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TEA MARKET IN EGYPT
Transcript of TEA MARKET IN EGYPT
History & Evolution of the Local Market
In Egypt, tea is the most consumed good after water.
Egypt's tea consumption is a massive profit making market and and an integrated part of the Egyptian culture.
In Egypt, tea is the second cheapest beverage after water.
Tea serves as a welcoming drink in most areas around Egypt.
Interviewed Mr. Bahaa Badawy, one of the owners of El Aroussa tea.
Interviewed Mr. Sherif El Agamy, Director of the Lipton factory.
Will visit El Aroussa factory on Tuesday.
Visited the Lipton factory in Alexandria.
Egypt is the largest potential market for tea in the MENA region with a total population of more than 90M. In fact, tea is not substitutable in Egypt.
The government provides incentives for businesses to enter the market.
Individual firms can diffrentiate products by creating a unique brand identity.
inspite of the fact that tea is the most favorable beverage it has been found that the market growth rate of tea is relatively low.
High cost of production due to the fact that tea is highly perishable.
the tea market is saturated.
New varieties of flavors
The weak economy of Egypt
El Bahrawy and Adel Nasser inaugurated Crown tea in 1979 with a capital of 35 million EGP.
Lipton entered the market and took from Crown's market shares until it discontinued its tea product.
Egyptian Business man Alaa Badawy created a new brand, ElAroussa tea, in 1898.
El Aroussa took from Lipton market shares although it is targeting low and medium tier.
Elements of Demand
Horizontal Preference: Taste
Upper Egypt: Strong tea
North Egypt: lighter tea
Vertical preference: Quality
Upper class consumers prefer higher quality tea as they are the only social class who can afford it
Everyone prefers higher quality tea but only the upper class can afford it
Necessary good: price elasticity between zero and one
(the change in demand of tea is less proportional than the change in price so it’s a necessary good)
Cross price Elasticity:
Substitutes: Ex. Coffee, as coffee prices increase, quantity demanded for tea increases
Complements: Ex. sugar and milk, as sugar prices increase, quantity demanded for tea decreases
Neutral good: income elasticity is equal to zero
Al Arosa manages to keep its market lead for several years now, using various marketing techniques, and one of the most effective techniques used is advertising.
Lipton’s market share continues to grow because Unilever is now making inroads to the market of El Arosa through effective advertising campaigns.
Elements of Supply
Market Structure and Segmentation
Duopoly: by market shares
Products are differentiated in terms of quality, packaging and sometimes in the types of tea offered by companies (ex. Earl Grey)
Companies are price makers
Switching between products is not easy
In 1998, Egypt joined the COMESA agreement for free trade.
They ended up providing a lower quality of tea thus loosing from their own market shares.
El Arosa Tea:
sells Kenyan tea
mainly targets the lower social class
has a market share of 57.7%
targets middle and upper social classes.
most demanded product is red tea bags, which are a mix of Kenyan, Malawian, indian ..etc tea.
El Jawhara Tea:
market share of 8.3%.
mainly targets lower income consumers only.
Dilmah Tea, El Salam Tea and Ahmed Tea:
some of the highest quality tea brands in Egypt
imported from Sri lanka
three brands serves the highest social class in Egypt, with Dilmah being the most popular.
Labor, Capital, & Technology
• Exporting country: labor intensive
Big companies: capital intensive
Small companies: more labor intensive
• Blending and Packaging
Subsidies on some food products -including tea- were restored in september 2003.
In 1994/5, monopolistic control on imports was removed from public companies, easing the growth of the private sector
The COMESA agreement reduced imports tariffs, which made Kenya the main tea supplier rather than Sri Lanka.
Very low consumption taxes are applied on tea.
A sales tax and service charges are applied on tea imports.
Egypt's annually consume 65,000 to 75,000 tons of tea, on average.
However, Egypt does not plant tea due to weather conditions.
It imports raw material from Africa and Asia.
In 2008, Egypt imported 12 million kg to kg to 13 million kg from India. And 6 million kg to 7 million kg in 2007.
since 2004, taxes on teas (import duties) were reduced from 30% to only 5%. Later in February 2007, it was further reduced to just 2%.
2013 = Violent Crackdown on Muslim Brotherhood.
Tea Prices decreased to over 1/3 of its original prices.
Egypt cut down from its imports (5th largest importer).
The world largest exporters (Kenya, Sri Lanka, and India) of raw material had to lower their prices.
The wholesale cost of Kenyan medium quality tea decreased by 34%.
NADA EL KERM
THAKEB EL ALFI
Countries of the COMESA agreement: Angola, Burundi, Comoros, DR Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.
The COMESA agreement reduced tarrifs from imported raw goods reducing the cost of tea in Egypt.
Having reduced its costs, Lipton reduced its prices to take from El Aroussa's market shares
Stakeholder Impact Assesment