South African Business 2018 edition

OVERVIEW
Food and beverages
Consumer companies are looking to Africa for growth.
Global consumer goods company Unilever has invested
nearly R4-billion in recent years, including R600-million in
a Gauteng ice-cream factory that will boost the company’s
drive into Africa.
This highlights a trend across the food and beverage sector. In 2016
Nestlé South Africa invested R1.2-billion in adding instant coffee to
the products it makes in South Africa. Heineken’s fairly new brewery
in Gauteng is already undergoing expansion, with cider production
set to increase.
The food and beverage sector experienced 18% growth from 1996
to 2013. A very serious drought and higher input costs led to tough
conditions for companies in the sector in the six months to June 2017.
An Ernst & Young analysis of consumer products companies with collective
annual revenues of R180-billion stated that the period had been
“one of the weakest” because of a combination of political, economic
and climate conditions.
Some of the biggest companies in the sector are Tiger Brands, RCL
Foods, Pioneer Foods, Clover, AVI and Astral. According to the EY report,
the industry’s revenue comes mostly from agri-business (25.8% of total
industry revenue), diversified companies (23%), food producers (13.6%),
beverage producers (12.5%) and sugar producers (8.9%).
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 accounts 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 about half of the companies in the sector located
in Gauteng.
ONLINE RESOURCES
Agricultural Research Council: www.arc.agric.za
FoodBev SETA: www.foodbev.co.za
National Agricultural Marketing Council: www.namc.co.za
SECTOR INSIGHT
Agri-business contributes
a quarter of revenue in the
sector.
The South African beer market
is growing by 1.5% per year.
Key players in the industry in
South Africa include South
Africa Breweries (SAB) (malt
beer), United National Breweries
(sorghum beer), Distell (spirits and
flavoured alcoholic beverages, or
FABs) and Brandhouse (malt beer,
spirits and FABs). SAB became part
of Anheuser-Busch in 2016.
RCL Foods, formerly Rainbow
Chickens, has been on an aggressive
run of acquisitions. RCL is reconsidering
its business model
with a thought to producing
fewer frozen chickens and doing
more in the fast-food sector.
The fast-food and familyrestaurant
franchise sectors are
sophisticated and cover a broad
range, from the indigenous
Spur and Nando’s brands to international
giants such as KFC,
McDonald’s and recent arrival of
Burger King.
Wimpy is the second largestfranchise
operation in SA (after
KFC).
SOUTH AFRICAN BUSINESS 2018
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