Sherine Abdel-Razek asks what an alliance with a global electric appliance producer means for Olympic Group Starting last month and for five years to come, all Electrolux brands bearing the "Made in Egypt" sign will be solely manufactured and distributed by Olympic Group (OG). These brands include Zanussi, Frigidaire, Electrolux and AEG. According to the new agreement, OG can also distribute Electrolux's products in the region in coordination with current Electrolux distributors there. Furthermore, OG is discussing the possibility of exporting some locally produced components to Electrolux. "This would double our sales volume to LE4 billion in the coming few years," revealed Ahmed El-Bakri, OG's managing director. OG currently exports to 27 regional markets, including Libya, Sudan, the Gulf, Morocco, Jordan, Syria, Lebanon and Iraq. Prior to the new agreement, both OG and Al-Abd Group had the right to distribute Zanussi automatic washing machines. Moreover, OG had the right to import components for the machines and assemble them in Egypt which enabled it to corner 55 per cent of the automatic washing machine market, compared to 20 per cent for Al-Abd. The latter's licence expired last month. The new deal will change the house appliances market in favour of OG, especially after Al-Abd Group sold its assets, trademarks and inventory to OG in August 2007 for LE38 million. This includes production lines to produce two-door refrigerators, dishwashers and deep freezers. Al-Abd installed these capacities to produce the Zanussi brand under licence from Electrolux, but had not started operations as of the time of sale. Having these capacities will give OG the opportunity to a wider range of Zanussi products, especially since it is planning to manufacture a full range of Zanussi products, including cookers and electric water heaters. According to a report prepared by EFG-Hermes, the deal will help OG increase its market share in manufactured Zanussi automatic washing machines to 57 per cent in 2008, and 67 per cent by 2010; this is up from 55 per cent in 2006. The group's share of the two-door refrigerator market will increase by three per cent by 2010, mostly as the company starts producing Zanussi refrigerators. The deal coincides with OG's 70th anniversary as a local electrical appliances manufacturer. It began operations in 1938 under the name of Shaher, mainly specialising in manufacturing and trading in radios, small appliances and electrical transformers. The enterprise expanded through the years and started producing new products, and acquiring licences of international manufacturers. Olympic Group has an agreement with Braun for distribution and Daewoo for manufacturing. In addition to distribution of Sony, Ariston, Indesit, Daewoo, Philips, Haier and Craft through its subsidiary B-tech. As for Electrolux, which sells 40 million products to customers in 150 countries every year, the deal best serves its plans to expand in the Middle East and North Africa. Magnus Yngen, executive vice-president of Electrolux, told Al-Ahram Weekly that the Egyptian market "is one with vast potential, especially that Electrolux will be using Egypt as a hub for the entire region". The value of Electrolux's activity in Egypt came at around 16 million euros in 2007. OG sees that success depends on the company's ability to quickly replace imported Zanussi automatic washing machines with manufactured ones, without facing production bottlenecks, particularly in 2008. The EFG-Hermes report noted that it is still not clear how fast and well the market will receive Zanussi refrigerators. Other external factors which may also affect the deal are shifts in steel prices, fluctuations in foreign exchange rates, as well as changes to tariffs on imported household appliances.
