CAIRO: Heineken’s Egypt unit said it is focusing on building its wine business, an unusual trade for the brewing giant, and wants to shift sales from tourists towards local customers in the mainly Muslim country.
Heineken bought the formerly state-owned Al Ahram Beverages Company, which dominates Egypt’s beer and wine markets, for about $300 million in 2002, giving the Dutch-based firm its second winemaking unit after Chile.
Wine brings in about a fifth of Al Ahram’s more than LE 2 billion ($350 million) of revenue a year, with much of the rest coming from its Heineken, Stella and other beer brands, the Egypt unit’s Chief Executive Officer Marc Busain told Reuters.
But only about 20 percent of wine sales come from local residents in a country where about 90 percent of the 78 million people are adherents of Islam, which prohibits drinking alcohol.
The government also puts restrictions on advertising for alcohol companies, such as limiting billboards to tourist hotspots, but does not ban alcohol in Egypt, where tourism accounts for some 11 percent of gross domestic product.
"We are happy with the tourism arrivals, but we consider that as being a bit more volatile than the domestic market," Busain said last week in comments cleared for release on Sunday.
"Luckily the country hasn’t faced any terrorist attacks or threats over the past years, but until 2006, I’d say that regularly there was one, and then there was a dip in arrivals."
In addition to beers, wines and spirits, the firm makes an alcohol-free malt drink Fayrouz which it exports to Saudi Arabia. In Egypt, its soft drinks compete with PepsiCo Inc and Coca-Cola Co.
Wine education
The firm wants to boost the local wine market, a challenge because Egyptian wines have faced widespread grumbles about quality since Al Ahram was nationalized in 1963.
Heineken installed new management in 2006, and has spent some €10 million ($13 million) on quality improvements such as new equipment over the last three to four years, Busain said. They also cut the firm’s staff by more than half.
The company has launched new wine brands, hired vinification consultants, and tried to teach the staff at restaurants, shops and bars how to store and serve wine properly, Busain said.
"We have cooled warehouses, but then you go to a retail shop and you see the wine stored in 40 or 50 degrees, in the sun. In one day, your wine is cooked," he said. "And do not underestimate the time it takes to educate people all down the chain."
Egypt’s restrictions on alcohol advertising have pushed the company to employ unusual forms of marketing, such as supplying wine for expatriates’ parties and helping pay to refurbish some of Cairo’s classic, but often musty, downtown bars.
"We can never show the product, we can never show the brand, so we tried to find other ways to bond and communicate with our consumers," Busain said. "That’s a big challenge for us. Producing alcohol in a Muslim country remains a challenge."
Taxes are also high. Al Ahram must pay a 100 percent fee on the ex-factory price of every bottle of alcohol it produces. Importing alcohol can draw taxes as high as 3,000 percent, Busain said, adding he did not see these rates changing soon.
