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spirited newcomer thirsts for market
share
by maha el dahan
five years since swallowing its sole competitor,
el gouna beverages, egyptian beverage giant al ahram beverages company
(abc) is facing competition from a new contender hoping to carve
a niche out of the company’s beer and wine monopoly. the egyptian
international beverage company (eibco), a brewery and winery staffed
by former employees of el gouna beverages – and reportedly
a few al ahram mutineers, has been the topic of bar conversations
since launching its flagship wine, shahrazade, and principal beer,
luxor, last october.
eibco’s managing director, andré hadji-thomas, says
the company plans to produce 150,000 cases of wine and 12 million
liters of beer at its private winery and brewery in el gouna by
year’s end. he optimistically predicts that eibco’s fresh
product line will capture 30 percent of the beer market and up to
40 percent of the wine market by 2008.
“we already have restaurants calling and asking for our drinks
by name, and our product is spreading very quickly,” he says.
but the company has its work cut out for it if it hopes to wrestle
a share of al ahram’s market. producing alcohol beverages since
1897, abc has held a monopoly on egypt’s beer and wine market
since buying out el gouna beverages in february 2001 for £e
255 million. the acquisition gave abc the remaining 15 percent of
egypt’s beer market and 40 percent of the wine market, and
put a cherry on top for abc’s sale to dutch giant heineken
the following year for £e 1.308 billion.
while el gouna beverages’ sale to abc included a non-competition
agreement that prohibited the company’s owners (the sawiris
family) and major shareholders from operating any other alcoholic
beverage company, it did not explicitly prevent their employees
from starting their own. the idea of forming a new alcoholic beverages
company lingered since the sale, but it wasn’t until business
tycoon sherif fanous agreed to put up the capital that plans began
to take shape.
“i have known the people i work with now for a long time and
we were constantly discussing starting up this company, until one
day sherif called me and said go for it,” recalls hadji-thomas,
formerly the managing director of el gouna beverages. fanous owns
a 75-percent stake in eibco, agribusiness company wadi holdings
holds 10 percent and the remaining 15 percent is owned by various
beverage wholesalers, who have an interest in distributing its products.
eibco is courting drinkers with its shahrazade wine, which comes
in red, white and rosé varieties, as well as its luxor brand
beer, which is available in bottles and cans. but it is the company’s
“xxx” beer – a pilsner clocking in at 10 percent
alcohol – that has garnered much of the publicity. while hadji-thomas
admits the extra-fortified beer’s appeal is pure novelty, he
says the market hype it has generated has carried over into the
company’s other products.
“we’ve had a really good response to luxor beer and shahrazade
wine; when we give a sample to customers to try, they usually come
back and buy loads more,” says gamil, a clerk at orphanides
liquor store in downtown cairo.
some of eibco’s success could be linked to the company’s
nationwide advertising blitz, which launched in time for the holiday
season. “we made it our aim to launch with a large campaign
close to christmas and new year’s so as to get maximum exposure,”
says hadji-thomas. “we also made it a point to have a big advertising
campaign in print media and sponsor as many events as we can.”
yet eibco does not have the benefit of abc’s extensive distribution
and retail network, which includes 500 trucks, 78 warehouses and
1,200 salespeople all working to spread their beverage products
throughout egypt. instead, it is relying on its unique distribution
approach to cut into the beverage giant’s share of the market,
and to develop its own.
hadji-thomas is confident eibco can penetrate the market by targeting
wholesalers long ignored by its much bigger rival. “al ahram
beverages [has severed its] relations with wholesalers and is making
their lives difficult, as its marketing strategy is to target the
customer, hotel or restaurant directly,” explains hadji-thomas,
“we have an opportunity to develop our distribution through
these wholesalers, who are suffering from lower activity compared
to what they had in the past.”
on the retail end, eibco is hoping to capture a slice of the foreign
tourism market, which accounts for 40 percent of beer sales and
70 percent of wine consumption. but instead of seeking exclusive
deals with tourism establishments – a strategy employed by
abc – the company is pricing its products in line with those
of its competitor and offering on top a sales commission to hotels
and restaurants that sell them. “if you give incentives according
to the quantities that hotels or restaurants buy then it’s
the best way to reach exclusivity,” he explains. “you
tell them that if they sell 10,000 cartons this year they will get
a certain rebate, and if they sell 15,000 [cartons], they get a
higher rebate.”
currently, the company is selling its products in hotels, restaurants
and 80 licensed retail stores in egypt. it also plans to open around
30 of its own shops by the end of 2007 – a marketing plan borrowed
from abc, whose drinkie’s retail outlets have proven highly
successful.
at the end of the day, hadji-thomas admits, the quality of eibco’s
products will play a greater role than any marketing strategy in
securing a share of the alcoholic beverage market. “we’re
a small company and the basic way to get into the market is to have
better quality than our competitor, otherwise we don’t have
any advantage.”
this is particularly important in the case of wine making, he argues,
where eibco’s small-scale operation has an advantage over the
mass production of its larger rival. “ok, they are big and
they produce more, but for them wine is an industrial product like
any other. with beer if you follow a recipe and the various steps
you get a decent drink, but wine involves a lot of know-how. we
take the culture of wine very seriously here,” he boasts.
eibco has a french-trained lebanese analogist on staff and a french
analogist as a consultant, both working to ensure the quality and
consistency of the wine. improving the quality of local grapes is
key to the operation, and a different tact from abc, which recently
launched two new wines produced using imported grapes: cape bay,
produced from south african grapes, and saray, produced from lebanese
ones.
“when you import grapes you might have three weeks between
the harvest day and the starting of fermentation, so the wine’s
level of maturity which is detrimental to the quality increases,”
claims hadji-thomas. “it is impossible to have good wine from
imported grapes, so our strategy is to revive the egyptian vineyards.
there is no other way.”
in its search for a partner with experience in growing grapes, eibco
turned to wadi holdings, whose subsidiary was already growing organic
grapes in its vineyards at karm al nada, 50 kilometers northwest
of cairo. when eibco approached the company three years ago with
the idea of making wine, the management jumped at the chance.
wadi holdings currently produces wine grapes for eibco on 150 acres
of vineyards, with plans to expand. “we are planning to plant
around 500 acres of grapes in our vineyards,” says ramzi nasrallah,
the company’s vice president. “we’re planning another
vineyard in wady al natroun on the road to al alamein to provide
eibco with a variety of grapes growing in different climates, as
they are planning on producing a wide range of wines.”
and for those who contend that egypt’s desert climate is unsuitable
for making world-class wines, nasrallah points to australia’s
experience. “it is not impossible to grow good grapes in the
desert, as this certainly hasn’t prevented the australians
from producing [great wine].”
australia produces award-winning wines from over 100 different grape
varieties, including chardonnay, shiraz and cabernet sauvignon.
according to the australian bureau of statistics, wine production
hit a record 1,422 million liters in 2004-05, with exports exceeding
669 million liters.
hadji-thomas is also confident about eibco’s prospects in the
beer market. despite the rising tide of conservative islam, he insists
beer consumption is on the rise and the country is ready for greater
variety. “egyptians drink beer all the time,” he argues.
“in fact, nearly 60 percent of all beer consumption in the
country is by egyptians, not tourists.”
so what does al ahram beverages company think about its new rival?
a former member of the company’s sales department said off
the record that there’s plenty of room for two. eibco may siphon
off some of abc’s customers, but both companies will benefit
from tourism growth and competitive marketing strategies. abc officials,
however, declined repeated requests to comment for this story.
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