Largely recovered from the political turmoil and economic instability of 2011 and 2012, Egypt is back to enjoying a fast-growing economy. With a forecasted real GDP CAGR of 4.7 percent until 2020, foreign direct investment is on the rise and is expected to make up 1.7 percent of GDP by 2019. The rapidly growing population could exceed 100 million people by 2020, with a large and vibrant base of consumers. Especially enticing to retailers are the predictions that the middle class could grow from 19 percent in 2015 to 34 percent by 2019 and private consumption could grow by 5 to 6 percent in real terms until 2020. The face of the retail market is also changing, with a steady shift away from traditional retail and toward modern trade. From 2013 to 2015, retail sales grew by a CAGR of 6.3 percent, with forecasts indicating a potential doubling of the market by 2021. The grocery segment is expected to grow from 18 percent in 2015 to 28 percent in 2019.
However, there are a few barriers. Inflation is high and projected to grow at 9 to 10 percent until 2020 as a result of the anticipated withdrawal of several subsidies and the introduction of a value-added tax. Recent depreciation of the currency versus the dollar and terror attacks could put more pressure not only on inflation but also on tourism and consumer spending. Short-term disruptions from political unrest and the risk of sudden regulatory changes pose additional challenges.
Moreover, Egypt’s retail market is fragmented, competitive, and largely traditional. Although 18 million people fall into mid- and high-income groups, the consumer base is largely made up of price-sensitive, low- to mid-income shoppers. As major retailers invest or announce big plans to invest, the market will become even more competitive. Forward-thinking investors that can overcome these obstacles will find their footing in a country that is now back on solid ground. In this paper, we take a look at the macroeconomic environment and the retail landscape before homing in on the grocery retail market, and discuss how investors can capture a piece of this fertile market.