CAIRO: Cilantro coffee shops have become a fixture of the Egyptian market since the chain first opened in 2000. With dozens of outlets, it is one of the leading coffeehouse chains in Egypt – but its parent company, Delicious Inc., is not satisfied with simply building its coffeehouse business locally.
In recent years, Cilantro has expanded onto the international scene, and Delicious is in the process of branching into new lines of business at home, said the company’s General Manager Nadine Beshir.
In less than a decade, Cilantro has managed to build its business in Egypt from one location in Zamalek into a chain of over 60 outlets, with plans to open a total of seven or eight outlets this year, according to Beshir.
Next year, Delicious will be putting less emphasis on Cilantro’s domestic expansion since the chain, Beshir said, has achieved good coverage in the local market.
“I think we’ve reached some sort of a critical mass in Egypt, she said. “We’re slowing down our pace [regarding local expansion], but we’ll be keeping up with the pace of the market.
She expects that Delicious will open three or four Cilantro outlets in Egypt next year.
One factor playing into the decision to decrease emphasis on local expansion is the increasing difficulty of obtaining suitable retail locations at desirable prices, Beshir says. In the context of the current real estate environment, Delicious is aiming to increase the value offered by existing Cilantro locations, she explained.
Shifting focus
Due to Cilantro’s market coverage domestically, at this point opening additional Cilantro outlets in some areas might actually harm existing outlets. The company is, however, focusing on expanding the presence of two other chains with a far smaller market presence: Ben’s Cookies and The Bakery Shop.
There is already one outlet of Ben’s Cookies, at the American University in Cairo (AUC). Beshir says Delicious will open one additional outlet of the chain in Egypt this year, and will pursue further expansion in 2010.
The Bakery Shop, which has one seasonal outlet open on the North Coast, is expected to open in Zamalek in late September, and Delicious is working to open at least two additional branches in 2010.
The company also manages another chain, Mega Bites, which provides hot meals and has two locations, at Hayah International School and in a corporate setting at Smart Village. Delicious is aiming to open a third branch, Beshir said.
Beshir points to another Delicious enterprise as a departure from retailing, where the company has extensive experience. The company is now managing a food production factory in Sixth of October, which received its licenses to operate earlier this year.
In addition to using this facility to prepare food for its outlets, Delicious intends to manufacture products that will likely be sold in supermarkets.
Delicious, which already holds the concession for food management at AUC’s New Campus, is seeking to capitalize on this experience with a separate venture in property management. The company will develop a 3,000 square meter plot of land on the Ring Road that will hold a number of food vendors, Cilantro included, as well as locations for Diwan Bookstore and El Sawy Culture Wheel, Beshir said.
This property management venture is useful as Cilantro must seek alternatives regarding real estate in the current environment, she added.
Going abroad
Decreased emphasis on Cilantro’s domestic expansion will go hand in hand with greater attention to international growth. While pointing out that the chain has built up its capacity for supporting international operations, Beshir said that as Cilantro’s overseas presence grows, top-level management must be able to focus on developments abroad.
“We don’t want to be spreading ourselves too thin, she said.
In growing its international presence, Cilantro already has a substantial base to build upon. While Delicious only began contemplating Cilantro’s international expansion in late 2005, today the chain has locations in the UK, Jordan and Saudi Arabia.
In moving abroad, Cilantro has relied on different strategies for the different markets, opening stores in London without a local partner, but relying on relationships with franchisees in Jordan and Saudi Arabia. Both strategies, Beshir notes, “have their pros and cons.
Opening without a local partner means greater control in Delicious’ hands, Beshir explained, but it also requires the company to expend additional effort and resources.
By sometimes relying on franchisees, Cilantro has been able to expand more than would have been possible if the chain took on all overseas efforts on its own. “We wouldn’t [have been] able to open in three countries if we were opening ourselves [in each], she said.
Cilantro is intending to continue expansion in its three current overseas markets. In London, where the first outlet opened in June 2008, the chain now has two locations, and is aiming to open two or three next year.
“What encouraged us is our second store is even more successful than our first, Beshir said, adding that falling real estate prices in this market are also encouraging.
There are plans to open one more location next year in Jordan, where Cilantro’s sole outlet opened in May of this year. As for Saudi Arabia, where Cilantro now has one large and one small location, Delicious is working to open at least one additional outlet in 2010.
Cilantro will also be opening two locations in Bahrain, Beshir said, after the company was approached by a suitable franchisee.
Cilantro will look into more new markets abroad, and Delicious is considering expansion of the chain into Algeria, France and the United States, where Beshir said there are a number of interested franchisees.
“We’re not really sure which of several markets to choose from, but we definitely are looking, she said.
