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Strategy Presentation On Tea Trade in Egypt Presented at Tea Expo Macau on May2008

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Medium and Small Companies like EL-ENANY ,LORD, CROWN ,CAIRO use African and ... or with 1- 2 spoons of sugar and sometimes /without sugar for ladies and girls. ... – PowerPoint PPT presentation

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Title: Strategy Presentation On Tea Trade in Egypt Presented at Tea Expo Macau on May2008


1
Strategy Presentation On Tea Trade in
Egypt Presented at Tea Expo Macau on May2008
  • Prepared by M.Heiza
  • Tea Consultant

2
Introduction
  • Tea is Considered to be one of the main Strategic
    Foodstuff commodities to Egyptians at all levels
    ( Very rich, rich, Middle Class and below middle
    class being the cheapest beverage after Water)
    .In rural Areas it is a substitute to Fruits and
    even served as a welcome drink minimum1-5times a
    day. The Average per capita consumption now is
    between 800-1000grams accordingly the Total
    Annual Consumption is between 70,000 to 75,000
    tons/year (current population is around 76
    Millions) . Since Egypt doesnt produce Tea ,
    Thus it is considered to be a NET Tea importer
    from main Tea producing Countries in Asia and
    Africa .
  • Government of Egypt alone imports 20-25.000tons
    alone for Ration cards consumers from Kenya and
    diverted some imports from India due to its
    cheaper price NOW while the private Sector
    imports the balance of around 50-55000 M.Tons
    mostly in loose form (inside Multilayer paper
    bags of 50-65kgs.)that is later packed in
    different pack sizes according to Market
    requirements and consumer needs . The remainder
    of small percentage of Pre-Packed Teas are
    imported mainly from Sri-Lanka , UK and India of
    Fancy or high quality and speciality Teas like
    Earl Grey, Darjeeling ,Green Teas , Assam
    ,Flavored Teas and Tea To Port Said Free Zone and
    Duty Free shops.
  • Recently there is a trend to import green Tea at
    a very limited scale for health reasons/benefits
    as well as some are re-exported to Libya.

3
  • 4. Most- if not all - Private Tea Importing
    Companies started Tea Business with imports of
    already packed Tea at Origin Countries including
    known Brands like Lipton , Brooke Bond , Dilmah
    ,Jawhara ,El-Salam Tea, El-Wardah ,Crown ,Shai
    El-Enany,Shay Lord, El-Farasha ( Later started
    local Packaging under Al-Arosa FAMOUS brand Name
    NOW)
  • 5- Ever since 2004 , The Egyptian
    Government had reduced The Import duties on Tea
    from 30 to become 5 instead and later on
    Feb.2007 it was reduced again to become2 Plus
    a Unified Sales Tax. On all Loose Tea of
    1.166Egyptian Pounds /Ton. Only Tea imported
    from Kenya/ East African Origin enjoys a ZERO
    Customs duties under COMMESA Treaty with Egypt
    .That is why most of the Tea imports into Egypt
    are from Africa .(1USD5.30Egyptian Pounds)
  • 6- But after recent unrests in Kenya
    affecting crop intake there is slight tendency
    for diversification of imports from other cheap
    origins like South India that may also be
    extended to origins like Vietnam and or China for
    Black Dust Tea .

4
Major Tea Producing/ Exporting Countries-
  • 1-India -
  • The largest Tea Producer in the world with
    925.000M.Tons of Orthodox and CTC Teas , that are
    cultivated in The North of India(715.000M.Tons)
    of Top quality Assam , Darjeeling ,Tripura and
    Deoars Tea . South Indian Tea Production at the
    hilly Areas of Nilgeries consists of
    210.000M.Tons . (Production figure till2005)
  • 2- China -
  • Is considered to be 2nd.largest Tea Producer and
    their main emphasis is on Green Tea with small
    quantities of Black Tea but their large
    population leaves no surplus for export that
    is why it is not to be considered as a large
    Exporter.
  • 3-Sri Lanka -
  • The 3rd. Producer of Tea with small population of
    around 23 millions , and their annual Production
    last Year reached 325.000 M.Tons out of which
    they export around 310.000M.Tons . That is why
    it is considered to be a Major Tea Exporter
    superceding India due to its large population .

5
  • 4-Kenya -
  • The 4th. Tea Producer with an average of 290.000
    M. Tons production along with some other East
    African Countries like Malawi , Mozambique,
    Tanzania ,Uganda and Rwanda .
  • 5- Other Origins -
  • Mainly Indonesia , Bangladesh and Vietnam that
    are counting as subside Producers and from there
    Major Blenders and Tea Packaging companies use
    their Low quality Teas as Fillers or Price
    Reducers , specially large Blenders like Lipton
    International with their vast experience and
    blending facilities.
  • Others like AROUSA depend either on getting
    direct blends from their Kenyan suppliers or
    others like AL-JAWHARA and El-Salam Tea who are
    specialized in Ceylon Tea and started to buy
    Kenyan Tea. Medium and Small Companies like
    EL-ENANY ,LORD, CROWN ,CAIRO use African and
    Ceylon Tea blends at small scale.
  • (N.B. above Production figures estimated till
    Year 2004 )

6
Imports of Tea into Egypt Market size and area
activities for different Brands -
  • Market size - Annual consumption 65.000
    -75.000M.Tons (Government Imports 20-25.000Tons
    For ration Cards) Balance Imports are through
    Private Sector Importers .(variation of imported
    quantities depends on carry over quantities from
    1 year to another )
  • Growth Rate - Same rate of Population
    growth _at_ 2. annually on average.
  • Types of Imported Tea
  • Mainly DUST specially D1,PD ,RD,SFD,
    Fangs, PF ,and BOBF of higher quality for Tea
    Bags .
  • As well as small percentage of
    flavored Teas/Earl grey/Assam Tea and jasmine
    green Tea for niche market and Hotels.
  • Main Tea Importers of Loose Tea and Areas of
    Distribution activities -
  • 1- El-Arousa with market share around
    45 All over and mainly Upper Egypt
    Governorates , with some exports to Libya .
  • 2 - Lipton - with market share 20 ,
    All over Egypt ,with special emphasis on Tea
    bags.
  • 3- Al-Jawhara - With market share 10
    5.000 M.Tons , mainly in Behira ,Alexandria
    ,North and west cost of Alexandria in addition
    to sporadic quantities in Cairo an Delta Region.
  • They also have new line of Green Tea
    sold locally and exports to Libya.

7
  • Crown , El-Enany and Cairo Tea with market
    share of around 7. Distributed in Giza suburbs ,
    Fayoum and Kalyoubia, also they pack OP Tea to
    Libya in 250/500 grams packets under a Brand Name
    Shai Al-Zahrah .
  • LORD and El-WardahTea - with 5 market share
    distributed in Giza , Ismailia ,Sharkya and
    Ismailia with superb .
  • El-Salam Tea - with 2 market share 1.000
    M.Tons distributed in Port Said , Domyat ,
    Ismailia , Manzalah , Mataryah Dakhlia and
    Mansoura Regions. ( all imported from SriLanka in
    soft packets) as well as Pre-packed Tea bags from
    Sri Lanka under this Name.
  • Other small Brands with balance market share of
    8 approximately .
  • Like Shai KEDAH spread all over
    Cairo,Delta , and lower Egypt(now out of the
    Market)
  • Shai El-Asary in Kanater and
    Menofia.
  • Shai Fawazir in Kanater and
    Qalyoubia .
  • Shai AFIONAL in Behira and
    Tanta Governorates .
  • Shai El-Moftah, Royal Club Tea
    and Farasha in Upper Egypt Area.
  • Shai El-Sherif Including RED
    LABEL locally packed .
  • Shai El-Temsah in Delta Region
    mainly (Now stopped activities).
  • Shai El-Gomhouria packed for
    Governmental Out-lets ( Al-Aama and ElMasrya
    Government Co- operatives Stores).
  • N.B. ( In the Year 2005/2006 some New Tea
    companies started , and some left the Market with
    limited effect).
  • IMPORTED PACKET TEA around 2 ( Dilmah
    ,Superfine ,Ahmad Tea ,TWINNINGS,AHMAD Tea and
    other small brands).

8
Chances for Tea Exports to Egypt -
  • MARKET GAP
  • Over last 15-20 years Kenyan Tea was dominant
    when COMESA Pact gave unfair advantage to Kenya
    ,with Zero duties . Coin-sided with Indian Tea
    and Sri Lankan Tea Board closing its Cairo office
    and instead depended on its Tea Promotion office
    from The UAE which had an adverse effect on
    their Gross Exports to this Market.
  • But Now local Packers are looking for moderately
    priced Tea to reduce Blending costs from other
    origins where China, Vietnam and other Tea
    producing Countries can have market share
    especially Black Orthodox and CTC well made and
    clean leaves .That trend is generated because of
    the price rise of Sri Lankan and Kenyan Tea NOW.
  • Also there is small room for Specialty Packed Tea
    (Green, Jasmine, Earl Grey ,Darjeeling and
    Organic Tea bags and Packets).
  • Common PACKET SIZES -
  • - For Dust Tea the 25gram pouches and 40 gram
    packets are major weights sold in rural and low
    income areas .
  • - 250 grams in Lined Cartons for mass market
    and that can be imported /or locally packed as
    well depending on costing in either case.
    Beside Tea bags of 25,50 and 100 bags.
  • - There is also a room for Tin caddies
    ,elegant Tea Presenters ,Organic Tea for Class A
    consumers besides Flavored Tea bags but at a
    very limited scale to Hotels and Tourist catering.

9
Market Share Volume 2007 of Major local Brands
10
Sales Split () of Tea Product Type by Urban Vs.
Rural Areas
11
Sales Split () of Tea Product Type by Regions
12
Sales Split () of Tea Products Type by Outlet
13
Upper Egypt
14
Market Research Situation Drinking habits-
  • Socio-economic classification in Egypt -
  • Socio-Economic classification Egypt is primarily
    very closely linked to family Income.
  • There are however no hard and no fast rules that
    can be applied .
  • Approximation of such a classification is based
    on defining a 5 group Pyramid as follows-
  • (Source Egyptian Statistical Organization)

15
  • As with such definitions , there is a lot of
    overlap between groups .We have no fixed
    variables by which we can invariably classify
    people .
  • AB families live primarily in Urban centers with
    the majority of ABs being found in Cairo ,
    Alexandria and some new Cities of Sharm El-Sheikh
    , Hurghada and Western coastal new communities in
    Summer.
  • The Area of Residence and profession and
    education level of household head are key
    determinants of this group .They would invariably
    own at least 4-5 of the following -
  • - Cars Colored TV and new Ultra modern
    Telecommunication apparatuses Separate Freezers
    Air Conditioning Units Automatic washing
    machines and sometimes Coastal Resort Residences
    out of Cairo and superb .
  • Classifying C1,C2 ,D and E respondent is based on
    a combination of all demographic variables , i.e.
    Area of Residence ,Occupation ,Education level of
    House-held Head and respondent and ownership of
    durables .

16
B- different levels patterns reflects Beverages
drinking habits - based on minimal research and
trade visits , Tea appears to be the NATIONAL
drink in Egypt being (cheapest beverage after
tap Water) followed by Strong Turkish coffee .
Both of those beverages are commonly drunk at
popular Coffee shops which can be found on
nearly each corner and street in Egypt cities and
villages and at home as well for family
entertainment or as a welcome drink. Instant
Coffee , like Nescafe is only popular amongst the
AB socio-economic Class and New Generation, due
to its premium pricing and fact that it is not
familiar to Egyptian Consumers. Soft drinks
although served every where are more seasonal (
mainly Summer ) with lower consumption levels
,while main 2 Competitors (Coca Cola and Pepsi
are on neck to neck fight with lucrative daily
Prizes aiming at Youngsters as their target
Consumers ).
17
  • Tea has mainly two attributes , which are its
    strong fresh taste (indicating its quality) and
    the deep red color (which is distinctive feature
    of good quality Tea when it is well brewed ).
    Both taste and color for a Normal Egyptian are
    a symbol of high quality Tea .In any Study to
    penetrate to the Egyptian Consumers SHOULD AIM
    AT BOTH Strong Liquir Color that will be the
    mile stone for Good start and Success on the long
    run. Of course that MISSION must be achieved
    considering the BEST Price and BEST acceptable
    and stable quality which is easily attainable
    when considering any Tea both in quality
    variation and all price levels .
  • Tea drinking Habits for differen Classes
  • Which has very specific characteristics across
    the different socio-economic classes-
  • Amongst The C,D E socio-economic class ,Dust
    Tea is commonly consumed .Tea is usually drunk in
    glass cup ( not in a Mug or Teacup -perceived as
    foreign trend) , as that allows them to determine
    the strength of the Tea , both through color and
    through the amount of Tea infusion precipitated
    at the bottom of their glass cup as sign of
    quality. Those results are obtainable by use as
    little as much of good DUST Tea to reach this
    satisfactory formula .At the same time , this in
    itself is self satisfying to this Segment of
    Consumers . Tea is preferred as black Tea
    (without Milk) and very sweet i.e. minimum 3-4
    spoons of sugar /medium cup .The only Tea flavor
    that they may add , is either Fresh or dried Mint
    leaves which is perceived to be soothing and
    relaxing.

18
  • Moving up the Socio-economic Level (A and B
    Social Class) , there is high level of
    consumption of premium Brands (i.e. Lipton Tea
    bags , Twinnings , Earl Grey ,English breakfast
    and English afternoon, Ahmad Tea , Dilmah
    ,Superfine ..etc.) both in Tea bags and flavored
    Teas with Bergamot , Lemon, Cinnamon , cardamoms
    , and Green Tea . This Segment usually drink Tea
    in a Mug or special Teacup ( which is more of a
    foreign trend that are now becoming a new habit
    for Youngsters in 5 Star elite Cafés without or
    with 1- 2 spoons of sugar and sometimes /without
    sugar for ladies and girls .
  • Now it is trendy to have Jasmine green Tea bags
    as well as Organic Tea.
  • Besides herbal and Organic Teas there is Iced
    Tea in cans normally consumed as soft drink in
    summer amongst girls and young boys.
  • To this segment Lipton and other pre-packed
    imported Teas are dominating . For Tea bags the
    competition goes in Liptons favor despite that
    AROUSA , JAWHARA , CROWN ,WARDA and El-SALAM Tea
    are selling Tea bags . Yet the image of Lipton
    Tea bags is the main target for AB Class. While
    others are active with Cafés , clubs , hospitals
    and Coffee shops for its cheaper price and easy
    dispensing no more.

19
From where , which Tea to buy ?
  • From the foregoing facts and knowing the Tea
    Origins it had been almost 15-20 years
    consumers are using Kenyan Tea , BUT still there
    is trace and Segment of Real Connoisseurs who
    still remembers Good Indian Tea especially Assam
    and NILIGRIES Tea , as well as High grown UVA
    Teas from Sri Lanka .
  • But due to the high rate of customs duties
    imposed by the Government till almost 2 years
    ago the Indian and Sri Lankan Tea presence was
    affected .
  • Now with the new decrease of Customs duties to
    become2 in place of 30 earlier
  • (Sept.2004 Egyptian Govn. reduced import
    duties to 5) there is a good chance to
    re-introduce Other Origin Tea at 2 Duties .
  • The South Indian Tea enjoys both the Characters
    of Sri Lanka Tea ( same vegetation plateau ) as
    well as well made CTC Teas coming from Kenya
    .Those Tea are cheaper in price and suits
    consumers from B C class when introduced in an
    attractive packet.
  • NOW local Tea packers started to use Indian Tea
    to be blended with other origin Teas or be
    imported pre-blended from Kenya to benefit from
    the COMESA . Thus Tea Merchants can achieve a
    consistent Tea Character at reasonable Price .
  • There is also greater scope for other Origin Teas
    to come into the Market if it is well made Dusts
    (without fibers or stalks and or liquor faults)
    at reasonable prices .

20
Tea import Procedures ,Taxes and duties -
  • -Tea imports Governing Rules -
  • Tea imported to Egypt are subjected to ISO /3720
    Specifications for Tests ,Health Authorities
    clearance at ports , and are governed by Egyptian
    Standardization Organization under article
    No.2613 and article No.1546 regarding Expiry
    date (3years for date of Production/packing) that
    must be printed or embossed in indelible way .
    Packet sizes also are subject to another
    Ministerial Decree Nos.107/94 and 283/98 which
    obliges all Tea Traders to have even weight
    nominations 15,25,40,50,100,125,250,500 and
    1000grams for Tea packets and 2grams for each Tea
    bag and to be packed inside 10 ,25 ,50 ,75 or 100
    Tea bags. That is to avoid mal-practicing for
    down sizing weights and raising prices.
  • Duties and Sales Taxes on Tea -
  • Currently it has become 2 for all Tea imports
    except COMESA countries Zero. Sales Tax are
    fixed at 1166 L.E./Ton for all Teas and all
    origins which is paid only once at Port and
    never claimed again from Retailers /Consumers
    .Only records have to be maintained and monthly
    reported to Sales Tax Offices for scrutiny .Other
    clearing charges are applicable like other
    commodities .

21
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