South Africa Food & Drink Report Q1 2013 - New Report Available

New Food research report from Business Monitor International is now available from Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 21 February 2013

Our outlook on South Africa's consumer sector remains optimistic, despite serious headwinds from the global economy that will inevitably take their toll on growth. We maintain our core view that economic growth in South Africa will be driven by the demand side (ie, wholesale and retail trade, and financial and personal services) while the supply side (primarily mining and manufacturing) continues to remain weak. In our view, several factors bode well for consumer spending, namely relatively contained inflation, high nominal wage growth and the low interest rate environment, which is likely to keep a lid on debt servicing costs.

Headline Industry Data (local currency)

- 2013 per capita food consumption = +8.9%; forecast compound annual growth (CAGR) to 2017 = +9.0%.
- 2013 alcoholic drinks sales = +9.2%; forecast compound annual growth to 2017 = +9.7%.
- 2013 soft drinks sales = +12.8%; forecast compound annual growth to 2017 = +13.4%.
- 2013 mass grocery retail sales = +9.9%; forecast compound annual growth to 2017 = +10.0%.

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/536608_south_africa_food_drink_report_q1_2013.aspx?afid=201) (http://www.fastmr.com/prod/536608_south_africa_food_drink_report_q1_2013.aspx?afid=201)

Key Company Developments

Pick n Pay Reports Mixed Results: In October 2012, Pick n Pay, the country's second biggest food retailer, reported encouraging first half results to August with like-for-like sales increasing by 3.2%. Pick n Pay is working towards making itself more efficient, as its operating margins have been lower than Shoprite's for the past few years. However, the company's profits suffered, recording a 6.3% year-onyear (y-o-y) decline in H112 to ZAR182mn (US$21mn). The company recorded overall revenue of ZAR28.3bn (US$3.25mn) in the first half, which represented a 5.9% increase from the same period the previous year.

Diageo Invests In UB Group SA's Sorghum Unit: In November 2012, UK drinks major Diageo and India's UB Group entered into a memorandum of understanding under which the UB Group's sorghum beer business in South Africa will become a 50:50 joint venture. This followed a spirits deal between the two firms. Diageo will spend US$36mn for its 50%, with the other half held by UB Group's chief, Vijay Mallya.

Key Risks To Outlook

Marikana Massacre Weighs On Investor Sentiment: The August 2012 deaths of 34 protesting miners at Lonmin's Marikana platinum mine illustrate the seriousness of worker tensions afflicting the platinum industry. Despite the government's efforts to address the underlying issues, we expect the dispute to rumble on, weighing on platinum output and investor perceptions in general. The incident has exposed the serious tensions stemming from poverty and inequality that exist under the surface in South Africa.

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