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June 2013

PREMIUM FOOD AND BEVERAGE MARKET IN SOUTH AFRICA

OFFICIAL PROGRAMME


PREMIUM FOOD AND BEVERAGE MARKET IN SOUTH AFRICA The publication is a valuable reference for Swiss companies wanting to enter the South African Food and Beverages market. It contains information about the regulatory environment, the most important players in the food retail trade, potential partners who are already importing brands from Europe, trade fairs and an analysis of opportunities and challenges. Language: English Number of pages: 76 Author: Lodestar Marketing Research

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Contents

1. SOUTH AFRICA: PROFILE AND ECONOMY ______4 2. CONSUMER TRENDS_________________________7

4.8.2. Trends for packaging _____________________ 37 4.8.3. Trends for machinery and equipment__________ 39

5. FOOD DISTRIBUTION _______________________ 41

3. REGULATORY ENVIRONMENT________________12

5.1. Route to Market __________________________ 41

3.1. Authorities involved in Food Industry Regulations __ 12

5.2. Importers and distributors __________________ 42

3.2. Regulations concerning the Food & Beverage Industry 15

5.3. Retailers_______________________________ 43

3.2.1. Packaging_____________________________ 15

5.4. Specialty / Gourmet Stores ___________________51

3.2.2. Labeling requirements ____________________ 16

5.5. Pricing ________________________________ 52

3.2.3. Claims ________________________________17 3.2.4. Other food and beverage relevant legislation ______17 3.3. Import procedures ________________________ 18 3.4. Tariffs ________________________________ 19

4. FOOD INDUSTRY ___________________________21 4.1. Food and Beverage Industry _________________ 21 4.2. Organic and Natural Food ___________________ 24 4.2.1. Functional Food ________________________ 24 4.3. Processed Food __________________________ 25 4.4. Bakery (including biscuits) __________________ 26 4.4.1. Cheese, yoghurt and ice-cream ______________ 28 4.4.2. Chocolate_____________________________ 29 4.4.3. Frozen meals __________________________ 30

6. OPPORTUNITIES AND CHALLENGES __________ 54 6.1. Opportunities ___________________________ 54 6.2. Challenges _____________________________ 55

7. EXPORT CHECK LIST _______________________ 56 7.1. Readiness to Export _______________________ 56 7.2. Market Research _________________________ 56 7.3. Trade Fairs _____________________________ 57 7.4. Regulatory – Your Product in South Africa _______ 58 7.5. Finding a Distributor / Importer ______________ 58 7.6. Regulatory: Adapting to the Local Legislation _____ 58 7.7. Logistics and Imports ______________________ 59 7.8. Product Launch __________________________ 59

4.5. Beverages ______________________________ 30

8. APPENDIX _________________________________ 60

4.5.1. Non-alcoholic beverages ___________________ 30

8.1. Trade Shows ____________________________ 60

4.5.2. Alcoholic beverages ______________________ 32

8.2. Trade Associations________________________ 61

4.6. Private Labels ___________________________ 33

8.3. Gourmet and Specialty Stores ________________ 62

4.7. Foodservice / HoReCa _____________________ 33

8.4. List of Abbreviations ______________________ 65

4.8. Industry Trends _________________________ 36

8.5. Import Duties ___________________________ 66

4.8.1. Trends for additives ______________________ 37

9. TRADE STATISTICS 2006 - 2012 ______________ 68


1. South Africa: Profile and Economy South Africa has the largest economy in Africa and is the only African member of the G20. Covering only 3% of the African continent, South Africa accounts for a massive 40% of industrial output and is by far the most sophisticated free-market economy in Africa. Together with Brazil, Russia, India and China, South Africa is a BRICS country, belonging to an exclusive group of emerging world economic powerhouses. It is therefore a key emerging market for global investors, with a wealth of opportunities for Swiss expertise across almost every sector of the economy, including access to the rest of Africa’s 300+ million customers. Switzerland is a key partner for investment in South Africa, ranking as the seventh-largest foreign direct investor in South Africa. During an official visit to Zurich in June 2012, Trade and Industry Minister Rob Davies, noted that Switzerland had invested around R17-billion and created over 13 000 jobs in the country over the last decade. These projects were spread across a range of industrial sectors, including financial services, metals, industrial machinery, equipment and tools, and food and tobacco. Georg Umbright, president of SwissCham Southern Africa, expressed confidence that there would be more Swiss industries coming into the country. A considerable number of Swiss companies have operations in South Africa, with many also utilizing South Africa as their base for doing business with the rest of Africa, and especially Southern Africa. South African subsidiaries and branches of Swiss companies employ around 22 000 people throughout the country and represent well-known concerns such as Nestlé, Novartis, Roche, Ciba, Sulzer, Hoffmann La Roche, UBS, Credit Suisse, Winterthur International, Xstrata, Swiss Re and Schindler SGS. Trade also takes place in the other direction and, in the five-year period ending in 2011, South Africa's exports to Switzerland showed an upward trend, with the exception of 2010. Total exports from South Africa to Switzerland increased over this period from R8.8-billion in 2007 to R21.2-billion in 2011. Precious /semi-precious metals, stones and jewellery are the major exports, followed by agricultural products and metals and metal products. South Africa has a two-tiered economy; one rivaling other developed countries and the other with only the most basic infrastructure. This means that it is a productive and industrialized economy that exhibits many characteristics associated with developing countries, including a division of labour between formal and informal sectors and an uneven distribution of wealth and income. It has an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that is the 18th largest in the world; and a modern infrastructure supporting a relatively efficient distribution of goods to major urban centres throughout the region. Growth was robust from 2004 to 2007 as South Africa reaped the benefits of macroeconomic stability and a global commodities boom but began to slow in the second half of 2007 due to an electricity crisis and the subsequent global financial crisis' impact on commodity prices and demand. GDP fell nearly 2% in 2009 but recovered in 2010-11. Unemployment remains high and outdated infrastructure has constrained growth. The South African Government has embarked on an ambitious five year capital expenditure programme to tackle infrastructure bottlenecks in energy, transport and water. It is hoped that the infrastructure programme will create short term employment and also provide the infrastructure necessary for the economy to grow at a faster pace in the longer term. As a potential export destination, South Africa has a number of attractive attributes: high market potential particularly in tourism and the retail sectors; developed infrastructures; an active stock exchange; macro-economic stability; a reasonably competitive domestic economy; and a well-developed transport and telecommunication infrastructure. On the negative side, South Africa has a high rate of criminal violence; a highly regulated labour market; and high unemployment. South Africa has nine provinces, each with its own legislature, premier and executive council – and distinctive landscape, population, economy and climate. Although it is the smallest province, Gauteng is the most populated and makes the biggest contribution to the country’s economy. It is responsible for 50.4% of all company turnover in South Africa, and contributed 35.6% to the national gross domestic product in 2011 and 7.7% to the GDP of Africa as a whole. Next is KwaZulu-Natal with

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16.5%, followed by the Western Cape with 14.5%. These three provinces collectively account for around 65% of the country’s GDP. South Africa's land area is 1,228,376 sq km (larger than the Netherlands, Belgium, France, Italy and Germany combined). It borders Botswana, Mozambique, Namibia, Swaziland and Zimbabwe, and entirely surrounds Lesotho (a total land border of 4,750 km). It has a coastline of 2,954 km, with few natural harbours. The coastal strip is below 1,500 feet fringed by steep mountain ranges, with a high plateau in the interior ranging up to 6,000 feet above sea level. On the west coast, the cold Atlantic current creates arid scrubland terrain. Higher levels of rainfall on the central plateau produce grassland. A continuous mountain range runs down the east coast warmed by the Indian Ocean giving a sub-tropical climate. The north of the country has savannah-type vegetation, whilst the southern tip has a Mediterranean-type climate. The three largest cities in South Africa - Johannesburg, Cape Town and Durban - have the most vibrant leisure and consumer retail markets. With its origins in gold mining, Johannesburg is the largest and wealthiest city in South Africa, and one of the 50 metropolitan areas in the world. It is the major city for the province of Gauteng, is the world’s largest city not situated on a river, lake or coastline and it boasts the largest man-made forest in the world. It is one of the world’s leading financial centres and is the economic and financial hub of South Africa. The container terminal on the outskirts of the city is known to be the world’s largest ‘dry port’, with about 50% of the cargo that goes through the ports of Durban and Cape Town arriving in Johannesburg. Cape Town is the second most populous city in South Africa and is the major city for the Western Cape province. The city is famous for its harbour, Table Mountain and its proximity to the winelands so it is no surprise that it is Africa’s most popular tourist destination. It has the primary harbour and airport in the province, and much of the produce is handled through the Port of Cape Town and Cape Town International Airport. Durban is the third most populous city and is the major city for the province of KwaZulu Natal. It has the busiest port in South Africa and is a major centre of tourism because of its warm subtropical climate and extensive beaches. Full name: Republic of South Africa Population: 51.8 Million (2011 Census) Capitals: Pretoria (executive capital); Cape Town (legislative capital); Bloemfontein (judicial capital) Largest city: Johannesburg (3.8 million) Area: 1.22 million sq km (470,693 sq miles) Provinces: Eastern Cape, Gauteng, KwaZulu Natal, Mpumulanga, Northern Cape, Limpopo, North West, Free State and Western Cape Languages: 11 official languages including English, Afrikaans, Ndebele, Sepedi, Sesotho, siSwati, Setswana, Xitsonga, Tshivenda, IsiXhosa, IsiZulu Language of government and business/commerce: English Ethnic groups: 79.6% Black African, 8.9% White, 8.9% Coloured, 2.5% Indian/Asian (2011 census) Age structure: 29.2% 14 years and younger; 65.6% between 15 and 64 years; 5.2% 65 years and older (2011 Census) Sex: 51.3% Female, 48.6% Male (2011 Census) Urbanization: 62% (2010), annual rate of urbanization = 1.2% Monetary unit: One Rand (R1) = 100 cents Currency code: ZAR CPI: 5.9% (February 2013) PPI: 6.2% 2012 GDP Growth: 2.4% 2012 Repo rate: 5.0% (March 2013) Prime: 8.5% (March 2013) Fiscal year: 1 March to 28/29 February Measures: metric system Government: ANC Alliance – ANC/South African Communist Party (SACP)/Congress of South African Trade Unions (COSATU) Head of State: President Mr Jacob Zuma Time: two hours ahead of GMT

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S-GE Market Study food and beverage south africa june 2013 preview