South Africa Food and Drink Report Q1 2012

South Africa is an established regional powerhouse, standing out as an attractive destination among other emerging markets given the potential for using the country as a base from which to expand into the wider Sub-Saharan African region. Whether South Africa is able to reduce unemployment will have a large bearing on how well it does relative to its potential. We highlight that with the population likely to get richer over the next few years, we see per capita food consumption growing at a compound annual rate of 10.9% to 2016.
Headline Industry Data
?? 2011 per capita food consumption growth in local currency = +9.6%; forecast compound annual growth to 2016 = +10.4%.
?? 2011 beer volume sales = +5.0%; forecast compound annual growth to 2016 = +3.4%.
?? 2011 mass grocery retail sales = +10.6%; forecast compound annual growth to 2016 = +11.5%.
Key Company Developments Unilever Upping the Game in South Africa: Unilever has launched a new US$82mn food plant in South Africa, adding to the four plants it currently operates. South Africa is very important to Unilever’s Africa business, which has demonstrated strong growth over the past few years. It is believed to be worth more than US$7bn in sales per annum. The company has revealed its ambition to serve higher demand for Knorr, Robertson’s, Knorrox, Aromat and Rajah branded products in South Africa and across the African continent.
Walmart Era Begins: Walmart’s acquisition of South African general merchandise retailer Massmart, which was finally completed in summer 2011 for US$2.4bn (a 51% stake buy that allowed Massmart to retain its Johannesburg listing), is going to have a major bearing on South Africa’s food retailing industry over the next few years. Even though Massmart is very much a peripheral part of the food retail scene, with most of its business focused on areas like electronics, Walmart has made it clear that it is going to focus largely on food retailing in South Africa. It is expected to launch at least seven of Massmart’s Cambridge bannered food stores over the next few months to get the ball rolling.
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.

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BMI Industry View 6
SWOT Analysis 8
South Africa Food Industry SWOT 8
South Africa Drink Industry SWOT 9
South Africa Mass Grocery Retail Industry SWOT 10
Business Environment 11
BMI’s Core Global Industry Views 11
Table: Agricultural Commodity Prices 13
Table: Core Views Q112 22
Sub-Saharan Africa Risk/Reward Ratings 23
Table: Nigeria Food & Drink Risk/Reward Ratings – Q112 24
Table: Sub-Saharan Africa Food & Drink Risk/Reward Ratings – Q112 26
Macroeconomic Outlook 27
Industry Forecast Scenario 30
Consumer Outlook 30
Food 32
Food Consumption 32
Table: Food Consumption Indicators – Historical Data & Forecasts 32
Confectionery 33
Table: Confectionery 33
Prepared Food 35
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts 35
Table: Meat 35
Table: Fish 36
Table: Frozen Fruit & Vegetables 37
Table: Jams & Jellies 39
Oils & Fats 40
Table: Oils And Fats 40
Dairy 42
Table: Dairy 42
Drinks 45
Alcoholic Drinks 45
Table: Alcohol Value/Volume Sales – Historical Data & Forecasts 46
Soft Drinks 46
Table: Soft Drink Value/Volume Sales – Historical Data & Forecasts 47
Hot Drinks 48
Table: Hot Drinks Value Sales – Historical Data & Forecasts 48
Table: Hot Drinks 48
Mass Grocery Retail 49
Table: Mass Grocery Retail Sales By Format – Historical Data & Forecasts 49
Table: Grocery Retail Sales By Format, 2009 And 2019 50
Trade 51
Table: Trade Indicators – Historical Data & Forecasts 51
Food 52
South Africa Food & Drink Report Q1 2012
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Key Industry Trends And Developments 52
Unilever Upping Game In South Africa 52
Tiger Brands On An Acquisition Path 52
AVI Boosted By Food Business 53
Greater Food Price Inflation Remains A Risk 54
Market Overview 54
Agriculture 54
Organics 55
Production 56
Drink 57
Key Industry Trends And Developments 57
SABMiller Full-Year Earnings Beat Estimates 57
SABMiller May Be Lining Up An Acquisition 58
Market Overview 60
Alcoholic Drinks 60
Soft Drinks 61
Mass Grocery Retail 62
Key Industry Trends And Developments 62
Woolworths Looking For Growth In Sub-Saharan Africa 62
Shoprite Plans 74 Supermarkets In FY12 As Retail Landscape Changes 63
Tesco Could Follow Walmart Into Africa 64
Walmart Era Begins, South Africa To Be Main Focus At Present 65
Who Stands To Lose The Most As Massmart Expands? 66
Market Overview 67
Competitive Landscape 69
Consumer Share Price Analysis 69
Key Players 72
Table: Key Players in South Africa’s Food & Drink Sector 72
Table: Key Players in South Africa’s Mass Grocery Retail Industry 73
Food 75
Illovo Sugar 75
Tiger Brands 76
Pioneer Foods 78
Drink 79
SABMiller 79
Distell 81
Mass Grocery Retail 82
Shoprite Group 82
Woolworths 84
Pick ‘n’ Pay 85
Risk/Reward Ratings Methodology 87
Table: Rewards 87
Table: Risks 88
Weighting 88
Table: Weighting 88
BMI Food & Drink Industry Glossary 89
Food & Drink 89
Mass Grocery Retail 89
South Africa Food & Drink Report Q1 2012
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BMI Food & Drink Forecasting & Sourcing 91
How We Generate Our Industry Forecasts 91
Sourcing 92
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