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Take a walk on the client side

In Advertising, Communicate, Marketing, Media, Published journalism on November 24, 2010 at 7:55 pm

Communicate casts an eye over Cairo’s advertisers to see who’s spending, what they are spending on, and what’s changing

Originally published in Communicate, June 2010

Stop us if you’ve heard this before, but there’s been a financial crisis in the Gulf. Marketing money has been pouring out through a real estate-sized hole, along with other perforations, and some of that money has been flowing towards Egypt. Clients there have been competing in a much more established market in ways that the free-falling GCC can only envy. Following on from April’s look at Egyptian agencies and media, Communicate takes a look at the country’s advertisers themselves.

Recession aside, Egypt comes with its own challenges to advertisers; Communicate decided to try and find out what some of these challenges are, and how brands have succeeded in overcoming them.

The big spenders, according to Karim Khouri, managing director of creative agency Impact BBDO Cairo, are from the telecom, real estate and FMCG sectors, in that order. It’s no surprise to discover that carbonated beverages drive the FMCG advertising market, with Coca-Cola and Pepsi being the biggest spenders.

In fact, by some estimates – including that of Universal Media’s managing director, Dina Hashem – Pepsi is the biggest spender in Egypt. But Khouri, whose agency handles creative for Pepsi, says it came in second to Vodafone last year.

Meanwhile, media preferences are shifting for clients (see “Engaging Egypt,” page 44, Communicate, April 2010). Although television is still the dominant form of media, one of the prime problems is how to break through in a cluttered market. Clients are looking to more research, and are also starting to experiment with activation and digital, and other less traditional ways of reaching consumers. They often use two popular platforms: sports and music. Both have the potential to forge strong brand-consumer relationships in emotional Egypt.

Mohamed Riad Shahin, head of commercial communication and marketing services at Nestle in Cairo, tells us that the food company, like most advertisers in Egypt, focuses its media spending on television. Shahin won’t tell us how large his marketing budget is, or what percentage of sales it makes up, but he says that last year he increased his advertising spend in real terms and as a proportion of the company’s sales.

BIG SPENDER. “It’s good to spend more,” he tells Communicate. “Especially if people tend not to spend money.” In frugal times, consumers tend to spend on cheap products or on products they have good communications with.

Of course, even in advertising, brands can’t spend themselves out of every problematic situation, and there are plenty of challenges above and beyond the recession facing advertisers in Egypt.

Illiteracy and poverty are part of the problem. The CIA World Factbook estimates that only 71 percent of the adult population can read and write. That means almost 30 percent of Egyptians are unable to read ads.

Even when they can consume messaging, Egyptians have to be able to afford the goods and services being touted. Karine Barakat, managing director of Starcom media agency in Egypt, says that the wealthiest 11 percent of the Egyptian population owns 77 percent of the country’s wealth. Which leaves the rest of the country with not much.

Dina Hashem at Universal Media says that the country’s middle class – the bread and butter clientele of advertisers in many other countries – was growing until the 1980s, then vanished. Now, she says, “It’s the rich and the very poor. There is no middle class; it doesn’t exist. The middle class went down to the poor.”

WHO’S BUYING? Among the sectors advertising in Egypt are government departments, which are pushing civic services and even using advertising to persuade the country’s populace to pay taxes (see “Jingle all the way,” page 37, Communicate, April 2010).

Other advertisers include the FMCG brands. The usual suspects, such as Nestle, are advertising, and those in the industry say that not only are newcomers entering the market, but those FMCG brands that have been around for a while are looking outside Egypt’s borders, using the country as a jumping-off point.

“There is a lot of investment in new product development,” says Khouri. “And we are seeing a lot of our clients going outside this market. Egyptian brands are starting to look at other markets, and are exporting to places like Sudan and Ethiopia.”

When the recession arrived, advertising markets in the Arabian Gulf were hit hard by the collapse of the region’s real estate sector. These effects have been cushioned in Egypt, where there is still a demand for housing, rather than for properties to be flipped, traded and invested in. Giant developers such as Palm Hills are still spending. There was a dip, says Wael Nazeem, client service director at Saatchi & Saatchi in Cairo, but it wasn’t drastic. Unlike heavily mortgaged, over-leveraged markets elsewhere in the Middle East, the property business in Egypt is largely cash-based. This helps negate cash-flow problems.

This is less the case with cars. Egypt has traditionally been a cash economy, even for big-ticket purchases. But since the start of the 21st century, people have started to borrow more. “A lot of people are buying cars now because of loans,” says Nazeem.

LOAN RANGERS. This is good news for the banks, who are launching new products to appease this rising demand. And advertising them. Nazeem says one of his agency’s clients, ABC bank, has even started advertising during Ramadan, “which is not a banking sort of month.”

Egypt’s state religion is Islam, and between 80 and 95 percent of its population is Muslim, depending on the statistics you read. However, alcohol is tolerated and sold openly. And advertised, although this is more undercover. “It’s a dark market,” says Barakat. Magazines can accept alcohol advertising, and Starcom uses periodicals for its hard beverage clients.

Soft drinks, on the other hand, keep more than magazines afloat. Egypt is one of the many battlefields where the rivalry between Coca-Cola Co. and Pepsi Co. is intense. The two carbonated-beverage brands go against one another hammer-and-tongs on a regular basis, with exaggerated spend that is driven – critics say – more by pride than numbers.

“There are a lot of personal egos in this market,” says Barakat. “Sometimes you think it doesn’t make sense for brands – it is the brands and the people who run the companies. You don’t see this in a developed market.” Media owners make the most of this, though, she adds. They can capitalize on the rising prices for space and airtime driven by a bidding war that goes beyond rational planning.

UM’s Hashem disagrees, however. Her media agency handles Coca-Cola. She says that in 2009 Pepsi put more into the Egyptian advertising market than any other brand, but that talk of a rivalry with Coke that goes beyond business is more hype than reality. “This is what they say to make it look like there is competition there,” she says. “But I see it from the Coke point of view. Coke is very focused; they know exactly that they want from the beginning of the year, with a very clear plan.” She says Coke’s marketing director Ahmed Nazmy also makes sure that he integrates media, creative and PR, more so than other clients, by forming teams across Coke’s different agencies. “He does this with every project, no matter how small it is,” she says.

CROWDED PITCH. One reason Coke and Pepsi are seen as being at each other’s throats is that they both choose to market themselves on a sporting platform, specifically soccer. “This is where it looks like they are following each other,” says Hashem. “But they are not. It’s simply because of the fact that there are very few good football events that take place each year, and both of them want to be part of it.” The same is true, she says, of music. But soccer is more vicious.

Telecoms companies are in a similar situation, with each of the operators trying to gain more coverage than its rivals. They also position themselves through either football (in the case of Etisalat and Vodafone, according to Barakat) or music (Vodafone and Mobinil) and have a tendency to indulge in what cynical buyers call “me-too advertising,” each trying to outspend its rivals.

However, the telcos at last came to a gentleman’s agreement in 2009, says Hashem. “For the first time on the media front it is cooling down; they are no longer fighting with each other to block each other,” she says. “They are no longer going to beat each other on exclusivities and sponsorships and blocking each other.”

As well as more traditional advertising channels, telecoms companies have been using on-ground activations to reach an often-illusive target of non-Cairene Egyptians, a demographic often overlooked by marketers. (The 18 million inhabitants of Cairo and its surrounding sprawl represent around a fifth of Egypt’s total population.)

Agencies – both creative and media – say that there have been more pitches since the credit crunch began. This could be a result of clients looking to use the global financial crisis as a chance to shop around for better deals on their advertising work. But it could also, say optimists, be a sign of the Egyptian advertising market welcoming new spenders.

“We see new entrants, smaller players, coming in,” says Starcom’s Barakat. “But I don’t think if we sit here in a year I will tell you this was a step change.” Newcomers entering the market include brands such as restaurants not known for their advertising and previously kept out by high prices, and Gulf companies looking to target a more stable consumer base than their home market.

Agencies also say they are seeing a shift in the way clients approach marketing: They are gradually moving from tactical advertising to commissioning more brand-building work. “Brands are developing corporate identities and pure branding to compete on a global level,” says Saatchi’s Nazeem.

Clients are also starting to investigate the potential of digital, in addition to traditional forms of advertising. In the words of UM’s Hashem, a few clients who were feeling the credit crunch said, “‘I want to try something else. What else is there? We have digital or Internet, let’s look into it.’ Internet started to boom in 2009. Not a big boom, but it started to show.”

But in spite of these forward steps, agencies still feel clients aren’t as professional as in other markets. “I would assume big local companies will become more professional, because the market is becoming more professional,” says Barakat. “But the smaller players, I don’t think so. You can’t come from a very professional market even if you want to do things professionally.”

It’s a big market where change comes slowly, but at least clients in Egypt are adapting gradually. This can only be a good thing for the clients, the agencies, and Egyptian advertising in general.

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