Malaysian Palm-Based Products Potential in Confectionery and Bakery Market in Egypt

Market Outline

Egypt remains the largest consumer market and most diversified economy in the Arab world, and the coming years. Consequently, it is expected that the confectionery and bakery sectors will remain stable, as it is dominated by local producers as Edita and Rich Bake that provide high-quality products at affordable prices. With its young, growing population, extensive distribution network, and low prices, confectionery and bakery products’ demand in Egypt is expanding. This growth will pave the way for higher demand for palm-based products. The growth also involves the expansion of the export market. Egypt’s central location in the MENA region acted as an edge for the Egyptian food manufacturers, allowing them to increase exports to nearby markets.

Given these results and general optimism surrounding the health of the sector, it is unsurprising that global players are looking to enter or expand their presence. In 2015, Kellogg Company, the biggest global cereal manufacturer, acquired a controlling stake in Bisco Misr, Egypt’s largest biscuit producer. This follows the plans of Swiss food producer Nestlé to expand into the Egyptian market, by increasing its investments to extend its footprint in the country. Such investment interest by major international companies constitutes a strong show of faith in the Egyptian market. This scenario provides an excellent growth stimulus for palm oil products in Egypt.

Confectionery, especially chocolate is enjoying relatively stable volume growth. The chocolate market in Egypt registered a positive compound annual growth rate (CAGR) of 8.98% during the period 2015 to 2020 with a sales value of EGP 4,296.38 million in 2020, an increase of 4.54% over 2019. Bakery goods have been and continue to be stapled dietary products in Egypt. Accessible and nutritious, the low cost and nutritional value of baked goods have allowed it to maintain stable growth.

In Egypt, palm-based products namely, cocoa butter equivalent (CBE), cocoa butter replacer (CBR), and cocoa butter substitutes (CBS) in which each one has their strength for different confectionery applications due to the high price and inconsistent supply of cocoa butter. Shortening is also used commonly used in bakery products. Multinational manufacturers operating in Egypt are demanding mass balanced oil, this demand is increasing to fulfill requirements made by their international customers. Those companies have made obtaining sustainable palm oil a core element of their business strategy in sourcing their ingredients. While global demand and consumption of palm oil are rising steadily, concerns have been raised about the sustainability of the production, sourcing, and usage of palm oil and the by-products derived from it. 

Oil and Fats Development

According to industry sources, the local oils and fats requirements for confectionery and bakery making are estimated at 90,000 tonnes. Most of this volume is met through imports of finished products, and only 22% is fulfilled through local manufacturers like Arma and Iffco who are using palm oil and palm kernel oil fractions in producing their fats products for this segment. Egypt’s imports of Lauric fats are witnessing some increase from 2016 until 2018. Slumped in 2019 and back to normal levels in 2020.  In 2020, Palm kernel oil accounts for 76% of lauric fats imports, it may also get some increase this year since imports in Jan-Sept 2021 amount to 17,374 tonnes.

Egypts Import Trend of oils and fats
Product 2016 2017 201’8 2019 2020 Jan-Sept 2021
Palm Kernel Oil 16,546 21,270 21,440 16,434 17,952 17,374
Coconut Oil 1,539 2,302 4,449 2,500 5,777 1,300
             
Total MT 18,085 23,572 25,889 18,934 23,729 18,674

Source: Trade Statistics

Egypt counts on imports of certain oils and fats products to meet the local demand for confectionery, and bakery industries.  On average, Egypt imports around 47,000 tonnes of oils and fats for this market segment. Imports from Malaysia contribute to 65% in 2020 while increasing to 85% in Jan-Sept 2021.

Egypt Import of Finished oils and Fats Products (2016-2021)
Category 1: H.S.Code 1516 (Vegetable fats and oils and their fractions, partly or wholly hydrogenated)
Origin 2016 2017 2018 2019 2020 Jan-Sept 2021
Malaysia 34,16519,11226,83532,01527,68829,156
Indonesia17,01411,47211,74311,1369,4243,316
Others4,6062,6821,6262,3393,1631,013
TotalMTCategory155,78433,26640,20445,49140,27433,485
MPOshare615767706987
Category 2: H.S.Code 1517 (Vegetable Origin Edible mixtures or preparations of vegetable fats or vegetable oils or fractions of different vegetables)
Origin 2016 2017 2018 2019 2020 Jan-Sept 2021
Malaysia 949 555 907 777 1,037 345
Germany 546 659 632 1,120 1,010 471
Ukraine 1,249 261 1,802 1,151 417 257
Australia 474 537 239 247 209
Belgium 461 1,004 900 697 151 8
Indonesia 143 62 2 138 108
Others 1,186 978 924 1,515 1,771 334
Total MT Category 2 5,007 4,057 5,406 5,645 4,702 1,415
MPO share 19 14 17 14 22 24
Grand Total MT 60,792 37,323 45,610 51,136 44,976 34,900
Total MPO Share 57.76 53 61 64 64 85

Source: Customs Authority

Malaysian Palm Oil Performance

Malaysian palm oil exports of palm kernel products are on an upward trend since 2017. In 2020, exports amount to 35,016 tonnes, an increase of 22% compared to 2019. The highest product was HRBD Palm kernel stearin, accounting for 46% of the total amount, followed by H palm kernel olein 12%, H palm kernel stearin 10%, RBD palm kernel olein 9% however significantly dropped as compared to 2019.

Exports in Jan-Sept 2021 were recorded at 26,756 tonnes, HRBD Palm kernel stearin is still the highest product with a share of 56% of the total volume during this period. It is perceived that Malaysia started to export some quantities of mass balanced oil, this is important to exploit the growing demand for such products in Egypt.

Malaysia Exports of Palm Kernel
Product 2016 2017 2018 2019 2020 2021 Jan-Sept
H PALM KERNEL OIL  517  762  1,104  84  326  538
H PALM KERNEL OLEIN  4,254  1,845  3,789  2,478  4,311  2,289
H PALM KERNEL STEARIN  796  623  2,163  1,120  3,648  2,439
HRBD PALM KERNEL OIL  2,914  705  212  585  1,255  491
HRBD PALM KERNEL OLEIN  4,892  1,767  884  6,059  3,158  2,109
HRBD PALM KERNEL STEARIN  7,480  7,329  7,684  15,513  16,233  15,105
RBD KERNEL OLEIN  10,112  7,439  4,529  817  2,448  365
RBD KERNEL STEARIN  2,503  47  3,293  600  800  –  
RBD PALM KERNEL OIL  1,165  2,264  3,004  1,346  2,836  3,103
RBDPKO FOR RSPO MASS BALANCE          303  147
RBDPKL FOR RSPO MASS BALANCE          1,433  –  
RBDPKL FOR RSPO FROM SEGREGATED          306  169
Total MT  34,631  22,780  26,662  28,601  35,016  26,756

Source: MPOB

In 2020, Malaysia exported around 9,213 tonnes of selected finished products which are mainly used in confectionery and bakery manufacturing. This represents an increase of 49% compared to 2019. Vegetable fats, CBS, shortening, and fat blends are the highest products in this category with the share of 39%, 20%, 13%, and 12.5% respectively.

Exports of the selected products were recorded at 6,298 tonnes in Jan-Sept 2021 compared to 7,522 tonnes same period last year. Vegetable fats are the highest with the share of 40% followed by CBS at 25%.

Malaysia Exports of Selected Finished Products  
Product 2016 2017 2018 2019 2020 Jan-Sept 2021
SHORTENING               13,614                 5,763                 2,265         1,245            1,176                  923
COCOA BUTTER SUBSTITUTE                 1,069                    322                 3,779            773            1,850               1,578
VEG. FAT                    713                    746                 2,732         2,964            3,624               2,571
PALM FAT                    576                    306                      –              168              386                  183
COCOA BUTTER REPLACER                    297                      43                    670            130                43                    43
FAT BLEND                    291                      67                      32            111            1,156                  508
COCOA BUTTER EQUIVALENT                    232                      45                    845            754              958                  492
MARGARINE                      36                      36                      45              40                20                    –  
 Total MT               16,827                 7,328               10,369         6,184            9,213               6,298

Source: MPOB

Conclusion

Confectionery and Bakery is a growing market in Egypt. The demand for oils and fats is mainly assured through importation. Malaysia has a significant market share in the total oils and fats imported by the country to meet this demand. Multinational manufacturers operating in Egypt are demanding mass balanced oil, this demand is increasing to fulfill requirements made by their international customers. Malaysian palm oil players need to capitalize on this opportunity in the Egyptian Market especially that Malaysia possesses a competitive edge in this area.

Prepared by Lamyaa El Enany and Fatimah Zaharah

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

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