Where Egyptians are putting their money as inflation + a weaker currency bite: With rising inflationary pressures cutting down on disposable income among Egyptians, consumer behavior has shifted to prioritize their spending and make more strategic choices to sustain their lifestyles, according to NielsenIQ’s 1Q 2023 State of the Retail Nation report (pdf). While the value of consumer spending is rising, more or less the same volume of products are being bought, leading to the Egyptian FMCG market seeing a sales value growth of 45.3% y-o-y.

The key takeaway: Egyptian consumers are spending more on the same amount of goods, but are less willing to spend on out-of-home purchases such as dining and entertainment, clothing, and home improvement. However, they are spending more (not necessarily willingly) on utilities, fresh produce and fresh groceries, health and wellness goods and services, transportation costs, and education.

REMEMBER- Inflation has been accelerating for the past several months, rising at its fastest-ever rate in June on the back of the impact of multiple currency devaluations combined with higher seasonal demand. Annual urban inflation hit 35.7% y-o-y during the month, while Core inflation — which strips out volatile items such as food and fuel — accelerated to 41.0% in June from 40.3% the month before.

WHERE IS THE MONEY GOING? Food and groceries constitute the largest portion of Egyptian consumer expenditures. Categories like dairy and snacking have seen sales volumes decline, but the consumption of ambient food and beverages (products that can be stored unrefrigerated) has increased ever so slightly, indicating a shift towards essential spending and a preference for in-home consumption. This includes the reduction of expenses going towards out-of-home dining and entertainment as well.

Over 50% of Egyptian consumers report their top concern as the increasing food and grocery prices, which constitutes the largest portion of their expenses. This has led to a significant shift towards the consumption of local products, seen in 43% of the categories tracked by NIQ. This is especially true within consumption of categories like detergents, noodles, biscuits, skincare, cheese, and ice cream. This shift is supported by the cost competitiveness of Egyptian manufacturers, 58% of which are cheaper compared to their global counterparts.

Other concerns plaguing Egyptian consumers are, in descending order, utility costs, economic downturn, and fuel and transportation expenses, although the FMCG market volume remains stable. On the whole, Egyptian consumers are less pessimistic than the global average: Whereas nearly half of global consumers (48%) expect current recessionary trends to persist for longer than one year, that figure falls to 37% in Egypt. That doesn’t quite mesh with the findings of our 2023 Enterprise Reader Poll, which found that 38% of respondents see conditions improving over the course of 2023, while 37% don’t see that happening — and a quarter are uncertain about what the year holds in store.

Egyptian consumers limiting their discretionary spending, with 50% cutting expenditures going towards holidays, food delivery/takeaway, and out-of-home entertainment. However, 39% of the consumers understand that they will be spending more on education, putting us 10 points ahead of the global average. More than 30% of the consumers also expect to spend more on fresh grocery products as well, which comprises the highest portion of Egyptian consumer expenditures.

To put this in perspective, 53% of the Egyptian consumer population only have enough income to spend on food, shelter, and basic needs (compared to 58% of consumers in Turkey and 24% of consumers in Saudi Arabia). As such, we will continue seeing the trend of nimble spending, wherein consumers seek more affordable shopping channels and local brands, as well as shopping only when necessary and increasing at-home consumption, says NIQ’s North Africa and Levant MD Nihal Elkoussi. These shifts are all designed to “gain the most effective control” of how consumers’ disposable income is used.

Tags: