Required Report - public distribution

**Date:** 2/27/2004

**GAIN Report Number:** SF4006

SF4006

**South Africa, Republic of**

**HRI Food Service Sector**

**HRI Food Service Sector Report**

**2004**

**Approved by:**

![](media/image1.wmf)Scott Reynolds

U.S. Embassy, South Africa

**Prepared by:**

Margaret Ntloedibe

**Report Highlights:**

The biggest growth industry in South Africa is tourism. Hotels,
restaurants, institutional and other food service sector outlets play an
integral part in the tourists' experience of South Africa. The sector is
expected to continue growing, as convenience fast food chain restaurants
become more and more important in the South African way of life. South
Africa is ranked 25th by the Global Competitiveness Report out of 75
countries, the highest place among all developing countries globally.
This means that the country's business environment is both competitive
and sophisticated. The restaurant sector dominates roughly 70% of the
market, hotels and resorts 20%, and institutional contract food catering
sector has a 10% share of the market.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Pretoria \[SF1\]

\[SF\]

**TABLE OF CONTENTS**

Section 1. Overview of South Africa
................................................................... Page
3 of 16

Section 2. Market Summary
.................................................................................
Page 3 of 16

2.1 South Africa's food service sector in overview..................
Page 3 of 16

2.2 Advantages and Challenges for US exporters .................. Page 4
of 16

Section 3. Road Map for Market Entry
.............................................................. Page 5 of
16

3.1 Hotels and Resorts
............................................................... Page 5
of 16

3.1.1 Hotels profiles
.......................................................................
Page 5 of 16

3.1.2 Entry strategy
.......................................................................
Page 6 of 16

3.1.3 Distribution channel
.............................................................. Page 6 of
16

3.2 Restaurants
.............................................................................
Page 6 of 16

3.2.1 Restaurant company profiles
.............................................. Page 7 of 16

3.2.2 Entry strategy
........................................................................
Page 7 of 16

3.2.3 Distribution channel
............................................................. Page 8 of
16

3.  Institutional Contract Food
    Services................................. Page 8 of 16

> 3.3.1 Major Caterer's Profiles
> ....................................................... Page 9 of 16

3.3.2 Entry Strategy
.......................................................................
Page 9 of 16

3.3.3 Distribution Channel
........................................................... Page 9 of 16

Section 4. Competition
........................................................................................
Page 10 of 16

Section 5. Best Products Prospects
................................................................. Page
15 of 16

A.  Products present in the market which have good sales

> potential
> ......................................................................................
> Page 15 of 16

B.  Products not present in significant quantities but which

> have good sales potential
> ....................................................... Page 15 of 16

C.  Products not present because they face significant

> Barriers
> .......................................................................................
> Page 15 of 16

Section 6. Post contact and further information
.............................................. Page 15 of 16

**Section 1. Overview of South Africa**

South Africa is one of the richest countries on the continent and in the
world in terms of minerals and other natural resources. It was, and
still is, amongst the world's largest exporters of gold and diamonds as
well as a range of other industrial minerals. The excellent
Mediterranean climate of its southern region makes it a major world
exporter of citrus fruits and wine.

This abundant natural wealth led European settlers here as early as the
17^th^ century. The economy boomed and physical infrastructure was
developed. In the middle of the 20^th^ century, the country faced the
problem of apartheid, decisively resolved in 1994 with the first
democratically elected government. Since then the country has continued
to rebuild its economy and work toward achieving its potential.

Today South Africa has a population of 44 million and a GDP of *US\$126*
billion (2003). It is rated at the low end of the OBED countries in
terms of its business environment and at the top end of developing
countries in international competitiveness. The Global Competitiveness
Report ranks South Africa 25^th^ out of 75 countries, the highest place
among all developing countries globally. Current tourist arrivals are
5.9 million per annum, with 1.0 million from Europe, 200,000 from North
America, 155,000 from Asia and the rest from other parts of Africa. For
general infrastructure, the country is rated 22^nd^; for financial
market sophistication 16^th^. It has a strong technological base, unlike
most developing countries, and has patented products such as the
computer tomograph using indigenous technology. Well developed,
tourism-related infrastructure and tourism support services, in
particular transport infrastructure, play an important role in the
tourism industry and are indispensable to tourism development and
promotion. Road transport at 70% showed the highest share of all travel
modes, mainly because the country is adjacent to six other countries.

There are 20 national parks in South Africa, all of which are
administered by the South African National Parks (SANParks). The system
of parks represents the indigenous fauna, flora, landscapes and
associated cultural heritage of the country. Of the 20 national parks,
14 have overnight tourist facilities and have their own restaurants,
with an unrivalled variety of accommodation in arid, coastal, mountain
and bushveld habitats. South Africa has added 121,000 hectares of new
land to seven of the country's 20 national parks.

National parks offer visitors an unparalleled diversity of adventure
tourism opportunities including game viewing, bush walks, canoeing and
exposure to cultural and historical experiences. Conferences can also be
organized in many of the parks.

The national parks are: Kruger; Cape Peninsula; Marakele; Golden Gate;
Vaalbos; Mountain Zebra; Addo Elephant; Tsitsikamma, Knysna; Wilderness;
Bontebok; Agulhas; West Coast; Karoo; Namaqua; Richtersveld; Augrabies;
Kalahari; Vhembe-Dongola and Tankwa Karoo.

In addition, South Africa has concluded highly attractive preferential
trade agreements with South African Customs Union (SACU), the European
Union (EU), the Southern African Development Council (SADC) countries
and is negotiating other agreements with the United States and MERCOSUR.
These agreements open up new market and business opportunities for
businesses wanting to invest directly in South Africa or partner with it
for other types of business collaboration.

# Section 2. Market Summary

2.1 South Africa's food service sector in overview

South Africa has a large and complicated food service market. The
foodservice sector of the South African economy is not only the largest
employer in the country, but has the potential to make a real difference
in terms of economic empowerment, skills transfer and social upliftment.
The foodservice establishment is comprised of sectors such as
Commercial, Institutions and Services; and Staff Feedings. Classified
under commercial sector are hotels, restaurants, fast food independents,
fast food chains, clubs and national parks/resorts; Institutions and
Services includes transport services, hospital (public and private),
educational institutions and prisons; Staff feeding sector includes
canteens (in-house cafeteria's), mines, South African Police, and the
South African Defence Force.

Tourism, with an estimated annual growth rate of 12 percent, is the
fourth largest industry in South Africa, supporting about 700 hotels,
2800 guesthouses and 10,000 restaurants. The Travel and Tourism industry
in South Africa is a major contributor to the economy and presently
accounts for 8.2% of GDP. Tourism plays a significant role in the
domestic economy employing some 500,000 or 3% of the total workforce and
contributing R73 billion or 7,1% to Gross Domestic Product. Expenditure
on tourism and related industries totaled R49 billion in 2003. An
average tourist spends R1,466 per day, staying about 12 days in the
country. The strong rand eroded South Africa's price competitiveness as
a tourist destination.

By 2010, South Africa plans to increase the proportion of protected land
from 5.44 to eight per cent. The government is also aiming to expand its
marine-protected network from 17 to 30 per cent of the coastline.
According to the South African Department of Environmental Affairs and
Tourism, more than 1,5 million foreigners visited South Africa between
Jan through October 2003, a 5.2 per cent increase from the previous
year.

Benefiting from this growth in terms of increased trade and investment
opportunities is the hospitality industry, which includes a vast array
of well-developed and sophisticated hotels, restaurants, cafes, resorts,
country clubs, fast food outlets, bars, airlines, supermarkets and
convenience stores.

South Africa, with an expanding middle class and a relatively stable
economy, presents growing opportunities for U.S. niche food products. In
addition, with its well-developed transportation infrastructure, South
Africa is ideally placed to serve as an export hub to markets throughout
the region. The table below provides the structure of the foodservice
establishments in South Africa, but excludes informal market segments
such as tuck shops, taverns, spazas and hawkers (known as street
vendors).

2.2 Advantages and Challenges for US exporters

+-----------------------------------+-----------------------------------+
| Advantages                        | Challenges                        |
+-----------------------------------+-----------------------------------+
| South Africans are developing a   | Consumers may need to be educated |
| taste for western foods and are   | in preparing and eating products. |
| willing to try anything once.     |                                   |
+-----------------------------------+-----------------------------------+
| The growing retail food industry  | Already acquired tastes and       |
| needs imported food and beverage  | preferences for traditional       |
| products.                         | locally produced products.        |
+-----------------------------------+-----------------------------------+
| Importers and distributors can    | Consumers are price-conscious and |
| help develop heavy brand loyalty. | do not exhibit brand loyalty.     |
|                                   | Products must constantly be       |
|                                   | promoted.                         |
+-----------------------------------+-----------------------------------+
| South African importers seek      | Higher prices for U.S. food       |
| suppliers who can offer reliable  | products relative to local market |
| and quality products,             | products and neighboring          |
| consolidators of mix containers   | countries.                        |
| at competitive prices.            |                                   |
+-----------------------------------+-----------------------------------+
| South Africa is a gateway for     | Competition is stiff from other   |
| regional markets.                 | countries and locally produced    |
|                                   | products.                         |
+-----------------------------------+-----------------------------------+
| South African consumers view U.S. | Limited knowledge of retailers    |
| products as high quality.         | and consumers of the variety and  |
|                                   | quality of U.S.                   |
|                                   |                                   |
|                                   | products.                         |
+-----------------------------------+-----------------------------------+

# Section 3. Road Map for Market Entry

**3.1 Hotels and Resorts**

There is a huge range of accommodation types in South Africa, from five
star hotels including hotel chains to lodges, guesthouses, bed &
breakfast (B&B) establishments, self-catering properties, youth hostels
and international hotels. The B&B, Guest House & Game Lodge market
sectors represent the fastest growing segment of the tourism industry in
South Africa. The Tourism Grading Council of South Africa is an official
body launched in 2003 mandated to grant Star grading to accommodation
establishments in South Africa, from B&B; Guest House; Hotel; Lodge;
Self-Catering; Backpacker and Hostelling; Caravan and Camping; and
Country House. There are approximately 1,600 graded establishments.
There are an estimated 30,000 establishments nationally, ranging from
luxury Guest Houses & Game Lodges that regularly host visiting heads of
state, to the more economical B&B's which together offer thousands of
bed nights. Hospitality Resorts and Hotels are owned by the Premier
Group, which is owned by Anglo American. Premier and Anglo American have
extensive holdings in the milling, baking, dairy, fish, confectionery
and edible oils industries.

There are 20 national parks in South Africa, all of which are
administered by the South African National Parks (SANParks). Most of
these resorts have their own restaurants. Generally, the trend towards
healthier eating is evident in this sector once again with an increase
in the consumption of fresh vegetables and salads. The consumption of
red meat has not changed, because the National Parks often offer venison
on the menu, which is a novelty to tourists.

The National Parks negotiate contracts for certain products, and resorts
are then able to buy independently from these sources. Most perishable
items are purchased from local specialist retailers, while dry groceries
are often sourced from catering wholesalers.

Prospects: The latest trend in hotel investment in South Africa is that
a number of significant joint ventures are taking place between local
operators and overseas investors. Smaller and independent owners,
particularly are benefiting from an injection of capital, infrastructure
and expertise enabling them to compete on equal terms with large groups.

# 3.1.1 Hotel Profiles

Most of the key hotels are owned by large locally listed companies and
managed through agreements with international hotel management chains,
in particular, Mercure Accord Hotel (French), Sheraton Group (US),
Hilton (US), Legacy Hotels and Resorts (US), and Days Inn (US). In
addition to major foreign tourism projects, two South African groups
also have activities. The Sun International Group runs hotels and
resorts including the renowned Sun City Resort in Rustenburg in the
North West Province, while the Protea Group runs the Protea Hotel chain.
The table below provides an overview of some of the key hotel chains.

+---------------+-----------------+--------+--------------+-----------+
| Hotel Group   | Sales           | No.of  | Location     | P         |
|               |                 |        |              | urchasing |
|               | (US\$ Million)  | Hotels |              |           |
|               |                 |        |              | Agent     |
|               |                 |        |              | Type      |
+---------------+-----------------+--------+--------------+-----------+
| Mercure       | Not available   | 28     | Major Cities | Local     |
| Accord        |                 |        | and tourist  | agents    |
|               |                 |        | centers      |           |
+---------------+-----------------+--------+--------------+-----------+
| Sheraton      | Not available   | 3      | Major Cities | Local     |
| Group         |                 |        |              | agents    |
+---------------+-----------------+--------+--------------+-----------+
| Hilton        | Not available   | 2      | Major Cities | Local     |
|               |                 |        |              | agents    |
+---------------+-----------------+--------+--------------+-----------+
| Legacy Hotels | Not available   | 17     | Major cities | Local     |
| & Resorts     |                 |        | and tourist  | agents    |
|               |                 |        | centers      |           |
+---------------+-----------------+--------+--------------+-----------+
| Sun           | Not available   | 49     | Major cities | Local     |
| International |                 |        | and tourist  | agents    |
| Groups        |                 |        | centers      |           |
+---------------+-----------------+--------+--------------+-----------+
| Protea Group  | Not available   | 74     | Major cities | Local     |
|               |                 |        | and tourist  | agents    |
|               |                 |        | centers      |           |
+---------------+-----------------+--------+--------------+-----------+

# 3.1.2 Entry Strategy

Although the majority of the hotels are part of the chain groups, each
hotel operates autonomously in terms of food purchases. In some cases
the head office may recommend regional or national suppliers, but
generally, hotels have a free reign as to what foods are served and whom
their suppliers are. Hotels prefers to buy directly from local
manufacturers, this is always not possible, and it is usually only
perishable product that are bought in this manner. Dry groceries are
usually sourced from catering wholesalers, while local specialist
retailers provide hotels with bakery goods, fruit and vegetables, meat,
and dairy products. Many hotels have in-house bakeries and contract
caterers to run in-house restaurants. Growth in the hotel industry is
largely reliant on the growth in foreign tourism, which is expected to
increase considerably in future.

# 3.1.3 Distribution Channel

In general, hotels do not import food and beverages but obtain their
requirements from the local manufacturers, catering wholesalers,
specialist retailers and others. This is because most if not all hotel
kitchens have the policy of holding only sufficient quantities of food
and beverages for short term needs only. The following table highlights
and summarize source of supply in percentage.

# SOURCES OF SUPPLY TO THE HOTEL INDUSTRY

  ---------------------------------------------- ------------------------
  Sources of Supply                              \% of total

  Direct from manufacturers                      28

  Catering Wholesalers                           20

  Cash & Carry                                   5

  Specialist Retailers                           32

  General Retailer                               3

  Fresh Produce Market                           12

  TOTAL                                          100
  ---------------------------------------------- ------------------------

# 3.2 Restaurants

Restaurants plays an integral part in the tourists' experience of a
country. The Restaurant Association of South Africa (RASA) was launched
in November 2002 in order to gather statistics and provide evidence of
the size and importance of the foodservice industry to the tourism
industry, as well as South African economy. Restaurants and Groups
represented in the Association are The Grill House, News Café, The M & A
Group, Mikes Kitchen, The Steers Group, Nandos, Mugg & Bean, Global
Wrapps, Dulce Continental Cafes, O'Hagans and the Spur Group. South
Africa has a highly developed web of fast-food and chain restaurants.
The changing trend shows that people are eating out of home more often
than ever before. The restaurant industry, particularly the fast food
sector is faced with stiff competition from the supermarket, retail
chains and convenience store sector. The supermarkets also offer ready
meals every day of the week.

On food spending, visiting restaurants and bars is one of the favorite
activities of overseas tourists in South Africa. Overseas visitors spend
approximately R290.00 per day on food during their trip to South Africa,
which represents about 20% of the total daily spend.

# 3.2.1 Restaurant Company profiles

The table below provides information on the major fast food and family
restaurants involved in this sector.

+-------------------+---------+----------+-------+---------+---------+
| Restaurant Name   | Ow      | Sales    | No.   | L       | Pur     |
| and Outlet Type   | nership |          | of    | ocation | chasing |
|                   |         | (US\$    |       |         | Agent   |
|                   |         | million) | ou    |         | Type    |
|                   |         |          | tlets |         |         |
+-------------------+---------+----------+-------+---------+---------+
| Nando's Group     | Local   | Not      | 185   | Major   | Local   |
|                   |         | a        |       | cities  | agent   |
|                   |         | vailable |       |         |         |
+-------------------+---------+----------+-------+---------+---------+
| Steers group      | Local   | Not      | 989   | Major   | Local   |
|                   |         | a        |       | cities  | agent   |
|                   |         | vailable |       |         |         |
+-------------------+---------+----------+-------+---------+---------+
| King Consolidated | Local   | Not      | 188   | Major   | Local   |
| Holdings          |         | a        |       | cities  | agent   |
|                   |         | vailable |       |         |         |
+-------------------+---------+----------+-------+---------+---------+
| Tricon Global     | Local   | Not      | 450   | Major   | Local   |
| Restaurants       |         | a        |       | cities  | agent   |
|                   |         | vailable |       |         |         |
+-------------------+---------+----------+-------+---------+---------+

# 3.2.2 Entry Strategy

Specialist retailers such as bakeries, butcheries and green grocers are
the main suppliers to restaurants. Dry groceries are often purchased
through catering wholesalers, while perishables and frozen products are
purchased directly from the manufacturers or designated distributors.

-   Export opportunities in this sector may not be readily apparent,
    since these outlets generally prefer to source their inputs locally
    -- for goodwill assured supply, or due to a corporate relationship
    with a supplier. However, as the number of outlets increases, and
    competition between retail chains rises, it will become more
    difficult for them to meet their needs in the local market and
    maintain their quality and price competitiveness.

-   The South African fast-food market has witnessed strong growth in
    recent years due to changes in lifestyle trends and a growth in
    disposable income.

-   Although independent restaurants are plentiful, the growth in the
    number of franchised fast food chain restaurants has been phenomenal
    over the past number of years, which has brought about interest in
    American-style cuisine and consumption patterns. South Africa, has
    an extensive number of franchise restaurants chains serving fried
    chicken, hamburgers, steaks, hoagie-style deli sandwiches, and
    pizza. Portuguese and Italian-style cuisines are also popular, as
    well as seafood, steak and ribs. Some of the major chains are
    Nando's Group Holdings (Nando's Chicken land); The Steers Group
    (Steers, Debonair Pizza, FishAways, Church's Chicken, House of
    Coffees, Brazilian, ESP Illy Boutique, Wimpy and Whistle Stop); King
    Consolidated Holdings (McGinty's, Keg SA, Saddles Steak Ranches,
    Bimbos, and Dockside Porterhouse); McDonalds; Mike's Kitchen, Mugg &
    Bean, Global Wrapps, Dulce Continental Cafes, O'Hagans, the Spur
    Group, Something Fishy, Ocean Basket, Pleasure Foods, Chicken
    Licken, News Café, Pizza Perfect, St. Elmo's Pizza, Leisure Net
    (Bulldogs-British type-style pup), Black Steer (Steakhouse and
    take-out store), Flame Diners, and Max Frango's Chicken take-outs;
    Shoprite-Checkers; Tricon Global Restaurants Inc (Kentucky Fried
    Chicken and Pizza Hut); Subway Sandwiches; and TGIF's.Tex-Mex or
    south western cuisine has yet to significantly penetrate the South
    African market, although this cuisine would be popular, due to the
    South African consumer's preference for hot, spicy sauces. Pub-style
    restaurants are also booming.

-   Franchising in South Africa contributes a massive 11.6% (including
    fuel) and 6.8% (excluding fuel) to Gross Domestic Product (GDP). The
    turnover for the franchise sector in South Africa is estimated at
    R134.7 billion. Turnover excluding fuel is estimated at R78.4
    billion. Currently, there are 165 franchisers and affiliates
    registered with the Franchise Association of South Africa (FASA) and
    over 6000 franchisees. 89.7% of franchises in South Africa have been
    locally developed while 10.3% were developed internationally.

-   There is a growing awareness among South Africans of healthy eating,
    and along with this is the trend towards lighter meals. Consumption
    of chicken and fish has grown considerably, at the expense of red
    meat and demand for fresh produce and foods without preservatives is
    increasing. Trade sources report that chicken appears to be South
    Africa's most popular take-away food, with 44% of people who
    purchased takeaways in the space of a month choosing meals from a
    specialized chicken outlet at least once. Kentucky Fried Chicken,
    Chicken Licken and Nando's were voted the top three takeaway venues.
    Of the 43% who chose chicken (1.8 million people), 66% were black,
    18% white, 8% colored and 7% Indian. The research shows that 4.2
    million people (26% of the urban adult population) bought takeaways
    during the month surveyed. Kentucky Fried Chicken came out on top,
    with 1.2 million buyers, followed by McDonalds (446,000), Nandos
    (382,000), Spur (322,000) and Steers (310,000).

-   Prospects: The fast food industry has experienced phenomenal growth
    over the last two years, and this is set to continue in future. As
    food trends in South Africa develop, U.S. exporters are well
    positioned to provide South African restaurants with

> innovative products (i.e., seasoned French fries, curly fries) to
> entice consumers. Thus, according to a local magazine's brief
> discussions with some of the major chains,
>
> opportunities exist for U.S. exporters to be supplementary suppliers
> of certain new food products.

# Distribution Channel

The following table highlights sources of supply to the Restaurant
Industry:

  ------------------------------------------------- ---------------------
  Sources of Supply                                 \% of total

  Manufacturers/distributors                        20

  Catering wholesalers                              23

  Cash & Carry                                      8

  Specialist retailers                              42

  General retailers                                 5

  Fresh produce markets                             2

  TOTAL                                             100
  ------------------------------------------------- ---------------------

Growth in the restaurant industry is mainly attributed to the middle and
upper class restaurant goer's as well as the increase in the number of
blacks who previously did not frequent restaurants on a regular basis.
Additional current trends are the move of more blacks from the townships
to the city.

**3.3 Institutional Contract Food Services**

Currently the South African Contract Catering and Institutional sector
is valued at R4.3 billion. State tenders and parastatals alone account
for R1.18 billion. With 80% of this market still remaining in-house.
This sector constitutes a very large market for food and beverages and
include various institutions such as Commercial Sector, Institutions and
Services; and Staff Feeding. It is estimated that only 28% of
public-sector and 55% of private-sector catering have been out-sourced
to contract caterers. As with the rest of the South African food
industry, this sector is fairly concentrated and is dominated by a
relatively few large catering companies. Total value of staff catering
market in South Africa is approximately R5.5 billion per annum.
Estimated value of outsourced market between R2.8 and R3 billion.
Contract caterers include Tsebo Outsourcing Group (formerly the Fedics
Group) owned by ICS Holdings, Royal Food Services, Kagiso Khulani
Supervision Food Services owned by Tongaat Hulett, Delmont Caldow
Caterers, Sodexho Southern Africa, and Sixel & Patterson. In general,
they do not import food and beverages but instead purchase food products
directly from the local manufacturers, catering wholesalers and
distributors. By far the most significant of the catering companies is
Tsebo Outsourcing. Tsebo Outsourcing, South African Leader in outsourced
catering, is South Africa's largest black-owned outsourced catering
company, and enjoys a 34% market share of the currently outsourced
catering marked. The catering at all major airports within South Africa
are contracted out to Fedics in-flight catering company, Air Chefs. Air
Chefs prepares a total of 650,000 meals per month of which 450,000 are
manufactured in Johannesburg.

# Major Contract Caterer's Profiles

The table below provides information on the major businesses involved in
the catering sector.

+----------------+----------+----------+---------+---------+---------+
| Name and       | O        | Sales    | No. of  | L       | Pur     |
| business type  | wnership |          |         | ocation | chasing |
|                |          | (US\$    | Co      |         | Agent   |
|                |          | million) | ntracts |         | Type    |
+----------------+----------+----------+---------+---------+---------+
| Fedics Food    | ICS      | Not      | 650     | nat     | Local   |
| Services       | Holdings | a        |         | ionwide | agents  |
|                |          | vailable |         |         |         |
+----------------+----------+----------+---------+---------+---------+
| Royal Food     | Rebserve | 45       | 175     | nat     | Local   |
| Service        | Holdings |          |         | ionwide | agents  |
|                | (W       |          |         |         |         |
|                | holesale |          |         |         |         |
|                | &        |          |         |         |         |
|                | Dist     |          |         |         |         |
|                | ribution |          |         |         |         |
|                | D        |          |         |         |         |
|                | ivision) |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+
| Kagiso Khulani | Compass  | Not      | 703     | nat     | Local   |
| Supervision    | Southern | a        |         | ionwide | agents  |
| Food Services  | Africa   | vailable |         |         |         |
| (KKS)          |          |          |         |         |         |
+----------------+----------+----------+---------+---------+---------+

# 3.3.2 Entry Strategy

Contract caterers purchase the bulk of their supplies directly from the
manufacturers on a contract basis. Companies running their own canteens
usually buy food as and when needed from catering wholesalers and
localized specialist retailers, as this is more convenient when buying
smaller quantities.

In general, contract caterers do not import food and beverages but
instead purchase food products directly from the local manufacturers,
catering wholesalers and distributors.

# 3.3.3 Distribution Channel

The following table highlights the source of supply to the Institutions
Caterer's:

  ------------------------------------------------- ---------------------
  Source of Supply                                  \% of Total

  Manufacturers/distributors                        33

  Catering wholesalers                              10

  Cash & Carry                                      2

  Specialist retailers                              46

  General retailers                                 4

  Fresh Produce Markets                             5

  TOTAL                                             100
  ------------------------------------------------- ---------------------

# Section 4. Competition

The South African market offers opportunities for suppliers of food and
beverage products. Approximately 80% of food products found on the South
African supermarket shelves are locally produced. South Africa is
aggressively marketing local products and has introduced the "Proudly
South African" campaign whereby consumers will associate the campaign
with products and services made in South Africa. Sources reports that
recognition of the Proudly South African logo has grown from 10% to 64%
with 32% of the population having seen the logo on products. Currently
20% - 30% of the population is consciously buying products with the logo
on it. There are smaller niche markets for processed products.

South Africa's food and beverage industry is a strongly competitive
sector producing high quality commodity and niche products for local and
international markets. There are smaller niche markets for processed
products. South African importers are seeking suppliers who can offer a
reliable source of top quality products at competitive prices. The
following table highlights the key products offered in each category of
foods and beverages in 2002.

+------------------+----------------+-----------------+----------------+
| Product          | Import Market  | Major Supply    | Reasons for    |
|                  | Size in 2002   | Countries in    | Strengths of   |
|                  | (Millions of   | 2002            | Key Supply     |
|                  | South African  |                 | Countries      |
|                  | Rand)          |                 |                |
+------------------+----------------+-----------------+----------------+
| Meat and Poultry | 662.1          | Brazil (29%)    | South Africa   |
| products         |                |                 | is a net       |
|                  | Beef (42)      | Australia (19%) | importer of    |
|                  |                |                 | meat and meat  |
|                  | Pork (104)     | Canada (11%)    | products.      |
|                  |                |                 |                |
|                  | Lamb (65)      | France is major | Brazil         |
|                  |                | supplies of     | supplies price |
|                  | Offal (65.8)   | Pork (65%),     | competitive    |
|                  |                | Australia Lamb  | beef.          |
|                  | Poultry Meat   | (94%) and Offal |                |
|                  | (368,317)      | (49%), Brazil   | Australia and  |
|                  |                | major supplies  | Canada         |
|                  | Dried Meat (7) | of Poultry Meat | products are   |
|                  |                | (52%), and 98%  | demanded by    |
|                  |                | of dried meat   | the high end   |
|                  |                | comes from      | food service   |
|                  |                | Zimbabwe.       | sector.        |
|                  |                |                 | Opportunities  |
|                  |                | USA is a minor  | in this sector |
|                  |                | supplies of 7%  | exist mainly   |
|                  |                | of offal, 4% of | for frozen     |
|                  |                | Poultry meats,  | boneless beef  |
|                  |                | and .13% of     | forequarter    |
|                  |                | pork products.  | cuts, turkey,  |
|                  |                |                 | frozen whole   |
|                  |                |                 | chicken,       |
|                  |                |                 | frozen         |
|                  |                |                 | boneless       |
|                  |                |                 | poultry cuts   |
|                  |                |                 | and prepared   |
|                  |                |                 | poultry cuts.  |
|                  |                |                 | In July 2000,  |
|                  |                |                 | South Africa   |
|                  |                |                 | imposed        |
|                  |                |                 | prohibitive    |
|                  |                |                 | anti-dumping   |
|                  |                |                 | duties of U.S. |
|                  |                |                 | chicken leg    |
|                  |                |                 | quarters, an   |
|                  |                |                 | action that    |
|                  |                |                 | has virtually  |
|                  |                |                 | cut off U.S.   |
|                  |                |                 | chicken meat   |
|                  |                |                 | exports to     |
|                  |                |                 | South Africa.  |
+------------------+----------------+-----------------+----------------+
| Fish and Seafood | 273            | Mozambique      | South Africa   |
|                  |                | (21%)           | is a net       |
|                  | Crustaceans    |                 | exporter of    |
|                  | (96)           | India (10%)     | fish and       |
|                  |                |                 | seafood        |
|                  | Other Seafood  | Norway (9%)     | products.      |
|                  | (67)           |                 | Imports in     |
|                  |                | Mozambique      | this category  |
|                  | Frozen fish,   | supplies 56% of | have been      |
|                  | not fillet     | crustaceans,    | increasing     |
|                  | (59)           | Spain supplies  | steadily over  |
|                  |                | 21% of Other    | the past       |
|                  | Fish fillet    | Seafood, Japan  | years, and     |
|                  | (19)           | supplies 28% of | thus, despite  |
|                  |                | frozen fish,    | the fact that  |
|                  |                | and Argentina   | South Africa   |
|                  |                | supplies 33% of | is a net       |
|                  |                | fish fillet.    | exporter,      |
|                  |                |                 | opportunities  |
|                  |                | US is a minor   | do exist. The  |
|                  |                | supplies of     | majority of    |
|                  |                | 1.3% of         | imports are    |
|                  |                | Crustaceans,    | canned tuna,   |
|                  |                | .20% of Other   | frozen shrimp  |
|                  |                | seafood, 1.75%  | and prawns,    |
|                  |                | of Fish Fillet, | and frozen     |
|                  |                | and 5% of       | fillets.       |
|                  |                | Frozen Fish.    |                |
|                  |                |                 | Goods of       |
|                  |                |                 | Mozambican     |
|                  |                |                 | origin are     |
|                  |                |                 | traded to      |
|                  |                |                 | South Africa   |
|                  |                |                 | free of duty   |
|                  |                |                 | and quotas in  |
|                  |                |                 | terms of the   |
|                  |                |                 | trade          |
|                  |                |                 | agreement.     |
+------------------+----------------+-----------------+----------------+
| Dairy products   | 339,742        | France (20%)    | South Africa   |
|                  |                |                 | is net         |
|                  | Milk & Cream   | New Zealand     | exporter of    |
|                  | concentrated   | (17%)           | dairy          |
|                  | (144)          |                 | products.      |
|                  |                | Switzerland     | Opportunities  |
|                  | Cheese and     | (10%)           | exist for the  |
|                  | Curd (94)      |                 | import of      |
|                  |                | Switzerland     | cheese, whey,  |
|                  | Whey (61)      | supplies 21% of | concentrated   |
|                  |                | Milk & Cream,   | milks milk     |
|                  |                | New Zealand     | powders, and   |
|                  |                | supplies 35% of | butter. New    |
|                  |                | Cheese and      | Zealand has a  |
|                  |                | Curd, and       | 66% share of   |
|                  |                | France supplies | the cheese     |
|                  |                | 81% of Whey.    | market.        |
|                  |                |                 |                |
|                  |                | US is at        |                |
|                  |                | present a minor |                |
|                  |                | supplier of     |                |
|                  |                | .01% of Milk    |                |
|                  |                | and Cream, 2%   |                |
|                  |                | of Cheese &     |                |
|                  |                | Curd, and .02%  |                |
|                  |                | of Whey.        |                |
+------------------+----------------+-----------------+----------------+
| Edible           | 309,996        | China (37%)     | South Africa   |
| Vegetables       |                |                 | is a net       |
|                  | Dried legumes  | Canada (14%)    | importer of    |
|                  | (235)          |                 | dried legumes. |
|                  |                | Netherlands     | Imports jumped |
|                  | Dried          | (10%)           | from R35       |
|                  | vegetables     |                 | million in     |
|                  | whole cut (39) | China supplies  | 2001 to        |
|                  |                | 42% of Legumes, | 309,996 in     |
|                  | Frozen         | and 28.4% of    | 2002.          |
|                  | vegetables     | dried           | Opportunities  |
|                  | (24)           | vegetables.     | exist for the  |
|                  |                |                 | import of      |
|                  |                | US supplies     | kidney beans   |
|                  |                | 28.2% of dried  | and other      |
|                  |                | vegetables and  | dried beans.   |
|                  |                | 5% of legumes.  | China supplies |
|                  |                |                 | price          |
|                  |                |                 | competitive    |
|                  |                |                 | white kidney   |
|                  |                |                 | beans, has 90% |
|                  |                |                 | of the local   |
|                  |                |                 | market share.  |
+------------------+----------------+-----------------+----------------+
| Edible Fruits    | 202,377        | Italy (11.43%)  | South Africa   |
| and Nuts         |                |                 | is a net       |
|                  | Coconuts,      | US (11.42%)     | exporter of    |
|                  | Brazil nuts &  |                 | dried fruits   |
|                  | cashew nuts    | Turkey (10%)    | and a net      |
|                  | (64)           |                 | importer of    |
|                  |                | Italy supplies  | nuts. However, |
|                  | Other nuts     | 85% of fruit    | a small market |
|                  | (58)           | and nuts        | exists for     |
|                  |                | temporarily     | dried exotic   |
|                  | Fruit & nuts   | preserved; US   | fruits, and    |
|                  | temporarily    | supplies 38% of | opportunities  |
|                  | preserved (24) | other nuts and  | exists for     |
|                  |                | .04% of         | shelled        |
|                  |                | coconuts,       | hazelnuts,     |
|                  |                | brazils &       | desiccated     |
|                  |                | cashew nuts;    | coconut,       |
|                  |                | Brazil supplies | cashew nuts    |
|                  |                | 21% of          | and shelled    |
|                  |                | coconuts,       | almonds.       |
|                  |                | brazil and      |                |
|                  |                | cashew nuts.    |                |
+------------------+----------------+-----------------+----------------+
| Spices, Coffee,  | 517,061        | Malawi (15%)    | South Africa   |
| and Tea          |                |                 | is a net       |
|                  | Coffee (192)   | Zimbabwe (12%)  | importer of    |
|                  |                |                 | spices. Local  |
|                  | Tea (171)      | Indonesia (11)  | coffee and tea |
|                  |                |                 | production is  |
|                  | Spices:        | Indonesia       | insufficient   |
|                  |                | supplies 24 %   | to meet local  |
|                  | \- Pepper (45) | coffee; Malawi  | demand.        |
|                  |                | supplies 43%    |                |
|                  | \- Seeds of    | Tea; and on the | In terms of    |
|                  | various spices | spices India    | the bilateral  |
|                  | (42)           | supplies 46%    | trade          |
|                  |                | seed of various | agreements all |
|                  | \- Other       | spices, 54% of  | goods of       |
|                  | spices (34)    | other spices    | Malawi origin  |
|                  |                | and 37% Nutmeg; | enter South    |
|                  | \- Cloves (13) | Singapore       | Africa         |
|                  |                | supplies 17%    | duty-free.     |
|                  | \- Nutmeg (13) | Pepper and 47%  |                |
|                  |                | Cloves.         |                |
|                  |                |                 |                |
|                  |                | US supplies     |                |
|                  |                | .33% Tea, .36%  |                |
|                  |                | Pepper, 1.18%   |                |
|                  |                | Other Spices    |                |
|                  |                | and             |                |
|                  |                | insignificant   |                |
|                  |                | amount of       |                |
|                  |                | coffee, seed of |                |
|                  |                | various spices, |                |
|                  |                | cloves and      |                |
|                  |                | nutmeg.         |                |
+------------------+----------------+-----------------+----------------+
| Prepared Meat,   | 228,127        | Philippines     | India supplies |
| Fish, etc        |                | (32.4%)         | price          |
|                  | Fish and       |                 | competitive    |
|                  | Caviar (170)   | Thailand (32%)  | Shrimps and    |
|                  |                |                 | Prawns.        |
|                  | Crustaceans    | Philippines     | Philippines    |
|                  | (49)           | supplies 43%    | and Thailand   |
|                  |                | fish and        | supplies tuna. |
|                  | Meat Offal (7) | caviar; India   |                |
|                  |                | supplies 41%    |                |
|                  |                | Crustaceans;    |                |
|                  |                | and Zimbabwe    |                |
|                  |                | supplies 58% of |                |
|                  |                | Meat offal.     |                |
|                  |                |                 |                |
|                  |                | US is a minor   |                |
|                  |                | supplier 2%     |                |
|                  |                | fish caviar,    |                |
|                  |                | and is non      |                |
|                  |                | significant in  |                |
|                  |                | crustaceans and |                |
|                  |                | meat offal.     |                |
+------------------+----------------+-----------------+----------------+
| Beverages        | 1,006,622      | UK (52%)        | South Africa   |
|                  |                |                 | is a net       |
|                  | Spirit         | Austria (9%)    | exporter of    |
|                  | Beverages      |                 | alcoholic      |
|                  | (742)          | US (5%)         | beverages.     |
|                  |                |                 | This market is |
|                  | Non alcoholic  | UK supplies 69% | dominated by   |
|                  | beverages      | spirit          | well known     |
|                  | (119)          | beverages,      | brands from    |
|                  |                | Austria         | the UK.        |
|                  | Wine of Fresh  | supplies 71%    |                |
|                  | grapes (80)    | non alcoholic   | Opportunity    |
|                  |                | beverages,      | exists for     |
|                  | Undenatured    | Argentina       | imports of     |
|                  | alcohol (28)   | supplies 43%    | specialty      |
|                  |                | undenatured     | brand name     |
|                  |                | alcohol; and    | bourbon and    |
|                  |                | France supplies | whisky.        |
|                  |                | 37% wine of     |                |
|                  |                | fresh grapes.   |                |
|                  |                |                 |                |
|                  |                | US is a minor   |                |
|                  |                | supplier of all |                |
|                  |                | products in     |                |
|                  |                | this category.  |                |
+------------------+----------------+-----------------+----------------+
| Fats and Oils    | 2,109,479      | Malaysia (33%)  | South Africa   |
|                  |                |                 | is a net       |
|                  | Palm oil (765) | Brazil (17%)    | importer of    |
|                  |                |                 | edible fats    |
|                  | Soybean oil    | US supplies 99% | and oils.      |
|                  | (435)          | of Pig &        | Local          |
|                  |                | Poultry fats    | producers are  |
|                  | Bovine (141)   | and oils and is | unable to meet |
|                  |                | a minor         | total          |
|                  | Coconut (140)  | supplies of the | requirements   |
|                  |                | rest of the     | due to limited |
|                  | Ani            | products in     | crop sizes.    |
|                  | mal/vegetables | this category.  |                |
|                  | (128)          | Malaysia        |                |
|                  |                | supplies 60% of |                |
|                  | Margarine      | Palm oil,       |                |
|                  | edible mix     | coconut,        |                |
|                  | (99)           | an              |                |
|                  |                | imal/vegetable, |                |
|                  | Olive oil (69) | and margarine   |                |
|                  |                | edible mix.     |                |
|                  | Pig poultry    | Argentina       |                |
|                  | (22)           | supplies 59%    |                |
|                  |                | soybean oil,    |                |
|                  |                | Australia       |                |
|                  |                | supplies 79%    |                |
|                  |                | Bovine, and     |                |
|                  |                | Italy supplies  |                |
|                  |                | 43% Olive oil.  |                |
+------------------+----------------+-----------------+----------------+
| Cocoa            | 303,193        | Cote d'Ivoire   | Cocoa is not   |
|                  |                | (34%)           | grown in South |
|                  | Butter, Fat    |                 | Africa and     |
|                  | and Oil (77)   | Indonesia (17%) | thus offers    |
|                  |                |                 | good           |
|                  | Cocoa Beans    | US (2%)         | opportunities  |
|                  | (65)           |                 | for potential  |
|                  |                | Cote d'Ivoire   | exporters.     |
|                  | Cocoa Paste    | supplies 100%   |                |
|                  | (53)           | of cocoa beans, |                |
|                  |                | and 49% of      |                |
|                  | Cocoa Powder   | cocoa paste;    |                |
|                  | (48)           | Indonesia       |                |
|                  |                | supplies 48%    |                |
|                  |                | Butter, fat and |                |
|                  |                | oil; and        |                |
|                  |                | Singapore       |                |
|                  |                | supplies 30%    |                |
|                  |                | cocoa powder.   |                |
|                  |                |                 |                |
|                  |                | US is a minor   |                |
|                  |                | supplier of     |                |
|                  |                | .08% cocoa      |                |
|                  |                | powder.         |                |
+------------------+----------------+-----------------+----------------+
| Baking Related   | 278            | Ireland (21%)   | Products in    |
|                  |                |                 | this category  |
|                  | Food prep of   | Italy (18%)     | are regarded   |
|                  | flour (97)     |                 | as South       |
|                  |                | US (2.3%)       | African staple |
|                  | Bread, pastry, |                 | food,          |
|                  | cake, etc (78) | Italy supplies  | especially     |
|                  |                | 67% pasta       | bread,         |
|                  | Pasta,         | couscous;       | therefore      |
|                  | couscous (61)  | Ireland         | growth is      |
|                  |                | supplies 60%    | assured.       |
|                  | Food prep from | food prep of    | Current trends |
|                  | cereal (41)    | flour; UK       | are in-house   |
|                  |                | supplies 54%    | bakeries       |
|                  |                | food prep from  | stores in      |
|                  |                | cereal; and     | convenience    |
|                  |                | United Arab     | retail stores  |
|                  |                | Emirates        | and hotels.    |
|                  |                | supplies 22%    |                |
|                  |                | bread, pastry,  |                |
|                  |                | and cakes.      |                |
|                  |                |                 |                |
|                  |                | US is a minor   |                |
|                  |                | supplier of all |                |
|                  |                | products in     |                |
|                  |                | this category,  |                |
|                  |                | but could       |                |
|                  |                | improve here.   |                |
+------------------+----------------+-----------------+----------------+
| Sugar            | 237            | Brazil (16%)    | South Africa   |
|                  |                |                 | is a net       |
|                  | Other sugars   | Zimbabwe (15%)  | exporter of    |
|                  | (102)          |                 | sugar. The     |
|                  |                | US (7%)         | majority of    |
|                  | Confection     |                 | imports are in |
|                  | (74)           | Zimbabwe        | the category   |
|                  |                | supplies 57%    | of other sugar |
|                  | Cane/beet (57) | Cane/beet and   | products in    |
|                  |                | 44% Molasses;   | solid form,    |
|                  | Molasses (4)   | Brazil supplies | such as cane   |
|                  |                | 47% confection  | and beet       |
|                  |                | and New Zealand | sugar.         |
|                  |                | supplies 23%    |                |
|                  |                | other sugars.   |                |
|                  |                |                 |                |
|                  |                | US is a minor   |                |
|                  |                | suppliers of    |                |
|                  |                | all products    |                |
|                  |                | except          |                |
|                  |                | molasses.       |                |
+------------------+----------------+-----------------+----------------+
| Preserved Food   | 156            | Italy (17.3%)   | Italy supplies |
|                  |                |                 | price          |
|                  | Prep vegetable | China (17%)     | competitive    |
|                  | (45)           |                 | products.      |
|                  |                | Netherlands     |                |
|                  | Fruit &        | (13)            |                |
|                  | vegetable      |                 |                |
|                  | juice (43)     | Italy supplies  |                |
|                  |                | 86% of tomatoes |                |
|                  | Other fruit    | without         |                |
|                  | nut (33)       | vinegar; China  |                |
|                  |                | supplies 37% of |                |
|                  | Tomatoes no    | fruit &         |                |
|                  | vinegar (22)   | vegetable       |                |
|                  |                | juice; US       |                |
|                  |                | supplies 24%    |                |
|                  |                | Other fruit nut |                |
|                  |                | and is minor    |                |
|                  |                | supplies of all |                |
|                  |                | products in     |                |
|                  |                | this category;  |                |
|                  |                | and Netherlands |                |
|                  |                | supplies 12%    |                |
|                  |                | Prep.           |                |
|                  |                | Vegetables.     |                |
+------------------+----------------+-----------------+----------------+
| Food Waste,      | 1,398,241      | Argentina (71%) |                |
| Animal Feed      |                |                 |                |
|                  | Soybean        | US (4%)         |                |
|                  | residue (946)  |                 |                |
|                  |                | Argentina       |                |
|                  | Animal feed    | supplies 94%    |                |
|                  | prep. (228)    | soybean         |                |
|                  |                | residues and    |                |
|                  | Other solid    | 36% of other    |                |
|                  | residue (100)  | solid residue;  |                |
|                  |                | Mozambique      |                |
|                  | Bran (38)      | supplies 49%    |                |
|                  |                | Bran, and US    |                |
|                  |                | supplies 21%    |                |
|                  |                | Animal feed     |                |
|                  |                | prep. and is    |                |
|                  |                | minor supplier  |                |
|                  |                | of all products |                |
|                  |                | in this         |                |
|                  |                | category.       |                |
+------------------+----------------+-----------------+----------------+

# Section 5. Best product prospects

# A: Products Present in the Market Which Have Good Sales Potential

-   Fats and oils

-   Edible vegetables

-   Animal feeds

-   Edible fruits and nuts

B: Products Not Present In Significant Quantities but Which Have Good
Sales Potential

The hotel-restaurant and institutional sector continues to expand and
restaurant chains are rapidly becoming the dominant sector. Findings
show that following products have good sales potential.

-   Fish and seafood

-   Spirits

-   Baking related products

-   Meat products

-   Cocoa powder

-   Tea and Spices

# C: Products Not Present Because They Face Significant Barriers

Poultry Products: In July 2000, South Africa imposed prohibitive
anti-dumping duties on U.S. chicken leg quarters, an action that has
virtually cut off U.S. poultry exports to South Africa.

**Section 6. Post contact and further information**

If you have any questions or comments regarding this report or need
further assistance, please contact AgPretoria at the following address:

Foreign Agricultural Service

U.S. Embassy Pretoria, South Africa

Washington, D.C., 20521-9300

Tel: 27-12-431-4235

Fax: 27-12-342-2264

Email: <agpretoria@fas.usda.gov>

For more information on exporting U.S. agricultural products to other
countries, please visit the Foreign Agricultural Service's website at:
[http://www.fas.usda.gov](http://www.fas.usda.gov/)

Post acknowledges the following sources: Industry websites such as World
Trade Atlas; euro monitor, South African Tourism, Department of
Environmental Affairs and Tourism, Statistics South Africa, The
Department of Trade and Industry, local foodservice industry
publications, and individual company websites.