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South Africa Food and Drink Report Q3 2010
Business Monitor International, Sep 2010, Pages: 59
South Africa Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Africa's food and drink industry.
Consumer confidence is returning slowly after headline retail sales (compiled by Statistics South Africa) declined for 14 consecutive months (year-on-year) up until March 2010. However, the recovery will be drawn out with high household debt and unemployment continuing to weigh down on spending.
Discretion remains the key trend with companies continuing to place a strong focus on value. While the FIFA World Cup, hosted by South Africa, should provide near-term demand momentum to key discretionary food and drink segments, such as beer and soft drinks, weak household finances will continue to stifle spending.
Longer term, growth in South Africa’s two-tiered food and drink industry (highly segmented and increasingly premiumised on the one hand and extremely underdeveloped on the other) will largely be driven by the emerging middle class.
Headline Industry Data
- 2010 per capita food consumption = +8.62%; forecast to 2014 = +52.11%
- 2010 beer volume sales = +4.72%; forecast to 2014 = +21.11%
- 2010 mass grocery retail sales = +8.50%; forecast to 2014 = +44.09%
Key Macroeconomic Data
- 2010 Real GDP growth = +3.0% (2009, -1.8%)
- 2010 Consumer Price Index = +5.53% chg y-o-y (period average) (2009, +7.15%)
- 2010 Real Private Consumption Growth = +0.9% (period average) (2009, -3.1%)
Key Company Trends
Consumer Weakness Persisting – Consumer weakness continues to persist in South Africa with leading food companies painting cautious outlooks. In May 2010, Tiger Brands cautioned that net income for the year to September 30 2010 would be weaker than previously anticipated, as consumer confidence remained stubbornly weak.
Also in May, Pioneer Foods reported a decline in H110 (six months to March 2010) earnings. Headline earnings per share dipped more than 50% year-on-year (y-o-y) to ZARc81.7, while sales revenues fell 5% y-o-y to ZAR8bn (US$1bn).
World Cup To Lift Beer Sales – The FIFA World Cup should provide a strong boost to beer with the influx of more than 300,000 tourists contributing to a strong near-term outlook that will to some extent mask over the fact that consumer confidence remains weak. In May 2010, SABMiller announced it would spend SAR170mn (US$21.6mn) in South Africa to drive beer sales. It expects to sell an additional 100,000 hectolitres (10mn litres) of beer over the course of the five week tournament during June-July.
Key Risks to Outlook
Chinese And Eurozone Risks – With South Africa much more closely integrated with the global economy than the rest of Sub-Saharan Africa, mounting concerns of a property bubble-led slowdown in China and the fragile state of the eurozone could weigh on private consumption and upset the delicate ongoing recovery in consumer spending.
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