Mareike Grytz

Fast Moving Consumer Goods – Inclusive Business in Egypt

BoP as customer
Egypt
Middle East and North Africa
4. May 2016

Have you heard of the term Fast Moving Consumer Goods (FMCGs)?

Every day, nearly everyone in the developed and developing world uses them - they are essential items that are purchased and picked up when you're buying groceries or visit your local chemist or pharmacy. FMCGs are referred to as 'fast moving', quite simply, because they're the quickest items to leave the supermarket shelves. They also tend to be the high volume and low cost items such as milk, bread, fruit and vegetables (food) and toilet paper, as well as shampoo (non-food).

The affordability, availability and quality of those products are of high importance for people living at the Base-of-the-Pyramid (BoP). According to IFC’s Global Consumption Data almost half of the spending at the BoP is dedicated to Food and Beverages. This accumulates to an amount of 2.3 trillion USD. Adding non-food FMCGs as soap or over-the-counter drugs to this sum, makes it an even bigger market. Due to rapid urbanization processes and less home grown food, the demand for FMCGs at the BoP is booming in bigger cities. It is still a market that has little been targeted by companies although the sector offers huge opportunities – e.g. by addressing specific needs of the BoP for FMCGs in terms of package size, price and variety.

Inclusive business models play an important role by making high quality products available to low-income groups and integrating them as consumers, as well as suppliers and distributors in the value chain. As the FMCG value chain overlaps with many development areas, including agri-business, nutrition, health and waste management, examples for IB models can be diverse. They range from

  • product innovations,

  • integration of small-holders into production and sourcing processes,

  • new packaging solutions,

  • development of last mile distribution channels to

  • handling package waste.

Throughout all these different stages it is important for companies to gain a deep understanding of needs and consumer behaviour at the BoP in order to design their business models and products accordingly and enable inclusive growth and sustainable development.

In 2010, the IFC’s Global Consumption Database examined a sample of 39 African countries and their household expenditure on FMCG goods. In total, the expenditure added up to almost 240bn USD. Following Nigeria with an expenditure of 41.7bn USD, Egypt had the second highest expenditure of 27.6bn USD on FMCGs. Despite this huge spending power in Egypt, there are several bottle-necks and unmet demands for the BoP in the FMCG value chain as a baseline assessment conducted by the BoP Learning Lab showed. For example a lack of cooling chains in distribution channels and high crop wastage rates reduce the availability of goods to customers. Up to now only few FMCG business models target the BoP in this region; however, the number is expected to increase over the next years. Current examples are mostly found in developing new packaging solutions and last mile distribution channels – as e.g. Kheir Zaman, a supermarket chain targeting low-income groups by offering mostly local products at lower costs than supermarkets targeting middle-income groups.

"Two Vegetable vendors in Egypt"
Two vegetable vendors in Egypt

To leverage the potential of this sector in Egypt and the MENA region, the Inclusive Business Action Network (IBAN) in cooperation with the Responsible and Inclusive Business Hub (RIBH) MENA and BoP Learning Lab gathered together businesses and organizations from the FMCG sector in Cairo. The aim of this two-day practitioner sector dialogue was to develop new ideas for innovative products and inclusive business models. A strong group of carefully selected international companies such as Danone, Tetra Pack and Unilever, as well as Egyptian companies as Tatweer and social entrepreneurs, start-ups, organizations and NGOs across the value chain, participated. Within the two days, they jointly elaborated strategies for scaling existing successful business endeavours.

The workshop in Cairo was just a first step by IBAN to promote and enable inclusive business in the FMCG sector. There are two more workshops to come in Tunisia and Egypt by the end of this year/beginning of 2017. In addition, building on the baseline assessment and the workshop, a guide for businesses will be launched - not only to better understand the FMCG sectors value chain but to generate and leverage business models targeting the BoP.

Are you curious to find out more about the workshop? A film team of ‘It’s Africa’s Time’ – a media platform promoting and encouraging the adoption of inclusive business models - accompanied it! The footage turned out great as it gives an impression on the workshop format and – most importantly - tells the stories of two entrepreneurs in the FMCG sector in Cairo. Click here to watch the episode and get to know Tayssir Ibrahim, an inspiring social entrepreneur running a business of upgrading and developing street kiosks across Egypt.