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Food Processing

Food Processing, Egypt
Region: Egypt
Created: Jan 12, 2010, modified: Jan 13, 2012, overall rating: 1.000

WITH ANANNUAL growth rate of over 34%, the Egyptian food processing industry is one of the most dynamic and last-growing manufacturing sectors in the coun­try. According to the Industrial Development Authority, the industry's output grew by 37% between 2001 and 2007. With 6,000 food manufacturing facilities currently operating in the country, the sector employs 2.2% of the country's labor force and generates 50% of manufacturing output.

Today, Egyptian factories produce a wide variety of prod­ucts including frozen vegetables, tomato sauces, juices, starch, dairy products, confectionery, herbs and spices, pro­cessed cheese and essential oils.

Egypt's Competitive Advantage

Egypt is endowed with an agricultural sector that is capable of providing food processors with comparatively low priced, high-quality agricultural products. Land reclamation efforts during the past decade have added an additional 277,000 fed-dans, bringing Egypt's grand total of cultivated land area to 6.8 million feddans (7.06 million acres).

Unlike Europe, Egypt's climate and the nature of its ag­ricultural seasons make it possible to cultivate winter crops from November to May when agricultural production be­comes very limited in neighboring Europe.

Egypt's climate and geographic proximity to export mar­kets in Europe, the Middle East and Africa, coupled with a number of regional and international trade agreements, com­petitive wages, favorable energy prices and low corporate taxes, make the country ideally suited to become a major manufacturer and exporter of food products.

Foreign Investment

The stock of investments in Egypt's food processing industry accounts for 14% of the total issued capital for manufacturing companies and 5% of all businesses established under the um­brella of Investment Law 8 and Companies Law 159.

Egypt's food processing sector has attracted a host of mul­tinational companies that have not only been catering to the local market but also using Egypt as an export hub. Thirty-seven percent of the investments in Egypt's food processing industry come from foreign companies that have made use of Egypt's clear competitive advantage in the sector.

Prominent multinationals Heinz, Tetrapak, Unilever, Cad-bury, Alcoa, Nestle, Kraft, Cadbury, Danone and Coca-Cola all have a manufacturing presence in Egypt.

Heinz, one of the first foreign food companies to invest in Egypt, established Heinz Egypt as a joint venture with lo­cal investors in 1992. The business initially began as an im­port operation for tomato concentrate but quickly grew into a thriving manufacturing base for the company, producing to­mato-based products, juices, jams and condiments for Egypt and other Arab markets. Heinz is now exporting approximate­ly 35% of its total output to markets in the Middle East and North Africa.

Exports

A combination of targeted economic reform measures and pri­vate-sector led expertise has helped the Egyptian processed food sector achieve substantial growth in exports in recent years.

Over the three-year period between 2004 and the end of 2006. Egypt's export of processed food products increased by a healthy 24.6%. Benchmarking the country's export perfor­mance against five comparator economies indicates that Chi­na (+45.2%) and Morocco (+25.7%) have surpassed Egypt's performance, while Egypt has outpaced Turkey (-9.1%), South Africa (+15.5%) and Spain (+7.2%).

According to the Ministry of Trade and Industry, Egypt ex­ported EGP 6.9 billion (US$ 1.3 billion) worth of processed food products in 2007 up from EGP 5 billion in 2006 and 3.9 billion in 2005. Egypt is ranked among the top five exporters of vegetable and fruit juices in the Mediterranean basin after Spain, Italy and Morocco. Egypt also exports large amounts of rice, preserved fruits, frozen vegetables and dried onions.

The bulk of Egypt's food exports go to regional markets — particularly GCC and COMESA countries — where similartastes and dietary considerations create a huge

market for Egyptian products. In 2007. Saudi Arabia was the largest recipient of Egyptian food products, at US$ 151 million, followed by Libya which imported US$ 129 million worth of Egyptian foodstuffs.

The Local Market

Egypt’s processed food sector is also experiencing substantial growth on the local market. With a population of 74 million, changing life styles and the fact that more women are joining the labor force, demand for processed food products in Egypt is on the rise.

The scope for further investments in the food processing industry for both the local and export markets remains substantial.

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