Egypt: Increased Food Demand Despite Political Turmoil

Though Egypt’s economy has been badly damaged by continuing post-revolution turmoil, the food sector has bucked the trend and an unlikely beneficiary has been a company that established its reputation supplying gourmet products to upmarket hotels and wealthy consumers.

Wadi Food, an agricultural business that has carved out a niche in gourmet olive products, has managed to thrive despite the loss of the important tourism market.

The company, says Khalil Nasrallah, co-founder and executive manager, is on track to reach $21m in sales this year, an increase of more than 50 per cent on the $12.8m achieved in 2012.

One reason, he points out, is that the wider food sector in Egypt has been doing well, even if political strife since the 2011 uprising has scared away western tourists – hitting hotel profits hard and causing them to cut their spending on gourmet items.

“In general, demand for food has increased and it has been complemented with an increase in retail outlets such as Spinneys, Carrefour and Seoudi [supermarkets], which have all been opening new branches,” he said. “People in Egypt have a new hobby which is to go to megastores to buy.”

Mr Nasrallah says Wadi has also benefited this year from the introduction of two new products, tomato paste and fava beans – a staple in the Egyptian diet – allowing it to reach a broader market segment.

“We are now trying to move from being a niche kind of product to a quality product that is affordable, so we can enter a section of the market we were not present in,” he said. “If you send olive jars to a poor area no one will buy them, but with tomato paste and beans we can be in that market.”

The company has redesigned its logo, shedding what Mr Nasrallah described as “a gourmet, niche and foreign” look in favour of a modern and sleek “homey” design.

Another factor helping sales this year is what Mr Nasrallah describes as a “golden opportunity” afforded by the failure of the olive crop in Spain, which would normally supply 60 per cent of the world market.

“The olive crop in Spain was very low last year, but it was very good in Egypt,” he said. “For the first time we are able to compete with Spain in North America and Europe, so our exports have increased.”

He reckons Wadi will be able to retain its market share even if Spanish crops recover because of work done by the company supporting distributors of its brands in Libya, Iraq, Saudi Arabia, the United Arab Emirates and Sudan. The decline in the Egyptian pound, which has fallen by more than 10 per cent of its value against the dollar since the beginning of the year, has contributed to expanding the export market.

A vertically integrated company, Wadi carries out every step of the production process, from reclaiming the desert land where it grows its organic olives, wine grapes, fruit and vegetables to manufacturing the jars and bottles in which its products are packaged. The company, which has 5,000 acres under cultivation, employs 700 people. It is a subsidiary of Wadi Group – a poultry and animal feed producer established in 1984 by Lebanese entrepreneurs and which operates in Egypt, Lebanon and Sudan.

In Egypt’s post-revolution atmosphere, Wadi has found the market “less of a challenge” than labour relations within the company, says Mr Nasrallah. Strikes and work stoppages have swept the country since the revolution and Wadi Group has not been spared. A month-long strike last November was, Mr Nasrallah, believes “politically instigated” to gain recognition and build support for a local Islamist leader whose mediation helped settle the dispute.

“This year we favoured the lower tier of employees and gave them a bigger increase than managers,” said Mr Nasrallah. “We felt that supporting them is essential for stability and loyalty. At the same time we are asking more from them.”

Wadi’s current targets include expanding its presence in the North American market and increasing the export of greenhouse fruit and vegetables to the UK. The Egyptian investment climate, however, remains too uncertain for fresh ventures.

“The investment climate is at best dark,” said Mr Nasrallah. “We are really trying to slow down our new investment. We have a lot of projects on hold waiting for stability. We are just focusing on what we have now.”

Source: Financial Times