South Africa Food and Drink Report Q2 2012

Published : June 2012
No. of Pages : 104

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We are relatively positive on private consumption in South Africa, forecasting real growth of 3.3% in 2012, following an estimated 4.8% expansion in 2011. Although our figures suggest a notable slowdown, we highlight that given the bleak outlook for the global economic environment, the numbers are relatively decent. In our view, a number of factors bode well for consumer spending: high nominal wage growth, declining unemployment (albeit slowly, and driven by public sector job creation) and the low interest rate environment which should keep a lid on debt servicing costs. Certainly, the latest retail sales numbers from Statistics South Africa are encouraging and indicate that spending is holding up well.
Headline Industry Data
.. 2012 per capita food consumption growth in local currency = +9.2%; forecast compound annual growth to 2016 = +9.7%.
.. 2012 beer volume sales = +3.0%; forecast compound annual growth to 2016 = +3.4%.
.. 2012 mass grocery retail sales = +10.4%; forecast compound annual growth to 2016 = +10.9%.
Key Company Developments
DTI Makes Food Processing An Economic Priority: In April 2012 the South Africa's Department of Trade and Industry (DTI) made food processing a priority area in the country's econom. The department is to launch a new incentive scheme, the Manufacturing Competitiveness Enhancement Programme, in April 2012 to support industry development and help businesses become more competitive. Although South Africa's food processing sector is lucrative, it has suffered a number of setbacks in recent times, including dwindling export performance and a lack of innovation.
Court Upholds Ruling On Wal-Mart Massmart Deal, SA Retail Set For Major Shakeup:
In March 2012, despite an appeal by the South African government, a South African court upheld an initial decision by the South African tribunal for Wal-Mart's acquisition of Massmart to proceed with a few concessions. There is no doubt that Wal-Mart's entry into South Africa with the acquisition of Massmart is going to have a major impact on the food retail sector. The big question is which retailers stand to lose the most? We have argued that Pick ’n Pay and Spar would probably be the most vulnerable, with Shoprite more likely to put up a sterner resistance. Shoprite has an impressive centralised distribution system which allows it to keep costs down. Efficiency will be important because Wal-Mart can source food more cheaply than almost anyone else.
Key Risks To Outlook
Food Price Inflation: Consumer confidence could take a hit if the eurozone debt crisis escalates further, prompting a tightening of purse strings. Similarly, a weakening of the domestic housing market (from its already subdued state) could provoke some belt-tightening. Inflation is also a key risk: headline consumer price inflation is relatively contained, being close to 6.0% year-on-year (y-o-y), but food prices in particular could rise higher than we expect, taking a toll on consumer budgets.

BMI Industry View 7
SWOT Analysis 9
South Africa Food Industry SWOT . 9
South Africa Drink Industry SWOT .. 10
South Africa Mass Grocery Retail Industry SWOT .. 11
Business Environment .. 12
BMI’s Core Global Industry Views ... 12
Table: Agricultural Commodity Prices 14
Table: Core Views Q212 .. 23
SSA Food & Drink Ratings: Region's Reward And Risk Profile Poles Apart 24
Macroeconomic Outlook ... 28
Table: South Africa – Economic Activity . 30
Industry Forecast Scenario .. 31
Consumer Outlook 31
Food .. 33
Food Consumption ... 33
Table: Food Consumption Indicators – Historical Data & Forecasts . 34
Confectionery ... 35
Table: Confectionery ... 35
Prepared Food . 37
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts ... 37
Table: Meat .. 37
Table: Fish ... 38
Table: Frozen Fruit And Vegetables 40
Table: Jams And Jellies ... 42
Oils & Fats .. 43
Table: Oils and fats .. 43
Dairy 46
Table: Dairy. 46
Drinks ... 49
Alcoholic Drinks .. 49
Table: Alcohol Sales – Historical Data & Forecasts ... 50
Soft Drinks ... 50
Table: Soft Drink Sales – Historical Data & Forecasts ... 51
Hot Drinks ... 52
Table: Hot Drink Sales – Historical Data & Forecasts ... 52
Table: Hot drinks . 52
Mass Grocery Retail . 53
Table: MGR Sales by Format – Historical Data & Forecasts . 54
Table: Grocery Retail Sales By Format ... 54
Trade . 55
Table: Trade Indicators – Historical Data & Forecasts .. 55
Food 56
Key Industry Trends And Developments ... 56
Olam's Acquisition Complements Nicely With Its Diversification Push ... 56
DTI Makes Food Processing An Economic Priority 58
Tiger Brands Completes 100% Purchase Of Langeberg .. 58
Unilever Upping Game In South Africa ... 58
Tiger Brands On An Acquisition Path .. 59
AVI Boosted By Food Business 59
Greater Food Price Inflation Remains A Risk .. 60
Market Overview ... 61
Agriculture ... 61
Organics .. 62
Production ... 62
Drink 64
Key Industry Trends And Developments ... 64
SABMiller Full-Year Earnings Beat Estimates 64
SABMiller May Be Lining Up An Acquisition .. 65
Market Overview ... 67
Alcoholic Drinks .. 67
Soft Drinks ... 68
Mass Grocery Retail .. 69
Key Industry Trends And Developments ... 69
Court Upholds Ruling On Wal-Mart Massmart Deal, SA Retail Set For Major Shakeup 69
Strong Year Ahead For Shoprite .. 71
Pick ’n Pay CEO Stands Down 73
Woolworths Looking For Growth In Sub-Saharan Africa 75
Shoprite Plans 74 Supermarkets In FY12 As Retail Landscape Changes. 76
Tesco Could Follow Walmart Into Africa 77
Market Overview ... 79
Competitive Landscape 80
Consumer Share Price Analysis 80
Key Players ... 83
Table: Key Players in South Africa’s Food & Drink Sector . 83
Table: Key Players in South Africa’s Mass Grocery Retail Industry ... 84
Company Monitor .. 86
Food .. 86
Illovo Sugar . 86
Tiger Brands 87
Pioneer Foods .. 89
Drink . 90
SABMiller 90
Distell .. 92
Mass Grocery Retail . 93
Shoprite Group 93
Woolworths .. 95
Pick ’n Pay ... 96
Risk/Reward Ratings Methodology . 98
Table: Rewards 98
Table: Risks . 99
Weighting .. 99
Table: Weighting.. 99
BMI Food & Drink Industry Glossary . 100
Food & Drink.. 100
Mass Grocery Retail ... 100
BMI Food & Drink Forecasting & Sourcing ... 102
How We Generate Our Industry Forecasts . 102
Sourcing . 103Table: Agricultural Commodity Prices . 14

Table: Core Views Q212 . 23

Table: South Africa – Economic Activity . 30

Table: Food Consumption Indicators – Historical Data & Forecasts . 34

Table: Confectionery . 35

Table: Canned Food Value/Volume Sales – Historical Data & Forecasts . 37

Table: Meat . 37

Table: Fish . 38

Table: Frozen Fruit And Vegetables . 40

Table: Jams And Jellies . 42

Table: Oils and fats . 43

Table: Dairy. 46

Table: Alcohol Sales – Historical Data & Forecasts . 50

Table: Soft Drink Sales – Historical Data & Forecasts . 51

Table: Hot Drink Sales – Historical Data & Forecasts . 52

Table: Hot drinks . 52

Table: MGR Sales by Format – Historical Data & Forecasts . 54

Table: Grocery Retail Sales By Format . 54

Table: Trade Indicators – Historical Data & Forecasts . 55

Table: Key Players in South Africa's Food & Drink Sector . 83

Table: Key Players in South Africa's Mass Grocery Retail Industry . 84

Table: Rewards . 98

Table: Risks . 99

Table: Weighting. 99

South Africa Food and Drink Report Q2 2012

Published By: Business Monitor International

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