Pre-Feasibility Studies For 5 Crops For Processing in Upper Egypt

SALASEL Pre
Pre-
Feasibility Study
Final Deliverable with Recommendations
April , 2012
Strictly Private &
Confidential
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Table of Contents
Section I: PESTEL Analysis 5
Political Overview 6
Economic Overview 8
Societal Overview 13
Technological Overview 16
Environmental Scan 18
Legal/Regulatory Environment 21
Conclusion 23
Section II: Agro Industry Analysis 24
The Agro Industry in Egypt 24
Industry Challenges 33
SWOT Analysis 41
Conclusion 43
Section III: Identification of Key Agro Industry Projects 44
Part 1: Proposed Agro Industry Options 45
A clear market opportunity for Agro-processing in Upper Egypt… 45

…Yet, with some challenges to consider 46
Implications for potential agro processors in Upper Egypt 48
High-level processing options for key horticulture crops in Upper Egypt 48
Five Project Ideas 54
1. Dehydrated Onions 54
2. Processed Tomatoes 57
3. Dried Dates 61
4. Pomegranate 63
5. Frozen Vegetables 65
Part 2: Benchmarking of Horticulture Experience in Other Countries 68
Success Story 1: Horticulture Production for Poverty Reduction: Tanzania 68

Success Story 2: Floriculture in generating more jobs opportunities: Columbia 69
Success Story 3: Development of an export oriented horticulture sector: Ethiopia 69
Success Story 4: horticulture export growth in Kenya 71
Conclusion 73
Section IV: Pomegranate Processing 74
Project Brief 74
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Project Rationale 74
Commercial Possibilities 76
Market Overview 78
Inputs and Outputs 82
Key Success Factors 83
Financial Analysis 84
Summary of Results 87
Section V: Dried Dates 94
Project Brief 94
Market Overview 98

Section VI: Dried Tomatoes 117
Project Brief 117

Market Overview 120


Summary of Results Error! Bookmark not defined.128
Section VII: Dried Onions 134
Project Brief 134


Market Overview 137

Section VIII: Frozen Vegetables 155
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Project Brief 155


Market Overview 158

Conclusion 178
Recommendations 179
About this Report 181
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Section I: PESTEL Analysis

PESTEL (Political, Economic, Societal, Technological, Environmental, and Legal) analysis is a tool widely used
for assessing the macro environment of an intended, or existing, business venture. In this section of the report
we will present and analyze data on the investment environment in Egypt, focusing on political, economical,
societal and demographic trends, impact of technological, environmental and major regulatory issues, focusing
on Upper Egypt, with data relating to Beni Sueif, Minia, Assiut, Qena , Sohag, and Luxor to the extent available.
As a result of this analysis, high level recommendations for mitigating any risk areas will be suggested for closer
consideration by Salasel management.
The following section of the Pre-feasibility Study, Industry Analysis, will be addressing the agro-industry in
Upper Egypt.
Egypt: Country Background

Since the turn of the new millennium, the pace of structural reforms, including fiscal, monetary policies,
privatization and new business legislations, helped Egypt to move towards a more market-oriented economy
and prompted increased foreign investment. The reforms and policies have strengthened macroeconomic
annual growth results which averaged 5% annually. However, the government policies and practices over the
same 2 decades have largely failed to equitably distribute the newly created economic wealth and the benefits,
with the lack of proper social welfare policies and practices. As a result, the fruits of economic growth have
failed to trickle down to improve the economic conditions for the broader segments of the population, especially
with the growing problem of unemployment and underemployment among youth under the age of 30 years.
A youth protest demanding more political freedoms, fighting corruption and delivering improved living
standards forced President Mubarak to step down on February 11, 2011. In the Post-Mubarak Era, among the
different and wide-ranging challenges, the Egyptian economy faces a rocky road to stabilize after 18 days of
protests Followed by continued social movement to demand the complete removal of the old regime and its
heritage across the country’s institutions and government practices.
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Political Overview
Egypt has entered a critical stage in its political history with the overthrow of President Hosni Mubarak, as the
country transitions away from authoritarian rule. More importantly, risks of widespread demonstrations,
mainly those that stress on economic grievances such as low wages and poor working conditions are feared in
the short term (end of 2011). In the longer term, the type of political system and the nature of the political force
that will come to power after the first transparent and democratic elections, planned for end of 2011, are still
unclear creating a state of uncertainty on the political dimension.
Domestic Politics
The resignation of former president Hosni Mubarak on February 11 has gone a long way towards improving
Egypt’s short-term political risk profile, particularly as the abatement in large-scale demonstrations and
widespread violence allows the country to regain a sense of normality, and economic activity is able to slowly
resume. As of now, executive power has been transferred to the Higher Council of the Armed Forces led by Field
Marshal Mohamed Hussein Tantawi. On the surface, it appears that the worst of Egypt’s political crisis is now
over, and that the country is set to embark upon a path towards democratic rule, especially compared to
neighboring Arab countries where the public uprising has created direct clashes between the ruling regimes and
the people, such as in Libya and Syria.
However, risks of strike activity increased over the months following the political unrest. Having witnessed how
large-scale demonstrations are able to bring about change, workers in a variety of industries have since gained
the confidence to go on strike or demonstrations, demanding higher pay and better working conditions,
requests that have been either ignored by government and stakeholder, or repressed by security forces over the
years of the fallen regime.
Due to lack of reliable polling data definitive conclusions about whom the key players in Egypt's new political
arena are difficult to confirm. Given this fundamental lack of strong and well-organized opposition groups, it
remains to be seen who will be able to form a coherent political platform and mount a credible campaign ahead
of the elections in the coming few weeks.
As a result, for the time being it appears as though Egypt’s military will maintain its firm grip on power, and will
be the key players dictating how events unfold until elections conclude. Indeed," since Mubarak’s departure,
sit-ins and strikes have occurred at the stock exchange, textile and steel firms, the postal service, railways and
banks (with the latter forcing the closure of the nation’s lending institutions until February 20)"1. Moreover,
with different civil society groups calling for large-scale rallies to be held every Friday until new elections are
held, it is apparent that the threat of further public unrest will remain high over the coming months, and
disruptions to local business activity should be expected accordingly.
Although the symbolic ousting of the former president as the head of the previous regime is certainly an
important development, the country’s main political bodies remain dominated by an institution, which will be
unlikely to relinquish a significant degree of its power. This has ramifications for policy making going forward,
and also for how the country’s political transition over the coming months may proceed.
Therefore, while the political situation in Egypt brings positive expectations in the long term, the continuation
of popular movement over the last few months, and uncertainity about the outcome of the planned first
democratic elections pose high levels of uncertainty about the political outlook, hence resulting ina cutious
rating for this dimension.
The following table presents a summary of the findings of the Political dimension, which will be built on for the
rest of the dimensions of PESTEL
1 Business Monitor International, Egypt Business Forecast Report Q2, 2011
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PESTEL Implications for Risk Areas to

Indicator Reason
Dimension Client Mitigate
Political  Political Risk Volatility in current Willingness to
remains high political scene, that accept requests
 Lack of effective might deter new for higher
policing and investments in the premium
security risk still country, in the short relating to
exist and medium term, political risks
 Recurrent scenes by local and foreign
of large scale investors
demonstrations
and domestic
political upheaval
Indicator legend
Bad Average Good
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Economic Overview
Economical Environment
Egypt is bisected by the Nile valley, where most economic activity takes place. Egyptian government from 2004
to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth; while
by 2009 further economic reforms were postponed because of global economic turmoil. Despite the
achievements done by the cabinet economic team between 2006 and 2009 , the economy is still hampered by
government intervention, substantial subsidies for food, housing, and energy, and bloated public sector
payrolls. Moreover, the public sector still dominates most of the heavy industries.
The international economic downturn slowed Egypt's GDP growth to 4.5% in 2009, predominately affecting
export-oriented sectors, including manufacturing and tourism. Meanwhile, unemployment is rising, and was a
major driver for the public uprising of 25th January 20112.
Table: Business Monitor International, Economic Activity, 2009-2015
2009 2010e 2011f 2012f 2013f 2014f 2015f
Nominal GDP, EGP bn [1,2] 1,081.3 1,269.6 1,445.5 1,652.2 1,898.1 2,161.0 2,450.4
Nominal GDP, US$ bn [1,2] 194.9 225.3 242.9 280.0 334.5 382.8 434.5
Real GDP growth, % chg y-o-y 4.7 5.1 3.2 3.7 4.9 4.9 5.0
GDP per capita, US $ [1,2] 2,390 2,715 2,875 3,258 3,825 4,307 4,810
Population, mn [3] 83.0 84.5 86.0 87.4 88.9 90.3 91.7
Unemployment, % of labor force, 9.4 9.8 10.5 10.3 9.1 7.8 7.5
Source: BMI, Egypt Business Forecast Report Q2 2011
(1) Refers to financial year July to June

(2) Source: Central Bank of Egypt/BMI
(3) World Bank/BMI calculation BMI
Budget Deficit
The full extent of the recent political events on Egypt’s economy remains uncertain. There has been substantial
downward pressure on the Egyptian Pound exchange rate. The global increase of food prices could have a
substantial impact on Egypt’s inflation and poverty level, especially since Egypt is the world’s largest importer
of wheat.
Accordingly, the budget deficit is expected to rise from 8.1% in 2009/10 to close to 10% in 2010/11, as the
interim government boosts spending to offset the impact of the political unrest. Moreover, the current account
deficit is expected to widen from 2.0% of GDP in 2009/10 to 3.2% in 2010/11 and then fall marginally to
2.9% in 2011/12 as FDI inflows, remittances and the services balance remain vulnerable3.
Changed priorities
As per a Statement issued by the Ministry of Finance the amended 2011/12 fiscal year budget is based on the
principle of using fiscal policy to achieve greater social justice, given the strong popular demands for fairer
distribution of wealth.
Accordingly, total spending will increase by 24.5%. The allocation for wages and compensation for state
employees has been pushed up by 21.7%, and government has also increased the minimum wage to £E700
2 Business Monitor International, Egypt Business Forecast, Q2, 2011

3 African Economic Outlook
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(US$118) per month and raised the income tax threshold by one-third to £E12,000 per year; the total allocation
for subsidies has gone up by 30%4.
Policy Trends
For 2011, the Central Bank of Egypt (CBE) is expected to hold fire on any hikes to its benchmark interest rate
(the overnight lending and deposit rates currently sit at 9.75% and 8.25% respectively), as concerns
surrounding a potential slowdown in economic activity outweigh short-term risks of higher inflation5.
Moreover, although core inflation has now spiked above the central bank’s 6-8% target range, the explosion in
political unrest in early February that is likely to lead to a marked slowdown in the economy’s growth prospects
this year will also have a pronounced impact on any future rate decisions.
Inflation
In accordance to the World Bank, inflation rates were calculated showing the rate of price change in the
economy as a whole. As a result, for the moment we expect rates to remain on hold through 20116.
Inflation Rate
Year
(GDP deflator)
2003 6.80%
2004 11.70%
2005 6.20%
2006 7.40%
2007 12.60%
2008 12.20%
2009 10.80%
2010 11.95%
2011 12.10%
Exchange Rates
Elevated volatility across Egyptian financial markets is foreseen in the near term, and the foreign exchange
market will be no exception. Indeed, the currency depreciated against the dollar to as low as EGP5.9500/US$
at one point, before intervention by the Central Bank of Egypt stabilized the unit at 5.8770/US$ on February 17.
It is increasingly apparent that the Central Bank of Egypt (CBE) will be more focused on growth than inflation
for the time being,. Accordingly, we expect the CBE to keep rates on hold through the remainder of the year,
with the overnight lending rate likely to remain at 9.75% in 2011.
Trade, Exports and Imports

As the fourth largest economy in MENA, a downturn in Egyptian growth and fixed investment activity in 2011
will likely have an impact on manufacturers throughout the region who have previously relied on the country as
an export market.
With reference to the table below, exports have decreased from July 2010 to January 2011 by $300. Indeed,
according to latest data from the IMF, exports to Egypt came in at US$1.8bn, US$1.0bn and US$472mn for
Saudi Arabia, Kuwait and Algeria respectively in 2009. Moreover, while reliable statistics on relative exposure
to Egypt is somewhat sparse, it is safe to say that for those who have invested heavily into the country’s growth
story, 2011 may prove to be a difficult year.
4 The Egyptian Ministry of Finance

5 The Central Bank of Egypt
6 World Bank
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Month/ Year Exports (by Millions USD)

July/2009 5900 $
January /2010 6100 $
July/2010 6900 $
January/2011 6600 $
Source: Central Bank of Egypt (CBE)
According to the CBE, over the past four quarters during the year 2009/10, total foreign direct investment in
the country by Arab states came in at US$1.4bn, with Saudi Arabia and the UAE contributing US$387mn and
US$277mn respectively to this total (the UK and US are the largest investors)7.
The Egyptian Labor Force

Egypt's labor force is estimated at more than 25.6mn, with at least 600,000 new entrants into the market
annually; roughly 25% is concentrated in the Cairo and Alexandria governorates. The unemployment rate was
around 9.4% in FY2008/09, according to Central Bank of Egypt (CBE) figures. The situation regarding Egypt's
labor force is that it is growing much faster than employment growth, and the global economic downturn has
not helped.
As per latest available statistics, 36% of the labor force works for the Government, armed forces & public sector;
34% work in agriculture and 30% in the private sector.
Labor policies
There is to be a minimum wage, yet the newly formed National Council for Wages has not determined its
precise level. There are significant complex restrictions on the hiring and firing of workers, however a labor law
introduced in 2003 is regarded as an improvement on previous legislation, allowing employers and employees
to terminate employment contracts under specific circumstances.
Investment Environment
Business Environment
According to EIU forecasts, Egypt's business environment score improved to 5.86 for the forecast period (2011-
15) from 5.65 for the historical period (2006-10). The business environment will continue to be affected by
political instability in the short term, and there's uncertainty over the future direction of economic policy.
Despite a large number of reforms in the past few years, which have undoubtedly improved the investment
climate significantly, Egypt’s investment environment continues to bear the legacy of years of state domination
of the economy and a strong public sector focus. Bureaucracy is a major issue for foreign companies, with legal
and property transactions often subject to severe delays, and there is evidence of a public backlash against pro-
market reforms. Strikes are increasingly common, and a generalized anti-Western sentiment could also make
life difficult for investors.8
Trade & Investment Ratings
Country Openness to Investment Score Openness to Trade Score

Egypt 52.0 53.1
Sudan 53.4 8.6
Saudi Arabia 10.5 78.1
Source: Business Monitor International, Business Forecast Report – Economic Outlook, Q2 2011
7 Central Bank of Egypt

8 Business Monitor International, Business Forecast Report Q2, 2011
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International Financing Institutions

The Egyptian government has identified an external financing requirement of US$11bn up to June 2012 owing
to widening current account and budget deficits9. It has already received commitments of financial assistance
from several multilateral and regional institutions, which has boosted investor confidence.
International financing institutions will in turn be using financial aid instruments to support the transition of
fragile states into stable nations, instead of viewing budget support as a dole out. The main theme running
through the World Bank, IMF, UN and EU aid finance packages of political and financial economic assistance
is: economic stabilization in the short term, as well as global and regional integration over the longer term.
Foreign Trade Regime

The government’s post-2004 reform drive has brought significant changes to Egypt’s tariff system, with a cut in
the weighted average tariff rate from 14.6% to 14.1% and the slashing of the number of tariff bands. It has also
eliminated import fees and surcharges and revived some free trade agreements (FTAs) with Arab countries.
Additionally, Cairo signed an association agreement with the EU in 2001 that will ultimately see the creation of
a free trade area, with tariffs to be dismantled over a 10-to-15 year period.
In September 2004, the government implemented a new tariff structure, cutting the average tariff rate to 9.1%,
removing GATT inconsistent services fees ranging from 1-4%, and eliminating import surcharges. It also cut the
number of ad valorem tariff rates from 27 to 6 and redressed tariff inconsistencies, rendering the process more
transparent. As of January 29, 2009, a new customs tariff was issued by the Presidential Decree No. 51/2009,
where tariffs have been reduced to zero on manufacturing equipment and apparatus needed for various fields of
production and industries10. In addition to the customs tariffs, all imports are subject to sales tax ranging from
5-25%. Every importer is required to pay the tax and also to register for sales tax. Companies producing largely
for export can set up in free zones and operate in foreign currency. In May 2002, parliament approved the
Special Economic Zones (SEZ) Law, providing for the establishment of special zones for industrial, agricultural
or service activities designed specifically for the export market. The North West Suez Special Economic Zone
was the first one created under the said law, and will serve as a model for the future development of other SEZs
in Egypt.
Tax Regime
With effect from 1 July 2005, Egypt’s tax system radically transformed where rates of corporate and personal
taxation were sharply lowered. This was particularly conducive to increased investment flows, given the
previous uncompetitive average corporate tax rate of 42%. Corporate tax: Corporate tax is effectively 20% on
profits.
Foreign Direct Investment

The main recipients of foreign investment are the oil and gas, tourism and textile sectors. Leading sources of
FDI are the UK, the US and France, tilted towards the centerpiece oil and gas developments. As the figures
below demonstrate Egypt's FDI net inflows have represented an increasing percentage of the total country's
GDP.
Foreign Direct Investment, as a total % of GDP11

2005 2006 2007 2008 2009
0.2% 0.1% 0.15% 0.5% 1.2%
Source: The World Bank
9 Economist Intelligence Unit, Egypt Country Outlook, 2011

10 Ministry of Finance
11 The World Bank Group
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Initiatives supporting SME financing

A project called AWI SME Finance Facility for the Middle East and North Africa was approved on July 14, 2011.
The project consists in the establishment of a regional MENA SME Initiative (“MSI” or “Initiative”) to scale up
and support SME financing in the MENA region. MSI proposes to offer a comprehensive package to enhance
SME access to finance in MENA in a systemic and sustainable manner12.
Moreover, during May 2011, a seminar was organized by the General Authority for Investment and Free Zones
(GAFI) to launch the "SME's Credit Guarantee Initiative" at GAFI's headquarters in Cairo. It was stated during
the seminar that SME support initiative maintains the relationship between SMEs and the various financial
institutions as it provides credit guarantees and cover for SMEs13.
Additionally, it was announced by President Obama in May 2011, that OPIC would provide up to $1 billion in
new financing to support infrastructure and job creation in Egypt. OPIC financing will support public-private
partnerships in key sectors such as energy, health and wastewater treatment as well as potential facilities for
SME lending, housing or consumer financing. Separately, in March 2011, Secretary of State Hillary Clinton
announced OPIC will provide up to $2 billion in financial support to catalyze private sector investment in the
Middle East and North Africa region. This initiative will prioritize small- and medium-sized enterprises and
provide projects with fast-track approval to mobilize capital quickly14.
The following table summarizes the Economic dimension

PESTEL Indicator Reason Implication for Client Risk Areas to Mitigate
Dimension
Economic  Diverse sources of  Egyptian economy  It is expected that

foreign exchange currently stalled and labor costs and the
 Political support & return to solid power of labor
Financial assistance growth not unions will be higher
commitments predicted for a while in the post-
 Public debt and finances  Demand for projects revolution Egypt
deficit limiting across sectors due to
infrastructure mounting needs for
development goods and services
 Banking system
incapable of meeting the
economy's needs
 Egyptian pound is under
pressure as a result of
capital outflows leading
to currency weakness
Indicator legend
Bad Average Good
12 International Finance Corporation

13 General Authority for Investment
14 USAID, Egypt
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Societal Overview
Egypt is the most populous country in the Arab world and the second-most populous on the African continent.
Nearly all of the country's estimated 85 million people live along the Nile Valley in Cairo and Alexandria;
elsewhere on the banks of the Nile; in the Nile delta, which fans out north of Cairo; and along the Suez Canal.
Egypt suffers from regional disparities with the rural parts of Upper Egypt having the lowest socio-economic
standards in the country. The previous government has tried with mixed success to encourage migration to
newly irrigated land reclaimed areas of the desert. However, the proportion of the population living in rural
areas has continued to decrease as people move to the cities in search of employment and a higher standard of
living, increasing the urban portion of the population.
In 2008, extreme poverty increased to 9.1% of the population; whereas 20% of Egyptians live below the poverty
line. Many households remain food-insecure, largely a result of food price inflation, high unemployment,
limited income-generating opportunities and the loss of productive assets.
Egypt continues to face substantial natural resource constraints, particularly fertile land and water. Although
57 percent of Egyptians live in rural areas, where agriculture represents the major livelihood source and is the
key determinant of household food security for a large proportion of households, farming households must
cultivate within the context of limited resources; only 3 percent of the land throughout Egypt is arable and
permanent crops(which are formed from plants that last for several seasons rather than being replanted after
each harvest) are produced on only 0.5 percent of the total land surface.
Regarding the employment traditions and culture in Upper Egypt, males spend considerably more hours at
work than females, where men spend an average of at least three more hours. That is an outcome of the
tradition that women need to be at home at an early hour.
High-value horticulture crops are labor intensive and create job opportunities for employment both in
production and to a greater extent in the harvesting, packing, transporting, and shipping of these crops. High-
value horticulture industries that supply sophisticated markets require as many as 38 days of employment per
ton of a common horticulture crop like green beans10 as opposed to traditional hand harvested commodity
crops such as sugar cane stalk that require no than four days per ton. Additionally, high-value horticulture
industries generate higher average earning per worker because higher skill levels are required for many tasks
and the bonus incentives are often used to minimize harvest and packing time.
Poverty
With only 25% of the total population, Upper Egypt has 66% of the extremely poor, 51% of the poor and 31% of
the ‘near poor’. Within each region, there are also differences, which clearly show that some governorates and
within governorates certain areas have much higher poverty rates than others: almost one third of Egypt’s poor
are in the poorest villages of Sohag, Assiut and Menia governorates: Assiut is the poorest, closely followed by
Sohag and Qena.
Poverty is concentrated in rural areas and in Upper Egypt. About three-quarters of the poor live in rural areas,
with 55% living in rural Upper Egypt. In addition to lower consumption, rural dwellers and residents of Upper
Egypt have less access to basic infrastructure and services. Moreover, they are mostly non-wage workers in
household enterprises, which limit their capacity to rise out of poverty.
There is gradual increase in the number of income generating activities in rural areas, however are mostly
confined to petty trading and micro agri-businesses. In most cases, involvement in such activities in an
opportunistic response to immediate needs for cash for food and other consumables. There is general lack of
sufficiently integrated agribusiness value chains that effectively and equitably integrate smallholder farmers,
especially the poor farmers.
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Unemployment
One of Egypt’s biggest socio-economic problems is the high unemployment rate which has been growing over
the years. The unemployment rate, which has averaged more than 10% over a decade, increased to over 11.9% in
March 2011.
While the average growth in employed population during the last five-year period stood at 2.3%, the rise in
unemployed population has been much higher during the same period averaging around 8%. The high rates of
unemployment and population growth coupled with meager wages in most of the public sector companies
contribute to the poverty levels, with close to 20% of Egypt’s population below the poverty line. A big challenge
for Egypt in the near future will be to create jobs, as the population within the 20–45 age-group constitutes
around 65% of the total population.
According to CAPMAS on 25th of May 2011, the unemployment rate in urban areas reached 15.9% compared to
12.7% in previous quarter and 12.5% during same quarter in previous year. On the other hand, the rate reached
8.8% in rural areas compared to 6.0% in previous quarter and it was 6.5% during same quarter of previous year
The Table below presents unemployment rates in Egypt as a percentage of the Labor force15.
Month/Year Percentage of the Labor Force
July/2009 9.4 %
January /2010 9.4%
July/2010 8.9%
January/2011 8.9%
March/2011 11.9%
Source: Agency of public mobilization and statistics
Education
The education indicators of Egypt project a poor image of the education system. Only about 58% of the
population is literate and there is a big difference in the literacy rates for males and females16. Although levels of
education are relatively high, the essential problem is the existence of a considerable mismatch between the
skills taught in schools and those required by most employers.
However, there was an establishment of a Continuing Education Centre, which Opens in Aswan. The
Continuing Education Center (CEC), an initiative of Om Habibeh Foundation (an affiliate of the Aga Khan
Development Network), in Aswan. This centre is unique to Upper Egypt in that its mandate is to provide new
graduates with the skills necessary to be employed in the labor market. It also aims to provide practical
employment-related training to the youth of Aswan and Upper Egypt with the ultimate goal of fostering
economic development.
The centre has signed protocols of cooperation with the School of Continuing Education at the American
University in Cairo (AUC) to teach courses in General English, English for Specific Purposes and Accounting
and with Microsoft Egypt for Information Computer Technology. Trainers, recruited from Aswan, who have
undergone intensive training, will deliver these courses. In the next couple of years, the Om Habibeh
Foundation proposes to offer courses for entrepreneurs as well as vocational training courses.
In addition, a five-year public-private sector partnership between USAID, H.J. Heinz Company and
ACDI/VOCA assists farmers in eight Upper Egypt governorates, including Aswan, by increasing farmer income
15 Agency of Public Mobilization and Statistics

16 The World Bank
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through the promotion of good agricultural practices, the introduction of new varieties of tomatoes and
alternate crops, and linking farmers to processors, wholesalers, retailers and exporters.
Total Illiterate Literate Under Intermediate Above College

pop. immediate Degree intermediate Degree or
Region 10+yrs Degree Degree above
Mil Mil % Mil % Mil % Mil % Mil % Mil %

Urban 25.1 5.1 20.0 2.7 10.9 5.2 20.6 7.0 28.0 1.1 4.5 4 15.8
Rural 32.2 11.7 36.6 4.4 13.6 6.6 20.5 7.2 22.5 0.7 2.1 1.5 4.7
Total 57.3 16.8 29.3 7.1 12.4 11.8 20.6 14.2 24.9 1.8 3.2 5.5 9.6
Source: The World Bank
The following table summarizes the Societal dimension

PESTEL Indicator Reason Implication for Risk Areas to
Societal  Increased emphasis on  The pressure for  Availability and
poverty alleviation socioeconomic suitability of
 Increased pressure on reforms reinforces technical and
the government to the SALASEL managerial skills in
reformulate a social project's agenda Upper Egypt to
policy that's more (Poverty alleviation ensure the success of
effective and inclusive and improvement Salasel intended
and weighs the needs of in living standards) projects
different social classes
and groups in Egypt

Indicator legend
Bad Average Good
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Technological Overview
Infrastructure
According to the latest BMI Infrastructure Report "growth, opportunity and stability between 2010 and 2014"
expectations are forecasted for the Egyptian Infrastructure sector. Foreign investment companies have
famously faced bureaucracy issues, land and property transactions delays, delays, especially since 25% of the
construction materials in Egypt are imported.
Private investment in Egypt's Energy and Utilities infrastructure is expected to thrive; this is evident due to the
Government's plans for much-needed
needed investment in the sector between 2010 and 2027. The Government is
pushing through with its strategy for constructing power plants in Egypt; in addition to making strides towards
achieving its nuclear power ambitions17.
Accordingg to BMI's Infrastructure report, Egypt's transportation infrastructure is driven mainly by the Suez
Canal as it represents a main source of revenue, its Authority therefore must take the appropriate action in
ensuring correct and updated balance of transit
transit fees. Also as improvements to the airports are being made in
terms of upgrading and expansion, they believe that airports need to keep improving to keep up with increased
traffic.
Construction industry value EGP bn

HLS
80
60
40 Construction industry
20 value EGP bn HLS
0
2008 2009 2010f 2011f 2012f 2013f 2014f
HLS: Hock Lian Seng Infrastructure
Internet Usage
The Egyptian Revolution
tion in the 25th of January 2011 was also known as the internet revolution. Internet users
reached 20,136 million in 2010. Egypt's high ranking regarding the rate of internet users is down to its
population, especially after the revolution more people started showing interest in using internet. Even the
government started using the internet to reach out to its users and turn it to an effective media through which it
can communicates with certain segments of the society. Here is a look at the country's ratio of citizens to
internet users
rs that shows how penetration increased with time.
Internet Usage and Population Growth
Year Users Population (mil) Penetration
2000 450,000 66,303,000 0.7%

2006 5,100,00 71,236,631 7.0%
2008 10,532,400 81,713,517 12.9%
2009 16,636,000 78,866,635 21.1%
Source:: Internet World Stats, World Bank
17 BMI Infrastructure Report, Q2.2011
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The following table summarizes the Technological dimension

Technological  Rapidly increasing  Advantageous and  May have to build
penetration of internet complimentary its own utilities
use public sector (power and
 Liberalization of the reform strategic sanitation) if not
telecoms and audio- direction and publically available
visual sectors policies in the project area
 IT spending on the  Good
increase telecommunication
 Spread of E- s services for the
government portals business activities
 Egyptian Energy and
Utilities Infrastructure
sector expected to
boom
 Upgrading and
expansion of airports
to keep up with
increased traffic
Indicator legend
Bad Average Good
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Environmental Scan
Approximately one-third of Egyptian labor is engaged directly in farming, and many others work in the
processing or trading of agricultural products. Nearly all of Egypt's agricultural production takes place in some
2.5 million hectares (6 million acres) of fertile soil in the Nile Valley and Delta.
Impact of Environmental Degradation

The past decades have seen a significant increase in environmental health risks in Egypt. Due to the adoption of
a policy, for increased industrialization and for intensification of vertical agricultural production18; there was an
increase in the practice of discharge of untreated industrial wastes and in the load of chemical fertilizers and
pesticides that find their way into drainage canals and the irrigation network.
In addition, according to CAPMAS 2006 Census figure for national sanitation coverage is 24.3% for rural areas,
which further increases environmental degradation. Additionally, the burden of water scarcity and climate
change further complicate the picture through the introduction of a new list of health hazards.
Moreover, the unhealthy environments of the growing number of informal settlements and the millions living
in them under unhygienic conditions with minimal or no basic infrastructure services further increase the
magnitude of the health hazards and the environmental insults to which Egyptians are exposed.
Renewable resources
Egypt is facing great challenges on the energy front, as demand is currently growing far greater than the supply
of the nationally generated energy resources19. The Egyptian energy sector depends on diverse resources for its
primary supply of energy20.
Egypt is an attractive site for solar energy and has a huge potential of solar energy production. If Egypt takes
advantage of this solar energy it will open doors for producing electricity through photovoltaic technology.
Egypt has a vast capacity for photovoltaic technology, but the current installed capacity does not reflect this. In
fact, Egypt had one of the very first plants in the world to utilize solar thermal energy in generating steam, but
there was no follow up, and the integration of solar energy in industrial processes is thus limited.
As for wind energy, Egypt also has a great potential for it as well as better plans for its expansions, since the cost
of wind energy is relatively more affordable than that of solar energy. Even though Egypt has leading position in
wind generation compared to EU and MENA region, the development is still low when compared with the
installed capacity. However, the most recent strategy from the Egyptian Supreme Council aims to have 12% of
total electricity generation in 2020 coming from wind, which reflects a shift in policy.
The growing demand for energy in Egypt is driven by population growth as well as economic growth, and these
will continue to drive increased demand for energy. Given this fact, energy intensity must be the major focus of
policy.
The Water Situation

The World Bank forecasts that Middle East per capita water availability will fall by half by 2050, to just 550m
3/y. Absolute water scarcity is forecast by as early as 202521. The government forecasts that Egypt would need
water resources totaling around 86bn m 3 by 2017 if it is to meet fast-rising demand, but a state-commissioned
report estimates that the country is only likely to have access to little more than 70bn m 3.
18 United Nations development Programme, UNDP

19 The Egyptian National Competitiveness Report, 2010
20 The UNDP Situation Analysis, Key development Challenges Facing Egypt 2010
21 The World Bank
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The problem is being compounded by issues similar to those being faced by countries upstream, such as Sudan,
Ethiopia and Uganda. Increasing water demand there, resulting in a desire to extract more water from the Nile,
may mean less water for Egypt and rising regional tensions.
This possibility has become more acute, in light of an agreement between five upstream Nile Basin countries to
question the water rights allocation from the Nile. A framework agreement signed between four Nile Basin
countries on May 14 2010 —Tanzania, Uganda, Rwanda and Ethiopia — and then acceded to by Kenya, has
proved highly controversial for both Egypt and Sudan.
With Nile resources under pressure due to the upstream dispute, Egypt’s government has put pressure on the
agriculture sector to rationalize water use. For water-intensive crops like rice — which accounts for 20% of the
55.5bn m 3 per year water allocated under the Nile treaties, this is proving to be a major challenge.
Therefore, Egypt has embarked on a program to overhaul and expand its creaky water infrastructure, and has
restructured the government framework for the industry. International donor agencies are heavily involved in
this, providing technical support and major project funding. Parliamentary approval in April 2010 of a public-
private partnership (PPP) law will lay the foundation for privately financed and operated water projects,
concentrated in the wastewater and desalination sectors.
Egypt signed an agreement for its first PPP project in wastewater treatment in 2009. An Egyptian/Spanish joint
venture (JV) was awarded the contract to build and run the New Cairo Waste Water Treatment Plant. Two more
wastewater PPPs are in the pipeline, with pre-qualifiers already under consideration for one and the bid
deadline for the other imminent. If these PPPs are regarded as a successful, others are likely to follow.
Key PPP projects include Alexandria West wastewater expansion project, which is due on stream in 2014. The
Abu Rawash wastewater treatment plant, on which BOT methods were due to be deployed to provide an
800,000 m3/d increase in capacity, is being revised and the Housing Ministry will restart the prequalification
process in early 201122.
A master plan for water and sanitation up to 2037 which is supported by the World Bank has been finalized.
This prioritizes potential water projects according to socio-economic need. The project includes four
governorates where two of them are in Upper Egypt. Both The National Organization for Potable Water and
Sanitary Drainage, as well as The Holding Company for Water and Wastewater are implementing the project.
The Egyptian government’s National Rural Sanitation Master Plan is organized in order to achieve 100%
sanitation coverage in all rural governorates by 203723.
Egypt is on course for a sustained increase in water production over the next four years, with more than 1bn m 3
per year likely to be added by 2014. The only downside risk is the use of PPP structures, with which Egypt has
only limited experience up to now. If problems emerge in the financing of these BOT schemes, then the
timetabling of some of these key projects could be upset. For now, however, we are confident that the outlined
projects will be implemented and that Egypt will be able to meet a water production target of 7.23bn m 3/y by
2014.
Climate Change
Another issue adding to the severity of the water problem. As a result of climate change it is likely that the
average Nile flow will change. The Nile discharge in Lake Nasser is very sensitive to relatively small changes in
rainfall in the basin. Studies have shown that an increase of 10% in average annual precipitation would lead to
an average increase in annual flow of 40%. Similarly a decrease of 10% in precipitation would lead to a
reduction of the annual flow with more than 50%. More than 70% of the cultivated areas in Egypt depends on
low-efficiency surface irrigation systems, which cause high water losses, a decline in land productivity,
waterlogging and salinity problems.
Moreover, unsustainable agricultural practices and improper irrigation management affect the quality of the
country’s water resources. Reductions in irrigation water quality have harmful effects on irrigated soils and
crops. A major challenge is to close the rapidly increasing gap between the limited water availability and the
22 The Egyptian Environmental Affairs Agency

23 World Bank, 2011
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escalating demand for water from various economic sectors. The rate of water utilization has already reached its
maximum for Egypt, and climate change will exacerbate this vulnerability.
The following table summarizes the Environmental dimension

Environmental  Water scarcity and  May directly affect  Need to be mindful
fast-rising demand the feasibility of of Environmental
for water resources chosen project degradation and
not likely to be met in health risks as they
the near future may have a
 Rising tension with significant impact
the Nile basin on project
countries, may mean
Egypt's Nile resources
are under pressure
 Water rationalization
may have a negative
impact on some water
intensive crops such
as rice
 The government has
embarked on the
overhaul of creaky
water infrastructure
 Environmental health
risks prevalent
 The government is
taking steps to tap
into Egypt's great
potential for
renewable energy
production
Indicator legend
Bad Average Good
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Legal/Regulatory Environment
Egypt’s legal system is founded on both Islamic and civil law concepts with substantial European influences. It
is complex and at times bureaucratic and inefficient.
Overall, the commercial court system remains somewhat unresponsive to the needs of foreign investors and the
private sector as a whole. In general, arbitration – whether domestic or overseas – is preferable to seeking
dispute settlement through the court system. However, even if arbitration rules in favour of the foreign
investor, the losing party can appeal arbitral decisions in Egyptian courts. If no specific dispute settlement
procedure is mentioned, any future dispute with a government party will go to the government’s Council of
State – a government agency that reviews the constitutionality of proposed legislation.
Protection Rights of the Investor

Property Rights
The legal system ensures adequate protection for property, though laws governing real estate ownership are
highly complex. It was calculated in the year 2000, that the process of registering a property on desert land
could take 6-14 years. However, property is a key focus of the government’s reform process: property
registration costs have already been slashed from 12% of the value of the property to 3%, and the government
has talked about introducing a flat fee, probably of just EGP1,000.
There are no restrictions on foreign ownership of non-agricultural real estate in Egypt. The Investment
Incentives Law guarantees against nationalization or expropriation of investment projects.
Foreign and domestic private firms have the right to establish and own business enterprises and engage in all
forms of remunerative activity, however there are some limitations such as restrictions on imports unless there
is an Egyptian partner. Although the government has little track record of seizing foreigners’ property, local
authorities have in the past expropriated land from private firms.
Legal regulations
There are not any specific laws and regulations dealing with vegetable and fruit packinghouses or cold stores,
except those dealing with food safety and environmental requirements and regulatory issues. In addition, all
contractors and designers will be required to be licensed in Egypt and meet all Egyptian codes, regulations and
standards as defined by local, regional and national authorities.
Pesticide residues Regulations

Regulations governing pesticides, pesticide registration and use are the responsibility of the Ministry of
Agriculture and Land Reclamation. The Division of Pesticide Residues and Environmental Pollution (DREP),
an office of the Central Agricultural Pesticides Laboratory (CAPL), is charged with analyzing pesticides and
chemical contaminants in foods.
Corruption
Egypt is one of the 30 countries that signed the United Nations Convention against Corruption in Merida,
Mexico, on December 9, 2003. The treaty came into force on December 14, 2005.
Egypt has various institutions that have roles to play in fighting corruption, such as, the Administrative
Authority Council, the Central Auditing Agency, Administrative Prosecution Authority, and Public Funds
Prosecution. A committee of integrity and Transparency was established in 2007 with a mandate to formulate a
strategy for combating corruption. However, lack of independence, access to information, protection of whistle
blowers and lack of clear mandate of the agencies has crippled their impact in fighting corruption.
Accountability and transparency is very weak in the legal/ regulation system and its implementation. This
includes accountability of the government and Parliament, despite the fact that there are regulations to govern
conflict of interest and asset disclosure. Moreover, there is a lack of access, creation and circulation of
information. A UNDP report has identified, among other factors, the weak civil society monitoring capacity
Page 21 of 181
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especially in CSO networks, weak professional journalism on corruption and no protection for whistle blowers
and overall impunity and marginalization of the poor in rule of law and access to justice as the power context by
which corruption exists. .
In the most recent Corruption Perception Index, Egypt ranked at 93rd place out of 180 states surveyed in
Transparency International's Corruption Perceptions Index 2010, i.e. near the middle, comparing unfavorably
with regional peers. "We would be encouraged to expect a better result thanks to the positive information
regarding the new Prime Minister Dr. Essam Sharaf, in terms of his integrity, competence and previous track
record in public service , as well as the Ministers in his cabinet"24
Country CPI
Qatar 19
UAE 28
Oman 41
Saudi Arabia 50
Egypt 93
Libya 146
Sudan 172
Source: Transparency International
The following table summarizes the Legal / Regulatory dimension

PESTEL Indicator Reason Implication for Risk Areas to Mitigate
Dimension Client
Legal  Commercial court  Lack of clarity as to  May choose to advocate
system responding whether any new with government to
poorly to the needs of government will introduce more reforms
foreign investors and push through and consistent
the private sector investor friendly application of law, from
 Laws tend to be policies or reform a corporate
highly complex efforts responsibility
 Government perspective
attempting to reform
by slashing costs and
facilitating processes
 Bureaucracy issues
and transaction
delays are notoriously
common
 Risks as to what
direction the new
government will take
towards encouraging
or discouraging
foreign investments
Indicator legend
Bad Average Good
24 Transparency International , Corruption Perception Index CPI 2011
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Conclusion
PESTEL Dimension Indicator Conclusion
Political It can be seen that the current political scene

is unstable due to the demonstrations, as well
as the upcoming elections.
Economic The Egyptian economy is hindered as result of

the revolution, however there is an increased
demand for projects along industries.
Societal There is an observable prominence on poverty

alleviation which reinforces the SALASEL
project’s agenda.
Technological A speedy increase in the number of internet

users is detected, in addition to a predicted
boom in the Egyptian energy and utilities
infrastructure sector.
Environmental The feasibility of SALASEL project may be

directly affected as a consequence of water
scarcity. However, various wastewater
treatment projects are expected to resolve this
issue. Furthermore, The government is taking
steps to tap into Egypt's great potential for
renewable energy production .
Legal There is uncertainty regarding the new

government’s approach towards foreign
investments, as well as a large predicament of
Bureaucracy issues and transaction delays.
Page 23 of 181
Section II: Agro Industry
Analysis
Egypt is one of the oldest countries to develop an agriculture sector in history. Until today, agriculture remains
a key contributor to livelihood for a significant portion of the Egyptian population. Globally, it has been found
that as the GDP per capita increases (such as in developed countries), the share of the agriculture sector in GDP
decreases while the share of the agribusiness in GDP increases. This is because the importance of the
agriculture declines as GDP per capita increases from 50% at low levels of incomes to approximately 5% at high
levels of income. Studies reveal that the share of the agribusiness -which includes the agro industry and its
related services- is generally rising as it becomes much more important than agriculture for a country.
Nevertheless, since the agribusiness sector is dependent on the output of the agricultural activities, the
importance of the agro production (agriculture) sector remains high as it supports the emergence and the
growth of an industrial sector in agribusiness25. According to IFAD, despite the decline of agriculture
contribution to GDP to about 17% in recent years, it accounts for 20% of total exports and foreign-exchange
earnings. Moreover, the related industries such as processing, marketing and input supplies contribute an
additional 20% to GDP.26
World development trends, globalization, climate change, and privatization mean that poverty reduction and
the interrelated adaptations to climate changes are becoming increasingly critical in the years to come. The
World Bank Development Report of 2008 has in this context put the agriculture and the agro industry
development high on the agenda as effective means of poverty alleviation. The same was also emphasized in a
recent UNIDO (with FAO and IFAD) publication on agro industry for development.
The agro industrial sector is here defined as the subset of the manufacturing sector, which is taken to involve
the processing of raw materials and intermediate products, derived from the agriculture, fishery and forestry
sectors27. In turn, agro industry forms part of the broader concept of agribusiness that includes suppliers of
inputs to the agricultural, fisheries and forestry sectors and distributors of food and non food outputs from agro
industry. For purposes of this pre feasibility study, Agro industry involves the use of the agriculture products-
post harvest-as inputs for the production of processed food products where the level of processing actually
differs from one product to another based on the type of the final commodity produced. In addition, the
processing industry has not been limited to the direct processing of the agricultural products, but it has also
expanded to include several inputs such as packaging material, fertilizers, pesticides and irrigation supplies28.
However, for purposes of this study and the related reports, the reference will be made to only processing of
agricultural products when we address agro processing. This is because by PwC definitions, other elements as
mentioned would correctly fall under other completely different industries (e.g. packaging materials is under
paper or plastic manufacturing industry, fertilizers is related to chemicals industries, etc)
The Agro Industry in Egypt

The agriculture and the agro industry sectors in Egypt are closely related to GDP per capita. A growing per
capita GDP reflects the rising purchasing power of consumers, which bodes well for the food and beverage
industry in particular by way of higher demand. Due to economic reform and pro-investment policies
experienced in the past few years, Egypt’s per capita GDP has grown considerably over the past 5 years. Overall,
GDP per capita increased at CAGR at 12.2% over the past 5 years, increasing from EGP 8.5 thousand in FY2006
to more than EGP 15 thousand in FY2010. This fact is illustrated as follows:
25 Food and Agriculture Organization (FAO) and Unites Nations Industrial Development Organization (UNIDO), “Agro Industries for
Development”, 2009
26 Egypt: Smallholder contract farming for high-value and organic agricultural exports, IFAD
27 UNIDO, IFAD and FAO: “Agro industries for Development”, 2009
28 Ministry of Agriculture and Land Reclamation MARL, “Sustainable Agriculture Development Strategy towards 2030”
Page 24 of 181
GDP per capita EGP
25,000
19,278
20,000
17,380
15,275
15,000 13,570
11,908
10,120
10,000 8,579 GDP per capita
EGP
5,000
0
FY06 FY07 FY08 FY09 FY10 FY11* FY12*
18% 18% 20%
14% 14%
13% 13% 15%
11%
10%
5%
Growth
0%
FY06 FY07 FY08 FY09 FY10 FY11* FY12*
Source: Ministry of Finance, Egypt by IMF
Furthermore, social & demographic changes in Egypt have influenced the demand and the consumption pattern
for processed food output. Population growth and the higher urbanization rates, the increasing ratio of working
women, in addition to the large number of the Egypt’s middle and upper class changing their dietary patterns
into more balanced healthy diets, have engendered greater demand for high value commodities, processed food
products and pre-prepared foods. This has resulted in the large expansion witnessed in the Egyptian food
processing industry. On the other hand, on the supply side, Egypt has a reasonable endowment of high quality,
indigenous raw materials such as exotic fruits and wide variety of vegetables, which forms the basis for the
important food processing sector29.
Industry Overview
Egypt has favorable characteristics and natural resources that provide the basis for striking potential for growth
of the agro industry sector. These are mainly identified as follows;
29 Industrial Modernization Center IMC: Egyptian Processed Food sector Review, Final Report, April 2005
Page 25 of 181
 The strategic geographical location, in midway between east and west, situated on the
Mediterranean, which gives Egypt a preferential access to the important international markets
including the EU and the Arab region30.
 Climatic conditions and the nature of the agricultural seasons which makes it possible to cultivate
different crops in off-season periods of high demand markets such as Europe.
 In addition, Egypt is endowed with an agricultural sector that is capable of providing the food
processors with comparatively low priced, high quality agricultural products and this
competitive advantage has greatly contributed to the increase in volumes of the agricultural processed
products whether used for local consumption or produced for export.
 Moreover, the GOE has an emphasis on the development of the agricultural sector and its
land reclamation efforts over the last decade through the wide investment projects in infrastructure and
channeling water to desert lands.31 Such efforts have added an additional 277,000 feddan over the
recent years, bringing Egypt grand total cultivated land area to 6.8 million feddan.
According to the Agribusiness Report 2010 by the General Authority for Investment GAFI, there are 8,060
companies operating in the agro industry sector in Egypt32, with an estimated 6 million employees, which is the
largest agro industry workforce in the Middle East region, representing ~30% of the country’s total labor force.
Moreover, Egypt’s agro industry exports that was worth EGP 10.8 million in 2009, represents 12% of the total
Egyptian exports, where most of the exports were targeted towards the Arab world with the leading export
destinations being Saudi Arabia, Libya, and Sudan33.
However, The agro processing industry in Egypt still needs further development efforts since it’s a growing
attractive industry that shall provide Egypt with large employment opportunities, raise farm returns through
the strong synergies between the agricultural and the manufacturing sectors, promote entrepreneurship
especially for agro processing SMEs, and realize food security for rural households. All that will further promote
Egypt’s socio economic conditions, alleviate high poverty rates, enhance export performance and increase the
country’s growth rates34.
The Food Processing Sector

The food processing industry is one of Egypt’s main manufacturing sectors. The food processing sector includes
around 5,ooo companies, employing some 250,000 people35. In addition, it is one of the most dynamic and fast
growing sectors in the economy with an annual growth rate of over 34% in 201036. The sector in Egypt
comprises of a wide range of processed foods, where the largest segments are frozen and dehydrated fruits and
vegetables (see below), herbs and spices, canned foods and pickles including olives, and juices & fruit
concentrates. It also includes other segments such as dairy products, processed meat and fish, breakfast cereals,
soft and alcoholic beverages, confectionary and baby food, and oils and fats37.
However, the food-processing sector in Egypt is characterized by a major disadvantage. As can be seen from
the table below, significantly low percentage of the agricultural output undergoes processing, preservation,
preparation and industrialization, in addition to the wide disparity in the processing level for each type of crop
produced. Based on 2007 output data, and the level of processing for each product as a percentage of tonnage
produced is indicated:
30 General Authority for Investment GAFI, “Agribusiness Report”, 2010

31 Projects like for example: Toshka, lake Nasser, ..etc
32 These include food processing and non-food companies that fall under agri-business
34 UNIDO, IFAD, and FAO, “The Importance of agro industry for socio economic Development and Poverty Reduction”, May 2008
35 Agricultural Engineering Research Institute AERI: “Food Processing, packaging, cold storage and Agricultural machinery in Egypt:
Recent Situation Report”, 2009

37 FIAS, “Pre feasibility Study for the Establishment of a Model Industrial Estates Program in Alexandria, June 2007, Egypt
Page 26 of 181
Product Production (000 tons) Processed %
Tomatoes 8,600 0.7
Potatoes 2,300 7.8
Onion and Garlic 1,600 1.1
Other Vegetables 9,400 1.8
Fruits (including dry dates) 9,800 0.9
Legumes 1,400 0.3
Meat and Poultry 1,500 0.3
Milk 5,000 25
Source: MARL, Food Technology Research Institute
As seen, milk processing into cheese products comprises the largest share, 25%, among the other processed
products. Despite that, Egypt now is a net importer of cheese products because of the large market demand
unmet by the local production. While on the other hand, other products like tomatoes, onions and fruits go
through a minor level of processing that is not even exceeding 1% of the volumes produced. For example, Egypt
imports processed tomato products, yet it is the fifth largest producer of tomatoes in terms of fresh tomatoes
produced annually38.
The processed food products vary in type, composition, quality and distribution, resulting in a difficulty of a full
market segmentation of the Egyptian food processing industry. The emergence of the fresh produce industry,
particularly fresh cut/packed fruits and vegetables is a new and rapidly developing segment of a simple form of
processing of fresh produce that is not sufficiently yet developed in Egypt. On the other hand, the processed
food industry in Egypt is a more developed industry that holds great potential, with the dried and frozen fruits
and vegetables being two of the largest segments especially for some crops like onions, dates, oranges, beans
and other legumes. This is evident as Egypt is a major exporter of dried onions where the primary export
destinations are the Middle East, Russia, and the United Kingdom. In addition, it’s a traditional supplier of the
international markets in dried herbs and spices with an annual export value averaging US$ 30 million39. It’s
worth noting that Egypt has several drying plants located in Alexandria, and in Qena and Assuit in Upper
Egypt.
Therefore, for purposes of this pre feasibility study, PwC will focus in this analysis on the horticulture products
made for processing, mainly fruits and vegetables, with a detailing to their production and processing levels,
their waste generation amounts and their export trades volumes.
Trade in Processed Food Sector in Egypt

During the last decade, Egypt has taken wide steps to liberalize the economy and integrate with the global
market. Egypt has initiated rapid and full implementation of WTO rules and regulations, and the pursuit of
multilateral, regional and bilateral trade agreements, which allowed the country to gain access to the world’s
markets, giving investors in the country a base for increasing exports. Egypt also accelerated the improvement
of trade and investment procedures in line with international best practices.
Based on Egypt Competitiveness report in 2004-2005, the joint effects of the devaluation of the Egyptian
pound in 2003 together with the subsidy support and the industry efforts to enhance the export performance of
the Egyptian food products, have resulted in increased exports and more differentiated products and demand
for Egypt40. In addition, the combination of targeted economic reform measures41 and private sector led
expertise has helped the Egyptian processed food sector achieve further growth in exports in recent years.
In fact, the Egyptian food processing exports enjoyed a boost during the last few years with fairly strong growth
rates since 2002 due to its better performance which is reflected in the increasing value of exports. According
to the Ministry of Trade and Industry, Egyptian processed food exports in 2007 was worth EGP 7 billion up
from EGP 5.3 billion in 2006, and approximately 4 billion in 2005. Below is a chart that shows the export
performance of the Egyptian processed food products for the past few years, and the estimated forecasts in the
short run42:
38 Global Development Alliance, 4000 Tons per Day Project, by d.anderson, published in 30/9/2008
39 Egypt “Wiram Report”, 2004
40 Industrial Modernization Center IMC, “Food Export Strategy Study: Final Report”, May 2006, Egypt
41 The devaluation of the Egyptian pound, the support subsidy in addition of the liberalization of trade activities through the several regional
and multilateral trade agreements

42 Forecasts might be subject to significant variance from actual achieved in 2011 due to the political and economic instability in the country
post the January 25th revolution.
Page 27 of 181
Export Growth of Processed Food
25
20.2
20
17.4
14.8
15
12.6
10.8
9.9 EGP Billion
10
7.3
5.3
5 4.1
2.6
1.08 1.4
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Note: (Actual until 2009, Expected for 2010, Targeted up to 2013)

Source: Chamber of Food Industries
Although the food processing industry in Egypt witnessed a large expansion during the last decade, and the
processed food exports held the position of the second largest share with 6.85% of total Egyptian manufactured
exports43, yet this industry still has a long way to go given the significantly low percentage of processing
compared to total output. On the other hand, the fresh produce industry in Egypt is also developing; fresh
products exports have also been on the rise since 2005. Below is a chart that indicates the value of total exports
of the fresh produce in EGP from 2005 to 2010:
Total Exports of Fresh Produce

12000 11.4
10.5
10000 9.4
8000
6.6
6000
4.6 EGP Billion
4000
2000
0
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Note: (Season July 2005-2010).

The major types of exported food products are traditional fresh agricultural products that include vegetables
like tomatoes, potatoes, green beans, onions, garlic, artichokes and others, in addition to other fruit crops for
43 As the Egyptian manufactured exports sector is led by the mineral fuels and oil products sector with 31.3%.
Page 28 of 181
export like grapes, pomegranate, strawberries and citrus fruits. However, other nontraditional products fairly
contribute to the total Egyptian exports, which include olive products, cut flowers and other fruits and
vegetables44. As an indicator, breakdown of export commodities for 2009 based on FAO statistics database is
illustrated below. The unit value per ton in US$ indicates that fruits and vegetables, fresh and processed,
command some of the highest value in export markets.
Rank Commodity Quantity Unit value

(tonnes) ($/tonne)
1 Oranges 821,812 602
2 Rice Milled 560,430 794
3 Onions, dry 235,151 717
4 Potatoes 215,078 676
5 Sugar Refined 170,018 645
6 Grapes 135,586 1662
7 Cheese of Whole Cow Milk 106,198 3241
8 Beans, dry 98,505 936
9 Vegetable Frozen 83,077 1234
10 Rice Broken 82,497 289
11 Tobacco Products Nes 70,280 1122
12 Strawberries 66,992 1291
13 Food Prep Nes 64,516 1524
14 Flour of Wheat 56,938 432
15 Frozen Potatoes 54,591 892
16 Sugar Confectionery 52,912 1730
17 String beans 45,238 1225
18 Fruit Fresh Nes 42,853 1144
19 Bagasse 42,689 476
20 Olives Preserved 37,090 1684
Destination Markets
Egypt’s unique geographical position enables exporting to worldwide destination. Despite that, there is a
higher concentration in exports to the neighboring Arab countries.
This can partially attributed to the fact that after the establishment of the Arab common market, Egypt
removed customs on agricultural products trade among the market member countries. Below is a list of the top
10 importing Arab countries45:
Regional Shares of Egypt Exports, 2009

12%
3% Arab Countries
EU countries
11%
74% USA
Other countries
44 Ministry of Agriculture and Land Reclamation MARL, “Sustainable Agriculture Development Strategy towards 2030”
45 (n.d.) “Trade Guide For Egypt”, retrieved from Muslim Trade Network”, 2011
Page 29 of 181
Top 10 Importing Arab Countries
Saudi Arabia
Libya
Iraq
Sudan
Jordan
Yemen
Lebanon
UAE
Syria
Kuwait
The EU, on the other hand, is considered Egypt’s main trade partner as ~30% and more of the total Egyptian
exports are directed to the EU’s 27 member countries. The agricultural products represent 8.5% of total
Egyptian exports to the EU. The main export destinations for Egyptian products in the EU are Italy, Spain,
France, Germany and the UK. In 2010, the exports of Egyptian agricultural products to the EU were valued at a
total of 637.5 million Euros, higher by 2% than in 2009. The products subject to free access to the EU market
represented 66.5% of the total; an additional 15% was represented by products benefiting from duty-free and
quota-free treatment for an export season that in fact does not overlap with EU production (e.g. tomatoes,
courgettes, artichokes and table grapes). The main agricultural products exported by Egypt to the EU are fresh
table grapes, potatoes, sweet oranges, beans, onions and strawberries.
Top 10 Importing EU Countries
Germany
Italy
UK and North Ireland
France
Spain
Holland
Greece
Belgium
Poland
Bulgaria
Moreover, Egypt's exports to Russia highly increased from January to September 2007 by 65%, where most
Egyptian exports were vegetables and fruits, while for the same period Russian exports to Egypt rose by 34%;
and most imports were wheat, representing 41% of Egypt's total imports46. Below are the top 20 destination
countries of agricultural crops for the year 2009-2010:
Exported Quantity Top 10 Other Exported Quantity
Top 10 EU Countries
(1000 tons) Countries (1000 Tons)
Russia 320 Saudi Arabia 493
United Kingdom 223 Syria 234
Italy 130 Libya 201
Holland 124 Arab Emirates 105
Republic of Ukraine 114 Iran 93
Belgium 104 Kuwait 92
Turkey 75 Sudan 80
Greece 69 Lebanon 63
Germany 42 Iraq 53
Romania 33 Jordan 46
46 “Economic Relation , Retrieved from Egyptian Russian Relation”, 2009
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Horticulture products: Fruits and Vegetables
According to the baseline survey completed for the Salasel program47, vegetables are grown in Egypt on an area
of about 560, 000 feddan and contribute 10.5% of the value of horticulture crops, whereas fruits are grown on
an area of about 1 million feddan (0.4 million ha. As per baseline report, page 16).
In recent years, Egypt has witnessed evolution in its production volumes of particular agricultural products.
FAO statistics database48 indicates that Egypt has a global rank in a number of products, most of which are
horticulture crops, which are shown in the below table :
Rank Commodity
1 Dates
1 Figs
3 Artichokes
3 Eggplants (aubergines)
4 Tomatoes
4 Peas, green
4 Broad beans, horse beans, dry
4 Lupins
5 Onions, dry
5 Beans, green
5 Pumpkins, squash and gourds
6 Strawberries
6 Watermelons
7 Okra
7 Chillies and peppers, green
7 Tangerines, mandarins, clem.
7 Peaches and nectarines
7 Other melons (inc.cantaloupes)
8 Garlic
8 Anise, badian, fennel, corian.
9 Oranges
9 Cucumbers and gherkins
10 Fruit Fresh Nes
11 Apricots
11 Spinach
13 Chillies and peppers, dry
13 Mangoes, mangosteens, guavas
13 Grapes
14 Bananas
14 Cabbages and other brassicas
15 Cauliflowers and broccoli
47 Baseline Investigation of Horticulture Value Chain in Upper Egypt, Final Report, May 2011 by Entrust Development & Management
Consultants
48 Data available only up to 2009
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According to the baseline study of Salasel, horticultural produce has a unique nature which warrants special
treatment and handling post-harvest. This is mainly due to the perishable characteristics of the products, their
sensitivity to handling, the need for special storage requirements with regards to temperature and humidity as
well as the seasonality of the produce. As a result they are mostly consumed fresh. Nevertheless, market data
indicate that there are increasing volumes of fruit and vegetables undergoing processing, and much of that is
exported.
The Ministry of Trade and Industries database indicates that strong Egyptian food processing exports are
mainly in dried vegetables (particularly dried onions), frozen vegetables, and fruit juices, while the major
import categories include edible oils, dairy products and prepared fish49. Below is a table that indicates the most
exported commodities in 2009 compared to 2008, in value in EGP million.
Commodity 2008 2009 % Change

Juices 371 388 5%
Frozen Vegetables 343 388 13%
Frozen & Preserved Potatoes 367 353 -4%
Dried Fruit 75 218 193%
Dried Onions 221 195 -12%
Frozen Artichokes 103 173 68%
Egypt ranks the 26th in global processed vegetable export. Considering the growth rate, it occupies the 17th
place and 3rd in the region following Jordan and Iran, noting that the domestic market grows by more than
20% per year. In consequence, the country expects a noteworthy increase of vegetables exports in dried onions,
olive oils, frozen fruits and vegetables (strawberries and artichokes), tropical juices and spices50.
Consistent with professional estimation, the volumes of Egypt’s exports of fruit and vegetables to the EU may
double in the foreseeable future. Hence, there are substantial possibilities for further growth of Egyptian food
products’ share on the EU markets. Nonetheless, Turkey is Egypt’s main competitor in the EU market in many
of the same segments of the horticulture produce that Egypt exports, which include frozen fruits and vegetables,
dehydrated vegetables, prepared/preserved tomato products, jams, spices, and olives & olive oil51.
There are six horticulture crops that will receive focus in analysis for purposes of this prefeasibility study . This
is mainly because they are grown in significant amounts in Upper Egypt that qualifies them to be considered for
further processing. Those are tomatoes, grapes, potatoes, onions, green beans and pomegranate.
FAO provides historical production data for 5 of the selected key crops, providing production quantities in tons.
The table indicates that over the decade, several of these crops witnessed significant growth, particularly
tomatoes, where Egypt ranks 4th worldwide in production. While the other crops have increased in production
over the years, the total volume remains slim for some of them, such as green beans and grapes, despite the
high market value they can be sold at, frozen or fresh respectively.
Item 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Beans,
201,628 214,887 215,000 229,171 235,485 318,277 259,610 330,257 247,336 300,000
green
Grapes 1,075,100 1,078,910 1,073,820 1,196,850 1,275,290 1,391,750 1,431,970 1,485,010 1,531,420 1,550,000
Onions,
762,993 628,376 754,856 686,345 895,491 1,302,130 1,119,890 1,485,930 1,728,420 1,800,000
dry52
Potatoes 1,769,910 1,903,130 1,985,320 2,039,350 2,546,610 3,167,430 2,312,790 2,760,460 3,567,050 4,000,000
Tomatoes 6,785,640 6,328,720 6,777,880 7,140,200 7,640,820 7,600,000 8,576,070 8,639,020 9,204,100 10,000,000
Currently, some of the output is consumed fresh locally like tomatoes, while other amounts are minimally
processed and directed for export markets like the dried onions exported to the EU. Thus, those horticultural
products hold great potential for Egypt for further processing throughout the value chain whether for local
consumption or export markets.
49 Industrial Modernization Center IMC, “Egyptian Processed Food Sector Review: Final Report”, April 2005
50 Agricultural Engineering Research Institute AERI: “Food Processing, packaging, cold storage and Agricultural machinery in Egypt:
Recent Situation Report”, 2009
51 FIAS, “Pre feasibility Study for the Establishment of a Model Industrial Estates Program in Alexandria, June 2007, Egypt
52 Data on green onions were not available on FAO database
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12,000,000
10,000,000
8,000,000 Beans, green

Grapes
6,000,000
Onions, dry
4,000,000 Potatoes
Tomatoes
2,000,000
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Industry Challenges
Egypt-EU Trade Restrictions of Processed Horticulture products
As a result of the EU-Egypt Association Agreement in 2004, Egypt's food exports to the European Union are
on the hike, rising 80% over the two years immediately after the signing of the agreement and continuing the
upward trend until 2011. Per terms of the agreement, the EU granted duty free access for pasta, cocoa
preparations, processed vegetables, tobacco and other products from Egypt. Egypt’s main exports to the EU
include oil seeds and oleaginous fruits, preparations of fruits and vegetables, and sugar confectionery, valued at
EUR 598m in 2009 according to Eurostat53.
Egypt in compliance with the EU import regulations
Given that all agricultural products sold in the EU, either imported or locally produced, must comply with the
EU requirements in terms of food safety through an integrated approach (from farm to fork) covering food and
feed safety, animal health and welfare, as well as plant health, it is emerging the need to produce and deliver
high quality products that meet the buyers’ expectations. This is due to the increase of global supply of
processed vegetables. Many of the quality and cost issues that are important are affected by policies,
regulations, and actions of the Egyptian government.
The Ministry of Trade and Industry records show that Egypt shipped approximately US$720 million (about
EGP 4.3 billion) worth of agricultural goods to Europe last year. In June 2010, a European Commission
regulation aimed for eradicating customs on almost all agricultural products imported from Egypt, however,
none of the exceptions are on Egypt’s most exported or highest valued crops.
In fact, late in July 2011, there occurred a riot among the Egyptian exporting companies of the agricultural
crops because of the EU ban on importing 31 types of the Egyptian agricultural products because the EU
claimed that the bacteria of the Ecoli spread among the European countries comes mainly from its imports
from Egypt. Thus, they imposed a ban on particular types of vegetables, legumes, seeds, and edible oils &
plants. However, it was later proven that the Ecoli initially existed in Europe based on the laboratory
examinations and tests of the sample products withdrawn, conducted by the Ministries of Agriculture,
Environment and Health in Egypt. The ban was lifted in September 2011.
53 BRICs and beyond: Egypt Crisis Sparks Food Supply Jitters in Europe, by International News Services , February 2011
Page 33 of 181
Egypt Trade Import Restrictions from the EU
The Egyptian Organization for Standardization and Quality Control (EOSQ) in the Ministry of Trade &
Industry has sole responsibility for establishing, adopting and publishing food standards and codes of
practice. While the EOSQ issues all product standards, it is the responsibility of the Ministry of Health and the
Ministry of Trade and Industry to apply those standards. Egyptian authorities claim that all product standards
and requirements applied to imported food are identical to those applicable to domestically produced
products. In fact, Egyptian authorities are stricter in enforcing product standards on imported food products
than on locally produced food products54.
On one hand, the GOE has put restrictions on its imports from the EU, since the bacteria of the Ecoli has been
initially existing in the EU countries. This has resulted in limiting its agriculture import products to only
products fit for human consumption, free from contagious diseases, and in compliance with its product
specifications.
On the other hand, the EU exporting policy does implement the Sanitary and Phytosanitary (SPS) standards55,
which are one of the non tariff barriers that aim also for assuring the quality of the product fits with the
importing country’s specifications and regulations. However, lately, the EU faced SPS market access problems
because of the dioxin contamination and the Ecoli outbreak earlier this year. As per the SPS Newsletter issued
this September, there was a huge need to communicate to all third countries -including Egypt- what was done
by the EU so that they could trust that the EU countries are trading only in safe products with many markets
worldwide and therefore there was no need to block the European products56.
Value chain analysis

The value chains lengths highly influence the final products’ prices. Plausibly, the longer the value chain, the
various the distribution channels are, and consequently the higher the final prices of given goods.
In Egypt, the value chain for horticulture produce can be simplified as below:
Small Wholesale Retailers

Producers markets
Final
Consumer
Market
Food Institution
Processors
Studies and reports indicate a number of challenges, and also opportunities that relate to each portion of the
value chain, in relation to horticulture production and processing.
Small producers: one of the major challenges of enhancing the agriculture production and food processing
activities in Egypt is the fact that the majority of landholdings is very small and lacks the economies of scale. It
is estimated that across the country, 50% of landholdings are less than 1 feddan (0.4 ha).57 In Upper Egypt,
even a higher percentage of the land is held by small farmers (or grown by tenants), where the average holding
ranges between 1.1 and 1.3 feddan in the six governorates of focus for the Salasel program.58 A number of
challenges arise from this reality:
 Production cost is high due to lack of economies of scale,
54 USDA, Global Agricultural Information Network GAIN, Egypt: “Food and Agriculture Import Regulations and Standards Report”, 2009
55 As per the WTO Agreement
56 Sanitary and Phytosanitary Standards “SPS Newsletter”, September 2011
57 National Investment Brief-EGYPT, High-Level Conference on: Water for Agriculture and Energy in Africa: the Challenges of Climate
Change Sirte, Libyan Arab Jamahiriya, 15-17 December 2008

58 Salsael Baseline Survey
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 The application of science and technology in production of crops is non-existent. Most farmers rely on
inherited practices and knowledge and traditional techniques, with no incentive for enhancing their
knowledge and learning,
 Farmers have very little or no power on the value chain dynamics and are price takers in most
incidence,
 Food processors or large traders for export markets (or purchasers of international chains for example)
find it highly difficult to approach growers on individual basis to secure contracts for purchase,
 The role of the government as regulator, enforcer, and service provider to the agriculture production
sector has diminished over the years.
In response, and in alignment with the millennium development goals aiming at poverty eradication, a number
of projects, spearheaded by development organizations in cooperation with the government authorities, have
been implemented in Egypt to tackle the above challenges to an extent. Several activities relating to forming
and enhancing the capacity of Farmer Associations have been completed over the past decade, including
activities to link them with international buyers and enforce contract purchase arrangements. Capacity
building of farmers and enhancing their technical knowledge, and adopting non-traditional crops production,
especially in Upper Egypt have also taken place. As a result, and by 2011, it is expected that some improvement
has been achieved in the challenges facing the small farmers. The Salasel program was established to take this
further and enhance the performance of the following segments of the value chain.
The Wholesale markets: most output, particularly fruits and vegetables, are still handled through the
various wholesale terminal market centers. The largest two wholesale markets in Egypt are El Obour and Sixth
of October. Wholesale markets in Egypt present a physical trade exchange in commodities. The existence of
such market centers has an impact on the prices of the traded goods as prices are set by this market and
according applied through retailers (small traders and stall merchandisers) and on to final consumers. The
limited number of wholesale markets and their concentration near Greater Cairo (where the largest consumer
base resides) creates problems for consumers across the country. It is argues that in Upper Egypt for example,
output of the local farmers is transported to El Obour market and maybe subsequently returned back to Upper
Egypt after it has been sorted, processed and repackaged, and sold at a much higher price. The limited
transportation infrastructure between the South and North of Egypt, despite major improvements over the past
two decades, is still an impediment and causes significant losses of produce during transport, combined with
sub-optimal handling practices.
Food Processors: although it is indeed a growing sector in Egypt with much more potential to be achieved,
there are a number of challenges facing this portion of the value chain. In addition to the challenges of having
to deal with small landholders, and the quality and specifications of the required produce, the industry players
face a number of regulatory limitations that might act as a set back to the growth of this sector. For example,
there are numerous government authorities and bodies that have a mandate relating to food safety and
production inspection. In reality, this creates practical difficulties for producers who have to manage and
handle many overlapping regulators and regulations as well. The limits on building industrial facilities on or
near farm lands, while understood, also present a challenge for food processors. The factories are located very
far from the farm and hence produce has to be transported long distances in most cases, which increases costs
and reduces efficiency due to waste during transport and handling. Thirdly, ensuring the quality and quantity
of the desired produce is a challenge given the fact that small landholders lack the funds, technical knowledge,
and institutional capacity to set and manage quality throughout the production process from input material, to
pesticides, fertilizers, irrigation, harvest, handling, packing, etc.
On the upside, a recent regulation to create a Food Safety Authority than unifies the bodies overseeing this
sector was issued, in September 2011. This is most welcome move as seen by the food producers as it will surely
enhance one problem area that they have to deal with. On the other hand, business associations of food
processors, such as the Chamber of Food Industries, is putting efforts in leveraging the power of the industry
players to influence the regulatory landscape of the industry, hence taking incremental steps to overcoming
such challenges with time.
Retailers: traditionally, fruits and vegetables had been sold in traditional area markets (souqs), through
roaming stall traders, or fruit and vegetables shops or kiosks in various urban areas. Those typically source
from wholesale markets. The past decade or so witnessed the introduction of the hyper market in Egypt, with
various local and international chains spreading across the larger cities. The hyper markets, and to some extent
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the smaller version of super markets, present the Egyptian consumer with higher end product, both fresh and
processed at a price that is convenient for the middle and upper classes. Such large scale retailers have
significant high demand on products, and can command a significant portion of the purchase contracts for
growers. The downside is that given their large volume, they usually have significant power in price setting and
squeezing the margins out of suppliers.
The Institutional markets: these include restaurants, hotels, hospitals, schools and other institutions. They
purchase major quantities of fresh and processed horticulture products. Those are also fragmented to a largest
extent and the bigger challenge is connecting them to the suppliers, either growers or wholesalers.
As a result, the final consumer in Egypt is a price taker, with very limited power to influence the price or
quality of the offered product, fresh or processed. Recently, with the global hike in basic commodity prices, and
in 2011 with the overall shake in the economy as a result of political turmoil after the revolution, the fruit and
vegetable prices, along with other food stables, have been at highest levels for Egyptian consumers. Although
there is a regulation against monopoly and uncompetitive practices, and a Consumer Protection Agency, the
impact of these regulations is still to be felt by individual consumers across the country.
Futures contracts are one way in addressing the several issues along the value chain and they are seen to be the
most efficient way to reduce the cost of the final food products as they shorten the length of the value chain.
Signing a contract with small farm holders would decrease the cost for food processors, and consequently for
the final consumer as it will also benefit the small farmers that they will grant selling their crops annually with a
pre determined price which could be higher than the traditional selling process.
International and Regional Market Trends

Consumer Preference on Global Level
Taking the position that any producer may now be dealing with a global consumer, it is worthwhile to assess the
latest trends in consumer behavior relating to the consumption of fruits and vegetables. Below is a figure that
shows the consumption of fruits and vegetables in 2010 in different countries globally:
100%
90%
80%
70%
60%
50%
Fruits
40% Vegetables
30%
20%
10%
0%
US Spain France Mexico Japan Russia Brazil South China India
Africa
Source: Goodwin 201059
With the exception of Spain and Mexico, most consumers consume more vegetables than fruits in their
dietary systems. The portion of fruit and vegetables compared to other food groups (proteins, carbohydrates,
etc) will very much depend on two major factors; the climatic conditions of the country, and the average income
59 Goodwin, C. “World Comparison- Fresh vs. Processed food consumption”, 2010
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level and hence living standards of the population. Other factors, such as health consciousness and
environmental factors may also contribute to the dietary composition for consumers. As consumers, and entire
countries, evolve in the income spectrum from low to middle or high-income categories, their consumption
patterns changes and demand for higher prices food items, fresh or processed, increases.
Moreover, as for the consumption patterns of the fresh fruits and vegetables versus the processed, it was found
that in Canada, the consumers tend to buy more processed (dried) fruits, particularly berries60. For example,
processed blueberries witnessed an increase of 16% in the diet since 2007. Thus, the increase in processed fruits
was mainly influenced by the higher intake of dry fruits. In 2008, ~50% of the Canadian females and 37% of
males reported consuming fruits and vegetables 5 or more times per day. As for their consumption of fresh
fruits and vegetables, it has been found that carrots, lettuce, onions and tomatoes, which represented 27% of
the Canadian diet of fresh vegetables, decreased in 2008 by 9% compared to its previous year. With an
exception of potatoes, that continued in its popularity, representing 44%of the fresh vegetable diet. While on
the other hand, the consumption of potato chips and frozen potatoes has risen in their diets61.
In the USA, people consume 31% more packaged food than fresh food. Below is a graph that shows the annual
food spending in US, by category in 2006:
Annual Food Spending at home- by Category
$368
Other food at home (36%)
$446 $1,212 Meats, poultry,fish and eggs

(23%)
Fruits and Vegetables (17%)
Cereals and Bakery products

$592 (13%)
Dairy Products (11%)
$797
Source: Consumer Expenditure Survey
According to McKinsey and Company, the Thai consumers highly focus on convenience, health, wellness and
food safety, however, processed food consumption is increasing. As per the Thailand Board of Investment in
2007, the domestic demand for processed food products increased by 12 %.
The economic slowdown since 2008 has led to consumers spending less on nonessential food items. More
people are now opting for low cost dining options and home cooked meals in favor of restaurants. This was
supplemented by the global awareness of health foods. These trends gave an impetus to frozen foods as well as
organic and diet foods (for niche areas). The frozen food sales increased worldwide during the recession period,
as most consumers preferred eating at home rather than dining outside due to reduced household budgets. In
addition, frozen foods are perceived as a good option to cut expenses on fresh food, and also reduces waste and
trips to the supermarket. Also, frozen foods are easy to prepare, and as good as fresh food in most cases.
60 Berries here include cranberries, blueberries, strawberries…etc

61“Fruits & Vegetables consumption” Retrieved from Statistics Canada, 2010
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Going forward, growing consumer demand for convenience food and increasing health consciousness are
expected to continue driving growth in this sector. The frozen food market is expected to reach US$ 95.9 bn by
2013 from US$82.5 bn in 2008, registering a CAGR of 3.1%62, where the highest growth in this segment is
expected in Latin America with a CAGR of 10% to reach in 2013 US$ 5 bn63.
Technological Impact on the Agro Industry Development

Undoubtedly, the ability of the agricultural and food industries to respond to the great increase in demand in
future decades will be highly dependent on the increased application of the existing technologies as well as the
exploitation of new and innovative technologies. Thus the focus should be on improving agricultural practices
and on post harvest preservation technologies.
Moreover, it’s essential to give focus on this aspect as one of many other factors for the development of the agro
industry since it is well recognized in Egypt and many other countries that the food production will be
constrained by land and water availability. Below we will discuss the various drivers for technological change
then discussing the different options of applied technologies that have substantial impact on the development
of the agro food industry in developed and developing countries.
Drivers for Technological Change

Social
In recent decade, most developed countries have witnessed a dramatic rise in concerns among their citizens
over the quality and safety and long term health effects of their food. Apart from safety, consumers are
increasingly concerned about the origin of their food in terms of locality (locally produced vs. imported,
environmental impact and organic production). But while all of the above play a major role in the market
demand for agricultural and food products, consumers remain very price sensitive and get to buy products that
are affordable within their budgets which places a constraint on the potential for innovation.
While in developing countries, there is a trend for consumers in changing their eating patterns from traditional
diets to western style foods and eating ready prepared foods outside the home. This is mainly affected by the
rising incomes and the fact that women are entering the workforce and thus have no time to prepare food at
home. In addition, increased urbanization in many developing countries as in Egypt will pose challenges in
relation to storage and distribution.
Economic
In fact, the key economic issues that affect the development of the processed food industries are: cost and
availability of raw materials, labor availability and costs, rate of return on capital investment, transport costs
and availability of distribution infrastructure , costs of obtaining regulatory approval for a new technology,
ingredient or food, and cost of compliance with national and international regulatory frameworks.
Political
As per the SPS Agreement, member countries in the WTO have to ensure that their food safety measures are
objective, science based, consistent and harmonized with international standards where they exist.
Environmental
Throughout the food supply chain, there will be increasing pressures on the agro industry in relation to the
environmental issues, these will include the need to lower and optimize the use of fertilizers and pesticides in
the agricultural production. Another major environmental consideration that will influence the development in
the agro industry is that of waste management. A commonly adopted waste management hierarchy is waste
reduction and prevention, reuse, recycling, other recovery options (including bioenergy) and lastly safe and
environmentally sound disposal.
Technological Trends
Technological trends in the agro industry and their implications are too many, there are the food preservation
technologies, separation technologies, conversion technologies, technologies to control the water activity,
packaging technologies, and storage and distribution technology.
62 IMAP Consumer Staples Report: Food & Beverage Industry: Global Report, 2010
63 Just Food: August 2009 Briefing
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Among them all, we will focus on the waste management technologies, which require the conversion of the agro
processing waste to other usable energy products.
Waste Management
It is worth noting that during the different activities of processing, considerable amounts of waste are generated
which can cause significant downstream effects. All of the waste generation processes can be controlled to a
certain extent, but in the fresh pack segment, some waste is inevitable. Nevertheless, for the processed food
segment, all processes have their own special wastes. In addition, there are again inevitable losses associated
with this subsector industry realized during transport, packaging, storage, warehousing, display, and
consumption stages.
For example in Egypt, in the fruit juices segment industry, post harvest losses have reached approximately 40%
of the total production. This is due to the poor packing and multiple labor handling, thus a low quality product
reaches the consumer, which reduces the expiry time of the product. Another example, during the tomato
processing into the different tomato products such as ketchup and tomato paste, losses in the Egyptian tomato
marketing system are high, estimated in ~30%. These losses result from suboptimal post harvest and handling
practices.
There are a range of technologies for the conversion of food waste to usable fuel or energy. With the increased
emphasis on optimizing the use of natural resources and reducing the waste, the EU has adopted a five stage
waste management hierarchy for use by industries in all EU states. The following figure shows the waste
management hierarchy:
Waste reduction or prevention
Reuse
Recycling
Other Recovery options including energy recovery
Lowest
Safe and Environmentally sound disposal
Priority
This technological trend includes few implications on the productions of fuel and energy such as producing the
Bioethanol (which is a high profile technology) from the energy crops, the biomass to fuel, the biodiesel from
the conversion of oils and fats in addition to other implications using heat.
New projects planned to Egypt, will have to take issues of waste management seriously during planning and
implementation. This is particularly to be in compliance with stringent regulations at the export markets, with
increasingly aware final consumers. Local regulations for environment and waste management also exist and
significant penalties exist for violators.
Foreign Direct Investments (FDI)

The global FDI has not yet recovered to its pre crisis level that was in 2008. According to the UNCTAD’s
Investment Report, worldwide FDI flows rose moderately to $ 1.24 trillion in 2010, but were still 15% below
their pre crisis average. By contrast, global inflows were $1.97 trillion in 2007, 37% higher than in 2010.
Furthermore, the report was optimistic in estimating that FDI will return to its pre crisis average of between
$1.4 and $1.6 trillion sometime in 2011 before approaching its peak in 2013.
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According to a spokesman for the United Nations Conference for Trade and Development (UNCTAD), the long
term outlook for foreign direct investment in Egypt is promising, but political instability is likely to affect
recovery in the short run. Nevertheless, “political instability is not the only fear” said Liang at the launch of the
UNCTAD’s Investment Report 2011. This is because the increasing likelihood of a renewable global economic
crisis could also trigger a decline in FDI inflows.
Egypt used to witness glory years from 2006 when it attracted more than fifth of FDI flowing into the continent,
which was due to investments in oil and gas facilities which were later redirected into manufacturing and the
services sector. Below is a graph that shows the growth of FDI in Egypt over the past decade:
in Billion EGP
14 13.2
12 11.1
10
8.1
8 6.7
6.1
6
3.9 in Billion EGP
4
2 0.7 0.41
0
Source: Ministry of Finance
In 2010, FDI inflows dropped by 5 % to US$ 6.38 bn, but maintained its place as Africa’s second largest
recipient of investment, receiving 12 %of the continent’s total, according to the UNCTAD64.
Accoridng to General Authority for Investments, investments in Food industries have witnessed substantial
increase in the past decades. Below is a table that illustrates this fact:
1970-2009 EGP 15.5 Bn
2001-2009 60% of above figure
2004-2009 44% of above figure

Source: GAFI
64 “El Ahram Online”, July 2011
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SWOT Analysis
As the Salasel program is focused on Upper Egypt the following analysis if strengths, weaknesses, opportunities
and threats is specific to the horitculture sector in Upper Egypt, and builds on information gathered from
multiple sources. Further analysis of the specific models of horticulture processing suggested for Upper Egypt
will be tackled in the following section of this study.
Strengths for Horticulture in Upper Egypt (UE)

UE horticulture produces: characterized by its lower latitude and early seasonality
This will allow inncreasing the production of Upper Egypt’s produce which will improve the continuity of the
supply of fruits and vegetables to temperate zone markets by expanding the season on produce currently
sourced, primarly out of Central and Lower Egypt.
Employment per ton of a horticulture crop
The supply of a horticulture crop requires as many as 38 days of employment/ton such as for green beans as
opposed to traditional hand harvested commodity crops such as sugar cane stalk that require no more than four
days per ton. This constitues a great opportunity for horticulture production n in Upper Egypt as it creates more
jobs, thus decreases unmemplyment rate and enhaces the farmers incomes.
Weaknesses for Horticulture in Upper Egypt (UE)

Lack of education and technology
This point embraces two types of education: technical education and managerial education. The technical
education involves information about the timings of cultivating crops, new crops to be cultivated in different
seasons, utilizing cheap technologies aiming for a better quantified harvest, and utilizing existing resources for
the general sustainable use of land. Since most Upper Egyptian farmers are not technically educated and lack
the know-how of new cultivation techniqes, this has influenced the quality of their produce, the allocation of
their resouces, also their profit margins and their production costs, consequently their competitiveness in the
international export markets.
Moreover, small farmers in Upper Egypt are deficient in infrastructure, and management; they lack the
knowledge to effectively manage their lands and crops, and also fail to reach to markets in order to sell their
production. They even sometimes get abused by the pre cultivation contracts.
Inadequate or false information
Culture in Upper Egypt is to some extent enforcing small farmers to take on the career after their parents and
grandparents, that even they use the same tools and strategies of cultivation that was being used for ages ago.
This actually has led to the harvest devastation, and eventually reduce the quality of the production. Thus
adequate prodcution information and know-how cultivation techniques are essential for Upper Egyptian small
famers.
Inadequate economic Infrastructure
Upper Egypt region suffers from infrastructural deficiencies causing huge amounts of losses at each stage of the
horticulture supply chain. At the farm level, infrastructure constraints affect the physical movement of the raw
materials, while at the processing level, these constraints influence the efficiency of the processing operations,
the cost and the quality of end products. Finally, there exist infrastructural constraints in the transportation of
the final commodities, which affect the responsiveness to the customer demands.
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Access to physical and human capital
Upper Egypt is characterized by its severe poverty rates among all other regions in Egypt, and by its high
unemployment rates. The challenge here remains in the lack of skilled educated human capital required for the
production of nontraditional horticulture crops in this region. Access to physical and human capital becomes
more critical, with the progressive shift from the informal to formal sectors and as the agro processing
enterprises attempt to add value and compete with their industrialized country counterparts.
Opportunities for Horticulture in Upper Egypt (UE)

UE horticulture produce: are seen as high value crops for export
Upper Egypt produces high value crops that are harvested in the earliest season when prices are highest. This
allows exporters to cash in on premium markets for a variety of fruits and vegetables making certain agriculture
operations in Upper Egypt highly profitable, particularly as supply chain infrastructure, market access, and
farmer sophistication improves.
Higher average earning per worker
Generally, high value horticulture industries generate higher average earning per worker because higher skill
levels are required for many tasks and the bonus incentives are often used to minimize harvest and packing
time.
Off farm employment opportunities
Non-traditional horticultural production and processing in Upper Egypt create off-farm employment
opportunities. This would probably decrease the unemployment rate in UpperEgypt, concurrently should
reduce the poverty rate in the Southern governorates of Egypt.
Threats for Horticulture production in the six Governorates of focus

Changing costs of seeds and Fertilizers
High costs of seeds will result in either a decrease in the profit margin of small farmers, or an increase of the
good’s price to the final consumer, or both. Egypt is a heavy user of chemical fertilizers, especially nitrogen. It
is using it in the production of some of the horticulture crops like tomatoes, potatoes and grapes.
Egypt owns 5 plants for the production of nitrogen fertilizers located in Abu Qir, Suiz, Kima, Talkha, and El
Nasr Coke, in addition to other phosphorus production plants. However, Egypt currently suffers a shortage in
the local fertilizers consumption. This is due to the companies in free zones that produced 8 million tonnes,
directed to exports, while other companies produced additional 8 million tonnes and sold them locally. Total
production of fertilizers equal to 16 million tonnes in 2011, yet, in this same year, the local consumption of
fertilizers reached 9 million tonnes, resulting in a shortage of 1 million tonne based on the amount supplied for
the local market, and boosting the prices in the black market to EGP 3,600/ tonne65.
Global and Domestic positioning
The most critical challenge for the Egyptian food processors is to find their way into the new global market; pre-
market penetration studies are essential for the exporter’s survival. This will actually pave the way before
entering the global market, granting exporters a stabilized position in the market.
65 El Masry El Yom Newspaper, quoted by fertilizers traders
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Lack of sufficiently integrated agribusiness value chain
Small farmers short on the access to beneficial value-chains that affect their ability to increase their income
from the farm based agri-produce sector. The diversification of integrated agribusiness value-chain in Upper
Egypt, would positively contribute to the small farmers incomes.
Weak business development services
The informal operations of traders on a small scale decelerate the pace of the trading process in the high value
horticultural products as well as unjustified increase in their initial costs. This is due to the lack of working
capital and to the poor transport and storage facilities.
Conclusion
Based on the above information and analyses, there is obviously a significant opportunity for food processing
investments to take root in Upper Egypt given the significant potential of this sector, and despite the prevailing
challenge. Evolving global markets, consumer behavior and enhanced trade arrangements between Egypt and
global markets are boosting demand on processed horticulture products. The abundance of produce in Egypt in
a number of horticulture crops, of which 6 are significant in Upper Egypt is a clear advantage for processing,
especially with the current levels of waste and inefficiency across the supply chain. The challenges relevant to
the regulatory environment, and the immediate political and economic situation in Egypt are expected to
improve over the medium to long term, and increased levels of investment in this sector, among others, are
expected to resume especially as the global economic situation improves as well. Specific opportunity
assessment and recommendations will be the subject of the following section of this report.
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Section III: Identification of Key
Agro Industry Projects
This section of the report presents the outcome of Stage II of the engagement. It specifically presents our
findings regarding the identification and analysis of possible options for agro-industry investment
opportunities in Upper Egypt. This section is organized into two main parts. The first part presents our
recommendations for 5 ideas of business ventures that can be established in Upper Egypt, providing the
rationale for each. The second part presents the findings of a benchmarking exercise undertaken for a number
of developing countries, to identify the extent of their success in the horticulture sector.
The following section of the prefeasibility study will provide a focus on one of the proposed ideas, after agreeing
with Salasel management on the choice of the project profile. It will present more details about the selected
project idea, marking the final conclusion of the engagement.
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Part 1: Proposed Agro Industry
Options
A clear market opportunity for Agro-processing in Upper
Egypt…
Based on the macro analysis of the agro-industry in Egypt (section 2 of this study), this sector is obviously
experiencing significant growth and has more potential to be reaped as one of the highest growth
manufacturing sub-sectors, with expanding local and global market opportunities.
Upper Egypt is endowed with additional prospects for agro-processing, in addition to specific challenges to
overcome. Agriculture provides 62.4% of the jobs in Upper Egypt. As a result of recent interventions by
development programs in collaboration with the government of Egypt over the past two decades or so, a
structural shift in the agriculture sector in Upper Egypt has started to accelerate a wheel of growth and
development in the sector. Farmers in Upper Egypt have started to shift from dependence on growing
traditional crops, and subsistence farming for household consumption to introducing horticulture crops not
traditionally grown in Upper Egypt. Accordingly to agriculture technical experts, the drier weather conditions,
and use of newly reclaimed farmland in Upper Egypt result in produce that is of better quality and resistance to
disease than what is typically producer in the Delta region of Lower Egypt. In addition, Upper Egypt has a
lower latitude and early seasonality for certain horticulture crops, hence an opportunity for continuity of
supply of fruits and vegetables to international markets with different temperature and seasonality conditions.
In effect, produce from Upper Egypt expands the season of crop produce that has traditionally been supplied
from the Delta and lower parts of Egypt.
The climate conditions in Upper Egypt additionally allow for high value horticulture crops to be harvested in
the earliest season when prices are highest. As a result, this advantage allows exporters to gain higher margins
on sales to high-end markets internationally, who have high demand for various fruits and vegetables off their
national seasons. This presents a clear market opportunity for traders and processers to capitalize on the
agriculture potential in Upper Egypt which can be highly profitable.
Upper Egypt has always suffered from high levels of poverty and persistent lack of job opportunities over
decades. Only recently, a government focus on the pressing development needs of Upper Egypt has been
renewed. As a result, a number of national program to support development and economic growth in Upper
Egypt have been designed, with special incentives. A number of industrial zones have been allocated in many
Upper Egyptian governorates. Investor incentives for creating job opportunities are in place to encourage the
establishment of new business operations in Upper Egypt. In addition, a number of infrastructural and
transportation projects are underway in various governorates of Upper Egypt to further facilitate business
conduct for investors. The government established the Upper Egypt Investment Company in 2007, with public
sector shareholding, particularly to identify and invest in high potential investment opportunities in Upper
Egypt. A number of business ventures have since then been created, including a growing agro processing
venture (see details below)
Relevant to the renewed focus on encouraging investment in Upper Egypt, the fact is horticulture crops create
significant job opportunities not only during farming, but also during the harvesting, packing, transporting, and
shipping of these crops due to their nature of requiring specific handling and hence being labor intensive. To
illustrate, according to a USAID study, “an average of one direct full-time employment opportunity and two
indirect jobs are created when a conventional cash crop farmer becomes a vegetable or fruit crop grower… it
would not be an exaggeration to assume an increase of 0.5 person jobs created in direct employment, and 1.5
indirect employment opportunities per feddan as small growers begin producing higher value crops and moving
more of that crop into export markets… High-value horticulture industries that supply sophisticated markets
require as many as 38 days of employment per ton of a common horticulture crop like green beans as opposed
to traditional hand harvested commodity crops such as sugar cane stalk that require no than four days per ton.
Additionally high-value horticulture industries generate higher average earning per worker because higher skill
levels are required for many tasks and the bonus incentives are often used to minimize harvest and packing
time”66. Depending on the nature of technology used for the processing stages of the crops, the numbers of jobs
created per crop will vary. This presents a compelling argument for encouraging new investments in
66 Excerpt based on data from the AERI El-Shams project
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horticulture crops production and processing that can be further supported by investment incentives geared
towards Upper Egypt.
…Yet, with some challenges to consider
However, there are realities that have to be considered and closely addressed when a new investment
opportunity is assessed in details.
As per the Baseline survey conducted in Upper Egypt, the main problem that encounter many farmers in
agriculture and in the cultivation of crops in Upper Egypt is the high wages of agriculture workers, in relative
terms to economic conditions in Upper Egypt and of the small farmers. The survey indicated that 65% of small
farmers in Upper Egypt own 1-5 feddans and ~25% own less than 1 feddan. This problem is mainly existing in
the Sohag and Qena governorates67. Farmers in order to overcome this problem, have reported they’d rather
start to employ women in farming activities, as female labor is less expensive. Moreover, shortage of labor was
cited also by the majority of small farmers who own 1-5 feddans in Upper Egypt. Labor shortage is particularly
keen during the harvest season of certain horticulture crops as harvesting is almost carried out manually in
Upper Egypt.
Challenges relevant to production of crops stem from the fact that there remains persistent lack of education &
technical knowledge among farmers. A large number of small farmers take on their career after their parents
using the same old strategies which lead to the harvest devastation and thus reduce the quality of the produce.
This is particularly relevant to knowledge and skills about timings to cultivate, and choice of new crops to
cultivate off season. High costs of seeds (mostly imported, with specific types that generate high quality and
high yield for export markets), result in an increase in the cost of production for farmers, who have no sources
of convenient financing to support the production of higher value crops. In addition, small farmers in Upper
Egypt are deficient in managing their lands and crops, such as days to harvest of the crop to maximize yield and
reduce residue of the pesticide, to maximize productity. In addition, there is a persistent lack of marketing and
selling skills to command higher earnings by small farmers. Worth noting is that such gaps are being addressed
by a number of development interventions including the Salasel program.
The entire value chain for horticulture sector in Upper Egypt is still in early evolutionary stages. Margins are
mostly made by middle-men and traders, who remain to operate on small scale and informal basis (non-
institutional). Access to export markets is a challenge for famers and traders alike due to their small scale and
lack of knowledge and expertise. Experience of processing companies indicate that in addition to the challenge
of positioning Egyptian manufactured products (including processed vegetables and fruits), small and
inexperienced players continue to tarnish the reputation of the Egyptian producers abroad through lack of
professionalism in managing export contracts to European or US markets.68 Sourcing of input supply of
vegetables and fruits for processing also remains a challenge due to the small size of farmers and the lack of the
desired quality and specifications needed for processing. To conclude, there is room for improvement across
the entire value chain in Upper Egypt.
In addition, there remain some infrastructural challenges within the sector. Transportation is almost
completely undertaken by non refregirated trucks. There are very limited proper facilities for handling crops
post-harvest, such as packing houses with proper cooling storage. Cold transport and storage protect the
quality of perishable goods and extends the life of the products reducing spoilage and waste. In addition, until
recently Egypt lacked a perishable terminal at Upper Egyptian airports. A demand for a new perishable goods
terminal in Luxor airport was spearheaded by Luxor-area farmers who have organized a new cooperative to
produce high quality, high value fruits and vegetables for export and for the domestic tourist industry. They
identified an opportunity to use the Luxor Airport to export vegetables and fruits and take advantage of
available cargo space in charter planes flying directly into Europe, or transitting to Cairo Airport where a larger
scale pershiable goods terminal exists. Moreover, the legal infrastructure and contract enforcement in Egypt
still needs further improvements as some farmer associations from Upper Egypt have suffered from
dishonoring of export-related contracts with buyers (traders or companies) when crop prices changed post-
harvest.69
67 The baseline survey for Salasel program

68 Based on interview with Upper Egypt for Food Industries Company
69 Based on interviews with representatives of farmers associations in Upper Egypt
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Implications
ns for potential agro processors
processors in Upper Egypt
The current context for agro-processing
processing in Upper Egypt therefore offers significant
significant potential for investors, and
demands that some considerations are well planned by a potential player. Based on the above, we can conclude
the following:
 New agro-processing
processing ventures will have to undertake a partnering approach with farmers and gr growers,
either directly or through farmers’ associations, in order to enhance the efficiency across the value
chain of the horticulture crops, from choice of seeds and undertaking proper growing techniques, to
handling and transport. Where this might seem like additional investment burden to worry about, the
benefits and margins across the value chain that can be realized significantly outweigh the related costs
over the medium to long term, as will be illustrated in the choice of models below.
 Demand for processed vegetables and fruits are highest in international markets, with Egypt having a
competitive position based on location, climate, production volume, and market access through trade
agreements with a number of key export markets. In addition, Egypt
Egypt does not use genetically modified
seeds which remain subject to global controversy. What remains to improve is the specification and
quality standard for the fresh produce and the processed product. Investors will necessarily address
such aspects, through
ough close collaboration across the value chains, if they are to focus on the export
market.
 In addition, local market consumer habits are evolving, and foodservice market growth has been
significant over the last decade, both trends warranting future increase
increase in local demand for processed
food as well, to compliment international demand.
 Investment incentives and advantages for Upper Egypt, combined with the potential of horticulture
production, will continue to have a comparative edge over other locations
locations within Egypt, or in other
countries.
Based on the above, the following ideas for horticulture processing projects in Upper Egypt are identified and
assessed.
High-level
level processing options for key horticulture crops in
Upper Egypt
Based on the input off PwC technical expert, seven crops have been identified as major for Upper Egypt (several
of which have also been recommended by Salasel baseline survey). This is based on the current and potential
output levels and quality of produce at the six governorates
governor of focus.
For each of the crops, common processing options that can be deployed in the Upper Egyptian context have
been identified. These were further narrowed into 5 project ideas as discussed in detail the following section.
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Crops Processing options
Tomatoes Juice, pastes, dried
Potato Chips, frozen
Onions Dried
Green Beans Frozen
Grapes Dried, juice, canned, frozen, jam
Pomegranate Peeled ready to eat, juice, medical applications of peels

Dates Dried
A high level processing map for each option indicates the level of sophistication of the involved
production
Tomato Juice
Tomato paste
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Sundried tomato
Potato chips
Frozen potatoes
Frozen green beans
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Dried onions
Dried grapes (raisins)
Frozen grapes
Canned grapes
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Grape juice
Grape jam
Pomegranate juice
Dried dates
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With the above possibilities, a short list of 5 options to analyze further was selected based on a number of
criteria. These criteria were developed to be in line with the project scope of Salasel program, and PwC
engagement scope.
VOLUME OF CROP PRODUCE

Processing would make best choice when the total tonnage of production in Egypt is significantly high, covering
needs of the fresh market and providing excess for export, fresh or processed. Hence crops with smaller overall
tonnage might create supply bottlenecks for processing and would be less appealing for consideration.
INTENSITY OF CURRENT COMPETITION IN EGYPT

The higher the level of existing completion from well established businesses, regardless of size of operations,
the higher the entry barriers will be for new investors into this domain. This is particularly relevant if existing
competition already dominate production and supply of raw material, and if they operate in Upper Egypt.
APPLICATION OF LOW COST TECHNOLOGY

As the focus of this prefeasibility study is medium to large scale project ideas, that will integrate small farmers
into the value chain and contribute directly to enhancing the income levels of small farmers in Upper Egypt,
high cost technology requirements would entail significant up-front investments and will accordingly command
higher return on investment by investors, hence reducing the potential of better margins being transferred to
small farmers. Hence crop processing requiring highly sophisticated and expensive technology will be less
appealing for consideration.
VALUE OF PROCESSED OUTPUT HIGHER THAN FRESH PRODUCE

When fresh produce commands higher selling price than processed crops, then the idea of processing loses its
rationale and any related projects will be less appealing for purposes of this pre-feasibility study.
LEVEL AND SOURCE OF DEMAND

This criterion presents a subjective assessment of extent of demand and source of demand being either
international (export) or local in nature. The combination of high demand in both local and international
markets would position a project idea as most appealing.
Based on the above criteria, a qualitative assessment of the various high level options were considered and rated
accordingly:
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Volume Intensity of Application Value of Level of demand
of crop current of low cost processe (Export
produce competition technology d higher /Local)
(tonnage) in Egypt than
fresh
Tomatoes Highest
Juice Medium No Yes Low/Local+Export
Paste High No Yes High/Local+Export
Dried Lowest Yes Yes High/Export
Potato High
Chips High No Yes High/Local
Frozen Medium No Yes Medium/Local+Export
Onions Medium
Dried Low Yes Yes High/Export
Green Beans Lowest
Frozen Medium No Yes Low/Local
Grapes Medium
Dried Medium Yes No Medium/Local
Juice Low No No Lowest/Local
Canned Low No No Lowest/Local
Frozen Low No No Lowest/Local
Jam High No No Lowest/Local
Pomegranate Medium
Preparation Lowest Yes Yes High/Export

(aril
separation)
Juice Lowest No Yes Low/Local
Medical Lowest Yes Yes High/Export
application of
peels
Dates Medium
Dried Low Yes Yes High/Export+Local
Based on the above criteria and ratings, 5 project ideas are presented below, with 4 of them being strong
candidates for serious consideration for detailed feasibility assessment given that they would make attractive
investment propositions.
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Five Project Ideas
1. Dehydrated Onions
Onion is one of the most important vegetable crops and an essential ingredients for cuisines the world over. Its
main global suppliers are the US followed by India and China, and Egypt ranking fifth in global rank with
output quantity of 1.8 million tons of dry onions70 in 2009.
Top 20 producers of onions (dry), as per 2009 data.
Rank Area Production (Int $1000) Production (MT)

1 China 4420558 21046969
2 India 2919458 13900000
3 United States of America 714229 3400560
4 Turkey 388472 1849580
5 Egypt 378059 1800000
6 Pakistan 357917 1704100
7 Russian Federation 336378 1601550
8 Iran (Islamic Republic of) 317601 1512150
9 Brazil 317538 1511850
10 Netherlands 266531 1269000
11 Spain 265355 1263400
12 Republic of Korea 252039 1200000
13 Mexico 251161 1195820
14 Japan 242378 1154000
15 Myanmar 220534 1050000
16 Algeria 205865 980160
17 Indonesia 200085 952638
18 Ukraine 183904 875600
19 Uzbekistan 166976 795000
20 Bangladesh 154403 735140
Source: FAOSTAT
Dehydrated onions are used interchangeably with fresh or frozen onions, with preferences varying across the
world according to taste, seasonality of national produce, availability, and price. They are typically used as
1. As condiment for cooking.

2. For vegetable and instant food.71
Major markets of dehydrated onions are UK, Canada, Germany, Poland, Finland, Denmark, Australia, Spain,
Italy, Greece, UAE, France, Belgium, Netherlands, South Africa, Latvia, Brazil, Colombia, Chile, Argentina,
Saudi Arabia, Bahrain, Philippines, Korea, New Zealand, Japan, Singapore, Israel, South Africa, Russia, and
East European countries.72
70 Dry onion does not indicate dehydrated onions, but raw dry onions versus green onion (shallots) as per FAO source
71 Dehydrated Onion, Global Agri-System.
72 Dehydrated Onions and Onion Powder, Niir Project Consultancy Services, 2008.
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Global Market Situation
The supply and demand of the 2009-2010 crop have been balanced in global terms, however, the overall market
position varied considerably between different regions.
US
The US has the largest processors, who lost market share in certain markets and in certain applications as they
misread both of the mindsets and market of most important buyers. There was a trend of decrease in demand
due to the reduction of quality requirements aiming for prices reduction in such markets/areas. US processors
were forced to reduce prices and then other rivals were forced to follow the price reduction strategy. The US lost
volumes mainly to processors from Asia, particularly China and India.
Europe
European suppliers had an uneventful season in 2009 /2010 considering the four processors functioning as
normal supplying; in the mean time their customer bases have witnessed an obvious absence of odd activity.
However,, the instability of the weather in Europe, besides the expensive labor stands as a solid obstacle facing
the vegetable dehydration business in Europe.
India
India offers a wide range of product quality as producers still lack experience to deal with the flavor profile
where inadequate feed stock is absent. These issues block the operation when selling powder to seasoning
houses. The product’s quality, traceability, and provenance are compromised on a regular basis. Supply of input
material for dehydrators, and prices, is dependent on weather conditions and the output of each season, hence
at times making dehydrators compete for affordable raw materials with the fresh market. Although the misery
that the Indian crop is going through, India’s output will remain in Asia and Eastern Europe as standards is less
demanding.
China
China produces yellow and white dehydrated onions; however, both tend to be lower-solids fresh onion
varieties. Onions in China are more delicate, less intense in flavor compared to the US and other origins. Most
of the dehydrated onions exports are of the yellow variety and the great portion is destined for the US although
the white dehydrated onion does not match the USA origin material in terms of flavor.
Moreover, the rivalry for land because of cereals subsidies has negatively affected the onion cultivation
attractiveness, and thus resulting in increase of prices for dehydrators. Despite that, China is a country that is
hard to predict. Also, China is a major consumer of its own production; this will actually lead to an addition
increase for the export prices, unless the Chinese output continues to increase.73
Egypt
Egypt produces very large amounts of onions of which about 50% is devoted to the export market. Biggest
producers for onions in Egypt are Upper Egyptian governorates.
Governorate Year 2005 (latest available by governorate)

Crops - (Area in Feddans- Production in Tons)
Onions
Beni Suief 16159 - 169488
Menia 8753 - 90238
Assuit 7748 - 122057
Sohaj 9800 - 161182
Qena 3075 - 37203
73 Dehydrated Onion Market Report, Champagne Foods Limited, 2010
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Luxor 339 - 2955
Given the volume of output and global market conditions, Egypt has an opportunity for a global position in
dehydrating onions, making use and adding value to the considerable output volumes in Upper Egypt.
Egyptian material is first and foremost from the sweet yellow fresh market and is classified by its unique flavor
profile, however, the supply for dehydrations could be squeezed due to the fresh market demand.
Introducing factories for onion dehydration would eventually preserve the crop prices from reduction, hence
protecting the income levels of small farmers when supply is high in certain seasons. Moreover, regulating the
production levels through medium-long term supply contracts between growers and processors will level the
prices of produce and stabilize the market.
There are currently two major factories dehydrate onions they are located in Beni Suef and Menia governorates.
However, their capacity levels do not absorb the production volume supplied within these two governorates,
nevertheless the rest of the Upper Egypt region.
Proposed Onion Dehydrating Project

The dehydrating process requires machines/equipment rather than labor, however, pre-processing activities
require are labor intensive for preparing the crop to push it into the production line. All dry onion varieties are
suitable for dehydrating. Ideal locations for this project would be Sohag, Menia and Beni Suef governorates due
to availability of crop.
Manufacturing process
Raw onions are procured at the most economic prices. The onions are preferred to be matured and ripe and
then stored. The storage rooms should be well ventilated, dry, and at low temperature. The onions are then
cleaned by spray washers and then pealed right after. The “abrasion” peeling method is used for peeling; peeled
onions then go into the production line (machines) to be sliced by rotating blade slicers and then go to the
tunnel drying stage.74
It is best that seeds are provided by the processors to achieve the desired output quality. Typically, processors
are expected to transport the crop from the field to the processing facility, hence proximity to the farm land
would reduce transportation expenses.
Machine labor is skilled and would command higher wages than non-machine labor who will handle the onion
preparation prior to pushing through the production line.
Production results in very strong odors that make the facility less suitable for use for other crops unless
extensive cleaning and deodorizing takes place, the same problem facing freezing process of onions.
Waste Management
The outer layer of onions after the manufacturing process can be utilized in other business operations such as
entering another production line and turning it into fertilizers.
Price Variance between Retail and Producer Prices

Retail prices in US and UK markets of dried onions vary between $12.2-14.775. They typically come in a wide
variety from flakes, to chopped to powder. In contrast, producer prices of dry onions in 2009 were $205.8 per
ton. This is equivalent to $0.21 per kilogram. A spread of over $12-14 per kilogram exists between the final
consumer price and the producer price. Accordingly, significant value can be capitalized on the processing and
marketing of dry onions across the value chain.
74 http://www.mpstateagro.nic.in/Project%20Reports%20pdf/DEHYDRATED%20ONION.pdf
75Based on October 2011 retail prices of various outlets as identified from internet sites. Various volume units were converted to obtain
price per kilogram for ease of comparison.
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Existing Player in Upper Egypt
Information is available about one manufacturer only in Upper Egypt, Shinnawy company of Beni Suef. The
company operates since 1977 and focuses on dehydrated onions. They entered the export market in 1996,
tackling destinations such as : Japan, Germany, France, US, Belgium, UK, Netherlands, Mexico, Italy, Ukraine,
and South Africa. Website of the company indicates the export capacity is 5000 tons/year of a variety of
outputs including: Rings, Slices of 10-14 mm, Kibbled, Chopped, Minced of 2-4 mm, Minced of 1-2 mm,
Granulated of 0.5-1.0 mm, Granulated of 0.2-0.5 mm, and Powder.76
There is another government owned facility in Maghagha in Menia and a private sector facility in New Menia,
namely the Arab Company for Agri Crop Drying and Processing, with investment from Kuwait, and large drying
capacity across the Middle East region. However, no public information was available about these two facilities.
2. Processed Tomatoes
Mediterranean regions produce significant quantities of tomatoes, nevertheless just a small proportion goes to
the sun dried tomatoes industry as it takes 11 kg of fresh tomatoes to obtain only 1 kg of dried product.77.
Considerably the greater portion are canned or made into sauces. Top producers of tomatoes are China, the US,
India and Egypt ranking fourth in global output in 2009, with output of 10 million tons. Analysts estimate that
between 40 and 60% of total output is subject to being wasted due to poor postharvest handling and transport.
Top 20 producers of tomatoes in 2009.

1 China 16765471 45365543
2 United States of America 5226337 14141900
3 India 4120195 11148800
4 Egypt 3695640 10000000
5 Turkey 3375505 10745600
6 Italy 2541639 6877400
7 Iran (Islamic Republic of) 2175885 5887710
8 Spain 1664368 4603600
9 Brazil 1592998 4310480
10 Mexico 957688 2591400
11 Russian Federation 802098 2170390
12 Uzbekistan 779780 2110000
13 Ukraine 754206 2040800
14 Greece 498911 1350000
15 Portugal 497691 1346700
16 Nigeria 492839 1333570
17 Morocco 480433 1300000
18 Syrian Arab Republic 430767 1165610
19 Tunisia 369564 1000000
20 Iraq 337594 913493
Source: FAOSTAT

The demand of tomato is widely enormous as the people know the significance of the using it either fresh or
processed in cooking. The leading countries in tomato production are the ones who are capable of processing
tomatoes or dehydrating it as tomato processing takes a big share from the whole crop production.
The virtue of drying tomatoes is that it protects the crops’ prices from dropping down. Usually, when the prices
drop the tomato paste processors enjoy significant economic advantage, squeezing prices out of growers.
76 Based on company website: www.shinnawy.net

77 Sun dried tomatoes, Sacla.
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Alternative processing options, such as sundried or dehydrated tomatoes, which command extremely high retail
value are needed to widen the scope of the crop’s usage and protect the income levels of growers, especially if
medium to long term supply contracts are arranged.
Even though some non-tropical countries lead the tomato production sector, they fail to utilize the crop in
drying tomatoes. This is because drying tomatoes requires intense sun availability that they actually lack. For
instance, sun drying tomatoes in turkey takes 45 days to complete the process.
Top 10 Global Tomato Processors78
 Xinjiang Chalkis Tomato Products (China)

 COFCO Xinjiang Tunhe (China)
 Morning Star (US)
 JG Boswell Company (US)
 Consorzio Interregionale
 Ortofrutticoli (Italy)
 Conesa (Spain)
 Sugalidal (Portugal)
 Tat Konserve (Turkey)
 D Nomikos (Greece)
 Aconcagua Foods (Chile)
Trends in Drying
The trend of drying or dehydrating tomatoes has emerged in the 1990s. In the Mediterranean areas, tomatoes
are dried using the availability of sun heat. Unluckily other regions were not gifted with the appropriate climate
for sun drying vegetables, however, oven drying is used as alternative technology. The time consumption of
drying tomatoes mainly depends on the variety of the tomato, the dryness of the air, the thickness of the slices,
and the efficiency of the dehydrator if an oven is used.
Dehydrator Drying
Dehydrators are rather expensive and many people think they produce the best quality of dried food. However,
dehydrators are not always healthy and not always effective nor efficient in drying vegetables. An electric
dehydrator can maintain a low, even temperature, and circulate the heated air by means of a blower or fan.
Most dehydrators are equipped with a thermostat to maintain a constant temperature.79
Trends in processing
US
Processors contract with growers to process red-ripe tomatoes. Most initial processing is by firms that
manufacture tomato paste, however, many firms do manufacture pulp-based products.
In the past, many firms prepared paste and then transformed this paste into other products. The industry is
polarizing, with several firms focus on the manufacture of industrial tomato paste and others focus on
remanufacturing industrial paste into final consumer products. Numerous California firms produce a range of
dried and dehydrated tomato products for instance tomato powder as well as whole dried tomatoes.
Exports are becoming a significant factor of the U.S. processing-tomato industry. In the early 1990s, the United
States became a net exporter of processed tomato products and has succeeded to continue reserving their place.
They exported about 8% of the processed tomato product supply in 2000-08, up to 5 % during the 90s.
78 Food news.
79 Dehydrating Tomatoes at home.
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Top U.S. export markets embrace Canada, Mexico, Japan, South Korea, and Italy. Generally, tomato sauces
account for the largest share of exports, followed by paste, catsup, and canned whole products.
Yet, about 6% of the tomatos products are consumed by Americans are imported. Imports averaged about 4% of
the total consumption in the 90s, down from 7 % during the 80s. Canada has always been the major exporter
to the United States, accounting for more than 40% of imported processed-tomato products. Other important
sources of tomato products are Italy, China, Mexico, and Israel. In years with short crops, tomato paste can
account for a significant share of import volume. However, sauces and catsup are usually the top tomato-
product imports.80
Turkey
In 2006, tomato production accounted for 36% of the total vegetable production. This share is relatively
constant since 2000. The production of vegetables differs from a year to another as the tomato share in the total
crop production value plays between 6.8-9.9%.
The industry is located in or close to the major tomato production areas. 15-20 % of the tomato production is
processed and 80-90% of the processed tomato is used to manufacture tomato sauce. Tomato sauce as well as
various products of processing industries is produced by some 100 holdings and facilities.
Most of the tomato processing factories and facilities were initiated from the private sector. From 1995 to 2007
the tomato production increased by 2.7 million ton to almost 10 million ton in 2007. While the Turkish exports
enormously increased by 300,000 ton to 400,000 ton in 200781.
Egypt
Tomatoes are grown on about 3% of the total planted area in Egypt. Significant amounts are produced in Upper
Egypt.
Governorate Year 2005 (latest available by governorate)

Crops - (Area in Feddans- Production in Tons)
Tomatoes
Beni Suief 22405 - 400355
Menia 22934 - 358199
Assuit 13721 - 232669
Sohaj 18404 - 478951
Qena 37147 - 1015591
Luxor 921 - 15876
The solar energy is extensively available in Egypt which facilitates the sun drying tomato industry and adds
value to investors as drying tomato depends mainly on the sun availability in addition to the quality and
quantity of the tomato crop which is also found in Upper Egypt specifically
Proposed Tomato Dehydrating Project

The dehydrating process requires either sun drying or a dehydrator/oven. Ideally, Qena and Luxor would be
most suitable locations for establishing such projects due to availability of crop in addition to the powerful and
strong sun even during winter season, hence reducing the number of days needed for sun drying. In addition,
air pollution in Upper Egypt is much less than the rest of the country.
In terms of verities most suitable for drying, plum tomatoes are more suitable as their shape will expose larger
volume of the tomato for drying. Total dissolved solids (TDS) percentage should be high in the selected crop.
80 Vegetables and Melons: Tomatoes, Economic Research Service, 2009

81 Turkish Tomato Sector analysis, Keskin- Ozudodru- Nzli.
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The following steps embrace the overall process of tomato drying:
- Pre-drying treatments which entail selection of the fruit size, washing tomatoes, and tray placing. This
step requires intensive labor. The preparation of the raw tomatoes for the dehydration process is made through
the pre-drying process. This step is mainly concerned by the appropriate selection of the tomatoes based on
their soundness and maturity. Based on the climatic condition during tomato growth and harvesting.
Tomatoes are classified into two sizes as the fruits above 90 gm go into a production line that differs from the
tomatoes of lower weight. Then tomatoes are placed in crates to be washed and get rid of dust and dirt, cut into
two halves and placed into stainless steel trays and then goes to the second step which is the drying.
- Drying or dehydration through stacks in sun drying structure or the use of electric dehydrators
- Post-dehydration treatments which entail inspection, screening, and packaging which is also labor
intensive.
Tomato drying using the solar energy is considered to be the traditional way of tomato drying; its advantages
are summarized in the process simplicity, and the need for small capital investments. On the other hand, the
disadvantages appears in the long time that it requires that may have adverse outcomes to the quality of the
product such as: the product’s contamination from dust, insects, enzymes, or microbial activities.
Alternatively, the other way of drying is the industrial drying which requires exposing tomatoes to high
temperatures of (~90oC). Although the industrial drying is more protective to the product in terms of insects
and dust, the product may suffer from quality losses with regards to the color and aroma which may result in
the formation of a hard outer shell decelerating the interior part drying. Thus the perfect conditions for
tomatoes to be dried are mild temperature between 45-55 oC as it enables tomatoes to retain its nutrients and
protect it from flavor loss.
Waste management
Sun drying tomatoes produces no wastes to be utilized in compost production, however, post harvest wastes of
the tomato crop can be effective in the compost businesses.

Retail prices in US and UK markets of sun-dried tomatoes are significantly high. Tomato halves or slices range
between $ 10.8-11.3 per kg. when preserved in olive oil, the price jumps to $27-55.5 per kg for high end
brands. In contrast, fresh tomato producer price in Egypt in 2009 was $ 180.5 per ton according to FAO. This
is equavalent to $0.18 per kg, indicating a spread of a minim of $10.6 per kg and up to $55.3 per kg when
preserved in olive oil and branded for niche markets.

The market knows two main businesses that operate in the sun drying tomatoes industry in Upper Egypt,
known by their owners “Youmna El Rashidy” working with an Italian partner and “Amr Abo El Doh” working
with a Turkish partner. In addition, Wadi Food (Alex desert road) has also recently produced sundried
tomatoes.
The challenges that could face investors in this sector in Egypt is that they need to position themselves
in markets across borders so they can enhance from the potential of the sun dried tomato crop in the
export market gaining better profits in the near future, as demand in the local market might be
minimal for the immediate term.
Meanwhile, there are many producers of tomato paste in Egypt who have well established market
shares. In addition, a paste manufacturing factory is planned by Upper Egypt Investment Company
and is expected to start operations in 2013 in Menia governorate. So, little room for creating
additional value in the tomato paste industry can be realized in the medium to long term.
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3. Dried Dates
Dates are the fruit of the date palm. They are sweet berries with a sugar content of more than 50%. The palm’s
origin is supposed to be in North Africa and the Middle East. In these areas the palm is considered as a staple
food that can be produced easily under unfavorable circumstances, and economic conditions. Often, this palm
is cultivated for local markets on small holder farms besides other crops because of its nutritional value, and its
long life. Dates are eaten raw or processed (dried with or without adding preservatives). In addition to dates,
several industries can be developed around the palm tree leaves, such as furniture and packaging containers.
By 2009, Egypt ranked number one worldwide in date production in an amount of 1.35 million tons, followed
by Iran, Saudi Arabia and Pakistan.
Top 20 producers of dates in 2009.

1 Egypt 689450 1350000
2 Islamic Republic of Iran 555666 1088040
3 Saudi Arabia 537464 1052400
4 Pakistan 375508 735276
5 United Arab Emirates 356982 759000
6 Algeria 306777 600696
7 Iraq 210411 507002
8 Sudan 173281 339300
9 Oman 137987 278590
10 China 71498 140000
11 Tunisia 66645 145000
12 Libya 56229 160101
13 Yemen 28987 56760
14 Morocco 24260 72000
15 Niger 19301 37794
16 Turkey 12911 25281
17 Israel 11333 22191
18 Qatar 11031 21600
19 Mauritania 10214 20000
20 Chad 9591 18780
Source: FAOSTAT
This clearly presents an opportunity for drying dates for Egypt.
Leading Exporters of dates
FAO trade data indicate that despite being the largest producer, Egypt does not rank of the top 5 exporters of
dates. Over the past five years or so the top 5 positions have been taken, interchangeably by Iran, Iraq,
Pakistan, UAE, and Tunisia, changing rank from one year to the other. Egypt’s rank over the same period falls
somewhere within the top 20 exporters.
In terms of unit value in US dollars per ton, surprisingly the highest unit value is typically for dates exported
from Israel, with a value that of as high a $5374 per ton in 2008. In contrast, date exports from Egypt ranged in
value from $604 per ton, in 2005 to $1196 per ton in 2009. Lowest value per ton over the same period related
to output of UAE and Iraq.
Major importers of dried dates
India is viewed to be the major importer of dried dates from Pakistan as it imported 9.1 tons of dates during
July-March (2010-11) against the imports of 10.3 tons during the previous year. This was followed by the USA
and UK that imported dried dates.
Other countries that imported dried dates from Pakistan during 2010-2011 include
- Australia,
- Bangladesh,
- Canada,
- Japan,
- Saudi Arabia,
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- South Africa,
- Turkey,
- UAE,
- Qatar, and
- Malaysia.82
In 2010, the United States exported nearly 3,970 tons of dates, which were valued at $23.6 million. The largest
markets for U.S dates were Canada and Australia. Meanwhile, the US imported nearly 12,300 metric tons of
dates in 2010, with a value of more than $17.4 million. The largest suppliers of dates for the U.S market were,
by value, Israel, Pakistan, and Tunisia.83
Trends
Production is characterized by the increasing level of private ownership of the date plantation and thus the
drying process. This is done through the engagement with large holdings by companies integrated with large
scale packing and packaging and other processing facilities.84
Egypt
There are about 10 million date palms in Egypt, and Luxor, Aswan, and Qena are currently the major producers
of dried dates. The quality of the Egyptian dates is much better than other produce in comparison with others.
The Arab world and India highly demand dried dates as they use it for religious rituals.
Producti 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
on (tons)
Dates 541963 1006710 1113270 1090000 1121890 1166180 1170000 1328720 1313700 1326130 1350000
Production has increased almost three fold since the early 1990’s, with high annual growth rate in the late
19902 and early 2000s. Over the latest period between 2007 and 2009 production increase has slowed down
averaging 0.5% annually over those three years.
Despite significant output, Egypt lacks factories to dry dates. They are typically dried by households through
primitive means. Therefore, an opportunity shines for investors to start a formal business of a significant scale
for drying dates and start to position a brand in both of the Egyptian market and foreign markets.
Proposed Date Dehydrating Project

Industrial processing of certain varieties of dates available in Egypt can greatly enhance the product value and
the efficiency of using the output volumes currently produced. There are three categories of dates: dry, semi-
dry and fresh dates. Dry dates are available only in Upper Egypt and are most suitable for dehydration.
Qena, Luxor, and Aswan are the most suitable governorates for dry date production in Upper Egypt.
Traditional Dates Drying Process
The traditional process of dates drying engages mechanical work. Old techniques of drying dates involve
exposing the fruit to the sun for long times in an open atmosphere and these techniques actually lead to great
damage in large quantities of dates. Also, it is unsafe and unhygienic technique of drying as it faces animal and
weather interface. In addition, traditional techniques of drying are time consuming and they yield low quality
products.
Solar Dehydrator
82 India Major importer of Pakistani dried dates, Pakistan Today, 2011

83 Date profile, Agricultural Marketing Resource Center, 2011
84 Date profile, Agricultural Marketing Resource Center, 2011
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Solar dehydration techniques embrace the benefits of the sun drying yet avoiding the disadvantages. A
dehydrator device works on the solar energy and it basically dries the food items trough solar energy. The inside
temperature is double than that out of the dehydrator.
Solar dehydrators are simple in design; they function by trapping the radiations from the sun inside the
dehydrator itself. It contains an exhaust, air inlet and racks mounted in stair case style. They are usually made
from glass and iron.85
The dates dried all the way through solar dehydrators have topped the traditional drying in a number of
respects:
Properties Traditional drying Solar drying
Time Factor 5-6 days 2-3 days
Quality Medium High
Wastages High Less
Colour Light Brown Dark Goldish Brown
Labor
Both of the cultivation process and the drying process of dates necessitates an intense amount of labor, noting
that the drying process requires approximately double the amount of labor needed in cultivation as the drying
process mainly requires manual efforts for separation, selection, and preparation of the overall process.
Waste management
Waste of this process is typically low quality items that are unsuitable for marketing. Typically, such waste is
used as animal feed back in the farm.

Retail prices in UK and US markets as of end of 2011 indicate that sundried dates are sold at an average of
about $7 per kilogram. Other types of dates such as pitted date for $7.8 per kg and jumbo dates for $17.2 per
kg. the producer price of dates in Egypt in 2009 was $321.3 per ton, equivalent to $0.32 per kg. This indicates
a spread of a minimum of $6.7 per kg for dried dates. This value would increase if the type of date traded is of
higher quality.

As mentioned there are no industrial players in Egypt in the date business. Yet there are a number of large
traders who are known for their date business.
4. Pomegranate
Pomegranate is native to semitropical Asia (Iran) and naturalized in the Mediterranean region in very early
times. Pomegranates are either eaten fresh or used for syrup, in which the juice of the acid fruit pulp is the chief
ingredient. It has been classified by commentators as a “super food” due to its richness with nutrients that can
prevent several ailments such as heart disease, diabetes and cancer. It also includes antioxidants that are
beneficial in slowing the aging process. Increasingly, pomegranates are in high demand for both their
nutritional and medicinal value in addition to the sweet, rich flavor it offers. It is also an ingredient in several
Middle Easter cuisines.

Major producers
Iran has the highest area under cultivation of pomegranate, has the highest production and is the number one
exporter, although no data on pomegranate is available on FAOSTAT. Other countries including Turkey,
Afghanistan, Pakistan, India, Armenia, Georgia, Tajikistan, Jordon, Egypt, Italy, Tunisia, Azerbaijan, Libya,
Lebanon, Sudan, Myanmar, Bangladesh, Mauritania, Morocco, Cyprus, Spain, Greece, France, China, Japan,
and the U.S have areas with pomegranate cultivation.
85 Drying of dates through solar dehydrators, Asif Shah.
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However, among these countries, India, The Central Asian Republics, Upper Caucuses, and Spain have the
highest area under cultivation and varietal diversity.
Iran
It is estimated that the consumption of pomegranate in Iran is on average between 7-8 kgs per person
annually.86 As Iran is considered the number one producer of pomegranate, the national codex committee
proposed a project idea in order to increase outcome and thus revenues. This is besides the protection of
consumers’ health and promoting fair practices in food trade.
The scope of the project is to supply fresh pomegranate after proper preparation and packaging. Also, they
decided to establish standards to cover safety, quality, and hygiene so as they can have a reference that has been
agreed upon internationally by the consensus between the producing and trading countries87.
Egypt
Assiut governorate is the largest producer of pomegranate as it produces around 2245 tons annually. It is
recommended for investors to start this project in Assuit as the workforce is skilled with low cost. Chopping and
canning pomegranate would guarantee an increase in the crop’s revenues and profits for growers.
Proposed Pomegranate Processing Project

The pomegranate is consumed mainly fresh however is less appealing for consumption due to the difficulty
presented of peeling the fruit to separate the arils within. With the growing recognition for its nutritional and
medicinal value, a business opportunity clearly presents itself for producing fresh arils minimally processed and
"ready-to-eat". The proposed project is ideal for Assuit governorate.
The pomegranate can be peeled and prepared where the arils (seeds) are sorted from the surrounding pulp and
packaged for ready-to-eat sale. Machinery can be used in chopping pomegranate, but the manual chopping is
more appealing to healthier fruits. As the machines contains oils, and chemicals. On the other hand, manual
chopping will employ more people and will produce around 40 kg on daily basis. However, very high hygiene
conditions are very important for this production process. The pulp can also be packaged and exported for use
for medicinal purposes providing more value from the output.
Based on a new project in Iran88, there are main aspects to be covered in the standards procedures for such
production process:
1- Establishing minimum requirements for pomegranate that should comply independently from the
quality class.
2- Defining classification categories of pomegranate according to the characteristics of the fruit.
3- Establishing tolerance considering quality and size that might be permitted for packaging.
4- Including provisions for marking and labeling the product according to the general standards of
prepackaging labeling.
5- Including hygienic provisions considering the recommendations of international code of practice for
hygiene and general standards of food hygiene.
According to one source, “the minimal processing consists in the washing with sanitizing agents to reduce the
initial microbial count, pH modifications, and use of antioxidants agents, temperature control and others, to
control partially the high perishability of the fruits”89. The cited study also indicates that the use of film
packaging protects the product property to a great extent.
Another highly automated option for processing is also available from ArilSystem90:
86 FAO statistics.
87 Project document for a regional standard for pomegranate, WHO, 2009.
88 Project document for a regional standard for pomegranate, WHO, 2009.
89 “Minimum processing of pomegranate var. wonderful”, by E. Sepulveda, et al
90 The section is extracted, with slight adaptation, from : http://www.arilsystem.com/aril-system-pomegranate-processing/from-fresh-
fruit-to-packaged-arils
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1. Reception
The fruit enters the receiving line tub which also serves as a disinfection unit as the first step in the
pomegranates deseeding process. Here it is washed to remove surface dirt, disinfected, and brushed while being
bathed in hot water. The whole fruit is now placed on a conveyor, ready to enter the Extractor, the main work
room where the air is filtered, and temperature and pressure regulated.
2. Aril Extraction
The now clean whole fruit is conveyed into the extraction line where the skin is scored, the fruit is gently broken
open, and the pomegranate arils are extracted with the aid of air and water. The extracted pomegranate arils are
immersed in a bath of cold water and all other elements of the fruit are washed away.
3. Conveyors
The conveyor system moves the shell and membranes to a collection bin and gently convey the pomegranate
arils to the final stage.
4. Drying
The extracted arils, separated from all other fruit parts leaving them pristine, whole, untouched and washed,
are now air-blown dry using unique fans. By the end of this process, yielding high quality, long shelf-life arils.
5. Packaging
The pomegranate arils are packed into containers with perforated plastic covering that allows the arils to
breathe while preventing oxygen from entering. The result is a package attractively displaying the sparkling red
arils, ready for market and offering a relatively long shelf-life.”

Producer prices for pomegranates are not available. However, retail prices of items like pomegranate powder is
in the area of $95.7 per kilogram. Fresh freeze-dried pomegranate ranges in the zone of $25 per kg.

There are no processors of pomegranate in Egypt. Fresh complete fruit has been supplied to “Shahrazad”
factory in Beni Suef, of the Upper Egypt for Food Industries company in Beni Suef, and Blue Skies, producers of
fruit salads. The main challenges in that kind of business is that the product needs intense marketing efforts
domestically and internationally in order to start making good profits.
Waste management
- The outer layer of the pomegranate is utilized for some medical uses.
- It is used in other production lines to produce dyes.
- The wastes of the harvest can also produce fertilizers.
5. Frozen Vegetables
Freezing halts the decay process of perishable foods and also enables the distribution of fresh foods to
consumers at anytime and wherever they are located. However, the process of freezing has to be quick in order
to protect the cell structure of food from the formation of large ice crystals.

Despite the existence of adverse and perverse economic conditions, the global market for frozen vegetables
carries on to expand. This is because consumers tend to ask for more convenient and faster to prepare foods.
The emergence of innovative products and packaging as well as the increasing health consciousness of
consumers has also contributed to the increase of consumption of the various frozen foods.
The frozen vegetables market has successfully managed to overcome the recession and the unfavorable
economic conditions due to the increase in the demand of convenient and healthy products, and overcoming
traditional preconceptions that fresh food is better than frozen, which might not be very true given the
conditions of transport and handling of fresh produce. Furthermore, the materialization of new freezing
technologies does open a new way for manufacturers to preserve the nutritional benefits in vegetables for
longer periods of time.
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The largest share of the global market’s demand on frozen vegetables belongs to the US and Europe. Asia-
Pacific and Latin America are viewed to be the top growing regional markets with CAGR that range between 4%
and 5.5% from 2007-2015.
The dynamic preferences of consumers does influence the trends in the frozen vegetables market, leading to an
emergence of new value-added products such as frozen entrees, vegetable mixes and prepared meals.
Major traders of frozen vegetables

The top traders in the market of frozen vegetables are China, US, Japan, Taiwan, Canada, New Zealand and
Belgium. China, USA, Taiwan, Canada, and Belgium present the top importers to the Japanese frozen market.
Previously the US was leading the supply in the global frozen vegetables market, but recently China passed the
US and possesses the leading share. Before the food company incident in China in 2007, China has increased its
supply by 14.2% where potato which makes 86% of the share increased by 4.6%, and corn that has the biggest
share on the country basis increased by 6.5%. Thailand had a 6.8% increase for the supply of mixed vegetables.
New Zealand also increased its corn supply by 18.8%.
Excluding frozen potatoes, China is the world’s second largest exporter of frozen vegetables after Belgium.
United States
In 2009, the US trade shortage in fresh and processed vegetables totaled %5.7 billion. The US imports has
surpassed the exports, however, the US exports of fruits and vegetables are rising. Imports increased by an
average of 6% annually since 1990, meanwhile, exports increased by 4% during the same given period. Between
1990 and 2009, the gap between imports and exports were widened as it rose from a $0.5 billion to $5.7 billion
shortage.
The frozen vegetable trade in 2007:
Product Category 2009 $billion

Imports
Fresh, Dried, Frozen Vegetables 6.5
Processed Fruits and Vegetables 4.6
Exports
Fresh, Dried, Frozen Vegetables 3.0
Processed Fruits and Vegetables 2.9
Net trade (exports less imports)
Fresh, Dried, Frozen Vegetables -3.6
Processed Fruits and Vegetables -1.7
Russia
The frozen food market growth rate varies between 10 to 20% per year. Although the market grows, the growth
is limited because of the deliveries of raw materials from abroad and to the regional expansion of retail outlet
networks. In 2006 Moscow consumed 18% of the entire market in Russia which represents a drop in the
consumption rate compared to 2005 and 2004.
The demand for frozen vegetables in Russia is relatively greater than the domestic supply. Most of the Russian
producers of frozen vegetables operate in freezing foreign raw material and pack them, and also few processors
were willing to increase the share of raw materials to 20-35% in 2008. Meanwhile, the poor quality frozen
vegetables imports from china increased in Russia and are consumed locally, whereas the government exports
the Russian frozen vegetables to western countries.
Major Global Players

• Ardo Group,
• Birds Eye Foods Inc.,
• Bonduelle Group,
• ConAgra Foods Inc.,
• Findus Sverige AB,
• Gelagri Bretagne SA, Green Giant,
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• H.J. Heinz Company,
• McCain Foods Limited,
• Merko Gida Sanayi ve Ticaret A.S.,
• NG Fung Hong Limited,
• PinguinLutosa NV, and
• Simplot Food Group.
Production requirements
 Freezing Equipment:
The selection of proper equipment for the freezing operation, it is significant to take the production rate into
consideration. A lower production rate is used to simplify the process parameters of the selected prototype
formulations. In a small scale operation, it is quite suitable to produce 1000 kg of frozen product on monthly
basis, and hence, the usage of a domestic freezer would be more convenient than industrial freezers. In markets,
there are several types of domestic freezers but the selection of the appropriate one should be based on
economical considerations, and thus, the chest freezers are relatively more economical than the other available
types in terms of energy usage for the operation of small enterprises.
 Processing Equipment:
In pre-freezing operations, the equipment required include proper kitchen utensils for washing and cutting,
proper devices for packaging after passing through the hot water kettles for blanching. The freezer operation is
found to be the highest investment cost in the overall process as the utensils present a small share of the initial
investment.
 Frozen Storage:
Maintaining the frozen products in frozen storages is essential after the freezing operation. Storage is also
significant in the quality retention of frozen food products. Monitoring the efficiency of frozen storages for
retention of high quality is essential for the success of the whole operation.
 Labor:
The labor needed in the freezing process is required to be technically aware of the process and the usage of the
equipment. The operation needs no intense labor as it depends more on machines and freezers. The amount of
labor also depends on the size of the operation meaning that the amount of labor in large-scale operation
definitely differs from those in small-scale operation. It is important to utilize skilled, and educated labor to run
the operation with the assistance of pre-operation labor that helps in the preparation process.

There are about 16 players in the frozen vegetable sector in Egypt, 10 of which are of considerable scale and
market share. Only one player operates in Upper Egypt, mainly the Upper Egypt for Food Industries (UEFFI)
Company with the manufacturing facility in Beni Suef and the brand name Shahrazad. The total market supply
capacity is about 116,000 tons but much of it is in smaller and older production facilities
UFFI factory started production in 2011 with a maximum capacity of 40,000 tons per year, which is the largest
in the Middle East region, and to be fully utilized in the medium term. The factory has the ability to freeze
many types of vegetables and fruits and is seeking supply of input from Upper and Lower Egypt.
Because there is a number of players in this domain and a very large player in Upper Egypt we do not expect a
new investor to be able to create much value from entering into this type of processing for the near future.
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Part 2: Benchmarking of
Horticulture Experience in Other
Countries
For purposes of this section, a benchmarking analysis was conducted. The focus of the analysis was other
countries’ experiences in the horticulture sector and the related agro industry, which were identified and
assessed order to recognize how horticulture sector in particular countries has been the main driver for
improving the livelihoods of the poor farmers through increasing their incomes and by providing more job
opportunities in other related industries like processing. This analysis helps in identifying these countries best
practices in the agro industry sector that has for objectives: enhance rural incomes and reduce poverty rates,
which are in common with the SALASEL program objectives.
In the present world, floriculture and horticulture has become a major foreign exchange earner for Latin
America and more recently for Africa as well (see the Kenyan experience). While the major exports of Africa are
directed towards the European markets, the Latin American industry exports are directed to the U.S. The two
major countries which have the largest share in the fresh cut flowers export in the region are Colombia and
Ecuador. Below we will discuss the success stories for Tanzania, Columbia, Ethiopia, and Kenya.
Success Story 1: Horticulture Production for Poverty

Reduction: Tanzania91
“Kinondoni” municipality in “Dar Es Salam” as case study
Smallholder farmers in the sample study grew various kinds of vegetable products such as pumpkins, legume
leaves, spinach and other crops. This variation is attributed partly due to the difference in profitability of the
products, availability of customers, and climatic conditions. That is farmers prefer to cultivate vegetables with
high profit, suitable to climate such as amaranthus species and pumpkins rather than low profit vegetables such
as tomatoes, and okra because it requires heavy rainfall.
Vegetable crop 2004 2005 2006 2007
Amaranthus 191 224 575 1318
Chinese 177 140 410 900
Salad - - 25 508
Spinach 102 105 115 135
Tomato - - - 2600
Legumes 785 795 885 895
Based on information from “Potentials of Urban Horticulture for Poverty reduction in Dar es Salam: a case study of Kinondoni
91
Municipal”, working paper written by H. Masashua, P. Dimoso and F. Hawassi, 2008
Page 68 of 181
Source: Survey Data 2008
The contribution of vegetables production on poverty reduction in urban areas was assessed by examinations of
several poverty factors, where the main factor is the household income. The study revealed that smallholder
farmers received significantly higher income per month after being involved in vegetable production compared
to before engaging in vegetable production. The following table shows the monthly income received by sample
smallholder farmers:
Number of Min Max Mean

Monthly Income
farmers
Average income before 2,000.00 300,000.00 65,672.70

engaging in vegetable 55
production
Average income after 10,000.00 840,000.00 163,000.00

engaging in vegetable 55
production
Source: Survey Data 2008
Success Story 2: Floriculture in generating more jobs

opportunities: Columbia92
Cut flower cultivation began in Columbia in 1965, when USAID promoted it as a substitute for coca. Columbia
has since become the second largest flower exporting country in the world, with 11% of the world market in
2002. Flowers are Columbia’s fourth largest export earner.
Most of the roses and carnations produced in Columbia are exported to US where they are sold in florist shops,
supermarkets, and online retail sites. There are over 1,000 workers in Columbia working to grow, harvest, and
package these flowers. About 66% of the Columbian workers are female.
Women participation in Floriculture

Women are engaged in flowers cultivation and production. They are assigned mainly to do flower selection,
classification, packing, and flower arrangements. Men were assigned to do the furnigating, the construction and
the infrastructure, while both were engaged in the cultivation of plants and tending the flower beds.
It is also worth noting that floriculture generates direct and indirect jobs that help in reducing the
unemployment rates and contribute in raising the farmers and workers incomes. In fact, floriculture creates in
Columbia ~ 94,000 jobs and other indirect jobs of about ~80,000.
Success Story 3: Development of an export oriented

horticulture sector: Ethiopia93
For long Ethiopia depended to a large extent on coffee for its foreign exchange earnings as it is used to account
for about 65% of its total export revenues. Until recently, horticulture was seen as one of the most
underdeveloped sectors in Ethiopia and its contribution to the country’s export earnings had been almost
negligible (until 2001 less than 2 % in export value). Large state farms dominated the production and export of
fresh fruits and vegetables. Few years ago however, most of these farms have been privatized and the cultivation
of fruits, vegetables and flowers for export was promoted.
Within the context of this market oriented policy reforms, Ethiopia also worked on attracting FDI into the
agriculture sector and exports from Ethiopia. But since there were some sectors that are reserved for domestic
92 Based on information from “Floriculture in Columbia: foreign exchange at the cost of exploitation of women”
93 Based on information in “Development Strategy for the Export oriented horticulture in Ethiopia”, March 2007
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private investments and the state, the horticulture sector was an exception because it was open for the FDI. It is
worth noting that some of the facilities offered by the Ethiopian government to investors are:
 New foreign investors are exempted from customs duties and import tariffs on all capital equipments
and up to 15% on spare parts
 Income tax holidays from 1 to 5 years
 Remittance of capital are tax exempted
Government Policies for Export Horticulture

In accordance with the “Sustainable Development and Poverty Reduction Program” (SDPRP), the Gov of
Ethiopia has set itself a strategy plan to achieve this objective, this plan is for the period of 2005 to 2009/10
that’s called: “Plan for Accelerated and Sustained Developments to End Poverty” (PASDEP in order to help the
country attain the MDG by 2015.
While regarding the production of flowers for exports, the PASDEP program targets an intensification of the
recently initiated flower production. This is through leasing lands to investors and builds more greenhouse
shelters. This has led at the end to increase the area under cut flower from 519 ha in 2005/06 to 2,000 ha in
2009/10. In terms of employment generation, the policy objectives is to increase the number of employees from
well over 21,000 in 2005 (64.4% female workers) to a total of 70,000 in 2009/10.
Floriculture
In 2006, Ethiopia was the second largest exporter of large roses to the Dutch auctions (after Kenya) and the
third largest supplier for small roses (after Kenya and Uganda). The following table shows the major statistics
floriculture development in Ethiopia:
Year Cultivated area ha # of exported stems Export value (US$)
2002-2003 - 16,000,000 2,900,000
2003-2004 - 32,000,000 5,500,000
2004-2005 150 83,000,000 12,700,000
2005-2006 345 186,000,000 26,900,000
2006-2007 645 1,114,000,000 113,000,000
Source: Ministry of Trade and Industry
Cut flowers are produced at different altitudes farmlands in Ethiopia, but because of logistical reasons, most
flower farms are located within a radius of 4 hours driving to the airport in Addis Ababa. This is in order to
improve the quality and efficiency of the horticulture supply chain since the Ethiopian horticulture sector is
mainly export oriented.
The EU has been by far the most important market destination for the Ethiopian flowers, Ethiopia has
surpassed the export volumes of some of its main competitors such as Egypt, India, Morocco and Zambia.
The first flower farms in Ethiopia exported their products mainly via the German wholesale company Florimex.
As the number of growers increased, the Ethiopians diversified their sales to other European markets and the
Middle East (Dubai).
An important feature of the Ethiopian floriculture supply chain is that very little freight forwarding services or
cold storage services at the airport are purchased by the rose growers. Instead, export growers prepare their
own documentation and load roses from their own cold trucks directly into the palletized loads for air
shipment. Thus, the flowers during the transport remain the grower’s property, which bears the risk in case of
the flowers loose quality or value as a result of delays. Moreover, phytosanitary inspections are conducted on
farm in Ethiopia on the basis of the production techniques, rather than product inspections of the respective
export consignments.
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Success Story 4: horticulture export growth in Kenya
The following success story shows particularly how trade in these horticulture and floricultural products has
proved to be a success factor in the benchmarked country Kenya.
The horticulture subsector of agriculture is a major foreign exchange earner, employer and contributor to the
food needs in the country Kenya. This is mainly because horticulture crops including fresh and processed
vegetable and fruit as well as cut flowers, are export oriented. They are considered as nontraditional exports
that are high in cash value. The subsector generates over US$ 300 million in foreign exchange earnings with a
total production that’s close to 3 million tonnes, making Kenya one of the major producers and exporters of
horticultural products in the world.
Kenya’s top exports in 2009.
Rank Quantity Unit value
Commodity Value (1000 $)
(tonnes) ($/tonne)
1 Tea 331594 894027 2696
2 Coffee, green 59991 198103 3302
3 Vegetables fresh nes 52085 175471 3369
4 Cigarettes 10150 85770 8450
5 Tobacco, unmanufactured 22043 50121 2274
6 Palm oil 44625 47270 1059
7 Sugar Confectionery 27188 42202 1552
8 Pineapples Cand 46898 40434 862
9 Beans, green 12447 34403 2764
10 Beer of Barley 58813 32563 554
11 Fruit Juice Nes 21373 21451 1004
12 Fruit, tropical fresh nes 19098 20748 1086
13 Vegetables Preserved Nes 12753 19845 1556
14 Oil Hydrogenated 20532 19279 939
15 Fat Prep Nes 14573 17441 1197
16 Jute 19864 16703 841
17 Margrine Short 11749 16170 1376
18 Food Prep Nes 8081 13104 1622
19 Nuts, nes 10755 12600 1172
20 Bever. Dist.Alc 5052 10789 2136
Source: FAOSTAT
The Kenyan horticultural exports are dominated by the cut flowers known as floriculture which the most
important types of them are roses, carnations and static, followed by a variety of fruits and vegetables of which
avocadoes, bananas, passion fruits and beans are on the top of the country’s horticultural exports94. Europe is
the main market for the Kenyan fresh horticulture produce with the main importing countries being UK,
Germany, France, Switzerland, Belgium, Holland and Italy as well as other non EU countries that include Saudi
Arabia and South Africa95.
The remarkable growth noticed in the Kenyan exports is mainly attributed to many factors that non
exhaustively are, conductive horticulture export environment, well developed dynamic private sector that
helped in the marketing of the horticulture products in international markets, the minimal government
intervention limited to being a facilitator and supporter through developing infrastructure, the country’s
preferential duty free access to the EU markets under the Lome Agreement, in addition to many other that are
related to the Kenyan structural and macroeconomic reforms and trade liberalization, which contributed all to
boosting the country’s horticultural prospects.
94 HCDA 2003
95 Horticulture Industry in Kenya 2005
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On one hand, from an investment viewpoint, it is to state that the outstanding performance of the Kenyan
horticulture sector is portraying the attractiveness of the country for new private and/or foreign investments
showing that the horticulture sector is an ideal investment opportunity for potential investors96.
On the other hand, from a socio economic perspective, Kenya being a major exporter of horticultural products,
this indicates that horticultural activities and other related industries have largely contributed to linking the
small farmers to the high value urban and export markets which has further raised the farmers’ rural incomes,
reduced poverty rates and improved the farmers’ livelihoods. As the horticulture in Kenya is considered a
success in terms of export growth, it is also important to identify the success in terms of incomes for Kenyan
families, particularly the poor.
Floriculture
According to the Kenya Flower Council, flower growing has overtaken coffee and tourism as a source of foreign
exchange for Kenya and ranks second only to tea. The main cut flower growing areas include Lake Naivasha,
Thika, and Kiambu/Limuru regions. Most of the flower production companies in Kenya have their own flower
farms. These companies grow, harvest, pack and transport cut flowers to airports for export. It is worth noting
that the floriculture production in general is a labor intensive subsector, in addition, it mostly use green houses
for cultivation.
Kenya has seen exceptional growth in its exports of cut flowers. The Kenya flower industry is expanding with
roses continuing to dominate the export market where the main export season is October to May, however there
are some cut flowers that are also sold locally mainly in Nairobi and Mombasa by street vendors and floriculture
shops in high/medium class shopping centers97. The main markets for cut flowers especially roses from Kenya
is the European Union in particular Germany, Netherlands, UK, Sweden, Italy, Switzerland and France. The
Kenyan exporters were keen to supply these markets with high quality flowers and roses -which is a sort of
compliance also with the EU high and specific quality standards and grading of the cut flowers-, ranking Kenya
at the end as the largest supplier of the cut flowers to the EU.
Roses make up more than 70% of Kenya’s flower exports, followed by carnations, which are the most popular
flower in Britain because they last longest. Kenyan growers have developed a factory style business that can
deliver wrapped bunches into UK supermarkets, where staff need to do nothing more than stand them in water.
Part of product offer from Kenya includes a bouquet ready to go, labeled, date coded.
The major importers include Flamingo UK, which supplies British supermarkets and Marks & Spencer. Other
markets are Netherlands, and supermarket chains like Tesco –where Kenyan firms have 25% market share,
beating Colombia and Israel, which each has about 16%.
In Kenyan cut flower industry, total employment is estimated to be 40-70,000 where ~75% of this total are
female. Women are concentrated in the segments of the production process that hold the most significance for
the quality of the final product, such as picking, packing, and the value added processing activities. Women are
more likely to be located in temporary, seasonal or casual emplyoment than permanent, however, for the cut
flower market, there is a high concentration of permanent work98. The following table indicates the
employment in the horticulture export agro industry in selected sub Saharan African countries:
#of employees in Share of Female

Country Commodity Year of survey FFV agro employees
industry
Cameroon Banana 2003 10,000 -
Cote D’ivoire Banana and pineapple 2002 35,000 -
Kenya Flowers 2002 40,000-70,000 75%
French beans 2005 12,000 90%
Senegal
Cherry tomatoes 2006 3,000 60%
Vegetables 2002-2003 7,500 65%
Zambia
Flowers 2002-2003 2,500 35%
Source: Arias (2003) for Cameroon; Minot and Ngigi (2004) for Cote d’Ivoire; own calculations from casestudies for
Senegal; Smith et al. (2004) and Barrientos et al. (2001) for Zambia and flowers in Kenya; Jaffee (2003) and Lambert
(2002) for fruits and vegetables in Kenya; Danson et al. (2004)
96 Case Studies of Agri-processing and Contract Agriculture in Africa, November 2006

97 Kenya in Horticulture 2005
98 Ethical trade in African horticulture: Gender, rights and participation, March 2004
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Conclusion
There are clear business opportunitites to reap significant value across the value chain of the horticulture sector
in Upper Egypt. The level of output in several crops is significant enough to warrant investment in medium to
large scale processing facilities to produce output that is in high demand and high retail value in international
markets. Additionally, there is little to no competition in most of the proposed processing options for
hotiruclture produce in Upper Egypt, providing interested investors with clear first mover advantage.
Given the current context in Upper Egypt and also the experience in other developing countries, the new
business ventures will have achieve two strategic objectives: integrate the growers into the operations with a
partnering approach, and work across the length of the value chain to the extent possible to maximize return
and enhance effeciency.
To elaborate on the above, growers in Upper Egypt are new to horticulture production of many crops, especially
on commercial basis targeting export markets. Hence much is needed in terms of knowledge, quality inputs,
improving the production and harvest process, and supporting the working capital needs of growers to ensure
timely supply of input at the desired quality specifications. Such partnership approach would enable the
companies to sustain long term quality supply, and create a socio-economic impact in the surrounding area of
its operation that will also be appealing to aware consumers in international markets. In other countries, such
as Hungary, the farmers are owners or part owners of the proessing business so that they can secture most of
the gained value across the chain.
Secondly, because the value chain of horticulture sector in Upper Egypt is significantly under-developed, there
is major room for opportunity to improve its performance directly by the processors. Learning from the
experience of countries like Kenya and Ethopia in the floriculture industry, the private sector owned most of the
steps in the value chain. Even in Egypt, a company such as the Upper Egypt for Food Industries Company is
strategically considering to integrate backawards into agriculture production to be able to secture its own
supply given the fragmanetation of the small farmers in Upper Egypt and the inadequacy of the supply chain.
Such integrated operation across the value chain, albeit going against the global trends in other industries, will
in the horticulture sector in Upper Egypt provide much higher value and effeciency to operators given the
context and the current state of the sector, the significant market opportunities, and the existing competitive
advantages.
At a micro level, potential investors will also need to focus on two tactics. First, develop processing facilities as
close to the farmlands as possible in order to reduce transportation costs and waste. As many industrial zones
are being offered or planned in Upper Egypt, access to suitable land plots at convenient locations would be an
advantage. Secondly, especially in the aftermath of the 25th january revolution in Egypt, there is room for
shaping and influencing the regulatory environment to overcome obstacles faced in the past, such as the
overlapping regultory bodies with mandate over food processing businesses. Recent steps such as approving
the establishment of a Food Safety Authority have been taken in 2011 and more can be expeced in the near
future.
Overall, there is a strategic window of opportunity for horticulture processing in Upper Egypt, that can be best
captured by innovative and long-term investors. Based on the analysis presented above, the rewards can be
significant and highly sustainable.
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Section IV: Pomegranate
Processing
The proposed project here is about the Pomegranates. The project’s focus is for the post harvest preprocessing
activities involving the preparation of the fruit for end-user consumption , or further processing for the
production of juices, syrups as well as for the use in the preparation of medicines.
Based on the benchmark studies presented in the previous deliverable, preprocessing would include the
following activities:
 Chopped pomegranate
 Fresh packed extracted arils
 Packaged pulps for medical usages
Egypt has a strong potential for taking a bigger role in the world’s production of preprocessed and processed
pomegranates as the Assuit governorate (the major pomegranate producer) currently produces approximately
0.11% of the world’s overall production of fresh pomegranates. Moreover, preprocessing activities do not
necessarily require educated or highly skilled labor, so investors could grasp the opportunity of utilizing both
the crop availability and the cheap available labor to develop a profitable enterprise, and take the initiative to
utilize a growing global market, with key inputs available in Egypt.
Project Brief
The proposed project is to establish a facility that undertakes the processing of fresh pomegranate collected
post harvest. The main output of the processing will be aimed at the end-user market of fresh packed arils,
which can be sold from the facility directly to large retail outlets (supermarket chains and hyper markets)
locally or internationally, traders and wholesalers, and institutional buyers (hotels, restaurants, etc). The
packed arils can also be sold to industrial producers for the manufacturing of concentrates and juices,
depending on their needs and their respective production facilities. The by-product of the process, such as
pulp, can be packaged and sold locally or internationally for medicinal use. The outer crust of the fruit can be
sold for industrial use for the production of dyes. Remaining by-products can be processed into compost.
Project Rationale
Pomegranates are either eaten fresh, or used for syrup, in which the juice of the acid fruit pulp is the main
ingredient. Over the past few years, more and more consumers have become aware of the health benefits of
pomegranates. This led to an increase in the demand for fresh pomegranates and also for its juice and
concentrate. However, fresh consumption has been limited due to the relatively difficult peeling process of the
fruit to extract the arils within. In response, companies and technologies had been developed to extract the
arils and sell them fresh packed to consumers, encouraging increasing consumption.
Globally, the US witnesses an increase in the consumption per capita. In 2002, Americans, have consumed ten
times as many pomegranates as they did in 2000. Likewise, in Europe, this trend has been taking place, and
pomegranate consumption is becoming more widespread across all European countries.
The increasing consumption trend can also be observed from the countries’ exports and imports amounts.
Within Europe, Spain is a leading exporter. More than 90% of Spanish exports are destined for the EU15, and
approximately 5% to Eastern Europe. Within Eastern Europe, Croatia and Slovakia are the main destinations
for Spanish exports in the EU. 99
In the case of imports, the main global import destinations are the non-pomegranate producing countries of
Europe. The UK is the current leader in imports, but according to one industry source, there is very little
difference between EU countries in terms of their consumption and / or growing preference for pomegranates.
Australia is another leading import destination, importing 12,000 cartons in 2006 from the US and aiming to
increase imports by 30%. South Korea is the main importer of Iranian pomegranates, while Japan favors
99 Albanian Export Opportunity to Europe and the Region
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imports from the US. Latvia is another destination for Iranian imports, possibly indicating unfilled Eastern
European demand. 100
Reflecting the previously mentioned information on Egypt, it is recommended for investors to be as quick as
possible in seizing the potential opportunities currently found in the pomegranate market.
Egypt is considered one of the largest producers of Pomegranate although it has always been primarily a
backyard ornamental product within the horticulture industry. Increasing levels of output especially in Assuit
governorate in Upper Egypt reaching production amounts of almost 46, 784 in 2009/2010101 tons per
annum102, which103, is a major opportunity to set-up production facility in this governorate.
The proposed project additionally provides direct benefit to small farmers in a number of ways. It is expected
that the new company will undertake medium-long term contracts with a number of farmers, directly or
through Farmers’ Associations, in order to supply annual amounts of pomegranates at specific levels of quality.
These contracts will encourage small farmers to grow the fruit and meet the required specifications, including
paying close attention to seeds and other inputs, and the proper management of the farming process to
maximize yield. Payment terms of such contracts should provide suitable financing options for small farmers at
the start of the growing season to overcome the challenge they face in obtaining financing to produce higher
quality and yield crops.
In addition, the proposed processing is a labor intensive process that will require the employment of a number
of semi-skilled and unskilled labors to work through the steps of production. This should provide a number of
employment opportunities to the households of small farmers, particularly females that can contribute to
increasing the income of the households.
Operations Vision
The proposed project can be set up as a medium-scale investment that is labor intensive and deploys low
technology production processes. This can be enhanced in the future as suggested below.
The current vision for the operations of the proposed project can be set as follows:
1. Supply chain management: this is the most critical aspect of the operations as it is the core of the
success of this project. The management of the supply chain on both the input and the output sides are
equally important:
a. Input: the abundant produce of pomegranate in Upper Egypt is hardly processed for industrial
use, and is currently mostly sold fresh at relatively low consumer prices, compared to global
prices of fresh-packed, ready-to-eat arils. In addition, processing by-products can also be
supplied for medical and industrial use, capturing additional value from the crop. Therefore,
securing the supply of considerable amounts of the crop from Assuit farmers, and other
governorates in Upper Egypt, up to expected quality specifications, would require establishing
and managing close links with growers, through a partnership approach. This relationship
should also provide growers with the needed support through technical and financial assistance
in order to ensure the quality of the crop, and reasonable returns to growers.
b. Output: the market for the project outputs will initially target the local market. Eventually,
and as quality and operations are well established, sales can become mostly be international in
nature, as this is where consumer demand is highest and growing as illustrated below. Given
the fragile nature of the output, especially fresh-packed arils, efficient management of the post-
production logistics is crucial. This includes securing delivery contracts to international buyers
in addition to securing proper transportation and storage facilities at efficient cost levels.
2. Capacity planning: pomegranate crop is available during the fall season and possibly early winter,
therefore, optimum production output can be achieved during these months. However, the whole fruit
has long storage life under proper storage conditions, through modifying temperature and humidity,
hence extending the supply duration for up to 4 or even 7 months, ensuring production capacity is
100 Albanian Export Opportunity to Europe and the Region

101 CAPMAS
102 Salasel Pre feasibility study: Qualification and Identification of 5 Key Agro-industry Projects, by PwC
103 Worldwide production is ~2 million tons
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maintained for most of the year. Some sources indicate that the pomegranate is best maintained at a
temperature of (0º-5º C), and can be kept for up to 7 months within this temperature range and at 80
to 85% relative humidity, without shrinking or spoiling. At higher humidity levels, such as 95% relative
humidity, the fruit can be kept for only 2 months at (5º C); and for longer periods at (10º C).104 other
sources recommend the use of certain packing techniques to preserve the fruit, and resort them after
storage. 105 Therefore, storage planning for whole fruits needs to be established in order to extend the
production capacity for as long as possible. Output has limited shelf life and can hardly be stored.
3. Production conditions: since buyers will most likely be international, it is critical that output
meets quality and hygiene standards of international markets. Such standards will have to be observed
from the farming stage, working closely with farmers to ensure that the resulting pomegranates are up
to international consumer expectations and comply with standards of health and environment, such as
pesticide residues in the resulting fruit. In addition, the production process needs to be of high levels of
cleanliness and hygiene in order to preserve the resulting arils, and other by-products, from
contamination during processing. There are known international standards already applied in
countries like Iran, a leading exporter of pomegranate products.
4. Packaging and Branding: as can be seen below, a few companies have succeeded in establishing a
global brand for their pomegranate output. Egypt has a significant global rank in the crop production,
but no processing whatsoever. Therefore, it is critical that the packaging of the project output is in line
with global trends. Examples include creating multiple shelf-keeping units (SKU’s) of the fresh-packed
arils, according to the demands of the various international buyers. Industrial buyers of arils (for
example for juice or concentrate production) can use other sizes of packages. Technically speaking,
packaging should also be planned to maximize the shelf-life of the arils. On the other hand, an
attractive brand should also be established in order to protect the value of the product and build up
market presence effectively over a short period of time. The combination of a unique brand and proper
packaging meeting consumer needs will advance the success potential of the project.
Future Possibilities
The suggested project implies simple yet effective and value adding processing that can be highly profitable
given the spread between producer and retail prices of the output. In addition, it is expected to be a low
investment project yet requiring strong management of key aspects. In the future, it is possible to extend and
expand the activities of the project into more sophisticated, and costly production processes, such as producing
pomegranate concentrates, juices, or other derivatives, based on market demand locally and internationally. It
is our expectation that such possibilities should be considered as additional expansion in the future, once the
initial concept materializes. However, if such possibilities are considered in the outset, they should be further
studied and analyzed in more details.
Commercial Possibilities
The global market of pomegranate is rapidly emerging . The market witnesses new products and companies
entering the pomegranate business in a high pace. Some global players, have established a brand for the
pomegranate juice, such as POM Wonderful juice, which are operating and selling at relatively higher prices
than other fruits with demand out-stripping supply. In addition to emerging demand from new consumers,
mostly related to health benefits, pomegranate has traditionally been a part of the diet of plenty of countries
and cultures for many thousands of years People from these countries, mostly Middle Eastern, carry around the
tradition of using pomegranates as they move around the world and they can more often than not be found
growing them in the suburban backyards for home use. As the value added products increase in demand, the
growth in the market place continues, hence the strong potential of the proposed project.
104Morton, J. 1987. Pomegranate. p. 352–355. In: Fruits of warm climates. Julia F. Morton, Miami, FL. http://www.hort.purdue.edu)
105“Modified Atmosphere/Modified Humidity Packaging for preserving Pomegranate Fruit during Prolonged Storage and Transport”
(http://www.stepac.com/)
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Global Supply
The estimated global total production of pomegranates amounts is around 2,000,000 tons, of which India
produces 50%. Although the majority of the Indian production is consumed locally, there is an increasing
trend to export to Europe and the Middle East. In the second place comes Iran with estimated 55,000 hectares
under cultivation and another 6500 hectares still to bear. It is believed that these acreages produce around
700,000 tons per year. Spain produces about 50,000 tons used both locally and through Europe. The US grows
a total of 6000 hectares and is projected to increase to 10,000 over the next 3-4 years. The balance is produced
in countries such as Turkey producing around 80,000 tons in 2003 and other Mediterranean countries which
include Morocco, Italy as well as countries in the Middle East such as Egypt, and the also former Russian
states.106
In California, production is viewed to be increasing more of sweet varieties only. The pomegranate cultivation
in most of the northern hemisphere seems to be more stable and consistent than other countries.
South Africa has witnessed a number of plantings trials in recent years but it is believed that the acreage does
not account for any more than 100 hectares. Also Peru and Chile have started planting the Wonderful brand
attempting to capture some counter seasonal market share into the US. Germany is perceived to have a solid
market potential as it embraces over 4 million Turkish emigrants. Australia also is following the new approach
for entering the global pomegranate market and estimated to have 200 ha under pomegranate cultivation with
the largest single planting in Condobolin NSW.107
The Supply Chain

The global supply chain is not well organized. The growers producing pomegranate are many and often working
on very small areas, so putting consistent lines of fruit supply together, making quality assurance accreditation
rather difficult.
The UK consumer market is organized with pre-arranged supply chains in place with category managers
working with major producers. South Africa, Spain, Netherlands, and Israel lead the aril processing for this
market as they depend on the timing of supply.
The market in the US is dominated by POM Wonderful in all categories, and also Simonian fruit in fresh fruit.
Seven new companies operating in the business have emerged in the juice sector in the US. These include:
 Fruitfast
 Traverse bay farms
 Odwalla
 Pomegreat juice
 Purely juice
 R.W. Knudsen
 Old orchard.
In addition, arils are being used as an ingredient in the pre packaged and prepared meals segment in large
retailers such as Marks & Spencer of the UK. They are packaged under private labels such as Trader Joes that
produce juice themselves as well. In Europe most of juice and cordial suppliers are Turkish108.
Market size and production

The size of the processed pomegranate market is hard to be precisely determined, however, recently a rapid
move of new companies entering the market is quite obvious and this helps in drawing a clearer picture of that
106 Pomegranate preliminary Assessment of the potential for an Australian Industry, by Colin Lye, published by Rural Industries Research
and Development Corporation (RIRDC), November 2008

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market indicating a growth phase. Furthermore, the global production varies from one year to another
depending on the irrigation and other climatic factors. Analysts suggest that the most likely achievable
productivity is 30 tons per hectare. Aril extraction is mostly handled through intensive labor, yet with high
levels of hygiene procedures. Lately, new technology for automated extraction has been deployed, yet the high
cost of installing the machines is still a barrier for some producers .
Juice and concentrate products are being processed differently depending upon publicly available technology.
Some technology is developed in house by producers and is not publicly accessible.
Market Overview
Production and Consumption Overview
As previously mentioned, demand on pomegranate various products are highly increasing in today’s world. This
trend seems to be tempting for investors to take the initiative of fulfilling the pomegranates market needs. This
would grant stakeholders a larger market share leading to an increase in their profit margin and finally a better
position in the global market.
Production
Dry areas with very hot summers and very cold winters are viewed to be the ideal lands for growing
pomegranates. There are various and diverse varieties of Pomegranates, but from the consumer point of view,
there are only two main types classified by color: yellow and purple or red. the former is often used in juice
production. Although fruit sizes vary greatly, quality is determined by color, size, weight, unblemished skin, and
taste for sweetness.
Generally, pomegranate production worldwide is mainly centered in the Mediterranean and Middle Eastern
regions or regions with similar climates such as California in the USA, South America and Australia.
Currently, the best quality of pomegranate comes out from Iran, Turkey, Afghanistan, Morocco, Syria, Spain
and Egypt. Iran is the number one producer and exporter of fresh pomegranate as it produces best quality and
has the largest area under cultivation and also leads the export market of pomegranates. As mentioned earlier,
although India is the biggest pomegranate producer, most of the local production is consumed in the domestic
market, thus India follows Iran in the amounts of exports. Iran and India together account for 95% of
concentrate production.109
In California, USA, pomegranate is cultivated by 250 growers responsible for producing 80% of domestic
pomegranate crop on approximately 6475 ha110. Because of the continued popularity of the fruit, acreage is
expected to dramatically increase in the coming years. The fresh harvest totals about $60 million in value.
In general, production is rising rapidly; however, demand is not wholly fulfilled, especially in the hot market of
USA. Large producers are gearing up production to meet anticipated increase in global demand and new
producers such as South Africa, which has extensive backyard production, is planting commercial orchards.
Consumption
Pomegranates have many varied uses, such as:
 Fresh: (chopped and canned)

 Processed: (juices, syrups, arils, and seed oil)
 Non food usages: (pharmaceutical and ornamental)
109 Epunica Pomegranate industry website

110 which is ~16,000 acres, as 1 acre= 0.404685642 ha
Page 78 of 181
The main success factors of this project would be summarized in the increase of demand on pomegranate due to
its medical significance as it has been lately discovered. Also people will start to perceive it as a convenience
product due to it being offered after peeling the arils from it, which facilitates the process of consumption and
increases consumers’ demand on the fruit. Furthermore, one of the best success factors of pomegranate is that
nothing of it goes to waste as its compost can be used in dying processes and also its pulp has several medical
uses.
Recently, emerged the evidence that pomegranates contain very powerful agents against cancer. Increased
world consumption is partly being driven by these claims and observations111. That was actually one of the
major reasons of increasing the demand on pomegranates in the international market. Moreover, the trend of
Europeans to search and try exotic fruits is another point that could increase the pomegranates popularity,
consequently the global demand. In general, the same trends that are influencing fruit and vegetable
consumption everywhere, are increasing the popularity of pomegranates112; as follows:
1. Health and fitness trends: A shift towards more healthy living and healthy lifestyles is generally
witnessed. Obesity has become a serious health problem in many countries. Increasing the consumption of fruit
and vegetables is one of the measures most often mentioned by consumers to reduce weight. Pomegranates, in
particular, are rich with nutrients that can prevent several health problems. Among reported health benefits of
the pomegranate: antioxidant properties to fight disease; lowers cholesterol levels; high potassium content
(almost as high as in orange juice, but not a source of vitamin C); good source of fiber. It might possibly be also
beneficial in fighting prostate and breast cancer. Some studies even point to pomegranate juice helping to
overcome the AIDS virus.
2. Opening up of new markets in Eastern Europe: Especially in the eastern countries, consumption
patterns are changing towards a Western European style which creates an opportunity for export.
3. Immigration: Pomegranates are more common in the Mediterranean and the Middle East regions than in
Western Europe. Immigrants have kept their culinary traditions of consuming fruits and vegetables, such as
pomegranates, which were unfamiliar to native Europeans. This has contributed to the increase in the global
market demand for this fruit. For example: The annual pomegranate consumption in Iran ranges from 7-8 kg
per person which is relatively high.
Competition Analysis
The global environment in the pomegranates industry is not highly competitive, thus the market entry is viewed
to be easy compared to other highly competitive industries. There are few large companies dominating the
global market, whereas the greatest market share is for US companies, Israeli and Iranian companies.
 Persian Pome (P.J.S With about 70 hectare under Persian Pome's supervision, this company is
considered one of the biggest pomegranate producers in Iran, with production capacity of more than 2000 tons.
However, there is a barrier that might face Iranian producers due to their attachment to old growing methods
and their dependency on traditional ways of production..113114
 POM Wonderful115 is a global brand committed to innovation and wellness. They grow and market
pomegranates and pomegranate-based products. It is the only company that grows, harvests, processes and
ships their own pomegranates. Plus, they are the only pomegranate company that has provided over $35
million in funding to support scientific research on Wonderful variety pomegranate products at top
institutions around the globe.
Pomegreat116 is an Irish company that started in 2001, not viewed as a big company however, it has a quite
big market share. They offer a variety of products that include: 100% pure, chilled Juice Drink, Juice Drinks,
111 “Pomegranates New Woolbelt opportunities, by the Dept of Agriculture and Food”, 2008
112 “Pomegranates: Albanian Export Opportunities to Europe and the Region”, by OTF Group, December 2007
113 http://www.importers.com/agriculture-food-beverage/fruit/Exporter/Persian-Pome-Co-/ID.288076.TP.424544/Pomegranate.html
114 http://www.eceek.com/about_46751_persian-pome-co-ltd-p-j-s.htm
115 POM Wonderful website
116 http://www.pomegreat.com/about-us
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and Capsules. In Egypt, there is a good supply of pomegranate, with an annual total production of 51,150 tons in
2009/2010.117 However, companies in agro processing industry have not yet paid much attention to the fruit,
and the consumers are generally still not fully aware of its nutritional value. There are no pomegranate
processers in Egypt, and only very few processors are recognized in the industry for utilizing pomegranate. For
instance: Shahrazad factory in Beni Suef which produces frozen vegetables and Fruits, and Blue Skies that
produces fruit salads. In addition, there is only one company that produces pomegranate juice under its
premium brands, Faragello Gold. Otherwise, there is no known institutional competition. Most produce is sold
fresh, and some local shops sell freshly prepared juice during the fruit high season.
The demand for consuming the fresh fruit may be harnessed by the general trend towards more convenient
products . Consuming fresh pomegranate is often perceived to be hard for eating due to the difficult lengthy
peeling process. This actually points out the opportunity for the proposed project to freely enter and lead the
market as well as making better use of all the by-products, achieving decent profits and respectable reputation
in the domestic and international markets.
Food Consumption Trends and their Impact on the Project

The schedule below shows the key food consumption trends globally over the next few years, and accordingly
identifying the potential opportunities for Egyptian players, to either penetrate global markets or to foresee the
trends in the local market and plan accordingly118:
Food consumption trends for 2010 Implication for the Project
Plays against the demand for fresh pomegranates, which

are often perceived as difficult to eat. By simplifying the
Greater demand for convenience processing of pomegranate and offering ready-to-eat
arils, the market would increase the demand on
convenient pomegranates products.
Pomegranates are exotic fruits with high nutritional

value, and whose demand is on the rise from new
More diversity of choice markets, other than the traditional users of the Middle
East region. Egypt has levels of supply that qualify it to
play a role as a global provider.
Pomegranates are popular in many Middle Eastern

cuisines that would create stable demand in those
Growth of demand for ethnic / exotic ingredients markets, as well as helping the product price to rise with
the increased consumption from new markets, such as
European and US.
Not necessarily relevant for pomegranates production in

Increased demand for organic products
Egypt, though organic farming is a growth niche.
More ready cooked, take out foods Not relevant for pomegranates
Demand for open, honest and informative There should be a labeling intent to promote the health
labeling benefits of the product.
117 CAPMAS
118 “Pomegranates: Albanian Export Opportunities to Europe and the Region”, by OTF Group, December 2007
Page 80 of 181
In addition, there are a number of threats, global and local, that may have an implication for the project:
Threatening trends Implications for the Project
Climate conditions are changing dramatically worldwide

and Egypt notwithstanding. Such changes can have a
Global warming
negative impact on the ability to grow pomegranates in
the required quality in the long term
With more awareness of the benefits of the fruit , and the

expansion of processing facilities across different
Increasing global competition countries, more competition is expected. Hence it is
essential that entry to this new market idea proceeds
fairly quickly.
This is the key challenge for the project. As indicated in

the rationale (in addition to previous stages of this
study), it is essential that investors undertake a
Quality of output of horticulture in Egypt, and
partnership approach with growers in order to support
dependence on traditional methods.
them, technically and financially, to grow the desired
crops in the quantities and qualities suitable for
processing.
Pricing
The price of fresh pomegranate in the international market is estimated to be on average of US$60 to US$70
dollars per tray for imported fruit in a country like Australia119. In addition, POM Wonderful has launched new
fresh packed arils that are available in the grocery markets since January 2011, at retail price of $4.99 per pack
(of about 170 grams).120. Other pomegranate product such as powder is in the area of $95.7 per kilogram in
retail outlets. Fresh freeze-dried pomegranate ranges in the zone of $25 per kg in international retailers as
well. While comparable products are not available in Egypt, what is available is pomegranate juice, selling at 9
EGP per liter ($1.5 per liter) as per end of 2011 prices.
Sales and Marketing issues

The introduction of a new product to the Egyptian market would require tailored and product specific
marketing strategies and plans. Initial strategies would focus on product orientation and highlighting the
benefits and convenience of the product. At such a stage distribution channels, availability and product
consistency would be key to achieving the targeted sales figures. With time and accumulated success, the
company would have a respected brand in the market. International markets are not less challenging.
POM Wonderful for example introduced new convenient, ready-to-eat fresh arils servings in the cut-fruit
section of most grocery stores in the US market. The company launched the new product in a new layout which
is a small handy plastic bowl covered with paperboard sleeve contains both bowl and lid. These ready to eat
servings are expected to attract more consumers as the transparent bowls shows the fresh product inside and
the way of preparation eases the enjoyment of eating pomegranates121 the price is $4.99 for a 170 grams
package.
119 “Pomegranates New Woolbelt opportunities, by the Dept of Agriculture and Food”, 2008
120 POM Wonderful, “POM Wonderful launches single-serve bowls for fresh pomegranate arils”, Posted by Lisa McTigue Pierce, 11/11/2010
121 POM Wonderful, “POM Wonderful launches single-serve bowls for fresh pomegranate arils”, Posted by Lisa McTigue Pierce, 11/11/2010.
Page 81 of 181
Sales also have to be strengthened by developing long term contracts, locally and internationally. However,
there are some other factors that would affect sales effectiveness within a given market. The distribution
channel is one of the aspects that have a high influence on sales. If the factory is located in Assuit governorate,
the yield will not take much time or efforts to deliver from the farm to the production facility, which would cut
the cost of transportation and also middle men, like wholesalers or traders that work as middle men between
growers and factories. Then transportation would play an effective role to distribute the final product to
retailers covering the local market. International market access will have to be planned and well managed to
protect the quality of the output, especially with limited air transport options in Upper Egypt.
Inputs and Outputs

Inputs
Proposed Capacity
The expected capacity can be up to 35-40 kg of chopped pomegranate per person pomegranate in the condition
of using manual labor. Using manual labor will help in creating employment opportunities, and will be
economic in terms of reducing machinery and electricity costs, However, special attention should be given to
hygiene issues through providing specific related training as well as continuous internal control and inspection.
Land / Governorate
Assuit governorate is known for its great production of pomegranates regarding quantity and quality, thus it
would be preferable to fid / establish a production facility within or nearby Assuit so as to reduce
transportation costs and employ people from Upper Egypt achieving SALASEL’s main target.
The project can take place in the Assuit Industrial Zone so as to be near to the pomegranate acreages and
horticultures saving transportation costs. The venue’s size will not determine the exact production capacity as
the proposed project is not concerned with machines but man power.
Plant and Machinery

As previously mentioned, the chopping process requires more labor than machines. Future expansion can
deploy automated production lines of aril extraction, yet they are relatively costly(refer to Stage 2 report for an
example122.). Also other activities including chopped pomegranate and pulp usage would require other
mechanic processes and packaging depending on the desired production capacity of the factory.
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Human Resources
In order to produce the expected capacity of 40 kg chopped pomegranate per day, the factory should employ
intense labor to be able to handle the huge production. Also the management team should take into account the
employee’s health conditions and meet the standard procedures of hygienic pomegranate preparation and
processing.
Infrastructure
The significant infrastructure resources need in the project can be summed up mainly in water, electricity,
machines (for packing), and the building/venue of the factory
Outputs
The project’s output is mainly chopped pomegranate and extracted fresh packed arils for consumer,
institutional or industrial use.
Pulp cleaned and packaged for medical use can also be sold to international buyers.
Crust and other by-products can be used for compost production or dye production, depending on agreements
that can be reached with buyers.
Key Success Factors

Selling pomegranates in the form of convenient products is a way to penetrate and position the product in
consumer minds, turning the fruit to be essential for the one’s diet putting in mind that pomegranates can
survive for long periods on shelves without rotting.
A number of factors have to be planned and implemented for the proposed project to ensure its success. These
are based on our analysis of the agro industry in Upper Egypt, and the macro market conditions.
1. Selecting a location that is nearest to quality roads connecting Upper Egypt, and as close as possible to
location of farms growing pomegranate to reduce transportation costs.
2. Contracting with a number of growers to provide supply of the required quantities needed to meet the
planned production levels per year.
3. Supporting growers, technically and financially, to ensure that the framing method, inputs, and
harvesting are aligned to produce the desired quality of fruit and maximize the yield of the land.
4. Identify and contract with buyers locally and internationally so as to ensure that production output is
immediately shipped to the right destination.
5. Plan and manage the post-production storage and logistics to maximize the quality of the fresh-packed
arils and other outputs.
6. Ensure the production facility and staff is meeting international hygiene standards.
7. Identify and comply with international regulations relevant to production and trading in fresh fruits.
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Financial Analysis
Project Investment Cost and Financing Plan
All figures are expressed in LE 000. In developing the pre – feasibility financial projections model for the
pomegranate processing project, we depended on initial estimates arrived at in consultation with PwC’s
agricultural consultant. The financial model is a variable price model. Escalation rates were applied on those
items, which are known before hand to be liable to escalation.
The attached appendix displays the financial projections for the construction period as well as five operating
years.
Initial Investment Cost

The total investment cost of the project is estimated at LE 1.45 million to be fully spent over one year of
construction Following is a breakdown of the investment cost estimates:
Description Amount(LE 000)
Fixed Assets 1,197
Pre-operating Expenses 100
Initial Working Capital 543
Total Investment Cost 1,850
Details of the estimated initial investment cost are explained below and are shown in Table 1 of attached
financial tables.
Fixed Assets
Land Cost
The Pomegranate processing facility is proposed to be located in Upper Egypt on an estimated total land area of
1,000 square meters. The total cost of the land allocated to the proposed project is estimated at LE 500,000.
Buildings
The cost of buildings will cover the cost of supporting facilities to the processing project, which include utility
connections, concrete work, wall cladding, metal, doors and windows. The total building cost is estimated at LE
360,000 based on 600 square meters of building at a construction cost of LE 600 per square meter.
Equipment
The cost of equipment is estimated by the industry expert to reach LE337,000. This cost includes fridges,
knives, vacuum packing machines, weights, tables and washing tubs.
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Pre-opening Expenses
Incorporation & Legal Fees

This item represents the incorporation charges required for the company establishment and the estimated legal
fees for the company’s contract preparation. It is estimated at approximately LE 10,000.
General & Administrative Expenses

General & administrative expenses include the cost of travel, accommodation, telephone, transportation,
employee benefits, utilities, training and other miscellaneous expenses during construction. They are estimated
at approximately LE 50,000.
Sales & Marketing

This item will cover the cost of some promotional efforts required for building some relations with clients in
preparation for selling the pomegranate. . An estimated amount of approximately LE 50,000 has been
allocated to this cost item.
Initial Working Capital

The initial working capital required for the operation start-up of the pomegranate processing project is based
on the following assumptions:
Cash: Two months of utilities, general and administrative expenses and labor cost.
Accounts Receivables: estimated at 15 days of total revenues.
Inventory: estimated at 4 months materials and packaging materials.
Accounts Payables: estimated at 45 days of total cost of raw materials and packaging material.
Financing Plan
The project is assumed to be totally financed through owner’s equity with the amount of LE 1.45 million.
Financial Evaluation
Financial projections have been made for the first five operating years in addition to the construction years, and
are expressed in LE 000.
Revenue
The proposed project assumed to generate different sources of revenues as follows:
Pomegranate Revenue
Pomegranate Revenue
The total quantity of pomegranate available for sale is 250 tons. Since processed and packaged pomegranate is
not available in the local market, we have estimated selling price at LE 12,000 per ton. This price is based on
the output percentage of 50% of the raw fruit volume in addition to an estimated profit margin of 32% of the
total direct cost. The selling price is assumed to be escalated by 5% annually.
Pulp Revenue
The pulp quantity is estimated at 100 ton representing 20% of the total fruit weight. This will be sold at an
estimated price of LE 3,000 per ton with an escalation of by 5% annually.
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Cost of Sales
The proposed project cost of sales is as follows:
Pomegranate Cost
The quantity of pomegranate required for the above required output is 500 ton, and the estimated cost is LE
3,500 per ton based on current available market prices.
Packaging Cost
The cost of packaging for the output of pomegranate is estimated at 15% of the fruit cost.
Transportation Cost
The cost of transportation of the fruits to the processing facility is estimated at 15% of the fruit cost Operating
Expenses.
Depreciation
Depreciation of fixed assets was calculated based on the rates shown in the following table:
Asset Rate
Buildings 5%
Equipment 20%
Administrative Expenses
Administrative expenses are calculated at 2% of total revenue. and they include the cost of travel,
accommodations, telephones and communications.
Energy & Utilities

The total cost of energy and utilities is calculated to be 2% of total and they cover the cost of water, electricity as
well as the cost of power.
Labor Cost
Labor cost is calculated based on the number of workers required as estimated by the industry expert. The
estimated number of daily workers is 25 at a cost LE 30 per worker per day, in addition to a supervisor with a
monthly pay of LE 1,500. This cost is assumed to be escalated by 5% annually.
Marketing Expenses
Marketing expenses are calculated to be 3% of total sales revenue.
Other Expenses
Amortization
Pre-opening expenses and interest during construction will be fully amortized in the first year of operation.
Taxes
Based on the Egyptian tax law the project net earnings are subject to income tax of 20% annually.
Page 86 of 181
Summary of Results
Internal Rate of Return (IRR)
In order to calculate the internal rate of return of the Pomegranate Processing project, the net profit was added
to the depreciation and amortization as they represent non-cash expenses. The residual value represents the
project’s net fixed assets in addition to the cash available in the last projected year. Total outflows, representing
the capital expenditures, pre-opening expenses and the change in working capital, are deducted to arrive at the
net cash flow.
The IRR of the project was calculated to be 31.9% meaning that the net present value of the project equals to
zero at the mentioned discount rate.
Key Financial Indicators

The subject project enjoys healthy financial indicators as revealed in the following table:
Liquidity: The current ratio t is never below 5.4 in the first year of operation and quick ratio
with the same amount in the first projected year.. It greatly improves thereafter with
the full repayment of the project’s debts.
Profitability: Profitability ratios are very favorable. Return on sales starts at 9% in the first year, and
return on investment starts at 15% in the first year. The profitability ratios increase
gradually to reach much higher and more favorable throughout the projection years.
Page 87 of 181
Initial Investment Cost Pomegranate
LE 000
Description Year -1 Total
Fixed Assets:
Land 500 500
Building 360 360
Equipment 337 337
0
Total Fixed Assets 1,197 1,197
Pre-opening Expenses:
Incorporation & Legal Fees 10 10
General and Administrative Expenses 50 50
Sales & Marketing 50 50
Financing Charges 0 0
Total Pre-opening Expenses 110 110
Initial Working Capital 543 543
Total Investment 1,850 1,850
Financing Structure Pomegranate

LE 000
Description Year -1 Total (%)
Paid-up Capital 1,850 1,850 100%

Long-term Loan 0 0 0%
Total 1,850 1,850 100%
Paid-up capital represents 100% of the total investment.
Page 88 of 181
Depreciation Charges Pomegranate
LE 000
Year
Description Cost Rate Year 1 Year 2 Year 3 Year 4 5
Building 360 5.0% 18 18 18 18 18

Equipment 337 20.0% 67 67 67 67 67
Total Depreciation 85 85 85 85 85
Accumulated Depreciation 85 171 256 342 427
Amortization 110 100% 110 0 0 0 0
Net Pre-opening Expenses 0 0 0 0 0
Revenues & Costs Pomegranate

LE 000
Year
Description Year 1 Year 2 Year 3 4 Year 5
Pomegranate:
Quantity Ton 500 500 500 500 500
Cost Per Ton 3,500 3,675 3,859 4,052 4,254
Output Percentage 50% 50% 50% 50% 50%
Net Pomegranate Quantity 250 250 250 250 250
Pulp Quantity 100 100 100 100 100
Pomegranate Selling Price per
Ton 12,000 12,600 13,230 13,892 14,586
Pulp Selling Price per Ton 3,000 3,150 3,308 3,473 3,647
Pomegranate Revenue 3,000 3,150 3,308 3,473 3,647

Pulp Revenue 300 315 331 347 365
Total Revenue 3,300 3,465 3,638 3,820 4,011
Direct Cost 1,750 1,838 1,929 2,026 2,127

Packaging Cost 263 276 289 304 319
Transportation Cost 263 276 289 304 319
Total Cost 2,275 2,389 2,508 2,634 2,765
Gross Margin 1,025 1,076 1,130 1,187 1,246
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Projected Profit & Loss Statement Pomegranate
LE 000
Year
Revenue
Total Revenues 3,300 3,465 3,638 3,820 4,011
Total Cost 2,275 2,389 2,508 2,634 2,765
Gross Profit 1,025 1,076 1,130 1,187 1,246
Other Expenses
Depreciation 85 85 85 85 85
Administrative Expenses 66 69 73 76 80
Energy & Utilities 66 69 73 76 80
Labour Cost 243 255 255 255 255
Marketing Expenses 99 104 109 115 120
Total Operating Expenses 559 583 595 608 621
Profit Before Interest & Tax 466 493 535 579 625
Other Expenses
Amortization 110 0 0 0 0
Insurance 0 0 0 0 0
Total other Expenses 110 0 0 0 0
Net Profit Before Interest &

Tax 356 493 535 579 625
Interest 0 0 0 0 0
Net Profit Before Tax 356 493 535 579 625
Taxes 71 99 107 116 125
Net Profit 284 395 428 463 500
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Statement of Change in Working Capital Pomegranate
LE 000
Year Year
Description 1 Year 2 Year 3 4 Year 5
Cash 62 65 66 67 68
Receivables 136 142 150 157 165
Inventory 594 624 655 688 722
Total 791 831 870 912 955
Payables 248 261 274 287 302
Total 248 261 274 287 302
Net Operating Working Capital 543 570 597 625 654
Inc./Dec. in Operating Working

Capital 0 27 26 28 29
Projected Cash Flow Statement Pomegranate

LE 000
Description Year -1 Year 1 Year 2 Year 3 Year 4 Year 5
Operating Cash Flow

Net profit Before Tax 356 493 535 579 625
Taxes -71 -99 -107 -116
Total Operating Cash Flow 551 507 522 557 594
Investing Cash Flow

Fixed assets -1,197
Pre-opening expenses -110
Inc./Dec. in working capital -543 0 -27 -26 -28 -29
Total Investing Cash Flow -1,850 0 -27 -26 -28 -29
Financing Cash Flow

Paid-up capital 1,850
Long-term loan 0 0 0 0 0 0
Dividends 0 0 0 0
Total Financing Cash Flow 1,850 0 0 0 0 0
Operating Cash Flow 0 551 507 522 557 594

Investing Cash Flow -1,850 0 -27 -26 -28 -29
Financing Cash Flow 1,850 0 0 0 0 0
Net Cash Flow 0 551 480 495 529 565
Cumulative Cash Flow 0 551 1,031 1,526 2,056 2,621
Page 91 of 181
Projected Balance Sheet Statement Pomegranate
LE 000
Assets
Cash 0 551 1,031 1,526 2,056 2,621
Working capital 543 543 570 597 625 654
Fixed assets 1,197 1,197 1,197 1,197 1,197 1,197

Accumulated depreciation 0 85 171 256 342 427
Net fixed assets 1,197 1,112 1,026 941 855 770
Net pre-opening expenses 110 0 0 0 0 0
Total assets 1,850 2,206 2,628 3,064 3,536 4,045
Liabilities & Owners Equity

Taxes 71 99 107 116 125
Net Worth
Paid-up capital 1,850 1,850 1,850 1,850 1,850 1,850
Dividends 0 0 0 0 0
Retained earnings 284 679 1,107 1,570 2,069
Total net worth 1,850 2,135 2,529 2,957 3,420 3,920
Total Liabilities & Owners Equity 1,850 2,206 2,628 3,064 3,536 4,045
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Selected Financial Indicators Pomegranate
LE 000
Year
Revenues 3,300 3,465 3,638 3,820 4,011

Net Profit Before Interest and Tax 356 493 535 579 625
Net Profit Before Interest and after Tax 284 395 428 463 500
Net Profit 284 395 428 463 500
Current Assets 1,342 1,862 2,397 2,968 3,576
Current Liabilities (Current portion of LTD +
taxes) 248 332 372 394 417
Net Worth 1,850 2,135 2,529 2,957 3,420
Liquidity:
Current Ratio 5.410 5.615 6.631 7.778 8.826
Quick Ratio 5.410 5.615 6.631 7.778 8.826
Profitability:
Return on Sales (ROS) 9% 11% 12% 12% 12%
Return on Equity (ROE) 15% 18% 17% 16% 15%
Return on Assets (ROA) 15% 18% 16% 15% 14%
Return on Investment (ROI) 15% 21% 23% 25% 27%
Project's Internal Rate of Return Pomegranate

LE 000

Inflows
Net Profit before interest 284 395 428 463 500
Residual value 3,391
Total inflows 480 480 513 548 3,976
Outflows
Fixed assets -1,197 0 0 0 0 0
Pre-opening expenses -110 0
Inc. \ decrease in working capital -543 0 -27 -26 -28 -29
Taxes 0 -71 -99 -107 -116
Total Outflows -1,850 0 -98 -125 -135 -145
Net Cash Flow -1,850 480 382 388 414 3,831
Internal Rate of Return

(IRR) 31.9%
Page 93 of 181
Section V: Dried Dates
Project Brief
The proposed project relates to the industrial processing of dates available in Upper Egypt, particularly in Qena,
Luxor, and Aswan governorates. Processing activities here mainly refer to dehydrating certain varieties of dates
in order to enhance the product value and increase the efficiency of using the output volumes currently
produced.
The project will be using one of two techniques; traditional primitive drying techniques or solar dehydrators.
While each of the proposed methods has its advantages and disadvantages, the solar dehydrator is mostly
recommended as it is faster, produces higher quality dates of dark goldish color, in addition to the little waste
produced compared to the primitive drying technique, yet waste produced from the traditional technique does
not exceed 10% of the total output produced.
Currently, in Egypt, date growers depend mostly on the traditional techniques for the dates dehydrating;
mature dates are exposed to the sun for not more or less than 60 days on the floor, dust or sand or on rocks,
while being reverted on average twice over the whole process for the dehydrating activity to be successfully
completed. This guarantees all dried dates are of the same color, same level of dehydrating and of the same
quality. Yet there are hygiene concerns since the dates are being exposed to dust and other climate factors. To
address such concern, there are trays that may be used to put the dates on instead of putting them on the floor
to be still exposed to the sun. Later in this report, a detailed assessment of this project will be identified.
Project Rationale
This project is very suitable to be applied in Egypt as the country is ranked number one worldwide in date
production in an amount of 1.35 million tons in 2009/2010123, followed by Iran, Saudi Arabia, UAE and
Pakistan. This presents a great opportunity for dates processing due to the generous volumes of dates produced
mainly in Upper Egypt. In addition the sun availability all year round and the abundance of relatively cheap
labor further place Egypt as a perfect location for such a project.
On the demand side, Europe, particularly the EU region is a key market for date exports, in addition to Muslim
countries that consume date especially during the Ramadan season. Although the EU imports of dates
represent only 10% of world imports in volume, they account for some 30% in value, where the main markets
for dates are France, the UK, Germany, Italy, and Spain. They collectively account for 85% of total EU imports
of dates in volume. In addition, India and Bangladesh are becoming the major date importers from Pakistan in
recent years. Bangladesh imported 1,057 tons of fresh dates and 557 tons of dry dates in 2008. Also, for the
years 2008-09, Pakistan had exported over 100,125 tons of dry dates to India worth of US 38 million out of
total dry exports of 39,9 million during that period124.
From the above, it can be concluded that the global market highly demand dried dates products. Egypt being
one of the major date producers in the world, can meet such global demand. Moreover, prices of dried dates
worldwide are high relative to other types of dried fruits. Part of such price level is due to the high nutritional
value of the dates that consumers are aware of nowadays. This actually realizes the rationale behind the
establishment of the proposed dried dates project.
Moreover, palms are usually grown in addition to the regular crops farmed by small holders in Upper Egypt.
The volumes produced are mostly sold to the local market as there is only one company operating in the
processing of dates. The establishment of a facility that processes dates in a hygienic and quality oriented
operation will provide opportunity for growers to receive higher value for their harvest of dates, especially if
longer term contracts are established. As the production process is labor intensive, this will also create
additional employment opportunities in Upper Egypt that can utilize other household members such as women.
Operations Vision
The proposed project can be set up as a medium-scale labor intensive investment which deploys low technology
production processes. This can be enhanced in the future as suggested below.
123 CAPMAS, prepared in 29-11-2011

124 “Dates Drying and De-hydration Plant”, Sindh Board of Investments, Government of Sindh, 2010
Page 94 of 181
1. Supply chain management: securing the required level of input of fresh dates for this project is a
critical aspect of project success. In addition, planning the time of output availability in the market is
also crucial given the seasonality of dried date consumption in Egypt and other Muslim countries.
International market access also offers significant opportunity given the increasing demand on dates as
discussed later
a. Input: given Egypt’s global position in date production, it is a clear opportunity to produce
better quality dried dates that can command a global and local market position. Securing the
supply of fresh dates from growers might be a challenge given that a number of large scale
traders currently procure and dry dates using traditional techniques. Therefore, longer term
contracts with better price offers to growers will need to be deployed to secure input. In
addition, technical and financial assistance during the farming process of palm trees could
provide additional measures to secure dates quality. For the longer term, plans to grow
different varieties that are highly priced internationally (see references to Majdool variety
below) can be arranged with growers around Upper Egypt, given suitability of environmental
conditions.
b. Output: the market for the project output of dried dates will be local, regional and
international in nature given current trends in consumption. This warrants identifying and
contracting with different segments of buyers in various countries, to secure sale of outputs at
best prices capturing the most value out of the dried dates. The product output can also be
stored over long time durations offering the ability to sustain revenues throughout the year, if a
variety of markets are addressed.
2. Capacity planning: Dates for drying will be picked at the latest stage of crop development, when the
date fruits are mature. Then, the fruit will be dehydrated to produce quality dates for end users, which
can be stored for very long durations when rightly packaged and kept in suitable storage conditions.
While the proposed dehydration process offers the advantage of producing cleaner and better preserved
dates (using solar dehydrators, over the traditional technique of sun-drying in exposed areas), the
quality of the dates used is critical in order to enhance the commercial value of the dried product.
There are no international unified standards of quality, however, higher quality products will have to be
nurtured during plantation in order to meet the required quality profile of dates, which include
parameters as:
i. color, shape, size, taste, texture, pit/date ratio and uniformity in color and size of the fruit
ii. moisture, sugar and fiber content
iii. Defects of the fruits, which may include discoloration, broken skin, sunburn, blemishes, shrivel
deformity etc.
iv. presence of insect infestation, foreign matter, pesticide residues, mold and decay
Therefore, the processor should ideally work closely with growers in order to ensure that the resulting crop
meets most of the above criteria as possible, to be able to create a strong product position in the market.
3. Production conditions: The process of dates sorting prior to the dehydration and during the
process is key to the resulting product quality. It is a labor intensive process that required some skill
and a high emphasis on quality. While there aren’t necessarily highly specialized work conditions in
terms of hygiene as the fruit will not be sold fresh, still high levels of cleanliness, and protecting the
dates from external factors such as dust and insects will be key differentiating factors in the quality of
the dried product, compared to output of current traditional local dryers .
4. Packaging and Branding: dried dates have seasonal consumption patterns in many cultures, in
addition to growing international demand for their nutritional values. Therefore, it is important that
the product is positioned with special brands meeting the cultural expectations of the various
consumers locally, regionally and globally. Branding will help protect the commercial viability of the
product and the quality sought during farming and drying. In addition, varieties of package sizes will
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have to be developed in order to meet the varying needs of customers, retail, institutional and
industrial, across target markets.
The proposed production process is simple and aims at enhancing the value of the dried dates, and utilizing the
high levels of output in Egypt to match growing demand. In the future, extension of operations to produce
special dates can be considered and can enhance the success potential of the venture. Examples include
producing dates that are filled with quality nuts (almonds for example) and nicely packaged for special
occasions. Chocolate-covered dates are also a special product that can command much higher retail value if
produced with quality chocolates, well branded, and nicely packaged. However, such production extensions
will warrant different settings for production conditions in order to meet the higher levels of hygiene and health
expectations for the resulting product, in addition to managing the supply of additional inputs such as nuts and
chocolates. Special storage facilities will also have to be implemented due to the different storage conditions
needed for output like chocolate-coated dates.
The market of dry dates in Egypt faces some fluctuations, however, the demand is relatively constant compared
to other fruit markets. Rivalry is not intense by any means as the fruit is usually used domestically and
internationally mainly for religious rituals. Also,, consumers prefer dates than any other dried fruits as they are
aware of its nutritional value as it is also a part of their diet at some times of the year.
Structure and Location

Egypt’s production capacity of dates is estimated to be 1.3 million tons per year. However, little data is available
about the exact amounts of dried dates produced in Upper Egypt, which is the most appropriate location for
dates drying due to the intense sun availability and dry weather conditions.
Below is a breakdown of the production of dates in the Southern governorates of Egypt:
Governorate Production (in tons)

Menia 34,257
Beni suef 31,913
Assuit 37,825
Sohag 35,807
Qena 20,108
Aswan 91,235
Source: CAPMAS, prepared in 29/11/2011
The table above reveals that the Upper Egypt governorates have great potential for the dates drying, this is due
to the vast amounts produced there, and only there, particularly in Menia, Assuit and Sohag governorates125.
Current Production Trends

Dates are produced in Egypt in ~10 governorates, where some of them are El Ismailiya, El Behira, and El
Fayoum in the Northern of Egypt and others in Southern that include Assuit, Qena, Sohag and Aswan.
In fact, most of the dates palms especially in Upper Egypt are randomly grown. However, farmers and growers
at the harvesting season of these palms -from end of August till October-, start to collect the mature dates either
for fresh consumption or for drying activity.
The drying activity in the Upper Egypt zone is very primitive; where dates are exposed to the sun for at least 2
months, while being reverted twice in order to make sure they are wholly dried. Dried dates are then stored in
dried and shaded rooms with good ventilation for an average 1 year to be consumed in the off season times126.
“Aswan” is not included; the scope of the analysis includes only six governorates namely: Assuit, Qena, Sohag, Beni suef, Luxor and
125
Menia.
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The Supply Chain
Grower
Pre Harvest Contractor
Processor Dry/ Fresh

dates
Exporter Wholesaler
Domestic Market
Export Markets
Importer Retailer
Retailer
Consumer
The dates’ supply chain is not complex, as the grower maybe able to sell his product directly to the processor.
The dates separation127 starts in the phase in between the harvest and processing or even drying. The project as
proposed is supposed to be drying dates which can be packaged to be directly sold to the domestic or export
markets, or can be sold to other processors that will use the dried fruit in other further production lines.
126 For example, Ramadan will be in the summer season for the coming 20 years, which means that dates will not be harvested yet, that’s
why we will need to store them from the previous year.
127 Separation here means grading according to quality and separation based on size and variety types.
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Market Overview
Egypt is the world’s top producer of fresh dates. Dates drying in Egypt has not yet taken any professional form,
thus there is an opportunity for investors to lead the market by establishing a large up to date dates drier in
Egypt benefiting of the stable demand consumption inside and outside the country. Besides the dates’
nutritional value, dates are also widely used for religious rituals in some countries such as India, and other
Muslim cultures.
Production
Global date production is steadily growing. It is expected that the world production would have crossed 7.5
million tons in 2010, due to aggressive efforts made by the largest date growing countries of the world over the
last few years. These countries include: Saudi Arabia, UAE, Iran, Iraq, Tunisia, Algeria, Sudan, Oman, Pakistan
and China. The following table shows the top 10 producers of the dates in 2009 worldwide:
World date Production

Country Production (Int $1000) Production (tons) % share
1 Egypt 6,894,50 1,350,000 20%
2 Iran 555666 1088040 16%
3 Saudi Arabia 537464 1052400 15%
4 Pakistan 375508 735276 11%
5 UAE 356982 759000 11%
6 Algeria 306777 600696 9%
7 Iraq 210411 507002 7%
8 Sudan 173281 339300 5%
9 Oman 137987 278590 4%
10 China 71498 140000 2%
Total 6,850,304 100%

Source: FAOSTAT
Since Egypt is located on the top of the list of the largest date producers – with a market share of 20% amongst
the top ten producing countries-, it has strong potential for producing various dates products. In Egypt, despite
the huge date volumes produced, it supplies and exports mostly fresh dates. Egyptian exports of dates in recent
years included also fresh and dried dates stuffed with almonds, or coated with chocolate. Below is a table that
indicates the Egyptian exports and imports of fresh and dried date products in 2010:
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Exports Quantity (KG) Value (EGP)
Dates, not stuffed, fresh 13,994,052 59,605,267
Dates, not stuffed, dried 16,520,085 72,358,938
Dates, stuffed, fresh 70,278 3,086,64
Dates, stuffed, dried 128,950 431,525
Imports
Dates, not stuffed, fresh 11,828,93 10,824,535
Dates, not stuffed, dried 227,38 197,101
Dates, stuffed, fresh 3,791 96,799
Dates, stuffed, dried 1229 34,760
Source: CAPMAS
This indicates there is clear opportunity of directing Egypt dried date products for export. New dried date
varieties stuffed with almonds, or coated with high quality chocolate are introduced to the international
markets packaged in gift packages rendering them fairly attractive to the consumers.
Nevertheless, there are other processed date products such as date juices and syrups, which are also seen as a
good opportunity in the market to attract new investors, yet, they require technologies that are more advanced,
infrastructure and transportation, as well as refrigerated rooms and efficient storage techniques.
Consumption
Dates are consumed as:
 Fresh
 Semi dried
 Dried
Demand on dates is obviously increasing across the globe; nevertheless, this demand is limited to certain date
varieties rather than others where these varieties are exclusively nontraditional, namely :
 Deglet nour
 Medjool
Medjool varieties are produced by the USA and Israel, mainly in the regions of Eilat and the Dead Sea128. They
have attracted major interest in the UK, and France and fetched high prices. Thus, some other countries started
producing the same variety, like Namibia. However, prices of Medjool, vary depending on the origin, the
manufacturer, the size, and the means of transport. While, the Deglet Nour varieties are semi dried dates that
are not so sweet and unique in taste. They are mostly known in the Middle East. They are mainly consumed by
Southern EU countries, mainly Spain and Italy as they already have strong trading links with Tunisia and
Algeria.
128The Marketing Potential of Date Palm Fruits in the European Market, by Pascal Liu, Food and Agriculture Organization (FAO), a paper
prepared for the International Date Palm Forum, UAE, 2002
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It is worth noting that Tunisia is a bright example for success in the business of dates. As shown in the table
above, it only produces 2% of the world total production, however, it has developed infrastructure complying
with international agricultural and trade standards to only produce the prime varieties of Deglet Nour and
Medjool. Moreover, Tunisia has targeted the high end market of Europe and earns huge foreign exchange,
placing the country now as the largest exporter of dates in terms of dollar value – exports of prime dates in
2008 worth of over US$170 million129.
In Egypt, the dried date (Tamar) varieties that are mainly grown in Upper Egypt are:

Bertumuda: this is one of the high quality dried dates varieties, its color turns to light brown when it’s
wholly riped, and its taste is sweet. Its date palm produces on average 30-50 kg.
 Sacout, El Abrimi, El Barakawi: they are the most popular varieties, the date palm produces on average
55 kg
 El Malakabi: this is one of the high quality and high price varieties.
These dried date varieties are almost consumed domestically rather than for export. Egypt only exports fresh
Siwi (Saidi) dates grown in El Wahat, these varieties are semi dried.
Pricing
In Egypt, one kg of dried dates is being sold to a wholesaler at the price of EGP 5/ Kg while it reaches the final
consumer at the price of EGP 15/ Kg, not including the plastic bags or any other packaging material used for
packaging the final product. This indicates considerable commercial potential for the proposed project.
Retail prices in the UK and US markets as of end of 2011 indicate that sundried dates are sold at an average of
about $7 per kilogram. Other types of dates such as pitted date for $7.8 per kg and jumbo dates for $17.2 per
kg. The producer price of dates in Egypt in 2009 according to FAO database, was $321.3 per ton, equivalent to
$0.32 per kg. This indicates a spread of a minimum of $6.7 per kg for dried dates. This value would increase if
the type of date traded is of higher quality.
Across the globe. It was found that the major players for drying and exporting dates exist mainly in the Muslim
world countries such as Egypt, Iran, Pakistan, Algeria and Iraq. Below are some examples for companies130 that
operate in the dates trading across borders.
 AHT Co: in Tehran, Iran. This company is a major exporter of all kinds of top quality Iranian dates in
all kinds of packaging from Iran.
 SAIR Golden Palm Co SGP: in Iran. It is the main packager and exporter of the Iranian date in
different variety dates and grades (Sair, Kabakab, Zahidi, Chopped dates…etc)
 Dawood Ahmed and Co: in Karachi, Pakistan. This company is the leading exporter of Quality dried
dates. They export with quality and competitive prices.
 Bio Oasis Sarl: in Algeria. This company is the largest producer of Deglet Nour dates in Algeria,
exporting more than 800 tons per year. They are specialized in the processing of Deglet Nour dates by
selecting the best grades of fresh dates.
Regarding the production and sales rivalry in Egypt,

 El Waha Company for Dates Industries leads the sector of dates processing and exporting. The
company is producing more than 3,500 tons that are exported to many countries including Indonesia,
Malaysia, Singapore, Vietnam, Bangladesh, Morocco, Argentina, Mauritius, Macedonia, Cyprus, and
130 Companies operating in trade industry of dates in Iran, Pakistan and Algeria, Source: Export Bureau.
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Netherland131. The company plans to expand its capacity through the establishment of a new factory to
increase its capacity up to 5,000 tons.
Opportunities and Threats Analysis

High demand for dates currently creates a clear opportunity to further investments in this market, particularly
the dry date market as mentioned in the previous section. The peak season for date consumption is during the
month of Ramadan, where the entire Muslim community around the world (currently exceeding 1.6 billion
people) is regular consumers of dates whether fresh or dried. Consumption is also quite high during Christmas.
Similarly, the fruit enjoys enormous significance on the occasion of Divali132 and such festivals in other
religions133.
In fact, the realization of a drying project in Egypt is highly dependent on the amount of labor required, the
level of infrastructure, as well as the storage facilities. For the post drying and dehydrating activities, cool
rooms and refrigeration facilities are needed for the storage of the less moisture dried dates. On another note,
dates drying and dehydrating is labor intensive, as the drying process requires approximately double the
amount of labor needed in cultivation, as manual efforts are required for separation, selection, and preparation
of dates. As mentioned above, this clearly points out to a potential comparative advantage in Egypt, especially
the Upper Egypt zone.
From a different perspective, such intense amount of labor required would increase the pre-opening and
operational costs of the facility. Furthermore, investors would find it hard to gather the needed dates quantity
as they would probably deal with many suppliers because date palm trees are randomly grown aside to the Nile
River or other water resources.
Case Study: Iran, Iraq and Pakistan experience in

processed date production134
Processing Sayer stoneless dates began some 60 years ago as a result of studies carried out by FAO in date-
growing countries in the Middle East, namely Iran, Iraq and Pakistan135. The project was assisted and co-
sponsored by England and USA. Date customers helped the development of the processing and packaging
industry in Iran, Iraq and Pakistan. The method of production and packaging was gradually formulated in these
countries and achieved outstanding growth, in a way that before the outbreak of Iraq imposed war the stoneless
date production of these nations amounted to over 100,000 tons per year. After the war, production figures
dropped, and a few years later with the US economic sanctions, date exports dwindled to almost 10,000 tons
per year. The United States, a major importer of Sayer stoneless date experienced increasing domestic demand
for this product and doubled its imports from Pakistan.
Once severely damaged during the war, the date processing and packaging industry recently sought new
markets in Europe, Australia, New Zealand, Canada and East European countries. During these years, Iran
exported 30-40 thousand tons of date. It should be noted that industrially harvested Sayer date in the
processing and packaging unit is disinfected, stoned (stone is removed), sorted, cleaned and packaged in bulk
method in cartons of over 10 kg. Then they are transported to foodstuff factories or exported to European
countries including England, Germany, the Netherlands, Sweden, North American countries to Canada and to
131 El Waha Company for Dates Industries Website

132 Divali, popularly known as the festival of lights, is celebrated between mid October and mid December. For Hindus, Divali is one of the
most important festivals of the year and is celebrated in families by performing traditional activities together in their homes. It is a holiday
in India, Nepal, Sri Lanka, Myanmar, Mauritius, Guyana, Trinidad & Tobago, Suriname, Malaysia, Singapore. Diwali marks the end of the
harvest season in most of India. Farmers give thanks for the bounty of the year gone by, and pray for a good harvest for the year to come.
Traditionally this marked the closing of accounts for businesses dependent on the agrarian cycle, and is the last major celebration before
winter
133 “Dates Marketing Strategy”, Pakistan Horticulture Development & Export Board, January 2008
134 Extracted from an article from AHT Iranian Exporter for dried fruits, dates, pistachios and raisins, “Iranian Date and Its Market in the
World”
135 Which are now the major players in the global date market, see table of the top 10 producers for dates in previous section
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US, and recently to Australia and New Zealand, and to a number of Eastern Europe states such as Poland and
Russia.

New dried date products are well marketed in the Middle East region. As mentioned previously, great amounts
of fresh and dried dates are consumed during the Holy month of Ramadan. Not only because consumers are
aware of its high nutritional value, but also dates stuffed with almonds and coated with high quality chocolate
attracted consumers to buy more. Nevertheless, the packaging of dates in attractive gift packages made
consumers feel they are willing to pay high prices, which eventually led to increasing sales and profits in the
dates market.
Value chain stages

Generally, the dates are harvested and marketed at three stages of their development. The choice for harvesting
at one or another stage depends on varietals characteristics, climate conditions and market demand. The three
stages of fruit ripening are as follows:
 Doka Stage (Khalal136): physiological mature, hard, moisture contents 50-85 %, yellowish or reddish .
 Dang Stage (Rutab): Partially browned, reduced moisture contents (30-35 %), and softened.
 Pind Stage (Tamar): Colour from amber to dark brown, moisture contents reduced below 25 % to 10 %.
Below is an illustrative figure of the different stages Doka dates go through for drying and dehydration:
Dates; Doka stage

(Processed)
Doka shifts to
Atmosphere dehydrators’ trays
Venting out of the Trays full of Doka shifts Controlled Temperature

water vapors from to Dryer Hot air blow
drying chambers
Drying process under

controlled Temperature
and Humidity
Water Content/ Moisture

Evaporation
Physical Quality Check
Brown Dry dates

(Cohara)
Value Chain: Doka Dates to
Dry Brown Dates
136 In Arabic
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Quality
Most of the date varieties produced in Egypt, whether fresh, dried or semi dried are of high quality and fetch
high prices. These include mainly El Bertmuda, El Barakai, El Abrimi, El Malakabi and other varieties that are
mostly produced in Upper Egypt in great amounts. It is recommended to classify the various dates types and set
different prices for each, thus it would be much easier for investors to meet the EU import qualifications of
dates regarding the species, the degree of maturity of the ripe fruit, the level of moisture content as well as the
size in addition to other importing countries that include the Far East, the Middle East and other European
countries.
Inputs and Outputs

Inputs
Proposed Capacity
It is estimated that a size of land of 1 feddan137 produces ~1 ton of dates, with ~100 palms. This means that each
palm produces approximately on average 10 Kg of dates.
Since Egypt has more than 10,000,000 palms in around 10 of its northern and southern governorates, it is
estimated that its production of fresh and dried dates would be not less than 100 million tons annually with
~300,000 tons in Upper Egypt only.. Thus, in order to breakdown the allocation of the dates volumes to the
consumption channels or for processing, Agricultural experts assumed that it will dedicate:
 60% for export (180,000 tons)
 20% for local consumption (60,000 tons)
 20% for processing (60,000 tons)
Land / Governorate
Industrial processing of certain varieties of dates available in Egypt can greatly enhance the product value and
the efficiency of using the output volumes currently produced. Dry dates are available only in Upper Egypt138.
There are industrial zones in the Qena and Quift, Assuit (East New Assuit) governorates, which points out to the
reality that Southern Egypt is the most suitable location for drying dates.
Plant and Machinery

Traditional Dates Drying Process
The traditional process of dates drying engages manual work. Old techniques of drying dates involve exposing
the fruit to the sun for long periods in an open atmosphere. Such techniques actually lead to damage in large
quantities of dates. It is also unsafe and unhygienic, as the dates may be subject to animal and weather
interface. In addition, traditional techniques of drying are time consuming and they yield low quality products.
Solar Dehydrator
Solar dehydration techniques embrace the benefits of the sun drying yet avoiding the disadvantages. A solar
dries the food items by the solar energy and it basically , where the inside temperature is double that outside of
the dehydrator. Solar dehydrators are simple in design; they function by collecting and keeping the radiations
from the sun inside the dehydrator itself. It contains an exhaust, air inlet and racks mounted in stair case style.
They are usually made from glass and iron.
137 1 feddan~4,300 meter square

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Human Resources
Both the cultivation process and the drying process of dates are labor intensive activities.
As a post harvest activity, a date palm collector is needed to collect the dates at the harvesting season in
September and October. The collector is required to climb the palm tree on average from 3 to 4 times to collect
the dates. He receives ~EGP 10/palm,
While, the drying process whether traditional drying or solar dehydration requires approximately double the
amount of labor needed in cultivation as the drying process mainly requires manual efforts for separation,
selection, and preparation of the overall process.
Infrastructure
The appropriate infrastructure should be as follows:
 Properly planned pieces of land along with a road network connecting the area with rest of the city,
 Adequate piped water network for industrial use
 Piped gas network to support industrial consumption
 Efficient sewerage system
 Provide and supply all new industrial units and factories with the electricity capacity required for
operation.
Outputs
The main output of the proposed project would be dried dates produced at a high quality and under hygienic
conditions that can meet international trade standards.
Dates drying and dehydration would play a very pertinent role on the agricultural horizon of Upper Egypt. This
plant would not only be making significant difference for dates growers but would also be used in drying other
agricultural products too, such as potatoes, onions and garlic139 (although the later have the weakness of
emitting very strong smells that might negatively affect the quality of date processing). Therefore, these
opportunities would increase the viability and profitability of the project, as it would be operating all the year
round, regardless of the dates seasonality. This facility can be of immense importance in multiple weather
conditions. In normal situations when the crop has been completely harvested, this facility would be used as a
dehydrator for making the dry date. However, during the winter seasons, this would support the stakeholders in
getting the fruit dried with its hot air blowing/circulation system.
Possible expansion into other forms of date processing can also be assessed. Examples include nut-filled dates,
and chocolate coated dates. Such products are highly appealing in the Middle East market and can make savory
offerings in European markets as well, but the related additional processing would require the expansion of the
facility into slightly more sophisticated production process, and the use of more automated and hygienic
portions of the facility to ensure quality and safety of the output.
Key Success Factors

A number of factors have to be planned and implemented for the proposed project to ensure its success. These
are based on our analysis of the agro industry in Upper Egypt, and the macro market conditions.
1. Selecting a location that is nearest to quality roads connecting Upper Egypt.
2. Contracting with a number of growers to provide supply of the required quantities needed to meet the
planned production levels per year.
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3. Supporting growers, technically and financially, to ensure that the palms are producing the expected
level of quality and yield of dates, and perhaps introducing new varieties over time.
4. Innovative and quality packaging and labeling of dried dates that contributes to strong brand
awareness.
5. Plan and manage the post-production storage and logistics to protect the quality of the produced dates.
6. Ensure the production facility and staff is meeting international hygiene standards.
7. Identify the comply with international regulations relevant to production and trading of dried dates (or
other processed dates if such options are explored.
8. Create some alliances with chocolate and other bakery / confectionary producers who could be
potential customers.
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Financial Analysis
Drying Dates project, we depended on initial estimates arrived at in consultation with PwC’s agricultural
consultant. The financial model is a variable price model. Escalation rates were applied on those items, which
are known before hand to be liable to escalation.
The attached appendix displays the financial projections for the construction period as well as five operating
years.

Fixed Assets 996
Details of the estimated initial investment cost are explained below and are shown in Table 1 of attached
financial tables.
Fixed Assets
Land Cost
The Dried Dates processing facility is proposed to be located in Upper Egypt on an estimated total land area of
1,000 square meters. The total cost of the land allocated to the proposed project is estimated at LE 500,000.
Buildings
Equipment
The cost of equipment is estimated by the industry expert to reach LE 196,000. This cost includes vacuum
packing machines, weights, sorting/grading tables and washing tubs.

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Sales & Marketing

This item will cover the cost of some promotional efforts required for building some relations with proposed
customers in preparation for selling the Dried Dates . An estimated amount or approximately LE 50,000 has
been allocated to this cost item.

Inventory: estimated at 15 days of fresh dates and packaging materials.
Accounts Payables: estimated at 21 days of total cost of fresh dates and packaging material.
Financing Plan
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Financial projections have been made for the first five operating years in addition to the construction years, and
Revenue
Dates Revenue
Dates Revenue
The total quantity of Dried Dates available for sale is 85 tons as a result of fresh dates quantity of 100 tons. We
have estimated selling price at LE 11,000 per ton. This price is based on the output percentage of 85% of the
raw fruit volume in addition to an estimated profit margin of 44% of the total direct cost. The selling price is
assumed to be escalated by 5% annually.
Cost of Sales
Dates Cost
The quantity of Dates required for the above required output is 100 tons, and the estimated cost is LE 5,000 per
ton based on current available market prices.
Packaging Cost
The cost of packaging for the output of Dates is estimated at 15% of the fruit cost.
Transportation Cost
The cost of transportation of the fruits to the processing facility is estimated at 15% of the fruit cost Operating
Expenses.
Depreciation
Asset Rate
Buildings 5%
Equipment 20%
Administrative expenses are calculated at 2% of total revenue and they include the cost of travel,
Energy & Utilities

Labor Cost
The cost of labor was calculated based on two operating cycle, each extend for a period of two months as
discussed with the agriculture expert.
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Marketing Expenses
Other Expenses
Amortization
Taxes
Summary of Results
In order to calculate the internal rate of return of the Dates Drying project, the net profit was added to the
depreciation and amortization as they represent non-cash expenses. The residual value represents the project’s
net fixed assets in addition to the cash available in the last projected year. Total outflows, representing the
capital expenditures, pre-opening expenses and the change in working capital, are deducted to arrive at the net
cash flow.

Liquidity: The current ratio is never below 8 in the first year of operation and quick ratio with
7.3 in the first projected year. It greatly improves thereafter with the full repayment
of the project’s debts.
Profitability: Profitability ratios are very favorable. Return on sales starts at 3% in the first year,
and return on investment starts at 2% in the first year. The profitability ratios
increase gradually to reach much higher and more favorable throughout the
projection years.
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Initial Investment Cost Dried Dates
LE 000
Fixed Assets:
Land 500 500
Building 300 300
Equipment 196 196
0
Total Fixed Assets 996 996
Financing Structure Dried Dates

LE 000

Total 1,145 1,145 100%
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Depreciation Charges Dried Dates
LE 000
Year
Description Cost Rate Year 1 Year 2 Year 3 Year 4 5
Building 300 5.0% 15 15 15 15 15

Equipment 196 20.0% 39 39 39 39 39
Amortization 110 100% 110 0 0 0 0
Revenues & Costs Dried Dates

LE 000
Year Year
Description Year 1 Year 2 Year 3 4 5
Dates:
Quantity Ton 100 100 100 100 100
Cost Per Ton 5,000 5,250 5,513 5,788 6,078
Net Dates Quantity (Ton) 85 85 85 85 85
Dates Selling Price per Ton 11,000 11,550 12,128 12,734 13,371
Dates Revenue 935 982 1,031 1,082 1,136

Total Revenue 935 982 1,031 1,082 1,136
Direct Cost 500 525 551 579 608

Packaging Cost 75 79 83 87 91
Total Cost 650 683 717 752 790
Gross Margin 285 299 314 330 346
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Projected Profit & Loss
Statement Dried Dates
LE 000
Year
Revenue
Total Revenues 935 982 1,031 1,082 1,136
Total Cost 650 683 717 752 790
Gross Profit 285 299 314 330 346
Other Expenses
Labour Cost 26 27 27 27 27
Other Expenses
Insurance 0 0 0 0 0
Net Profit Before Interest & Tax 29 149 161 173 185
Interest 0 0 0 0 0
Taxes 6 30 32 35 37
Net Profit 23 119 128 138 148
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Statement of Change in Working Capital Dried Dates
LE 000
Year
Cash 10 11 11 12 12
Accounts Receivables 38 40 42 44 47
Inventory 24 25 26 27 29
Total Current Assets 72 76 80 83 87
Accounts Payables 33 39 41 43 45
Total Current Liabilities 33 39 41 43 45
Working Capital 39 37 38 40 42
Inc./Dec. in Working Capital 0 3 -2 -2 -2
Projected Cash Flow Statement Dried Dates

LE 000
Year
Description Year -1 Year 1 Year 2 Year 3 4 Year 5
Operating Cash Flow

Taxes -6 -30 -32 -35
Investing Cash Flow

Fixed assets -996
Inc./Dec. in working capital -39 3 -2 -2 -2
Total Investing Cash Flow -1,145 0 3 -2 -2 -2
Financing Cash Flow

Dividends 0 0 0 0

Investing Cash Flow -1,145 0 3 -2 -2 -2
Net Cash Flow 0 194 200 183 193 203
Cumulative Cash Flow 0 194 393 577 770 973
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Projected Balance Sheet
Statement Dried Dates
LE 000
Year
Assets
Cash 0 194 393 577 770 973
Working capital 39 39 37 38 40 42
Fixed assets 996 996 996 996 996 996

Net fixed assets 996 942 888 833 779 725
Total assets 1,145 1,175 1,318 1,449 1,589 1,740

Taxes 6 30 32 35 37
Net Worth
Paid-up capital 1,145 1,145 1,145 1,145 1,145 1,145
Dividends 0 0 0 0 0
Retained earnings 23 143 271 409 558
Total net worth 1,145 1,169 1,288 1,417 1,555 1,703
Total Liabilities & Owners

Equity 1,145 1,175 1,318 1,449 1,589 1,740
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Selected Financial Indicators Dried Dates
LE 000
Year Year
Description Year 1 Year 2 Year 3 4 5
Revenues 935 982 1,031 1,082 1,136

Net Profit 23 119 128 138 148
Current Assets 266 470 656 853 1,060
Current Liabilities (Current portion of LTD
+ taxes) 33 45 71 75 80
Net Worth 1,145 1,169 1,288 1,417 1,555
Liquidity:
Current Ratio 8.04 10.53 9.66 11.74 13.69
Quick Ratio 7.33 9.98 9.29 11.38 13.33
Profitability:
Project's Internal Rate of Return Dried Dates

LE 000

Inflows
Total inflows 188 173 183 192 1,901
Outflows
Fixed assets -996 0 0 0 0 0
Inc. \ decrease in working capital -39 0 3 -2 -2 -2
Taxes 0 -6 -30 -32 -35
Total Outflows -1,145 0 -3 -31 -34 -36
Net Cash Flow -1,145 188 170 151 159 1,864

(IRR) 21.1%
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Section VI: Dried Tomatoes
Project Brief
PwC’s proposal to Salasel is to conduct a project that takes place in the post harvest phase and initiate a tomato
drying business that embraces packaging and distributing the product in both of the domestic and international
market. The project will also manage the post harvest waste of the tomato crop that could add more value to
the business as it will probably necessitate a separate specialized production line only for compost production.
The proposed project has been designed as a medium scale-processing unit. It entails the processing facilities
for dried tomato with processing capacity of 11 tones of fresh tomatoes to produce one ton of dried tomatoes.
The main output of the processing will be aimed at the end-user market of dried/ dehydrated tomatoes that can
be sold directly from the facility to retail stores, wholesalers, and institutional buyers as well as the export
market.
According to the benchmark studies presented in the previous deliverable, the tomato drying process embraces
the following activities:
 Pre-drying treatments
 Drying/dehydration process
 Post dehydration treatments.
Project Rationale
Tomatoes are eaten fresh, dried, or used for other products such as tomato paste and juice. The trend of drying
or dehydrating tomatoes has emerged in the 1990s. In the Mediterranean areas, tomatoes are dried using the
available of sun heat. Unluckily other regions were not gifted with the appropriate climate for sun drying
vegetables, however, oven drying is used as alternative technology. The time consumption of drying tomatoes
mainly depends on the variety of the tomato, the dryness of the air, the thickness of the slices, and the efficiency
of the dehydrator if an oven is used.
The demand for tomato is generally high due to its extensive use either fresh or in cooking. The leading
countries in tomato production are the ones who are capable of processing tomatoes as this takes a big share
from the whole crop production.
The virtue of drying tomatoes is that it protects the crops’ prices from dropping down. Usually, when the prices
drop the tomato paste processors enjoy significant economic advantage, squeezing prices out of growers.
Alternative processing options, such as sundried or dehydrated tomatoes, which command extremely high retail
values are needed to widen the scope of the crop’s usage and protect the income levels of growers, especially if
medium to long term supply contracts are arranged.
Even though some non-tropical countries lead the tomato production sector, they fail to utilize the crop in
drying tomatoes, as it requires intense sun availability which they actually lack.
According to FAO, in 2009 Egypt was the world’s 5th largest tomato producer recognized by the high quality of
the crop. Furthermore, the country enjoys sun availability and other climatic conditions that would save further
machinery costs.
Operations Vision
The proposed project can be set up as a medium-scale investment that requires labor at certain activities. This
can be enhanced in the future as suggested below.
1. Supply chain management: this is the most critical aspect of operations as it is the core of the
success of this project. Supply chain management on both the input and the output sides are equally
important:
a. Input: the abundant tomato production in Upper Egypt gives investors an edge to make better
profits and sustain their stability in the market as well as reach economies of scale that would
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grant them a competitive advantage. The drying process and packing dried tomatoes does cut
down a lot of operational costs such as packing in tins and employing expensive labor in other
areas.
b. Output: The value of dried tomatoes in the international market is considerably high relative to
other forms of processed tomatoes, especially as the popularity of the Italian cuisine is
increasing worldwide. The market for the project outputs will mostly be international in
nature, as this is where consumer demand is highest and is growing as illustrated below. Yet
demand in the local market can be identified through institutional buyers (restaurants and
hotels, etc) and large-scale retail chains. Therefore, securing delivery contracts to international
buyers in addition to securing proper transportation and storage facilities at efficient cost levels
will be critical factors for the project’s success.
2. Capacity planning: Tomato crop is available almost all year around in Egypt, with significant large
volumes produced in the southern region; therefore optimum production output can be achieved
throughout the year without much need for special storage arrangements. Accordingly drying tomatoes
can n take place all year round in Upper Egypt, as also the rainfall is less likely to present a threat on
the drying process.
3. Production conditions: since buyers will most likely be international, it is critical that output
meets the quality and hygiene standards of international markets. Such standards will have to be
observed from the farming stage, working closely with farmers to ensure that the produced tomatoes
are up to international consumer expectations and standards of health and environment, such as
pesticide residues in the resulting crop. In addition, the production process needs to be of high levels of
cleanliness and hygiene in order to preserve the resulting dried tomato slices. The above international
standards already are already applied in countries like China, a leading exporter of tomato products.
4. Packaging and Branding: Egypt has a significant global rank in the crop production, however, few
companies undertake tomato drying activities. Therefore, it is critical that the packaging of the project
output is in line with global trends. Examples include creating multiple shelf-keeping units (SKU’s) of
dried tomatoes, according to the demands of the various international buyers. Technically speaking,
packaging should also be planned to maximize the shelf-life of the product. On the other hand, an
attractive brand should also be established in order to protect the value of the product and build up
market presence effectively over a short period of time. The combination of a unique brand and proper
packaging meeting consumer needs will advance the success potential of the project.
The suggested project implies simple yet effective and value adding processing that can be highly profitable
given the spread between producer and retail prices of dried tomatoes in international markets. In addition, it
is expected to be a low investment project yet requiring strong management of key aspects. In the future, it is
possible to extend and expand the activities of the project into more sophisticated processes to enlarge the
production capacity, based on market demand locally and internationally. Ideas include the packaging of dried
tomatoes in olive oil in attractive and luxury bottles. Alternative processing that requires more sophisticated
technologies such as paste production can also be considered. It is our expectation that such possibilities
should be considered as additional expansion in the future, once the initial concept materializes. However, if
such possibilities are considered in the outset, they should be further studied and analyzed in more details.
Vegetables, particularly tomatoes are of great importance in human nutrition as they supply essential vitamins
and minerals (which are necessary to maintain good health) to the diet, provide variety to the food and make
food appetizing. Unfortunately, They are highly perishable and deteriorate very fast few days after harvest,
losing almost all their required quality attributes and some could likely result to total waste. It is estimated that
45 million tones of tomatoes are produced each year from 2.2 million hectares excluding the large amount
grown in home gardens. New drying techniques had increased demand for dried foods than in the past due to
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improved quality and researchers are of the opinion that if more attention is given to food quality during
drying, there would even be more significant boost to its demand140.
Recently, the demand for dried tomatoes has grown enormously, yet this demand is still largely met by a small
number of producers.141 Hence, the market is openly ready for new players to satisfy the market needs.

According to FAOSTAT, in 2009 the tomato global total production was about 150 million tons. The largest
producer was China that accounted for about one quarter of the global output, followed by the US and India. In
only one variety, the processing tomatoes or the plum, California produces about 90% of the US production and
35% of the world’s production.
Biggest tomato producers in 2009 (tons)142:
China 45,365,543
United States 14,141,900
India 11,148,800
Turkey 10,745,600
Egypt 10,000,000
World Total 152,956,115
As mentioned in the previous report, major producers are those who are capable of handling successful
processing businesses as it takes 11 kilograms of fresh tomatoes to produce 1 kg of dried product. Some
countries produce big amounts of tomato crop but they lack the climatic conditions that would ease or enhance
their drying facilities. This probably narrows down the opportunity for some big producers to utilize the crop in
sun-drying tomatoes. At the same time this gives an advantage to other producers that have the climatic gift to
dry tomatoes using solar energy instead of electric dehydrators cutting machinery costs and producing a better
quality of the product. As per the client agricultural consultant and the Italian consultant expert, the length of
The drying season cycle in Egypt ranges from 5 to 10 days in a temperature that’s higher than 20 Celsius
Degrees (the season would be around 180-200 days in Luxor for example), while in Turkey, the length of sun
drying tomatoes season take around 45 days.
Upper Egypt enjoys a number of important factors which determine the viability of the tomato dehydration
plant in Upper Egypt.
 Availability and supply of different quality tomatoes.
 Sufficient supply of electrical power. Availability of suitable labor.

Understanding the process of how a particular material actually dries is a commonly over-looked aspect of food
drying. Many processors expose the food product to as much heat as possible to remove the required amount of
moisture the minimum time possible. The manner in which the water removal takes place can result in such
negative impacts as:
∙ Nutritional degradation (e.g., vitamin loss)

∙ Flavor changes (e.g., burnt, toasted, or caramelized)
∙ Color changes (e.g., toasting or browning)
∙ Reduction of functionality (e.g., starch gelatinization during drying)
∙ Loss of structural integrity (e.g., stress-induced cracking)
∙ Case hardening (i.e., formation of an outer hard dry shell)
On another hand, there is an advanced technological technique for drying tomatoes, which is through using
electrical dehydrators. This technique seems to be complex in operation and needs trained labor, not only
because it is hard to control temperatures but because of the urge to using machines and complicated
technologies. Countries that have appropriate climates for traditional tomato drying seem attractive to
140 http://lejpt.academicdirect.org/A10/123_136.htm
141 http://www.sacla.us/sitinazioni/usa/pagine/en/sacla/artepomodorisecchi.lasso
142 FAOSTAT
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investors aiming at entering the business with the lowest costs possible, hence investors could seize the sun
availability and cut down some of the electric dehydrators costs and complexity.
The Supply Chain

Large amounts of tomatoes are produced in several locations in Upper Egypt. Beni Suef is the biggest producer.
Supply chain is relatively organized as transportation to processors and distribution channels are clearly
identified. Quality accreditation of tomatoes is rather easier than other crops because of the enormous supply of
high quality tomatoes in Egypt and specifically in Upper Egypt. The supply chain of dried tomatoes mainly
entails the following steps143:
Fresh tomatoes cut, Dried (time/temp. Dressing with

placed on drying racks depending on product additives
Vacuum-packed
and/or frozen
Packing
(containers/sealed
packs)
143 Managing Food Incident, Food Standards Australia, 2010
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The global demand for dried tomatoes has subtly, though steadily, climbed while available supply has. The
expanded international market opportunities for dried vegetables specifically dried tomatoes needs to be
fulfilled, though the Egyptian market should seek development so as to be able to cope with the big demanding
market.
Over the years, high labor costs in Europe have forced many British, Irish, Spanish, and Polish producers of
dried vegetables to stop production. This has created new processing opportunities for developing rural
economies with the appropriate agro-climatic conditions, high production potential, and low operating costs.
Egypt, China, India, and smaller countries are trying to fill the gap, yet are unable to completely satisfy the
demand for quality dried products. Each year, demand of some 8,500 tons of dried vegetables remain unfilled
mostly because these producers are too large to effectively re-tool their machinery for comparatively small, ‘odd
cut’ orders, that is, diced and sized vegetables (such as, turnips, spinach, cabbage, and sun dried tomatoes) to
nonstandard dimensions.144
The Egyptian processing/drying industry can play a much more important role in the export market,
particularly the European market, if it is upgraded to comply with international standards (HACCP, Global GAP
and the International Organization for Standardization). There is a need to increase the awareness of
smallholders and micro-entrepreneurs about the business opportunities available to them. This would broaden
the options for small-scale activities among the rural population and provide complimentary technical
assistance to get business projects under way. Smallholders should also be made aware of financing sources for
microloans and small loans enabling them participate in the production of high-value crops.
Data on the consumption of vegetables in the modern retail market and the processing industry are not
available by type of crop, but the bulk of consumption involves tomatoes, potatoes, onions, beans, peppers and
artichokes, representing around 60 per cent of the total annual consumption of 89,220 tons for the two
markets. It is estimated that an additional 8,922 feddan would be required to meet this growth145.
Market Overview
There is clear opportunity due to increasing demand on dried tomatoes worldwide.
Production
Dried tomatoes are produced from the sound, whole, ripe, red tomatoes selected, washed with microbiologically
controlled water, quartered and sun semi dried under controlled conditions before filling to jar semi dried
tomatoes are boiled and inspected before packaging. In order to produce sun dried salted tomatoes, the
following chemical requirements146 should be met:
 Moisture Content: 18-20%

 Salt Ratio: max. 8-9%
Quarter of the tomato global production is processed. The world’s two major temperate zones are the
productive regions, the Northern region producing 91% of the world’s crop, including Turkey, Syria, Israel,
Jordan and Egypt. The production period is usually between July and December and the opposite in the
Southern Hemisphere. The Jordan valley, where tomatoes could be produced all year round is unique.147 In
Egypt, tomato production does not stop at any point in a year, and accordingly drying tomatoes can take place
all year round in Upper Egypt, as the rain fall does not present a threat on the drying process.
144 Case Study: Vegetable dehydration and processing factory in Afghanistan, Dr. Kenneth E. Neils.
145 Egypt: Smallholder contract farming for high-value and organic agricultural exports, IFAD.
146 http://www.deltaagrifoods.com/pdf/pectlertomatoes.pdf
147 Investment Opportunities in Agriculture and Food & Beverage, Jordan investment board
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Consumption
It is difficult to state with certainty the size of demand of different dehydrated vegetables and fruits in the retail
market. Consumers’ acceptance for such products would, however, be affected by the quality, presentation,
taste versus fresh products and price. Availability of quality products, with convenience in use, should make
dried vegetables quite popular among the consumers’ minds. The virtue of dried vegetables is convenience
accompanied with health benefits that are not lost during the dehydration process, as well as the long shelf life
in stores.
Generally, people follow the same trends of fruit and vegetable consumption. Tomato being a commodity that is
included in every nation’s diet makes the demand always increasing for tomatoes in either domestic or
international markets.
Furthermore, there are some trends that affect the international market demand such as people’s tendency to
consume healthy food and improve their fitness.
Pricing
Sun-dried tomatoes vary in price. They are sold in different forms such as by halves, julienne, double diced,
triple diced, finely diced and powdered. They are also packaged differently for example by jars with olive oil or
dry in a plastic bag. The price depends on the form and the packaging. Generally, the jars of sun-dried tomatoes
packed with olive oil are more expensive. At Valley Sun, a 900g jar of sun-dried tomato halves or julienne is
sold retail for LE 40148 .
Competition exists between firms that are producing sun-dried tomatoes. It is a gourmet food enhancer, which
makes other types of foods hard to compete with it. As the demand for organic and natural products grows, the
demand on dried tomatoes increase as it combines deliciousness, convenience, and organic benefits together.
149
The global environment in the dried tomatoes industry is not highly competitive, thus the market entry is
viewed to be easy compared to other highly competitive industries. There are few large companies dominating
the global market, whereas the greatest market shares are for China, USA, India, and Turkey. Although Egypt is
one of the major fresh tomato producers, yet the sun drying operations are not taking big place in the market.
Hence, an opportunity is pointed out for initiating a sun-drying tomato facility in Egypt.
Top 10 Global Tomato Processors150:

 Xinjiang Chalkis Tomato Products (China)
 Valley Sun Premium (US)
 Conesa (Spain)
 Sugalidal (Portugal)
 Tat Konserve (Turkey)

The tomato production in Egypt represents 3% of the total vegetable production. In 2010,Egypt had a total
tomato production of about 8,544,993 tones. The production of fruits and vegetables in Egypt has often been
accompanied by neither better postharvest management, nor appropriate modernization of the processing
techniques, which causes huge losses to local growers.
148 The John Ogonowski and Doug Bereuter, Farmer-to-Farmer (FTF) Program, Agriculture, USAID,
http://www.usaid.gov/our_work/agriculture/farmer_to_farmer.htm
149 Farmer-to-farmer program, USAID
150 Food News, “Tomato products business news and analysis”,

http://foodnews.agra-net.com/tomato-products-business-news-and-analysis
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Most of the vegetables/fruits are wasted due to negligence and lack of processing facilities, which could convert
them into nonperishable forms, and thus permitting their transportation and storage without wastage.
With the spread of education, change in habits of populace, growth in working women force and increase in per
capita income & urbanization, the demand for processed vegetable/fruit products is increasing progressively,
which is an opportunity for horticulture processing.
Compared to frozen fruits and vegetables, dehydration requires less energy and the product is generally more
stable with long shelf life, without the need for external facilities such as refrigeration or high-priced packaging
material.151
On the other hand, there are several threats that can be summarized in the following points:
 Crop failure. Fruit and vegetable growers are usually unable to get right prices for their good quality
fruits/vegetables. The year of good harvest is usually accompanied by low prices in the local market.
 Increase in international competition with China, India and Eastern Europe.
 Imposition of new quality and environment standards by importing countries.
 Decline in the average sale price for Egyptian products. 152
Inputs and Outputs

Inputs
Proposed Capacity
As mentioned earlier, in order to produce one kilogram of dried tomatoes, 11 kg of fresh tomatoes are needed,
and 15-20 days are required for the drying process.
The facility is proposed to have a processing capacity of about 2,000 tons/annum on a single shift with
260working days basis (the capacity could be tailored to the budget and it also depends on the machinery vs.
labor operation). Production is directly proportional to size of the dehydrating unit and according to the
increase of budget, facility, production capacity and thus profits could be duplicated.
The following reasons grant the profits duplication as a consequence of the facility extension:
1. The cultivation of vegetables is localized; it is highly available in Upper Egypt as well as the vast areas
in the country.
2. Transportation of fresh commodity over long distances will not be expensive, however, it can be
detrimental to the product quality.
Land / Governorate
The biggest governorate that produces tomatoes in Upper Egypt is Beni Suef that produced around 627,837
tons in 2009/2010. The prices of lands in the industrial area in Beni Suef are cheap compared to other areas.
For a food production facility, hygienic conditions are significant issues to be taken into account as the drying
process necessitates the crop’s exposure to the sun and dry air, thus this should be reflected on the facility’s
location.
Plant and Machinery

The machinery, equipment and accessories required for dehydration of tomato plant in Upper Egypt are not
numerous. Most advanced technology for drying parameter control, belt control and belt structure can be used.
151 Dehydration plant, SMEDA, September 2011

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The technology not only can reduce the cost of production but also reduces the cost of manpower required and
other related overhead cost up to 15 % percent as compare to the available fabricated machinery.153
Human Resources
The production of dried tomatoes involves several steps and activities, each step requires certain amount of
labor. The first step (pre-drying treatments) requires more labor than other activities as it entails selection,
washing, cutting, and tray placing.
Infrastructure
The significant infrastructure resources need in the project can be summed up mainly in water, electricity,
machines (for packaging), space for storage and the building/venue of the factory. Other main items needed are
available in Upper Egypt such as transportation.
Outputs
The expected output of the project is sun-dried tomatoes packaged and ready for direct selling to the targeted
markets.
Key Success Factors

The factors that are forecasted to be deriving best profits are concluded in the following points:154
1. Selecting a location that is nearest to quality roads connecting Upper Egypt, and as close as possible to
location of farms growing tomatoes to reduce transportation costs.
2. Contracting with a number of growers to provide supply of the required quantities and quality of
tomatoes around the year needed to meet the planned production levels per year.
3. Supporting growers, technically and financially, to ensure that the framing method, inputs, and
harvesting are aligned to produce the desired quality of tomatoes and maximize the yield of the land to
reduce transportation cost for the input material.
4. Plan and manage the post-production storage and logistics to maximize the quality of packed dried
tomatoes.
5. Ensure the production facility and staff are meeting international hygiene standards.
6. Identify and comply with international regulations relevant to production and trading in dried
vegetables

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Financial Analysis
Drying Tomatoes project, we depended on initial estimates arrived at in consultation with PwC’s agricultural
The attached tables displays the financial projections for the construction period as well as five operating years.

The total investment cost of the project is estimated at LE 901,000 to be fully spent over one year of
Fixed Assets 746
Details of the estimated initial investment cost are explained below and are shown in Table 1 of the financial
tables.
Fixed Assets
Buildings
Equipment
The cost of equipment is estimated by the industry expert to reach LE 225,500. This cost includes, weights,
sorting/grading tables, washing tubs and drying tables.


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Sales & Marketing
customers in preparation for selling the Dried Tomatoes . An estimated amount or approximately LE 50,000
has been allocated to this cost item.
Land Rent Cost

The Dried Tomatoes processing facility is proposed to be located in Upper Egypt on an estimated total land area
of 20,000 square meters. The total cost of the land rent allocated to the proposed project is estimated at LE
6,000 during the pre-operation period for 6 months.

Inventory: estimated at 15 days of fresh Tomatoes and packaging materials.
Accounts Payables: estimated at 1 month of total cost of fresh Tomatoes and packaging material.
Financing Plan
Financial projections have been made for the first five operating years in addition to the construction year, and
Revenue
Dried Tomatoes Revenue
Dried Tomatoes Revenue

The total quantity of Dried Tomatoes available for sale is 56 tons as a result of fresh Tomatoes quantity of 600
tons based on output percentage of 9% of dried tomatoes. We have estimated selling price at LE 22,000 per ton
comparing to international price of US$ 4 per KG for the export quantity and LE 15 per KG in the local market.
The price is calculated based on assumption of 75% export and 25% to be sold in the local market. The selling
price is assumed to be escalated by 5% annually.
Cost of Sales
Tomatoes Cost
The quantity of Tomatoes required for the above required output is 600 tons, and the estimated cost is LE
1,000 per ton based on current available market prices.
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Packaging Cost
The cost of packaging for the output of Tomatoes is estimated at 15% of the fresh tomatoes cost.
Transportation Cost
The cost of transportation of the tomatoes to the processing facility is estimated at 15% of the fresh tomatoes
cost .
Depreciation
Asset Rate
Buildings 5%
Equipment 20%
Energy & Utilities

Labor Cost
The cost of labor was calculated based on two operating cycle, each extend for a period of three months as
Marketing Expenses
Other Expenses
Amortization
Taxes
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Summary of Results

In order to calculate the internal rate of return of the Tomatoes Drying project, the net profit was added to the
cash flow.

Liquidity: The current ratio is never below 5.38 in the first year of operation and quick ratio with
Profitability: Profitability ratios are very favorable. Return on sales starts at 2% in the first year, and
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Initial Investment Cost Dried Tomatoes
LE 000
Fixed Assets:
Land 100 100
Building 420 420
Equipment 226 226
0
Total Fixed Assets 746 746
Land Rent 6 6
Total Investment 901 901
Financing Structure Dried Tomatoes

LE 000
Paid-up Capital 901 901 100%

Total 901 901 100%
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Depreciation Charges
LE 000 Dried Tomatoes
Description Cost Rate Year 1 Year 2 Year 3 Year 4 Year 5
Building 420 5.0% 21 21 21 21 21

Equipment 226 20.0% 45 45 45 45 45
Amortization 116 100% 116 0 0 0 0
Revenues & Costs Dried Tomatoes

LE 000
Description Year 1 Year 2 Year 3 Year 4 Year 5
Tomatoes:
Quantity Ton 600 600 600 600 600
Cost Per Ton 1,000 1,050 1,103 1,158 1,216
Net Tomatoes Quantity (Ton) 55 55 55 55 55
Tomatoes Selling Price per Ton 22,000 23,100 24,255 25,468 26,741
Tomatoes Revenue 1,200 1,260 1,323 1,389 1,459

Total Revenue 1,200 1,260 1,323 1,389 1,459
Direct Cost 600 630 662 695 729

Packaging Cost 90 95 99 104 109
Total Cost 780 819 860 903 948
Gross Margin 420 441 463 486 511
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Projected Profit & Loss Statement Dried Tomatoes
LE 000
Revenue
Total Revenues 1,200 1,260 1,323 1,389 1,459
Total Cost 780 819 860 903 948
Gross Profit 420 441 463 486 511
Other Expenses
Labor Cost 54 57 57 57 57
Land Rent 13 14 14 15 16
Other Expenses
Insurance 0 0 0 0 0
Net Profit Before Interest & Tax 27 153 167 182 197
Interest 0 0 0 0 0
Taxes 5 31 33 36 39
Net Profit 21 123 134 145 157
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Statement of Change in Working Capital Dried Tomatoes
LE 000
Cash 19 20 20 21 21
Inventory 28 30 31 33 34
Total Current Assets 96 101 106 111 116
Working Capital 40 42 43 45 47
Inc./Dec. in Working Capital 0 -2 -2 -2 -2
Projected Cash Flow

Statement Dried Tomatoes
LE 000
Year
Operating Cash Flow

Taxes -5 -31 -33 -36
Investing Cash Flow

Fixed assets -746
Inc./Dec. in working capital -40 -2 -2 -2 -2
Total Investing Cash Flow -901 0 -2 -2 -2 -2
Financing Cash Flow

Paid-up capital 901
Dividends 0 0 0 0
Total Financing Cash Flow 901 0 0 0 0 0

Investing Cash Flow -901 0 -2 -2 -2 -2
Financing Cash Flow 901 0 0 0 0 0
Net Cash Flow 0 209 212 201 213 225
Cumulative Cash Flow 0 209 421 622 834 1,059
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Projected Balance Sheet Statement Dried Tomatoes
LE 000
Assets
Cash 0 209 421 622 834 1,059
Working capital 40 40 42 43 45 47
Fixed assets 746 746 746 746 746 746

Net fixed assets 746 679 613 547 481 415
Total assets 901 928 1,076 1,212 1,360 1,521

Taxes 5 31 33 36 39
Net Worth
Paid-up capital 901 901 901 901 901 901
Dividends 0 0 0 0 0
Retained earnings 21 144 277 423 580
Total net worth 901 923 1,045 1,179 1,324 1,481
Total Liabilities & Owners Equity 901 928 1,076 1,212 1,360 1,521
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Selected Financial Indicators Dried Tomatoes
LE 000
Revenues 1,200 1,260 1,323 1,389 1,459

Net Profit 21 123 134 145 157
Current Assets 305 522 728 945 1,175
taxes) 57 65 93 99 105
Net Worth 901 923 1,045 1,179 1,324
Liquidity:
Current Ratio 5.38 8.13 8.14 9.88 11.51
Quick Ratio 4.88 7.67 7.80 9.55 11.18
Profitability:
Project's Internal Rate of Return Dried Tomatoes

LE 000

Inflows
Total inflows 204 189 200 211 1,433
Outflows
Fixed assets -746 0 0 0 0 0
Taxes 0 -5 -31 -33 -36
Total Outflows -901 0 -7 -32 -35 -38
Net Cash Flow -901 204 181 167 176 1,395
Internal Rate of Return (IRR) 24.7%
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Section VII: Dried Onions
Onions are highly valued for their flavor and for their nutritional value in supplying minor constituents such as
minerals. Their bulbs are boiled and used in soups and stews , fried or eaten raw. They are also preserved in the
form of pickles. However, dehydration offers an economical and satisfactory means to extend the shelf life of
onions. The main advantages of dehydration of onions over the other methods of preservation are:
 Lighter in weight and occupy much less space than the original , frozen or canned material.
 Cheaper to pack compared to others tinned materials
 More stable under normal storage conditions.
Project Brief
This project is primarily focusing on the onion crops, as it is produced in vast amounts in Egypt, mainly in the
Upper Egyptian governorates. PwC is proposing to dry/dehydrate all varieties of the onions volumes produced
in the Upper Egypt governorates, which then can be typically used as a condiment for cooking and/or for
vegetable and instant food. The country’s great supply of raw onions opens a window for different processing
and drying activities to take place in the aim of making the best use of such large volumes.
Project Rationale
This project is viewed to be most suitable to be applied in Upper Egypt since this zone is producing considerable
output volumes of onions. Although there are currently at least two factories in Upper Egypt producing dried
onions, their capacities cannot accommodate the abundant produce within Upper Egypt, hence an opportunity
for an additional facility.
Although dehydrating onions is generally considered a capital intensive process, it does require large numbers
of labor in the preparation of the crop to be ready for processing into the production line. Thus the project is
expected to reduce the unemployment in the region of Upper Egypt, and accordingly increase incomes and
eventually reduce poverty rates. In addition, onion dehydration would eventually maintain the crop prices from
reduction, hence protecting the income levels of small farmers when supply is high in certain seasons.
Moreover, regulating the production levels through medium-long term supply contracts between growers and
processors will level the prices of produce and stabilize the market.
Operations Vision
The proposed project can be set up as a large-scale investment that is labor intensive during the crop
preparation phase, and deploys a relatively sophisticated technology in the dehydration process. The current
vision for the operations of the proposed project can be set as follows:
Supply chain management:
Input: the abundant produce of onions in Upper Egypt is mostly sold fresh although there is a number of
drying facilities in Upper Egypt, and elsewhere, yet with insufficient capacity. As a result, crop prices can
decrease significantly reducing value earned by growers. Combined with the increasing global demand on
onions, including dried products, the opportunity for the proposed project is significant. Securing crop supply
through contracts with growers would improve the supply chain efficiency of the project and protect value for
both the processor and growers.
Output: the market for the project outputs will be both local and international in nature. Managing the buyer
relationship, including long-term sales contract with large retailers and institutional customers will contribute
to realizing the project’s commercial potential.
1. Capacity planning: over the last decade, R&D work in agro processing was carried worldwide; it can
be categorized as follows:
• Development of new products and processes for better nutrition, convenience and taste
• Enhancement of shelf life of the products, safe storage /packaging, and development of better
performing materials.
• Better economic utilization of agricultural residues, by products, and recycling of wastes.
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• Product quality analysis, and consumer acceptance studies
This has developed a large number of technologies, where the most popular one is the development of
driers using solar energy and by products. However, there is a new dehydration technology called “The
Osmotic Dehydration” which entails the partial removal of water from fruits and vegetables, by replacing
solid food, whether in pieces or whole, by salt or sugar aqueous solutions of high osmotic pressure.
Osmotic dehydration is gaining attention due to its important role in the food processing industry. This is
because the product by osmotic process is more stable during storage due to the low water activity by solute
gain and water loss. The quality of the product is also higher in terms of color, flavor and texture and it is a
less energy intensive process than air or vacuum drying process 155.
2. Production conditions: Consumer of end product, either individual or institutional buyers, would
expect certain quality standards to be met. Such standards will have to be observed from the farming
stage, working closely with farmers to ensure that the resulting onion crop is up to international
consumer expectations and complies with standards of health and environment, such as pesticide
residues . In addition, the production process needs to meet the required processing standards in order
to produce quality dried onions.
3. Packaging and Branding: Dried onion can be sold to institutional buyers in large packages. Such
buyers would include restaurants, food processors, and hotels, among others. Individual / household
consumers can purchase dried onions from large-scale retailers or traditional grocers. In addition,
generic packs of dried onions are sometimes sold in traditional vegetable stalls and kiosks. Creating a
brand for the dried onion might not necessarily be a value adding activity especially at the outset of the
project. However, if special technology is deployed such as the “osmotic dehydration” suggested above,
additional value would be gained from branding the product based on the use of such technology. In
addition, international markets can be more appreciative of a product brand than local buyers.
The suggested project can be further expanded in the future into manufacturing of alternative powders and
pastes using dried onions and other spices. Such products are now increasing in demand, at least in the local
market, to aid the working woman in food preparation. However, such forward integration would require
expanding into different types of production processes that also require expert specialization in condiment and
recipe preparations.
Dry onion crop (as apposite to green onion crop (including shallots) can be divided into two categories: fresh
onion and storage onion. Fresh onion is available in late May or early June and can be purchased until end of
November. Storage onions are available in the market in November just at the time the fresh onions are
ending. These onions have a darker and much thicker skin than that of fresh onions. In addition, they are firm,
compact and are much less susceptible to bruising and shipping damage.

Due to the generous amounts of raw onions produced in Sohag, Menia and Beni suef, it is recommended to
initiate the dehydration project nearby any of them in order to reduce transportation costs from the farm gate
to the processing facilities.

Over the last decade, onions production worldwide fluctuated greatly due to a clear instability in the producers’
prices. It increased from 2001 to 2004, then slightly declined in 2005 due to decline in prices received by the
155 “Evolution Of Packaging: Trend and Growth Of The Plastic Industry”
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producers, then it increased again in 2006 by 4% to hit another 8.5 % decline in 2007 . Such a decline is mainly
attributed to the increasing costs of the inputs used. Yet the highest production volume of onions was recorded
in 2009156.
Moreover, supply of onions have largely increased in recent years in order to meet the great global demand on
onions, especially in the US, where it is witnessing a shift in the balance of power from kitchens to restaurants
which resulted in increased onion consumption. Another favorable trend for the onions industry is the
increasing consumer demand for herbs and spices; Americans are expected to have more onions, chili pepper,
cilantro and garlic in their diets.
The Supply ChainOnions are grown worldwide in over 170 countries, mostly for domestic use, with about 8%
being traded internationally. It is estimated that annually, over 3.7 million hectare of onions are harvested
around the globe resulting in the world production estimated at approximately 105 billion pounds each year.
Leading onion production countries are China, India, United States, Turkey, and Pakistan, respectively.157 The
supply and demand of the 2009-2010 crop have been balanced in global terms, however, the overall market
position varied considerably between different regions158.
Egyptian onions are known for its unique strong aroma. Having dehydrating factories in a country which has
such a unique flavor is a large asset which must be fully utilized. Some customers have developed a mix between
Egyptian onions and Indian onion to benefit from the strong Egyptian flavor and the cheap Indian prices159160.
Also, Egypt has been having good harvest in the last few years. Besides, the quality of their crop too is higher
than that of India. It is worth noting that the ratio of dehydrated onion output in Egypt is 6:1, where 6
kilograms of onions are required to be crushed to obtain 1 Kg of dehydrated onions161. This has led to a
paradigm shift among the global players, who have been turning towards high-quality dehydrated onions of
Egypt.
156 Republic of South Africa: Agriculture, Forestry and Fisheries, “A Profile of the South African Onion Market Value Chain”, 2010
157 http://www.onions-usa.org/
158 In the 70s Egypt was among the three major players in the world. The United States, Egypt and Hungary were the market leaders. In the
mid 80s, India was able to crack into the market by grabbing market share from Egypt. At the time, Egypt was producing 14,000 tons. This
figure was reduced to 8000 tons by the end of 1990s even though international demand started to grow. But USA and India were increasing
their market share
159 IMC, “Local Assessment study of the herbs and spices sector, prepared by ProGress business Consultants, 2006
160 In the 1990’s, price of Egyptian dehydrated onions reached $2200/ton versus $2600/ton for the American equivalent. Due to the
increase of capacities and the devaluation of the Egyptian pound, Egypt was able to reduce the price to $1550 in 2005. The cheaper onions
come from India which sells for $1300/ton. American onions are sold for a significantly higher price reaching $2200 and so are the French
onions which are traded at $1900.
161 Business Standard, “Dehydration units hit by rising onion prices”, by Himanshu Bhayani, 2007
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Market Overview
Onion’s global suppliers are the US, followed by India and China. Also, Egypt is rated as the world’s fifth
biggest producer of onions in 2009 as it produced 2,304,377 metric tons.
Production
Egypt’s production of onions is huge, mainly in its Southern governorates where its supply is primarily limited
to the sweet yellow fresh market onions.
The table below shows the production volumes in tons in the Upper Egypt governorates in 2009/2010:
Governorate Production (in tons) % share of total for all

governorates
6%
Beni Suef 142,910
7%
Menia 150,495
6%
Assuit 149,451
9%
Sohag 206,551
1%
Qena 18,053
1%
Aswan 21,885
Total of the 6 UE governorates 689,345 30%
Total of all governorates162 2,304,377
The table above shows that Upper Egypt accounts for ~30% of the total onions production in Egypt. This lays
down the basis for initiating a dehydration project in these governorates or near them, where there are
industrial zones like the ones in Assuit, Qena and Ift. There are currently two major factories dehydrating
onions that are located in Beni Suef and Menia governorates. However, their capacity levels do not absorb the
production volume supplied within these two governorates, nevertheless the rest of the Upper Egypt region163.
According to CAPMAS statistics, production of dried onions is solely undertaken by the private sector, as
shown in the table below:
Name of the Public Sector Private Sector

processed Q in tons Value in Q in tons Value in
product thousands EGP thousands EGP
Dried Onions
- - 14,505 178,565
Source: Annual production for the commodity industrial production in 2009, CAPMAS
162 Includes the production of other 24 governorates in Egypt producing raw onions.
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Egypt has also started to export its dried onions in large amounts whole, cut, sliced, broken or in powder.
Dried Onions Quantity (ton) Value in EGP
Exports 18,981 178,075,071
Imports 222 1,024,311
Consumption
Onion is one of the most important commercial vegetable crops grown worldwide. It is consumed largely in
various ways; fresh, dried, powder in addition to many others. In cuisines all over the world, both mature and
immature bulbs are used as vegetable and condiment. Interestingly, Libya has the highest average per capita
consumption rate for onions with ~ 66.8 pounds per year164. In addition, onions are the most vital ingredient in
Indian food, and seasonal shortages can cause price increases and social unrest.
Historically, demand for onions worldwide rapidly increased over the last few years, with the fast food chains
becoming more popular, with the boom popularity of salad bars as well as the growing popularity of pizza,
pasta, salsa and other ethnic cuisines. Moreover, onions’ natural qualities have attracted many consumers,
especially in today’s health conscious market. Research has shown that onions are low in calories and are a
source of dietary fiber. Fresh onions also contain vitamin C, additionally they can aid in disease prevention due
to their antioxidant content, which can reduce the risk of body degeneration and disease. Accordingly. Onions
are playing an increasing role in the diets of many people worldwide after receiving considerable attention for
their health benefits.
In the United States, onion is one the top five vegetables in terms of both farm value and per capita domestic
consumption. As well, in 2010, the average American consumed ~20 pounds of onions165. Thus, the USA
remains the dominant supplier of and consumer of dehydrated onion products, whereas, many EU countries
use significant amounts of extra low bacti material especially powders for seasoning applications. The
European region witnesses a shift from dehydrated onion to fresh & chilled onion for wet food applications.
Over time, the source of dehydrated onion imports into the EU has shifted away from the USA & Egypt and
towards India & China166.
Pricing
Retail prices in US and UK markets of dried onions vary between $12.2-14.7 per kg167. They typically come in a
wide variety from flakes, to chopped to powder. In contrast, producer prices of dry onions in 2009 were $205.8
per ton. This is equivalent to $0.21 per kilogram. A spread of over $12-14 per kilogram exists between the final
consumer price and the producer price. Accordingly, significant value can be capitalized on the processing and
marketing of dry onions across the value chain.
As for the Egyptian local market, dried (air cured) onions are sold to end consumers at a price range of 60
piaster to 1 LE for one Kilogram, while dehydrated onion products are sold at a much higher price in the
supermarkets that’s not less than 15 LE per Kg.
Dehydrated Onion is the largest used general food ingredients. This industry is dominated by USA168, followed
by India and Egypt. Dehydrated onion industry uses less than 2% of world’s total fresh onion production169.
164 Agricultural Marketing Resource Center, Onion profile, Revised August 2011
165 ERS 2011
166 Dehydrated Onion Market Report, Champagne Foods Limited, July / August 2010
167 Based on October 2011 retail prices of various outlets as identified from internet sites. Various volume units were converted to obtain
price per kilogram for ease of comparison.

168 The United States which is the biggest producers of onions worldwide, only harvests one crop per year. Their dehydrating factories
operate 90 to 100 days as opposed to 280 days in Egypt, which supplies 2 crops per year.
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The US, being the one of the top onion producers, has the biggest and largest onion supplier company called
“ConAgra” price leader, followed by “ Sensient Technologies Corporation170” which is number two processer of
onions171 forced to follow the pricing lead of the largest player. “Cascade Specialties Inc172”comes in the third
place, and is the smallest of the US processors, however, Cascade’s niche remains that of extra low bacti and low
bacti onion powder.
Similarly in the EU region, there are also some big players in the onion markets; in France there are:
“Sodeleg173”
“STL”
“Sensient”, its EU output and sales remain stable at ~ 1,200 metric tons of onions
In Spain, there is a company called “Vegenat”
And in India, there is a newly established company called “NH Global Inc.”, which is engaged in the
manufacturing and the exportation of dehydrated onions, garlic and other food ingredients. Their main export
products are red and white onions in various forms like slices, flakes, kibbled, chopped, minced, granules, and
powder.
In Egypt, there exist 15 drying factories and dehydrating units for the onions and garlic crops located in around
11 governorates174, where most of them are proximate to the farmlands, particularly in the industrial zones of
Upper Egypt. However, industry players indicate that the collective capacity of such factories does not absorb
the excess produce of the onion, which results in reduced market price of the crop.

A main threat limiting the dehydration of vegetables mainly the onions crops for export is the quality standards.
In the EU, Safe Quality Food has recently been introduced, which implies finished dried vegetables must not be
treated with water or steam to improve appearance or increase weight. Also, excessive drying is avoided as it
affects the color of the product. In addition to other standards and practices which need to be observed in food
processing unit such as the Hazard and Critical Control Point Analysis HACCP and the SPS measures which all
relate at the end to the protection of the raw material for food industry.
Globally, due to the competition for farmland from other crops and the rising cost of fuels, onion production
costs worldwide witness significant rise placing the onions industry to an intense international competition in
the market place. This is a major threat for onions producers and processors since in order to keep their profit
margins realized; they will need to increase the prices of onions, whether fresh or dried, which will eventually
harm the end consumers. While on the other hand, onions are important crops especially in the tropical
countries, accounting for nearly 30% of total global production. Although some tropical countries are net
importers, export potential of onions is developing in several tropical regions partly because if dried and packed
properly, the bulbs can be transported for considerable distances without deteriorating
In Egypt, and as per the baseline survey report undertaken for Salasel, findings revealed that onions together
with potatoes and green beans are considered low cost crops, i.e. production costs per ton are relatively low,
compared to other crops produced in these same governorates such as tomatoes and pomegranate. Such low
cost production in Egypt creates an attractive opportunity for investors. In addition, commercial potential can
be enhanced through introducing new cultivation techniques and improving post harvest methods.
Moreover, changing consumer trends are considered to be creating further opportunities for the onion industry.
Onions have certain medicinal and disease prevention powers; modern science has even begun to show that
169 Jain Management Discussion and Analysis

170Sensient Technologies Corporation a leading global manufacturer and marketer of colors, flavors and fragrances, employing advanced
technologies to develop food and beverage systems as well as cosmetic and pharmaceutical systems. http://www.sensient-
tech.com/home/index.htm
171 Raw onions are dehydrated in dehydrating facilities, and the product is available in different cuts: sliced, diced, chopped, minced,
ground, granulated, powdered, and in juice concentrate

172 Cascade Specialties Inc is engaged in onion and garlic dehydration business with specialization in natural low bacteria and organic
dehydrated products. For the year ended 31st March, 2011, the Company had reported revenue of US$ 19.87
million.
173Sodeleg is a French company specialised in the production of dehydrated onion. All the onion used in drying is of European origin, either
from the company's own production or from partner farmers. The annual production of dehydrated onions exceeds 13,000 tonnes, making
Sodeleg one of the world's four largest producers of dehydrated onion. The product line consists of dehydrated white and yellow onions in
the form of powder, granules or flakes, and fried or toasted onion.
174 Forum" ‫”دراﺳﺔ ﺟﺪوى ﻹﻧﺸﺎء ﻣﺸﺮوع ﺗﺠﻔﯿﻒ اﻟﺒﺼﻞ ﺑﻤﺼﺮ ﻟﻠﺘﺼﺪﯾﺮ‬, 2011, http://ejabat.google.com/ejabat/thread?tid=2f5071eba0a20ced&pli=1
Page 139 of 181

they may be capable on inhibiting growth of certain cancer. Onions also contain compounds that reportedly
reduce blood cholesterol levels and also contain Vitamin C175.

Value chain stages
It is necessary for quality issues to undercut the onions and allow them to cure (air dry) for two to three days,
clip the tops and roots, bag the onions in burlap sacks, transport them to a warehouse, dry, grade, then finally
bagging or boxing the final product176. Below is a detailing illustrative figure of the onion value chain:
Input suppliers Onion Producers
Harvesting and drying
Cleaning and handling
Imports Quality grade standards

and packaging
Storage, transportation
and distribution
Fresh produce markets, Exports

wholesalers,
supermarkets, retailers,
and informal market Processing: dehydration,
freezing and canning
Consumer
Quality
As per the baseline survey, findings revealed that classification and grading according to specific quality
standards are less common for onions crops compared to pomegranates and potatoes177. Onions varieties
selection depend on skin color (red, white, brown, or yellow), taste (sweet or pungent), and shape of the bulb
(round, flat, or globe). Such criteria differences are caused by several factors such as the in row spacing and
between rows during the cultivation process of onions as well as the time of pulling the onions.
It is also important –for hygiene purposes- to maintain quality standards in the onions post harvest practices;
washing, peeling, coring and cutting for special packaged products or ingredients for the prepared food
industry.
175 Republic of South Africa: Agriculture, Forestry and Fisheries, “A Profile of the South African Onion Market Value Chain”, 2010
176 Agricultural Marketing Resource Center, Onion profile, Revised August 2011
177 The Baseline Investigation of Horticulture value chain in Upper Egypt: Final Report
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Inputs and Outputs
Inputs
Proposed Capacity
The production capacity is not identified, however, raw onions are supplied all over Egypt in ~2 million tons in
2010, whereas in Upper Egypt’s six governorates solely, the production volumes reached ~700,000 tons in this
same year. Such large amounts produced in southern Egypt may undergo some level of preparation, drying and
processing instead of directly sold fresh.
Land / Governorate
The drying or dehydrating unit should be located near to the supplying governorates so that the availability of
the raw material would not be a problem. As stated earlier, ideal locations for this project would be Sohag,
Menia and Beni Suef governorates due to availability of crop, however, since there are industrial zones178 in
Upper Egypt, it would be more logical to set up the dehydrating plant for onions in one of those zones, as they
already have infrastructure, which will help reduce the transportation costs between the farmlands and the
processing units.
There is currently some dehydrating plants that are mainly supplied from Upper Egypt including; “El Ramly”
in Menia, “El Neanaiya” in Menoufia, in addition to two other factories in Beni suef.
Plant and Machinery

Dehydrating plants needed for this project are expected to be large in scale, as onions’ dehydrating requires
relatively some level of technology, specific machines and drying equipments such as solar dehydrators and
ovens.
Onion dehydration involves the use of a continuous operation, belt conveyor using fairly low temperature hot
air from 38-104 C°. Typical processing plants will handle 4500 kg of raw product per hour (single line),
reducing the moisture from around 83% to 4% (680 - 820 kg finished product).
Onion dehydration using a continuous conveyor dryer involves the following basic steps179:
a) Harvesting,
b) Transporting to the plant,
c) Curing,
d) Washing,
e) Slicing,
f) Dehydration in three to four stages,
g) Milling, and
h) packaging; as soon as the drying of onions is completed, dehydrated onions need to be well packaged
in plastic bags and stored efficiently in cooled/refrigerated rooms for longer-term storage -could be for
a year ahead.
Human Resources
In assessing the labor requirements along this processing activity, it was found that the dehydrating of onions
requires more machines and equipments than labor, while for the preparation of the crop requires intensive
labor in order to push it into the production line. Preparation mainly involves pre treatment of the crop;
washing and peeling, then cutting and slicing the onions if needed. Thus, significant labor is needed to be
engaged in these activities, which will reduce f unemployment rates in the Upper Egyptian region.
178 In Assuit, Ift and Qena governorates

179 “Onions Dehydration”, Working paper by John W. Lund and Paul J. Lienau
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Infrastructure
Onions commercial operations are expected to be large-scale, integrated production-processing-packing
systems equipped with specialized processing and storage equipment. Most of the equipment needed for
production and processing can be used for other vegetable crops despite the fact that onions have strong smell
that may be an obstruction in undertaking these similar activities for other crops.
Standard practices in onion harvesting include undercutting the onions and allowing them to cure (air dry) for
two to three days, clipping the tops and roots, bagging the onions in burlap sacks, transporting them to a
warehouse, drying, grading, bagging or boxing and shipping. Onions also need an appropriate "curing period"
where the neck opening closes.
Outputs
This project aims at the end to produce dehydrated onions for domestic consumption and/or export. Onions
dehydration is applicable on all varieties whether fresh onions or dry storage onions. Raw onions are
dehydrated and they can be further processed into sliced, diced, chopped, granulated, powdered, roasted, and
fried products.
And as mentioned earlier, dehydrated onions have many advantages to:
 The food manufacturing industries and Processors: consistent product quality, all year round
availability of dehydrated product, and minimum storage space requirement as after the onions are
dried, the weight of dehydrated onions is approximately 14.8 percent of the weight of the raw onions180.
 Housewives and Caterers: dehydrated vegetables offer quality along with convenience in storage ,
preparation, and serving, as well as help in stabilizing the prices of seasonal produce
 Onions producers and suppliers: stability in the price of the produce. Any situation of over
production is likely to be buffered by the dehydration industry.
Key Success Factors

Similar to other vegetable crops, and in order to ensure the success of this project in Upper Egypt, a number of
factors and conditions need to realized for the implementation of an onion dehydrating plant in this region.
Some of these are:
 Select the most suitable location for the establishment of the factory, where there is availability of the
crop, its proximity to the farmlands to reduce the transportation costs.
 Provide trainings for labor engaged in harvesting the crop, improve the post harvest methods as well as
the pre treatment and preprocessing activities required for the crop, which entails some hygiene control
such as for the washing, peeling, cutting and slicing activities.
 Manage the postproduction storage and logistics in order to maintain the quality standards locally and
internationally for the exported onions.
 Ensure the waste management techniques are applied. Onions dehydration generates waste; the outer
layer of onions after the manufacturing process, however, can be utilized in other business operations
such as entering another production line and turning it into fertilizers.
 Since the vegetable processing sector in Egypt is underdeveloped thus there is an essential role for the
national and state governments to stimulate the dehydrated vegetables sector, enhance the farmer’s
income, and promote agribusiness.
180 “Water Footprints Assessments: Dehydrated Onion Products, Micro Irrigation Systems”, IFC, WB Group, September 2010
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Financial Analysis
Drying Onions project, we depended on initial estimates arrived at in consultation with PwC’s agricultural
The attached tables displays the financial projections for the construction period as well as five operating years.

Fixed Assets 5,420
Initial Working Capital 1,007
tables.
Fixed Assets
Land Cost
The Dried Onions processing facility is proposed to be located in Upper Egypt on an estimated total land area of
4,500 square meters. The total cost of the land allocated to the proposed project is estimated at LE 1.125
million.
Buildings
1.6 million based on 2,700 square meters of building at a construction cost of LE 600 per square meter.
Equipment
The cost of equipment is estimated by the industry expert to reach LE 2.7 million. This cost includes vacuum
packing machines, weights, trays, washing tubs and dehydrators.

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Sales & Marketing

customers in preparation for selling the Dried Onions . An estimated amount or approximately LE 50,000 has
been allocated to this cost item.

Inventory: estimated at one month of fresh Onions and packaging materials.
Accounts Payables: estimated at three weeks of total cost of fresh Onions and packaging material.
Financing Plan
Revenue
Dried Onions Revenue
Dried Onions Revenue

The total quantity of Dried Onions available for sale is 1,250 tons as a result of fresh Onions quantity of 7,500
tons based on output percentage of 16.7% of dried Onions. We have estimated selling price at LE 12,000 per ton
comparing to international price through internet search. The selling price is assumed to be escalated by 5%
annually.
Cost of Sales
Onions Cost
The quantity of Onions required for the above required output is 7,500 tons, and the estimated cost is LE 1,000
per ton based on current available market prices.
Packaging Cost
The cost of packaging for the output of Onions is estimated at 15% of the fresh Onions cost.
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Transportation Cost
The cost of transportation of the Onions to the processing facility is estimated at 15% of the fresh Onions cost .
Depreciation
Asset Rate
Buildings 5%
Equipment 20%
Energy & Utilities

Labor Cost
estimated number of daily workers is 70 at a cost LE 25 per worker per day, in addition to 7 supervisors with a
Marketing Expenses
Other Expenses
Amortization
Taxes
Summary of Results
In order to calculate the internal rate of return of the Onions Drying project, the net profit was added to the
cash flow.
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Profitability: Profitability ratios are very favorable. Return on sales starts at 14% in the first year,
and return on investment starts at 33% in the first year. The profitability ratios
increase gradually to reach much higher and more favorable throughout the
projection years.
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Initial Investment Cost Dried Onion
LE 000
Fixed Assets:
Land 1,125 1,125
Building 1,620 1,620
Equipment 2,675 2,675
0
General and Administrative
Expenses 50 50
Initial Working Capital 1,007 1,007
Financing Structure Dried Onion

LE 000

Total 6,537 6,537 100%
Paid-up capital represents 100% of the total

investment.
Page 147 of 181

Depreciation Charges Dried Onion
LE 000
Year
Description Cost Rate Year 1 Year 2 Year 3 4 Year 5
Building 1,620 5.0% 81 81 81 81 81

Equipment 2,675 20.0% 535 535 535 535 535
Accumulated Depreciation 616 1,232 1,848 2,464 3,080
Amortization 110 100% 110 0 0 0 0
Revenues & Costs Dried Onion

LE 000
Year
Onion:
Quantity Ton 7,500 7,500 7,500 7,500 7,500
Cost Per Ton 1,000 1,050 1,103 1,158 1,216
Net Onion Quantity (Ton) 1,250 1,250 1,250 1,250 1,250
Onion Selling Price per Ton 12,000 12,600 13,230 13,892 14,586
Onion Revenue 15,000 15,750 16,538 17,364 18,233

Total Revenue 15,000 15,750 16,538 17,364 18,233
Direct Cost 7,500 7,875 8,269 8,682 9,116

Packaging Cost 1,125 1,181 1,240 1,302 1,367
Transportation Cost 1,125 1,181 1,240 1,302 1,367
Total Cost 9,750 10,238 10,749 11,287 11,851
Gross Margin 5,250 5,513 5,788 6,078 6,381
Page 148 of 181

Projected Profit & Loss
Statement Dried Onion
LE 000
Year
Revenue
Total Revenues 15,000 15,750 16,538 17,364 18,233
Total Cost 9,750 10,238 10,749 11,287 11,851
Gross Profit 5,250 5,513 5,788 6,078 6,381
Other Expenses
Labor Cost 181 190 190 190 190
Depreciation 616 616 616 616 616
Total Operating Expenses 2,447 2,539 2,625 2,716 2,812
Profit Before Interest & Tax 2,803 2,974 3,163 3,361 3,570
Other Expenses
Insurance 0 0 0 0 0
Net Profit Before Interest & Tax 2,693 2,974 3,163 3,361 3,570
Interest 0 0 0 0 0
Net Profit Before Tax 2,693 2,974 3,163 3,361 3,570
Taxes 539 595 633 672 714
Net Profit 2,154 2,379 2,530 2,689 2,856
Page 149 of 181

Statement of Change in Working Capital Dried Onion
LE 000
Year
Cash 178 187 194 203 211

Inventory 709 744 782 821 862
Total Current Assets 1,503 1,578 1,656 1,737 1,822
Working Capital 1,007 1,057 1,108 1,162 1,219
Page 150 of 181

Projected Cash Flow Statement Dried Onion
LE 000
Year -
Description 1 Year 1 Year 2 Year 3 Year 4 Year 5
Operating Cash Flow

Net profit Before Tax 2,693 2,974 3,163 3,361 3,570
Depreciation 616 616 616 616 616
Taxes -539 -595 -633 -672
Total Operating Cash Flow 3,419 3,051 3,184 3,345 3,513
Investing Cash Flow

Fixed assets -5,420
Inc./Dec. in working capital -1,007 -50 -51 -54 -57
Financing Cash Flow

Dividends 0 0 0 0
Operating Cash Flow 0 3,419 3,051 3,184 3,345 3,513

Net Cash Flow 0 3,419 3,001 3,133 3,291 3,457
Cumulative Cash Flow 0 3,419 6,420 9,553 12,844 16,301
Page 151 of 181

Projected Balance Sheet Statement Dried Onion
LE 000
Year -
Description 1 Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Cash 0 3,419 6,420 9,553 12,844 16,301
Working capital 1,007 1,007 1,057 1,108 1,162 1,219
Fixed assets 5,420 5,420 5,420 5,420 5,420 5,420

Accumulated depreciation 0 616 1,232 1,848 2,464 3,080
Net fixed assets 5,420 4,804 4,188 3,572 2,956 2,340
Total assets 6,537 9,230 11,665 14,233 16,962 19,860

Taxes 539 595 633 672 714
Net Worth
Paid-up capital 6,537 6,537 6,537 6,537 6,537 6,537
Dividends 0 0 0 0 0
Retained earnings 2,154 4,534 7,064 9,753 12,609
Total net worth 6,537 8,691 11,070 13,601 16,290 19,146
Total Liabilities & Owners

Equity 6,537 9,230 11,665 14,233 16,962 19,860
Page 152 of 181

Selected Financial Indicators Dried Onion
LE 000
Year
Revenues 15,000 15,750 16,538 17,364 18,233

Net Profit Before Interest and Tax 2,693 2,974 3,163 3,361 3,570
Net Profit Before Interest and after Tax 2,154 2,379 2,530 2,689 2,856
Net Profit 2,154 2,379 2,530 2,689 2,856
Current Assets 4,922 7,998 11,208 14,581 18,123
taxes) 496 1,060 1,142 1,207 1,275
Net Worth 6,537 8,691 11,070 13,601 16,290
Liquidity:
Current Ratio 9.92 8.06 10.34 12.60 14.74
Quick Ratio 8.49 7.35 9.65 11.92 14.06
Profitability:
Page 153 of 181

Project's Internal Rate of
Return Dried Onion
LE 000
Year
Inflows
Net Profit before interest 2,154 2,379 2,530 2,689 2,856
Depreciation 616 616 616 616 616
Total inflows 2,880 2,995 3,146 3,305 17,942
Outflows
Fixed assets -5,420 0 0 0 0 0
Inc. \ decrease in working capital -1,007 0 -50 -51 -54 -57
Taxes 0 -539 -595 -633 -672
Total Outflows -6,537 0 -589 -646 -686 -729
Net Cash Flow -6,537 2,880 2,406 2,500 2,619 17,213

(IRR) 49.8%
Page 154 of 181

Section VIII: Frozen Vegetables
Project Brief
Freezing has been successfully employed for the long-term preservation of many foods, providing a significantly
extended shelf life. The process involves lowering the product temperature generally to -18 °C or below.
Therefore, freezing vegetables would fulfill the market needs in off seasons by providing these vegetables all
year round. Meanwhile, Egypt produces significant amounts of vegetables that exceed the needs of local
consumers all year round, whereas, the global market experiences large demand for convenient healthy food
products of high nutritional value. Therefore there is an opportunity for freezing excess vegetable production to
target global markets.
PwC is proposing building a facility in Upper Egypt to be specialized in vegetables’ freezing, benefiting of the
availability of land and the cheap labor. Thus, investors can easily achieve economies of scale and find various
distribution channels in both of the domestic and international markets. Yet, there are few reservations to be
taken into account such as the intense technology needed in the industrial process and the high investment
costs. When compared to other vegetable processing options, in terms of energy use, cost, and product quality,
freezing requires the shortest processing time and involves the highest technology and capital investment. Any
other conventional method of preservation focused on vegetables, including dehydration and canning, requires
less energy when compared with energy consumption in the freezing process and storage.
In addition, there exists intense rivalry in Upper Egypt as the Shahrazad factory of the Upper Egypt for Food
Industries Company has recently started operations in Beni Suef and has the largest production capacity
compared to other factories across Egypt, which would make the competition even harder.
Project Rationale
The demand on frozen vegetables in the global market is enormous. People tend to go for using convenient
products because of their tendency to be more practical, in addition, frozen products are faster and easier to
prepare while keeping their nutritional value as the fresh vegetable products. Competing with new technologies
of minimal processing of foods, industrial freezing is the most suitable method for preserving quality for long
storage period.
Page 155 of 181

In recent years, due to the changing consumer habits, the frozen food industry has changed significantly. The
major trend in consumer behavior documented over the last half century has been the increase in the number of
working women and the decline in the family size. These two factors resulted in a reduction in time spent
preparing food. The entry of more women into the workforce also led to improvements in kitchen appliances
and increased the variability of ready-to-eat or frozen foods available in the market. Besides, the increased
usage of microwave ovens has affected food habits in general and the frozen food market in particular, as well
as allowing rapid preparation of meals and greater flexibility in meal preparation. The frozen food industry is
now only limited by imagination, an output of which increases continuously to supply the increasing demand
for frozen products and variability181.

The top traders in the market of frozen vegetables are China, US, Japan, Taiwan, Canada, New Zealand and
Belgium. Previously the US was leading the supply in the global frozen vegetables market, but recently China
passed the US and possesses the leading share. Before the food company incident in China in 2007, China has
increased its supply by 14.2% where potato which makes 86% of the share increased by 4.6%, and corn that has
the biggest share on the country basis increased by 6.5%. Thailand had a 6.8% increase for the supply of mixed
vegetables. New Zealand also increased its corn supply by 18.8%. Excluding frozen potatoes, China is the
world’s second largest exporter of frozen vegetables after Belgium.

The frozen food industry is highly based in modern science and technology. Starting with the first historical
development in freezing preservation of foods, today, a combination of several factors influences the
commercialization and usage of freezing technology. The future growth of frozen foods will mostly be affected
by economical and technological factors. Growth in population, personal incomes, and relative cost of other
forms of foods, changes in tastes and preferences, and technological advances in freezing methods are some of
the factors concerned with the future of freezing technology.
Population growth and increasing demand for food has generated the need for commercial production of food
commodities in large-scale operations. Thus, availability of proper equipment suitable for continuous
processing would be valuable for freezing preservation methods. In addition, depending on personal incomes,
relative cost of frozen products is one of the most important of economical factors. Producing the highest
quality at the lowest cost possible is highly dependent on the technology used. As a result, developments in
freezing technology in recent years have mostly been characterized by the improvements in mechanical
handling and process control to increase freezing rate and reduce cost.
Today an increasing demand for frozen foods already exits and further expansion of the industry is primarily
dependent on the ability of food processors to develop higher qualities in both process techniques and products.
Improvements can only be achieved by focusing on new technologies and investigating poorly understood
factors that influence the quality of frozen food products. Improvements in new and convenient forms of foods,
as well as more information on relative cost and nutritive values of frozen foods, will contribute toward
continued growth of the industry.182
The Supply Chain

Vegetable supply chains are organized differently all over the world, the mainstream trend is that more and
more vegetable suppliers (growers, traders, processors included) are adapting to a more demand driven
approach, in which there is a need to cater to the requirements of the various distribution channels, in
181Freezing of fruits and Vegetables: An Agri-Business Alternative for Rural and Semi-Rural Areas. FAO Publication 2005
(http://www.fao.org/docrep/008/y5979e/y5979e03.htm)
182 Ibid, Chapter 1
Page 156 of 181

particular the large food retail chains and foodservice companies, whilst at the same time understand and fulfill
the needs of consumers.183
A typically supply chain for frozen vegetable processors will probably be similar to the right-hand section of the
below diagram. This indicates that securing supplies for the factory will require creating a position among
competing segments of the same chain, such as fresh produce exports, local market sales, and wholesale
markets. Securing timely supply at the required quality and quantity of the various vegetables to maintain the
production capacity of the freezing facility at a reasonable cost effective level is one of the key success factors for
processors.
Farmers
Local Middle men collectors Specialist

collectors assemblers
District and
provisional Exporter
wholesaler markets
Central wholesaler Factory

market
Supermarket
Local market
End Consumer

Despite the existence of adverse and perverse economic conditions, the global market for frozen vegetables
continues to expand. This is because consumers tend to ask for more convenient and faster to prepare foods.
The emergence of innovative products and packaging as well as the increasing health consciousness of
consumers has also contributed to the increase of consumption of the various frozen foods.
The frozen vegetables market has successfully managed to overcome the recession and the unfavorable
economic conditions due to the increase in the demand of convenient and healthy products, and overcoming
traditional preconceptions that fresh food is better than frozen, which might not be very true given the
conditions of transport and handling of fresh produce in many countries. Furthermore, the materialization of
new freezing technologies does open a new way for manufacturers to preserve the nutritional benefits in
vegetables for longer periods of time.
183 The Vegetables Industry in Tropical Asia: Thailand, Greg I Johnson.
Page 157 of 181

The largest share of the global market’s demand on frozen vegetables belongs to the US and Europe. Asia-
Pacific and Latin America are viewed to be the top growing regional markets with compounded average growth
rates that range between 4% and 5.5% from 2007-2015. The dynamic preferences of consumers does influence
the trends in the frozen vegetables market, leading to an emergence of new value-added products such as frozen
entrees, vegetable mixes and prepared meals184.
Market Overview
The vegetables sector is diverse in terms of the crops produced and in terms of the countries producing these
crops. Global vegetable production amounted 881 million tons and has grown by 56% in the last decade.185 Asia
cultivates by far the most vegetables in the world and has also shown strongest growth over the last decade
where much of this growth can be attributed to China. As most vegetables are perishable by nature, the product
is best consumed shortly after harvest but in most cases there is a time gap between harvest and consumption.
Climate controlled storage and distribution are required to safeguard the quality of fresh vegetables. That’s why
processing provides a good solution to increase the shelf life of vegetables particularly the freezing technique.
Production
The market for frozen food in Egypt increased at a compound annual growth rate of 3% between 2003 and
2008. The frozen meat products category led the frozen food market in Egypt, accounting for a share of
71.1%186. Frozen fruits and vegetables are produced all over Egypt, in its Northern and Southern governorates.
However, big player companies operating in this market are mostly located in the North while solely the “Upper
Egyptian Company for Food Industries”-with the largest production capacity under the brand name
“Shahrazad”- is operating in Upper Egypt where its factory facility is located in Benisuef, seeking supply of
input from lower and Upper Egypt.
The frozen vegetables production in tones in Egypt from 2007 to 2015:187
2007 2008 2009 2010 2011 2012 2013 f 2014 f 2015 f
67,865 80,080 93,649 101,246 106,209 112,196 120,416 129,059 138,246
According to CAPMAS statistics, both public and private sector companies in Egypt have started supplying the
local market as well as exporting frozen vegetable products; the private sector has the largest share.
Also, data from the Ministry of Trade and Investment indicated that over the last decade, frozen vegetables
exports in Egypt stood secondly after the dried vegetables sector among the overall Egyptian processed food
exports.
184 Global Frozen Fruits and Vegetables Market to Reach 22.6 Million Tons by 2015, PR web, 2011
185 The world of vegetables Challenges and opportunities for vegetable suppliers, rabobank, 2006
186 Research and Markets, “Frozen food in Egypt to 2013”,
http://www.researchandmarkets.com/reports/1199425/frozen_food_in_egypt_to_2013.pdf
187 Egypt Agribusiness Report, BMI, 2012
Page 158 of 181

Below are the Egyptian exports of few vegetables products that are frozen, in 2009:
Exports Quantity (kg) Value in EGP
Artichokes, uncooked, frozen 14,131379 169,163267
Artichokes, cooked by steaming, or boiling in 4,525138 47,174204

water, frozen
Grape leaves, uncooked, frozen 159,841 1,124014
Grape leaves, cooked by steaming, or boiling in 153,680 1,157939

water, frozen
Okra, uncooked, frozen 5,917,617 38,058492
Okra, cooked by steaming, or boiling in water, 467,447 2,014899

frozen
Other vegetables, uncooked, frozen 15,433974 103,121961
Other vegetables, cooked by steaming, or boiling 1,276187 6,979353

in water, frozen
Mixture of vegetables, uncooked, frozen 19,292965 107,511375
Mixture of vegetables, cooked by steaming, or 18,262986 112,587534

boiling in water, frozen
Potatoes, uncooked, frozen 11,479984 45,957534
Potatoes, cooked by steaming, or boiling in water, 6,363433 29,879860

frozen
Peas, uncooked, frozen 2,459532 14,924005
Peas, cooked by steaming, or boiling in water, 189,653 782,411

frozen
Molokhiya, uncooked, frozen 4,226773 20,042394
Molokhiya, cooked by steaming, or boiling in 67,741 284,833

water, frozen
Total 104,408,330 700,764,075
Page 159 of 181

Consumption
Food consumption is expected to grow at a double-digit annual rate in both absolute and per capita terms to
2015. Coming off a low base, strong expected economic growth over the forecast period will drive up food
expenditure. However, in absolute terms, annual per capita expenditure on food is still expected to come in
under US$ 1,000 in 2015, even with the local currency strengthening against the US dollar.
Over the long term, the likely spread of mass grocery retail (MGR) beyond obvious urban centers and greater
investment into the country's food processing sector will contribute to a more dynamic food consumption
growth outlook. However, per capita consumption will still remain low in comparison with many MENA
markets for the foreseeable future.188
Changing consumer patterns are reflected for instance in frozen food sales, which are increasing faster than
overall food sales overcoming traditional preconceptions that fresh food is better than frozen. The most
significant increase was for the processed chicken pieces, which became the largest single frozen product in the
consumer market, however, in recent years, there is an evident demand in the fruit and vegetable sector for
frozen and canned products. Convenience in use and the health aspects of various species of vegetables are
playing an increasingly important role now.
Consumer trends worldwide are evolving in various ways where the major drivers would be:
 Economy
 Convenience
 Health and nutrition
 and food security
In response to these trends, one of the fastest growing sectors is that of the frozen vegetables, with the
European and North American countries being the largest per capita consumers of these products in the world.
In Europe, the consumption of frozen vegetables, at 3.6 million tons, has surpassed that of canned vegetables189.
Meanwhile, the US and Canada consume together about 2.6 million tons of frozen vegetables. Although the
European and North American markets are growing at rates of about 8% yearly, this growth rate is achieving
maturity, with some countries already at about 19 kg/capita190.
According to a report by Global Industry Analysts Inc, it is estimated that the global market for frozen food,
particularly fruits and vegetables will reach 22.6 million tons by the year 2015191; Latin America, along with
South and Southeast Asia are two areas where frozen food consumption in general is expected to grow fast over
the next years192. Rationale behind such projection mainly can be summarized in the following:
 Changing food consumption patterns and fast paced lifestyles

 Growing number of working women
 The development of new innovative freezing technologies
Pricing
People often consume fresh or canned vegetables due to the health’s benefits of the former and the convenience
of the latter. Both of the products do have a tight expiry compared to frozen vegetables but are still used often
by people. Below is a prices comparison between both of the fresh and canned vegetables:
188 Egypt Agribusiness Report, BMI, 2012

189 Quick Frozen Foods International Website
190 “Procurement strategies in the Frozen Vegetable industry in Argentina: A multiple-case study”, International Food & Agribusiness
Management Association 21st Annual World Symposium, Frankfurt, Germany June 20-23, 2011
191 PR Web Online Visibility from Vocus, Frozen fruits and vegetables: A global strategic Business Report, January 2011
192 FAO
Page 160 of 181

Crops Price per pound Canned Crops Price per pound
Sliced mushrooms $4.02 Olives, black, pitted $3.12
Fresh cut leaf and baby $3.92 Mushrooms, whole, $2.59

spinach slices and pieces
Mushrooms, whole $3.40 Carrots whole $1.05
Green Beans $3.23 Carrots sliced $0.69
Tomatoes, round $2.94 Green beans, whole $0.93
Okra $2.55 Green Beans, cut $0.67
Artichoke $1.71 Potatoes $0.70
Onions $0.67 Tomatoes $0.77
Potatoes $0.48
Note: Prices are for vegetables sold in a prepackaged container, such as in a bag or clamshell, Source: USDA, Economic
Research Service analysis of 2008 Nielsen Homescan data.
As for frozen vegetables, generally they have long shelf life, convenient, and reserves health benefits. Demand is
escalating dramatically on those vegetables as the percentage of working women is increasing and peoples are
turning out to have a full busy life. The prices of some frozen vegetables in retails are as follows:
Product per Kilogram Price in US $
Carrots 1.5
Oven Chips 1.5
Peas 2.6
Mixed Vegetables 3.1
Sweet Corn 3.5
Broccoli 2
Green beans 1.5
Mixed Peppers 3
Okra 3.1
Page 161 of 181

The frozen vegetable market is dominated by China, US, Taiwan, Canada, Belgium, New Zealand and Japan193.
A number of factors are shaping the current competitive frozen vegetable market worldwide, and may be
contributing to trends in producing and trading of frozen vegetable products in Egypt:
 Increased competition from low cost or subsidized production of some vegetable products. For
example, the USA -one of the largest producers of frozen vegetable products- its production costs are
increasing, this is due to energy requirements and the high rates of workers’ compensation.
 Restrictive import and inspection requirements in some countries, in addition to technical product
requirements, and sanitary and phytosanitary (SPS) requirements.
 Increased domestic demand for vegetables all year round.
 Other factors, such as the exchange rate fluctuations…etc
In Egypt, a number of companies are operating largely in the frozen fruit and vegetable market, also exhibiting
at the Jacob K. Javits Convention Center as well as other shows such as the Fancy food show in New York and
Food Gate/Fresh gate Egypt 2010. These major companies are194:
• Basma
• Montana
• Lazza
• Farm
• Cold Alex
• Upper Egypt
• Givrex
• Faragello
• Aga
• Elmarwa
• Tiba
As per the previous report, a large number of companies exist in the frozen fruits and vegetables global market;
these are namely:
• Ardo Group195,
• Birds Eye Foods Inc.,
• Bonduelle Group,
• ConAgra Foods Inc.,
• Findus Sverige AB196,
• Gelagri Bretagne SA, Green Giant,
• H.J. Heinz Company,
• McCain Foods Limited,
• Merko Gida Sanayi ve Ticaret A.S.,
• NG Fung Hong Limited,
• PinguinLutosa NV197, and
• Simplot Food Group.
193 PwC previous report of Stage 2

194 Quick Frozen Foods International, “Bumper Crop of Egyptian Fruits, Vegetables: At Summer Fancy Food Show in New York City”, July
2010
195 Ardo recently took over Ploegmakers Food Ingredients BV, Veghel, the Netherlands. Ardo owns 15 production and packing units in eight
European countries. Last year the group grew, froze and sold 520,000 tons of vegetables, fruits and other products to customers in 52
countries, generating turnover of 566 million Euros.
In addition to producing and marketing frozen foods, Ardo recently entered the cold storage and distribution business in the UK
196 England-based Findus Group ranks as one of Europe’s largest frozen food and seafood companies with 6,000 employees and £1.1 billion
in annual sales. It is looking to become the dominant brand in the Spanish frozen food market after completing deals for frozen vegetable
brand Frudesa and frozen ready meal brand Salto from Bonduelle, France. Findus now leads both categories with 24% of the frozen
vegetables market and 14% of ready meals.
197 PinguinLutosa the Belgium-headquartered company recorded consolidated sales of 111.9 million Euros, an increase of 4.68%, for the
first three months of 2010.
Page 162 of 181

For Egypt, there exist a great opportunity in the frozen vegetable and fruit market, this was reflected in the
Summer Fancy Food show in New York held in June 27-30 in 2010. Egyptian frozen vegetable and fruits
producers were looking for new customers in the USA market making use of a comparative advantage that
frozen beans and mixed vegetables imported from Egypt are fully exempt from custom duties effective July 1 of
the same year.
Moreover, increased vegetable consumption on the global level is also perceived as an opportunity for
producers in Egypt to supply fresh and frozen or canned vegetable products for domestic consumption and for
export all year round. Such increase in the consumption pattern is likely due to the increased concern about
health and nutrition as well as increases in the variety of vegetables that are available. Nevertheless, recent
studies regarding the per person vegetable consumption shows that in the US, there are increases in the
consumption of fresh and frozen vegetables rather than canned vegetables, yet there appears to be little
increase in per person vegetable consumption in more recent years. Also, similar trends in the per person
consumption have been observed in the EU198, with only small increases in consumption over the last decade.
Another major challenge facing the frozen vegetable market is the importance of quality management during
the freezing process. This is because slow freezing, inappropriate handling, or poor storage of vegetables lead to
either loss in the volumes produced as vegetables are deteriorated and/or quality degradation as these
vegetables are perceived as lower graded quality products and thus don’t comply with the international export
standards regarding the shape, the color and the size. This indicates the extremely high costs that are incurred
during this freezing process which entails that this investment is relatively expensive.

Recently, there has been a controversy regarding the frozen vegetables; whether they are nutritional in value as
fresh products or not. Reports show that frozen vegetables are in fact better than fresh vegetable products in
terms of health nutrition, as well as for other reasons. The rationale behind are:
 More sanitary than fresh produce because they are already cooked
 Easy to process and ready to eat since they are partly prepared
 Longer shelf life (at least for one year at -18 C°)199
 Availability all year round (in the off season when their fresh is not available)
 In many cases, they are cheaper than the fresh products
 Keeping the identity and the color
However, there are still concerns that these products having been processed from their original form, they do
not have the same taste as fresh vegetables.
In addition, one of the newly applied freezing techniques, there is the Individual Quick Frozen (IQF) technique,
which can be applied for all varieties of vegetables. IQF fruits and vegetables are preserved by deep freezing. In
IQF, the product remains free-flowing while rapidly deep freezing in an environment at -50 ºC. The core of the
product will reach -18 ºC within 2-3 minutes. With IQF, most natural characteristics of fresh fruit and
vegetables are retained. Fruit and vegetables can be frozen whole, or in slices of different sizes. IQF products
are easily processed as they defrost rapidly and are perfect for portion control.
From another perspective, global developments in the retailing sector have had an effect on demand for frozen
vegetables. First was the move from the counter service towards self-service, second was the emergence of
supermarkets and large supermarkets chains200. All this has resulted in expanding and increasing vastly the
marketing opportunities available to frozen food processors, including introducing new and novel products and
packaging.
198 It has been estimated that apparent vegetable consumption in the European Union was around 150 kilograms per person in 2003
(EuroStat 2005)
199 Agribusiness Handbook, “Fruit and vegetable processing”, FAO, 2009
200 Case thirteen: Birds Eye and the UK Frozen Food Industry, Robert M. Grant
Page 163 of 181

Value chain stages
Frozen vegetables are slightly processed and rapidly deep-frozen in order to maintain as many of the original
properties as possible. First graded vegetables are preferred, as well as common vegetables such as green beans,
peas, broccoli, cauliflower, spinach and mixture of these and other vegetables. Potatoes that are frozen without
pre boiling are also included in this category. While frozen potatoes for French fries are excluded.
The Frozen vegetables during their production process are cleaned, washed, cut, and subsequently blanched or
steamed. They are then led to the filling line where they are packed in containers hermetically sealed. After
cooling, the container is labeled.
Involves the intake of the fresh vegetables to pass
Cleaning
through the grading belt for cutting and slicing
Involves mixing the cut fresh vegetables with other

Mixing
ingredients (blanching) for longer preservation
Freezing Involves the deep freezing of the clean cut

vegetables in a tunnel of 40 C°
Packing Frozen vegetables are packed in 10-25 Kg plastic

lined cardboard boxes or in 200 liter drums
Quality
Because of the perishability of fruits and vegetables, the geographical location of planted areas in relation to
markets, processing units and consumers are more important than with other crops. That’s why maintaining
post-harvest quality of fruits and vegetables is essential.
Moreover, during the freezing process, vegetable products must retain their original identity in shape, colour,
and aroma. When sliced or cubed, it should not be smashed, pulped, or broken, as this will lower the grade of
the final frozen products.
However, some quality problems whether for the processing or during the handling may arise, causing the
vegetable products to be lower in grade, thus reducing its price. These problems are:
 Split or broken products can be caused by slow freezing or rough handling
 Cheap raw material can result in small sized products
 Uneven sizes or products indicate poor grading
Page 164 of 181

Inputs and Outputs
Inputs
Proposed Capacity
Inputs supplied of vegetables that are required for a single company to produce frozen food products range
from 80-100 thousand tons per year. Thus, the proposed capacity for this project is estimated to be 20,000 tons
per year.
Land/governorate
There exists already a huge facility for freezing fruits and vegetables in Beni suef, under the brand name
Shahrazad. This is viewed to be the largest among the Middle East companies as it receives its supplies from
Upper Egypt as well as from the Northern governorates. Yet there may be some room for new entry in Upper
Egypt, benefiting from the cheap labor, and the availability of land in this region.
Plant and Machinery

Freezing facilities are perceived to be large in scale and expensive. Vegetables freezing aim the long-term
preservation of some vegetable crops, providing a significantly extended shelf life. The process involves
lowering the product temperature generally to -18 °C or below. In addition to the various production lines that
should be located in the facility for different types of vegetables, and this is actually reflected on the investment
costs.
Human Resources
Since the facility is expected to be big, and embrace many machinery and various production lines, it is
expected that the operation will require large numbers of labor for washing, separating, and preparing
vegetables before entering the production line.
Infrastructure
As previously mentioned, the frozen vegetables facility is expected to be held on large scale operation which will
require integrated production-processing-packing systems equipped with specialized processing and storage
equipment. Also weights and cooled storage spaces would be highly needed.
Outputs
The project aims at producing ready-to-eat frozen vegetables for both of the domestic and export markets. The
facility could entail a variety of vegetables depending on the seasonality, and the freezing methods of the
vegetables, meaning that adopting three production lines points out the opportunity for other crops like fruits
to enter the operation as long as they require the same process of freezing.
Key Success Factors

In order to ensure the success of this project, a number of factors and conditions need to realized for the
implementation of a freezing vegetables facility. Some of these are:
 Since this project is highly dependent on the technology level, thus ongoing technological
improvements together with some level of development within this market segment are needed
 Since this project’s aim is to increase the vegetables’ shelf life and preserve them for longer periods to
be later consumed, this entails excellent transport connections and storage facilities with controlled
temperature degrees.
 Since this project is assumed to meet an intense competition especially in the region of Upper Egypt,
there should be some level of creativity and innovativeness –complete the freezing process in relatively
less time than any other preservation techniques- resulting in creating some balance in the market.
 Since the vegetable processing sector in Egypt is underdeveloped thus there is an essential role for the
national and state governments to stimulate the frozen vegetables sector, enhance the farmer’s income,
and promote agribusiness.
 The production lines could also be utilized in freezing further vegetables or fruits to expand profit
margins and achieve economies of scale.
Financial Analysis
Frozen Vegetables project, we depended on initial estimates arrived at in consultation with PwC’s agricultural
The attached tables display the financial projections for the construction period as well as five operating years.

Fixed Assets 6,305
tables.
Fixed Assets
Land Cost
The Frozen Vegetables processing facility is proposed to be located in Upper Egypt on an estimated total land
area of 3,000 square meters. The total cost of the land allocated to the proposed project is estimated at LE 1.5
million.
Buildings
1.2 million based on 2000 square meters of building at a construction cost of LE 600 per square meter.
Equipment
The cost of equipment is estimated by the industry expert to reach LE 3.6 million. This cost includes vacuum
packing machines, weights, and sorting/grading tables, washing tubs freezing machines and freezing
warehouses.


Sales & Marketing

customers in preparation for selling the frozen vegetables . An estimated amount or approximately LE 50,000
has been allocated to this cost item.

Inventory: estimated at 15 days of fresh vegetables and packaging materials.
Accounts Payables: estimated at 21 days of total cost of fresh vegetables and packaging material.
Financing Plan
Revenue
Frozen Vegetables Revenue
Frozen Vegetables Revenue
The total revenue of the frozen vegetables were calculated base on the processing of 4 tons of fresh vegetables
for each of the 5 selected items and based on 250 working days per year. The following table displays the
proposed products, selling price, output percentage and annual escalation:
Okra Molokheia Green Beans Carrot Peas
Fresh Vegetables (Ton) 1000 1000 1000 1000 1000
Frozen Vegetables (Ton) 700 900 850 900 850
Selling Price LE/Ton 8,000 8,000 4,000 3,000 4,000
The selling price is assumed to be escalated by 5% annually.
Cost of Sales
Okra Molokheia Green Beans Carrot Peas
Fresh Vegetables (Ton) 1000 1000 1000 1000 1000
Cost Price LE/Ton 4,000 4,000 1,500 1,000 1,500
Packaging Cost
The cost of packaging for the output of the frozen vegetables is estimated at 15% of the fresh vegetables cost.
Transportation Cost
The cost of transportation of the frozen vegetables to the processing facility is estimated at 15% of the fresh
vegetables cost .
Depreciation
Asset Rate
Buildings 5%
Equipment 20%
Energy & Utilities

Labor Cost
The cost of labor was calculated based on two operating cycle, each extend for a period of two months as
estimated number of daily workers is 30 at a cost LE 25 per worker per day, in addition to 5 supervisors with a
Marketing Expenses
Other Expenses
Amortization
Taxes
Summary of Results
In order to calculate the internal rate of return of the Frozen Vegetables project, the net profit was added to the
cash flow.
The IRR of the project was calculated to be 45% meaning that the net present value of the project equals to zero
at the mentioned discount rate.

5.73 in the first projected year. It greatly improves thereafter with the full repayment of
the project’s debts.
Profitability: Profitability ratios are favorable. Return on sales starts at 9% in the first year, and
Initial Investment Cost Frozen Vegetables
LE 000
Fixed Assets:
Land 1,500 1,500
Building 1,200 1,200
Equipment 3,605 3,605
Financing Structure Frozen Vegetables

LE 000

Total 7,401 7,401 100%
Depreciation Charges Frozen Vegetables

LE 000
Description Cost Rate Year 1 Year 2 Year 3 Year 4 Year 5
Building 1,200 5.0% 60 60 60 60 60
Equipment 3,605 20.0% 721 721 721 721 721
Accumulated Depreciation 781 1,562 2,343 3,124 3,905
Amortization 110 100% 110 0 0 0 0

Revenues & Costs Frozen Vegetables
LE 000
Okra:
Quantity Ton 1,000 1,000 1,000 1,000 1,000
Cost Per Ton 4,000 4,200 4,410 4,631 4,862
Net Okra Quantity (Ton) 700 700 700 700 700
Okra Selling Price per Ton 8,000 8,400 8,820 9,261 9,724
Molokheia:
Quantity Ton 1,000 1,000 1,000 1,000 1,000
Cost Per Ton 4,000 4,200 4,410 4,631 4,862
Net Molokheia Quantity (Ton) 900 900 900 900 900
Molokheia Selling Price per Ton 8,000 8,400 8,820 9,261 9,724
Green Beans:
Quantity Ton 1,000 1,000 1,000 1,000 1,000
Cost Per Ton 1,500 1,575 1,654 1,736 1,823
Net Green Beans Quantity (Ton) 850 850 850 850 850
Green Beans Selling Price per Ton 4,000 4,200 4,410 4,631 4,862
Carrots:
Quantity Ton 1,000 1,000 1,000 1,000 1,000
Cost Per Ton 1,000 1,050 1,103 1,158 1,216
Net Carrots Quantity (Ton) 900 900 900 900 900
Carrots Selling Price per Ton 3,000 3,150 3,308 3,473 3,647
Quantity Ton 1,000 1,000 1,000 1,000 1,000
Cost Per Ton 1,500 1,575 1,654 1,736 1,823
Net Peas Quantity (Ton) 850 850 850 850 850
Peas Selling Price per Ton 4,000 4,200 4,410 4,631 4,862
Revenue:
Okra Revenue 5,600 5,880 6,174 6,483 6,807
Molokheia Revenue 7,200 7,560 7,938 8,335 8,752
Green Beans 3,400 3,570 3,749 3,936 4,133
Carrots 2,700 2,835 2,977 3,126 3,282
Peas 3,400 3,570 3,749 3,936 4,133
Total Revenue 22,300 23,415 24,586 25,815 27,106
Direct Cost:
Okra Cost 4,000 4,200 4,410 4,631 4,862
Molokheia Cost 4,000 4,200 4,410 4,631 4,862
Green Beans Cost 1,500 1,575 1,654 1,736 1,823
Carrots Cost 1,000 1,050 1,103 1,158 1,216
Peas Cost 1,500 1,575 1,654 1,736 1,823
Total Direct Cost 12,000 12,600 13,230 13,892 14,586
Packaging Cost 1,800 1,890 1,985 2,084 2,188

Transportation Cost 1,800 1,890 1,985 2,084 2,188
Total Cost 15,600 16,380 17,199 18,059 18,962
Gross Margin 6,700 7,035 7,387 7,756 8,144
Projected Profit & Loss Statement Frozen Vegetables
LE 000

Revenue
Total Revenues 22,300 23,415 24,586 25,815 27,106
Total Cost 15,600 16,380 17,199 18,059 18,962
Gross Profit 6,700 7,035 7,387 7,756 8,144
Other Expenses
Labor Cost 243 255 268 281 295
Depreciation 781 781 781 781 781
Administrative Expenses 892 937 983 1,033 1,084
Marketing Expenses 1,561 1,639 1,721 1,807 1,897
Total Operating Expenses 4,146 4,314 4,491 4,676 4,871
Profit Before Interest & Tax 2,554 2,721 2,896 3,080 3,273
Other Expenses
Insurance 0 0 0 0 0
Net Profit Before Interest & Tax 2,444 2,721 2,896 3,080 3,273
Interest 0 0 0 0 0
Net Profit Before Tax 2,444 2,721 2,896 3,080 3,273

Taxes 489 544 579 616 655
Net Profit 1,955 2,177 2,317 2,464 2,618

Statement of Change in Working Capital Frozen Vegetables
LE 000
Cash 297 311 327 343 360

Accounts Receivables 916 962 1,010 1,061 1,114
Inventory 567 595 625 657 689
Total Current Assets 1,780 1,869 1,963 2,061 2,164
Working Capital 986 1,035 1,087 1,142 1,199
Projected Cash Flow Statement Frozen Vegetables

LE 000
Operating Cash Flow

Net profit Before Tax 2,444 2,721 2,896 3,080 3,273
Depreciation 781 781 781 781 781
Taxes -489 -544 -579 -616
Total Operating Cash Flow 3,335 3,013 3,133 3,282 3,438
Investing Cash Flow

Fixed assets -6,305
Inc./Dec. in working capital -986 -49 -52 -54 -57
Financing Cash Flow
Dividends 0 0 0 0
Operating Cash Flow 0 3,335 3,013 3,133 3,282 3,438

Net Cash Flow 0 3,335 2,964 3,081 3,227 3,381

Cumulative Cash Flow 0 3,335 6,299 9,380 12,607 15,987
Projected Balance Sheet Statement Frozen Vegetables
LE 000
Assets
Cash 0 3,335 6,299 9,380 12,607 15,987
Working capital 986 986 1,035 1,087 1,142 1,199
Fixed assets 6,305 6,305 6,305 6,305 6,305 6,305
Accumulated depreciation 0 781 1,562 2,343 3,124 3,905
Net fixed assets 6,305 5,524 4,743 3,962 3,181 2,400
Total assets 7,401 9,845 12,077 14,429 16,929 19,586

Taxes 489 544 579 616 655
Net Worth
Paid-up capital 7,401 7,401 7,401 7,401 7,401 7,401
Dividends 0 0 0 0 0
Retained earnings 1,955 4,132 6,448 8,912 11,530
Total net worth 7,401 9,356 11,533 13,850 16,313 18,932
Total Liabilities & Owners Equity 7,401 9,845 12,077 14,429 16,929 19,586
Selected Financial Indicators Frozen Vegetables

LE 000
Revenues 22,300 23,415 24,586 25,815 27,106

Net Profit Before Interest and Tax 2,444 2,721 2,896 3,080 3,273
Net Profit Before Interest and after Tax 1,955 2,177 2,317 2,464 2,618
Net Profit 1,955 2,177 2,317 2,464 2,618
Current Assets 5,115 8,168 11,342 14,667 18,151
Current Liabilities (Current portion of LTD + taxes) 794 1,322 1,420 1,498 1,581
Net Worth 7,401 9,356 11,533 13,850 16,313
Liquidity:
Current Ratio 6.44 6.55 8.37 10.18 11.87
Quick Ratio 5.73 6.10 7.93 9.74 11.43
Profitability:
Project's Internal Rate of Return Frozen Vegetables
LE 000

Inflows
Net Profit before interest 1,955 2,177 2,317 2,464 2,618
Depreciation 781 781 781 781 781
Total inflows 2,846 2,958 3,098 3,245 19,060
Outflows
Fixed assets -6,305 0 0 0 0 0
Taxes 0 -489 -544 -579 -616
Total Outflows -7,401 0 -538 -596 -634 -673
Net Cash Flow -7,401 2,846 2,419 2,502 2,611 18,387
Internal Rate of Return (IRR) 45.0%

Conclusion
As indicated earlier, there are several opportunitites that could reap significant value across the value chain of
the horticulture sector in Upper Egypt. given the level of output in several and the available varieties, and
quality, pending some technical support to enhance production even further. Additionally, there is little or no
competition in most of the proposed processing options for hotiruclture produce in Upper Egypt, providing
interested investors with clear first mover advantage.
Based on more analysis of the proposed business model for each of the five crops of concern, the proposed
project ideas mostly require small investments, low technology, and generate high returns. This makes the
project appealing to a wider spectrum of investors, including small farmers directly or through their farmer
associations.
In addition, all the recommended business models focus on integrating the small farmers as key suppliers for
the proposed projects, through establishing long-term contract farming arrangements with them to supply the
requied quality and quanity of output, and also support them to enhance yield and specifications of the required
varieties. Such arrangements will ensure a win-win situation between the growers and the processors, hence
achieving one of the key goals of the Salasel program.
Secondly, because the value chain of horticulture sector in Upper Egypt is significantly under-developed, there
is major room for opportunity to improve its performance directly by the processors. Learning from the
experience of countries like Kenya and Ethiopia in the floriculture industry, the private sector owned most of
the steps in the value chain. Even in Egypt, a company such as the Upper Egypt for Food Industries Company is
strategically considering to integrate backawards into agriculture production to be able to secure its own supply
given the fragmanetation of the small farmers in Upper Egypt and the inadequacy of the supply chain. Such
integrated operation across the value chain of horticulture sector in Upper Egypt, albeit going against the global
trends in other industries, should provide much higher value and efficiency to operators given the context and
the current state of the sector, the significant market opportunities, and the existing competitive advantages.
Overall, there is a strategic window of opportunity for horticulture processing in Upper Egypt, that can be best
captured by innovative and long-term investors. Based on the analysis presented above, the rewards can be
significant and highly sustainable.
Recommendations
Based on the detailed analysis of each proposed project and the resulting financial prefeasibility assessment, we
can provide a number of recommendations that can be further considered by Salasel while taking these project
ideas forward.
Recommendation 1: Frozen Vegetable Project not

recommended
Although financially profitable and feasible, it is our recommendation not be pursue the frozen vegetable
project further especially now. Within this segment, there are already over 15 well established players in Egypt,
some of them have been operational for many years. This represents a highly competitive segment, reducing
the potential market share for a new entrant, and requiring relatively large marketng efforts to achieve some
decent market penetration. In addition, the Upper Egypt for Food Industries factory in Beni Suef has just
started operations with a capacity estimated to be the largest within the region. Therefore, there is expected to
be excess capacity for the coming years, that can utilize the crop output from Upper Egypt for a number of crops
and for a number of years as well. Thirdly, given the relatively higher level of investment required, and the
higher technology nature of the project, as well as the scale of existing competition, the proposition might be
less attractive for potential target investors.
Recommendation 2: Combine the Dried Dates and

Pomegranate Processing Projects
The rationale behind this recommendation is the seasonality associated with each crop, combined with the
relatively simple processing required for each. The combination of the two ideas under one investment will
save on the land, related infrastructure and utility costs of both projects, and also generate higher utilization of
the manual labor required for each processing option. Each crop will require a separate production line and
equipment, with specific hygiene factors for pomegranate as discussed, but many other aspects of the two
projects can be joined for efficiency and enhancing return on investment.
This recommendation will not be valid, however under two conditions. If an automated production line for
pomegranate processing is procured, which will increase the capacity and investment cost of the project and
may warrant separate and sophisticated operations management. In this case the project should be pursued
stand-alone. The other condition is if the production of dried dates is further integrated into more value adding
products, such as chocolate coated, or nut-stuffed dates. In such case, the facility will also require more
processing steps and the capacity of production, storage, sales and marketing will be expanded making the
project more appealing as a standalone idea.
Recommendation 3: Combine the Dried Dates and Dried

Tomatoes Projects
This recommendation is based on the fact that the dehydration process is the same for both crops. If an electric
dehydrator is procured as the production method, then it will be cost efficient to utilize the dehydrator for both
crops, while protecting the specific hygiene and treatment requirements for each. Another advantage of this
combination is it overcomes the seasonality of the dates crop, as it will be dried during its season only, while
tomato is available year round. In this case, the equipment and labor will be utilized throughout the year,
enhancing efficiency and returns.
Recommendation 4: Approach a large scale international
investor to undertake all 4 projects
This idea is based on the relatively low cost and high returns of each project. If a large-scale investor with
industry knowhow and technical expertise in horticulture processing can be approached to undertake all four
projects, efficiency and high-value added activity can be expected. In addition, such investor can deploy
advanced technology for production in order to target the high quality export markets. This is mainly because
high levels demand for the output of the proposed projects is expected to be international in nature. Therefore,
an international investor will have the necessary marketing and skills capability and network to penetrate
international markets more effectively, for the four projects.
However, if such an investor is pursued, it is important that the inclusion of small farmers as suppliers though
contractual farming arrangement be ensured in the investment agreement with such potential investor. This is
mainly to protect the minimum benefit for farmers as producers.
Recommendation 5: Develop an awareness campaign for

the local market to promote the use of dried products to
enhance local demand
This recommendation assumes one or all the projects are implemented by local investors, or directly by the
farmers association. In this case, it will be important to ensure considerable local demand for the project
outputs, in addition to penetrating the international markets. Therefore, it might be worthwhile to coordinate
for a national awareness campaign about the efficiency, convenience and sustained nutritional value of dried
products. Such campaign can be developed through the Processed Food Industry Association, much like the
recent campaign promoting tetra pack UHT milk. Such efforts will increase awareness and also demand for
dried crops, hence benefiting the new projects and other established players in the local market as well.
About this Report
 This Report has been prepared on the basis set out in our Engagement Letter addressed to “the Client”
and should be read in conjunction with the Engagement Letter.
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judgment with respect to the services and work provided by us, to make implementation decisions, if
any, and to determine future courses of action with respect to any matters addressed in any advice,
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Pre-Feasibility Studies For 5 Crops For Processing in Upper Egypt

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SALASEL Pre

Final Deliverable with Recommendations

A clear market opportunity for Agro-processing in Upper Egypt… 45

Five Project Ideas 54

Part 2: Benchmarking of Horticulture Experience in Other Countries 68

Success Story 1: Horticulture Production for Poverty Reduction: Tanzania 68

Section V: Dried Dates 94

Financial Analysis 106

Section VI: Dried Tomatoes 117

Project Brief 117

Market Overview 120

Financial Analysis 124

Section VII: Dried Onions 134

Project Brief 134

Commercial Possibilities 135

Financial Analysis 143

Section VIII: Frozen Vegetables 155

Project Brief 155

Commercial Possibilities 156

Financial Analysis 167

Section I: PESTEL Analysis

Egypt: Country Background

1 Business Monitor International, Egypt Business Forecast Report Q2, 2011

PESTEL Implications for Risk Areas to

Bad Average Good

(1) Refers to financial year July to June

2 Business Monitor International, Egypt Business Forecast, Q2, 2011

Trade, Exports and Imports

4 The Egyptian Ministry of Finance

Month/ Year Exports (by Millions USD)

The Egyptian Labor Force

Trade & Investment Ratings

Country Openness to Investment Score Openness to Trade Score

7 Central Bank of Egypt

International Financing Institutions

Foreign Trade Regime

Foreign Direct Investment

Foreign Direct Investment, as a total % of GDP11

9 Economist Intelligence Unit, Egypt Country Outlook, 2011

Initiatives supporting SME financing

The following table summarizes the Economic dimension

Economic  Diverse sources of  Egyptian economy  It is expected that

Bad Average Good

12 International Finance Corporation

Month/Year Percentage of the Labor Force

January /2010 9.4%

Source: Agency of public mobilization and statistics

15 Agency of Public Mobilization and Statistics

Total Illiterate Literate Under Intermediate Above College

Mil Mil % Mil % Mil % Mil % Mil % Mil %

Source: The World Bank

The following table summarizes the Societal dimension

Bad Average Good

Construction industry value EGP bn

HLS: Hock Lian Seng Infrastructure

Internet Usage and Population Growth

Year Users Population (mil) Penetration

2000 450,000 66,303,000 0.7%

17 BMI Infrastructure Report, Q2.2011

The following table summarizes the Technological dimension

Bad Average Good

Impact of Environmental Degradation

The Water Situation