Country Report: Egypt
In 2008 tissue products in Egypt registered dynamic value growth of almost 12% to reach E£498 million ($91 million),
equating to a 35% share of the country’s disposable paper products market. While these impressive figures were largely
due to high inflation and price rises implemented to cope with rising production costs, all categories registered strong
volume growth, driven largely by the country’s fast-developing retail infrastructure, writes Magdalena Kondej
Egypt saw a rise in the number of new
supermarkets and hypermarkets in
2008, which positively impacted
tissue product sales. These new stores, such
as Carrefour and Spinneys, offer a more
modern and pleasant retail environment than
the small grocery stores that have long been
the dominant outlets for tissue products. As
a result, they have attracted a growing number
of shoppers. The modern retail format and
opportunities for in-store marketing have
resulted in growing brand awareness, and, for
the first time, consumers have found they
have a choice as to which tissue products to
purchase, all of which has served to drive
sales.
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Egypt: Per capita value spend (E£)
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Tissue products in Egypt are dominated
by local players, in particular Nuqul Group
with its two mills – Al-Bardi and Al-Sindian
– and Pyramids Paper Mills SAE, a subsidiary
of Zeritis Group. The two manufacturers
command the top two spots in every tissue
products category, which amounts to a total
tissue products market share of 39% for Nuqul
and 29% for Pyramids Paper Mills.
Both companies increased their market
share in 2008 as a result of opening paper
mills and increasing production levels.
Although other smaller local players vie for
share, price and innovation are driven by the
two major players, which have both developed
strong consumer loyalty, making major gains
for other companies difficult to achieve.
Kimberly-Clark is the only major
multinational currently present in tissue
products in Egypt. The company has been
active in toilet paper, tissues and kitchen
towels since 2005, when it re-entered after
being absent for almost a decade. The
manufacturer has made slow but steady gains
in every sector.
The bulk of the Egyptian population live
in poverty, with low spending power and
purchases limited to necessities such as food.
Total per capita spend on tissue products
stands at just E£7 ($1), and purchasing power
is not expected to improve dramatically in
the future because of rising inflation. These
low-income consumers prefer to use cloth as
a cheaper and reusable alternative to tissue
products and this will remain the case for the
foreseeable future. Egypt does, however, have
a small but rising number of high-income
consumers and expatriates living in the
country, accounting for the rising share of the
Kleenex brand, but this group is expected to
remain a small minority for some time to
come, hindering the growth of imported
brands.
Grade By Grade
Tissues account for the lion’s share of the
market, with sales amounting to E£284 million
in 2008. Tissues also registered the strongest
value growth in 2008 of 12%, with volume
growth of almost 4%. The hot and dusty
climate means the product is often used to
wipe perspiration from the face. The Fine and
Flora brands, from Nuqul and Pyramids Paper
Mills respectively, account for almost 70%
of the category, and both saw their share grow
in 2008. Kleenex has made slight gains since
its re-launch in 2005, and now commands a
0.5% share of the category.
Pocket handkerchiefs are widely used and
account for the majority of tissue sales because
of their low unit prices and smaller, more
convenient packaging. However, innovation
in terms of soft packaging for boxed tissues
in recent years has driven sales in the category
as the products retail at a lower price. This
development is expected to continue to drive
short-term innovation. Tissues are predicted
a value CAGR of just over 2% to 2013, with
a similar level of growth in terms of volume,
ensuring the category remains the most
important in tissue products in Egypt.
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Egypt: Top five tissues brands
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Toilet paper achieved total value sales of
E£181 million in 2008, recording 11% value
growth. Volume sales rose by 4%. Despite toilet paper currently trailing in value to
tissues, it is still the primary focus for
manufacturers which believe it offers more
potential as consumers become more educated
about hygiene practices. Again, the Fine and
Flora brands dominate and jointly account
for more than 50% of the category.
Kimberly-Clark’s Kleenex brand accounts
for a 1.5% share, which has grown every year
since its launch. Due to the price-oriented
nature of the Egyptian market, toilet paper
manufacturers have focused on discounting
rather than advertising or innovation. As a
result, the category is predicted to post a 1%
value CAGR to 2013, the lowest of all the
tissue product categories, although in volume
terms a predicted CAGR of over 2% will be
the highest of all categories. This represents
a widening of the consumer base, which
should translate into good long-term growth
as disposable incomes rise.
Kitchen towels grew by 11% in value
terms in 2008 to reach E£24 million and
recorded 3% volume growth. The category
suffers in Egypt as the majority of consumers
are not wealthy enough to purchase the
product and prefer cloths, a much more
economic alternative. To add to the difficulties,
those Egyptians wealthy enough to buy
kitchen towels are likely to have cooks and
maids who will also choose cloths.
In light of this, kitchen towels are likely to
remain a niche category for some time.
Kimberly-Clark’s Kleenex brand has,
however, made the most headway in kitchen
towels of all the sectors in which it is active,
now holding a 3% share. The imported,
premium product appeals to just the sor t of
high-income, aspirational consumer who can
afford to buy into the category.
Paper tableware is the smallest tissue
products category in Egypt and, like kitchen
towels, suffers because of its non-necessity
status. The category reached almost E£8
million in 2008, recording strong value growth
of 11% and volume growth of 2%. Napkins
remain the only type of paper tableware
available in Egypt, and, like kitchen towels,
the category suffers because toilet paper and
tissues can be used as a viable and more costeffective
alternative. The product’s use
remains limited almost exclusively to
children’s birthdays.
As a result of their continued limited
consumer base, both kitchen towels and paper
tableware are predicted slow but steady
volume and value growth of a around 2%
over the forecast period. Both are likely to
remain niche categories for the foreseeable
future as manufacturers focus their efforts on
the more profitable toilet paper and tissues.
Risky Market
Although all categories in tissue products
do hold some potential in Egypt, they are also
fraught with difficulty for manufacturers
looking to capitalise on this – most
significantly the country’s continued
widespread poverty and the established longterm
dominance of Egypt’s two major players.
Toilet paper and tissues will continue to offer
the most potential, but the developing retail
structure has also provided an outlet for private
label products, with Spinneys and Carrefour
both offering own label toilet papers that are
gaining in popularity and further intensifying
the competitive environment.
Any major manufacturer that did intend
to enter the market would perhaps be able to
benefit from playing on corporate social
responsibilities, promoting their brands while
educating consumers as to the importance of
general hygiene.
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Magdalena Kondej is Head of Research for Household Care, Euromonitor International. |
