By Naglaa Alsoud and Sarah Ibrahim
Seclam Dairy Processing plant, affiliated to Mansour Distribution Company, is planning to invest EGP 75m to add new production lines to its factory.
“The investment process is planned to start this year, to upgrade some production lines, thus increasing the factory’s production capacity by about 84%,” said Alaa Al-Wakeel, Seclam’s General Manager.
He further noted that the new investment scheme is part of the original investment plan that was set by the company in 2011, aiming to inject a total of EGP 500m. The plan was suspended, however, due to the political unrest and the unstable circumstances that were witnessed in the country.
The company’s board of directors has however agreed on reviving a part of the plan this year.
The Seclam complex for dairy industries is located east of Alexandria, whereby it includes seven factories producing a number of dairy products, including one cheese factory, another for fresh milk production, a long-lasting milk factory, the Beity juice plant, a tea factory, a white cheese factory and a yoghurt factory.
Al-Wakeel further added that the company’s production capacity registered approximately 12,000 tonnes in the past year. The company is targeting to increase this amount in the current year.
With regards to Seclam’s exports, they have declined by 70% in the past two years, which led to decreasing the company’s production capacity, whilst flooding the local market with dairy products.
Mansour Distribution Company purchased Seclam in 1997, with the aim of decreasing the amount of imports from abroad. Mansour then began to develop and advance the factories’ production lines to keep up with the latest technologies in this field internationally.
Al-Wakeel indicated that before the political instability that was witnessed in the country and in other neighbouring countries, approximately 30% of the factory’s production capacity was exported. The company exported to Iraq, Yemen, Libya, Syria, Lebanon and East Asian states, which were the main markets for Egyptian food industries, especially dairy products with short expiration rates.
He further highlighted that the amount of Egyptian exports highly decreased, especially during the last year, whereby food exports decreased by 25% in one year.
Seclam will not be able to define any export plans in light of the instability in neighbouring markets and the absence of a vision for this regard, he noted.
Moreover, Al-Wakeel pointed out that the Libyan market was considered one of the main markets for Egyptian exports. However, it is suffering from a number of problems. One of the main obstacles is the transfer of money, as Libyan importers cannot be dealt with except through foreign exchange offices.
He added that Egyptian dairy exports currently go to Russia, which is considered one of the most promising markets, especially as it does not import American, European and Australian dairy products, which opens the door for Egyptian products.
Egyptian food industry companies are targeting participation in exhibitions to take place in this field in Russia, in order to reach this target market, which will compensate for Arab markets in the upcoming period, he indicated.
“There is a new programme belonging to the Chamber of Food Industries to encourage the exportation of dairy products to Western Europe. Accessing those markets is however difficult and may take a long period of time of no less than two years, because those countries have regulations that are more strict when it comes to their imports,” Al-Wakeel said.
He added that the improvement in Egyptian-Russian relations eases the procedures of export opportunities. The Egyptian companies’ next step will concentrate on reaching new customers.
Al-Wakeel said dairy products, especially cheese, have great export potential to Western Europe. The Egyptian market is the second largest in the world in exporting processed cheese.
He added that energy price decline in Egypt is about 40 times more than Europe, which gives Egyptian exports a competitive advantage. In addition, the high cost of European labour, as well as the high costs of insurance and transportation, give Egyptian products a great opportunity to compete in European markets.
“Despite the low cost of production in Egypt, the low productivity of Egyptian workers raises the final cost of the product,” he added. “For European labour, for example, the productivity of 350 workers may reach 1,200 tonnes of milk a day while, while the productivity of 1,000 Egyptian workers does not exceed 300 tonnes.”
He said the company provides employment training programmes inside the factory, whereby about half of factory workers receive training once a year. Egyptian workers still work in line with agricultural activity, which is very slow, while the production process requires speed and productivity.
He added that Seclam has equipped the training hall inside the plant at a cost of approximately EGP 500m in order to raise the efficiency and skills of workers.
Al-Wakeel further disagreed with the government strategy to support exported products, as it is considered supporting the foreign consumer. However, Egyptian products are still among the cheapest products in foreign markets, even with higher energy prices.
He noted that food industry companies in Egypt cannot transfer the increase in production cost to the final price of the product, especially in light of the fierce competition and oversupply in the Egyptian market. Therefore, companies bear the bulk of the increase in cost by reducing their profit margin to maintain the continuation of production, which adversely affects long-term investment plans.
He explained that Seclam operates through distributors in foreign countries to market its products, and the company is responsible for preserving the product quality and conditions until they arrive to the final consumer in any country.
“With regards to determining the distribution policies and pricing , a representative of the company will be appointed to make sure to maintain the quality of the product, a policy that most food industry companies depend on to maintain their brands abroad,” Al-Wakeel said. “Seclam aims to participate in dairy products industries and food industries exhibitions in Russia to access the Russian market.”
Food Africa is the most important exhibition in Russia, which was held last May. Moreover, Seclam is participating in the Anuga exhibition, which is one of the largest food industry exhibitions worldwide, according to Al-Wakeel.
He said this year, it is scheduled that 7,000 food industry companies around the world will participate in the Anuga exhibition.
He added that the company has participated in the exhibition since 2011 to offer its products, and identify any new developments with regards to the food industry and new technologies in the sector, and discuss investment opportunities with other countries.
Al-Wakeel noted that the Food Export Council, and the Egypt Expo and Convention Authority (EECA) have the responsibility to choose the Egyptian pavilion in the expo.
He pointing out that the level of Egyptian participation and representation in the Anuga exhibition has significantly declined, in spite of the increase of Egypt’s participation compared to other countries before 2011.