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South Africa Food and Drink Report Q2 2011

South Africa Food and Drink Report Q2 2011

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Additional Information

Price	$530.00
Publisher	Business Monitor International
Date of Report	Apr 8, 2011

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Quick Overview

Accommodative interest rates and wage growth also helped considerably as the South African consumer came back promisingly, although most of the big retailers are still united in their view that the consumer is still in a tough spot, with stubbornly high unemployment and excessive household debt keeping a lid on a full-blown recovery. Higher food prices that have so far been largely cushioned by strong crop yields domestically and rand strength could also have a bigger say later in 2011.
Headline Industry Data
?? 2011 per capita food consumption growth in local currency = 6.51%; forecast compound annual growth to 2015 = 8.92%.
?? 2011 beer volume sales = 6.62%; forecast compound annual growth to 2015 = 1.30%.
?? 2011 mass grocery retail sales = 7.83%; forecast compound annual growth to 2015 = 10.57%.
Key Company Trends
Strong rand cushioning acceleration in global food prices so far: Imported food inflation has been less of a big deal in South Africa. Our somewhat benign view on inflation (forecasting an average 4.3% for 2011) is largely based on favourable domestic food supply trends. From the point of view of the food industry, a stronger rand has also helped cushion some of the margins threatened by higher grain prices.
Shoprite continues to see weakness in consumer: Shoprite believes the South African consumer remains in a tough spot and is recovering more slowly than in most emerging economies. Although the high-end South African consumer looks in much better shape (see our online service, February 18 2011, ‘Woolworths Coming Back Well And Trying To Make Its Food Cheaper’), the average South African still looks pretty stretched, with unemployment staying worryingly high. Low food price inflation has also not helped the food retail industry, with the strong rand so far largely shielding South Africa from the imported inflation hitting much of the world.
Key Risks to Outlook
Rising food prices: Even though the strong rand has provided a cushion so far, the risk is that the strong currency means the effects of upward global moves in soft commodity prices have yet to be realised and could have a much greater impact in H211, perhaps if inflation outweighs disinflationary cushions provided by the rand. This would hit consumer spending hard given how high unemployment is.

Table of Contents

BMI Industry View ........................................................................................................................................... 5
SWOT Analysis ................................................................................................................................................ 6
South Africa Food Industry SWOT........................................................................................................................................................................ 6
South Africa Drink Industry SWOT ....................................................................................................................................................................... 7
South Africa Mass Grocery Retail Industry SWOT ............................................................................................................................................... 8
Business Environment ................................................................................................................................... 9
BMI’s Core Global Industry Views ............................................................................................................................................................................ 9
BMI Food & Drink Core Views .......................................................................................................................................................................... 14
Macroeconomic Outlook .................................................................................................................................................................................. 15
Table: South Africa Economic Activity, 2006-2015 ............................................................................................................................................ 17
Industry Forecast Scenario ........................................................................................................................... 18
Consumer Outlook ........................................................................................................................................................................................... 18
Food ................................................................................................................................................................................................................. 19
Food Consumption ...................................................................................................................................................................................... 19
Table: Food Consumption Indicators, 2007-2015 .............................................................................................................................................. 20
Drinks .............................................................................................................................................................................................................. 21
Alcoholic Drinks ......................................................................................................................................................................................... 21
Beer ............................................................................................................................................................................................................ 21
Table: Beer Value And Volume Sales, 2008-2015............................................................................................................................................... 22
Soft Drinks .................................................................................................................................................................................................. 22
Table: Soft Drinks Value And Volume Sales, 2008-2015 .................................................................................................................................... 23
Mass Grocery Retail ........................................................................................................................................................................................ 24
Table: MGR Value Sales By Format, 2008-20145 .............................................................................................................................................. 25
Table: Grocery Retail Sales By Format, 2009 And 2019 .................................................................................................................................... 25
Trade ............................................................................................................................................................................................................... 26
Table: Food & Drink Trade Indicators, 2008-2015 (US$mn)............................................................................................................................. 26
Food ................................................................................................................................................................ 27
Key Industry Trends And Developments .................................................................................................................................................................. 27
Strong Rand Cushioning Acceleration In Global Food Prices So Far ................................................................................................................. 27
Leading Food And Drink Company Looking To M&A ........................................................................................................................................ 29
EU-Africa Sugar Protocol Likely To Boost Illovo ............................................................................................................................................... 30
Consumer Weakness Persisted ............................................................................................................................................................................ 31
Market Overview ............................................................................................................................................................................................. 32
Agriculture .................................................................................................................................................................................................. 32
Organics ..................................................................................................................................................................................................... 33
Food Production ......................................................................................................................................................................................... 33
Drink ............................................................................................................................................................... 35
Key Industry Trends And Developments .................................................................................................................................................................. 35
SABMiller May Be Lining Up An Acquisition ..................................................................................................................................................... 35
Downturn Affecting Margins .............................................................................................................................................................................. 37
Growing Competition In Beer ............................................................................................................................................................................. 37
Wine Exports Faring Well .................................................................................................................................................................................. 37
Market Overview ............................................................................................................................................................................................. 38
Alcoholic Drinks ......................................................................................................................................................................................... 38
Soft Drinks .................................................................................................................................................................................................. 39
Mass Grocery Retail ...................................................................................................................................... 40
Key Industry Trends And Developments .................................................................................................................................................................. 40
Shoprite Continues To See Weakness In Consumer ............................................................................................................................................ 40
Woolworths Coming Back, High-End Consumer Seems To Be Doing Better ....................................................................................................... 40
Wal-Mart Target Massmart Cautious On Outlook, Set To Up Food Presence .................................................................................................... 41
Tougher Year For Some .............................................................................................................................................................................. 43
International Strategy Growing .......................................................................................................................................................................... 43
Retailers Sending Out Mixed Zimbabwe Signals ................................................................................................................................................ 44
Market Overview ............................................................................................................................................................................................. 45
Table: Structure Of South Africa’s MGR Market – Sales Value By Format, 2004-2009 (US$bn) ....................................................................... 46
Table: Structure Of South Africa’s MGR Market – Sales Value By Format, 2004-2009 (ZARbn) ....................................................................... 47
Competitive Landscape ................................................................................................................................ 48
Consumer Share Price Analysis ............................................................................................................................................................................... 48
Key Players ...................................................................................................................................................................................................... 51
Table: Key Players In South Africa’s Food & Drink Sector ............................................................................................................................... 51
Table: Key Players In South Africa’s MGR Industry .......................................................................................................................................... 53
Company Analysis ........................................................................................................................................ 55
Food ................................................................................................................................................................................................................. 55
Illovo Sugar ................................................................................................................................................................................................ 55
Tiger Brands ............................................................................................................................................................................................... 56
Pioneer Foods ............................................................................................................................................................................................. 57
Drink ................................................................................................................................................................................................................ 59
SABMiller ................................................................................................................................................................................................... 59
Distell ......................................................................................................................................................................................................... 61
Mass Grocery Retail ........................................................................................................................................................................................ 62
Shoprite Group ........................................................................................................................................................................................... 62
Woolworths ................................................................................................................................................................................................. 64
Pick ‘n’ Pay ................................................................................................................................................................................................ 65
BMI Food & Drink Methodology .................................................................................................................... 66
BMI Food & Drink Industry Glossary ..................................................................................................................................................................... 66
Food & Drink ............................................................................................................................................................................................. 66
Mass Grocery Retail ................................................................................................................................................................................... 66
BMI Food & Drink Forecasting And Sourcing ........................................................................................................................................................ 68
How We Generate Our Industry Forecasts ......................................................................................................................................................... 68
Sourcing ...................................................................................................................................................................................................... 69