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

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Strategy Presentation On Tea Trade in
EgyptPresented at Tea Expo Macau on May2008

• Prepared by M.Heiza
• Tea Consultant

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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.

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• 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 .

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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 .

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• 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 )

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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.

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• 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).

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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.

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Market Share Volume 2007 of Major local Brands
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Sales Split () of Tea Product Type by Urban Vs.
Rural Areas
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Sales Split () of Tea Product Type by Regions
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Sales Split () of Tea Products Type by Outlet
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Upper Egypt
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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)

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• 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 .

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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 ).
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• 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.

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• 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.

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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 .

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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 .

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Thank You