South Africa Food and Drink Industry Update Quarter 3 2011

• Publication date: July 2011

Consumer confidence in South Africa has definitely improved over the past year. Retail is coming back nicely and people are generally spending more freely, well reflected by the fact that South Africa's largest retailers have generally outperformed the FTSE/JSE All-Share index from December 2009 to date. While a lot of the retail segment was hammered (mostly barring Shoprite) during the worst of the global downturn, the strength shown by premium ...

Consumer confidence in South Africa has definitely improved over the past year. Retail is coming back nicely and people are generally spending more freely, well reflected by the fact that South Africa's largest retailers have generally outperformed the FTSE/JSE All-Share index from December 2009 to date. While a lot of the retail segment was hammered (mostly barring Shoprite) during the worst of the global downturn, the strength shown by premium players such as Woolworths over past year and a half certainly reflects the fact that things have gotten better. Still-low interest rates and real wage growth have been prime drivers here.
Headline Market Data
- 2011 per capita food consumption growth in local currency = 6.51%; projection compound annual growth to 2015 = 8.92%.
- 2011 beer volume revenues = 6.60%; projection compound annual growth to 2015 = 1.30%.
- 2011 mass grocery retail revenues = 7.83%; projection compound annual growth to 2015 = 10.57%.
Key Firms Trends S
trong 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 market, 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 market, 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.

Food Retailing Industry in South Africa

BMI Market View .... 5
Industry SWOT Analysis .... 6
South Africa Food Industry Environment and Risk Analysis ... 6
South Africa Drink Industry Environment and Risk Analysis .. 7
South Africa Mass Grocery Retail Industry Environment and Risk Analysis ... 8

Environment Overview . 9
BMI’s Core World Market Views .. 9
Data : BMI Food & Drink Core Views .... 14

Macroeconomic Data . 15
Data : South Africa - Economic Activity .. 18

Market Projection Scenario ... 19
Consumer Outlook 19
Food.. 21
Food Consumption 21
Data : Food Consumption Indicators, from 2007 to 2015 .. 22
Drinks .... 22
Alcoholic Drinks ... 22
Beer .. 22
Data : Beer Value And Volume Sales, from 2008 to 2015 ... 23
Soft Drinks .. 24
Data : Soft Drinks Value And Volume Sales, from 2008 to 2015 .. 25
Mass Grocery Retail .. 26
Data : MGR Value Sales By Format, from 2008 to 2014 5 .. 27
Data : Grocery Retail Sales By Format, 2009 And 2019 .. 27
Trade 28
Data : Food & Drink Trade Indicators, from 2008 to 2015 (US$mn) 28
Food 29
Key Market Trends And Developments .. 29
Greater Food Price Inflation Remains A Risk.... 29
Tiger Records Modest H1 Sales Growth .. 29

Industry Analysis .. 30
Agriculture .. 30
Organics 31
Food Production ... 31
Drink .... 33
Key Market Trends And Developments .. 33
SABMiller Full Year Earnings Beat City Estimates 33
SABMiller May Be Lining Up An Acquisition .... 34

Industry Analysis .. 36
Alcoholic Drinks ... 36
Soft Drinks .. 37
Mass Grocery Retail .... 38
Key Market Trends And Developments .. 38
Wal-Mart Finally Cleared To Buy Massmart In Breakout Africa Merger and Acquisition Deal .. 38

Industry Analysis .. 43
Data : Structure Of South Africa’s MGR Industry – Sales Value By Format, from 2004 to 2009 (US$bn) . 44
Data : Structure Of South Africa’s MGR Industry – Sales Value By Format, from 2004 to 2009 (ZARbn) . 44

Competition Overview ... 45
Consumer Share Price Analysis 45
Key Players . 48
Data : Key Players in South Africa's Food & Drink Segment ... 48
Data : Key Players in South Africa's Mass Grocery Retail Market . 49

Company Profiles . 51
Food.. 51
Illovo Sugar 51
Tiger Brands .... 52
Pioneer Foods .. 53
Drink . 54
SABMiller ... 54
Distell .... 56
Mass Grocery Retail .. 57
Shoprite Group 57
Woolworths . 58
Pick ‘n’ Pay 59
BMI Food & Drink Methodology . 60
BMI Food & Drink Market Glossary 60
Food & Drink .. 60
Mass Grocery Retail .. 60
BMI Food & Drink Projection ing And Sourcing .. 62
How We Generate Our Market Projections ... 62
Sourcing . 63

Food Retailing in South Africa

South Africa Total Mass Retailer Sales, Us$bn

• $ 250
• Industry data
• February 2013

Yearly, From 2002 To 2016
By Business Monitor International
Source: South African Reserve Bank, Company Information, Trade Press, BMI

• Industries : Food Retailing
• Countries : South Africa

South Africa Per-capita Food Consumption, Us$

• $ 250
• Industry data
• February 2013

Yearly, From 2000 To 2016
By Business Monitor International
Source: Statistics South Africa, Africa Business Direct, South African Revenue Service, BMI/BMI calculation

• Industries : Food Retailing
• Countries : South Africa

South Africa Supermarkets Sales, % Total Mass Grocery Retail

• $ 250
• Industry data
• January 2013

Yearly, From 2002 To 2017
By Business Monitor International
Source: South African Reserve Bank, Company Information, Trade Press, BMI/BMI calculation

• Industries : Food Retailing
• Countries : South Africa

South Africa Total Mass Grocery Retail Sales, Zar, % Chg Y-o-y

• $ 250
• Industry data
• January 2013

Yearly, From 2003 To 2018
By Business Monitor International
Source: South African Reserve Bank, Company Information, Trade Press, BMI/BMI calculation

• Industries : Food Retailing
• Countries : South Africa

South Africa Total Mass Grocery Retail Sales, Us$bn

• $ 250
• Industry data
• January 2013

Yearly, From 2002 To 2018
By Business Monitor International
Source: South African Reserve Bank, Company Information, Trade Press, BMI

• Industries : Food Retailing
• Countries : South Africa