On the JSE Securities Exchange, food and beverages are distinct categories, though both are fast-moving consumer goods.
Within the alcoholic drinks category, the biggest player by far is SAB, which has for many years had near-monopoly status in the SA beer market. That dominance has not been seriously threatened, though there has been some consolidation among the opposition. Foreign giants Heineken and Diageo combined to acquire Interbrew's stake in Namibian Breweries.
Rumours abound that Heineken will build a brewery in SA and take back its Amstel brand production from SAB when their contract expires in 2008. But this is pure speculation.
SAB used to brew and distribute Heineken in SA, too. Shortly after it stopped doing so, SAB began importing Miller Genuine Draft and Pilsner Urquell, both in the premium segment of the market, to replace that lost volume. By the end of 2003, Miller Genuine Draft alone had virtually replaced the Heineken volume and SAB had begun to produce it locally. Pilsner Urquell volumes are said to be growing according to plan.
The premium beer market in SA is small - only about 5% of the total market by volume - but is forecast to grow to about 9%-10% in the next five years. Amstel is the leading brand in this segment, with over 50% of the market. That's why there is so much interest in the possible face-off between SAB and Heineken over production and distribution of Amstel in SA after 2008.
The SA market for flavoured alcoholic beverages (FABs) is small but growing rapidly. This covers wine and malt products, as well as products generically referred to as cider. The two biggest players in the market are Distell and SAB.
Wine exports from SA suffered because of the strong rand, but SA producers managed, mostly, to retain their shares of overseas markets. On the positive side, costs of raw material inputs, such as packaging and corks, were reduced by the strength of the rand. The poorer growth was reflected in relatively pedestrian results from both Distell and KWV Investments.
KWV Ltd, an unlisted company, announced its intention to enter the local SA market with its wine and brandy products. This occurred after the competition tribunal ruled that KWV Ltd could no longer distribute its products through Distell, in which it has a 30% holding.
ABI, the leading soft-drink bottler in SA, had a great year, helped by warm, dry weather in its Coca-Cola franchise territories. Innovation in the use of pack sizes, combined with more efficient channels to market, also helped grow volumes. Its non-Coke products, though small by comparison, grew volumes strongly. The overall volume growth of just under 7% to March 2004 was one of the highest ever recorded at ABI. The group has a huge cash pile.
Food consumption tends to be relatively stable over time - people don't necessarily eat more just because they have greater spending power. But changes in preference occur.
The past year was characterised by deflation in basic food products: prices of basic commodities actually fell. This can be a problem for most food companies, as they are unlikely to get volume increases sufficient to compensate for the fall in prices. On the other hand, they can be stricter about containing costs.
