The pet care industry is taking off in Egypt, but local producers are being held back by inconsistent quality and import biases
By Kimberly Adams
Egypt's pampered pets are high-class customers: Expensive imported products currently dominate the pet-care industry here, but local companies are squeezing their way into this growing market. Egyptian producers of pet food and accessories have a price advantage, but are still struggling to lure A-class consumers away from the brands they know.
And while government restrictions on pet-food imports are giving a boost to local players, pet lovers and veterinarians are less than impressed with what they are offering their precious pets.
The emergence of a defined pet-care market in Egypt began roughly 10 to 15 years ago, when retailers began carrying small supplies of pet food and veterinarians started opening clinics in wealthy areas such as Maadi and Heliopolis. The UK-based market research firm Datamonitor expects the pet-care industry in Egypt to grow 104.8% between 2000 and 2010, with a controlled annual growth rate of 7.4%. It forecasts that the entire pet-care industry in Egypt — encompassing everything from cat and dog food and accessories to other pet foods, and pet healthcare — will continue to grow at this same 7.4% rate per year and that spending on pet healthcare will grow 13.5% annually.
Cats are the most popular pets, and their food and other supplies account for the majority of spending, but the number of dogs is increasing as more people move to the suburbs, making ‘man’s best friend’ a more feasible option. Datamonitor predicts the dog care sector to be the strongest growing through 2010, with anticipated growth at 14.1%.
“The whole field is growing,” says Tarek Sika, managing director and co-owner of PetsMarche.com, an online community and information hub for pet owners. “People are looking at it from a different perspective.” When Sika and co-owner Hesham El-Rashidy launched their website in Egypt four years ago, they had ten members. Now they have 4,600, about 80% of whom live in Egypt.
Despite the growth of the sector, it was only in the last five years that local producers have picked up on the burgeoning opportunity, stepping in with Egyptian-made pet food and accessories. At least three local companies now produce pet food, with several others crafting pet accessories. Still other local companies are importing products including brushes, collars and leashes, then packaging and distributing them for local use.
Whether chasing cats away from garbage or being chased by packs of stray dogs while running in Cairo’s streets, it’s obvious that there’s no shortage of free ‘pets’ to be found. But the animals stimulating the growing supplies market are a far cry from the baladi dogs and cats in the street. Holding court in the plush apartments in Maadi and guarding the villas of Sixth of October City, imported or purebred animals make up the bulk of Cairo’s pampered pet population.
“Of course, with the population increasing [in Egypt], the number of pet lovers is increasing as well,” says Dr. Magda Nashed. She and her husband, Dr. Madgy Boutros, have run the New Maadi Vet Clinic since 1984. According to the pair, not only has the number of pet-owners risen, there has also been a substantial increase in the proportion of Egyptian visitors to their large clinic.
“When I started my clinic in the early ‘80s, the percentage of Egyptians to foreigners was maybe 1%,” says Boutros. “Now they are about half.”
Approximately 140 steady Egyptian customers provide newfound stability for his practice, since foreigners come and go. The increase has also created an opportunity for more competition in the pet healthcare sector: Boutros and Nashed say that they were the only veterinarians in Maadi when they started, but now there are at least five other clinics in the area and more than 20 in greater Cairo.
Sika explains increasing pet ownership as “part of development. People have been moving to more spacious compounds outside the city center which made the possibility of owning a pet feasible.” He says Egyptians have more “pet awareness” than before due because of the work of animal shelters and non-governmental organizations, but adds that media plays a part. “The appearance of different pets in movies, for instance, has led many young adults to pay attention to different breeds and potential pets.”
Mom and Dad might not want the dog in the room in which they’re praying, but they’re increasingly willing to accept a pet in the garden if it keeps the kids happy.
Picky, Picky, Picky
The strength of imported pet products rests primarily on the prejudices of local pet owners. Wael El-Fatah, the non-food buying manager for the Mansour Group’s Metro supermarkets, the nation’s largest food retailers, says that even though there are local products available, most of Metro’s customers prefer the imported pet food, often claiming that their pets refuse to eat anything else.
“The customer is the driver,” says El-Fatah. “If the imported food is available, we buy imported food. They’re fast-moving items if the imported product is not available, we use the local product, but it doesn’t have the same level of turnover.”
The non-profit Egyptian Mau Rescue Organization (EMRO) in Moqattam spends about LE 15,000 to 20,000 in a single month to feed between 50 and 75 cats rescued from the streets as part of an effort to send them to pet lovers in Europe and North America (yes, that’s a minimum of LE 300 per cat). But apparently, beggars can be choosers — when it comes to their food, at least. Though most of their diet is composed of fresh beef, chicken and vegetables mixed with bread, these pampered felines dine on dry cat food as a snack — and they simply won’t tolerate the local brands.
“The dry food we’re using is imported from Germany, and this is the only brand they are familiar with,” says EMRO office manager Maged El-Razih. “They won’t eat any other brand.” That imported food comes with a price tag of LE 500 for every 20 kilogram bag.
While El-Razih is struggling with what brand of food to give his cats, Karim El-Sharkawy, general manager of Joe Trade Company (JTC), is struggling to convince Egyptians to even buy pet food in the first place. JTC produces the best-selling local pet food brand, Joe Fid. El-Sharkawy does not think it is a price issue, since Joe Fid-brand pet food retails for about LE 9 per kilo for dog food and LE 15 per kilo for cat food. He believes the reason his pet-food division is not expanding faster is because of the mindset of Egyptian customers.
“The mentality of people is, ‘Why should we buy them pet food when we could just give them the leftover food?’”
While emphasizing that fresh food is best for pets, Nashed highlights the difference in attitude towards feeding pets between foreigners, who have traditionally made up the majority of pet owners, and Egyptians, who are now balancing out the equation. “A lot of Egyptians do not like to give their dogs dry food because it’s more expensive, and if the dog gets used to one type, it can be very difficult to find it on the market.”
If a picky pet becomes acclimated to an imported brand, owners can anticipate spending anywhere from LE 40 to LE 150 or more per kilo on food, with no guarantee that it will always be in stock because of government import restrictions. If the animal gets hooked on a local formula, different supermarkets might not keep it in stock, preferring instead to sell the more popular and higher-priced imports.
El-Sharkawy worries that many Egyptians are particularly averse to trying the local brands not only due to brand loyalty or a beloved pet’s preferences, but also because they simply do not want to buy an Egyptian brand. Many customers, he says, associate locally produced products with low quality and would rather spend more on the imports (particularly from the United States or Germany). Attempting to compensate for this, his company recently revamped their products, introducing slicker packaging and new food shapes that make the product look more like the imported brands.
Unlikely Allies and Missed Opportunities
The Egyptian pet-care industry had an unexpected benefactor in 2005: avian flu. To curb the risk of further introduction of the virus to the nation, the government halted the import of all products containing chicken, a ban that covers almost all of the imported pet foods. With the supply suddenly cut off, local producers stepped in to meet demand.
For JTC, this provided just the opportunity managers needed.
“It was a coincidence that [the government] restricted imports,” says El-Sharkawy, “so people had to face the facts that all they have is this Egyptian product. So people tried it, and it went okay.”
More than okay, actually. JTC, which primarily produces fish feed, sold 350 tons of pet food in 2005. That may be nothing next to the 35,000 tons of fish feed they sell per year, but it marks growth of 134% since they began making pet food in 2003. This year, JTC has manufactured roughly 34 tons of pet food per month. The company’s biggest consumers are the army and the Police Academy, which purchase from JTC to feed their working dogs (bomb and narcotics dogs, crowd-control animals and the like).
JTC only entered the pet food market because they discovered the same machine they had purchased to make fish feed — an extruder — could also be used to make pet food for dogs, cats and tropical fish.
“It’s a good market. No one had ever entered it before. It has a good profit, a good mentality of people,” El-Sharkawy says, noting that the profit margins on pet food are stronger — and that bills are paid faster than are those for his fish feeds. The fish feed is sold to farmers, who can only buy it on credit until they get their revenues at the end of the season, but pet food profits come in immediately. The company now has at least five of its 150 employees working full time on pet food.
“We make pet food the priority,” says El-Sharkawy. “So when an order comes in, we just stop [making] the fish feed We enjoy working in it because it’s a growing market.”
Although some local producers used the bird flu opportunity to establish themselves in the market and siphon some of the brand loyalty away from the imported products, other pet enthusiasts think Egyptian pet food companies bungled a rare chance.
“[The bird flu] gave Egyptian producers a good push. They had no competition, but they neglected the quality,” says Sika of PetsMarche.com, citing complaints from site users of inconsistency in products and bad formulas making pets sick. He warns that with the slow return of imported food to the market, the local companies have not gained the loyalty of pet owners. “Everybody bought it because they had to, but now that the imports are coming back, local production is definitely going to suffer.”
Distribution is another problem for the local producers. Supermarkets prioritize fast-selling imported foods, but sometimes have to carry local brands when there is a shortage of imports. Lamis Ghoniem, supply chain data analyst for Metro markets, argues that with Metro’s increasing number of stores since they first began selling pet food in 2000, their pet food sales should have tripled, but the fluctuating nature of supply has kept their overall sales largely constant. Metro’s numbers show that customers prefer to buy the imported food, but will buy the local food when the imports are not available.
“[Carrying] the local products really affects our sales,” says Ghoniem. “So where we sell 100 bags [of the imports] for LE 1,000, for example, the local is going to go for LE 100. So, it’s the same quantity sold from the local nowadays, but it really affects our sales, and our profits as well.”
El-Sharkawy complains that while his company is ready and able to produce the pet food the market wants, supermarkets don’t place their orders on a regular basis, leading to inconsistent supplies in various locations.
“They can’t predict the market. They have a certain quantity, but they don’t know when [it will run out]. By the end of the week, by the end of the month? That’s why they don’t place an order until they run out of the product, and then they make their order.”
For a market with such a demanding clientele, Nashed complains of inconsistency in quality as well. She says much of the local dry food is not properly processed, and she has noticed a significant increase in worms in cats eating locally produced dry food.
El-Sharkawy says that his company is constantly working to improve its formula, and he receives daily quality-control briefings from his labs. His company is experimenting with new shapes, colors and flavors and trying to determine what works best with the local animals.
To compensate for the fluctuating market, Metro markets coordinated with a local feed company to produce a Metro-exclusive brand of cat food called Cat Way. This exclusive brand allows them to carry cheaper local products to make up for a deficiency of imports, but still garner more profit than they would from selling other local products. Before the launch of the brand, Metro was selling 8,945 units of cat food per month due to low supply of imported brands.
After the brand launched in May 2005, sales of cat food almost tripled to 24,577 units sold in December.
Pets Versus People
For pet owners choosing packaged pet food over table scraps for their animals, it can easily cost more to feed a pet than to feed a human. Many pet owners spend more on their pets in a month than they will pay their bawwab and his family. With widespread poverty in Egypt, simple guilt can put a damper on the market.
Another hindrance to the expansion of the market: The religious qualms many Muslims have about pet ownership — particularly when it comes to dogs.
“A lot of Egyptians don’t want to have pets because they think it will spoil their praying,” says Boutros. “The new generation, they do not care anymore.” But with more people moving to villas in the suburbs of Cairo, the pressure is easing off the issue, with many new homes including gardens where dogs can live apart form the family. For some living in apartments in the city, there may not be enough space for dogs and religion in the same house.
“[Muslims] consider first their religion,” says Nashed. “They can have cats, but dogs they consider twice and three times over.” Not surprisingly, in 2005, the size of the cat-care market in Egypt was two and a half times larger than that of dogs, according to Datamonitor.
Making a Profit on Pets
El-Sharkawy hopes to dedicate at least one of Joe Fid’s two (soon to be three) production lines in its main factory exclusively to pet food in the near future and possibly move to exporting their products.
“You have a good market,” he says, “with good people and a good way of thinking and good mentalities and good education. Because when you have a dog or a cat, you treat it like your own child; you can pay more [for its food].”
Pet food production is not the only expanding segment of the pet-care market. Local manufacturers realized that their plastic molding machines can also make cat litter boxes — simple, rectangular plastic trays that can sell for more than LE 20 each — and companies can put gravel in a bag with a few chemicals and sell it as kitty litter. A visit to the supermarket reveals attractive displays of locally produced (or at least locally packaged) dog treats, brushes, pet toys, plush beds and pet carriers.
Nashed notices new pet owners coming in to the clinic now tend to come with more than just their pets.
“If they get a pet in Egypt, they go straight and buy the [locally produced] accessories.”
With the launch of its print magazine, Pet Post, in September, PetsMarche.com is breaking even, but not making a profit. However, the pet ‘matchmaker’ service on the site could be a source for future revenues. Sika notes that most of the site’s visitors come to post or search the listings of local dogs and cats available for mating.
“So many times, people ask me to find mates for their dogs, and I just gave them the website,” says Nashed. Sika says PetsMarche.com is the only website in Egypt providing such a service, but says they do not plan on charging for the service any time soon. For now, the magazine is providing an opportunity to bring in ad revenue.
“People are really excited about the magazine,” Sika says. “People are glad that someone is finally doing something for animals in Egypt.”
When Price Doesn’t Really Matter
El-Sharkawy of Joe Fid believes a lower price and quality ingredients are the main factors that make his products competitive on the local market, but according to veterinarians Boutros and Nashed, Sika of PetsMarche.com and El-Fatah of Metro, price alone will not be enough to convince Egypt’s elite pet owners to switch to local brands.
“This level of customer does not consider price as a big issue,” says El-Fatah, citing that the type of customer shopping for pet food is usually far more concerned about quality, which he says is incomparable between imported and local pet foods.
With these conditions, El-Fatah believes it is only a matter of time before the big international pet food brands come to try the Egyptian market for themselves, possibly producing in Egypt for distribution throughout the Middle East.
Sika feels the industry will definitely get bigger, but he is not sure how fast or in which directions.
“Right now, it’s a bit blurry,” he admits. “It’s promising, and it’s growing, but we don’t know where it will take us. We’re going with the flow.” He wants more investors and producers to enter the market, particularly if they are knowledgeable about animals. Sika cautions that investors must realize it will take some time to achieve turnover, but predicts that once new companies and brands are established in the market, they will make real profits.
“If you got in today, it’s better than if you got in later.” bt
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