In November 2014, following an announcement made in 2013,  Turkish supermarket retailer BiM entered the Egyptian market. It opened 46 stores at once. Later that month, domestic supermarket chain Kazyon opened its first outlet.

BiM and Kazyon compete directly against each other. Both companies operate a discount model and target lower-end consumers with small neighborhood store formats (with an average estimated floorspace of 250m²). Both companies entered the market with aggressive expansion plans.

Kazyon and BiM stores in Cairo (source: Facebook, Trendtype)

BiM is the market leader in its domestic grocery market, Turkey, with a share of over 7%. In Turkey the company has grown from its first store in 1995 to nearly 6,000 stores today. It has opened nearly one thousand stores in Turkey in the last eighteen months alone. From the moment it entered Egypt, BiM has been clear about its ambitions: it aims to open more than 100 new stores in a year. It currently operates 256 stores in Egypt.

Kazyon, which is owned by Tawfeer for Food Products, has also been clear about its expansion plans. It opened almost 160 stores in its first two trading years. It opened its 200th store on July 5th 2017, the last time the company gave an update on the size of its store network. A month earlier, the company announced its intention of having 300 outlets by the end of 2017.

Who’s growing faster?

BiM has outlets in 11 of the 27 governorates in Egypt. Kazyon has outlets in 14 governorates. In the 12 months between August 2016 and the end of July 2017 BiM opened 74 new stores, a rate of 6.17 new stores per month. Over the same period Kazyon opened 56 new stores, a rate of 4.61 stores per month. Bear in mind, however, that at the time of writing Kazyon has not announced any store openings for nearly 6 weeks.

Can Kazyon meet its own growth targets?

Kazyon seems to be struggling to hit its aggressive store opening targets. In order to reach 300 stores by the end of 2017, it needed to open 10 stores a month from June through to December. That does not look likely, based on either past performance or what the company achieved in June.

Kazyon has also stated it plans to have 1,000 stores operating in Egypt within the next five years. This would mean it would need to open 800 new stores by 2022. Maintaining the current growth rate would leave the retailer with just shy of 700 stores in 2022. In order to achieve its goal, Kazyon would have to grow its store network by about 38% every year – a 10% increase on the current store expansion rate.

We know that BiM does have experience taking its store network through various pain points of growth and can manage the process of scaling its operational capabilities as it grows. It is also winning the battle thus far to grow the fastest. But in comparison to other grocery retailers in Egypt, Kazyon’s expansion is nonetheless extremely impressive. In fact, one consistent theme in Egypt is how many grocery retailers are trying to rapidly grow their store networks: Carrefour, Al Othaim, the Mansour Group among them.

How much should small retailers worry?

We estimate that the whole Egyptian market could theoretically support 80,000 stores like those of BiM or Kazyon if those stores were to account for 100% of grocery sales. Within that context, a store network of 1,000 equates to around 1-2% of the market value. In other words, there is plenty of room for aggressive modern supermarket chains to grow into.

But BiM and Kazyon aren’t growing uniformly across Egypt. They are focusing on the densest and wealthiest urban markets. Each new store is capable of stripping 5-10 independent retailers from the market. The impact of not just BiM and Kazyon but the growing number of other modern grocery chains will have a profound effect on the way Egyptian consumers shop and who they buy from.

BiM, Kazyon and other expanding grocery retailers are shaping the supply chain as they expand. As such, the time it takes for BiM or Kazyon to open 100 stores could fall from over a year to a matter of weeks.

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