South Africa - Republic Of Retail Foods The South African .

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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BYUSDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENTPOLICYRequired Report - public distributionDate: 6/28/2019GAIN Report Number: SA1921South Africa - Republic ofRetail FoodsThe South African Retail Foods IndustryApproved By:Laura Geller, Senior, Agricultural AttachéPrepared By:Margaret Ntloedibe, Agricultural Marketing SpecialistReport Highlights:South Africa has a well-developed retail sector expanding into other African countries. The country isthe biggest market for food and beverage products in Southern Africa and serves as a gateway to otherSub-Saharan African countries. The market gives opportunities for U.S. exporters of food andbeverages who can offer quality products at competitive prices.

Market Fact Sheet: South AfricaExecutive SummarySouth Africa is a middle-income emerging market economy, with an estimatedpopulation of 58 million people (64 percent in urban areas). South Africa’s GDPreached 218 billion in 2018, representing 0.2 percent growth from 2017. SouthAfrica has a well-developed agribusiness sector which plays a significant role injob creation and economic development. South Africa is the largest exporter ofagricultural products in Africa. Although largely self-sufficient in agriculture,there are opportunities for imports. In 2018, imports of agricultural productstotaled 6.7 billion, a slight decline of 0.9 percent from 2017.Imports of Consumer-Oriented ProductsSouth African imports of consumer-oriented agricultural products increased 9percent in 2018 to 2.6 billion. The European Union had the largest share with39 percent of the Market.Quick Facts CY 2018Imports of Consumer-Oriented ProductsUS 2.6 BillionList of Top 10 Growth Products in South Africa1) Food ingredients6) Food Preparations2) Rice7) Whiskies3) Wheat & Meslin8) Live Cattle4) Chicken cuts and edible offal 9) Soybean Oilcake5) Palm oil10) Beer made from maltFood Industry by Channels (US billion) 2018Food Industry Output 143.0Food Exports 9.8Food Imports 6.7Retail 52.2Food Service 6.8Food Industry Gross Sales (US billion) 2018Food Industry RevenuesFood (Domestic market) US 56Top 7 Host Country Retailers1) Shoprite5) Woolworths2) Pick n Pay6) Food Lover’s Market3) Cambridge (Walmart)7) Choppies4) SparGDP/PopulationPopulation (millions): 57.7GDP (billions USD):218GDP per capita (USD): 3,700Sources: GTA, Statssa, EuromonitorFood Processing IndustryThere are over 1,800 food production companies in South Africa. However, thetop ten companies are responsible for more than 80 percent of the industry’sproduction revenue. The retail industry employs 450,000 people in thesubsectors of meat, fish, fruit, dairy products, grain mill products, and beverages.As a major producer and exporter of finished processed food products, SouthAfrica’s appetite for ingredients drives demand for a wide range of ngesStrengthsAdvanced economywith well-developedinfrastructure.Food Retail IndustrySouth African food retail sales totaled US 52.2 billion in 2018. The sector iswell developed and aggressively expanding into other African countries.OpportunitiesSophisticated andgrowing middleclass. A welldeveloped retailsector, and linkage tothe rest of SubSaharan Africa.WeaknessesLimited technicalcapacity and weakpolitical will byregulatorscontribute to tradebarriers and delaysin resolving accessissues.ThreatsFTA with EU. Apolitical preferencetowards BRICScountries.

Data and Information Sources:Global Trade Atlas (GTA); Statistics South Africa(Stats SA); Local food processing industrypublications, and trade press.Contact: FAS Pretoria, South Africa,Agpretoria@fas.usda.govSECTION 1. Market SummaryThe South African food retail market is highly concentrated with the top seven companies of Shoprite,Pick n Pay, Cambridge – (Walmart owned), Spar, Woolworths, the Food Lovers Market, and Choppies– (Botswana owned) accounting for about 80 percent of all retail sales. South African food retail salestotaled 52.2 billion in 2018 and imports of all agricultural products decreased by 0.98 percent to 6.7billion. Imports of consumer-oriented agricultural products increased by 9 percent to 2.6 billion in2018.South Africa local retailers are expanding with solid growing footprints into other African countries,thereby providing an opportunity for U.S. companies doing business in South Africa with market andpotential business partners to Sub-Saharan Africa. In addition to the major chains, the evolution ofconvenience stores attached to forecourts, retailing gas stations, and fast food including smaller formatexpress stores, and small grocery shops catering to the convenience retail market is growing at a rapidrate in South Africa. In 2018, convenience stores totaled US 3.1 billion, an increase of 6 percentcompared to 2017.Woolworths/Engen which maintained dominance in the convenience stores with the expansion of itsFood Chain stores including partnership with UberEATS for consumers to order groceries to have itdelivered to their door-step. Pick n Pay/British Petroleum (BP) continues to convert stores into Pick nPay Spaza stores to service the lower-income areas. Others include Fruit & Veg City of Food LoversMarket/Caltex; Burger King/Sasol; Steers/Shell, and Wimpy/Engen. Shoprite Holdings, a significanceplayer in convenience stores benefits from the success of its OK Franchise chains stores that has ownidentity and personality and offers shopping facilities appropriate to the market in which they trade.Key consumer market drivers and consumption trends The South African consumer is becoming increasingly health conscious. Wellness foods, healthand convenience continue to be key drivers. Growth in the South African retail sector prompts development and expansion of shopping mallsand supermarkets convert or revamp their less successful store brands to boost sales and toimprove quality control. A major population change shift from rural to urban living leading to rapid urbanization due toexpansion of middle class and rise of single households driving demand and create opportunityfor convenient-ready-to eat food items, including longer store hours or even 24-hour shopping. Changing consumer needs and immigrant demands require a diversification towards a mix ofproducts for ethnic foods. Population ageing leads to shift of lifestyle and purchasing decisions, including demand forhealth and wellness and “free-from” products. Fair trade and organic products remain important with some of the South African groceryretailers, specifically Pick n Pay and Woolworths, health stores and organic markets.

South Africa consumers want food labels to inform them about what they are eating and wantboth retailers and manufacturers to be held accountable for problems found in a product.Table 1: Advantages and Challenges facing the U.S. exportsAdvantagesChallengesSouth Africa is an attractive developed businessSouth African importers may not be able tomarket, and a gateway to Sub-Saharan Africadeal in the volumes that U.S. companies aremarkets.used to for procurement.South Africa has a well-developed food andFood safety and phytosanitary restrictions maybeverage retail industry, and the demand foraffect imports of food products and certainfood ingredients are growing.food ingredientsSouth Africans have diverse food tastes and areCompetition from local producers and otherwilling to try new products.countries, especially those with preferential orfree trade agreements.Labelling requirements may make smallshipment cost prohibitive.Source: FAS Pretoria OfficeSECTION 2. Road Map for Market Entry2.1 Entry StrategyPost recommends two entry strategies into the South African retail market, namely, establishingrelationships with the buyers from the main retail companies, and/or through using an established andreputable distributor or import agent. Notably, U.S. exporters need to fully understand the food retailmarket needs and how best to meet their purchasing requirements and specifications. Due to thecompetitiveness of the South African retail market, it is recommended that United States exportersconsider the following: U.S. exporters are encouraged to contact FAS Pretoria to request a list of South African food andbeverage importers. It is essential that U.S. exporters choose and nominate the correct agent. Exporting throughdistributors or import agents with knowledge of the South African market is the safest or easiestway to enter the South African retail food market. Agents must be registered with the SouthAfrican Revenue Services (SARS), and should be able to handle the necessary custom clearance,compliance with all the regulatory requirements, documentation, warehousing, and financingarrangements United States exporters must also be registered with the South African Revenue Services(SARS). The U.S. exporter registration will only be processed after the nomination of aregistered agent based in South Africa. The following link has all the details for Importers.aspx Evidence shows that the most successful U.S. company ventures are those that have

comprehensively researched their market prior to engaging retailers, agents or importers. Oncecontacts are established, it is advisable to visit the country, since firsthand knowledge of themarket is highly useful. It is important for a U.S. exporter to maintain close contact with thelocal agent to track changes in importing procedures and to ensure that the agent is effectivelyrepresenting the sales interest of the exporter. To help U.S. agricultural exporters meet credible agents, FAS organizes many marketdevelopment activities, including exhibitions and trade missions promoting U.S. food andagricultural products. U.S. exporters can participate in these large, multinational exhibitions thatdraw tens of thousands of buyers and distributors. FAS also organizes buying teams of foreignimporters and buyers to visit U.S. food exhibitions to meet with potential U.S. suppliers. At theexhibitions, FAS provides one-stop service to potential customers, providing information tobuyers, facilitating trade contacts, answering inquiries, and maintaining a buyer-seller database. U.S. exporters can contact the State Regional Trade Groups (SRTGs) and the NationalAssociation of State Departments of Agriculture (NASDA) to obtain additional market entrysupport. Cooperators regularly organize trade missions which are often organized around tradeshows or other events. See ogrammap/state-regional-trade-groups Attending trade shows in the regions to meet South African food and beverage retail groups andprocessing industry players. Click on this link for Food and Beverage Trade Show events in theregion.2.2 Market Structure The South African retail supermarket sector is developed relative to other markets in in theAfrican continent and utilizes both centralized and decentralized distribution systems. The large supermarket chains and big franchises maintain their own centralized distribution andmodern warehouse systems which supplies products to all their supermarket branches located invarious parts of the country. U.S. exporters usually deal or trade directly with the buyers at theretail head offices. Other retail supermarkets are flexible and permit each of their stores throughout the country todeal directly with United States exporters or local distributors and import agents. In addition to major retailers, there are independent retailers who often buy from the largeindependent wholesalers to sell to their segments to independent small grocer shops, streetsellers, and others. Convenience stores attached to forecourts gas stations are mostly owned by major retail groupsand would be stocked as per the retailer Head Office purchasing policy. Convenience andexpress stores catering to the convenience retail market is growing at a rapid rate in South

Africa.Links to Access Top Food Retailers InformationName of Retailer& ProfileWebsiteShoprite HoldingsLtdMassmart Holdings(Walmart)WoolworthsHoldings LtdChoppiesEnterprise w.woolworths.co.zaName ofRetailer &ProfilePick n PayStores Ltd.The Spar GroupLtdFood oversmarket.co.zawww.choppies.co.zaSECTION 3. CompetitionIn general, U.S. exports mostly face competition from South African producers in the Southern AfricanDevelopment Community (SADC), BRICS, the European Union (EU) and MERCOSUR, as SouthAfrica has Free Trade Agreements (FTA) with SADC, and the European Union and a preferential tradeagreement with MERCOSUR. Visit ons/countries/south-africa/ ; https://www.bilaterals.org ; xfor more information on trade agreements.Table 2: 2018 Competitive Overview of South Africa Imports of Consumer-Oriented ProductsProductCategoryMajor SupplyCountriesStrength of Key Supply CountriesTree NutsMT: 22,569USD: 89million1.USA – 23%2.Vietnam –12%3.Mozambique –11%1.Botswana –20%2.Namibia –19%3.Australia –17%4.SA – 12%USA is the leading supplier of almonds,nuts, pistachios, and brazil nuts. Vietnamhas the lead in cashew nuts, andMozambique with a lead in coconut.Availability, FTA and proximity. Botswanaand Namibia are leading suppliers of meatand offal of bovine, and carcasses.Australia is a leading supplier of tongues ofbovine, and USA a lead supplier of livers ofbovine.Domestic production unableto meet local demand.1.Brazil – 56%2.USA – 16%3.Denmark –5%Brazil largest market share in leg quarters,breasts, wings, and feet. Africa. USAsupplier of drumstick and the second largestsupplier of leg quarters and breasts.Denmark lead supplier in whole bird cut inhalf, and thighs.Domestic production unableto meet the local demand asa major source of protein inthe country.Beef & BeefProducts(HS 0201,0202, 0206,1602, and0210)MT: 69,269USD: 89millionPoultry Meat& Products(excl. eggs)(HS 0207 &1602)MT: 359, 891USD: 491millionAdvantages andDisadvantages of LocalSuppliersDomestic productions arepecans and macadamia nuts.

DairyProducts(HS 0401 –0406, 1702,3502)MT: 92,673USD: 244million1.NewZealand –22%2.France –15%3.Germany –13%7.USA – 5%Trade agreements benefits. New Zealand aleading supplier of butter, processed cheese,milk and cream, casein, including fats andoils derived from milk. France has the leadin whey, buttermilk and ice cream and otheredible ice. Germany leads in the supply offood preparations for infants. USA leadsupplier in lactose and syrups, and milkalbumin.Namibia leading supplier of hake fillets.Thailand has a lead in sardines and tunas.USA is the largest supplier of frozen hake,Alaska Pollock fillets, and fish of families.The strong South Africandairy production market ofliquid products of UHT andpasteurized milk, with majorprocessed products of hardand semi-hard cheese.Fish Products(HS 03 & 16)MT: 268,948USD: 501million1.Namibia –23%2.Thailand –20%3.China – 10%9.USA – 3%1.USA – 13%2.Germany –12%3.Poland –10%FTA, availability and pricing.Strong domestic foodproduction.1.Swaziland –28%2.China – 7%3.India – 6%19.USA –1.31%FTA, availability and proximity.Strong production by localproducers of snack foods.1.USA – 20%2.UnitedKingdom –12%3.Italy – 11%USA a leading supplier of sauces andpreparations and is the second largestsupplier of vinegar and substitutes, andmustard flour meal. Italy has the lead invinegar and substitutes.The competitiveness of localprocessors and producersboosting prices and quality.1.Namibia –36%2.France –17%3.Netherlands– 16%9.USA 0.85%Source: Global Trade AtlasSuppliers FTA, competitive prices, andreputation.Strong domestic wineproduction coupled withinsufficient beer production.FoodPreparations(HS 210690)MT: 30, 603USD: 187millionSnack FoodsNESOI(HS 1704 &1905)MT: 3,091USD: 95millionCondiments &Sauces(HS 2103 &2209)USD: 34millionWine & Beer(HS 22032206)Liters: 174,895USD: 215millionSECTON 4: Best Products Prospects Categories4.1 Products Present in the Market which have Good Sales PotentialStrong and well-developeddomestic fishing industry.

Potential products in the market that present market opportunities for U.S. Agricultural products in theSouth African retailers and gateway to the rest of Southern Africa include beef & beef products, porkand pork products, poultry meat, meat products, fish and seafood products, tree nuts, liquor products toinclude bourbon whiskey, wine & craft beers, food ingredients, hops, oils and fats, pet food, snackfoods, and prepared food.Table 3: Top 10 Consumer-Oriented Products Imported from the worldSouth Africa Import Statistics from WorldCommodity: Consumer-Oriented Agricultural Total, (2017)Calendar Year: 2016 - 92022216United States DollarsDescription(2017)Chicken Cutsand EdibleOffal (IncLivers),FrozenFoodPreparationsNesoiBeer Madefrom MaltAnimal (NotFish) Guts,Bladders,Stomachs &PartsMeat & Offalof Chickens,Not Cut inPieces, FrozenCoffeeExtracts,Essences Etc.& PrepTherefromMeat ofSwine, Nesoi,FrozenCocoaPreparations,Not in BulkForm, NesoiDog and CatFood, Put Upfor Retail SaleApple Juice,Nesoi,NtFortified WVitamins,Unferm% ,469Source: Global Trade AtlasTable 4: Top 10 Consumer-Oriented Products Imported from the United StatesSouth Africa Import Statistics from United StatesCommodity: Consumer-Oriented Agricultural Total, (2017)

Calendar Year: 2016 - 3,953,9385,138,8254,174,077332-19United States DollarsDescription-2,017Chicken Cuts andEdible Offal (IncLivers), FrozenFood PreparationsNesoiAlmonds, Freshor Dried, ShelledAnimal (NotFish) Guts,Bladders,Stomachs & PartsLivers of BovineAnimals, Edible,FrozenTurkey Cuts andEdible Offal(Includ Liver)FrozenSauces Etc.MixedCondiments andSeasonings NesoiMilk Albumin,IncConcen of 2 OrMore WheyProteinsNuts (ExcPeanuts) AndSeeds, PreparedEtc. NesoiLactose &Lactose SyrupCont. 99% MoreLactose by Wt.% ource: Global Trade Atlas4.2 Products Not Present in Significant Quantities but which have Good Sales PotentialBeef, and pulses.4.3 Products Not Present Because They Face Significant BarriersThe United States is currently working with South Africa to obtain full market access for the followingproducts:Egg products, pork shoulder cuts, pork casings, pork offal, heat treated canned meat and poultryproducts. This link provides more updates on the poultry situation in the country.SECTION 5: Key Contacts and Further InformationA. PostIf you have questions or comments regarding this report, please contact the FAS Office of AgriculturalAffairs in Pretoria at:Office of Agricultural Affairs

United States Embassy, South Afric

The retail industry employs 450,000 people in the subsectors of meat, fish, fruit, dairy products, grain mill products, and beverages. As a major producer and exporter of finished processed food products, South Africa’s appetite for ingredients drives demand for a wide range of products.

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