Living in a global world is not seen as a threat by the Egyptian food and beverage industry, but rather as an opportunity to learn, develop and expand internationally
By Osama Diab
Thirty years ago you would be hard-pressed to find a chain restaurant on the streets of Egypt. Today, urban centers like Cairo and Alexandria are saturated with multinational and home-grown fast food chains, and the country’s streets are littered with the wrappers of Big Macs and empty chicken buckets.
In the late 1970s, Egypt was introduced to the Western concept of fast food chains as a result of the country’s open door policy. Among the first to arrive were American chains Kentucky Fried Chicken (KFC), Pizza Hut and Wimpy. Puzzled at first with the concept of fried chicken in a bucket and round meat sandwiches with cheese, Egyptians quickly warmed up to standardized fast food.
However, American chains didn’t dominate the scene for long, as they were soon joined by Egyptian players in the food and beverage industry. The local players have managed to survive stiff competition from international brands in a local market where there are many options available. Instead of being swept away by the influx of international names, some Egyptian companies have benefited from the local market’s exposure and are now operating abroad and turning international themselves. Several Egyptian fast food chains, a coffee shop brand and a beverage company have recently expanded to other countries after achieving various degrees of success at home.
Cook Door and Mo’men, established in the late 1980s, are now among the biggest fast food chains in the nation, offering fast meals and sandwiches that relate more to the Egyptian norms, such as kofta, liver and shish tawook. Local fast food chains began to grow rapidly in the 1990s. Not restricted by a standard international menu, Egyptian fast food chains were better equipped to accommodate local tastes, making them competitive with established, experienced, international brands. Despite this, since the 1970s Egypt has primarily been an importer of international brands. The nation was then seen by multinational giants as a virgin market with great potential for growth. While foreign brands were booming, Egyptian brands lacked the reputation and resources needed to compete with the well-known international names. You can also add to that the “khawaga complex,” a notion reflecting Egyptians’ obsession with all things foreign, and the perception that all local products are inferior to goods produced abroad.
Some names in the food and beverage industry managed to overcome the stigma, and their local success has translated to regional and international expansion, turning the once strictly local brands to names with an international flair. The fast food boom was followed by the appearance of Western-style coffee houses, which made competition for patrons’ pounds even tougher.
Mohamed Mo’men, founder of Mo’men, says that fast food restaurants are not just a place to go and eat, but that they are turning into an eating experience. “Now, competition from coffee shops changes how fast food restaurants look. Now you find sofas, homey settings, breakfast menus, salads, fresh juices and wireless internet in fast food restaurants,” says Mo’men.
According to Mo’men, also a board member on the Chamber of Egyptian Food Industries, Egyptian food exports have grown in the past five years from LE 700 million a year to LE 8 billion.
Mo’men
The fast food establishment is now serving up Chicken Magnums, Shish Kofta, cheesecake and other international and Middle Eastern fare, but Mohamed Mo’men’s success story began in 1988 with a start-up capital of LE 12,000 and 12 employees. From these humble beginnings, the Mo’men brand grew to become one of the biggest food companies in Egypt and the region. Twenty-one years after its launch, the Mo’men Group now runs three restaurant chains (Mo’men, Pizza King and Planet Africa), as well as Three Chefs frozen foods.
There are now 48 Mo’men restaurants in more than 10 cities across the nation. Internationally, there are nine restaurants in Sudan, Libya and Bahrain, and more than 12 branches are due to open in the United Arab Emirates, Saudi Arabia and Malaysia.
Proudly defining itself as an Egyptian brand, Mo’men also likes to define itself as a world-class fast food chain. Mo’men first went international in 2005 in Sudan, followed shortly in 2006 by its Libya launch.
“We were afraid to go international at first, so we decided to start somewhere where competition is not so strong. In other words, a place where if you make a mistake, the consumer will forgive you,” says Mo’men. “The awareness of the Sudanese consumer is less than the Gulf or the Egyptian consumer. Awareness is a result of competition, so in such markets, the competition is not perfect, so the consumer can be more tolerant of some problems we might face.”
Therefore, Libya and Sudan seemed to be the ideal places to learn how to run international stores without risking too much, since start-up costs are generally much less than in places like Europe. “The concept behind Mo’men was new to these countries, because Mo’men, even though it is Egyptian, has international and world-class standards thanks to competition with multinational giants in Egypt,” says Mo’men.
Last year, Mo’men sold 28% of its business to the UK-based private equity investment company Actis in a deal worth $48.5 million (LE 257 million). The deal is seen by the group’s founder as a chance for Mo’men to focus on its operations and the food industry, while Actis takes care of the finances. “The Actis partnership was mainly to deal with the investment and financial side of our business,” says Mo’men.
Inside Egypt, Mo’men Group owns about half of its restaurants, but still runs the other half that have been franchised out. Internationally, Mo’men doesn’t own any of the outlets but provides the name for franchising and the know-how, and audits the operations, making sure everything is going according to Mo’men standards.
To be able to compete in Sudan, Mo’men had to change some of its ingredients to cater to local tastes. Sudanese people are known for their love of spicy food, and even though Mo’men has spicy and mild versions of its food in Egypt, it had to be kicked up a notch for Sudanese consumers.
“Even the multinational giants do localize according to the culture of the host country. McDonald’s in Indonesia offers rice and in Egypt they used to have a falafel sandwich,” explains Mo’men, who says his restaurant chain maintains its core menu of four or five items everywhere it goes, making adjustments to accommodate local tastes.
The financial crisis might slow Mo’men’s expansion rate — the group has already postponed working on two projects in Egypt and Saudi Arabia, because banks in both countries are wary of lending money for new projects, says Mo’men
Cook Door
After opening its first store in Heliopolis in 1988, it wasn’t long before Cook Door gained popularity among Egypt’s youth for its generously filled sandwiches. Four years later, a second branch opened in Nasr City. In recent years, Cook Door has changed from a family business into a shareholding company, allowing it to expand rapidly. It now has more than 40 branches in 10 cities throughout Egypt. The parent company, International Company for Food Industries (ICFI), owns about 12 of its restaurants, with the rest owned by franchise holders.
Cook Door’s menu is diverse, offering a variety of chicken, meat and seafood sandwiches. It also has a broad selection of burgers, pizza, rice and salads. Cook Door was among the first local fast food chains to try to attract some health-conscious customers by making low-calorie versions of their sandwiches and platters.
ICFI now operates five Cook Door restaurants in Libya and Syria and has plans to open branches outside of the major cities, such as Benghazi, Libya and Latakia, Syria. “Libya and Syria were ideal markets for us to learn how to operate internationally, because the market there is virgin and we don’t face the type of competition we face in Egypt or might face in the Gulf region,” says Fouad H. El Said, board member of ICFI. “Now we are ready to expand further, and our focus is on the Gulf region.”
Menus in Libya and Syria are slightly different to those in Egypt. In Syria, for example, shwarma is not included on the menu. “In both Libya and Syria, there are no similar restaurants, so we introduced new stuff to their culture,” says El Said. “Our burger and apple pie are very successful and selling very well in Libya.”
According to El Said, the Libyan market is similar to the Egyptian market in the late 1970s when the concept of fast food chains was very new, and for him the real challenge starts in Qatar, where the market is saturated with all the international fast food chains.
In 2004, Cook Door won the Yallabina award of excellence for best fast food. In 2007 and 2008, DG magazine named Cook Door the best fast food chain in Egypt.
According to El Said, Cook Door is keeping an eye on Europe while building a strong base in Africa, North Africa, the Levant and the Gulf. The chain will open its first Gulf branch this month in Qatar, to be followed shortly by a branch in Saudi Arabia. Franchise offers have also come from Nigeria and South Africa.
El Said said that sales have dropped due to the financial crisis, but this won’t stop his company from carrying on its expansion plans.
Cilantro
Less than a decade ago, the concept of a western-style coffeehouse was wholly unfamiliar to Egyptians. Delicious Inc. took advantage of the gap in the market by introducing Cilantro to the exclusive and expatriate-dense neighborhood of Zamalek. Cilantro’s second branch opened in 2004 across from the American University in Cairo’s downtown campus.
“It was quite an adventure back then. The [Zamalek] store was small, it was non-smoking, weird drinks for what was known then, and no shisha. The food was also very different. It’s like sandwiches you make at home, not cooked sandwiches like what we were used to eating out,” says general manager Nadine Beshir.
Cilantro now operates more than 60 stores in Egypt, making it the nation’s largest coffee chain. It also paved the way for other international chains to enter the Egyptian market, such as Starbucks, Costa Coffee and The Coffee Bean and Tea Leaf.
In 2005, Egyptian businessman Hesham El Sewedy, noticing the success and the potential of the new coffeehouse chain, decided to buy Delicious Inc. “[El Sewedy’s] vision was to grow Cilantro to become an international brand. He was talking about a regional level at first, but when we told him ‘why not go international?’ he told us if you can be in Manhattan, be in Manhattan,” says Beshir.
According to Beshir, before going international, Cilantro needed to build a strong infrastructure in Egypt — manuals, franchisability, procedures, management skills, and an elaborate quality assurance system. Cilantro did not limit itself to regional expansion as many other Egyptian companies do because start-up costs are lower and the regional market is more familiar.
“After building our solid infrastructure, we were ready to expand abroad. When people in Egypt talk about expansion, it usually means going to the Gulf region. There’s a big difference between being a regional player and an international one,” explains Beshir.
After extensive research, Beshir and her team narrowed their options down to London and New York, eventually choosing London as the location for Cilantro’s first international operation. As they were opening in London, the company signed franchise deals in Jordan, Saudi Arabia, Kuwait, Bahrain and Qatar.
Cilantro took the leap, putting up the capital to open in the expensive Piccadilly area of London in June 2008. It also launched two branches in Saudi Arabia and Jordan last month. A second London branch is scheduled to open in June on Tottenham Court Road. Cilantro is negotiating three more locations in London.
The setting of the new Tottenham Court Road store will be similar to the Cilantro in CityStars. The beverages menu is also the same, but the food menu is a bit different due to the variety of supplies in the UK, which makes easier to offer a more diverse food menu.
Ten months after its launch in London, Cilantro is doing very well and has exceeded its targets, says Beshir. On weekdays, regular customers at the Piccadilly store are mainly Brits from the nearby Royal Academy of Arts and surrounding offices. Egyptians working in the National Bank of Egypt London branch also gather there to get a taste of home.
The entire staff at the Jordan and Saudi branches is Egyptian. In London it’s difficult to get work permits for Egyptians, so Cilantro had to rely on British staff after training them in Cilantro’s training center in Cairo. Cilantro recently opened a staff training center in London, but managers still have to fly to Cairo to receive their training.
Cilantro was grown in Egypt, but defines itself as an international coffeehouse. However, Beshir thinks Cilantro’s signature item is not a drink or a food item, but rather the Cilantro spirit that is inspired by Egypt’s well-known hospitality. “Visitors to Egypt like the warmth of the people the most, more than the Pyramids, more than anything. And this is what we try to bring to Cilantro. The Cilantro spirit is really what differentiates us,” she says.
Fayrouz
Proudly describing itself as the natural evolution of soft drinks, Fayrouz was launched in 1997 in Egypt as a flavored malt beverage by Al Ahram Beverages Company (ABC), the only producer of alcoholic and non-alcoholic malt beverages in Egypt since 1897.
The Dutch beer company Heineken acquired ABC in 2002, but the switch in management didn’t happen until 2006. Under the new management, changes were made to how the product looks and how it is marketed. “When a brand becomes part of Heineken’s portfolio, [Heineken] uses the best practices of other similar brands that are also part of Heineken,” says senior brand manager at ABC, Dalia Samir. “A management like Heineken’s, that has been operating in international markets for years, definitely gives the local brands a different mileage, and gives a vision where they can successfully operate in the international market.”
Following the redesign of the packaging and logo, the fruity soda was ready to go international, targeting markets in the Gulf, North Africa, Nigeria and Turkey. In 2006, Fayrouz had its international debut in the Maghreb and the Gulf, including Saudi Arabia, the UAE and Oman. A year later, Fayrouz entered the African market, starting with Nigeria. It was introduced to Turkey in March 2008, and will soon enter the Iranian market.
“In the Gulf, we’re not performing very well because competition there is very aggressive. Competition in Egypt is only with soft drinks, but in the Gulf, we are competing with soft drinks and malt beverages. We’ve only been in the international market since 2006, this is why our sales are still not that high,” says Samir, who declined to give the sales figures. “We’re doing very well in Nigeria, and I think it will pick up quickly in Iran because it is a good market for malt beverages. Overall, the brand is doing fine.”
In Egypt, Fayrouz is the third main player in the soft drinks market after Coca-Cola and Pepsi. In terms of brand equity, Fayrouz is number four after Pepsi, 7-Up and Coca-Cola, according to Samir.
Fayrouz comes in six different flavors and contains no additives, artificial flavoring or colorings. The Egyptian malt beverage is standard everywhere in terms of taste and branding, but the packaging materials change depending on the standards and the demands of the market. Fayrouz also has special flavors for the European market.
Fayrouz International, a Heineken subsidiary based in Switzerland, is responsible for launching the brand worldwide. The flavours are also created in the Fayrouz Manufacturing and Technology Center in Switzerland.
Playing with the Big Dogs
The Egyptian market has long opened its arms to foreign investment on both a regulatory and consumer level. Some local brands do not shy away from competition, despite Egyptians’ negative perception of locally made products, and have operated side by side with more establishedforeign brands.
With tough financial times ahead, all Egyptian exports may suffer as countries put up barriers to imports in an effort to protect domestic products. Egypt’s branded food exporters have a foothold in foreign markets, but it’s unclear whether they will hang tight during the new economic storm.
Beshir is adamant that Cilantro will remain focused. “We have a long-term vision. We don’t focus on making instant profit; we look five years or 10 years down the line,” says Beshir, who believes there are opportunities in an economic downturn for confident players to invest.
“The financial crisis benefited us because we can take locations now in London that we couldn’t have dreamt of just a year ago. Locations are not only cheaper now, but also more available. It’s to our benefit, and we think this is the right time to expand,” she says.
Egyptian brands still have a long way to go before joining the ranks of the world’s most prominent international names, but just taking these first baby steps can be inspiration for other companies to follow suit. bt
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