Date: 19-5-2020 Issue: 12

Views on The Crisis

Grocery Retail Trade

Introduction
While the whole world shares the broad outlines of
the economic and social repercussions of the
Coronavirus (COVID-19), which are unprecedented
in its recent history, the implications thereof for each
country are linked to the nature of each country’s
economic system, its ability to withstand the entailed
repercussions and the speed of its recovery.
In light of the need to study the sectoral implications
of these repercussions in order to address the crisis
properly, the Egyptian Center for Economic Studies
(ECES), in its initiative, is producing a set of daily
reports entitled "Views on Crisis". The reports aim to
1
analyze the implications of the coronavirus crisis for
Egypt in relation to a number of vital production and
service sectors and to key macroeconomic
variables. This ECES initiative comes from the belief
that the current critical conditions require directing
state’s efforts towards achieving two main goals:
providing a decent life for Egyptians during the crisis
and in the recovery phase, preserving the existing
investments-especially domestic investments- and
helping to overcome the crisis and prepare for a
rapid launch with the gradual decline of the crisis and
recovery of the global economy.
The methodology used in these reports is based on
an analysis of the supply and demand shocks
associated with the crisis cycle in its various stages.
Given the lack of detailed data on the sectoral impact
of the crisis, the sectoral analysis is based on logical
assumptions related to the nature of each sector and
the degree of sector vulnerability to previous severe
crises that were certainly less severe than the
current crisis and different in nature. However, it is a
starting point for the urgently required scientific
diligence at this stage.

“This pandemic is not a war. Nations

do not oppose other nations nor
soldiers against other soldiers. It is a
test of our humanity. This crisis brings
out the best and the worst of people.
Let us show others what is best in us.”
Frank-Walter Steinmeier
Germany’s President

2
First: Brief description of the subject of the report
- Internal trade is considered one of the main pillars of economic
and social development in Egypt, as it is the second source of
employment after agriculture accounting for 13 percent of total
employment, followed by manufacturing (12.5 percent), not
including logistical support services such as storage and
transportation, which if added, the internal trade sector will
become the top employer with 20.7 percent.1
- The sector has witnessed huge growth in recent years, with
annual investments increasing 21 times between 2002 and 2017
from only EGP 791 million to EGP 16.661 billion. Annual
investments in the supporting logistics sector such as storage
and transport doubled five times in the same period from EGP
9.801 billion to EGP 51.115 billion, according to central bank
data.
- The retail sector is one of the most important sectors of internal
trade, as it is directly linked to citizens and their consumption. Its
sales during 2016 alone reached EGP 1383.3 billion compared
to EGP 8.6 billion in 2009. In other words, the value of sales
increased more than 161 times during that period. It is one of the
most labor-intensive sectors, as the number of employees
registered about four million workers in 2016, according to the
latest data of the Central Agency for Public Mobilization and
Statistics (CAPMAS).
- The retail food and beverage sector (grocery trade) is the
second in size in the retail sector, following the automotive
sector (cars and others), as Egypt has the largest consumer
market among Arab countries. Some analysts estimated the size
of that sector at about $15 billion in 20182 - a growth rate of more
than 71 percent compared to 2011. The number of employed

1
Source: Federation of Chambers of Commerce.
2
Source: US Embassy Cairo Agricultural Affairs Office, Food Retail Trade Report 2019.

3
 reached about 1,442,939, or 36 percent of total employment in
the retail sector, according to CAPMAS data.3
- Aside from the Coronavirus crisis, most estimates indicated that
the market would grow over the coming years at rates ranging
from 15 percent to 20 percent as a result of the continuous
increase in population, especially the youth, which reflects in the
continuous increase in the demand for food.4
- The relative importance of online retail platforms has notably
increased in recent years, with the volume of online food and
beverage trade reaching about 5.18 percent of total online retail
trade, and about 0.08 of total retail trade in Egypt in of 2018.5
- Grocery products are divided into local and imported products.
The value of imported products was estimated at about $1.8
billion in the first half of 2018, and was extensively found in
hypermarkets and supermarkets. Table 1 shows the most
important of these products as well as their import shares in total
imports of grocery products according to the latest available data
in the first half of 2018.
Table 1. The most important imported grocery products
Imports (million The share of products in
The imported product dollars) during the total Egyptian imports
first half of 2018 during the period
Frozen meat and liver 652.5 36%
Dairy, cheese and
179.8 10%
derivatives
Red tea 152 8%
Apples and food
142.4 8%
preparations
Butter, fats and oils 132.5 7%
Source: The Egyptian Center for Economic Studies, based on data from the report of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Report, 2019.

3
Central Agency for Public Mobilization and Statistics, wholesale and retail bulletin for the private sector, 2016. We would like
to point out that these figures represent the numbers of employed in each of the specialized food stores, as well as the non-
specialized stores where food and beverages are dominant commodities.
* It should be noted here that, according to CAPMAS estimates, the volume of food sales in specialized and non-specialized
stores was estimated at EGP 351 billion pounds in 2016, at 25 percent of total retail trade sales as a whole. This difference in
determining the size of the market is likely related to the informal sector.
4
Source: Retail foods, FAS Cairo office research, 2019
5
Online grocery retail in MENA, Wamda research lab, 2019.

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 1. Brazil accounts for the largest share, followed by the United
States, New Zealand, Kenya, and India, as shown in Figure 1
Figure 1. Countries share of Egyptian imports of
consumption goods, %

27%

39%

Brazil
USA
New Zealand 11%
Kenya
India
others 6% 9%
8%
Source: US Embassy Cairo Agricultural Affairs Office, Food Retail Trade Report, 2019.

- The sales volume of goods is affected by their nature, whether

local or imported, as well as by factors pertaining to individuals’
income, purchasing power, consumption patterns, and
geographical location. High-income groups control most of the
imported products market, especially recreational goods.
Presenting these factors helps shed light on the nature of the
market, its dynamics, its response and its interaction with
economic crises.
- The volume of commodity sales is also affected by the
consumption pattern of citizens. The 2017 income and
expenditure survey data showed a decline in the annual
consumption of households of the higher-priced food items
despite their importance such as meat, fish, dairy and eggs,
compared to spending in 2015. However, spending on bread,
grains and vegetables increased due to higher prices resulting
from the liberalization of the exchange rate in 2016. The rural
areas had the largest share of that consumption decline due to
the higher proportions of limited income groups. Table No. 2
shows the annual consumption rates of households for some

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 commodities and the rate of change during the period (2015-
2017).

Table 2. Relative distribution of annual household

consumption of food and beverages, as well as the rate of
change over the period (2015-2017).

Annual Annual
Percentage
consumption consumption
Commodity of change
shares (2015) shares (2017-2018)
(2015-2017)
% %
Meat and poultry 29.8 27.8 -2% ↓
Greens 13.9 14.2 0.3% ↑
Grains and bread 11.2 13 1.8% ↑
Dairy, cheese and
13.7 12.5 -1.2% ↓
eggs
Oils and fats 7.9 8.8 0.9% ↑
Fish 6.7 6.6 -0.1% ↓
Fruit 6.4 5.7 -0.7% ↓
Sugar and sugary
4.7 5.5 0.8% ↑
foods
Non-alcoholic
3.7 3.9 0.2% ↑
drinks
Unclassified food
2 2
products
Source: The Egyptian Center for Economic Studies (ECES) based on data from the Income and
Expenditure Survey (2017-2018).

- The grocery retail market in Egypt is divided into four main

types:
1- Hypermarkets
2- Supermarkets and mini markets
3- Convenience stores
4- Traditional grocery stores: Small stores located in most
parts of the country and kiosks (both formal and informal)
Regarding the characteristics of each type, Table 3 shows
statistics for each of the four types in 2017 (most recent detailed
data), as well as the characteristics of each:
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 Table 3. Statistics and features of all grocery outlets
Convenience
stores (at gas Traditional
Hypermarkets Supermarkets
stations and grocery stores
highways)
115041
in addition to
18,000 rationed
253 grocery stores
Number of
37 1215 in 2020 and consumer
outlets (2017)
3597 cooperatives
affiliated with of
the Ministry of
Supply
Percentage of
outlets for each
type of the total
0.03% 1.02% 0.21% 96.71%
number of
grocery outlets
in Egypt6
Increase ↑ Increase ↑ Increase ↑
Outlet growth
By 6% By 15% 10% Decline↓
rate of each type
Average Significant Significant By 1%
(2016-2017)
growth rate growth rate growth rate
Percentage of
sales of each
type from total 25% 75%
grocery retail
sales in 2017
The real value of
average sales
per unit of each 122.7 18.5 4.7 0.58
type (million
pounds) in 2017
High except for
groceries and
Closing rate Weak Weak Moderate
consumer
cooperatives
Outlet size Relatively large Average Relatively small

6
Source: Retail foods, FAS Cairo office research ,2017, p.8.

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 - Concentrated
in urban areas
- Relatively far - Concentrated - Concentrated - Concentrated
from in urban areas in urban areas in urban and
Concentration population - Concentrated - Concentrated rural areas
areas densities due in densely in gas stations in - Prevalent
to their large populated and highway most streets
size and need areas rest-houses and roads
to provide
parking spaces
Regular, semi-
Regular daily
monthly
(to meet daily
(many families
Regular daily, needs)
Purchase cycle go to the hyper
weekly, Irregular except for the
(for consumers) markets
monthly rationed
periodically to
groceries
buy enough for
(monthly)
storage)
Storage Strong Medium Weak Weak
capacity
Most of them
are through
Most products wholesalers
Some products are sourced
are sourced except for ration
from the point of origin as
from the point groceries from
Supply chains factories, some are from
of origin wholesale and
wholesalers or goods imported
(factories and public
through import companies
direct import) companies of
the Ministry of
Supply
Multiplicity of
Multiple Medium Not multiple
suppliers
Dense, highly
Weak density
diverse, with
and diversity,
Nature of the the ability to
Average density and diversity with inability to
products offered meet the
meet most
needs of most
groups
groups
Formal and
Legal form informal.
(formal, Formal Formal Formal Informal is in
informal) popular and
weekly markets,

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 road kiosks and
inside
government
buildings
Medium- Medium- Mostly informal
Intensity of
intensity of intensity of employment,
Employment formal
formal formal and are of low
employment
employment employment intensity
Difficulty buying online
(Though there is an initiative for
The possibility
The possibility financial inclusion that includes
of buying via
Online purchase of buying 40,000 grocery stores annually,
online and app
online which the Federation of
stores
Chambers of Commerce will
start implementing)
Enabled but
Widespread
not widespread
due to the Only
due to the
proximity of widespread in
stores' Not
Delivery shops to urban areas,
distance from widespread
residential and not in rural
residential
neighborhoods areas
neighborhoods
and citizens
and citizens
Negotiating High negotiating ability - modern profitability
power and methods (rental of premium shelves, discounts Traditional
profitability for quantities, etc.) - offers from suppliers - trade methods
methods advertising campaigns
Strong -
facilities and - Weak facilities
offers in and special
commodity offers on
Strong -
.prices commodity
facilities and
Payment - prices.
Facilities offers in
facilities - Payment
commodity
through formal facilities
prices
channels through
(such as informal
banks and channels
others)
Outlet fragility Relatively Relatively
(ability to strong due to strong due to Medium
Very fragile
withstand the complexity the complexity fragility
shocks) of of

9
 administrative administrative
structures, and structures and
maintaining a maintenance of
strong stocks
inventory
- Carrefour
- Ragab's
sons
- On the run
- Kazion
- Chillout
- Fathallah
- Emirates All grocery
The most - BIM
- Carrefour Egypt stores
important - Spinneys
- Hyper One - Mobil throughout the
outlets in Egypt - Alpha
market country
Market
- Bonjours
- Saudi
- Smile
- Metro
- Kheir
Zaman
Source: The Egyptian Center for Economic Studies.

The following are important notes to the above table:

1- Traditional stores constitute the vast majority of grocery stores
in Egypt, accounting for about 98 percent of enterprises, and
about 75 percent of grocery sales in Egypt, while modern
stores account for only about 2 percent of enterprises.
However, modern stores account for 25 percent of the volume
of sales. The performance of one unit of those stores is much
greater than that of traditional store units, due to its large
storage capacity and its ability to withstand shocks in times of
crisis.
2- The linkage of modern stores to a huge value chain
contributes significantly to the upgrading of the product in
terms of quality and packaging, as well as the low price of the
commodity. It also contributes to increasing the number of
workers and suppliers in a way that exceeds traditional stores.
3- There is a relative shift in the purchase pattern of citizens from
daily purchase to weekly purchase, as hypermarket and
supermarket outlets located in commercial centers provide an
opportunity for entertainment alongside purchase, which calls

10
 for a program to support small groceries to help them align
with the new purchase pattern.
4- The informal sector accounts for a large proportion of the
grocery retail sector, represented in the kiosks scattered on
the streets and street vendors, whether in the streets or inside
government buildings as well as popular and weekly markets.
The number of employed in this sector (in addition to the
construction sector) is estimated at about 30 percent of the
size of the informal labor sector in Egypt.7
5- The grocery sector and its various outlets are affected by the
logistics associated with the supply of goods to factories, the
distribution of products after their manufacture to wholesalers
and retailers, the availability of transportation and ease of
movement.
6- Supply chains are also affected by the availability of liquidity,
as all stages operate with cash. This effect was evident when
the central bank set limits for withdrawals and deposits, which
negatively affected all supply chains to small grocers.
The impact of previous crises on the grocery retail sector
The focus here is on two phases: The January 25th Revolution in
2011 and the beginning of economic reform and in the heart of it
liberalizing the exchange rate in November 2016. The choice of
each was driven by its clear impact on the grocery sector, as well
as its relation to the income of individuals, the purchasing power of
consumers, high inflation, as well as the logistics associated with
obtaining food.

The January 25th Revolution Crisis

- In 2011, despite the sharp decline in the retail sector in
Egypt, as sales posted an estimated decline of about 47
percent, 8 the decline in grocery sector sales was less
severe than that in the retail sector as a whole, which was
7
The Egyptian Center for Economic Studies, Views on Crisis, the informal sector, dated 6/4/2020, p. 6.
8
Wholesale and retail bulletins for 2011, 2010, Central Agency for Public Mobilization and Statistics, 2012.

11
 estimated at only 4 percent in the year of the Revolution, as
shown in Figure 2. This is mainly due to the nature of the
sector, which assumes its permanent growth as it is related to
meeting the basic needs of citizens in terms of food and drink,
as well as other requirements that are indispensable.
- As for the number of employees, the retail sector has also
witnessed a decline, reaching nearly 50 percent, according to
CAPMAS data.9 Although the exact percentages of decline in
the grocery sector are unknown, they are likely lower by far than
those of the retail sector as a whole due to the predominance of
traditional outlets and the nature of commercial activity.
- The sector also experienced many logistical problems during
that crisis due to the imposition of curfews and lack of liquidity in
the Revolution year.
Figure 2. Development of the real value of grocery trade
sales in the period 2010-2013 in billion pounds after
excluding the effect of inflation (base year 2010)
154
152
150
EGP BN

148
146
144
142
140
2010 2011 2012 2013

Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2015.

- The impact of the crisis on the grocery sector can be analyzed

in two phases: The crisis phase itself and the recovery
phase.
First, the year of the crisis itself, 2011
- By calculating the real value of grocery sales as a whole, we
notice that sales fell sharply during 2011 by 4 percent, as real
sales value reached about EGP 146 billion, compared to EGP
9
Ibid.

12
 152 billion in 2010, as shown in Figure 2. We notice that the
largest percentages of decline are mainly due to the shortage of
imported high-priced commodities and not due to lower sales
quantity.
- Despite that general decline, we find a clear difference between
the different grocery outlets in terms of the nature of that decline,
and the percentages of each outlet, as shown in Figure 3.
- The actual sales of traditional stores, supermarkets, and
convenience stores in 2011 decreased by 6%, 2%, and 6%,
respectively, compared to 2010, as illustrated in Figure 4. It is
noted that the largest percentages of decline were in the share
of traditional outlets and convenience stores due to their weak
storage capacity and services provided to citizens, and being
impacted by curfews, as well as the shortage of imported high-
priced goods.
- The situation is significantly different in the case of
hypermarkets. The real sales of these outlets achieved a high
growth rate of 31 percent in 2011, as shown in Figure 4. This is
largely attributed to increased spending on food and drink for the
purpose of storage in times of crisis, in addition to factors related
to economies of scale and the consequent decrease in costs and
prices as well as increased storage capacity. However, the
impact of hypermarket growth on the growth trends of the
grocery sector as a whole has been limited due to weak
sales relative to the sector's total sales, which is still
dominated by traditional stores.

13
Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2015.

Figure 4. Real growth rate of sales of each outlet during the period 2011-2013
(%)
traditional stores -2%-2% -6%

supermarkets -2% 7% 3%

hypermarkets -3% 31% 12%

convenience stores 0% -6% 3%

-20% -10% 0% 10% 20% 30% 40% 50%

2011 2012 2013

Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2015.

Second, the recovery phase

- As for the recovery phase that followed the year of the
Revolution, we notice a relatively slow recovery of the grocery
sector compared to the recovery of the retail sector as a whole,
whether in terms of sales or the return of workers, as shown in
Figures 5 and 6, respectively. This means that the difference
between the retail sector as a whole and the grocery sector was
not limited to the year of the crisis, but also extended to the
recovery phase. The retail sector witnessed a stronger decline
in sales but relatively faster recovery, while grocery sector
witnessed a lower decline in sales but slower recovery.

14
 Source: Prepared by the Egyptian Center for Economic Studies based on data from the Central
Agency for Public Mobilization and Statistics, wholesale and retail bulletin for the year 2013.

- Real hypermarket sales growth rates continued to rise,

achieving a growth rate of 12 percent in 2012, albeit lower than
the rate of growth in 2011.
- Traditional stores continued to post losses, but with decreasing
rates, from 6- percent in 2011 to 2- percent in 2012, mainly due
to their weak ability to withstand shocks, limited capital and their
dependence on daily income. In addition, most of these stores
are located in remote and less developed neighborhoods in the
rural and urban areas—whose demand recovers at slow rates
because their incomes are the most affected compared to all
other classes during crises.
- As for the supermarket outlets, they witnessed a faster recovery
than others, as their sales increased during the year 2012 to
reach EGP 24.6 billion, with a growth rate of 7 percent compared
to 2011, as shown in Figure 4. Perhaps the reason for this is its
spread during that period and their increasing number, which
made it a more attractive alternative, given its presence near
population density in all neighborhoods of major cities on the one
hand and providing the same service offered by the hyper with
similar quality on the other hand.

15
US Dollar shortage crisis and exchange rate liberalization
2016
- With the beginning of economic reforms, preceded by the US
dollar shortage crisis, and the noticeable increase in inflation
rates, the grocery sector experienced a serious problem, as the
rise in prices coincided with the sharp decline in the value of
individuals’ savings and incomes, especially the middle and low-
income groups. This was translated into a decrease in the
sector's sales by up to 23 percent in 2017. Figure 7 shows the
evolution of the real value of sales from 2014 to 2018 in Egyptian
pound:
Figure 7. Evolution of the real value of grocery
sales after excluding the effect of inflation (in
million pounds) - base year = 2010
160
140
120
million EGP

100
80
60
40
20
0
2012 2013 2014 2015 2016 2017 2018

Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2017.10

- The above figure shows that the decline began in 2016. Perhaps
one of the factors associated with it is the decision of the Minister
of Trade and Industry to register companies eligible for exporting
to Egypt, which limited high-price imports. But that effect did not
continue for long after registering the main companies and
commodities started to flow again. This was evident on the
hypermarkets, supermarkets and convenience stores, but had
little effect on traditional grocery stores.

10
The value of sales for 2018 was obtained from the report issued in June 2019 by the same authority, in which the retail volume
was estimated at about $16 billion.

16
- Despite the general decline in the grocery sector as a whole, we
notice differences between the four outlets, whether in terms of
their numbers, sales, or in the recovery phase from the crisis
shocks.
- The stage that preceded the crisis witnessed a boom in the
number of supermarket and hypermarket outlets in Egypt as
shown in Figure 8, as they increased by up to 25 percent and 13
percent respectively in 2016. In fact, that period was associated
with a large expansion network and an increase of investments
in the sector as a result of the entry of various commercial chains
to the Egyptian market, such as Kazion and BIM. However,
these percentages did not last long, as the growth rates in the
number of those outlets declined to 15 percent in the case of
supermarkets and 6 percent in the case of hypermarkets in
2017.
- Traditional stores and convenience stores did not witness a
major change before the crisis, as their growth rates remained
almost constant. But what is noticeable is that traditional stores
achieved negative growth rates after liberalizing the exchange
rate, as the growth rate of their number reached -1 percent,
which indicates the closure of many of these small outlets due
to their inability to withstand crisis shocks.
Figure 8. The rate of change in the number of retail grocery outlets during
the period (2014-2017)
25%

15%
13%
11% 10% 10%
7% 8% 9%
7% 6%
3%
1% 1% 2%

2014 2015 2016 2017 -1%

hypermarket supermarket convenience stores Traditional stores

Source: The Egyptian Center for Economic Studies calculations based on data of the
Agricultural Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2017.

17
- As for the volume of sales, hypermarkets have witnessed a
noticeable decline in their sales since 2016 by -2%, 11 which
continued until reaching -19% in 2017.
- With regard to supermarket outlets, the increase in their number
translated into a noticeable increase in the volume of sales in
the period before the crisis, achieving a growth rate of 8 percent
in 2016. They were not surpassed in performance except by
convenience stores. But these rates have declined significantly
during 2017, as they decreased by -21 percent compared to
2016.
- Meanwhile, traditional stores continued to decline in
performance both before and after the crisis, although the impact
of the crisis on them was more detrimental. They posted a real
sales decline of 23 percent during 2017 compared to the
previous year. Tables 5 and 6 show the real sales per outlet, and
average real value of sales per unit of the total sales of its outlet,
which changed in the same direction but with higher proportions
consistent with the number of those outlets.

Table 5. Real values of grocery outlet sales during 2014-2017

Real
sales
value
Year 2014 2015 2016 2017
growth
rate in
2017
Real sales of hypermarkets in
4.6 5.7 5.6 4.5 -19%
billion pounds
Real sales of supermarkets in
27.4 26.5 28.6 22.5 -21%
billion pounds
Real sales of convenience stores
1.0 1.1 1.2 1.2 -4%
in billions of pounds
Real sales of traditional stores in
110.1 91.5 88.7 67.8 -23%
billion pounds
Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2017.

11
Compared to 2015.

18
 Table 6. Average real sales per outlet unit during 2014-2017
The percentage
change in
Year 2014 2015 2016 2017
average sales per
unit during 2017
Average real sales per
unit of hypermarkets in 158 185 160 123 -23%
billion pounds
Average real sales per
unit of supermarkets in 36 31 27 19 -32%
billion pounds
Average real sales per
unit of convenience 5 5 5 5 -13%
stores in billion pounds
Average real sales per
unit of traditional 1 1 1 1 -23%
stores in billion pounds
Source: Egyptian Center for Economic Studies calculations based on data of the Agricultural
Affairs Office at the American Embassy in Cairo, Food Retail Trade Report 2017.

- As for the recovery phase, we do not have detailed data for that
period, although recovery is expected to be relatively slower
than in the 2011 case, given that the dollar exchange rate did
not change much until late 2019, which may have led to some
recovery.
- The sector was not exposed to logistical problems during this
crisis.

Second: Demand and supply shocks in the context of the

crisis cycle
The expected impact on the demand and supply sides depends
on the relevant stage in the crisis cycle. We can trace five stages
of the crisis cycle, as shown in the figure below:

19
Source: Egyptian Center for Economic Studies

Below is a brief description of each stage:

The first stage: Emergence of the virus

The crisis began and aggravated in China only. The rest of the
world, including Arab and European countries, were not yet
affected by the crisis.

The second stage: Beginning of proliferation

The spread of the virus globally. Arab countries began to be
affected at the end of February and hence initiated
precautionary measures to prevent the spread of the virus.
European countries are greatly affected.

The third stage: Aggravation of the problem

The situation in the world has worsened, tougher measures in
the Arab countries, especially in Saudi Arabia and the
European countries, a major worsening of the crisis in Italy,
beginning of the virus’s receding in China, and the beginning
of its spread in the US.

Fourth stage: Crisis recedes

The beginning of recovery from the virus globally, starting from
China, which is expected to be followed by European
countries, and finally, the Arab countries and the US.

20
 Fifth stage: Recovery
Gradual recovery for all countries, including Arab countries,
although the latter's recovery is expected to be delayed due
to being strongly impacted by the global economy and their
weak impact on it.

As for the supply and demand shocks, they are defined as

follows:
- Demand shock: Sudden and large changes in the demand for
food products sold in various outlets as a result of the crisis.
- Supply shock: The inability of various sales outlets to adapt to
developments in demand, or other problems that affect their
ability to supply products as a result of the crisis and the
precautionary measures associated with it.
Different scenarios will be analyzed by examining the change in
the level of sales, the number of employees, the number of outlets,
and the impact of the logistics system.
According to the following concepts and assumptions:
1- The magnitude of the demand shock varies according to the
stages of the crisis, the type of outlet, and its geographical
location.
2- Precautionary measures and the associated closure of
restaurants will unexpectedly lead to an increase in the
demand for basic products sold in outlets.
3- With the issuance of the curfew decision, all citizens rushed to
buying and storing goods, which reflected noticeably on the
sales volume, and also in a decrease of sales during the
“Welcome Ramadan Initiative” compared to the previous year
despite the discounts granted, which ranged between 15
percent and 30 percent due to citizens resorting to hoarding
in the beginning of the crisis.
4- The ability to provide delivery services and allow payment by
bank cards represents a comparative advantage for sales
outlets that provide these services.
21
 5- The precautionary measures impact the arrival time of citizens
to the outlets, and the ability of the outlets to provide the
goods.
6- The offered products relate to the industrial production value
chain for each of them, and therefore any interruption in
industrial production will affect the sales of the various outlets.
7- All factories have a stock of final products in preparation for
variations in demand, but this stock is usually for a limited
time.
8- The sales activity is affected by decisions that are not related
to the sector, such as decisions regarding withdrawals and
deposits issued by the Central Bank.
9- The quantitative assessment of the percentage of change in
sales and employment is estimated according to three sources:
a. Limited survey of a number of supermarkets, hypermarkets
and traditional stores.12
b. The percentage of change during the aforementioned crisis
periods.
c. The average percentage of decline in the volume of fast
food restaurant sales.13

Two remarks should be noted here before starting the crisis

analysis:
First: Many of the hypermarket and supermarket outlets resorted
to manufacturing recently and provided many ready-made
meals, which made them an alternative to fast food restaurants
during the crisis period.
Second: Most of the hypermarket outlets are located in malls,
which affected their sales activity as a result of precautionary
decisions to close the malls.

12
These percentages were obtained from a survey conducted by the Egyptian Center for Economic Studies on a limited number
of different outlets in Cairo and Alexandria.
13
These percentages were obtained from a video recording of the Center for International Private Enterprise (CIPE) on April 30,
2020.

22
 The following table presents potential scenarios for the crisis
impact on the sector according to the above-mentioned crisis
cycle and in light of the assumptions made:
Supply and/or
Stage Analysis Impact
demand shock
1- There are no This is due to the There is no effect
Emergence shocks to emergence of the due to the fact that
of the virus most grocery virus in this period supply and demand
(December stores either in China only. have not changed.
2019 to in demand or Despite the large
January supply volume of Egyptian
2020) imports from China,
most of the food
products are
sourced from other
countries such as
Brazil, US, New
Zealand and
others.
2-The - Very limited - A limited shock to A slight increase in
beginning shock in the demand the volume of
of demand and appeared at the hypermarket and
proliferation supply end of February, supermarket sales,
(February as some citizens but no noticeable
through began to worry change in anything
mid-March about the virus in else.
2020) Egypt and this
was translated into
a desire for
hoarding. But the
real pressure did
not come about
until mid-March
with the beginning
of the
precautionary
measures.
- As for the supply
shock, the
increase in the
23
 volume of demand
has been
absorbed by
various sales
outlets, but the
shock has
appeared in some
complementary
non-food products
that are offered in
large outlets such
as hypermarkets
and supermarkets.
3- This stage is The first period The first period
Aggravation divided into The beginning of - Hypermarket and
of the two periods: the crisis, supermarket outlets
problem especially in the witnessed an
(From mid- First period: first three weeks, unprecedented
March to starts from created a state of increase in the
mid-May mid-March to anxiety and fear volume of their daily
2020) 24 April among citizens, sales during the first
(beginning of especially with the three weeks,
Ramadan) beginning of reaching from 40%
- This period precautionary to 100% according
witnessed a measures and the to the nature of the
severe shock imposition of outlet, its quality,
in demand, curfews, which led the level of health
and a limited most citizens to measures, and the
supply shock purchase more ability to deliver
that basic commodities orders to homes
progressively for the purpose of faster.
increased in storage. This
difficulty as resulted in an - The period also
events unprecedented witnessed an
unfolded demand for grocery increase in the
outlets of all kinds, number of workers
but to varying (especially delivery
degrees, according workers), with rates
to the nature of the between 20% and
outlet and the day 40%, albeit most of
of the week. Most them are irregular
24
factory owners and temporary
resorted to workers.
intensifying work in
order to meet the - As for the traditional
increasing demand stores, their sales
during the first volume increased
period of the crisis, during that period
with the emergence by rates ranging
of gradual problems between 20% and
associated with fear 40%, though they
of health measures. did not reach the
Large transport same percentages
vehicles used in the of increase as in the
transfer of goods case of the
were not exempted supermarket and
from the decisions hypermarket, due to
of the curfew (at the the changing
beginning of the consumer habits
crisis), unevenly and their resorting
affecting outlets as to safer outlets in
follows: addition to their
weak storage
- Hypermarkets capacity.
and
supermarkets: - Traditional stores
Hypermarkets and were also affected
supermarkets by the decision to
contributed to cap withdrawals
increasing the and deposits issued
volume of demand by the Central
and the influx of Bank, which had a
citizens due to the negative impact
availability of added to the
products and their problems of limited
relatively low potentials.
prices, and
availability of - We note in general
parking spaces, the increase in the
achievement of volume of sales,
social distancing, especially
as well as the deliveries, on
25
 ease of delivery Fridays and
and use of bank Saturdays, due to
cards. Sales the presence of
increased most citizens in
unprecedentedly, their homes.
especially for
basic commodities - The abolition of
of rice, pasta, popular markets
sugar, fatty oils, also increased
ghee and flour, in unemployment and
addition to the difficulty of life
detergents and for low-income
disinfectants. people, especially in
rural areas.
We note that the
largest - As for the fourth
percentages of the week, the
increase were in percentages
the case of decreased between
supermarket 20% and 60% as a
outlets due to their result of most
proximity to citizens being
citizens and the satisfied with what
speed of their they stored, as well
delivery of orders, as feeling reassured
unlike about the
hypermarkets availability of goods
whose outlets are at the time of the
located inside the crisis.
malls (which have
been closed) and - As for the factories,
are relatively far they resorted to
from residential increasing the
areas. number of working
hours from 12 hours
- Traditional to 24 hours to
stores: Traditional increase production
stores also and dividing
witnessed an workers over
increase in the different tasks
volume of
26
 demand, - A decline was noted
especially in the in the supply of
areas where imported products
supermarket sourced from
outlets do not European countries
exist, although and America, where
that increase was the virus has spread
less compared to significantly
supermarkets and
hypermarkets

While the decline

was higher in rural
areas, where most
of the inhabitants
depend on
domestic stocks of
agricultural crops
and the basic
commodities they
obtain using the
ration cards.

- Convenience
stores:
Convenience
stores have
witnessed a huge
decrease in the
volume of demand
as a result of the
application of
precautionary
measures (as they
mainly depend on
the movement of
cars and
pedestrians).

We note that the

previous effect
27
 applies to the first
three weeks, while
the fourth week
witnessed lower
percentages than
those achieved in
the previous
weeks.
The second The second The second period:
period: period - Supermarkets and
Starts from The second period hypermarkets have
April 24 and witnessed a relative witnessed an
continued to decline in the increase in the
mid-May volume of sales volume of sales by
compared to the rates ranging
This period first period. Despite between 20% and
witnessed the the advent of 60%. However, this
persistence of Ramadan, during increase was lower
demand and which outlets compared to the
supply experience a large previous period,
shocks, increase in sales, a and to the advent of
though less decrease in the the month of
severely volume of sales Ramadan in the
was observed past years.
compared to
previous years - The number of
(except for a few). employed did not
This could be witness an
ascribed to the end increase, though, as
of the state of most of the outlets
extreme fear and were satisfied with
anxiety that afflicted those appointed
many at the during the first
beginning of the period.
crisis and which
already started to - As for traditional
decline since the stores, they have
last week of the first returned to their
period, in addition normal levels, with
to the decline in the the beginning of a
storage capacity of
28
 citizens, the gradual decrease in
increase in the the volume of sales.
unemployment
rates, the decrease
in income levels,
and the decision to
cancel Ramadan
charity banquets.
4- The Supply and Perhaps this stage
crisis demand of the crisis easing
recedes shocks during is the most
(Mid-May- this period are important stage for
August related to the the grocery sector.
2020) persistence of A rapid recovery or
the deterioration might
precautionary occur subject
measures and mainly to traditional
the periods of outlets, which
curfew constitute more
than 70% of the
sector’s sales
volume, and
accordingly there
are more than one
scenario:

- The first In the first scenario:

scenario: It is the - It is expected that
optimistic scenario normal growth rates
in which the will return, with the
outbreak is hypermarkets and
expected to supermarkets
subside, and the reaching rates
precautionary ranging between
measures will end 7% and 15%
at the end of May annually
(as indicated by - Traditional stores
some officials). will gradually start
to recover
It is expected that - The volume of sales
the growth rates of of convenience
29
 the sector will stores will increase
return to their significantly due to
normal of the the end of the
previous years. curfew and increase
in car traffic and
It is also expected pedestrians
that the additional
employment that
took place in the
first period of the
crisis will gradually
be eliminated

- The second In the second

scenario: It is the scenario:
pessimistic • Hyper and
scenario in which supermarket sales
the large are expected to
increases in increase at the same
infections during average rates of
the second half of Ramadan, which
Ramadan are range from 20% to
expected to lead 40%.
to the continuation • As for traditional
of the stores, they will
precautionary resort to closure,
measures. achieving an
estimated decrease
In this case, the of -6% annually.
growth rates
associated with
the month of
Ramadan are
likely to continue,
and an increase in
the sales volume
will occur again
due to the
depletion of the
stocks stored by
most households.
30
 - As for traditional
stores, the
continuity of the
crisis for more
than 3 months
exposes these
outlets to severe
losses not only in
the volume of their
sales but also in
the continuity of
investment therein
as a result of the
resort of many of
their owners to
closures.

- As for the
convenience
stores, a decrease
in the volume of
sales is also
expected, but
investments
therein will not be
affected due to
being connected
to gas stations
and car traffic.
5. The supply - Continuity of the In the case of the
Recovery and demand optimistic optimistic scenario:
(As of shocks here scenario means Annual growth rates
September are linked to the return to a return to normal as in
2020) the previous normal lifestyle the previous stage
stage and thus a return percentages.
scenarios to normal rates.

- As for the In the case of the

pessimistic pessimistic
scenario, it is scenario:
31
 expected that the A sharp decrease in
number of the volume of sales,
problems exit of investments,
associated with and the growth rates
traditional stores of the sales of the
will increase, and grocery sector fall to
that these less than -20%,
problems may similar to the
extend to some exchange rate
supermarket liberalization period.
outlets, as a result Also, a closure of
of increased many of stores is
obligations in light expected, with their
of declining return to operation
income levels and becoming very
increasing difficult.
unemployment.

Third: Interventions required to mitigate the effects of the

crisis
1- Strict control over all outlets to counter any monopolistic
practices, or attempts to hide commodities, while adopting
legislation related to health procedures, and ensuring health
and safety standards.
2- Encouraging outlets to adopt health and safety procedures
and treating them as permanent with a future return rather
than merely an increase in cost through sterilization gates,
purification of shopping carts, obliging employees to wear
masks and gloves, and setting a specific system to achieve
social distancing between people and avoid crowding as
much as possible. The Egyptian Center for Public Opinion
Research (Baseera) conducted a survey inside 25 branches
of large and medium stores to measure the extent of following
the proper health procedures and the extent of disinfection
and sterilization of the shopping carts. The result was 92
percent of carts were not disinfected.

32
 3- Strengthening the e-commerce system to increase online
purchase.
4- Continuous coordination between the chambers of
commerce, sales outlets and the Ministry of Interior, and
implementing the special decisions regarding exempting
grocery outlet labor from curfew decisions, as many of those
workers resort to staying overnight in workplaces until the
curfew ends.
5- Establishing a branch of the crisis management committee to
follow up on the inventory status in each governorate and
every sub-region, so that the surplus from the strategic stock
is directed from one governorate to another or from one region
to another in the event of any deficit
6- Providing the necessary support to owners of small grocery
stores especially in the rural areas, and enabling them to get
the 500 pound grants, or providing facilities and exemptions
that enable them to increase their sales and restore their
growth rates.
7- Encouraging and assisting civil society organizations and
societies to provide basic commodities to limited income
citizens, activating supply chains and creating economic
activity. This was already done by some voluntary
associations, as amounts of money were transferred to small
grocery stores in villages and neighborhoods instead of
buying and delivering goods to the citizen directly, so that the
citizen gets the support provided, while grocery store owners
also benefit.

Fourth: Institutional weaknesses revealed by the crisis

1. The absence of accurate databases on retail outlets in Egypt
and their distribution in the rural and urban areas. Such
databases can be used to determine the required assistance or

33
 intervention, especially since many workers in that sector are
under the umbrella of informal employment.
2. Weak percentage of organized retail trade in food. There is
a need to expand it due to its association with a huge productive
value chain, which guarantees more efficient quality of the
product and packaging methods.
3. Weak system of communications and information
technology and e-commerce, as well as lack of platforms for
direct communication between supply chains and outlets.

34