Nestlé Egypt sees potential in African and Middle Eastern markets this year as well as plans to expand in its existing markets in the Arab countries and the Gulf area to benefit from the weakness of the Egyptian pound.
Nestlé Egypt CEO and chairperson Yasser Abdul Malak said that the company aims to boost its exports by 30% to reach EGP 1bn, up from EGP 700m in 2016.
He added that the company plans to invest EGP 250m this year to increase the production capacity in order to meet the external needs of the market, noting that increasing production will allow for more exports, along with being one of the main factors to curb production costs, which rose significantly after the pound flotation.
Abdul Malak pointed out that Libya represents the best export markets for the company—accounting for 40% of its exports—followed by the Middle East countries, including Lebanon, Jordan, the United Arab Emirates, and Saudi Arabia.
He said that the European Union and the United States of America, as well as African markets, account for 20% of the total annual exports of the company.
He added that the local market needs to increase the size of the agriculture industry and improve the quality and efficiency of agricultural products entering the industry, so that they raise their competitiveness in foreign markets.
He noted that raising the volume of manufacturing needs more scientific research that demonstrates the market’s needs of raw materials and the quality of these materials, as well as their ability to meet the needs of production plants in line with the tastes of consumers abroad.
“Nestlé Egypt intends to inject EGP 1bn of new investments over the next five years to increase domestic production; most notably Nescafé and chocolate,” he explained.
Moreover, he stated that the increase in exports is a move that aims to make the best benefit of the decision to float the pound and the depreciation of the EGP against the USD.
Abdul Malak said that the flotation is not a long term opportunity, which is why the company is trying to use the window in the best way possible.
He added that the market will go back to normal and costs will rebound again within the coming two years.
He pointed out that the company expects its sales to decline in the local market this year, noting that the sales, however, will be of more value after raising the prices.
He said that the company seeks to improve the quality of the nutritional value they provide to consumers, while continuing to pump more investments—especially with the company ‘s success in achieving average growth rates of 15%.
Nestlé Egypt owns two factories for food and packaging of mineral water in 6th of October City and Banha, with over 3,000 employees.
Abdul Malak said that the company aims to expand in the manufacturing and distribution of instant coffee. “The Egyptian market is showing strong indications that consumption is growing, which pushed us to buy Caravan Foods’ Bonjorno Café,” he explained.
Abdul Malak said that Egypt is one of the best investment countries in the Middle East, supported by a good work environment and a new investment law that contains good incentives for investors.
He added that the Egyptian market needs a legislative framework that is applied on local investors and foreign investors, as foreign investors observe the market and evaluate the performance of local investors before taking the decision to invest.
He praised the current governmental economic reform measures to control the rhythm of the market and attract more foreign and domestic investment.
He pointed out that the current investment law under review by the Egyptian Ministry of Industry is good compared to previous ones with more incentives.
Preliminary indications of the law show mechanisms to reduce the time and effort to finalise the procedures for investing, registration, and insurance, as well as legal intervention and arbitration.
Abdul Malak explained that the Ministry of Industry gave the opportunity to companies in all fields to express their views regarding the law and expressed willingness to change points according to companies’ suggestions.
He added that the chambers of commerce have also cooperated in this regard.
He noted that the company aims to expand in children’s products and increase the nutritional value—especially as 30% of children in Egypt suffer from iron deficiency.
Nestlé Egypt has two factories: one in the 6th of October City for the production of Mage, CERELAC®, and Nesquik, as well as the repackaging of Nido and Nescafé. The second factory is located in Banha, which produces and packages mineral water brands, including Pure Life and Baraka.
Abdul Malak pointed out that the company had to raise its prices in the past period due to a hike in production costs, as it imports large amounts of input raw materials, prices of which surged after the flotation of the pound.
He predicted that it will again have to raise prices in the coming period—as the market is volatile—calling for a mechanism to secure raw materials to avoid shortages.
He noted that local manufacturing and stimulating private sector expansion is a major factor in cutting down production costs.
It is noteworthy that global sales of Nestlé exceeded $90bn in 2016.