Businessmen battle

to scoop the wine market

By Gamal Essam El-Din

Equally controversial was a more recent government bid to sell Gianaclis Beverages Company, which hoards 95 per cent of Egypt's highly protected wine market and operates a large vineyard, distillation plant and winery south of Alexandria on an area of 2,000 feddans. The highly lucrative sale sparked an intense rivalry between two tycoons, Naguib Sawiris, deputy chairman of the Orascom Group, and Ahmed El-Zayyat, an Egyptian-American businessman and board chairman of the Luxor Group, which bought Al-Ahram Beverages Company in 1996.

There was a third bid submitted by Sami Saad, chairman of a construction group and agent for Mercedes cars in Egypt, but it was later excluded when it failed to increase its initial offer of LE36 million.

Gianaclis is being sold by the state-owned Housing, Tourism and Cinema Company (HTCC) in the form of 2.6 million shares at a minimum total price of LE30 million. The offers were opened on 15 July and, of the three bidders, Al-Ahram Beverages Company (ABC), owned by El-Zayyat, and El-Gouna Beverages Company (GBC), held by the Orascom group and run by Sameh Sawiris, emerged as the highest bidders. Revised offers were submitted on 20 July. ABC offered LE96.3 million, narrowly ahead of GBC, which held its price at LE96 million. The deal reached its final round on 12 August when ABC was reported to have raised its bid for Gianaclis to LE104 million, beating the offer of its only remaining rival, GBC, which finally stood at LE97 million.

Mustafa Eid, HTCC's chairman, said final negotiations with the successful winner, the Luxor Group, will begin in the next few days. However, Eid said that this does not mean that the GBC offer, will be excluded, because terms of sale stipulate that the best two offers should be kept to the final negotiations.

Privatisation insiders agree that Luxor group's imminent takeover of Gianaclis will be a significant development on the local market. The emerging group managed to buy the giant Al-Ahram Beverages Company and holds 95 per cent of the beer and brewery market in Egypt. Luxor's taking over of Gianaclis will mean that the protected beer and wine market will be monopolised by one group.

The Gianaclis company was originally a member of the Egyptian Vineyards Company, which itself was an amalgamation of five companies: Egyptian Vineyards, Alcohol, Zottos, Bolanachi, and Cassimatis, in the years from 1946 to 1967. Later, Gianaclis was separated from the Egyptian Vineyards Company and submitted for sale to anchor investors in July of this year.

The Gianaclis deal reflects the current intensifying competition among Egypt's top businessmen to acquire previous state monopolies. The Luxor group, pursuing a strategy of agressive growth, managed to buy ABC and become the sole Egyptian brewer with 90 per cent of the beer and 95 of the non-alcoholic market. It has even formed strategic alliances with leading international brands such as Carlsberg of Denmark and Diago of the UK as a key step in its plans to invade giant markets in the Arabian Gulf, Lebanon, Jordan, Yemen, Sudan and Iran. If it succeeds in taking over Gianaclis, the Luxor group is expected to form similar strategic alliances to tighten its hold on the local wine market.

For its part, El-Gouna, although it may finally lose the battle for Gianaclis, will not give up competition for the wine market. El-Gouna managed to get a licence for building a winery in Hurghada, which would be the Luxor group's future sole rival. It has even managed to build a brewery in Hurghada and to form an alliance with Loewenbraeu of Germany.

As concluded by privatisation insiders, the mobile phone and Gianaclis deals show clearly that the current strategy of Egyptian giant private sector groups is expansion and diversity whenever possible.

According to Mustafa El-Said, a former economy minister, it is good thing that deregulation of state monopolies leads to opening greater investment and business opportunities to Egypt's giant conglomerates. "The problem is that this deregulation could eventually leave the market a prey to a few private hands, and state monopolies will be replaced by private monopolies," he said.

The dangers of private monopolies emerging on the local market has been raised many times in parliament, but the government has so far failed to submit an anti-trust law to protect consumers against them.