Alwatanya Poultry

Channel Audit
Marketing Channels

Mohamed bahnasawy
Salem salem
Chirsteen abdulallah
Kareem Ahmed

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 Executive Summary

Egyptian poultry industry has evolved into a very significant sector of Egyptian agricultural production. The
times when growing poultry in the backyard farms was only a traditional activity that supported the well
being of particular household are gone. That does not necessarily mean that backyard poultry production
disappeared rather then the role of backyard poultry production for household consumption in the overall
national poultry production became minimal. Since middle of the 20th century there have been various
vectors and conditions for poultry sector development in Egypt. The socialist era is known for its generous
subsidies and support. Today the poultry industry in Egypt is predominantly market driven and has to find
its way in the turbulent waters of global market.

The vast majority of broiler production (close to 70%) is smallscale production (FAO sector 3) with a few
fully integrated poultry enterprises (FAO sector 1). Recently there is a general trend towards more vertical
integration and the establishment of scale production multinationals (for instance, Cairo Poultry Company
or Al Wataneya Group). In general the overall broiler poultry industry in Egypt in general has the traits of
FAO sector 3 farms – underutilization of production capacity (normally 5 rather than 7 or even 8 cycles per
year), old and very basic production equipment and intensive use of hand labor, poor biosecurity, high
FCR, high mortality, ununiformed stock. At the same time, vertically integrated companies execute good
management practices and comply with world safety and quality standards which allow to achieve key
performance indexes that match those in the main poultry producing countries.

Current structure of industrial broiler poultry production in general is very vulnerable and can barely resist
different market unrests that can happen due to numerous factors like AI consumer scare, poultry meat
import policy change, etc. This can result in tremendous price fluctuations and availability of poultry meat to
final consumers.

Al-Watania Poultry in Egypt is one of greatest integrated companies for poultry production in the Middle
East. The poultry industry in Al-Watania Poultry has several stages starting by poultry grandparents and
ended by poultry slaughterhouse accompanied with factory for processing poultry products which
contributes in producing a rich products range from poultry and processed poultry products.

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 Table of contents:

Executive Summary 2
Table of contents: 3
1 Business Description 4
Product Offering 4
Strategic Intent 4
Key Strategies 5
2 Organisations Channel Environment 6
Government 6
Competition 6
Markets 7
Technology 7
How Environmental Factors impact Organisations channel 7
3 Organisation's Channel Profile. 8
3.1 Target Market and Segmentation. 8
Key accounts 8
Retail 8
Distributer
Catering

Table 1: Service Output Demand Analysis. 9

3.2 Channel Structure: 10
Alwatanya slaughterhouse 11
Distribution Facilities 11
Distributers 11
Retailers 11
Key accounts

3.3 Channel Flows 12

Physical Possession/Ownership 12
Promotion 12
Negotiation 12
Finance 12
Risking 13
Ordering and Payment 13
Table 2: Efficiency Template 13
4 Channel Member Behaviour & Co-ordinating Mechanisms 14
Primary Research 14
Member Behaviour – Channel Conflict 15
Channel cooperation 15
5 Channel Performance 16
Channel Gap Analysis 16
Demand-side gap analysis 16
6 Problems and Prospects 17
Conflicting channel stakeholder demands 17
Conflicting channel goals between Alwatanya and retailers 17
Damage to reputation due to previous distribution network decisions 17
Government frozen chicken imports 17
7 Recommendations 18
8 Implementation 19

Appendix 21
Appendix 1; In-depth Interviews 21
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 1 Business Description

Product Offering

Al-Watania introducing a large range from poultry products by all its categories (chilled whole chicken- chilled
chicken parts – frozen whole chicken all weights – frozen chicken parts and wide range of full cooked processed
poultry products fried and grilled) which are 100 product out of it 55 processed products.

Strategic Intent
Working within Alwatanya on retail level and despite being an established company GCC for over
30 years; Alwatanya -only established have only been within Egypt for the past 10 years.
Alwatanya is also distributed across chicken goods cars such as alrawfed and multi tarde, but can
look to dominate the market with the necessary product knowledge from its workers as well look to
engage with consumers in a ‘local community ’.

Key Strategies

With Alwatanya establishing its reputation among several GCC markets, the focus for Alwatanya
has shifted from brand awareness, and more towards sustainable growth. Currently the executed
plans GCC for Alwatanya include sustainability within the areas of:

• Delivery of portfolio including sustainable products that enhance poultry

Performance.

• Prototype and scale sustainable sourcing and manufacturing models.

• Exploring new sources of revenue not based on constrained resources.

In addition to these sustainability focuses, Alwatanya also unveiled strategies to further build to the
strategy of sustainability through:

• Further growth of the Alwatanya brand in all GCC of its geographic locations.

• Open up additional 25-50 Alwatanya-branded stores in Egypt; as well elevating the consumer
experience within its premium stores, digital presence via online stores and continual growth of
Alwatanya –ID.

• Furthermore on customer experience – Alwatanya are looking to focus more on its relations
with retail partners to further create their ‘differentiated consumer experience’ where these
partnerships account for more than 70% of the company’s overall business.

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 2 Organization Channel Environment
Government

Consumer Protection Agency is a government agency established in accordance with Egyptian law
No. 67 for the year 2006 and affiliated to the Ministry of Supply and Internal Trade. CPA Controls
the market and achieve safety in all commercial transactions, Regulate the relationship between
the merchant and the consumer, Provide full protection to the consumer and to require each dealer
to apply the terms of the law and only exposure to the exclusion of all penalties and fines approved
by the Consumer Protection Act, Maintenance and protection of consumers and the interests of all
parties in the market.

It is now for the government to make a clear statement through the National Poultry Sector
Development Policy and Strategy how it sees these development itself, keeping in mind its
responsibility for all of Egypt’s people’s interests. On the shoulder of the government rests the
responsibility for the livelihood of especially the less privileged and vulnerable people in the
country. Where the recent unrest was probably mainly urban disillusioned people it would be a
prudent policy to avoid creating also a large contingent of rural disillusioned and disowned people
starting to demand further change. The policy and strategy should have a number of key principles,
which shows clearly the intention of the government:

a) It is acknowledged that poultry production in Egypt is diverse and serves both production and
socioeconomic purposes, whereby also cultural traditions cannot be ignored.

b) Only through full involvement and participation of the private sector will it be possible to
implement a national poultry development policy and strategy, of which disease control is only one
of the aspects the policy and strategy tackles.

c) There should be clear division of public and private responsibilities and tasks, whereby the
government wholeheartedly delegates certain tasks to the private sector and concentrates on its
regulatory and monitoring tasks.

Competition
Alwatanya is segmented in the highly competitive poultry industry. According fao According to
statistical report of Economic Affairs Sector of MALR, in 2015 out of 589 million broiler chicken
produced only 86,7 million have been slaughtered by the slaughterhouses. The rest was
consumed by the LBM. For example, the utilization of slaughtering capacity by Al Wataneya Group
has been close to 15%.

Alwatanya’s major competitors include:

Established by Americana in 1977, Cairo Poultry Company’s (CPC) operations kicked off with annual
capacities of 60,000 tons of feed, 150,000 parent chicks, and 27.2mn ODO broilers in hatchery division.

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 Later in 1992, CPC launched its processing segment—the largest revenue contributor—under the “Koki”
brand name. CPC is currently operating in eight different cities: Tenth of Ramadan, Al-Saff, Nubaria,
Regwa, El-Sadat, Anshas, Salehia, and Wadi ElNatron, with a retail distribution channel stretched over
Greater. Cairo, Alexandria, and Nubaria. CPC’s distribution network covers more than 95% of retail
freezing capacity and 100% of modern trade (hypermarkets). CPC exports mainly Koki products to
different countries in the MENA region. The share of exports of total sales currently stands at 3%, and CPC
plans to increase it to 6% over the coming five years. In March 2016, CPC acquired 100% of Joe Trade
Assets, which is specialized in aqua-feed and pet food production, providing top-line diversification. CPC
has a large fleet of 515+ refrigerated trucks and a sales team of 810+ employees. CPC has two plants in
Tenth of Ramadan City and Nubaria. CPC’s subsidiary, Egyptian Starch & Glucose (ESGI.EGX), produces
corn, starch, glucose syrup, corn oil, gluten feed, and gluten meal through its plants located in Mostrod and
Torah.

Markets
GDP growth, middle class growth and population growth are the key contributing factors to the poultry meat
consumption increase. In particular GDP growth in Egypt is expected to average 6% per annum in
2017-2026. According to OECD-FAO Agricultural outlook for 2017-2026, the total poultry consumption in
Egypt will increase from 993 thousand tons in 2017 to 1 156 thousand tons in 2026 with per capita
consumption staying around 9,2 kg during the whole period. This means that the total volume of poultry meat
consumed in 2026 will be 14% more than the volume consumed in 2017. This forecast is very reserved and
according to other experts’ opinion annual consumption can easily grow between 3 and 7 per cent. Current
estimate of Egypt’s annual consumption of poultry provided by the Egyptian Poultry Association is around 1,2
billion birds, the equivalent of around 1125 million tons of poultry meat.

On the marketing side in the coming years it will be vitally important for the broiler poultry industry to
introduce major changes into the poultry market transformation and development. The main highlight has to
be the transformation of LBM into the chilled poultry meat market. Such transformation will require additional
significant investment into slaughtering capacities and cold chain. In addition the category 2 and
3 farms will have to change their production practices and greatly improve biosecurity. This way category 2
and 3 farms will be able to fit into the new system offering to the market more uniformed healthy flocks that
will not be rejected by the slaughterhouses. One of the biggest challenges that will be faced by the industry is
becoming more cost efficient so that significant shrinkage of LBM will not affect the consumer prices by
adding additional cost with slaughtering and cold chain. Egypt’s WTO commitment will put additional pressure
on the broiler poultry industry that will have to benchmark its cost of production and final price offered to
consumer against the global poultry producing countries. National marketing campaign targeted at promoting
consumption of domestically produced and industrially slaughtered chilled poultry meat (this will mean
consumer category development) will help to protect Egyptian broiler industry using pure marketing tools.

Role of the growing supermarket chains in promoting chilled poultry consumption has to be addressed
through awareness building campaigns targeted at handling chilled poultry by the stores and explaining the
important role of poultry meat as key value item for the supermarket chains and traffic building category.

Technology
Technology plays significant role in the poultry industry. If we look at the firms that are highly profitable and market
leaders, we'll find out their competitive advantage is in technological advancements. Alwatanya poultry always have
been a leader in poultry production technology. In 2017, alwatanya poultry with the help of SecureNet, Inc.,
introduced a leading way insecurity and access technology. By integrating SecureNet system it reached the security
solutions for both physical and logical assets, designed and installed a new multi-technology ID system.This system
allows the company to control the physical access to their processing sites. It integrates technologies from Open
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Options software, Fargo card printer/encoders and H I D cards.

The company is in search of different ways to commercialize poultry fats and other by-products from the operations,
as well as the poultry waste of their contract growers, to produce energy and other value-added products. It has
developed R&D department where the team of people are trying to enhance their ability to develop new food
solutions and bring them to market faster. This R&D department includes Research Kitchen, A-Inspected Pilot P lant
and Consumer Center. These three main departments ensure the safe and healthy products from alwatanya poultry
in the markets.

How Environmental Factors impact Organizations channel

With the main focus on corporations shifting to sustainability of the environment, Alwatanya has
grasped this concept by being conservative of the environment in their product creation. Alwatanya
has applied as mentioned above strategies that fall under Alwatanya’s Better Egypt strategy. The
examples include the creation of air wash machine technology created by machines to reduce
wastage of water.

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3 Organization's Channel Profile

3.1 Target Market and Segmentation.

Alwatanya’s market for their broiler and slaughterhouse range can be segmented into two main
categories. These are poultry companies and Consumer products. The majority of their marketing
and sales come from the poultry segment; therefore, this would be their main target market. A brief
analysis of the two markets is below:

Consumer products
These are the people that use the product for consumption for fast food purposes. This has been a
segment that has grown more in recent years due to the increased work women's and also
increasing in population in Egypt . This is a primary market for the company. The brand quality
associated with Alwatanya has also brought consumers into this market as it can act as the brand
image gives the consumer a social status in some ways.

Segment name

Key account
( hyper markets & large groceries)

Retailers

Distributors

Catering
( Restaurants – Hotels – Factories – Hospitals, … etc)

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 Table 1: Service Output Demand Analysis.

Segment name/ Bulk Special Delivery/ Assortment/ Customer Information

descriptor breaking convenience waiting variety service provision
time

Key account Low High Low High High Low

( hyper markets &
large groceries)

Retailers High High Medium High Low Low

Distributors High High Medium High Low Medium

Catering Low High Low Low High High

( Restaurants – Hotels
– Factories –
Hospitals, … etc)

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 3.2 Channel Structure:

Alwatanya’s vertical integration

Between the raw commodities and the end product, there may be several processes managed by one or
many companies that handle the goods throughout the chain. Depending on its position in this chain, a
company is called either an upstream or downstream unit. An upstream unit is positioned at the beginning
of the chain, and a downstream unit is positioned at the end of it.

A single company may decide to integrate all the stages in this chain to gain control over the supply of raw
materials and strengthen its position in the market. This process is known as vertical integration.

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 Alwatanya`s Slaughterhouse
According to statistical report of Economic Affairs Sector of MALR, in 2015 out of 589 million broiler
chicken produced only 86,7 million have been slaughtered by the slaughterhouses. The rest was
consumed by the LBM. For example, the utilization of slaughtering capacity by Al Wataneya
Group has been close to15%. (FAO,2017)

Distribution Facilities
Alwatanya has their main distribution facilities based in the Maadi. Alwatanya hold the efficiency
associated with their distribution facilities in high regard.

Distributers
Distributers like Alrawfed, Multi-trade,...etc. act as distributors for Alwatania products across Egypt.
Products stored within distributers stores are normally less exclusive and are sold at a cheaper
price.

Key Accounts
Key-accounts like Carrefour, spinneys,...etc. act as distributors for Alwatania products across
Egypt. Products stored within distributers stores are normally less exclusive and are sold at a
cheaper price.

Retailers
Alwatanya utilizes its retail for a wider range of Alwatanya products, whereas poultry products
(such as frozen whole chicken, frozen chicken parts, VAT). Retailers also act as the main
distribution facilities for Alwatania products on a more local scale.

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 3.3 Channel Flows
Alwatanya poultry makes use of a variety of intermediaries to perform flow throughout the several
stages of its channel in order to deliver their products to Egyptian customers.

Physical Possession/Ownership
Retailer: Alwatanya products can be seen in Egyptian. On top of this, Alwatanya’s own retail
store holds and distributes products to Egyptian customers.

The retailer are utilized to assume ownership of Alwatanya products, taking on the costs
associated such as storage, replacement costs and product promotion and retail catalogues.

Promotion
Retailer: Retailer stores promote Alwatanya products through advertisements in-store through
photography boards and catalogues and utilizing the Alwatanya brand logo.

Negotiation
Suppliers: Alwatanya focuses on suppliers by providing incentives. Suppliers are scaled and rated
by index that acts as a framework to rate their performance across quality, delivery, costs and.
High scoring suppliers have access to priority consideration for orders.

Finance
Shareholders: Alwatanya has a variety of shareholders consisting of Saudian and Egyptian
investors that hold large percentages in the firm’s stocks. The shareholders include people of
the public with interests in the firm’s performance and share value.

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 Risking
Intermediaries: The intermediaries that flow the sale of Alwatanya products take on the risk
associated with faulty products from the brand. Customers will often return to the intermediary
from which they purchased the product instead of contacting the head office of Alwatanya. As
such, these intermediaries have established policies aligned with egyptian Consumer Laws stating
that consumers have the right to have replaced a product that is not up to acceptable quality upon
purchase.

Ordering and Payment

Alwatanya understands the dynamic nature of the economic environment, recognizing the
existence of bad debt. As such, the organization has developed ways to compensate for the
inability of customers to make required payments. By making regular estimates on the
collectability of accounts receivables and by setting aside an allowance to fill in the hole of bad
debt, Alwatanya can actively manage their receivables in conjunction with deadlines and the fact
that customers are not making payments.

Table 2: Efficiency Template

Weights For Flow Proportional Flow Performance Of

Channel Member

Costs Benefit Final MFGR Retailer End User Total

Potential Weight

Physical 30 High 32 40 40 20 100

Possession

Ownership 19 Medium 17 40 40 20 100

Promotion 12 Medium 14 0 100 0 100

Negotiation 6 Low 4 30 50 20 100

Financing 15 Medium 18 40 40 20 100

Risking 3 Low 3 45 45 10 100

Ordering 10 Low 7 20 60 20 100

Payment 5 Low 5 30 60 10 100

Total 100 N/A 100 N/A N/A N/A N/A

NPS N/A N/A N/a 32.25% 51.35% 16.4% 100

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 4 Channel Member Behaviour & Co-ordinating
Mechanisms

Primary Research
Channel Behaviour:

Primary research: 1 Retail level Interview with Emad wally Sales retail Manager

Main findings:

• Support of existing retailers with technical and sales representatives can provide reliable and
rapid information to staff members with a phone call.

• Minor conflict arising from lack of price protection from other distributors with higher fixed costs.

• Effective ordering and inventory control from Alwatanya to ensure seamless delivery of stock to
retailer and the ability to provide customers with realistic delivery dates for ‘out of stock’ items for
sale.

• Alwatanya recognizes the need for specialist shops in its distribution network and has provided
NSR with preferential stock ordering. This provides the large retailers with an advantage over
almost all other retailers.

• Limited exclusivity of product in the distribution network promotes competition between several
stores in a small geographic locale. This places emphasis mainly on price of product and service
within the store.

• Alwatanya controls distribution rights and selects stores to suit its needs for market share,
but is selective as to which stores it requires to break bulk and which it requires to be high
service stores.

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 Member Behaviour – Channel Conflict

There is conflict evident amongst various channels members in Alwatanya. Conflicts among
channel members are due to many different situations and factors. Conflict exists as channel
members have conflicting goals. This is evident in Alwatanya in retailer as their main objective is
to sell as many poultry as possible in order to generate as many sales and maximise profits,
regardless of whether the shoe is manufactured by Atyab, koki and sadia, but the Alwatanya
manufacturers wants a certain sales volume and market share in each market. This can be
especially problematic if its Alwatanya competitors are offering cheaper prices point or discounts
and hence maybe be more appealing than the Allwatanya product. These conflicting goals create
tensions in the distribution channel.

Conflict can also be prevalent when channels members fail to meet the expectations of other
channel members. This may be evident for example when retailers do not follow the rules set down
by Alwatanya, or if there is a miscommunication of expectations. This conflict may also be resultant
from ideological differences and differences in perceptions of reality. For example from a retail
perspective the “customer is always right” so retailers usually promote a very liberal return policy.
However from a manufacturing perspective they may suggest that customers may “try to get
something for nothing” or may argue that the customer did not follow the product instructions
carefully. These differences in ideologies and expectations between channel members such as
manufactures and retails will inevitability result in conflict.

Alwatanya currently faces a conflict between its brick and distributors because prices wars.

This is a source of conflict between channel members, as brick lose sales as distributors' prices
are cheaper. Furthermore brick see this as unfair as their staff are the ones using sales
techniques and handling objectives to persuade the consumer to purchase the product then
customers purchase from distributors because they have less prices.

Channel cooperation
There is a low level of channel cooperation that exists among channels members. This is evident
by terms of miss communication between different sales channels.

Alwtanya not ensures that all the representatives are provided with training and marketing
materials in advance of the launch to ensure success of new campaigns and products and this
lead to miss opportunities in the market.

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5 Channel Performance
Channel Gap Analysis

Overall Alwatanya is not success in meeting the demands and expectations of the consumer.
Alwatanya is in efficient in maintaining a healthy relationship between supply and demands.
However minimal gaps in supply and demand do exist.

As mentioned Alwatanya controls distribution rights and selects stores to suit its needs for
market share, but is selective as to which stores it requires to break bulk and which it requires
to be high service stores. Although this may be efficient to a certain degree this selective
distribution may potentially result in not have readily available supply and consequently will not
meet the demands of the consumer, furthermore this may result in the retailer losing sales.

Demand for Alwatania products may also be difficult to predict, the may be problematic if there
is huge differences between supply and demand and may result in excess stock or a shortage
of stock. This will consequently result in gaps between supply and demand. Furthermore,
having a shortage of desired stock readily available for the consumer would mean that the
product would have to be ordered and this would increase the waiting and delivery.

Demand-side gap analysis

Segment Bulk Special Delivery/ Assortment/ Customer Information

name/ breaking convenience waiting variety service provision
descriptor time
Key account Low High Low High High Low
(SOS>SOD) (SOS=SOD) (SOS<SOD) (SOS=SOD) (SOS=SOD) (SOS<SOD)

Retailers High High Medium High Low Low

(SOS=SOD) (SOS=SOD) (SOS=SOD) (SOS=SOD) (SOS<SOD) (SOS<SOD)

Distributors High High Medium High Low Medium

(SOS=SOD) (SOS<SOD) (SOS=SOD) (SOS=SOD) (SOS<SOD) (SOS=SOD)

Catering Low High Low Low High High

(SOS>SOD) (SOS=SOD) (SOS<SOD) (SOS<SOD) (SOS=SOD) (SOS=SOD)

Service output level demanded (SOD: L/M/H) versus Service output level supplied by Alwatanya (SOS)

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6 Problems and Prospects

After thorough analysis of our data obtained from primary and secondary research the
management team at Alwatanya identified the following key issues:

Conflicting channel stakeholder demands

Alwatanya currently faces a conflict between its brick and Distributors, as previously stated the
Distributors are currently undercutting other distribution channels on price. It is important for
Alwatanya to address this issue and retain distribution network support from all parties. In order for
Alwatanya to do this it will have equalize the competitive advantage of each distribution channel to
better support each channel member. In this example extended better return policies may be
marketed by brick and enforced by Alwatanya to compensate for higher prices.

Conflicting channel goals between Alwatanya and retailers

As mentioned previously, Alwatanya has recently added its own bricks. This will put Alwatanya in
direct competition with some of their geographically similar distribution channel members if their
distribution intensity formula is not precisely implemented.

Damage to reputation due to previous distribution network decisions

Alwatany’s emphasis on sustainable distribution stems from the initial bad reputation gained
through distribution methods. It is important that Alwatanya continues in their commitment to
sustainable business practice to sustain positive brand growth.

Government frozen chicken Imports

The Egyptian government defends the decision and says that it is actually protecting citizens from the poultry
price increases, and at the same time it won't harm local industry. "The competition will be in favour of the
local poultry producers as the prices of imported poultry will increase as the dollar price in Egypt increases,"
cabinet spokesman Ashraf Soltan said in media statements commenting on the decision. But local poultry-
makers have insisted that the decision could harm a successful industry. That can cause major tension to
distribution channel members and simultaneously damage because customer will buy less price frozen
chicken.

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7 Recommendations

Alwatanya is one of the largest poultry producers in Egypt. The brand’s products are demanded on
a national scale, highlighting the fact that Alwatanya has a constant stream of distributors and
consumers that are willing to distribute and purchase its products.

In order to keep their distribution networks sustainable, it is important for Alwatanya to evaluate
whether or not distributors are aligned with the central distribution goals of Alwatanya. The
oversupply of Alwatanya gear to multiple distributors may devalue the brand. As such, Alwatanya’s
strategic move to start its own retailer has seen a slight shift in their distribution strategy in order to
counter a conflict of interest as presented by distribution divergence.

Another area where recommendations could be implemented within Alwatanya involves the
distribution of products to consumers on a retail level. To help boost activity in only the Alwatanya
retail itself, the organization could offer an incentive, when a new product line is dropped,
Alwatanya could limit the drop to just to its retail only to ensure that customers recognize the
exclusivity of the product line and want to deal to purchase the products from retail of Alwatanya
only. Would allow for more efficiency within retail and reduce any conflicts of interests that retailers
have with Alwatanya involving the possession costs of their product.

Create ATL advertising campaign to increase the brand awareness to increase sales.

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8 Implementation

2019 2020 2021 2022

Action Plans Jan April Aug Dec Jan April Aug Dec Jan April Aug Dec Jan April Aug Dec

Communications

Channel Strategy
Confirmation

Channel
Communication

Projects

Phase 1: Gap Removal

(Alwatanya Distributors)

Phase 2: Gap Removal

(Over Supply of
Alwatanya products)

Phase 3: Gap Removal

(Retail only product line)

Operations / Logistics

Phase Analysis Review

(Rolling)

Project Review

Monitoring

Controlling

Re-Distribution

Selected Partners

Alwatanya Stores

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 Appendix

Appendix 1; In-depth Interviews

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