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Wednesday, 24 October 2018

PepsiCo to invest USD 515 mn in Egypt through 2021

** #4 INVESTMENT WATCH- Pepsi to invest USD 515 mn in Egypt through 2021: PepsiCo Egypt is planning to invest USD 515 mn in the local market over the next four years, including USD 16 mn in CAPEX to develop its beverage production lines, CEO Mohamed Shelbaya told us yesterday after a press conference. Other CAPEX plans include investing an unspecified amount next year in PepsiCo’s snack products, which include Chipsy, Doritos, and Cheetos. The company has no immediate plans to roll out new products, he said. PepsiCo also plans to upgrade its fleet and distribution centers and will expanding the domestic cultivation of its agricultural raw materials.

PepsiCo has “invested in Egypt every year regardless of the difficulties” since the US-based company first brought its business to Egypt 70 years ago, Shelbaya said. The company has invested USD 606 mn in Egypt in the past four years. “We want to be ready to jump on opportunities once conditions improve, rather than wait to invest and struggle to catch these windows,” Shelbaya told Enterprise. The food and beverage sector is expected to grow at a 16% clip this year, he noted.

Once local operations fully recover, PepsiCo plans to begin exporting — and Africa will likely be where it begins tapping new markets, Shelbaya told us. “Africa has many countries that are very promising export markets. We’ve visited a few countries and found there is a large gap to fill in the snack and beverage sector,” he said. Shelbaya declined to disclose a projected timeline for the company to begin exports.

PepsiCo’s profit margins in Egypt have begun to recover as it has been working to streamline its operating model after costs ballooned following the devaluation of the EGP in late 2016. At the heart of this is the company’s agricultural program, which has seen it provide local farmers with potato seeds to cultivate the crop and sell it back to the company at market prices. The company now locally sources 70% of its potatoes for its Chipsy brand locally and has plans to bring that number up to 100%, in addition to launching exports of potato seeds “in the near future,” according to Shelbaya.

What about Egypt is most surprising to PepsiCo’s HQ? The resilience of the domestic market despite challenging conditions, Shelbaya says. “They never expected that we would rebound this much, this fast. Most countries that face the hardships we have take years and years to recover,” he said. To an outsider, this resilience probably raises more eyebrows than our sky-high sugar consumption, he suggested.

Shelbaya also spoke to Masaa DMC last night (watch, runtime: 5:56).

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