OVERVIEW
Food and beverages Food and drink account for a quarter of all manufacturing.
T
he global trend towards healthier eating habits and being aware of the source of foods has come to South Africa. This means growth in sales of organic produce, but legislation is also part of the new equation. A proposal in 2016 to introduce a sugar tax on beverages has created a lot of debate. Even if a tax is not introduced, there is no doubt that the trend towards healthier food (and better labelling) is here to stay. Starbucks thinks the South African market is worth investing in. When the American coffee giant, in partnership with Taste Holdings, opened its first shop in Johannesburg in April 2016, customers queued through the night. Coffee shops are hugely popular in South Africa. The food and beverage sector is responsible for 24.4% of total manufacturing production and employs 230 000 people. Beverages account for just over 4% of all manufacturing sales while food is responsible for 13.5%. Within the sector, beverages account for 24% of sales. One quarter of the 37% of national GDP that is generated by agri-industries derives from agri-processing. Gauteng, the Western Cape and KwaZulu-Natal are the leading provinces with respect to food and beverages manufacturing. About half of the companies operating in the sector are in Gauteng. Unilever received a tax incentive in 2015 under the Department of Trade and Industry's 12-I Tax Allowance Incentive scheme for its new ice-cream factory in Midrand, Gauteng. This is Unilever's fourth plant in South Africa, following its investment in a savoury foods plant in 2011. RCL Foods, formerly Rainbow Chickens, has lately been on an aggressive run of acquisitions. Despite the large number of extra chickens available to the South African consumer (as above) and the persistent drought, RCL managed to increase revenue in the 12 months to June 2016 by 6.8%, to R25-billion. The groceries and logistics divisions performed best but RCL is reconsidering its busi-
ONLINE RESOURCES
SECTOR INSIGHT Food and beverages account for a significant share of the countr y's manufacturing sector.
ness model with a thought to producing fewer frozen chickens and doing more in the fast-food sector. South Africa has mature fast food and family restaurant franchise sectors, ranging from indigenous brands Spur and Nando’s to international giants such as KFC, McDonald’s and recent arrival Burger King. Nando’s, the Portuguesechicken chain, has done extremely well internationally and is proving to be something of a phenomenon in Britain. Wimpy is the second-largest franchise operation in South Africa (after KFC). Frost & Sullivan values the South African retail chocolate market at R5-billion with an expected growth rate of 10% per year for the next five years. Cadbury, Nestlé and Beacon account for 85% of sales.
FoodBev SETA: www.foodbev.co.za National Chamber of Milling: www.grainmilling.org.za
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SOUTH AFRICAN BUSINESS 2017