Stronger than your coffee: Economic crisis hits Egyptians' morning cups

Zeinab El-Gundy , Monday 3 Oct 2022

The global economic crisis and its repercussions on the Egyptian economy have hit millions of Egyptians’ daily mood fix – the caffeine dose from coffee and tea – with a 17-18 percent increase in prices and fears of a looming shortage.

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Last week, retailers announced a rise in the price of Unilever’s Lipton tea – which has the second market share in Egypt – nearly a week after a similar raise in the price of its archrival El-Arousa tea.

The price of El-Arousa’s 250g dust tea packet went from EGP 22 to EGP 26 while the price of Lipton 250g dust tea packet went from EGP 28 to EGP 33.

El-Arousa, Egypt’s most famous tea brand worldwide, has recently stirred controversy on social media platforms when its parent company Badawy Group issued a rare statement, warning of a possible tea shortage crisis.

In a plea in August to Prime Minister Mostafa Madbouly and several banks, including the National Bank of Egypt (NBE), Bank of Alexandria, and Qatar National Bank (QNB), Badawy Group urged them to make US dollars available to the company in order to enable it to continue importing tea.

In the plea, which was widely circulated online, the company said it imports 60 percent of the Egyptian local market demand, and that tea is a strategic staple for the Egyptian citizen.

The family-operated business also urged the authorities to help it obtain not just the US dollars it needs to import tea but also the necessary shipping and clearance documents for nearly 6,000 tons of already imported tea that have been sitting in Egyptian ports for more than a month.

Badawy Group claimed in the plea that 80 percent of the documents that pertain to the allegedly stranded 6,000 tons of tea shipments are sitting at the NBE, warning that the “country's tea stock is only enough for one month.”

The company also warned that further delay in the release procedures could result in the damage of the shipment.

A delay could also result in the company having to pay delay fines in foreign currency to shipping companies, the group said, and this would push up the cost of tea and lead to price increases, it warned.

The plea by the makers of El-Arousa tea sent shockwaves with the hashtag #El-Arousa in Arabic top-trending on all social media platforms and in talk shows on TV. Until late September, it was customary to see that hashtag trending on Twitter every few days.

According to Kantar, the London-based data analytics and brand consulting company, El-Arousa tea was Egypt’s most chosen beverage brand in 2021, its main customers being the middle and low classes who prefer strong loose tea.

A fabricated shortage?

A local grocer from Giza’s Agouza, who preferred to remain anonymous, told Ahram Online that the "tea shortage" was “fabricated" by the local companies so they can raise the prices of tea packets in the coming weeks.

“They are trying to make the public pay more by creating false demand,” he said.

Officials in the Food Commodities Division in the Cairo Chamber of Commerce said in media statements that the "tea crisis" was overblown, adding that tea stocks in the country were enough to cover demand for six months.

Division members warned the public that any proclamation about tea shortages may lead customers to hoard tea and thus create a real crisis that leads to actual shortages, especially amid the current global economic crisis.

In statements to the media at the time, the division officials said tea prices were stable in Egypt despite the increase in the price of tea internationally amid the global crisis that was triggered by the Russian invasion of Ukraine.

Last week, despite insisting that Egypt has enough strategic stock for a whole year, division officials began to retrace the hike in tea prices to the lack of US dollars in banks, which led to less supply against increasing demand. 

Egypt, which imports tea mainly from India and Kenya, is one of the world’s largest tea importers.

The country was the eighth largest consuming market of black tea in the world in 2020, according to the Food and Agriculture Organisation of the United Nations’ (FAO) 2022 report “International Tea Market: Market Situation, Prospects, and Emerging Issues”. It is also the biggest market for black tea in Africa and the Arab world.

However, contrary to all the hype, official figures show that imports are still flwoing.

Egypt’s imports of tea declined by $4.5 million in May 2022 to register $22.5 million, a slight drop from $22.8 million in the same month in 2021, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS).

Statista says that Egypt's tea sector generated $2.31 billion in 2021.

Figures from of the International Tea Committee show that Egyptians consumed 273 billion litres of tea from January to September 2021 to the tune of EGP 5 billion.

A bitter coffee crisis

Following the Badawy Group’s plea, Hassan Fawzy, the head of the Coffee Division in Cairo Chamber of Commerce, announced in September that there was a shortage in the country's stock of coffee.

Fawzy indicated that Egypt imports coffee beans from Brazil, Colombia, Indonesia, Lebanon, India, and Ethiopia, in addition to other countries, such as Peru and Guatemala.

He explained that the global coffee market was disrupted, and prices jumped worldwide after 25 percent of the crops of coffee farms in Brazil, one of the largest coffee producers in the world, were damaged in 2021 due to frost and bad weather.

 “We started to see shortages in our stock of coffee beans (recently) because of delays in the release of imports in customs to importers due to restrictions on the purchasing of the dollars necessary to complete importing transactions and requirements," he said.

Fawzy was referring to a February decision by the Central Bank of Egypt (CBE) that placed requirements on importers to complete importing processes that some say were very difficult to meet.

 “There are no local alternatives because our climate does not allow us to grow coffee beans locally; we want ways to speed up the import release procedures,” he said.

Ahram Online could not reach Fawzy for more details.

Moreover, the coffee industry faces a global crisis in shipping that is prolonging the import cycle of coffee.

Egypt has imported 100 percent of its coffee since the country first learned about the caffeine booster in the 17th century from Yemeni students studying in Al-Azhar Mosque.

A local importer of Brazilian coffee, who asked to remain anonymous, said that the “ongoing shortage was harder than anything he saw before."

In the first nine months of 2021, Egypt imported $100 million worth of coffee beans, according to the statistics of the International Coffee Organisation (ICO).

In the first five months of 2022, Egypt imported $101 million worth of coffee beans, a 58.2 percent increase over the same period in 2021.

Statista, the German statistics website, estimates that the revenues in the coffee sector in 2022 have exceeded $901 million.

ICO figures show that the national consumption of coffee reached 70,000 tons in 2021, twice the 36,000 tons figure for 2017 – a 94.4 percent increase in four years.

Ahram Online found that throughout the past few months, the coffee beverage niche market represented in fast coffee chains had its own problems but did not make it to the surface because it does not affect the majority of the population.

Starbucks devotees whom Ahram Online spoke with reported a range of problems related to the imported supplies, whether from the lack of certain flavours, chocolate mocha and some coffee blends.

Many customers confirmed that for some time, the chain did not have medium-sized cups because they were imported from Saudi Arabia, but it seemed that they solved the problem and used a local supplier.

The letters of credit conundrum

In response to the Badawy Group plea, Minister of Finance Mohamed Maait vowed to viewers of host Sayed Ali on El-Hadath TV that “God willing, there will be no problem in tea imports. We will try to solve the issue because the people’s mood is very important.”

Maait announced in late August a package of exceptional measures to facilitate the release of imports to ease the burden on importers and investors amid the international economic crisis.

According to officials, these measures are expected to come into effect within the coming days and stranded imported goods could be released within days after customs procedures are completed.

On Tuesday, in a meeting with businessmen from the private sector, President Abdel-Fattah El-Sisi said obstacles to investments including letters of credit (LC) will be solved within 1-2 months maximum.

In February, the CBE required all importers to present LC to guarantee the importing and release of imports in place of the cash-against-documents system.

The implementation of the LC system proved costly and time-consuming for importers since they were now required to cover 100 percent of the value of most imports in cash.

The difficulties faced by importers because of the application of the LC system have led to the stranding of imported goods in ports and to hindering production at some factories.


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