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Sat 10 May 2008 04:00 AM

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P&G’s Near East VP to back local sourcing

Egypt's retail market hit hardest in the Middle East's battle against inflation, according to P&G boss.

Inflation will pose a greater challenge to Egypt's "very different" retail market than other Middle East countries, according to
Mohammed Samir

, vice president, Procter & Gamble, Near East.

Samir said demographics including lower disposable incomes in the country have resulted in lower cost prices for FMCG products in a retail environment "concentrated on smaller stores rather than hypermarkets."

"The real challenge has come now," he remarked, on his role as VP to date. "I've been pretty lucky over the past three years as the economy in Egypt has been doing well."

"Inflation is a bigger challenge in Egypt", he said, yet ‘the whole cycle needs to be a positive one to drive more innovation. One simple way to drive costs down is to localise supplies."

The Egyptian operation currently sources up to 50% of its raw materials for its production, however he admitted, "even the local raw materials are going up in price, but compared to international levels they are lower so we could go higher."

The retail market is focused on smaller stores and independents rather than hypermarkets, he said, which were not in a position to pay up to 30% more for stock.

"We will offer them the choice of buying smaller packs. We are hearing about more international players coming in, yet consumers like smaller stores for shopping and bigger stores for entertainment.

"Only 3% of the population own cars, and shoppers are attracted to the personalised service and home delivery offered by small stores. There are currently 350,000 small stores in Egypt, so food products cost 20-30% more, where will that money come from?"

Samir revealed that Procter & Gamble's factory in Egypt is currently one of the biggest in the Middle East, and has created careers for 800 people. He admitted, however, that compared to international markets, it had a "very long way to go."

"Egypt is still an emerging market, a lot of the categories are still very underdeveloped. If we compare Egypt to Africa, it's OK. Compared to the Middle East, it's not OK.

We offer 12 brands compared to P&G's 300 brands worldwide, however we are market leaders in every category we compete in. We have been growing in the double digits."

Corporate responsibility should be a prime concern for manufacturers, he argued. Unilever Egypt worked with the Community and Institutional Development group (CID) to combat counterfeit by designing a program for garbage collectors, which provided educational programs in return for empty containers to be recycled.

"The Government is calling for it. If you look at CSR as just charity, this is the wrong approach. It should be looked at as a business strategy," he commented.

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