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

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

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

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  1. Strategy Presentation On Tea Trade in EgyptPresented at Tea Expo Macau on May2008 Prepared by : M.Heiza Tea Consultant M. Heiza / 2008

  2. 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 doesn’t 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. Introduction M. Heiza / 2008

  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 Importduties 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 .(1USD=5.30Egyptian 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 . M. Heiza / 2008

  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 . M. Heiza / 2008

  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 ) M. Heiza / 2008

  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 @ 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. M. Heiza / 2008

  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 , MataryahDakhlia 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. ShaiFawazir 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-A’ama 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). M. Heiza / 2008

  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. M. Heiza / 2008

  9. Market Share Volume 2007 of Major local Brands M. Heiza / 2008

  10. Sales Split (%) of Tea Product Type by Urban Vs. Rural Areas M. Heiza / 2008

  11. Sales Split (%) of Tea Product Type by Regions M. Heiza / 2008

  12. Sales Split (%) of Tea Products Type by Outlet M. Heiza / 2008

  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) M. Heiza / 2008

  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 AB’s 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 . M. Heiza / 2008

  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 ). M. Heiza / 2008

  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 drinkingHabits 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. M. Heiza / 2008

  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 Lipton’s 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 A&B Class. While others are active with Café’s , clubs , hospitals and Coffee shops for its cheaper price and easy dispensing no more. M. Heiza / 2008

  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 . M. Heiza / 2008

  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 . M. Heiza / 2008

  21. Thank You M. Heiza / 2008

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