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Projects and trends - enter ethics |
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January 2009 |
It is unnecessary to belabour the main trends in the food industry: health and convenience. But increasingly, the food industry internationally - SA will surely follow - is seeing another strong trend: ethics.
/~What "ethics" means varies in different cases - it can be organic, fair trade, environmental, etc.
Woolworths, always ahead of the SA food industry, is again ahead on this with its Good business journey (see page 37).
Woolworths also, in the past two years, had a blistering store opening programme. It could not foresee the end of the boom in consumer spending. That ending, combined with a - surely justified - consumer perception that Woolworths' prices are high, has produced a loss in market share for Woolworths recently.
Woolworths may be far ahead of its time, but the industry generally - manufacturers and retailers - can thank it for making a point about the trend to ethics.
Potential Suppliers:
The manufacturing industry
The SA food manufacturing industry itself faces a year in which commodity input prices will be well down compared to 2008 and the rand will be much weaker against the dollar.
This means that imported input prices will be only somewhat moderated; it will also encourage manufacturers with spare capacity to crank up their export efforts, especially in the face of muted local demand.
Domestic demand may hardly grow; the strongest demand domestically may be for products which are a step-down in price (as shopping trends away from Woolworths have shown).
The trend towards value-added products will continue, but value-added products of a cheaper type are likely to be in demand.
To be in the game, you have to have low prices.
Brands
SA is big brand country, and private label continues to make only marginal progress here. This compares to private labels' share of over 50% of products sold in large stores in Switzerland, and 40-50% in Britain.
Private label has progressed from cheap copies to better quality and then to specialist and organic, etc.
But SA brand owners can take heart, says Jonathan Banks, business insight director OF Nielsen Europe. Private labels only grow in categories where producer brands are not supported. The growth of private label is therefore generally a consequence of producer brands being weak.
The weakening of major brands in SA is unlikely - but never impossible.
Producing for private label by food manufacturers of all sizes is therefore a limited opportunity only. The growth of Woolworths has pulled in an increasing number of companies. However Woolworths still accounts for only 8-12% of the food industry in SA (depending on market conditions).
The World Cup
Then of course, an entirely different trend - for SA only - is the 2010 World Cup. This is the biggest (if not the greatest) show on earth - arguably bigger than the Olympics.
Most of the foods directly required will be packaged fast foods. So the food service industry has to be beefed up - but the food processing sector should also participate, and continue to participate in the sector long after the World Cup.
The food industry needs to focus on products which are packaged so that they can hit the spot in public viewing venues, fan parks, and the stadiums themselves (the three types of viewing places).
So far, few developments have been seen in this direction from the SA food processing industry. But perhaps the industry is simply following its normal just-in-time practices.
New directions
Among new directions in the overall industry in the past year, we identify the following:
- Health developments. Research on the positive effects of rooibos on heart health was published in November last year (see page 23). Antioxidants, and claims related to them, are likely to become more prominent in more products in the year ahead (see page 28).
- Growth in traditional/ethnic products. Tiger Brands has shown the way in canned products by introducing samp-and-beans (which traditionally takes three days to soak). The logical development will be into perishable products - other local large indigenous food companies are likely to see opportunities in this direction.
- Organic. Woolworths continues to grow in this sector; and Pick n Pay is continually emphasizing it as well - though it still has only a tiny range of organic products. The expansion of Allganix promises to create a bigger organic processing sector in SA, which will encourage organic agricultural production (search for "Allganix" on www.developtechnology.com ).
- Packaging. Packing fruit and other foods in multilayer plastic jars is set to become more commonplace. HG Molenaar of Paarl pioneered the provision of equipment for filling the containers, but until now the containers themselves had to be imported (mainly from India) and therefore the SA sector was basically experimental. But now, Astrapak's new facility to produce the first multilayer plastic jars in SA has been installed - it should be running by the time this is published. The jars will be used for packing fruit in both the Western Cape (deciduous) and Swaziland (subtropical).
Astrapak says negotiations to package products well beyond fruit are ongoing - other possible applications are (in competition with metal/glass packaging) dressings and spreads, jams, vegetables, snacks, crisps and nuts, coffee, health drinks and nutraceuticals, chemicals, etc (search for "multilayer jars" on www.developtechnology.com ).
- Labelling. Then there is, of course, the never-happening reform of statutory food labelling in SA. The end of the proposed "non-essential food" description was hardly surprising (search for "non-essential" on www.developtechnology.com ). This year, with a new health minister in place, the food industry should also find out whether some "health" food products will be classed as "medicinal" and therefore subjected to much stricter regulations.
- Environmental issues. There is, generally, increasing pressure for more environmental practices both in food and packaging. This is already a major issue for exporters; it will undoubtedly become a major domestic factor.
{/mosregread}
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