FAS/Pretoria used EMP resources to conduct a food retail assessment in South Africa.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
GAIN Report Number:
South Africa - Republic of
South Africa's Food Retail Assessment
February 2012, FAS/Pretoria used EMP resources to conduct a food retail assessment in South Africa.
The objective was to obtain a better understanding of the sector, develop new contacts, identify
constraints for U.S. products, and to find opportunities for U.S. exporters. Although comparatively
small, U.S. exports of consumer-oriented products have grown from $74 million in 2009 to a record
$131 million in 2011, and represent the largest segment of trade.
February 12-24, 2012, FAS/Pretoria used EMP resources to conduct a food retail assessment in South
Africa. The objective was to obtain a better understanding of the sector, develop new contacts, identify
constraints for U.S. products, and to find opportunities for U.S. exporters. South Africa, the Gateway to
the Southern African region, is increasingly presenting export opportunities for the United States.
Although comparatively small, U.S. exports of consumer-oriented products have grown from $74
million in 2009 to a record $131 million in 2011, and represent the largest segment of trade.
FAS/Pretoria plans to apply the findings of this assessment to focus resources on increasing our share of
this expanding market.
Opportunities in the South African Market:
After comprehensive meetings with various
retailers and distributors  in Johannesburg,
Durban, East London, and Cape Town, it
became clear that South Africa?s long-term
economic expansion, rising middle class, and
changes in consumer preferences will result in new
export opportunities for consumer-oriented
products and food ingredients for further
processing. For instance, one change is is rapid
urbanization, which has resulted in an
increasing demand for supermarkets,
Spar Headquarters in Durban, South Africa
convenience stores, and ?one-stop shops?.
Today, about 70 percent of food sales in South Africa are conducted by modern retailers and about 30
percent in traditional shops .
The retail sector in South Africa is well-developed and heavily dominated by a handful of powerful
players (see Table 1). In addition, these companies have expanded across the region despite the
sometimes difficult business environment in countries like Angola and Zimbabwe. South African
retailers now face new challenges with the recent entry of Wal-Mart through the acquisition of
Massmart in South Africa. Wal-Mart?s expertise and effective distribution system will be a game-
changer and will force retail companies to become more creative and efficient.
 Patleys Food Importers, Massmart, Spar, Shoprite-Checkers, Woolworths, M & L Distributors, Bokomo Foods, and Tiger Brands.
In contrast, only 10 percent of food sales are conducted by modern retailers in other African countries.
Table 1. National market share of major retail chains in South Africa (2009)
Retailer Market Share (%)
Shoprite Holdings 42
Pick n Pay Retail Group 35
Spar Group 20
Source: GAIN Retail Food Report 2011
Table 1, above, lists the major retail chains and market shares. Most firms are already anticipating
upcoming changes in the sector and are adjusting their business plans. One important South African
company, which specializes in small-store format, is experimenting with larger stores in Johannesburg,
and will focus on adding more than 1,000 new SKU?s (Stock Keeping Unit), mostly long-life grocery
products. This company currently sources only one percent of their grocery items from the United
States, but is interested in attending future U.S. trade shows, such as the private label show. Other
companies expressed interest in attending U.S. food trade shows in order to keep abreast of new
products and ingredients for the processing market. Our U.S. private-sector Our assessment found
opportunities for U.S. intermediate and consumer-oriented products such as snack foods, frozen foods,
maple syrup, corn starch, and whey protein concentrate.
Constraints in the South African Market:
One major challenge for U.S. exporters is that South Africa?s food processing sector has been
dominated by a few major processors . The dominance of these companies, together with its
longstanding relationship with powerful retailers, created an oligopolistic environment that has led to
inefficient processing methods, lack of product innovation, and higher prices. This environment was
fostered during the Apartheid years. In addition, government policies have supported import-
substitution policies in order to create on-farm jobs. As a result, South Africa is self sufficient in a
number of food products and over 90 percent of the products offered by retailers are produced
Another constraint is the recent enforcement of the new labeling regulation from the Department of
Health, which has affected the ability of importers to source products from Europe and the United States
. The main reason is that suppliers are generally unprepared to alter food packaging and labeling
panels just for the comparatively small South African market. Companies we met with expressed
concern that the regulation was loosely written and poorly enforced. Large food retail companies
complain that they are under greater scrutiny for spot inspections.
 Tiger Brands, Famous Brands, and Pioneer Foods control close to 80 percent of the industry.
 For more information on this new regulation, read FAS/Pretoria?s FAIRS report from December 22, 2011.
South African Consumer Profile:
An important factor to consider about this market is the complexity of the consumer profile. All retail
companies FAS/Pretoria met with discussed how fragmented the market is. The country is a diverse
nation with a wide variety of income groups and ethnic and cultural segments. Out of a population of
about 50 million, many of these companies focus on the top 10 million consumers. This group is more
health conscience, looks for convenience, quality and innovative products. These consumers are
concentrated in the main urban areas such as Johannesburg, Pretoria, Durban, and Cape Town. Another
12 to 15 million consumers receive government support through voucher programs and tend to be more
price-sensitive. It is important to note that South African consumers in general tend to have a good
perception of the quality of U.S. products; however, U.S. companies are increasingly facing
competition, as local producers focus on quality and packaging improvement.
Opportunities Are Evident:
A protected domestic market and other barriers to entry have made it difficult for consumers to access
the vast variety of U.S. food products. FAS/Pretoria notes that opportunities exist, as long as U.S.
exporters are prepared to invest time and resources in the market. This will require a strong marketing
strategy, one that exposes importers to the array of U.S. food products through specific U.S. trade
shows. The entry by Wal-Mart is another key event in the market that will lead to changes in the food
retail sector, both in South Africa and likely throughout the region. All these factors will continue to
create new opportunities for U.S. exporters.