By Mohsen Allam Transcending coffee with healthy food and juice offerings News Focus Freeing Taxpayers The ruling NDP cut personal income and corporate taxes in half, but the emergency law is here to stay High Times Bankers expect higher interest rates to heat up the investment climate and cool inflation Mastering Law A new law program at the American University in Cairo seeks to get students serious about law Until the Cows Come Home Consumers are still waiting for Sudanese beef to hit the market AloAchoo! The next generation of viruses has hit mobile phones Star Power The 2004 Olympics created some unlikely national icons and a powerful lineup of marketing potential Below Par The World Bank says Egypt is handicapped by the high costs to start a business and the difficulty of firing people, to name a few Corporate Bonding Orascom Telecom and Telecom Egypt have made a splash in the bond market, but rising interest rates may damper enthusiasm Unmaking Monopolies Opposition MPs say changes to a proposed anti-trust law defy the purpose of the law by protecting monopolies On Topic The Euromoney conference put an exclamation point on the liberalization efforts of the government Investment Matchmakers Egypt Invest 2004 seeks to convince foreign investors that the country has finally turned a corner ’Dish’ing it Out Satellite TV stations are set to give the state-run channels a run for their advertising revenues during Ramadan Cargo Crunch As exporters complain about skyrocketing airfreight prices, the government seems to be turning an unsympathetic ear Star Power The 2004 Olympics created some unlikely national icons and a powerful lineup of marketing potential By Omar Mohsen With free WiFi and open seating, Cilantro’s strives to be a community center. By Omar Mohsen (3) Cilantro’s newest addtion at Borg Umm Kalthoum Hotel

By Hadia Mostafa

When Hesham El-Sewedy acquired Delicious Inc., the company that built the Cilantro Cafés brand, barely one year ago, the popular coffee emporium had 12 locations throughout Cairo and Alexandria.

Today, they have 21 branches and are continuing to expand rapidly, with an upcoming opening in Sharm El-Sheikh and an eye on a regional presence — all while bracing themselves for the long-awaited entry of global coffee powerhouse Starbucks, which this summer plans to open the first of what could eventually be 50 storefronts in Egypt.

At the time of the acquisition, many people were unaware that El-Sewedy, the extremely low-profile CEO of El-Sewedy Industries, the largely family-owned business and regional powerhouse in the electronics and cable industries, had already begun to dabble in the foods sector.

Three years earlier, he established El-Sewedy Foods, which owns and operates Wessaya (a home-grown chain of fast food restaurants), as well as the Egyptian franchises of Sbarro Italian restaurants. El-Sewedy Foods will soon open the global Rainforest Cafe and Joe’s Crab Shack brands, making it one of the fastest-growing restaurant companies in the Middle East.

“The foods industry is very dynamic, and it’s an area that interests me personally,” says El-Sewedy. “I saw a lot of potential in Cilantro. It was a great business opportunity and a strong brand name, not only in the Egyptian market, but it had regional potential as well. We believe that this is an Egyptian brand that can compete and succeed internationally.”

Cilantro was originally established in 2000 by creative young entrepreneurs Maher Maksoud and Nader Lahzee. Their first location, a quaint and cozy little shop on 26th of July Street in Zamalek, quickly developed a cult following.

“Back then, coffee and cafés were a relatively new concept in Egypt,” says Nadine Beshir, general manager of Cilantro. “Things like flavored coffees, lattes and frozen drinks were not as common as they are now.

“We started a new concept in food as well with our healthy homemade-style sandwiches, salads and juices,” she adds. “I think Delicious Inc. pioneered a lot of things in those days, like the concept of the communal table, which encouraged interaction and helped foster a spirit of community. Cilantro has become much more than a café — it is now a place to gather.”

Cilantro first expanded when it chose a strategic location directly across the street from the American University in Cairo (AUC) for its second branch. Although cost constraints and funding in the early days made expansion a much more arduous process, Cilantro’s owners managed to pick prime locations until they slowly developed a presence in the best neighborhoods of both Cairo and Alexandria.

El-Sewedy brought both business expertise and a cash injection to the table when he purchased Cilantro, helping the chain expand faster than anticipated in previously unaffordable locations including new showcase stores in Mohandiseen, Heliopolis’s CityStars Mall and, most recently, Borg Umm Kalthoum Hotel on Abu El-Feda Street in Zamalek.

“Today, with 21 branches, we are right on target with our expansion,” says El-Sewedy. “We had to be careful not to move too quickly because it is not only financial issues that are at stake when you undertake this kind of rapid growth. We had other issues to consider, including making sure that the shops’ culture is maintained and that customer service does not suffer.”

“Managing 21 branches is completely different from managing 12,” says Beshir, who came to Cilantro with El-Sewedy in 2005 as his business development manager. “I initially took this on as a project and worked with the old owners and management team to ensure a smooth transition. The original contract stipulated that the old management would remain until the end of 2006, but as it turned out, I immediately clicked and had chemistry with the people in the company, so it took much less time then we anticipated to hand things over.

“The old owners are, however, still on board as consultants,” Beshir adds. “I am always on the phone with them with questions on the strategic level, but we have completely taken over the day-to-day operations of the cafés.”

Maksoud and Lahzee always had a clear vision for Cilantro: From day one they went to work establishing a strong brand identity. “Today, we have our own brand manual that we abide by very strictly, which is one of the things that distinguishes us from other local cafés,” says Beshir.

The chain’s hip, stylish look has been one of its consistent strong points. Everything from the furniture to the wall graphics, display cases and lighting fixtures are well conceptualized and well-made.

“Delicious Inc. has a very talented team of consultants that have been with the company from the beginning. We work with an extremely creative interior designer, Mona Hussein, on most of our branches,” explains Beshir. “Our formula is to maintain brand identity even as we want every store to have its own personality. We don’t use a cookie-cutter approach: Every branch gets its own design from A-Z to fit its environment and atmosphere, but there are certain elements that have to remain the same.

“For example, in the AUC store we went for a very modern look with lots of stainless steel because it’s a university store catering to a young crowd; elsewhere, like in Zamalek, we use more classical, cozy designs.”

Despite his ultra-low profile, El-Sewedy is a well known philanthropist and social entrepreneur whose other business ventures include Hayah International Academy, the first non-profit international school in Egypt. His social consciousness has carried over to Cilantro, upping its hipness a notch or two.

“We as El-Sewedy Group have always been social entrepreneurs,” he says. “We are always thinking about how we can add value to the community with each new venture that we undertake. In addition to charity work and community service projects — which are a given — we try to utilize local production whenever possible, even if it means that it will cost us a little more. As long as the quality is not compromised, we will always go for local sourcing.”

Many of Cilantro’s pastries and food products are sourced from small suppliers. “The people we source from usually end up becoming much more than just suppliers: They develop into partners.” Beshir notes. “We even help them to finance expansions, develop new recipes and carry out quality auditing. Some suppliers who started out really small with us now have factories.”

In an effort to connect with the community on a deeper level, Cilantro has started publishing its own magazine, Cilantro Central.

“Our magazine’s slogan is ‘By the people, to the people,’” explains Beshir. “We welcome and encourage our customers, or anyone for that matter, to send us their contributions, whether it’s articles, art, poetry or editorials. In a way it’s an extension of our Big Red Book [the café’s guest book] concept.” Art and graffiti from the Big Red Book are also used on Cilantro’s wall graphics.

There are fixed sections in the magazine, which Beshir says has a circulation of 30,000 copies every two months, on health, lifestyle and culture. In their first issue, published in April, there is a feature story on social responsibility and how to make a difference in your community.

“We are also very much into promoting art and culture, thus our second publication which will be debuting this month, The Cairo Gig Guide. This is basically a calendar listing of all the social and cultural events going on in Cairo,” says Beshir.

Although Starbucks is set to launch in Egypt this summer, El-Sewedy says he’s not terribly concerned. Cilantro’s founders, he notes, anticipated international competition from day one.

“Even though there was no competition at the time, Cilantro’s original owners had a vision of one day growing into a chain of cafés. They used international benchmarks to develop themselves every step of the way. Everything from the porcelain coffee cups to the take-away containers were FDA-approved,” he says, referring to the US Food and Drug Administration.

Cilantro is a member of the Specialty Coffee Association of America and the International Specialty Coffee Association, which gives it access to resources and connects it to the international scene. Both associations also conduct regular audits on members’ facilities.

Today, Cilantro is already competing and holding its own quite well with international names including Costa Coffee, but with Starbucks set to make its long-awaited Egyptian debut, the group will be dealing with an entirely different level of competition.

Starbucks’ first three branches, one in Alexandria and two in Cairo, will open by summer’s end. Mohammed Alshaya, CEO of Kuwait’s MH Alshaya Group, which owns the Starbucks franchise in the Middle East, announced at the World Economic Forum in Sharm El-Sheikh last May that he eventually plans to have around 50 Starbucks branches in Egypt.

“We welcome the entrance of Starbucks onto the Egyptian market. That kind of competition is really healthy for us because if we can not compete with them in our home market, then we will never be able to do so outside,” says El-Sewedy, “and we are seriously looking to expand regionally.”

El-Sewedy confirms that as first reported in Business Today Egypt’s Rumor Has It column, Starbucks was indeed bidding against his company to acquire Delicious Inc. back in 2005. The coffee giant, he says, wanted Cilantro’s chain of outlets to snap up their real estate and rebrand them as Starbucks. In the end, however, Delicious Inc.’s owners decided to go for the El-Sewedy bid, which was rumored to be close to LE 40 million.

El-Sewedy declined to specify the exact sum that he paid for the company and refused to comment on its current financial status.

“I think it’s a real testament to the success of the chain when Starbucks comes in and says our biggest competition in the Middle East is Cilantro,” says Beshir. “But we believe that Starbucks has a very different concept from our own. It’s about fast, take-away coffee for people on the go. They want quick turnover. I, on the other hand, want my customers to stay a long time. As you can see, we are not just about coffee. We are a meeting place. Our customers come to study, work, socialize, read, chat on the internet [using free WiFi] you name it.

“So I don’t see a reason to worry. There are a lot of big international names coming into the market that people don’t know about yet. The market is opening and growing and it makes us very proud that we paved the way.” bt