With a population nearing 80mn, Egypt can rightfully claim to be the Middle East region's most promising fast-moving consumer goods market, not least when it comes to the unsaturated soft drinks industry and its emerging mass grocery retail (MGR) industry. Unmoved in fifth position in BMI's regional Food & Drink Business Environment Ratings table for Q409, Egypt remains arguably the most intriguing Middle Eastern market as discussed in BMI's recently published Egypt Food & Drink Report for Q409. The most significant development this quarter was undoubtedly the report by the France-based publication La Lettre de l'Expansion that French grocery retail behemoth Carrefour was planning to develop a footprint of 17 hypermarkets and 70 supermarkets over the next five years in partnership with its Middle East affiliate Majid Al Futtaim Group (MAF). Should the report be substantiated, BMI believes it could kick start the formalisation of Egypt's MGR industry. Informal vendors currently make up about 70% of grocery sales. We believe there is plenty of scope for Carrefour MAF to strengthen its fledgling hypermarket footprint (it currently operates five outlets). Like their counterparts across the Middle East, Egyptian consumers (that can trade up to modern retailing) are attracted to the value-added services provided by large, mall-attached hypermarkets. Between 2009 and 2013, we expect hypermarket sales to increase 54.5% to EGP7.7bn (US$1.4bn). Not to be outdone, Egypt's underdeveloped soft drinks industry remains an attractive long-term proposition across all segments, although for the time being at least, the low-cost carbonates category is expected to remain its most dynamic contributor. Driven by the core brands of Coca-Cola and PepsiCo, carbonates volume sales are expected to increase 16.7% from a high base and reach 0.9bn litres. The strength of the carbonates category is unlikely to discourage investors keen on other segments. BMI believes that the promising bottled water segment remains largely immature. Like the wider region, fundamental demand triggers like Egypt's harsh climate, the poor hygiene of its tap water and a low-key alcoholic drinks industry are in place. Between 2009 and 2013, BMI expects bottled water volume sales to increase by 51.3% to 0.4bn litres. With this in mind, Egypt is likely to figure more prominently in the expansion plans of many of the GCC's leading bottled water producers (including the likes of UAE-based Masafi and Al Ain Water).
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