carrots, spinach, and turned vegetables (e.g. carrots). Although okra is traditional Egyptian vegetable, the others are processed primarily for export. The supply of vegetables is divided between larger managed farms166 and smaller independent farms. For the latter, crops are purchased via collectors (kellelas). The kellelas typically purchase crops still in the field (i.e. before harvesting) and then organise harvesting and delivery to food processors. Egyptian production has suffered in the recent past from the discovery of residues present in some vegetables, and attributed to the uncontrolled use of polluted water. This led to producers in some potential markets seeking to develop their own production of hitherto Egyptian produce (e.g. Molokhia). Strawberries, also processed by the frozen vegetable segment, are also being developed by Egyptian agriculture. The introduction of IQF (Individually Quick Frozen) provides the right technology to give value to frozen strawberries. Moreover, from the perspective of producers and processors they have several advantages over other frozen vegetables (e.g. French beans): (i) quality management is easier; (ii) as a fresh fruit they can be sold at a premium out of season (e.g. in Europe); they are an important industrial ingredient (e.g. jam manufacture).
4.2.2
Packaging range On the domestic market 400g and 1kg packs are common. For repacking for the export market 8-10kg packs are used. The relative importance of different packaging types could not be established during the company interviews.
166
Estimates, based on an evaluation of production of larger agri-managed farms (Mafa, Nadco, Pico, Dalah, Belco, Ragab, Alexandria Agro, Universal Co, El Aguizy) indicate that this sector probably accounts for 2.5% of total agricultural production and 20% of total (fresh and frozen) production going to export.
341
4.2.3
Technological performance and quality The industry is in the process of upgrading and renewing its freezing equipment and progressively upgrading batch freezing by IQF (Individually Quick Frozen).
4.2.4
Table 4.5
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity New product development Flexibility and service standards Business acumen and self image Comments Limited (managed farms), needs to be organised and proven to export markets Yes (molokheia, okra) Yes Very little (but improvements in freezing lines) Not evaluated Not evaluated
4.3
Domestic Market
Sales of frozen vegetables on the domestic market are estimated to be only around 24 thousand tonnes, with about 90% going to the modern retail distribution sector centred on Cairo. Compared to European consumption per capita levels, the Egyptian market remains small. Assuming that frozen vegetables are consumed only by high-income (Class A/B) consumers, annual consumption per capita levels are around 0.3 to 2kg per capita; this compares to Saudi Arabia (0.6kg), Kuwait (3kg), UAE (5.3kg). The development of the domestic market for frozen vegetables goes hand-in-hand with the broadening of the product range of frozen foods: processed meats and speciality foods, beef and beef-mix burgers167. Interviews with managers in the retail distribution sector indicate fast growth, all be it from a small base, for frozen foods; this segment may be growing by as much as 20-25% per year. The strategy appears to be to provide cheap frozen vegetables to incite consumer purchases in order for consumers to discover the (almost) as good as fresh quality of frozen vegetables.
167
Prepared frozen meals are just beginning to appear on the market (e.g. KOKY brand).
342
4.4

A breakdown of Egyptian frozen vegetables exports by type is shown in Table 4.5, together with the main export destinations for each product in Table 4.6. The dominance of the category frozen vegetables nes complicates the analysis of the main markets by product type, although this may also correspond to the dynamic development of customised frozen vegetables: prepared artichokes for Greece and France, and okra for the USA. The main markets are Saudi Arabia (a third of total exports of frozen vegetables), USA, Greece and France. To the extent that the data reveals a complete picture of Egyptian exports, it is noticeable that with the exception of frozen vegetables nes, exports are highly concentrated in a few markets.
Table 4.6
Egyptian frozen vegetable exports ranked by value (2002) HS Code Product Group Value $US thousands 71080 71090 71022 71010 71030 71029 71021 71040 Frozen Vegetables nes Frozen mixed vegetables Frozen beans Frozen potatoes Frozen spinach Frozen leguminous veg nes Frozen peas Frozen sweet corn Total of above Unallocated 710 Source: ICT Total 8,418 1,621 1,505 770 577 496 470 43 13,900 105 14,005 Share of total (%) 60.6 11.7 10.8 5.5 4.2 3.6 3.4 0.3 100.0
Table 4.7
Egyptian Frozen vegetables, main export destinations and destination share by product group, 2002 HS Code 71080 Product Group Largest market Frozen Vegetables nes Greece 19 France 16 Saudi Arabia 71090 71022 Frozen mixed veg. Frozen beans Saudi Arabia USA 80 49 Qatar Saudi Arabia 71010 71030 71029 71021 71040 710 Frozen potatoes Frozen spinach Saudi Arabia Saudi Arabia 60 56 68 74 100 33 USA 14 Greece 11 France 10 Qatar Germany Israel Qatar 40 27 14 11 Canada France Israel 11 8 7 Sweden Sweden Ireland 2 6 4 10 41 Jordan Israel 2 5 USA Canada 2 4 15 (%) 2
nd
largest
(%) 3 largest
rd
(%) 4
th
(%)
largest USA 13
Frozen leguminous veg Saudi Arabia Frozen peas Frozen sweet corn Total Saudi Arabia Israel Saudi Arabia
Source: ICT
343
Table 4.8
Frozen vegetables: evolution of exports Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value Total Value 1000 tons L.E. mil. $US 8.0 23 6.9. 17.1 49.5 13.4 23.4 44.1 9.8 25.0 89.6 15.0 27.0 96.8 16.2 92-00 a.a.g.r. (%) 10 10 9 00-03 a.a.g.r. (%) 13 22 4
4.4.1
Distribution channels for exports The main distribution channels for Egyptian exports of frozen vegetables are described in Table 4.8.
Table 4.9
Distribution channels for Egyptian exports of frozen vegetables Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Yes (exports to France, Saudi Arabia) Yes (USA, Greece) Yes (USA) No
4.5
4.5.1
Global trends
Global production and distribution Major countries that represent the main competitive threats to Egypt include: Belgium, France, the Netherlands, China, Canada and Mexico. These large countries have frozen vegetable processing industries that have by-and-large developed from processing for their local/domestic market and then the subsequent development of exports. In this respect they tend to have strong market/consumer awareness. By contrast, there are many small producers with a wide geographical spread that have developed exports progressively, first focussing on their local/regional markets and then expanding to other continents. For these countries, the step up from export of fresh produce towards 1stprocessing is a means to increase value added, often by exploiting the advantage of low labour costs. Often, the local domestic market for frozen vegetables remains limited. The global leaders in the sector are the Belgian frozen vegetables industry together with a few leading multinational companies. Belgium and France, have for some time set the standard for product supply from contract farming. They market both their own brands (particularly in the ready meals segment) and also supply retailer own brand (private) labels. Recently there has been some movement towards the south of Europe (Spain, Italy) where the market for frozen vegetables is less mature and there appear to be greater opportunities for growth. These Mediterranean regions may not yet be able to match production costs in the most efficient regions of Europe but their climate favours production of quality vegetables.
344
4.5.2
Export market requirements Producers and exporters are required by the industry to indicate the specific quality of their produce, including size, appearance and other factors (e.g. compliance with appropriate freezing processes). Products must also be maintained at appropriate temperatures during transportation, storage and through to distribution to the point of sale168.
4.5.3
Global demand and trade European Union (15) The EU (15) is estimated to have an annual production of frozen vegetables in the region of 2 million tons per annum; Belgium has a 25% share of this production. Within the EU the market for frozen vegetables has reached maturity and is relatively stable for single variety frozen vegetables. Growth areas are in frozen mixed vegetables and vegetables incorporated in frozen ready meals. On a per capita consumption basis the UK is the largest EU market (offsetting a low consumption of canned vegetables) see Table 4.10. In Mediterranean markets that have been more accustomed to fresh vegetables, the market for frozen foods particularly consumer-ready products is expanding. Key drivers underpinning the development of the market include: convenience meals diversity of choice ethnic and exotic foods safety and health (low fat, sugar and salt; enriched vitamins and minerals) open, honest and informative labelling. The leading suppliers of frozen vegetables to the EU are Belgium (42% of total EU imports169), France (13%), Spain (11%) and the Netherlands (9%). The largest non-EU suppliers are China (4%) and Turkey (2%).
Table 4.10
Per capita consumption of frozen vegetables Kg per capita United Kingdom France Germany Spain Italy 23 12 11 9 6
168
169
See Recommended International Code of Practice for the Processing and Handling of Quick Frozen Foods (Ref. No. CAC/RCP 8-1976). Extra and Intra-EU imports. Eighty percent of EU imports are intra-EU.
345
United States of America The market for frozen vegetables in the USA is slightly more advanced than that of the EU. Currently it is characterised by increasing concentration, with companies such as Nestle, Unilever, and Heinz enjoying market shares near or above 10 percent.
Table 4.11 European Union (15): trade in frozen single vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 988 998 1.01 769 799 1.04 1,815 1,393 0.77 1,573 1,238 0.79 6.3 3.4 -2.7 7.4 4.5 -2.7
Table 4.12
European Union (15): trade in frozen prepared vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 180 170 0.95 100 120 1.20 99 130 1.32 93 126 1.35 -5.8 -2.6 3.4 -0.6 0.5 1.1
Table 4.13
Eastern Europe: trade in frozen single vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 10 6 0.59 154 74 0.48 57 35 0.62 300 157 0.52 18.8 19.4 0.5 6.9 7.8 0.8
346
Table 4.14
Eastern Europe: trade in frozen prepared vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 3 2 0.76 8 4 0.54 2 2 1.05 3 3 0.79 -2.8 0.4 3.3 -8.6 -5.0 3.9
Table 4.15
Near East: trade in frozen single vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 22 24 1.13 26 20 0.75 46 35 0.76 92 48 0.52 7.8 3.6 -3.9 13.3 9.3 -3.6
Table 4.16
Near East: trade in frozen prepared vegetables unit 1992 2002 1992-2002 a.a.g.r. (%) Imports tons 1000 $ million $/kg Exports tons 1000 $ million $/kg Source: FAO 4.1 3.1 0.76 1.2 1.4 1.15 6.3 4.9 0.78 4.4 5.3 1.20 4.4 4.7 0.2 13.7 14.2 0.5
347
5 Tomato products
5.1
Table 5.1
Sector Overview
Key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number Value 20 11 18 18 3.5 6 n.a. >10
Egypt produces around 5 million tons of fresh tomatoes per year. The public sector took the lead in the development of processing capacity (e.g. Kaha), and over the last decade capacity has been increased through private sector investments, both for the production of tomato concentrates and for pastes, sauces and ketchup. In 1990, Heinz began operating in the country (in partnership with Americana) and promoted the cultivation of industrial varieties of tomatoes (i.e. with higher brix dry matter more suited to industrial processing)170. The Heinz brand claims to have a 90% share of the domestic market but newcomers (e.g. Faragalla and Frosty) have entered the market. Also, challenges are coming from abroad (e.g. Oman)
170
Heinz began production using imported tomato paste but has gradually replaced this with locally produced tomatoes. Heinz now claims a 90% share of Egyptian marker for tomato ketchup. Furthermore, 30% of Heinz production goes for export.
349
Table 5.2
Tomato products: production, source and usage (2000-01) Units Production (actual) Production (actual) Production (available capacity) Capacity Utilisation rate
171
Value 101.1 17.9 47.5 38 89 41 0.2 1.0 -0.2 18.9 95 5 1
L.E. million 1000 tons 1000 tons % % % 1000 tons 1000 tons 1000 tons 1000 tons % % %
Private sector share of production (actual) Private sector share of production (available capacity) Exports Imports Change in stocks Domestic consumption Production (output) to consumption ratio Imports to consumption ratio Exports to production (output) ratio Source: CAPMAS and authors calculations
5.2
Production
Egypt produces somewhere in the region of 18 thousand tons of tomato products (paste) per year. This is a limited figure when one considers that total production of the Mediterranean area is around 1 million tons172. Furthermore, Egyptian production is being challenged by the expansion of Chinese production, and the supply of low cost tomato paste from this country is one reason claimed for low capacity utilisation rates in Egypt173. Both cold break and hot break (up to 36 brix) tomato paste are produced. More generally, however, the product range of Egyptian companies remains, for the moment, quite limited; particularly when compared to ranges available in main export markets.
Table 5.3
Tomato products: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 5.5 18.3 89.6 17.9 101.1 18.0 105 92-00 a.a.g.r. (%) 16 00-03 a.a.g.r. (%) -1 5
171
172
173
The data from CAPMAS indicate a significant increase in available capacity between 1999/00 and 2000/01 for both the private sector (from 14.6 to 19.5 thousand tons) and more importantly for the public sector (3.7 to 28.0 thousand tons). These increases result in a drop in capacity utilisation rates from 100% to 81% for the private sector and to 7% (!) for the public sector. EU-Mediterranean countries dominate this production, but around 30% comes from non-EU countries: Turkey 16%, Tunisia 7%. See footnote 28.
350
The main companies in the sector are shown in Table 4.12174. Heinz is investing in new capacity in order to enlarge its product range and to increase production for exports175. Faragalla is, also, broadening its product range for export markets and is beginning to develop on the domestic market.
Table 5.4 Main Egyptian producers of tomato paste (hot and cold break) Company Production capacity (tons per day) Kaha Faragallah Paste & Juice Foodico Heinz / Americana Tamaget Other Factories: Edfina Alsohagy Fibco Frostie 100 80 70 50 600 450 300 200 100 (+new factory 300) 200
5.2.1
Supply of agricultural inputs Most of the supply of fresh tomatoes comes via intermediary collectors (kellelas) during high season when prices are at their lowest. The extent of contract farming, though developing, could not be established.
5.2.2
Packaging range Tomato paste is packed in aseptic bags inside 200 litre drums. Sauces and ketchup are mainly supplied in 250g or 180g glass bottles, though plastic bottles are also being used. Tomato products can also be package in (existing) carton packaging facilities. Access to packaging has been pointed out as a problem. Companies complain that they have difficulty obtaining packaging at competitive prices. This is particularly a problem for glass bottle for which demand has been outstripping supply for some time. Furthermore, there have been no real improvements in the quality (weight, resistance, leakage, shape etc.) of glass packaging available from Egyptian suppliers176.
174
175
176
These companies are involved in the production of tomato paste, but many more companies are engaged in tomato processing (e.g sauces.) As yet, it is not clear what is the impact of the devaluation of the Egyptian Pound on the competitiveness of Egyptian tomato products. The partnership with Americana, which markets products under its own brand and supplies to its network of fast-food companies, helps provide a continuous flow of production. The devaluation of the Egyptian Pound, which provided a boost to exports, highlighted the problems faced by Egyptian processed food manufactures in obtaining adequate supplies of glass packaging.
351
5.2.3
Technological performance and quality [No assessment available]
5.2.4
Business capacity The extent to which Egyptian production currently fulfils some of the main criteria consistent with (international) state of the art business capacity are summarised in Table 5.5. For standard tomato products (concentrates/paste) the global market is very much a commodity market. To be competitive in other segments requires participating in the modern rules of the game: emphasis on product development, broad product range (including convenience foods), promotion and advertising, efficient technology and distribution (from the farm through to delivery to the consumer). To some extent, Heinz provides an example to Egyptian companies, and challenging its dominant market position could provide an accelerator for Egyptian companies.
Table 5.5
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity Comments Moderate; though multinationals and larger companies are able to push contract farming (i.e. grater assurance of fresh product) None No established Egyptian identity. Otherwise via product range of multinationals New product development Flexibility and service standards Business acumen and self image Limited for Egyptian companies. Otherwise via multinationals Needs to be developed Needs to be developed
5.3
Domestic Market
The domestic market for processed tomato products is estimated to be around 20 thousand tons. The performance on the domestic market of Egyptian (based) companies is mixed. As noted earlier, Heinz has achieved a near monopoly of ketchup sales and is well positioned for other related products; to some extent this represents a problem in a market segment that is typically characterised as being innovative (new products) and open to competition. The experience of Egyptian companies indicates that it is important to be able to provide a range of products; this increases consumer recognition and can reduce distribution/delivery costs. Consumer expectations regarding quality, freshness and taste are considered to be high.
352
5.4

Official data on exports of tomato products do not provide a clear picture of the export situation. To date there has been hardly any exports of tomato pastes. For other tomatobased products, these are considered to be food preparations and are not separately identified. On the basis of company interviews, the estimated volume of exports is put at around 3 to 3.5 thousand tons ($US 6 million). The main target for exports is the Gulf Region and N. Africa; for, example Heinz claims that 35% of its Egyptian production goes to the Gulf region177. Moreover, it appears that the companies products are competing well against products form Asia (esp. China) in the Gulf region.
5.4.1
Distribution channels for exports The main distribution channels for tomato products are described in Table 3.7.
Table 5.6
Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Food service Own import company Comments No Yes Yes (e.g. Saudi Arabia, Africa) Limited (e.g. Heinz to Saudi Arabia, Kuwait, UAE Limited (e.g. Heinz-Americana) No
5.5
Global trends
There has been increasing global competition for tomato products over recent years, spearheaded by the rapid rise in Chinese exports of tomato paste and between other major suppliers of canned tomatoes. In 2003, China became the worlds largest exporter of tomato paste by volume (404 thousand tons at a total value of $US 206 million) with a market share of 35 percent. Thus China for the first time overtook the EU15 (extra-EU), whose market share fell to below 30 percent. All other major exporters (Turkey, USA, Chile, Brazil) had market shares below 15%. China remains only relatively small player in the canned tomato segment, where the EU15 remains the largest exporter, followed by USA, Turkey, Argentina and Canada. Both Turkey and the USA have seen significant increases in their market shares over recent years178.
177
178
It may be noted that, despite the fact that Turkey is a far more important exporter of tomato products, the export performance of Heinz-Egypt compares favourably with that of Heinz-Turkey. This may reflect good competitiveness of Egyptian production and/or the relative specialisation of Heinz-Egypts production that forces it towards exporting. Source: US Department of Agriculture FAS Tomato Products Situation & Outlook June 2004. Data from Global Trade Statistics
353
5.5.1
Global production and distribution China has become the Worlds largest producer of fresh tomatoes and one the largest exporters of processed tomatoes. Data on Chinas production is difficult to obtain, but it is expected that production will increase and, combined with improvements in yields and quality, that China will significantly increase its export shares over the coming years. The arrival of China has had a significant impact on 1st-processing of tomatoes at a global level179. Leaving aside the market for basic commodity tomato products, global demand is being shaped by consumer preferences for convenience foods and out-of-home eating behaviour. This pushes up demand for tomato products in the food service and prepared meals segments. In the sauces and condiments segment, success typically requires strong investments in product branding, which in turn is strengthened through active cooperation with the retail distribution sector.
5.5.2
Export market requirements To all intents, basic tomato products (paste, concentrate, canned) are commodities and the main requirement is to be able to produce at competitive prices. At the same time, consumers expect quality criteria to be met, which means that competitiveness will be adversely affected if the quality of fresh tomatoes is for any reason not maintained. Success in other segments, in addition to the quality of the product itself, typically requires heavily investing in establishing and maintaining product branding.
179
In fact, the proposed purchase by a Chinese company of a French cooperative tomato processor may be illustrative of a shift in Chinese strategy. The French production facility would use locally produced tomatoes for high value added products for both European and other export markets (including China itself), while Chinese tomato paste would be imported for the production of low value added products.
354
6 Dried onions and other dried vegetables
6.1
Table 6.1
Sector Overview
Key figures, 2003 Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Export data refer to dried vegetables Source: Study Team estimates Persons (1000) Number 13.5 20.0 12.1 17.7 1.2 8 Value 0.3
6.2
Production
In 1953 the first dehydrating unit was set up by foreign investors in the city of Port Said. This investment set out the path for future growth markets: industrial ingredients for products such as soups and sauces, and for the fast food business. In the 1960s, processing of dried onions started south of Cairo and later 3 factories were set up in Alexandria and the Delta area. Currently there are 8 dehydration units located in the geographical triangle of El Menia Port Said Alexandria; with average distances between supplying farms and dehydration units of around 50 km180. The main dehydrated vegetables produced in Egypt are onions, leeks and garlic, along with Molokhiyah181 Key players in the sector include: Giza National Dehydration (Kato group), which has maintained strong links to MacCormik (world leader in spices); El Nanaeiah (Gharieb group), which has strong ties to Germany; New Benisuef (El Shenawi group), which has 3 dehydration lines and operates freely on the market;
180 181
Some onions are supplied, however, from more distant farms. A green leafed plant, indigenous to Egypt, and popular in the Japanese market.
355
El Nasr Dehydration, former public enterprise that encountered difficulties after privatisation but is now performing well under new ownership; El Tanbouli in association with Kato has set up a new line in Beni Sueff.
In addition, Agro Green and AgroMisr, operating smaller units are, nonetheless, active in the sector. Further, Sekem, is the Egyptian leader in the organic segment. The value of production is not available from any known source, but its evolution has largely followed the success of Egyptian exports (annual increase in the region of 1,000 to 1,500 tons).
Table 6.2 Dried onions: evolution of production Units 1992 2000 2001 2002 2003 2004 forecast Volume Total Value 1000 tons L.E. mil. 9.2 10.5 12.0 13.5 14.0 92-00 a.a.g.r. (%) 00-03 a.a.g.r. (%) 14
Source: Study team estimates based on industry sources
6.2.1
Supply of agricultural inputs Egypt has a long tradition in the cultivation of onions. Production takes place mainly in the southern part of the country and reaches 750 thousand tons per annum182. Early investments in the sector revealed the importance of cultivating industrial varieties of onions suitable for dehydration183: high dry matter content (e.g. white globe), ability to support dehydration whilst retaining white colour etc. Although the industry has matured over the years, it still obtains a large part of its supply of raw materials from the surplus supply of fresh onion production184, while there is little contract farming of onions. With the possibility of two crops per year, dehydrating units usually work for up to 10 months per year.
6.2.2
Packaging range Dehydrated onions are typically supplied in 10kg (multiple layer) polythene bags.
6.2.3
Technological performance and quality Four factories have invested in new fully automated continuous flow dehydrating lines, for which bigger lines can reach an output of 14 tons per day. The investments in these new lines have been mainly geared through USAID soft loans programmes and utilise
182 183
184
Exports of fresh onions averaged at around 140 thousand tons annually for the period 1996 to 2001. Traditional local varieties have lower dry matter content which raises the cost of industrial dehydrating and, hence, the supply price. Traders (kellelas) supply 90% of the industry during the peak production season.
356
American technology (total investment close to $US 15 million). These same four factories (units) have been trained in HACCP management and are run accordingly. Investments in metal detectors and colour sorters have helped improve the quality (and hence value-added), while assisting exporters to gain direct access to industrial customers (e.g. in the EU)
6.2.4
Table 6.3
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity New product development Flexibility and service standards Business acumen and self image Comments Remains a challenge for the Egyptian industry. Market leaders are investing to assure quality and quantity of supplies Not applicable standard product Not applicable standard product Improved grading according to customer requirements The importance of the need for quick delivery is understood Improving with the specialisation of market leaders
6.3
Domestic Market
The domestic market for dried onions remains small, with the main customers being producers of soups, sauces and tomato paste products. Annual sales increases to the domestic market over recent years are estimated at around 100 tons per annum.
6.4

Europe is the main market for Egyptian exports of dried onions, with 90% of Egyptian exports going to Germany, the Netherlands and the United Kingdom185. The United Kingdom still maintains strong links to commonwealth countries and tends to import high quality products that are either destined for domestic distribution or further processing. The Netherlands and Germany import both for further processing and for re-export, either within the EU or beyond. The price for the EU market is formed in Hamburg/Hanover. Currently, Egyptian producers receive a fair price for the production. Improvements in the quality of production that has come on stream in early 2004 should enable a 10%
185
Egypt exports 7-10,000 tons of dehydrated vegetables to the EU (largely as an ingredient for soups and sauces). The EU duty free quota has been increased from 7 to 16 thousand tons per annum. Egypt is unlikely to reach this level in the near future due to the high price obtained for fresh onion exports in 2004.
357
increase in value (e.g. $US 1,800 per ton for kibbled grade, $US 2,000 per to for fine powder)
Table 6.4
Dried vegetables: evolution of exports Units 1996 2000 2001 2002 2003 2004 forecast Volume Total Value Total Value 1000 tons L.E. mil. $US 9.2 55.9 16.1 10.9 60.9 16.5 12.8 73.4 16.3 12.1 105.8 17.7 14 120 20 96-00 a.a.g.r. (%) 4 2 0 00-03 a.a.g.r. (%) 4 20 2
6.4.1
Table 6.5
Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Producer partnerships Own import company Comments Starting for high grade products Control virtually all export volumes Not applicable No No
358
7 Olive oil and table olives
7.1
Table 7.1
Sector Overview
Key figures, 2003 Value Indicator Domestic Consumption Production Unit Tons (1000) $ US million Tons (1000) $US million Exports Tons (1000) $US million Employment Enterprises (key players) Source: Study Team estimates Persons (1000) Number 6 5 5 80 8 160 Olive Oil 3.5 Table Olives 190
7.2
Production
Seven main companies dominate Egyptian production (see Table 4.21). Leading firms in the sector offer a broad range of products: all qualities of olive oils and many forms of table olives (further processed and marketed on the domestic market and in the Gulf region). The biggest producer of table olives in Egypt is Dr. Olive (Zagazig), with an annual production of about 10 thousand tons (of which 3,000 tons are exported to Libya and the Gulf states). It is followed by Wadi Foods, Hi Tadi and El Samahy. Beyond this there are numerous smaller traditional pickling plants producing around 100 thousand tons per year. The only top notch producer of quality table olives in Egypt is Egyptian Canning Co. (Americana), which produces 1000 tons of top quality canned and in glass jar table olives for export to N. America and Australia, with local consumption of 2-300 tons by American Pizza Hut franchises and fast food chains.
359
Table 7.2
Main Egyptian producers of olive oil Company Share of Egyptian exports of olive products (%) Mina Oils Dr. Olive El Salheiyah Wadi Foods NSPO EMCO Janaclis 50-60 15 13 7 6 5 4
Table 7.3
Olive oil and table olives: evolution of production Units 1991/92 1999/00 2000/01 2001/02 2002/03 prov. 2003/04 prov. 91/9299/00 a.a.g.r. (%) Table olives Olive oil 1000 tons 1000 tons 38.5 85.0 70.0 135.0 160.0 99/0002/03 a.a.g.r. (%)
10 -
23
1.1
3.8
8.0
17
28
7.2.1
Supply of agricultural inputs Farming of olive trees in Egypt is scattered. Estimates suggest that around 100 thousand feddans of olive groves, alongside which olive trees are planted at the side of roads etc. In 2002/2003 Egyptian production of olives amounted to 318 thousand tons186, which represents around 2-4% of annual world production. A few large farms have been established with significant production volumes. These larger plantations are able to benefit from better organisation and quality assurance. Out of a typical annual production of 270 thousand tons, approximately 70% goes to pickling for table olives and the remainder for crushing to produce olive oil (7-8,000 tons) Each oil mill tends to work with preferred suppliers and regions; for example, Mina sources most of its olives from Siwa.
186
Egyptian production of olives ranges from about this figure (a good year) down to about 200 thousand tons in a bad year.
360
7.2.2
Packaging range Olive oil is packed in metal tins of 5-10 litres and, also, in high quality design glass bottles (0.5 or 1 litre). Table olives are mainly packed in glass jars (400g, 800-1000g). For up-market packaging of olive oils for both the domestic and export market, Egyptian companies import glass bottles from Italy and France.
7.2.3
Technological performance and quality [No assessment available]
7.2.4
Table 7.4
Egyptian proximity to state of the art business capacity Criteria Guarantee of raw materials (quality and quantity) Original / genuine products Product authenticity New product development Flexibility and service standards Business acumen and self image Comments Developing with new large scale farms Egyptian labelled extra virgin oil Idem Yes, for table olives Not yet, still a small scale supplier Yes for some leading companies
7.3
Domestic Market
Olive oil is not widely consumed on the domestic market but table olives are popular. The domestic market for olive oil is estimated to be slightly above 600 tons per year, with Mina Oils having the largest domestic market share (>50%). The position of Mina Oils is being challenged by other producers, particularly using improved packaging (e.g. glass bottles imported from Italy and France).
361
Table 7.5
Olive oil and table olives: evolution of consumption Units 1991/92 1999/00 2000/01 2001/02 2002/03 prov. 2003/04 prov. 91/9299/00 a.a.g.r. (%) Table olives Olive oil 1000 tons 1000 tons 38 77 57 75 190 138 9.2 99/0002/03 a.a.g.r. (%) 35.1
1.0
1.5
1.0
1.5
3.5
2.5
5.2
32.6
Source: International Olive Oil Council
7.4

Italy is the most important export destination for Egyptian olive oil, reflecting the integration of a few Egyptian producers/exporters into the Italian global olive oil marketing industry. Other companies (e.g. Mina Oils, Dr. Olivee and Wadi Foods) have developed their export sales independently, focussing on the Gulf, USA and France.
Table 7.6
Olive oil and table olives: evolution of exports Units 1992 2000 2001 2002 2003 2004 forecast Table olives Olive oil 1000 tons. 1000 tons 9.0 1.1 10.0 3.6 12.0 3.8 25.0 4.0 80.0 5.0 55.0 5.5 92-00 a.a.g.r. (%) 1 16 00-03 a.a.g.r. (%) 100 12
7.4.1
Distribution channels for exports The main distribution channels for olive oil and olives are described in Table 4.24.
Table 7.7
Distribution channels for Egyptian exports of fruit juices and concentrates Channel Further processing industry Traders Wholesalers Modern (centralised) retailers Own import company Comments Most exports Yes Yes No
7.5
7.5.1
Global trends
Global demand Global demand for table olives and olive oil has been increasing steadily but considerable variation exists across countries in consumption per inhabitant. Within the EU15,
362
consumption is as high as 25kg per person in Greece, 12kg in Spain and Italy, 6.9kg in Portugal, and 1.5 kg in France. This can be compared to a figure of about 0.5kg per person in emerging markets such as USA, Japan, Australia and Eastern Europe. In developed country markets, consumer preferences are strongly oriented to high quality olive oils (i.e. virgin and extra-virgin); market shares for these high quality oils are: 96% in France, 90% in Germany, 69% in the United Kingdom; 61% in Canada, 54% in the USA and, by contrast, 37% in Australia and Brazil.
Table 7.8 Olive oil: evolution of demand (consumption) by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) EU USA Canada Australia Japan Others World Total 1214.5 88.0 10.0 13.5 4.0 336.5 1666.5 1835.0 194.5 24.5 31.0 30.0 475.5 2590.5 1894.5 188.5 24.0 27.5 31.5 440.5 2606.5 1918.5 184.0 25.0 31.5 30.5 505.0 2694.5 4.2 17.2 19.6 18.1 49.6 7.2 9.2 00/01-02/03 a.a.g.r (%) 2.2 -2.7 1.0 0.8 0.8 3.1 2.0
Source: International Olive Oil Council and authors calculations
Table 7.9
Table olives: evolution of demand (consumption) by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) EU USA Canada Australia Japan Others World Total 421.5 957.0 346.5 169.5 12.0 7.5 461.0 185.0 20.5 14.0 2.0 621.0 1303.5 525.0 205.0 22.0 16.0 2.0 612.5 1382.5 538.5 205.0 23.5 17.0 2.0 938.0 1724.0 2.9 1.8 11.3 13.3 8.1 6.4 00/01-02/03 a.a.g.r (%) 8.1 5.3 7.1 10.2 0.0 22.9 15.0
7.5.2
Global production and distribution Annual production of olive oil is highly variable, mainly due to the sensitivity of olive production to climatic conditions and, also, biological alternance (i.e. high production followed by low production). Nonetheless, the underlying trend in global production shows a step like development over the last 20 years, resulting from new plantations and more rational tree farming that has increased yields. Despite year on year variations in production levels, the main operators on the world market are able to maintain reasonably stable consumer prices. Spain and Italy are the main EU producers, followed by Greece, all having strong domestic markets for olive oil (Table 7.10). Spain, through the planting of new largescale farms has developed its position within the EU market organisation; Italy has
363
retained a strong position through active importation and re-export; Greece has strengthened its position through better organisation and greater quality control. Greece and Portugal export virtually exclusively directly for the consumer market (i.e. consumer packaged exports), 90% of Italian exports are also directly for the consumer market, whilst Spain still retains a substantial bulk export capacity (35% of exports).
Table 7.10 Production of olive oil, 2000-2003 Average annual production (tons thousand) Spain Italy Greece Syria Turkey Tunisia Morocco 978.8 633.7 405.6 125.8 121.3 111.3 45.0 Share of world production (%) 38.0 24.6 15.8 4.9 4.7 4.3 1.7
Table 7.11
Production of table olives, 2000-2003 Average annual production (tons thousand) Spain Italy Greece Egypt Turkey Syria Morocco 467.6 66.5 104.3 157.5 156.0 121.3 82.5 Share of world production (%) 31.5 4.5 7.0 10.6 10.5 8.2 5.6
7.5.3
Export market requirements High quality at appropriate cost is a key requirement for export markets. To achieve this normally means having a coherent system at the collecting and crushing level of production, combined with a concentrated/focussed export offer. The capability to analyse and certify the specification (virgin, extra-virgin) is also important. These factors favour the development of large-scale production of olives (i.e. large farms able to assure high yields and quality control).
364
7.5.4
Global trade Global exports187 of olive oil have reached a volume of 450 thousand tons, and just short of 400 thousand tons of table olives. The EU(15) is the dominant exporter, accounting for about two-thirds of olive oil exports and half of table olive exports. The global trade balance in olive products is fragile with increasing supply bringing downward pressure on prices.
Table 7.12
Olive oil: evolution of export by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) Italy* Greece* Spain* Portugal* Syria Tunisia Turkey World Total * Extra-EU Source: International Olive Oil Council and authors calculations 161.5 10.0 337.0 66.5 6.0 65.8 6.4 173 10.0 88.3 17.3 10.0 95.0 92.0 502.0 182.9 10.0 112.5 16.2 5.5 22.0 28.0 394.5 176.1 15.0 107.0 13.1 30.5 38.5 74.0 479.0 -5.2 24.8 4.1 10.0 5.2 3.0 10.5 00/01-02/03 a.a.g.r (%) 0.9 22.5 10.1 -13.0 74.6 -36.3 -10.3 -2.3
Table 7.13
Table olives: evolution of exports by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) Greece* Spain* Portugal* Morocco Syria Turkey Egypt Argentina World Total * Extra-EU Source: International Olive Oil Council and authors calculations 20.0 206.5 8.0 22.0 86.4 2.7 47.5 31.0 165.7 5.0 62.5 8.0 32.0 12.0 29.0 364.0 34.0 172.0 3.1 61.0 16.0 56.0 25.0 24.0 421.5 30.0 188.8 4.1 52.5 6.0 43.0 80.0 35.0 469.0 3.8 5.8 14.9 3.5 6.7 6.4 2.8 00/01-02/03 a.a.g.r (%) -1.6 6.7 -9.4 -8.3 -13.4 15.9 158.2 9.9 13.5
187
Excluding intra-EU trade.
365
Table 7.14
Olive oil: evolution of imports by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) EU* - Italy* - Spain* USA Canada Japan Australia Brazil World Total * Extra-EU Source: International Olive Oil Council and authors calculations 125.5 95.7 26.7 90.0 10.0 4.0 13.5 13.5 310.0 127 110.8 15.8 200.0 25.5 29.0 30.0 25.0 517.0 42.5 40.7 1.6 193.0 24.0 31.5 26.5 22.5 437.0 93.5 74.3 18.2 191.5 25.0 30.5 31.5 21.0 492.5 0.1 1.5 -5.1 8.3 9.8 21.9 8.3 6.4 5.2 00/01-02/03 a.a.g.r (%) -14.2 -18.1 7.3 -2.1 -1.0 2.6 2.5 -8.3 -2.4
Table 7.15
Table olives: evolution of imports by region/country (thousand tons) 1990/91 2000/01 2001/02 2002/03 90/91-00/01 a.a.g.r (%) EU - France - Germany - Bel-Lux - Italy USA Brazil Switzerland Canada Saudi Arabia World Total * Extra-EU Source: International Olive Oil Council and authors calculations 213.0 41.5 28.2 4.3 1.2 6.3 68.0 40.5 4.0 12.0 56.5 26.4 12.1 5.5 3.8 111.0 45.0 21.0 20.5 15.0 358.0 58 23.4 13.3 5.6 5.9 113.0 50.0 30.0 22.0 18.0 400.0 73 34.8 12.3 6.5 5.6 115.0 46.0 40.0 23.5 20.0 449.5 5.3 3.1 -0.7 10.9 16.4 -4.9 5.0 1.1 18.0 5.5 00/01-02/03 a.a.g.r (%) 13.7 14.8 0.8 8.7 21.4 1.8 1.1 38.0 7.1 15.5 12.1
366
8 Meat products188
Egypts production of Meat (Beef & Mutton) stands at 560,000 tons per/annum, however due to high demand and imported Animal feed, additives and veterinary medicines the price is high (28 35 LE/kg) therefore Egypt imports 150,000 tons of Frozen Beef from USA, Ireland, Australia, New Zealand, Uruguay, Brazil, India, Argentina and Sudan valued at 250 million USD mainly for processing into value added meat products (Luncheon, Canned Beef, Franks etc) also for retailing major processors are Faragallah, Halwani Bross, Royal Beef (Naggar Group), Beefy, Meatland, Mitco, Moamen, Kangary, Bedayah,. EU food safety commission prohibits import of Egyptian meat into EU until EU requirements are met Egypt also follows a rigid import policy on Frozen Beef to ensure safety from diseases specially BSE (Mad Cow disease). Egypts Halal Beef has a potential ethnic market in EU, some exports of fresh & processed beef is done to M. East & Africa. A trial shipment of chilled Beef from Sudan is in progress, which if successful is expected to reduce local Beef prices in Egypt, the same will be done with Ethiopian imported chilled beef.
188
Source: MALAR Veterinary Services
367
9 Poultry189
Egypt produces 720 million chickens per annum, which covers all its local demands. Consequently Egypt does not import frozen chicken meat but does import some live dayold chicks of certain varieties for breeding & egg laying and also day-old live ducklings from France. The per capita consumption of poultry meat rose to 11 kgs/annum and 110 eggs / annum local production of table eggs stands at 7.2 billion eggs/annum. The major problem facing poultry farms (18000 registered) is the rising cost of imported poultry feed components, veterinary medicines. Value added poultry products (e.g. coated, pre-fried, luncheon, franks, etc.), are increasing in popularity. Leading processors include: Cairo Poultry Co.(Koki-Americana Group), Faragallah, Basma, Momen, Galina, Wiso, El Maraai (Supper foods), Halawani Bros., and Kenzy. The poultry production & processing industry employs 2 million persons with investments of 15 Billion LE and has potential for exports of halal poultry to EU once EU Commission on Food Safety requirements are met and Egypt is lifted off the current embargoed list.
189
Source: Egyptian Poultry Association
369
10 Seafood190
Egypt produces 800,000 tons per annum of seafood from its aquatic resources in the Mediterranean, Red Sea, Nile River and lakes. Egypt was placed in an embargo for exporting to EU since 1997 due to delays in responding to EU Food Safety Commission requirements on HACCP in seafood processing plants in Egypt, the estimated export potential market loss is $US 100 million per annum which is now down to $US 6 million from 2 approved plants in Port Said & Alexandria when the embargo on sea fish was lifted in January 2004. The embargo remains on farmed fish and bivalves till further assurance of compliance to EU Standards is achieved. Egypt exports expensive fresh fish varieties like sea breams, sea bass, grouper and frozen octopus, mainly to Italy & Japan. Egypt imports 150,000 tons per annum of frozen herring (for local smoking), mackerel and sardines (for canning), and salmon (for smoking); the main suppliers are Ireland, UK, Holland & Norway.
190
Source: MALR Veterinary Services
371
11 Soft drinks191
Egypt is a large producer and consumer of soft drinks with majority of the 80 million cases (24 packs) market split between PepsiCo (50%) and Coca Cola (45%) groups plus a small share for Schweppes, Fayrouz and Aga (5%). Carbonated beverages are charged 30% additional production tax (plus 10% sales tax), which is one of the main restrictions to export potential to MENA markets. The main packaging is returnable glass bottles with an increasing share of one way PET and glass bottles, and steel cans (produced locally). Concentrates are mainly imported specially for Pepsico & CocaCola, an increasing number of plants are using locally made fruit concentrates (especially mango) also a new bottling plant (Sahara) is making its own version of Coca beverages.
191
Source: company interviews
373
12 Bottled natural and mineral water
Egypts state owned potable water authority produces 8 million cubic litres of drinking water daily. However many argue that the quality & sanitation of the water & network is below standards, therefore what began as a market for tourists, (bottled water) developed into a bigger industry comprising 10 brands mainly for local consumption and some exports to Cyprus, Malta, Palestine, Libya, Greece & UK (Schweppes) some products are fruit flavoured and also sparkling. The total market size is estimated it 1.5 million cartons/annum (12 bottles).
Table 12.1 Key players in the bottled water sector Baraka (Vitor) Siwa Schweppes Safi (military) Nestle (bottled by Baraka) Aqua Siwa (Sadat group) Hayat (Mansour Group) Aqua Delta Coca Cola Nubia (currently closed)
375
13 Confectionery and snacks
13.1
Confectionary
The total domestic market for confectionery is estimated to have a value of L.E. 2.169 billion, with an annual growth rate of around 17%.
Table 13.1
Breakdown of the Egyptian confectionary market by product (2003) Share (%) Chocolate Gum Candy / sweets Cakes Biscuits Other Total of above Source: AC Nielsen 26 10 10 7 21 26 100
Table 13.2
Key players in the confectionary sector Cadbury / BimBim Honeywell Horriya 2000 Biscomisr El Query Group (El Shamedan) Bezri Group (Edita, Hostess) Ocean Foods Family Foods (Kraft) Faragallah Auer-Portsaid
13.2
Snack Foods192
Egyptian consumption of the main snack groups is estimated at L.E. 360 million per annum for potato chips and L.E. 150 million for extruded corn puffs, with market growth of around 8.5% per annum.
192
Potato chips and puffed-extruded corn
377
14 Tobacco and cigarettes193
The Ministry of Health Study on chest disease in Egypt estimates that there are 14 million smokers in Egypt, consuming 95 billion cigarettes (and equivalent) per annum. The biggest tobacco producer in Egypt is Eastern Co. producing 220 million cigarette/day of 10 local & foreign brands. Egypt imports tobacco for $US 220 million per annum. Trials were made to farm tobacco plants locally to reduce imports, but production levels are small. Egypt also exports L.E. 120 million per annum of cigarettes, Cigarillo and water pipe tobacco (with Molasses or fruit flavored) to GCC, Tunisia, Libya, Palestine, Russia, Lebanon, Cyprus, Albania and COMESA. The tobacco Industry in Egypt provides 800 millions LE in Tax as state income. There are 12 factories producing tobacco products in Egypt.
193
Source: Eastern Tobacco Company
379
15 Sugar and molasses194
The total market demand in Egypt of refined sugar stands at 1.8 million tons per annum out of which 1.4 million tons is produced from local ingredients, both sugar cane and sugar beet, and 400,000 tons are imported in crude form for refining locally in Egypt, mainly from Caribbean Countries (Cuba). Egypt holds the highest sugar cane production record of 50 tons per feddan. Egypt exports molasses as a by-product of sugar cane processing. In 2003 the total exports of molasses were valued at $US 23 million mainly to UK, Spain, Holland, Canada and USA. The import of crude sugar is controlled by the Ministry of Supply however importers of refined sugar are free to import for their own needs, though mostly imported refined sugar is not competitive against locally refined or produced sugar.
194
Source: Sugar Chamber of Commerce - Cairo
381
16 Edible Oils195
Egypt is a net importer of vegetables oils due to shortage of oil seeds planted in Egypt (cotton seed, soy, peanut, sesame, sunflower seed, canola). Egypt consumes 1.2 million tons per annum of oil, of which only 20% is produced from locally grown oil seeds - the rest is imported either as seeds for local crushing & processing (soy, sunflower seeds) or in crude from for local refining, processing & bottling (palm oil mainly from S. E. Asia).
Table 16.1
Key players in the oil sector Extraction, refining & bottling Tanta Oil Kafr el Zayat Oil Alexandria Oil Extracted oils Safola (Ajwaa) Arma Alex Seed IFFCO Abu Seadah
195
Source: Edible Oil Chamber - Cairo
383
VII-C Local Assessment - Supplementary Tables
385
1 Supplementary Tables
Table 1.1
Food and drinks forecast (Egypt)
2003 Consumer expenditure
2004
2005
2006
2007
2008
Food, beverages & tobacco (US$ m) Food, beverages & tobacco (% of household spending) Food
20,680 21,033 22,332 23,271 24,112 25,436 40.2 40.5 40.8 40.9 40.9 40.9
Meat consumption (kg per head) Milk consumption (litres per head) Fruit consumption (kg per head) Vegetable consumption (kg per head) Confectionery, sales volume ('000 tonnes) Beverages
25 51 94 177 84
25 52 95 178 85
26 52 95 179 86
26 53 97 180 88
26 53 99 181 89
27 54 100 183 90
Coffee consumption (kg per head) Tea consumption (kg per head) Alcoholic drinks, sales volume (m litres) Soft drinks, sales volume (m litres) Tobacco
0.09 0.80 77 1,539
0.09 0.80 79 1,589
0.09 0.81 81 1,657
0.09 0.81 84 1,737
0.09 0.81 87 1,835
0.10 0.82 91 1,945
Cigarettes, sales volume (m units) Source: Economist Intelligence Unit.
64,271 65,107 65,943 66,778 67,624 68,480
387
Table 1.2
Available and actual capacity for the Public Sector selected product groups, 2001-2002 Available capacity Value million) Vegetables Canned cereals Tomato sauce products Fruits Raisin Jam Cheese & Dairy Cooked cheese White cheese Dry cheese Blue Cheese Yoghurt Ice cream powder Source: IDSC-CAPMAS 91.3 38.5 21.9 3.8 8.5 2.6 5600 7700 1500 240 3200 200 8.6 11.0 12.5 0.1 5.2 0.0 1100 2200 900 6 2000 1 0.4 81.1 43 22400 0.4 9.3 43 2900 14.9 30.0 4700 7200 6.3 6.6 2700 2200 (L.E. Volume (tons) Actual capacity Value million) (L.E. Volume (tons)
388
Table 1.3
Available and actual capacity for the Private Sector selected product groups, 2001-2002 Available capacity Value (L.E. 1000) Frozen Fruit & Vegetables Frozen vegetables - other Mixed frozen vegetables Frozen Molokhia Frozen Ocra Frozen artichoke Frozen potato Frozen strawberries Other Frozen fruits Dried vegetables Dried vegetables - other Dry Ocra Dry onion Dry garlic Dry parsley Ketchup & tomato products Ketchup Tomato sauce Other tomato sauce products Tomato concentrate Fruit juice and jam Fruit juice Other fruits and juices Mango juice Guava juice Apricot juice Fruit concentrates Jam Dairy products Cheese Cream Yoghurt Butter Other dairy 169,572 1,698 103,818 5,022 14,742 151,017 1,412 102,474 4,936 14,742 401,178 5,127 40,523 3,549 68 16,810 71,004 376,454 5,127 40,465 3,538 68 16,803 67,891 386,487 36,328 42,530 1,749 381,924 30,838 42,530 1,749 4,025 25 52,702 166 34 4,025 25 36,184 166 34 71,419 8,677 49 750 365 57,910 11 80 71,419 8,677 49 750 365 57,910 11 80 Actual capacity Value (L.E. 1000)
Figures based on company reports, as units of measurement differ it is not possible to estimates quantities/volumes Source: IDSC-CAPMAS
389
Table 1.4
Egyptian trade in cheese & curd (HS code 0406) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million -32.58 -28.77 -20.88 -15.01 -5.80 -2.5 -33.0 -17.5 1.750 2.366 2.546 n.a. 0.195 6.2 -46.4 -21.7 21.88 16.39 9.07 n.a 92.35 -5.6 54.1 17.4 38.27 38.78 23.09 23.05 17.98 0.3 -17.5 -8.1 1.841 1.927 1.076 n.a. 1.433 0.9 -7.1 -2.7 3.09 5.19 2.05 n.a 8.50 10.9 13.1 11.9 5.69 10.01 2.21 8.04 12.18 12.0 5.0 8.8 1999-2003 1994-2003
Source: CAPMAS
Table 1.5
Egyptian trade in vegetables (uncooked, steamed, boiled) frozen (HS code 0710) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million 8.25 13.00 11.92 20.08 15.89 9.5 5.2 7.6 0.822 0.942 1.091 n.a. 0.583 2.8 -11.3 -3.7 0.44 0.32 0.07 n.a. 0.01 -6.3 -62.3 -37.5 0.37 0.30 0.07 0.02 0.00 -3.7 -66.6 -39.8 0.758 0.695 0.572 n.a. 0.718 -1.7 0.8 -0.6 11.37 19.14 20.98 n.a. 22.14 11.0 3.7 7.7 8.62 13.30 11.99 20.10 15.90 9.1 4.6 7.0 1999-2003 1994-2003
Source: CAPMAS
390
Table 1.6
Egyptian trade in vegetables, dried, not further prepared (HS code 0712) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million 17.38 17.03 13.18 17.55 20.89 -0.4 5.2 2.1 3.527 1.491 2.313 n.a. 1.786 -15.8 4.6 -7.3 0.00 0.06 0.04 n.a. 0.09 100.5 9.0 52.9 0.01 0.09 0.10 0.08 0.15 68.8 14.1 41.8 0.757 1.628 1.414 n.a. 1.408 16.6 -3.6 7.1 22.98 10.52 9.39 n.a. 14.95 -14.5 9.2 -4.7 17.38 17.12 13.28 17.63 21.04 -0.3 5.3 2.1 1999-2003 1994-2003
Source: CAPMAS
Table 1.7
Egyptian trade in seed herbs and spices (HS code 0909) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 7.06 3.98 4.41 3.13 3.03 -10.9 -6.6 -9.0 1.217 1.175 1.645 n.a. 0.998 -0.7 -4.0 -2.2 1.60 0.48 0.57 n.a 2.63 -21.2 52.6 5.7 1.94 0.57 0.93 2.46 2.62 -21.8 46.5 3.4 0.762 0.679 0.690 n.a. 0.805 -2.3 4.4 0.6 11.81 6.70 7.74 n.a 7.01 -10.7 1.2 -5.6 9.00 4.54 5.34 5.59 5.65 -12.8 5.6 -5.0 1999-2003 1994-2003
391
Table 1.8
Egyptian trade in other spices (HS code 0910) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -0.80 -0.86 -0.29 -0.30 -0.07 1.4 -46.4 -23.6 0.891 0.929 0.741 n.a. 0.853 0.8 -2.1 -0.5 1.09 0.97 0.66 n.a 0.25 -2.3 -28.7 -15.1 0.97 0.90 0.49 0.43 0.21 -1.5 -30.2 -15.5 0.828 1.325 1.145 n.a. 1.249 9.9 -1.5 4.7 0.21 0.03 0.17 n.a 0.11 -30.8 36.9 -6.3 0.17 0.04 0.19 0.13 0.14 -23.9 34.9 -1.9 1999-2003 1994-2003
Table 1.9
Egyptian trade in sugar confectionary, non cocoa white chocolate (HS code 1704) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 6.90 0.49 0.63 2.42 2.50 -41.0 50.0 -10.7 1.243 1.078 1.293 n.a 1.087 -2.8 0.2 -1.5 0.60 1.80 2.08 n.a 1.84 24.8 0.6 13.4 0.74 1.94 2.69 2.51 2.00 21.3 0.8 11.7 1.517 0.910 1.195 n.a 0.880 -9.7 -0.8 -5.9 5.04 2.68 2.78 n.a. 5.12 -11.9 17.6 0.2 7.64 2.44 3.32 4.93 4.50 -20.4 16.6 -5.7 1999-2003 1994-2003
392
Table 1.10
Egyptian trade in Chocolate & other foods containing cocoa (HS code 1806) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -0.51 -1.90 -2.28 n.a. -7.02 30.3 38.6 33.9 3.320 3.010 3.043 n.a. n.a. 2.479 -1.9 -4.7 -3.2 0.31 0.85 0.97 n.a. 3.00 22.3 37.0 28.6 1.03 2.56 2.94 7.81 7.43 19.9 30.5 24.5 1.891 1.378 1.955 n.a. 1.570 -6.1 3.3 -2.0 0.28 0.48 0.33 n.a. 0.26 11.5 -14.3 -0.8 0.53 0.66 0.65 n.a. 0.41 4.7 -11.5 -2.8 1999-2003 1994-2003
Table 1.11
Egyptian trade in pasta, couscous, etc. (HS code 1902) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 2.06 -0.34 -0.85 -0.74 -0.10 -169.8 -25.6 -171.8 0.982 0.794 0.777 n.a. 0.687 -4.2 -3.6 -3.9 0.40 0.96 1.42 n.a. 0.90 19.2 -1.6 9.5 0.39 0.76 1.10 0.91 0.62 14.2 -5.1 5.2 0.685 0.611 0.648 n.a. 0.417 -2.3 -9.1 -5.4 3.59 0.69 0.39 n.a. 1.23 -28.2 15.8 -11.2 2.46 0.42 0.25 0.17 0.51 -29.8 5.2 -15.9 1999-2003 1994-2003
393
Table 1.12
Egyptian trade in baked bread, pastry, wafers, biscuits, etc. (HS code 1905) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 2.11 1.72 1.74 0.18 0.94 -4.0 -14.0 -8.6 1.393 1.026 0.746 n.a. 0.855 -5.9 -4.4 -5.3 0.46 1.11 2.95 n.a 1.32 19.5 4.5 12.6 0.64 1.14 2.20 2.01 1.13 12.4 -0.2 6.6 1.478 0.248 1.378 n.a. 1.052 -30.0 43.5 -3.7 1.86 11.54 2.86 n.a. 1.97 44.1 -35.7 0.7 2.74 2.86 3.94 2.19 2.07 0.8 -7.8 -3.1 1999-2003 1994-2003
Table 1.13
Egyptian trade in tomato paste (HS code 2002) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -1.17 -2.85 -0.32 -0.01 -0.18 19.5 -50.0 -18.9 0.815 0.891 0.628 n.a. 0.578 1.8 -10.2 -3.7 1.48 3.24 0.80 n.a 0.36 17.0 -42.4 -14.7 1.20 2.88 0.50 0.14 0.21 19.1 -48.3 -17.8 0.607 1.220 1.847 n.a. 1.612 15.0 7.2 11.5 0.06 0.03 0.10 n.a 0.02 -12.8 -13.3 -13.0 0.04 0.04 0.19 0.14 0.03 0.2 -7.0 -3.1 1999-2003 1994-2003
394
Table 1.14
Egyptian trade in pickled olives (HS code 200570) 1994 1998 2001 2002 2003 Annual average growth rate (%) 1994-1998 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -0.22 -0.23 0.82 n.a. n.a. 1.0 n.a. n.a. 0.725 1.356 1.179 n.a. n.a. 13.3 n.a. n.a. 0.33 0.20 0.02 n.a n.a -9.0 n.a n.a 0.24 0.28 0.03 n.a n.a 3.1 n.a n.a 1.287 0.819 0.738 n.a. 0.818 -10.7 0.0 -4.9 0.02 0.06 1.15 n.a 1.51 39.5 90.9 66.0 0.02 0.05 0.85 0.63 1.23 24.6 90.9 57.9 1998-2003 1994-2003
Table 1.15
Egyptian trade in jams, jellies, marmalades, fruits & nut pastes & purees (HS code 2007) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -2.65 -2.92 -3.98 -5.80 -4.70 1.9 12.7 6.5 0.891 0.820 1.037 n.a. 0.847 -1.7 0.8 -0.6 3.19 4.63 4.00 n.a 6.45 7.7 8.6 8.1 2.84 3.80 4.14 6.34 5.46 6.0 9.5 7.5 1.130 0.775 0.968 n.a. 0.771 -7.3 -0.1 -4.2 0.17 1.14 0.17 n.a 0.99 46.7 -3.5 21.8 0.19 0.88 0.17 0.54 0.76 36.0 -3.6 16.7 1999-2003 1994-2003
395
Table 1.16
Egyptian trade in fruit and vegetable juices, not fermented or spirited (HS code 2009) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 1.82 0.21 3.28 6.63 12.22 -35.1 176.6 23.6 0.662 0.939 0.903 n.a. 0.994 7.2 1.4 4.6 0.76 2.81 1.77 n.a. 1.22 29.7 -18.8 5.4 0.51 2.63 1.60 1.23 1.22 39.1 -17.6 10.2 0.891 0.808 0.604 n.a. 0.595 -1.9 -7.4 -4.4 2.61 3.52 8.07 n.a. 22.59 6.2 59.2 27.1 2.32 2.84 4.88 7.86 13.44 4.1 47.4 21.5 1999-2003 1994-2003
Table 1.17
Egyptian trade in extracts, essences, concentrates of tea, coffee, malt. (HS code 2101) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS -0.67 -2.81 -2.21 -0.98 0.26 33.3 n.a. -190.1 5.528 6.456 6.008 n.a. 3.002 3.2 -17.4 -6.6 0.12 0.44 0.37 n.a 0.24 29.2 -13.7 8.0 0.67 2.83 2.22 1.22 0.73 33.3 -28.8 0.9 3.528 1.025 2.835 n.a. 1.554 -21.9 11.0 -8.7 0.00 0.02 0.00 n.a 0.64 59.4 137.0 90.1 0.01 0.02 0.01 0.24 0.99 24.5 163.0 73.6 1999-2003 1994-2003
396
Table 1.18
Egyptian trade in tomato ketchup (HS code 210302) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 0.32 -0.03 -0.06 0.08 -0.08 -161.8 27.0 -185.1 1.296 0.677 0.990 n.a. 0.520 -12.2 -6.4 -9.6 0.08 0.15 0.10 n.a 0.23 13.2 12.0 12.7 0.10 0.10 0.10 0.01 0.12 -0.6 4.9 1.8 0.985 0.845 0.935 n.a. 0.519 -3.0 -11.5 -6.9 0.43 0.08 0.04 n.a 0.09 -28.1 0.7 -16.5 0.43 0.07 0.04 0.08 0.04 -30.2 -10.8 -22.2 1999-2003 1994-2003
Table 1.19
Egyptian trade in soups, broths and homogenized food preparations (HS code 2104) 1994 1999 2001 2002 2003 Annual average growth rate (%) 1994-1999 Exports Value $US million Volume 1000 tons Unit values $ per kg Imports Value $US million Volume 1000 tons Unit values $ per kg Trade balance Value $US million Source: CAPMAS 5.00 2.65 1.44 1.20 3.34 -11.9 5.9 -4.4 1.913 1.336 1.121 n.a. 1.725 -6.9 6.6 -1.1 0.22 0.21 0.14 n.a 0.06 -0.2 -26.3 -12.8 0.41 0.29 0.16 0.11 0.11 -7.1 -21.4 -13.8 1999-2003 1994-2003
397
VII-D Profile of interviewed Egyptian FPI Companies
399
Company Oils Alex Seed Arma Frozen Veg. Coldalex Faragallah Givrex Farm Frites Compote /pickles Egy-Spain Canned Veg. Harvest Food Olive Oil Mina for oil Wadi Food Jam NFC (Kato group) Super Foods Dairy products Domty / Candia Edafco / VIVA El-Masreen Enjoy Farm Cheese Green Land Juhayna Mifad Obour Land Qatilo Confectionery Golden Foods El Horrya 2000 BiscMisr Cadburys Honey Well Tea and Coffee Misr Caf Fine Foods Specialty Foods El Rashidi El-Mizan Quick meals Mass Food/Temmy's
Main Products Product 1 Product 2 Product 3 Product 4 Other
1 2 3 4 5 6
Edible oil Edible oil Frozen veg. Frozen veg. Frozen veg. Frozen Potato
Ghee
Soap
Frozen meat Frozen veg.
Dairy Frozen Strawberry Pickles Chick peas Lentils
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Compote Canned veg. Olive oil Olive oil Jam Jam Milk bottled Milk bottled Cheese Dairy Cheese Cheese Milk bottled Colorants Feta Cheese Cheese Biscuits Sweets Chocolate Biscuits
Artichokes Rice rolls
Pickles Juices Juice Cheese Cheese Milk bottled Juice Milk bottled Yoghurt Fixing dairy products Milk bottled Chocolate Biscuits Snacks Chocolate Other snacks Chocolate Sweets Sweets Crisps Soup Tomato paste Juice Juice Juice
Meat
Yoghurt
Tomato concentrates
Juice juice
Biscuits Chewing gum
28 29 30 31
Arabic coffee Tea & Iced Tea Halawa Quick breakfast meals
Instant coffee Tomato Paste Tehina
Turkish coffee Proc. Cheese
Dry Foods
401
VII-E
Overview of Food processing sectors in benchmark countries
403
1 Overview of food processing sectors in benchmark countries
1.1
Morocco196
In 2001 there were 1,762 firms registered in the agro-food sector (one quarter of the total number of industrial plants in the country), accounting for approximately one-third of value-added for the whole processing industries. The number of employees is around 100 thousand197. The food processing sector in Morocco is faced with impediments similar to its Egyptian counter-part, to which one can add the difficulties in securing raw materials as a result of several years of drought at the end of the 1990s through the early 2000s. The main problems can be summarised as follows: weak vertical integration, both backwards and forwards; variations in supply of raw materials, low technological level of production capacity, low capital utilisation, high energy and finance costs, lack of a coherent sector strategy.
Table 1.1
Production of main crops and livestock in Morocco (thousand tons) 1999-2000 Cereals Food Legumes Other Field Crops Fruits Vegetables Milk (million litres) Red Meat Poultry 1,986 80 4,259 n.a. 4,261 1,150 287 250
198
2000-2001 4,593 162 4,238 n.a. 4,669 1,100 290 280
2001-2002 est. 5,273 236 4,010 n.a. 5,292 1,200 340 315
Source: Ministry of Agriculture and Rural Development
1.1.1
Dairy products199 The dairy sector in Morocco has developed since the mid-1970 when the Ministry of Agriculture set out plan to develop dairy production. The plan was based on the following components:
196 197 198
199
Source: CIHEAM (Centre International de Hautes Etudes Agronomiques Mditerranennes), Agri.Med Annual Report 2004. Official data give a figure of 89.8 thousand in 2001. Source: Direction de la Planification et des Affaires Economiques, Ministre de lAgriculture et du Dveloppement Rural, 2003, as reported in CIHEAM (2004) Agri.Med Rapport annuel Maroc Source: A. Araba, S. Benjelloun, A. Hamamam R. Hamimaz and M. Zahar Organisation de la filire laitire au Maroc in Options Mditerranennes, Sr. B / no 32, 2001 Les filires et marchs du lait drivs en Mditerrane.
405
Development of forage production Improvement of the genetic pool through importation of heifers, artificial insemination, crossbreeding and the creation of nursery farms specialised in dairy replacement heifers The creation of co-operatives and dairy associations Subsidies to farmers Organisation and development of milk collection centres and dairy plants Supply of veterinary services
Milk production increased from 580 million litres of milk in 1975 to 1.2 billion litres in 2000. Out of this total production, around 15-25% is used for nursing calves and for selfconsumption of farmers, approximately 60% is processed in dairy processing units and the remainder is sold as untreated milk by colporters (street vendors) either directly to consumers, or cafs, or traditional milk processors (mahlabas). The system of street vending (often of dubious quality milk), which has developed as a result of the nonapplication of quality control and health measures, has engendered competition difficulties for the organised dairy processing sector. The dairy processing industry suffers from a number of difficulties, amongst which are: Under utilisation of installed capacity (the average utilisation rate is around 65%), which has been aggravated by the increase of colportage. The low quality of milk supplies, requiring more intensive thermal treatment resulting in higher costs and lower quality. Non-respect of (cold) storage requirements in distribution and marketing of milk and milk products. Cheese Cheese production is not a major segment of the dairy industry in Morocco. The production is dominated by fresh cheese and cheese spread, whilst most processed cheese is imported.
1.1.2
Fruit and vegetables Table 1.2 provides details of the volume of Moroccan fruit and vegetable production. At the same time, it should be noted that only a small proportion of production is destined to the food processing industry.
406
Table 1.2
Production of fruits and vegetables in Morocco (thousand tons) 1999-2000 Vegetables (market garden) - Tomato - Potato Fruit Plants - Olives - Almond - Citrus - Vine (grapes) - Dates Source: Ministry of Agriculture and Rural Development
200
2000-2001 4,669 648 1,155
2001-2002t. 5,292 805 1,334
4,261 765 1,090
380 46 1,400 207 74
699 82 979 192 32
455 70 1,142 227 33
Citrus Fruits201 Although Morocco is an important producer of citrus fruits, in the long term citrus production is not expected to increase significantly in spite of the government and farmers organization ambitious plans to expand planted area, reconvert to new varieties, and replace old orchards. Souss producers face serious water shortages that increase their cost of production considerably. In the Gharb area (vicinity of Kenitra) the orchards trees are old and most growers are not actively replanting orchards. So, although, there might be an increase in planting in some years, the average yearly planting over a long period has been below what was initially planned to maintain adequate growth of citrus production. Eventually, the low planting suggests that Morocco might be unable to even fulfil the increasing local demand for some varieties of citrus in the future. The traditional EU countries (taken as a group) will continue to be the main outlet for Morocco in spite of the downward trend over the past few years. The proximity of this market, the high prices paid by European consumers, and more importantly, the preferential access given to Moroccan citrus fruit are appealing to Moroccan exporting groups. The non- EU markets, commonly known in Morocco as "Contract Markets", include Russia (a major outlet for Moroccos clementines and oranges), Saudi Arabia, and Canada account each year for over a third of Moroccos fresh citrus exports. For these markets, each year, arrangements are made between importers and Moroccan exporters to ship agreed-upon quantities and quality of fruit. Long-term prospects for fresh citrus exports are poor: Local production can hardly keep up with the increasing demand from both export and local markets. In 2003, Morocco did not fill the duty-free quota granted by the EU for clementines (168,000 tons) and oranges (326,000 tons). Prices in the local market have reached a level so that many farmers see a benefit in selling to the local market and avoid risks and delays in payment when exporting. Also, the decline in the EU share in Moroccos agricultural exports indicate that some exporting groups have more difficulties to comply with increasingly complex EU industry standards and requirements. This explains partly why more emphasis has been given in recent years to exporting to non-EU countries. The Eastern-European
200
201
Source: Direction de la Planification et des Affaires Economiques, Ministre de lAgriculture et du Dveloppement Rural, 2003, as reported in CIHEAM (2004) Agri.Med Rapport annuel Maroc Source: USDA Foreign Agricultural Service (2004), GAIN Report: Morocco, Citrus, Annual
407
markets in particular (Russia) have been generally buying lower quality, cheaper fruit that are less suitable for the EU market. FRUMAT, the sole citrus concentrate producer in Morocco and, by far, the major producer has never been in such a weak position. In 2003 FRUMAT processed only 2,000 tons (less than 1 percent of its nominal capacity) because of high prices for fruit in the local market. FRUMAT has been struggling to increase farmers deliveries to its processing plants but the high demand in the local market combined with relatively lower supply resulted in prices in the fresh market that are far more appealing to farmers. The state owned farms that FRUMAT was hopping to contract to ensure reliable supply are being leased to the private sector (including foreign investors) which reduces further the companies ability to position itself in the market. Eventually, Morocco is likely to become a net import of single strength juice and concentrate for its local industry. Moreover, unless there is a major government financial intervention for FRUMAT, the company is likely to close. Although, if in the next few years, Morocco experiences large citrus crops, FRUMAT could be revitalized to help absorb the excess in production.
1.2
Turkey
Turkey benefits from a considerable agricultural resource base. Since the 1980s, Turkey has implemented agricultural policy reforms aimed at reducing agricultural subsidies, removing trade barriers and integrating Turkey into the global economy. During the 1980s the agro-industry developed rapidly, spurred on by both domestic and foreign investment. Reform of the foreign exchange system that reduced restrictions in international transactions, combined with trade policies (tax rebates, export credits, credit subsidies) helped to enhance the export performance of the sector.
Table 1.3
Production of main crops and livestock in Turkey (thousand tons) 2000 Cereals Food Legumes Other Field Crops Fruits Vegetables Milk Red Meat Poultry 30,149 1,311 35,830 9,350 864 725 2001 27,650 1,518 29,439 13,104 15,916 9,500 850 660 2002 est. 29,485 1,556 28,713 13,878 16,385 9,600 840 632
Source: SPO, Developments in economic and Social Sectors, Ankara 2002
408
Table 1.4
Production of major food products (thousand tons)
202
2000 Rice Macaroni Tomato paste Olive oil Sugar Milk White cheese Butter Red Meat Poultry Meat Other Meat products 221 440 260 54 2,504 370 220 133 294 766 58
2001 202 445 240 215 1,710 365 224 132 277 660 52
2002 est. 205 455 270 76 1,560 375 230 136 284 665 55
Source: SPO, Developments in economic and Social Sectors, Ankara 2002
1.2.1
Dairy Products203 Over the last decade or so, the Turkish dairy industry has benefited from modernisation resulting in investment in high technology dairy processing equipment. Furthermore there has been a substantial increase in FDI and (international) joint venture cooperation in the dairy processing sector. Overall, the dairy-processing sector is one of the most dynamic segments of the agro-food sector in Turkey, and has benefited from considerable international investment in the production of pasteurised milk, yoghurt and cheese. To all intents the State has removed itself from the dairy sector, notably with the privatisation of SEK (St endstrisi kurumu) at the beginning of the 1990s. These developments have gone hand in hand with a movement from traditional to modern processing of dairy products. In part this has seen increases in direct contracting between dairy processors and dairy farmers and greater vertical integration (production, conservation, transformation, marketing and distribution). At the same time, the arrival of multinational dairy processing companies has encouraged greater diversification of products matched by rising demand, particularly for products such as flavoured yoghurts and mozzarella cheese. Cheese The cheese sector in Turkey has an important historical/traditional base, for which rising domestic and export demand has encouraged major dairy processing to increase production of traditional cheese varieties. There probably remains a relatively untapped potential for increased exports of traditional Turkish cheeses to developed countries. Yet, at the same time, increased integration into the EU would increase international competition on the domestic market.
202 203
Production of main enterprises of agro-food industry. Source: F. Dogruel La port et les limites de la filire laitire en Turquie in Options Mditerranennes, Sr. B / no 32, 2001 Les filires et marchs du lait drivs en Mditerrane.
409
Table 1.5
Production of dairy products in Turkey (1000 tons) Growth 1996-2002 1996 Pasteurised and sterilised milk Yoghurt White cheese Cheddar Cheese Butter Total 278 680 179 44 122 1303 2002 375 910 230 55 134 1704 2003 est. 384 925 234 57 136 1736 (a.a.g.r. %) 4.4 4.3 3.6 3.2 1.3 3.9
Source: State Planning Institute and authors calculations
Table 1.6
Exports of Turkish dairy products (volume, value and unit values) 2002 Tons Cheese Butter Ice Cream Total 3,422 20 632 4,074 $US 1000 9,056 38 1,007 10,101 $/ton 2,646 1,900 1,593 2,479 Tons 4,311 33 208 4,552 2003 $US 1000 11,529 88 301 11,918 $/ton 2,674 2,667 1,447 2,618
Source: Under-secretariat for Foreign Trade and authors calculations
1.2.2
Fruits and vegetables Fruit juice Turkey produces more than 10 million tons of fresh fruit per year. The fruit juice industry in Turkey started in the late 1960s, and is now one of the most progressive sectors of the agro-processing industry in Turkey. The main fruits processed into fruit juice are apples, apricots, peaches, oranges, tangerines, grapefruits, lemons, sour cherries, cornel, strawberries, pomegranates, and grapes; there is also some processing of vegetable juice. Apple juice concentrate is the main production item, followed by sour cherry juice. Annual production of fruit juices and concentrates is estimated to be 330 thousand tons in 2003, compared to 185 thousand tonnes in 1994 (annual average growth rate 6.6 %). In 2003, Turkey exported 85 thousand tons of fruit juice and concentrates, with a total value of $US 72.6 million (double the level of 2002). The main export item is apple juice, and key destinations for exports are Germany, the Netherlands, Austria and the United Kingdom.
410
Table 1.7
Exports of Turkish fruit juices and concentrates (volume, value and unit values) 2002 Tons Orange Juice - Frozen Other Orange Juice Other Citrus Juice Pineapple Juice Tomato Juice Grape Juice Apple Juice Other Fruit & Veg Juice Mixed Fruit Juice Total 213 2,225 831 120 733 982 32,707 15,767 1,685 55,278 $US 1000 150 1,022 483 47 448 623 22,265 10,452 806 36,320 $/ton 706 459 582 391 612 635 681 663 479 657 Tons 76 7,361 912 269 761 2,157 42,925 27,645 2,671 84,808 2003 $US 1000 36 3,248 683 124 499 1,022 33,702 31,766 1,482 72,584 $/ton 479 441 749 463 656 474 785 1,149 555 856
Tomato products The origins of the modern tomato processing industry date back to the 1970s when government measures were taken to encourage the development of the food-processing sector. The sector is now characterised by the processing of industrial varieties of tomato in modern processing plants enabling competitive prices and in time delivery. In 2003 Turkey produced 9.8 million tons of tomatoes, making it one of the main vegetables produced in the country. Most of production is outside, although some production is in greenhouse (for fresh consumption during winter). Turkey process around 2 million tons of tomatoes per annum, in total there are around 60 varieties of tomatoes suitable for industrial processing, and most tomatoes for processing are produced on a contract basis. Total production capacity 63 plants - for tomato paste is over 650 thousand tons per annum; although actual annual production is around 250-270 thousand tons204. In 2003 Turkey exported 150 thousand tons of tomato paste, making it the third largest exporter after China and Italy. The main export markets are the Russian Federation, Japan, Saudi Arabia and Germany. Further, Turkey exports around 30 thousand tons (2003) of canned tomatoes.
204
Tomato paste processing plants are used to process other fruits and vegetables during the off season.
411
Table 1.8
Exports of Turkish tomato paste by destination (volume, value and unit values) 2002 Tons Russian Fed. Japan Saudi Arabia Germany Total 18,659 23,886 13,393 6,324 124,869 $US 1000 9,646 15,587 8,297 4,258 77,706 $/ton 517 653 620 673 622 Tons 26,383 20,139 17,349 8,549 149,801 2003 $US 1000 14,871 13,709 11,032 6,226 100,238 $/ton 564 681 636 728 669
Frozen vegetables The Turkish frozen fruit and vegetable industry is export orientated, with around 75-80% of production going for export. Although the domestic market is growing, domestic consumption is still less that 1kg per capita. There are 26 firms in Turkey using modern freezing techniques, with an estimated annual production in 2003 of 113 thousand tons, compared to 70 thousand tons in 1995 (annual average growth rate 6.2 %). The most important export varieties for frozen vegetables are: sweet peppers, mushrooms and onions. Over recent years there has been an increase in contract farming, particularly for peppers, broccoli and Brussels sprouts.
Table 1.9 Exports of Turkish frozen fruits and vegetables (volume, value and unit values) 2002 $US Tons
0710
2003 $US $/ton 531 Tons 63,642 1000 39,339 $/ton 618
1000 27,681
Vegetables cooked in water/steam frozen
52,172
0811 2004
Fruits (frozen) Vegetables (prepared, preserved) frozen Total
20,430 3,308
23,629 1,756
1,157 531
23,312 2,758
34,109 1,665
1,463 604
75,910
53,066
699
89,712
75,113
837
Olive products Turkey is one of the worlds major olive producers with olive production of around 1.8 million tons in a high year (600-700 thousand tons in a low year). About 70 percent of olives produced are pressed for oil, with the rest going to table olives. Turkey has a capacity to supply over 300 thousand tons of olive oil per year, with modern refinery plants and bottling lines for both bulk or retail packs. Standardisation of olive oil is compulsory for exportation, thus all plants conform to the Turkish Standards Institute that are consistent with the standards of the International Olive Oil Council.
412
Table 1.10
Exports of Turkish olive oil (volume, value and unit values) 2002 Tons Olive Oil - virgin extra, pure Olive Oil - virgin fine, pure Olive Oil - refined pure Olive Oil - other, pure Others Total 5,454 2,460 11,446 6,008 229 25,347 $US 1000 10,441 4,333 20,500 11,240 333 46,283 $/ton 1,914 1,761 1,791 1,871 1,454 1,826 Tons 9,119 6,384 29,482 27,478 2,726 75,189 2003 $US 1000 21,576 13,559 59,709 60,888 6,273 162,005 $/ton 2,366 2,124 2,025 2,216 2,301 2,155
Table 1.11
Exports of Turkish olive oil by destination (volume, value and unit values) 2002 Tons Italy USA Saudi Arabia Canada Morocco U.A.E Total 12,018 5,629 1,591 1,255 465 716 25,347 $US 1000 21,135 9,996 2,949 2,407 825 1,309 46,283 $/ton 1,759 1,776 1,854 1,918 1,774 1,828 1,826 Tons 32,180 14,047 2,285 2,446 1,581 706 75,189 2003 $US 1000 68,224 29,689 4,689 5,480 3,071 1,357 162,005 $/ton 2,120 2,114 2,052 2,240 1,942 1,922 2,155
1.3
South Africa205
South Africas food and beverage industry is a strongly competitive sector producing high quality commodity and niche products for local and international markets. Food production is linked strongly to the agricultural sector and South Africa is generally considered a net exporter. The South African food and beverage industry reflects sophisticated first world consumer demands within the context of a larger third world economy, with consumers in the middle to upper income levels demanding healthier, convenient quality foods and the poorer sections of the population demanding staple foods at low prices. South Africa is also an important entry point into other African markets. According to the South African Department of Trade and Industry, the agro-food industry (inputs, primary production, processing) contributes approximately $12.4 billion to South Africas GDP and employs 451,000 people in the formal sector. Food production is the largest manufacturing industry, forming 15% of the productive sector. The food industry is largely self-sufficient, but imports most of its rice and wheat requirements from the Far East and the United States respectively. South Africa produces a wide variety of crops
205
Source: USDA Foreign Agricultural Service (2004), GAIN Report: South Africa, Food processing ingredients sector, foodprocessing industry
413
and has substantial secondary food processing industries. Meat processing is the single largest sub-sector, followed by grain milling and animal feed manufacturing. Many South African companies have formed associations with international ones, giving South Africa access to the latest technology and expertise. Examples of this are Simba and Frito-Lay (US), Robertsons and Best Foods (US) and NCD Clover and Dannone (France); and a recent joint venture by H.J. Heinz and Pioneer Foods South Africa to form a company, Heinz Foods South Africa (SA). This allows foreign companies penetration into the local market. Food companies are among the largest holders of intellectual property rights (Unilever, Proctor & Gamble; and Nestle being the top three in South Africa), which involve patented processes, products, equipment, packaging technology and trademarks. South Africa is a major exporter of foodstuffs, exporting double of what it imports. Fresh fruit and nuts are the largest export (by value), followed by sugar, processed fruit and vegetables, fish products, alcoholic products and cereals and grains. South Africa also produces certain niche market products, such as Rooibos tea, which is being marketed internationally. South Africa has a well-established beverage industry, which is experiencing considerable growth, particularly in the brewing (beer) and wine sectors. South African Breweries (SAB) dominates the local brewing industry. 70% of SABs income is derived from beer, with the rest coming from soft drinks and sorghum beer. The wine industry is also relatively large, ranked seventh in world output. A total of 250 cellars operate, producing three times the Australian harvest. The soft drink business is dominated by Cadbury Schweppes, which sells and distributes its products through Amalgamated Beverages Industries, the leading Coca-Cola system bottlers. South Africa exports a large percentage of its alcoholic beverage production as domestic consumption of wine and spirits is ranked fairly low by international standards. Although there are over 4,000 food production companies, the top ten are responsible for seventy percent of the industrys turnover. Key players are Unifoods/Best Foods (including Robertsons), Nestle, National Brands, Tiger Brands, Premier Foods and Nabisco. H.J. Heinz, a U.S. based company, and Pioneer Foods South Africa launched a joint venture company, Heinz Foods South Africa (SA). It will utilize Heinzs world-class technology to manufacture products in South Africa. According to the Marketing Director of the company, the company will concentrate on four main segments of the South African food market: ketchup, sauces, and condiments; frozen meals and snacks; quickserve meals and soups; and tuna and seafood. Heinzs flagship products will now be produced in South Africa including ketchup, beans and soups. Heinz Foods SA will market products under various brands names, including Today Frozen Foods (formerly a part of Pioneer Foods) John West, Wellingtons, and Heinz. The food-processing sector is driven by a number of factors, including climatic conditions, overall economic growth, private consumption expenditure and the continued deregulation and liberalization of the agricultural sector.
414
1.4
Spain206
The Spanish agro-food industry ranks fifth in Europe in terms of turnover. It represents the leading sub-sector in the manufacturing sector, accounting for around 17% (euro 58.56 million in 2002) of production. At the beginning of 2003 there were 33,275 food-processing plants employing 438 thousand employees. Of these, 32,146 (or 96.6 percent) are small companies (less than 50 workers), among them 27,534 have less than 10 workers. 866 companies are medium size companies (50/199 workers); 193 companies (0.58%) have between 200 and 499 workers, while the remaining 70 companies (0.21%) are considered large companies with more than 500 workers. International companies now control about 25 to 30 percent of the volume of business. The food processing industry consumes 70 percent of all domestic agricultural production and provides almost half million jobs. Raw materials, which account for 58 percent of total production costs, are mainly sourced domestically and neighbouring EU Members.
1.4.1
Dairy Products A breakdown of Spanish production of dairy products is shown in Table 1.12. Annual production of cheese is in excess of 300 thousand tons.
Table 1.12
Spanish dairy product production (thousand tons) 2001 Fluid Milk Concentrated Milk Powder Milk Cream Butter Cheese Acidified Milk (yoghurt) Dairy Deserts Milk Shakes Other dairy Prod. 3,7348 65.5 22.1 103.0 31.9 294.2 615.3 214.8 231.9 75.4 2002 3,791.5 59.9 34.7 78.2 55.7 314.7 614.4 167.2 271.5 79.7 2003 3,700.5 61.0 40.0 80.0 53.1 323.0 618.3 160.4 282.5 79.7
Source: Federacion Nacional de Industrias Lacteas (FENIL) and FAS/Madrid estimates
206
Source: CIHEAM (Centre International de Hautes Etudes Agronomiques Mditerranennes), Agri.Med Annual Report 2004, and USDA Foreign Agricultural Service (2004), GAIN Report: Spain, Food Processing Ingredients, Food Processing
415
1.4.2
Fruit and vegetables Fruit juice207 According to trade organisations, production of juices totalled 1,106 million litres in 2003. In the same year consumption of juices and nectars was 773 million litres. The sector is working actively to attract more health conscious consumers by offering sugarless, enriched and prepared product lines. About 85 percent of juices are manufactured from concentrates. The industry is concentrated, with the top ten producers manufacturing 74 percent of total juices, and the top two producers have a market share of 38 percent. Common Agricultural Policy (CAP) reform of cotton production subsidies may result in further orange tree plantings here in Spain. In anticipation, it appears, Spanish operators have recently built up an additional 500,000-ton-fruit-processing capacity. The increased juicing capacity is for 11-brix juice, which is popular domestically and throughout the European Communities.
Table 1.13
Spanish production and consumption of fruit juices 2001 Production (million litres) Consumption (million litres) Ratio production/consumption Consumption (litres per capita) Source: USDA-FAS 1,080 756 1.43 19.5 2002 1,061 748 1.42 18.4 2003 1,106 773 1.43 18.9
Tomato products208 In 2003/04, Spains tomato harvest increased to 3.91 million tons. Of this amount, some 2.20 million tons were consumed fresh and a record 1.71 million tons were delivered to processing plants, of which 69,000 tons were processed into whole peeled tomatoes and 1,642,000 tons into paste and other tomato products. Deliveries to processors were 472,400 tons over the quota established for Spain under the EU program for processing tomatoes. The resulting EU penalty on the subsidy for processing tomatoes has had little effect on the further expansion of production. The crop remains very profitable in Extremadura and Andalucia as improvements in mechanization, as well as in new varieties and technology, are increasing yields and productivity. As a consequence, we are looking for a further expansion in the crop area for processing tomatoes in 2004/05. Processors say they have contracted some 2.5 million tons of tomatoes for their plants in 2004/05. In 2002/03, exports of both tomato paste and canned peeled tomatoes rose to new records due to the drop in production in Italy. For the future, the expected sharp increase in production of paste tomato could place a great deal of pressure on European markets.
207 208
Source: USDA Foreign Agricultural Service (2004), GAIN Report: Spain, Citrus, Annual Source: USDA Foreign Agricultural Service (2004), GAIN Report: Spain, Tomatoes and products, Annual
416
Olive products Spain is the worlds largest producer of olive oil. Total olive oil in 2003 was 1.38 billion litres. Traditionally production of olives is highly fragmented, but with farms organised into cooperatives in order to process olives or to market them directly to processing companies. However, through the planting of new large-scale farms and the replacement of older low-producing orchards with higher density and more productive orchards, Spain has developed its position within the EU market organisation.
1.5
China209
Rapid economic growth combined with higher disposable income means stronger demand for high quality processed food by Chinese consumers. To meet this demand, Chinas food processing industry also continues to grow at double-digit rates in excess of 10%. Experts predict that the Chinese food processing industry will surely have a bright future because currently only about one-quarter of China food production is processed compared to about 80 percent in more developed countries. Consumption of processed food products in China is extremely low but is increasing at a rapid rate. Many foreign companies are taking advantage of the increased demand for high quality processed food products and will benefit by the reforms being implemented by the WTO accession. Currently, the food industry sector is unable to advance further until all of its sub-sectors reach a more sophisticated level of manufacturing and produce products of higher quality. Only then will it be able to enter the worldwide market as a key player.
209
Source: USDA Foreign Agricultural Service (2004), GAIN Report: China, Food Processing Ingredients, Food Processing
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Table 1.14
The Food Processing Industry in China 2001 Food Processing Sector No. of Enterprises Revenue of RMB (in billions) Food-Manufacturing Sector No. of Enterprises Revenue in RMB (in billions) Beverage Sector No. of Enterprises Revenue in RMB (in billions) Total Food and beverages Total No. of Enterprises Total Revenue in RMB (in billions) Total No. of Employees (in millions) Notes: 1. 2. 3. Food-processing sector includes rice milling, flour milling, oil refining, sugar refining, slaughtering, salt processing, feed processing, and aquatic product processing Food-manufacturing sector is composed of pastries and confections, dairy products, canned foods, fermented products, and condiments Beverage sector involves the making of alcoholic beverages (i.e. distilled spirits, beer and wine), soft drinks and tea Source: China Statistical Yearbook, 2002, 2003 18,251 706.97 2.35 18,315 821.62 2.28 0.35% 16.20% -2.90% 3,307 172.71 3,287 187.3 -0.60% 8.40% 4,563 151.9 4,615 182.8 1.10% 20.30% 10,381 382.35 10,413 451.6 0.30% 18.10% 2002 % Change
1.5.1
Dairy products210 Chinas dairy industry is growing rapidly in response to rising consumer demand for milk and yoghurt products, and is forecast to grow by 25% in 2005211. However, the expansion of milk production has come largely through increases in the size of dairy herds rather than improved yields. Consequently, the dairy sector faces considerable constraints resulting from deterioration of natural grasslands, decrease in arable land for grain production, water shortages and lack of high quality cows. Overall, the dairy industry faces a shortage of raw milk supply and genetic improvements are seen as critical to increasing raw milk supply. Chinese data do not permit a detailed breakdown of processed dairy production, as they only distinguish solid and liquid products. In 2003, production of solid dairy products was 1.4 million tons, and fluid product production was 5.8 million tons. The situation of the dairy industry is seen as being fragile. Dairy products do not form part of the traditional Chinese diet, and consumption has been promoted through efforts of the dairy industry and government. Nonetheless consumers are price sensitive and there is a risk of consumers switching to other food products. While retail prices of dairy
210 211
Source: USDA Foreign Agricultural Service (2004), GAIN Report: China, Dairy and Products, Annual 2004 The volume of forecast production for 2005 is 28 million tons.
418
products have remained stable the industry faces rising costs of raw milk212 and other dairy production costs, and as a consequence profit margins are being squeezed. Furthermore, Chinas large dairy companies and foreign joint ventures are battling to carve up domestic milk sources, leaving small and medium-sized companies to resort to more use of imported milk powder. Cheese There is little information on cheese production in China but it is known that production is small as domestic consumption is low. China is a net importer of cheese products and has minimal exports of cheese products. The main suppliers of cheese and butter to China are New Zealand and Australia. Imports of high quality cheese are mainly for high-end restaurants and hotels.
1.5.2
Fruit and vegetables In 2003, the total sales revenue of the fruits and vegetable processing industry amounted to around US$ 3.02 billion (RMB 25 billion), an increase of 30 percent over 2002. Fresh fruits produced in China are mainly consumed fresh. Since technology for processing is fairly primitive in China, only about 5 percent of the fruit is processed into canned or preserved products. Imported fresh fruit are seldom used to make canned fruit. They are usually sold at a much higher price and consumed fresh by Chinese consumers. Some of the imported fresh fruit is also used as food ingredients in cooking. Meanwhile, imported dried fruits such as prunes and raisins are usually purchased by Chinese consumers as snack foods. Chinese restaurants would also incorporate dried fruits as an ingredient to prepare either cakes or Chinese dishes. Dried fruits and nuts are commonly imported in bulk and then packaged and labelled locally213. Vegetable production214 Vegetable production in China has expanded rapidly over the past 2 decades. In 1980, China produced around 80 million tons of vegetables, using about 3 million hectares of land. By 2000, these figures had increased to 400 million tons and 15 million hectares of vegetable-sown land (see Table 1.15). Similarly, in 1980 greenhouse capacity was only around 7 thousand hectares (annual production 200 thousand tons), a figure that increased dramatically to 1.7 million hectares by 2000 (annual production 87 million tons). Particularly during the latter part of the 1990s production of vegetables increased in response to the structural oversupply of grain. At the same time, vegetable exports are estimated to amount only around 1% of production but, nonetheless, with 5 million tons of exports China is one of the largest players in the international market for vegetables. In 2000, China exported $US 2.03 billion of vegetables with a trade surplus of $US 1.96 billion.
212 213 214
The rising cost of raw milk in China meant that in 2004 prices exceeded those in Russia, Australia and New Zealand. Source: USDA FAS, Ibid footnote 209. Source: Yuman, Jinsong, Zang and Kamphuis (2004) The Vegetable Industry in China: Developments in policies, production, marketing and international trade, Agricultural Economics Research Institute, the Hague, Report 6.04.14 (September 2004).
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Table 1.15
Sown area and output of vegetables in China Year Sown area (million ha.) 1980 1990 2000 3.2 6.6 15.2 Output (million tons) 80.6 195.5 423.9 Yield (tons/ha) 25.5 29.6 27.8 Per capita availability (kg) 79.8 173.1 326.1
215
Source: Editorial group: techniques for pollution-free vegetable production, China Agricultural Press (2002)
Most vegetable production is undertaken by independent household operators, which rely on local wholesale markets to sell their production. The average scale of production per household tends to be small (0.2-0.3 ha), and even larger scale operations rarely exceed 10 ha. However, more integrated operations are developing rapidly. Overall, despite progress in the technology of vegetable production, yields in China still lags significantly behind more developed vegetable producers (see Table 1.16). The vegetable marketing system in China is considered to be not very efficient; most of the traders are small-scale operations, business is conducted on a face-to-face basis and transactions are conducted in cash, traders undertake collection, transportation and preliminary distribution in the absence of specialist service providers. Furthermore post harvest losses (estimated to be about 30%), which is partly due to a traditional emphasis on cultivation rather than preservation and storage. Finally, only about 2-4% of Chinas vegetable production is processed.
Table 1.16 Comparison of vegetable yields of selected countries (tons per ha) USA 1980 1990 1999 1999, index China=100 Source: FAO
216
Japan 28 27 27
Spain 18.8 22.9 29.6
Netherlands 40.7 53.2 54.9
China 14.4 17.7 16.9
19 23 26
154
160
175
325
100
Although China is one of the largest producers of vegetables (with a share of over 40% total world output of vegetables), its share of total exports of vegetables is small by comparison. Only about 1-2 percent of production of vegetables is exported, giving China a share of less than 10 percent of world vegetable exports. For fresh and frozen vegetables, the main export types are: Fresh and frozen vegetables (1,707,800 tons in 2000); Temporarily preserved vegetables and vegetable processed to keep them fresh (381,500 tons in 2000). For processed vegetables, the main export types are: Pickled vegetables (206,600 tons in 2000); Dried vegetables (152,100 tons in 2000 roughly two-thirds of the total world exports);
215 216
As reported in Yuman, Jinsong, Zang and Kamphuis (2004), ibid footnote 214. As reported in Yuman, Jinsong, Zang and Kamphuis (2004), ibid footnote 214.
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Canned vegetables (471,800 tons in 2000).
Although the average share of China in world vegetable exports is only around 10 percent, it has high shares in particular segments217: Dried mushrooms (62% of world exports); Temporarily preserved vegetables (57%); Vegetable juice (38%); Dried vegetables (30%); Processed vegetables (15%); Frozen vegetables (13%). Chinas vegetable exports are concentrated in developed regions in Asia, particularly Japan. Currently, China has no real competitive advantage in exporting vegetables to the European market because post-harvesting and processing techniques are not advanced enough and transport distances are long. However, if these problems are addressed, China is thought to have considerable potential to increase exports to EU markets. Chinas comparative advantage comes from the abundant low-cost rural labour force, rather than from non-labour production costs. However, production costs (particularly labour costs) are rising rapidly, especially in production areas located close to major urban areas. At the same time, prices for vegetable production have been falling while input costs (e.g. fertilizer, plastic film for greenhouses have remained relatively stable). Overall, the vegetable industry faces an increasingly severe domestic market situation. Tomato products In 2003 China was estimated to have supplied over a quarter of the worlds tomato paste exports, but its position in canned tomatoes is much lower (estimated at 2% of the world export market). In the last few years Chinas production and export of fresh tomatoes have been growing rapidly due to increased planting, higher yields and quality improvements; though it is difficult to obtain reliable data on actual production levels. Chinas processed tomato exports have increased exponentially over the past decade and are expected to increase significantly over the coming years, which is an increasing concern for other tomato producers. Fruit juices218 Chinas fruit juice production capacity has grown rapidly in recent years with significant new plant construction and improvement of existing facilities. Concentrated apple juice (CAJ) manufacturers are facing greater domestic competition for low cost apples as capacity grows and as domestic fresh fruit quality improves and fresh fruit export markets grow. CAJ manufacturers had been able to rely on abundant low-cost low-grade fruit, but most manufacturers are now turning to slightly better grade apples. Although not widespread, a few of the larger integrated companies are beginning to plant cultivars specifically for processing, e.g. high-sour apples for juicing. CAJ exports remain strong and still account for nearly 90 percent of production, yet domestic consumption of juices and juice drinks keeps rising as well.
217 218
Shares refer to 1999, based on FAO data. Also, china had a 7% share of tomato paste exports. Source: USDA Foreign Agricultural Service (2004), GAIN Report: China, Fresh Deciduous Fruit Annual
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Industry sources forecast 2004 CAJ production at 500,000 metric tons (MT) , up 10% from last year, as market demand remains strong and more processing facilities are constructed. Post estimates 2003 calendar year production exceeded 450,000 metric tons . CAJ is produced primarily in Shandong, Shaanxi and Henan. Some processing plants do not operate at full capacity due to the increased cost of raw materials. Juicing companies are no longer able so easily to source out-of-grade apples for processing, as orchard management improves and fewer out-of-grade apples are available. Companies now mainly use second grade apples for juicing, increasing the purchase price to around RMB 80 per ton. As a result, export prices also jumped an average US$60 per. Last year, Chinas Chamber of Commerce began setting floor prices for exported CAJ to avoid countervailing measures from importing countries such as the United States. This years FOB prices, adjusted every three months, are from August 1 and set at $630 per MT to Europe and $720 per MT to the United States. Sources report internal debate on curbing CAJ production to prevent Chinas share of world CAJ trade from increasing too fast. Chinese CAJ processors are equipped with state-of-the-art facilities and benefit from cheap labor and raw materials, enabling their product to remain quality- and pricecompetitive. The greatest challenge facing the CAJ industry is that too rapid export growth may result in safeguard measures by importing countries, or that too few apples will be available for processing. Juicing companies are contracting more high-sour apples dedicated to juicing. Industry sources estimate no less than 40,000 hectares of high-sour content apples have been planted and another 40,000 hectares are under way with completion projected within a few years. Sources indicate that some of the dedicated apple trees planted several years ago have started bearing fruit this year, but larger volumes will not be available for another three years. China has limited production of other apple products such as jellies, sauces and additives. CAJ blending with other fruit/vegetable juices exists, but production of apple wine and vinegar is limited. Reports indicate some food manufacturers are using fructose derived from apples to replace cane sugar as a sweetener in processed foods. Fruit juice/drink consumption is surging at more than 40% each year in China, with production in 2003 surpassing 3 million tons. Annual per capita consumption of juice is still low at around one kilogram, but the number is expected to grow significantly in the next few years. Individual orange juice/drink dominates consumption. Apple juice, also widely consumed, is a key ingredient for many blended drinks and for the food industry. Currently, more than 90% of CAJ produced in China is for export. Domestic CAJ consumption is between 30,000-50,000 tons a year and growing fast. Housewives prefer 100% juice (including apple juice) while young people favour juice drinks (with juice content ranging from 10%-30%). While juice drinks maintain the fastest growth rate, tea drinks and sports drinks (or functional drinks) witnessed robust growth in recent years, as well.
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VII-F
The modern retail sector in benchmark countries
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1 The modern retail sector in benchmark countries
1.1
Introduction
Obtaining information on the size of the modern retail information is complicated by two issues: firstly definitions used for defining retail formats vary across country sources and, secondly, it is not simply the number of modern retail stores that is important but the proportion of the retail market that they control219. Notwithstanding these comments, Table 1.1 provides estimates of the number of hypermarkets and supermarkets in the benchmark countries, with the exception of China for which comparable data was not available. When the density of modern retail outlets (as measured by the number of retail outlets per inhabitant) is compared, Egypt and Morocco lag some distance behind Turkey and South Africa that have a more developed modern retail food market. In turn, these countries are a long way from achieving the density of modern retail formats in a fully developed country such as Spain.
Table 1.1
Number of hypermarket and supermarkets in benchmark countries (2002) Egypt Hypermarkets Supermarkets Hypermarkets per million population Supermarkets per million population 7.6 8.3 58.4 64.0 326.3 0.1 2.3 0.8 8.4 6 493 Morocco 241 Turkey 151 3,855 South Africa 33 2,752 Spain 343 13,377
Source: Authors calculations based on data from USDA Gain Reports, AC Neilson, and industry sources
A further indication of the level of development of the retail sector can be obtained from the Global Retail Development Index produced by AT Kearney220. Their analysis is designed to provide an indication of opportunities for investment in the retail sector in key emerging markets. The index, which identifies 30 top emerging markets, covered 4 of the benchmark countries in 2004 (see Table 1.2); Spain is excluded since it is not an emerging market, South Africa is excluded because of low growth in the retail market over the last 5 years combined with the high proportion of the market controlled by leading retailers.
219
220
Estimates of the size of the retail food market controlled by hyper and supermarkets suggest market shares of >60% in Spain, 55% in South Africa, and >40% in Turkey. AT Kearney (2004), Emerging Market Priorities for global Retailers The 2004 Global Retail Development Index.
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Table 1.2
A.T. Kearneys Global Retail Development Index 2004 Rank (out of 30 top emerging markets) 3 8 18 20
1.
Country
Country risk 25%
Market attractiveness 25%
Market saturation 30%
Time pressure 20%
Overall Score
China Turkey Morocco Egypt
71 50 58 51
42 58 36 36
62 67 80 84
90 65 46 46
86 75 67 65
Country risk: based on measures of political, economic, financial risks: the higher the rating the lower the risk of failure
2.
Market attractiveness: based on measures of retail sales per capita, laws and regulations, population, urban population. A higher score indicates a more attractive market.
3.
Market saturation: based on measures of share of modern retailing, presence of international retailers and concentration of retail sector. A higher score indicates a less saturated market.
4.
Time pressure: based on measures of the speed of development of the retail sector, a high score indicates rapid advancement of the retail sector.
Source: A.T. Kearney
A number of comments can be made about the relative position of Egypt based on the information shown in Table 1.2. Leaving aside the country risk index, which is lowered in the Egyptian case due to the inclusion of terrorism risk in the calculation, both Egypt and Morocco have relatively low scores for market attractiveness that reflect a combination of low retail sales per capita and low urbanization. However, these same countries obtain high scores for market saturation; this is an obvious reflection of the backward situation of the development of the modern retail sector as pointed to in the previous analysis of the number of hyper- and supermarkets. The final indicator, time pressure, indicates that when compared to Turkey and in particular China, the speed of development of the retail sector in Egypt is relatively low. All in all, the message being presented is that Egypt is a potentially interesting market for international investors because competition (i.e. market saturation) in the retail sector is low, but relatively much less so in terms of consumer demand (i.e. market attractiveness). Furthermore, the fact that Turkey and China are developing more rapidly, implies that potential investors need to respond more quickly if they wish to take advantage of opportunities in these markets than is the case for Egypt and Morocco. The following sub-sections provide a brief description of the modern retail sector in the benchmark countries. A description of the retail sector in Egypt is provided in the Local Assessment Report.
1.1.1
Morocco221 The Moroccan retail food sector has developed significantly over the last ten years, as modern and large supermarkets opened in major cities and have been increasingly
221
Source: USDA FAS GAIN Report (2003) Morocco: Retail Food Sector Report 2003
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changing the purchasing habits of a large base of urban consumers throughout Morocco. The advent of large supermarkets in major cities reflects the concentration of highincome populations. European multinationals (mostly French, but also Dutch in wholesale distribution) have invested heavily in the Moroccan modern distribution chain, bringing know-how in supermarket management that Moroccan investors lack. They have started increasingly to consolidate their purchases (food and non-food) in centralized purchasing departments in Europe.
1.1.2
Turkey222 The retailing sector in Turkey has developed rapidly since the 1980s with significant changes both in economic and social structures. Although the number of large retail outlets in Turkey is growing, the majority of the population does not shop in these stores due to low income and high prices. Industry sources estimate that only five to seven million people do the majority of their shopping in modern retail outlets. The structure of the retail sector is significantly influenced by the type of food consumed by the majority of the population. For low-income groups, it is estimated that 55 percent of the diet is made up of bread with additional 15 percent made up of rice, potatoes and pasta products. For the entire population, processed foods make up only about 15 to 20 percent of consumption. Thus, the share of hypermarkets in the overall food retail market is still low but increasing gradually. Industry sources estimate that hypermarkets controlled approximately 9.5 percent of the retail market in 2002, up from 6.5 percent in 1999. This share is expected to reach 12 percent by the end of 2004. In 2002 industry sources estimate the Turkish retail market to be about USD 66 billion, of which USD 23 billion (35 percent) comprised of food sales. Total retail food sales broke down as 47 percent in bakkals and markets, 10.5 percent in small supermarkets, 9.5 percent in supermarkets, 7.5 large supermarkets, 10 percent in hypermarkets and the remaining 14 percent in specialist food retailers and convenience stores and open air bazaars. The total number of food retail outlets including convenience stores is declining, due to modern supermarkets and discount stores replacing traditional stores. There are more than 50 different chains operating in the Turkish retail business. Foreign investors present in the Turkish retail market include Carrefour SA (France) and Sabanci JV, Bookers (UK) and Sezginler JV (joint ventures), or purchases of majority shares such as Tescos (UK) recent purchase of KIPA. Despite the slower growth since the crisis in 2001, hyper- and supermarkets continue to be among the most dynamic sub-sectors. While existing food retail chains continue to open up new stores, new international chains are buying local chains (e.g. Tesco bought majority shares of Kipa in 2003). Competition is getting tougher among the food chains. Oypa, which had fourteen stores decided to sell out its stores to other chains and leave the
222
Source: USDA FAS GAIN Report (2004) Turkey: Retail Food Sector Report 2004
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retail food business. Hard discount stores also grew rapidly starting from 2001. Discount stores have benefited from changes in consumer preferences towards lower-price goods.
1.1.3
South Africa223 There are many players in the food retail industry in South Africa ranging from highly sophisticated retail chain supermarkets such as Pick n Pay, Shoprite-Checkers, Spar, Woolworths; wholesale outlets such as Makro, Metro, Trade Center, Cash & Carry; independent stores such as Biforce Group, Bargain Group, Shield Wholesalers; convenience chain stores including forecourts (gas stations with convenience type stores); traditional stores which includes independent stores such as general dealers, cafes, spaza shops, street vendors, hawkers, tuck shops, and primitive little street corner stalls at the other end of the retail sector. The food retail sector continues to expand and supermarkets, convenience stores and forecourts are rapidly becoming the dominant food retail outlets. A major phenomenon in South Africa has been the evolution of hypermarkets, which sell large quantities of almost all consumer goods on a self-serve basis. The hypermarkets, located in suburban shopping centers/malls, have disrupted the traditional distribution chain by purchasing directly from manufacturers and bypassing the wholesaler, and with low margins achieving high turnover, thereby placing price pressure on all competing outlets. For major supermarket chains, gaining a competitive edge through image and service is their major preoccupation. The retailers work hard at establishing their own particular appeal. Some, like Woolworths and Spar, do this by targeting a particular shopper segment, such as upper income groups. Others, like Pick n Pay and Shoprite-Checkers group, go head-to-head more on price and shopping experience. One common characteristic among these retail groups is enormous bargaining power. They are all able to dictate their buying terms to suppliers who are expected to deliver products to central depots or warehouses, where the products are then distributed to supermarkets and retail outlet stores. Shoprite-Checkers and Spar, for example, are very strong in the black areas (townships) whereas Woolworths is stronger in the smaller up-market segment. Most supermarkets sell their own-label products as well as manufacturers brands. The retail industry prefers to buy directly from local manufacturers, and even for imported products will often deal directly with foreign manufacturers and exporters.
1.1.4
Spain224 The Spanish food distribution sector, like those in other EU countries, has reached maturity and is becoming more concentrated and specialized. The decline in the number of traditional outlets seems to be accelerating; with industry analysts predicting that as many as half of traditional retailers going out of business. Spains skyrocketing real estate prices are forcing up rental costs in many city-centre locations; only shops with substantial sales can survive in this environment. Consequently, traditional outlets, which
223 224
Source: USDA FAS GAIN Report (2004) South Africa: Retail Food Sector Report 2004 Source: USDA FAS GAIN Report (2003) Spain: Retail Food Sector Report 2003
428
currently make just under a third of food sales, are likely to see further sharp declines in the next few years. The shops best positioned to survive are those selling fresh products (fruit, vegetables, meat and fish), which currently hold just under half of all sales in this category. At the other end of the retail sector, hypermarkets are also feeling pressure; their market share of food sales continued to decline in 2002, falling to 17.5 percent of the total. While sales in hypermarkets are growing reaching 17.32 billion in 2002 they are not keeping up with the pace of sales in supermarkets. This may reflect the continued expansion of consumer income and employment during the past few years. Many consumers are unwilling to fight traffic to reach suburban hypermarkets, preferring to trade lower prices for the convenience of shopping nearer to home. In addition, hypermarkets face government restrictions on the number of new locations that can be opened. The supermarkets, which hold the middle of the retail sector, are currently best positioned to gain market share. In 2002, they took a record 42 percent of total food sales; their total sales reached 36.30 billion, up eight percent from the previous year. Within the supermarket categories, the medium-sized stores (those with an area of between 401 and 1,000 square meters) are doing particularly well. They are often located in urban centres, where traditional markets are failing, yet are large enough to offer a substantial variety of products on their shelves. In addition, many of these medium-sized supermarkets are part of integrated, nationwide retail chains that include a range of locations, from large, full service supermarkets to food marts attached to gas stations. As a part of these retail chains, the mid-sized supermarkets enjoy centralized buying that permits them to be very price competitive. Market share is becoming more concentrated each year. In 2001, the ten largest retail groups had a market share of 66.6 percent of the food market; in 2002, their share grew to 68.6 percent. The three largest groups (Carrefour, Mercadona and Eroski) now account for nearly 48 percent of total sales. The concentration of market share into fewer hands is having repercussions on the farm. Food producers claim that the increasing buying power of the big retail groups allows them to exact lower prices from farmers and manufacturers. To allow consumers to be aware of sellers margins, some farmers organizations have called for a labelling system that would show the farm price as well as the retail sale price of any fresh product. The food retailers reply that they are facing fierce competition, lower prices, and narrower profit margins
1.1.5
China225 Modern food retail is growing at a breakneck pace in China, with many major international chains now having a presence on the mainland. Key players in the Chinese market include national giants Lianhua and Hualian, and foreign invested joint ventures
225
Source: USDA FAS GAIN Report (2004) China: Agricultural Situation: Retail and Food Distribution Development of China 2004; USDA FAS GAIN Report (2004) China: Retail Food Sector North China 2004; USDA FAS GAIN Report (2005) China: Retail Food Sector: Mainland China Food Retail Annual Report 2005
429
from Carrefour, Wal-Mart, Metro, Lotus and Park n Shop. This development of the modern retail food industry, which has been accelerating since 2000, is part and parcel of the basic drive for growth and modernization that is transforming China. Driven by rising urban incomes, consumption patterns are changing and expectations are rising. These changes came first to the Pearl River Delta, in South China across the border from Hong Kong, and then spread to the Yangtze River Delta around Shanghai. Now the retail revolution is reaching Northern and North-eastern China. Major hypermarkets, including international powerhouses like Carrefour, Wal-Mart and Metro, are extending their reach into the major cities of the north and northeast. Strong local competitors are also fighting for market share. The rise of modern retail chains in China is changing the way that food is sourced, and creating new opportunities for imports. Poor internal logistics and handling capabilities within China, combined with demand for high volume and consistent quality on the part of retailers, have made imports a more viable option. Large retailers are also changing the balance of influence, transforming China from a supply-driven market (consumers buy whatever is available), to a demand driven one (suppliers produce what consumers want). Furthermore, the market is reaching saturation level in some major cities, and there appears to be a twin movement of (i) expansion of hyper- and supermarket operations to 2nd- and 3rd-tier cities and (ii) a shift towards differentiation with an emphasis on retail chains trying to distinguish themselves from the competition. Increased competition is driving down margins and pushing stores to supplement their revenue from other sources. One of the most widely favoured sources of income are everhigher listing fees charged to suppliers of new products. These are becoming an obstacle to innovation, as suppliers are unwilling to take the chance that a new product will not be able to recover the substantial cost of the listing fee. The Chinese government has expressed concern over the rapid expansion of foreigninvested chains and is making efforts to ensure that domestic chains are able to compete. These efforts have taken a number of different forms. Late in 2003, the government hinted that it would pursue violations of the complex licensing rules more aggressively. Carrefour was the most prominent victim, having its expansion plans suspended until issues related to the share of foreign ownership were resolved. The central government also warned local and provincial governments that approval for foreign-invested retail projects would be contingent on tighter licensing procedures. At the same time, government is attempting to make Chinese chains more competitive by encouraging mergers. The largest of these was the merger of Chinas two largest retail chains, Lianhua and Hualian, both state owned enterprises. It is worth noting that the quality of fruit, vegetables and processed food in China is improving rapidly. At the same time, many international companies have established processing plants in China to take advantage of low labour costs. While supermarkets shelves are often stocked with famous foreign brands, these are often manufactured in China or in Southeast Asia and can be formulated specifically for the Chinese market. Domestically manufactured products have completely cornered the market in several broad categories, including soft-drinks, beer, processed meat and low-end confections. Competition is becoming quite serious in other areas as well, including low-to-mid range wines, confectionery and pet food. Chinese products have traditionally competed on price
430
alone, but improvements in quality and efforts to develop recognisable brands have made these products increasingly competitive at all levels.
1.2
Implications of development of the retail sector for the food processing industry
Concern over the effects of increasing concentration in the retail and food service sector is a relatively recent phenomenon. Essentially it dates from the 1980s when there was a shift in the balance of power in agri-food systems under which the retail sector moved from a price taker to one in which it occupied a controlling influence over the agri-food system. This has led to increasing interest in the implications of increased concentration on the agricultural sector and, specifically, small agricultural producers226. At the same time, it is fair to say that within the context of low and middle income markets, the interrelationships of increasing concentration of the retail sector and the position of local food processing sectors has been subject to very limited analysis. There are a variety of factors that underpin the development of modern retailing the so-called supermarket revolution - and, in particular, the entry and expansion of international food retailers in emerging markets. The attractiveness of any given market is determined by a variety of factors that influence both the demand for modern retail services and their supply; the analysis by AT Kearney presented above points to some of these factors. There are, however, some key factors that are typically identified as underpinning the transformation of retail markets: Demand side incentives to consumers to avail themselves of the services of modern retailing include: Increasing urbanisation and womens participation in the workforce, which place a premium on the convenience aspects of shopping in supermarkets compared to traditional shopping behaviour; The reduction in food prices for consumers that supermarkets are able to offer as a result of their mass procurement and efficient merchandising. Demand side capacity of consumers use the services of modern retailing: Growth in per capita income that raises demand for processed foods; Growing access to consumer durables (e.g. refrigerators etc.) that enhance the utilisation of the products supplied, and improved transport/mobility that enables consumers to access modern retail stores. Supply side factors, particularly influencing the expansion of international retailers, include: Saturation of domestic and established-foreign markets with, accordingly, limited opportunities for growth; Foreign direct investment (FDI) liberalisation that opens up opportunities for retailers to enter into foreign markets.
226
See, for example: Reardon, T. and J.A. Berdegu (2002). The rapid rise of supermarkets in Latin America: Challenges and opportunities for development. Development Policy Review 20 (4), 371-388; Weatherspoon, D.D. and T. Reardon (2003). The rise of supermarkets in Africa: implications for agrifood systems abd the rural poor. Development Policy Review 21 (3); UK Department for International Development DIFD (2004). Concentration in food supply and retail chains. Working Paper.
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Once the right conditions are in place then the expansion of modern retailing can be extremely rapid, as is currently being witnessed in China and which has also been observed in South America and Central Europe, for example. In the space of less than a decade it has proved quite feasible for modern retail distribution to move from virtual non-existence to possessing a dominating control over retail markets. As the experience of retailers in new market entry and expansion increases, the period of time necessary for them to reach a dominating position appears to be shortening; though this is neither to say that all such attempts will be successful, nor that local factors such as regulations, cannot impede the development of retailing sector. The development of the retail sector, and the associated increase in competition, has important consequences for the organisation of the food supply system. The search to reduce costs brings with it a focus on organisational and institutional change in procurement systems. Essentially, retailers seek to enhance their competitiveness through: reduced coordination costs, economies of scale by buying larger volumes, and by exercising tighter control over product consistency in meeting standards. Thus, among the organisational and institutional changes in procurement, the following transformations are to be seen: Shift from store based to centralised procurement systems; and from this to crossborder procurement; Shift from general to specialised/dedicated wholesalers; and from this to preferred supplier systems; Shift to global logistics suppliers to improve procurement/distribution systems; Shift towards application of private standards. The latter of these transformations, namely the application of private standards, serves a number of purposes. On the one hand, private standards are used as a marketing tool by ensuring higher product quality and safety to consumers and, in turn, they provide protection for retailers by demonstrating that appropriate measures have been taken to ensure safety of the products they sell227. The application of private standards may also be a mechanism for enforcing standards in the absence of local (national) standards or the absence of effective enforcement of such standards. On the other hand, standardisation of products reduces costs and allows more efficiency in product flow in procurement systems. As expansion of modern retailing progresses and competition increases it is typically accompanied by retailers pursuing policies of format diversification. Format diversification is undertaken with the aims of increasing coverage of the market, driving down prices, raising product diversity and, hence, market share. In fact, format diversification is generally accepted as one of the first signs that the modern retail sector is maturing.
227
The need for traceability to demonstrate due diligence and manage risks stems from this motive. It is especially the case for providing protection against contamination of food pathogens, toxins and alien genes. A current example from the UK is retailer driven programmes to purge own-brand supply chains of genetically modified ingredients in response to consumer aversion to GM technology.
432
Concentration in domestic retailing implies that the conditions that suppliers may already face in export markets become part and parcel of the domestic scene. Whereas local producers may have had some protection from competition in the local market, expansion of international retailing combined with liberalisation means that this protection can rapidly disappear. In short, the challenges of competition in the domestic market will become as acute as those faced in export markets. Retailers, in search of cost savings, will increasingly seek to extract favourable terms from suppliers through lower merchandise prices or greater provision of services. Such services may be special packaging, thirdparty food certification, or demanding payments of fees (e.g. for promotion of new products in retail outlets228). If it is typically the case that the initial phases of restructuring of supply chains focuses on the procurement and distribution system per se (e.g. driving out traditional wholesalers, concentration of distribution centres, use of international logistics suppliers etc.), as the scope for such cost savings is reduced then there will be increasing emphasis on extracting savings from suppliers (fresh and processed food). Hand-in-hand with this restructuring is a tendency towards greater concentration in the food-processing sector, this is a response to the need to generate economies of scale under increased pressure from the retail sector, and the driving out from the sector of producers that do not manage to enter into the closed retailer controlled supply chains. Although the general picture of the development of agri-food supply chains under the expansion of modern retailing is one on which there is a move from arms-length to direct relationships (e.g. preferred suppliers etc.) in which retailers set the rules of the game for participation, it does not imply that the consequences for suppliers are entirely negative. Obviously those producers falling outside the buyer driven supply chains are potentially most at risk. As the modern retail segment grows then traditional markets will be squeezed and, at the same time, barriers to entry into the buyer driven supply chain will increase over time. However, for producers within buyer-driven supply chains there can be important advantages: Access to relatively high-value markets in which selling differentiated products can generate higher revenues. Access to various forms of technical, financial and other support. Access to new markets/clients: conformity with the standards of one retailer is a signal to other retailers of the safety and quality of products. On this last point, it is also worth noting that in certain respects private standards are interim measures that are being followed by mandatory standards under state regulations229. Thus, in many instances, meeting private standards often means achieving early compliance with future mandatory standards. Similarly, where pressure from modern/international retailers encourages improvement in the quality and safety of products destined for the local market, it also typically implies that producers attain the standards required in export markets.
228
See Section 1.1.5, where the issue of payment of fees is mentioned in the context of the development of the Chinese retail market. The EU food safety regulations that came into force in January 2005 - making it mandatory for all fruit and vegetable products arriving in the EU to be traceable at all stages of production, processing and distribution - are an illustration of legal regulations that follow behind industry/private standards.
229
433
On the issue of support from retailers to their suppliers, there is evidence of retailers assisting suppliers with credit, inputs, extension services and even bank loan guarantees to upgrade capacity to produce and deliver products meeting required standards. Typically, examples of this behaviour are to be found in fresh produce and the dairysector, but there is less evidence with regard to the food-processing sector. Nonetheless, in parallel to cooperation and support to fresh produce segments, similar relationships could develop in processed segments. In this respect, it is worth noting that the incentives for retailers to develop direct local supplier relationships and to provide assistance are increased when there is a specific need to source products locally. Such needs may arise for a variety of reasons, but could include: restrictions on and costs of importing; domestic regulations; need for products that meet local consumer preferences/tastes etc. Furthermore, where one retailer provides assistance that improves the quality of its supply then competition within the retail sector to secure quality suppliers may force other retailers to pursue similar strategies in order to maintain their supply base.
434
VII-G Benchmarking AnalysisSupplementary Tables
435
EGYPT: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group 2106 Food preparations nes 712 Dried vegetables 710 Frozen vegetables 406 Cheese and curd 904-910 Herbs and spices 2009 Fruit juices 2004 Prepared or preserved veg nes - incl. frozen 2101 Coffee & tea extracts 2007 Jams etc. 2005 Prepared or preserved veg. nes - not frozen 2202 Beverages (non-alcoholic) 1704 Sugar confectionary 2103 Sauces etc. 2104 Soups etc. 811 Frozen fruit and nuts 1806 Chocolate etc. 1905 Biscuits etc. 1904 Breakfast cereals 1507 Soya-bean oil 2008 Preserved fruits nes 1509 Olive oil 2001 Pickles 1512 Sunflower, safflower and cotton-seed oil 402 Milk and cream 405 Butter etc. 2105 Ice cream 813 Dried fruit 1902 Pasta and couscous 1602 Prepared or preserved meat 2002 Prepared or preserved tomatoes 2201 Mineral Water 1604 Prepared or preserved fish 1511 Palm oil 403 Buttermilk and yoghurt 1513 Coconut and palm-seed oil 1601 Sausages etc. 1605 Prepared or preserved seafood 812 Other preserved fruit and nuts 2006 Sugar preserved fruit & nuts Total Total (of the above) Source: Authors calculations based on COMTRADE $US thousands 35,676 21,596 14,005 13,142 12,049 8,032 6,168 4,590 4,369 3,870 3,725 3,037 3,010 2,983 2,773 1,920 1,746 1,607 1,302 1,146 952 907 706 526 364 355 265 218 188 163 163 124 116 111 108 86 86 68 39 152,291 total processed Market 1 food exports 23.4% Tunisia 14.2% Germany 9.2% Saudi Arabia 8.6% Saudi Arabia 7.9% United States 5.3% United States 4.1% Saudi Arabia 3.0% Korea, Rep. 2.9% Japan 2.5% Saudi Arabia 2.4% Saudi Arabia 2.0% Saudi Arabia 2.0% Saudi Arabia 2.0% Jordan 1.8% Saudi Arabia 1.3% Saudi Arabia 1.1% Saudi Arabia 1.1% United States 0.9% Jordan 0.8% Jordan 0.6% Italy 0.6% Saudi Arabia 0.5% Jordan 0.3% Sudan 0.2% Ireland 0.2% Saudi Arabia 0.2% Singapore 0.1% Sudan 0.1% France 0.1% Philippines 0.1% Saudi Arabia 0.1% Saudi Arabia 0.1% Sudan 0.1% Jordan 0.1% Sudan 0.1% Saudi Arabia 0.1% China 0.0% Saudi Arabia 0.0% Saudi Arabia 100.0% Saudi Arabia Leading export markets (destination) for the product group Share Market 2 39% 23% 33% 58% 31% 64% 74% 36% 63% 24% 37% 35% 58% 29% 73% 23% 36% 56% 64% 49% 43% 75% 60% 65% 46% 65% 37% 73% 41% 45% 55% 56% 34% 56% 56% 80% 100% 75% 100% 27% Saudi Arabia Netherlands United States Jordan Morocco Saudi Arabia Jordan Japan United States Israel United Kingdom United States Qatar Qatar United States Kenya Jordan Mexico Syrian Arab Rep. United States Israel United States Zimbabwe Saudi Arabia Syrian Arab Rep. Qatar Turkey Kenya Saudi Arabia Sudan Ireland Morocco Israel Saudi Arabia Saudi Arabia Oman France United States Share Market 3 36% 17% 14% 21% 14% 11% 19% 20% 24% 21% 24% 25% 14% 21% 12% 17% 23% 14% 36% 14% 42% 10% 29% 26% 26% 19% 29% 11% 20% 17% 41% 31% 33% 33% 44% 20% 24% 11% Jordan 10% Tunisia 10% Jordan United Kingdom Greece Oman Germany Jordan Oman Syrian Arab Rep. Saudi Arabia Italy Netherlands Jordan Jordan Saudi Arabia Japan Jordan Kenya Japan Saudi Arabia United States Qatar Ethiopia Ethiopia United States Jordan Saudi Arabia Saudi Arabia Jordan Italy Tunisia Ethiopia France Share Market 4 16% 11% 11% 17% 8% 6% 1% 18% 8% 21% 13% 16% 14% 13% 7% 16% 10% 12% 9% 15% 6% 4% 4% 17% 16% 28% 10% 16% 12% 11% 28% 11% Russian Fed. Poland France United States France Italy Cyprus Sudan Tunisia Spain Sweden Russian Fed. Oman United States Canada Mauritius Mauritius Jordan United Kingdom Canada Syrian Arab Rep. Mauritius Saudi Arabia Germany Italy Oman Oman Other Share Share 4% 8% 10% 3% 7% 6% 1% 8% 3% 17% 6% 5% 7% 13% 3% 11% 6% 8% 7% 3% 3% 4% 10% 5% 6% 12% 9% 4% 41% 32% 1% 39% 14% 4% 18% 3% 18% 21% 20% 6% 24% 4% 33% 24% 9% 0% 21% 0% 6% 4% 0% 1% 0% 1% 0% 11% 17% 4% 2% 4% 0% 0% 0% 0% 1% 0% 41%
437
Table 0.1
MOROCCO: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group $US thousands 1604 Prepared or preserved fish 254,222 2005 Prepared or preserved veg. nes - not frozen 80,851 406 Cheese and curd 32,057 811 Frozen fruit and nuts 16,904 2101 Coffee & tea extracts 14,903 2008 Preserved fruits nes 14,614 2001 Pickles 11,278 2106 Food preparations nes 9,677 712 Dried vegetables 7,206 2009 Fruit juices 6,803 904-910 Herbs and spices 6,668 2202 Beverages (non-alcoholic) 6,543 710 Frozen vegetables 5,413 2002 Prepared or preserved tomatoes 4,030 2104 Soups etc. 2,666 1511 Palm oil 1,790 1507 Soya-bean oil 1,770 1902 Pasta and couscous 1,691 1704 Sugar confectionary 1,403 1509 Olive oil 1,102 1905 Biscuits etc. 959 405 Butter etc. 380 1512 Sunflower, safflower and cotton-seed oil 219 813 Dried fruit 209 403 Buttermilk and yoghurt 165 2201 Mineral Water 131 1605 Prepared or preserved seafood 118 2103 Sauces etc. 114 2004 Prepared or preserved veg nes - incl. frozen 92 2105 Ice cream 57 1806 Chocolate etc. 32 2007 Jams etc. 18 402 Milk and cream 16 1602 Prepared or preserved meat 11 2006 Sugar preserved fruit & nuts 0 1904 Breakfast cereals 0 1601 Sausages etc. 0 1513 Coconut and palm-seed oil 0 812 Other preserved fruit and nuts 0 Total Total (of the above) 484,112 Source: Authors calculations based on COMTRADE total processed Market 1 food exports 52.5% France 16.7% France 6.6% Saudi Arabia 3.5% France 3.1% Tunisia 3.0% France 2.3% France 2.0% Germany 1.5% United States 1.4% France 1.4% Spain 1.4% Libya 1.1% France 0.8% Japan 0.6% France 0.4% Mauritania 0.4% Lebanon 0.3% France 0.3% Algeria 0.2% United States 0.2% France 0.1% Spain 0.0% Senegal 0.0% Spain 0.0% Mauritania 0.0% Germany 0.0% Italy 0.0% United States 0.0% U.A.E. 0.0% Libya 0.0% Mauritania 0.0% 0.0% Mauritania 0.0% Free Zones 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% France Leading export markets (destination) for the product group Share Market 2 16% 39% 28% 38% 15% 77% 66% 39% 85% 55% 29% 26% 58% 40% 30% 40% 49% 54% 36% 50% 16% 89% 43% 100% 61% 33% 98% 54% 29% 100% 84% 100% 100% Italy United States Lebanon Spain Finland Germany Germany Tunisia France Tunisia Japan Mauritania Spain United States Germany Equatorial Guinea Mauritania Belgium Germany Brazil Libya France Cameroon France Netherlands Tunisia Spain Share Market 3 11% 26% 14% 35% 14% 9% 11% 25% 7% 12% 29% 19% 23% 22% 21% 21% 23% 14% 22% 33% 15% 11% 29% 38% 16% 27% 28% Spain Italy Yemen Netherlands Cte d'Ivoire Belgium United States France Japan Germany France Germany Belgium Spain Belgium Gambia Gambia Spain Sweden Netherlands Tunisia Guinea Share Market 4 8% 7% 13% 6% 14% 9% 8% 24% 3% 11% 7% 11% 8% 21% 15% 19% 11% 13% 15% 7% 13% 13% Germany Libya Libya Switzerland Egypt Netherlands Italy United States Italy United Kingdom United States Senegal United Kingdom Senegal Algeria Ghana Guinea United States France United Kingdom United States Mauritania Other Share Share 8% 6% 12% 6% 11% 3% 2% 4% 2% 8% 5% 10% 6% 6% 10% 6% 7% 4% 12% 3% 9% 8% 57% 21% 33% 15% 46% 3% 13% 8% 3% 14% 29% 35% 4% 11% 23% 15% 9% 16% 15% 7% 47% 0% 7% 0% 1% 31% 2% 18% 8% 0% 16% 100% 0% 0%
Liberia
11%
France
8%
France
23%
Italy
12%
23%
United States
10%
Italy
7%
Spain
7%
53%
438
Table 0.2
TURKEY: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group $US thousands 2008 Preserved fruits nes 202,724 1905 Biscuits etc. 124,399 813 Dried fruit 123,960 1704 Sugar confectionary 98,777 2002 Prepared or preserved tomatoes 89,603 2001 Pickles 85,942 1806 Chocolate etc. 79,104 904-910 Herbs and spices 61,250 2005 Prepared or preserved veg. nes - not frozen 53,905 1509 Olive oil 46,145 2007 Jams etc. 39,236 2009 Fruit juices 36,251 710 Frozen vegetables 27,807 712 Dried vegetables 24,156 811 Frozen fruit and nuts 23,689 406 Cheese and curd 19,744 2106 Food preparations nes 16,969 1902 Pasta and couscous 16,826 1904 Breakfast cereals 15,601 1605 Prepared or preserved seafood 13,474 1512 Sunflower, safflower and cotton-seed oil 11,989 2201 Mineral Water 7,820 2105 Ice cream 7,100 2104 Soups etc. 6,886 2202 Beverages (non-alcoholic) 5,883 1604 Prepared or preserved fish 5,180 2103 Sauces etc. 5,174 1507 Soya-bean oil 3,246 812 Other preserved fruit and nuts 1,783 2004 Prepared or preserved veg nes - incl. frozen 1,767 2101 Coffee & tea extracts 625 2006 Sugar preserved fruit & nuts 490 1601 Sausages etc. 429 405 Butter etc. 378 1602 Prepared or preserved meat 271 402 Milk and cream 237 403 Buttermilk and yoghurt 84 1511 Palm oil 14 1513 Coconut and palm-seed oil 0 Total Total (of the above) 1,258,918 Source: Authors calculations based on COMTRADE total processed Market 1 food exports 16.1% Germany 9.9% Free Zones 9.8% United States 7.8% Azerbaijan 7.1% Japan 6.8% Germany 6.3% Free Zones 4.9% United States 4.3% Germany 3.7% Italy 3.1% Germany 2.9% Germany 2.2% Germany 1.9% United States 1.9% United Kingdom 1.6% Saudi Arabia 1.3% Spain 1.3% U.A.E. 1.2% Germany 1.1% France 1.0% Greece 0.6% Germany 0.6% Yugoslavia 0.5% Saudi Arabia 0.5% Germany 0.4% Belgium 0.4% Germany 0.3% Ethiopia 0.1% Italy 0.1% Greece 0.0% Free Zones 0.0% Germany 0.0% Cyprus 0.0% Cyprus 0.0% Azerbaijan 0.0% Saudi Arabia 0.0% Cyprus 0.0% Algeria 0.0% 100.0% Germany Leading export markets (destination) for the product group Share Market 2 31% 13% 23% 8% 21% 34% 19% 24% 29% 46% 33% 51% 21% 24% 28% 42% 39% 21% 23% 58% 20% 51% 45% 22% 42% 38% 12% 26% 63% 60% 62% 26% 34% 76% 24% 38% 17% 93% 17% United Kingdom Saudi Arabia United Kingdom Free Zones Russian Fed. Netherlands Russian Fed. Germany Romania United States France Netherlands United Kingdom Italy Netherlands Kuwait Free Zones Azerbaijan United States Italy Free Zones United Kingdom Italy U.A.E. Cyprus France Cyprus Bulgaria Greece Germany Cyprus France Azerbaijan Saudi Arabia Cyprus Free Zones Germany Share Market 3 14% 10% 13% 8% 11% 28% 7% 13% 14% 21% 11% 10% 19% 19% 15% 25% 17% 8% 12% 23% 17% 12% 13% 21% 24% 22% 10% 22% 21% 8% 24% 18% 22% 10% 21% 20% 13% Netherlands Germany Germany Germany Saudi Arabia France Saudi Arabia Brazil Netherlands Saudi Arabia Netherlands Azerbaijan France Germany Germany U.A.E. Germany Georgia Saudi Arabia Sweden Israel Cyprus Cyprus Germany Saudi Arabia Italy Italy Cyprus United States Georgia Iran Denmark Yugoslavia United States Former Yugoslavia Cyprus Share Market 4 8% 6% 12% 7% 9% 8% 7% 5% 13% 7% 9% 7% 16% 13% 15% 7% 5% 7% 10% 8% 15% 8% 12% 15% 6% 14% 10% 16% 13% 7% 4% 10% 15% 5% 15% 15% France Albania France Kazakhstan Germany United States Azerbaijan Spain United States Canada Belgium United Kingdom Belgium United Kingdom France United States Saudi Arabia Free Zones Israel Korea, Rep. Romania Denmark Former Yugoslavia Free Zones United States United States Free Zones Yemen Malta Cyprus Morocco Free Zones Free Zones Free Zones Bulgaria United States Other Share Share 8% 5% 12% 5% 6% 7% 6% 4% 11% 5% 8% 5% 13% 11% 14% 5% 4% 7% 8% 8% 9% 7% 12% 8% 4% 9% 9% 7% 2% 4% 2% 9% 8% 3% 13% 6% 39% 66% 41% 72% 53% 23% 62% 54% 33% 21% 38% 26% 31% 34% 29% 22% 36% 56% 47% 4% 38% 23% 19% 34% 24% 18% 59% 29% 1% 21% 8% 37% 21% 5% 27% 21% 70% 7% 64%
United States
8%
United Kingdom
6%
Netherlands
6%
439
Table 0.3
SOUTH AFRICA: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group $US thousands 2008 Preserved fruits nes 119,725 2009 Fruit juices 92,031 2202 Beverages (non-alcoholic) 48,119 2106 Food preparations nes 33,289 402 Milk and cream 24,163 1806 Chocolate etc. 17,961 1704 Sugar confectionary 16,938 904-910 Herbs and spices 13,052 1604 Prepared or preserved fish 11,600 1512 Sunflower, safflower and cotton-seed oil 11,353 406 Cheese and curd 10,458 1905 Biscuits etc. 9,289 2103 Sauces etc. 8,488 2005 Prepared or preserved veg. nes - not frozen 7,079 811 Frozen fruit and nuts 6,933 813 Dried fruit 6,447 1904 Breakfast cereals 5,404 710 Frozen vegetables 5,400 2104 Soups etc. 4,345 1605 Prepared or preserved seafood 3,494 2101 Coffee & tea extracts 3,457 2007 Jams etc. 3,357 1602 Prepared or preserved meat 2,865 1507 Soya-bean oil 2,409 405 Butter etc. 2,193 2105 Ice cream 1,892 1601 Sausages etc. 1,816 1902 Pasta and couscous 1,601 2001 Pickles 1,531 2002 Prepared or preserved tomatoes 1,256 2201 Mineral Water 1,199 403 Buttermilk and yoghurt 1,115 712 Dried vegetables 1,096 1511 Palm oil 788 2004 Prepared or preserved veg nes - incl. frozen 504 1509 Olive oil 402 2006 Sugar preserved fruit & nuts 309 812 Other preserved fruit and nuts 284 1513 Coconut and palm-seed oil 231 Total Total (of the above) 483,873 Source: Authors calculations based on COMTRADE total processed Market 1 food exports 24.7% Japan 19.0% United States 9.9% Angola 6.9% Mozambique 5.0% Angola 3.7% Saudi Arabia 3.5% Mozambique 2.7% Spain 2.4% United Kingdom 2.3% Mozambique 2.2% United Kingdom 1.9% Mozambique 1.8% United Kingdom 1.5% Belgium 1.4% Netherlands 1.3% Australia 1.1% Zambia 1.1% Germany 0.9% Mozambique 0.7% Hong Kong 0.7% Mauritius 0.7% Mozambique 0.6% United Arab E 0.5% Malawi 0.5% Mozambique 0.4% Mozambique 0.4% Uganda 0.3% Zambia 0.3% United Kingdom 0.3% United Kingdom 0.2% Mozambique 0.2% Mozambique 0.2% Germany 0.2% D.R. of Congo 0.1% United Kingdom 0.1% Mozambique 0.1% United Kingdom 0.1% Netherlands 0.0% Zimbabwe 100.0% Angola Leading export markets (destination) for the product group Share Market 2 15% 22% 59% 11% 27% 34% 15% 28% 27% 24% 75% 24% 27% 24% 38% 27% 17% 25% 46% 86% 18% 23% 32% 59% 44% 19% 67% 31% 44% 26% 39% 40% 32% 35% 22% 47% 37% 59% 52% 10% United Kingdom Netherlands Nigeria Zimbabwe Mauritius United Arab E United Kingdom United States Mauritius D.R. of Congo Mozambique Zambia Mozambique Mozambique United States United Kingdom D.R. of Congo Canada Nigeria Uganda Zambia Germany Pakistan Zambia Mauritius Angola Mozambique Mozambique United States Russian Fed. Angola Angola Italy Zambia Angola Zambia Angola Mauritius Zambia United States Share Market 3 12% 15% 6% 8% 15% 15% 8% 19% 19% 16% 7% 17% 14% 18% 18% 15% 13% 15% 13% 5% 17% 15% 25% 33% 13% 19% 16% 20% 20% 24% 16% 31% 14% 29% 13% 10% 14% 12% 24% 9% United States Japan Cte d'Ivoire Malawi D.R. of Congo Mozambique Angola United Kingdom Panama Zimbabwe Japan Angola Zambia Zambia United Kingdom Switzerland Mozambique New Zealand Zambia Switzerland Mozambique Israel Mozambique Mozambique Zimbabwe United States Angola Malawi Denmark Switzerland Zambia Malawi Switzerland Zimbabwe Australia Angola Seychelles Australia Malawi United Kingdom Share Market 4 12% 13% 3% 7% 13% 7% 6% 8% 7% 15% 4% 13% 12% 8% 10% 14% 8% 8% 6% 4% 16% 9% 7% 4% 13% 17% 4% 12% 8% 15% 7% 6% 10% 20% 11% 8% 11% 6% 19% 8% Germany Canada Mozambique Zambia Venezuela Zambia D.R. of Congo India United States Zambia Angola D.R. of Congo Australia Switzerland Mauritius New Zealand Australia Zambia United States Singapore Kenya Netherlands Cape Verde Zimbabwe Zambia Zambia Angola Angola Japan Seychelles Netherlands Benin United States Mozambique Mozambique Spain Zambia Gabon Mauritius Japan Other Share Share 12% 8% 3% 7% 9% 7% 6% 7% 6% 14% 3% 8% 8% 7% 8% 10% 8% 8% 4% 3% 9% 6% 6% 2% 7% 8% 4% 9% 5% 13% 5% 3% 9% 8% 11% 7% 8% 5% 5% 7% 49% 42% 29% 67% 35% 37% 65% 37% 41% 31% 11% 37% 40% 42% 27% 36% 53% 44% 30% 3% 40% 47% 29% 2% 22% 37% 10% 29% 23% 22% 33% 20% 35% 7% 43% 28% 30% 19% 1% 67%
440
Table 0.4
SPAIN: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group $US thousands 1509 Olive oil 1,307,568 2005 Prepared or preserved veg. nes - not frozen 548,448 1704 Sugar confectionary 338,004 1604 Prepared or preserved fish 329,789 2009 Fruit juices 321,987 1905 Biscuits etc. 273,623 2008 Preserved fruits nes 238,172 2202 Beverages (non-alcoholic) 203,229 710 Frozen vegetables 176,363 406 Cheese and curd 147,129 2002 Prepared or preserved tomatoes 138,451 2106 Food preparations nes 123,952 2103 Sauces etc. 107,637 1806 Chocolate etc. 101,297 403 Buttermilk and yoghurt 100,111 2101 Coffee & tea extracts 98,447 402 Milk and cream 94,493 2104 Soups etc. 92,510 1507 Soya-bean oil 91,267 1601 Sausages etc. 90,567 904-910 Herbs and spices 86,632 1602 Prepared or preserved meat 81,390 2105 Ice cream 77,429 1605 Prepared or preserved seafood 67,892 1904 Breakfast cereals 59,234 2001 Pickles 44,651 405 Butter etc. 43,375 1512 Sunflower, safflower and cotton-seed oil 39,238 1902 Pasta and couscous 35,704 2007 Jams etc. 31,938 712 Dried vegetables 29,041 811 Frozen fruit and nuts 28,221 2004 Prepared or preserved veg nes - incl. frozen 17,661 1511 Palm oil 12,507 812 Other preserved fruit and nuts 12,304 2201 Mineral Water 8,056 813 Dried fruit 5,780 2006 Sugar preserved fruit & nuts 3,412 1513 Coconut and palm-seed oil 3,040 Total Total (of the above) 5,610,549 Source: Authors calculations based on COMTRADE total processed Market 1 food exports 23.3% Italy 9.8% United States 6.0% United Kingdom 5.9% Italy 5.7% France 4.9% Portugal 4.2% France 3.6% Portugal 3.1% Germany 2.6% Portugal 2.5% France 2.2% Portugal 1.9% France 1.8% France 1.8% Portugal 1.8% France 1.7% France 1.6% France 1.6% Tunisia 1.6% France 1.5% United States 1.5% Italy 1.4% Portugal 1.2% France 1.1% Italy 0.8% United States 0.8% France 0.7% Portugal 0.6% France 0.6% France 0.5% Netherlands 0.5% France 0.3% France 0.2% France 0.2% Portugal 0.1% Portugal 0.1% France 0.1% Italy 0.1% France 100.0% Italy Leading export markets (destination) for the product group Share Market 2 53% 40% 15% 41% 47% 26% 18% 26% 26% 30% 22% 28% 41% 18% 43% 14% 32% 11% 21% 26% 20% 22% 25% 25% 28% 46% 50% 53% 42% 39% 27% 25% 40% 50% 31% 27% 29% 17% 60% 20% France France Germany France Germany France Germany France France France Germany France Italy Portugal France Poland Iraq Senegal Turkey Portugal United Kingdom Portugal France Germany Portugal France United Kingdom France Portugal Portugal Germany Netherlands Portugal Portugal United Kingdom Andorra Portugal Portugal Portugal France Share Market 3 12% 10% 11% 16% 12% 18% 17% 22% 19% 20% 19% 14% 22% 16% 29% 13% 13% 10% 20% 17% 12% 21% 17% 17% 23% 18% 12% 21% 26% 15% 25% 18% 25% 39% 18% 21% 18% 15% 23% 18% Portugal Italy United States Portugal United Kingdom Germany United Kingdom Italy Belgium Italy United States Italy Portugal Germany Italy United Kingdom Portugal Portugal Italy Germany France Russian Fed. Germany United States France Portugal Morocco Netherlands Ireland Germany France Germany Sweden Italy Italy France United Kingdom France Italy Portugal Share Market 4 8% 7% 10% 10% 7% 11% 12% 12% 14% 16% 11% 8% 8% 13% 7% 10% 11% 8% 13% 8% 7% 11% 13% 16% 17% 4% 12% 10% 3% 7% 12% 14% 6% 7% 16% 17% 13% 13% 14% 12% United States Russian Fed. France United Kingdom Portugal Italy United States Germany United Kingdom United States United Kingdom Greece Germany Belgium Germany Germany Algeria Cte d'Ivoire Portugal Belgium Netherlands United Kingdom Italy Italy Germany United Kingdom Germany EU Other United Kingdom Italy Portugal Switzerland Germany Belgium Germany Gibraltar Germany United Kingdom Algeria United States Other Share Share 6% 6% 7% 8% 4% 10% 8% 11% 11% 8% 11% 5% 6% 8% 5% 9% 9% 7% 8% 8% 7% 9% 9% 9% 8% 4% 8% 4% 3% 6% 12% 13% 5% 1% 12% 7% 6% 11% 1% 8% 22% 37% 57% 26% 31% 34% 45% 29% 30% 26% 36% 45% 23% 44% 16% 54% 36% 64% 38% 41% 55% 37% 36% 33% 24% 27% 18% 11% 26% 33% 24% 30% 23% 3% 23% 29% 33% 44% 2% 42%
441
Table 0.5
CHINA: Processed food exports, ranked by value ($US) in 2002

Share of Exports 2002 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 HS Product group $US thousands 1604 Prepared or preserved fish 866,588 1605 Prepared or preserved seafood 761,658 1602 Prepared or preserved meat 666,141 2008 Preserved fruits nes 551,260 2005 Prepared or preserved veg. nes - not frozen 399,695 712 Dried vegetables 373,917 2201 Mineral Water 301,700 710 Frozen vegetables 299,024 1902 Pasta and couscous 289,013 2106 Food preparations nes 271,923 904-910 Herbs and spices 209,172 2009 Fruit juices 199,307 2002 Prepared or preserved tomatoes 189,472 2103 Sauces etc. 121,596 1704 Sugar confectionary 120,391 1905 Biscuits etc. 86,377 2006 Sugar preserved fruit & nuts 75,537 2004 Prepared or preserved veg nes - incl. frozen 67,961 811 Frozen fruit and nuts 55,023 2202 Beverages (non-alcoholic) 52,959 1904 Breakfast cereals 50,222 812 Other preserved fruit and nuts 34,720 402 Milk and cream 31,959 1601 Sausages etc. 29,376 813 Dried fruit 28,633 2101 Coffee & tea extracts 23,992 1507 Soya-bean oil 21,627 1806 Chocolate etc. 18,861 2007 Jams etc. 18,753 2104 Soups etc. 15,929 2001 Pickles 10,631 2105 Ice cream 6,196 1511 Palm oil 3,173 406 Cheese and curd 1,604 1512 Sunflower, safflower and cotton-seed oil 1,358 405 Butter etc. 586 403 Buttermilk and yoghurt 111 1509 Olive oil 47 1513 Coconut and palm-seed oil 0 Total Total (of the above) 6,256,492 Source: Authors calculations based on COMTRADE total processed Market 1 food exports 13.9% Japan 12.2% Japan 10.6% Japan 8.8% Japan 6.4% Japan 6.0% Japan 4.8% Hong Kong 4.8% Japan 4.6% Japan 4.3% Japan 3.3% Japan 3.2% United States 3.0% Italy 1.9% Korea, Rep. O 1.9% United States 1.4% Hong Kong 1.2% Japan 1.1% Japan 0.9% Japan 0.8% Hong Kong 0.8% Korea, Rep. 0.6% Japan 0.5% Iraq 0.5% Japan 0.5% Japan 0.4% Hong Kong 0.3% Hong Kong 0.3% Japan 0.3% Japan 0.3% Japan 0.2% Japan 0.1% Hong Kong 0.1% Hong Kong 0.0% Hong Kong 0.0% Netherlands 0.0% Singapore 0.0% Cambodia 0.0% United States 0.0% 100.0% Japan Leading export markets (destination) for the product group Share Market 2 87% 42% 79% 41% 53% 45% 98% 69% 34% 35% 26% 30% 40% 25% 23% 45% 42% 92% 42% 73% 27% 97% 44% 50% 39% 37% 94% 29% 43% 53% 33% 41% 99% 97% 39% 98% 31% 100% 47% United States United States Hong Kong United States Spain United States Macau United States Hong Kong Hong Kong Korea, Rep. O Japan Russian Fed. Hong Kong Hong Kong Japan Hong Kong (SA Korea, Rep. Korea, Rep. Macau Japan Korea, Rep. Hong Kong Hong Kong Hong Kong Australia Mongolia Hong Kong Russian Fed. Hong Kong Italy Japan Uzbekistan Australia Kazakhstan Korea, Dem. P Hong Kong Share Market 3 3% 41% 11% 16% 9% 11% 2% 7% 20% 22% 12% 20% 13% 22% 16% 15% 14% 3% 24% 9% 21% 1% 35% 47% 19% 20% 2% 26% 14% 13% 23% 28% 1% 2% 27% 2% 30% Korea, Rep. Hong Kong Singapore Germany Germany Korea, Rep. Myanmar Germany Korea, Rep. United States United States Netherlands Japan Japan Korea, Rep. Korea, Rep. Singapore Germany Netherlands United States Hong Kong Hong Kong Myanmar Macau Korea, Rep. Japan Korea, Dem. Korea, Rep. Hong Kong Taiwan Korea, Rep. Australia Macau Thailand Macau Share Market 4 3% 5% 3% 6% 7% 9% 0% 6% 10% 14% 9% 9% 6% 15% 5% 6% 8% 3% 8% 7% 18% 1% 12% 1% 10% 17% 2% 15% 9% 11% 22% 23% 1% 12% 21% Hong Kong Russian Fed. Malaysia Korea, Rep. Netherlands Germany Malaysia Korea, Rep. United States Korea, Rep. Malaysia Germany Yemen United States Australia United States Netherlands United Kingdom Germany Singapore Australia Singapore Japan Philippines United States Malaysia Mauritania Thailand Singapore Korea, Rep. O United States Macau Other Share Share 2% 3% 2% 5% 6% 7% 0% 4% 8% 4% 8% 8% 4% 10% 5% 5% 7% 1% 6% 3% 9% 1% 4% 1% 7% 5% 1% 7% 6% 9% 10% 4% 5% 9% 5% 33% 25% 26% 0% 14% 28% 25% 45% 32% 38% 28% 50% 30% 29% 2% 20% 8% 25% 0% 6% 1% 25% 20% 1% 23% 28% 13% 12% 5% 0% 0% 12% 0% 5% 0% 23%
Indonesia Myanmar
10% 14%
Hong Kong
13%
United States 11%
Korea, Rep.
5%
442

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Egyptian Processed Food Sector Review

Client: Industrial Modernisation Centre - Egypt

ECORYS-NEI Macro & Sector Policies

Rotterdam, April 2005

T +31 10 453 88 00 F +31 10 453 07 68 E netherlands@ecorys.com W www.ecorys.nl Registration no. 24316726

4.1 4.2 4.3 4.4 4.5 4.6

4.2 4.3 4.4 4.5 4.6

5 Supplementary Tables VII-B Sub-Sector Profiles

Table 1.1 Table 2.1 Table 2.2

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

420 420 425 426 438 439 440 441 442

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Food Processing Industry in the New Global Setting

Egypts Competitive Performance in Processed food industry

Egyptian Processed Food Sector Review

Egypts Industrial Capabilities

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Sub sector Performance

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

UNCTAD, USDA-ERS and consultants calculation

Egyptian Processed Food Sector Review

2 Demand-side factors influencing global development of the FPI

Social and demographic change

Egyptian Processed Food Sector Review

Source: World Bank national accounts data

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

Fam ily budget LE per year

Source: Study team based on Family Budget Survey

Egyptian Processed Food Sector Review

Egyptian Processed Food Sector Review

2005 402,263 204,894 197,371 170,598 231,668

2010 445,036 226,386 218,649 181,192 263,846

2015 487,775 247,891 239,883 189,487 298,283

2020 529,503 268,834 260,667 195,726 333,775

Egyptian Processed Food Sector Review

Food safety and health concerns

Egyptian Processed Food Sector Review

Life-style and health foods

Egyptian Processed Food Sector Review

3 Supply-side factors influencing global development of the FPI

Global sourcing of raw materials

Traditional Supply Chain