Required Report - public distribution

**Date:** 11/20/2006

**GAIN Report Number:** SF6048

SF6048

**South Africa, Republic of**

**Retail Food Sector**

**Annual Report**

**2006**

**Approved by:**

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

U.S.Embassy, South Africa

**Prepared by:**

Margaret Ntloedibe

**Report Highlights:**

South African retailers continue to dominate the top five spots in the
Africa and Middle East ranking, mainly due to their position in Africa's
largest retail market. Market leaders Shoprite, Pick 'n Pay, Spar,
Massmart and Woolworths have been busy adapting to changing conditions
and perfecting their store formats while expanding across the borders
into Southern African countries and beyond. Additionally, South African
retailers are going organic and Woolworths and Pick 'n Pay are the two
leading retail-chain stores that are looking for suppliers of organic
food and beverages, organic baby food, vitamins and supplements, and
also beauty and skincare products. The South African natural and organic
market sector has grown 300% over the past two years, and is expected to
grow over at over 30% per year in the next five years. There are only
200 certified "Organic" producers in South Africa, compared to Mexico
with approximately 35,000. South Africa has only 4 organic wine
producers -- there were over 750 organic wines exhibitors at BIOFACH
Germany in 2005.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Pretoria \[SF1\]

\[SF\]

TABLE OF CONTENTS

Section 1. Market
Summary.........................................................................................page
3 of 26

1.1 Retail Trade
Statistics..........................................................................page
3 of 26

1.2 Wholesale trade statistics
................................................................page 5
of 26

1.3. Advantages and Challenges Facing U.S. Products in
SA............page 9 of 26

Section 2. Road Map for Market Entry
......................................................................page
9 of 26

2.1
Supermarket........................................................................................page
9 of 26

2.1.1 Entry
Strategy...................................................................................page
9 of 26

2.1.2 Market strategy
...............................................................................page
11 of 26

2.1.3 Major Supermarket profile
..........................................................page 11 of 26

2.2 Convenience
Stores...........................................................................page
17 of 26

2.2.1 Entry strategy
................................................................................page
17 of 26

2.2.2 Market structure
............................................................................page
17 of 26

2.2.3 Major Convenience store profiles
............................................. Page 17 of 26

3.  Traditional
    Markets.......................................................................page
    18 of 26

> 2.3.1 Entry strategy
> ...............................................................................
> Page 18 of 26

2.3.2 Market structure
..........................................................................
page 19 of 26

2.3.3 Traditional market profile
............................................................page 19 of
26

Section 3. Competition
..............................................................................................
page 19 of 26

Section 4. Best Products Prospects
.........................................................................
Page 24 of 26

A. Products Present in the Market which
have.................................. Page 24 of 26

B. Products not present in significant quantities but
which............page 25 of 26

C. Products not present because they face significant barriers.....page
25 of 26

Section 5. Post Contact and further information
................................................. Page 26 of 26

# SECTION 1. MARKET SUMMARY

South Africa, a growing retail market with a population of around 46
million people, possesses a modern infrastructure supporting an
efficient distribution of goods to major urban centers throughout
Southern Africa. South Africa also has well-developed financial, legal,
communications, energy, and transport sectors. South Africa's economic
situation and the strength of the rand continue to improve, causing food
retailers to continually update their selection of imported and locally
produced items. There are many players in the food retail industry in
South Africa. On the high end South Africa has highly sophisticated
retail chain supermarkets such as Shoprite-Checkers, Pick n Pay, Spar,
Woolworths, and New Clicks. Wholesale outlets such as Makro, Metro Cash
and Carry, and Trade Center; independent stores such as Biforce Group,
Bargain Group, Shield Wholesalers; convenience chain stores including
forecourts (gas stations with convenience stores); traditional stores
which includes independent stores such as general dealers, cafes, spaza
shops, street vendors, hawkers, tuck shops, and primitive small street
corner stalls at the other end of the retail sector. The South African
food and beverage market is becoming increasingly sophisticated and is
supplied by both local and imported products. Tables below, outlines
retail and wholesale trade sales.

**1.1 RETAIL TRADE STATISTICS**:

Table of Total retail trade sales (\$ million): 2001 -- 2005

  ----------- ------------ ------------ ------------ ------------ ------------
  Month       2001         2002         2003         2004         2005 1/

  January     2,402        2,674        3,046        3,446        3,650

  February    2,324        2,606        2,919        3,350        3,611

  March       2,581        2,909        3,235        3,537        3,858

  April       2,561        2,825        3,136        3,471        3,918

  May         2,609        2,971        3,303        3,664        4,021

  June        2,962        2,938        3,201        3,648        3,940

  July        2,649        2,932        3,249        3,706        3,995

  August      2,614        2,981        3,227        3,582        4,064

  September   2,593        2,975        3,295        3,773        4,149

  October     2,750        3,108        3,395        3,939        4,398

  November    2,899        3,318        3,658        4,157        4,638

  December    3,806        4,287        4,768        5,449        6,141

  Total       32,391       36,528       40,438       45,727       50,388
  ----------- ------------ ------------ ------------ ------------ ------------

Source: Statistics South Africa

Table of % change in Total retail trade sales 1/: 2001 -- 2005

  ----------- ----------- ----------- ----------- ----------- -----------
  Month       2001        2002        2003        2004        2005

  January     5.5         11.3        13.9        13.1        5.9

  February    6.3         12.1        12.0        14.7        7.8

  March       7.5         12.7        11.2        9.3         9.1

  April       7.4         10.3        11.0        10.7        12.9

  May         8.3         13.9        11.2        10.9        9.7

  June        9.7         13.0        9.0         14.0        8.0

  July        10.9        10.7        10.8        14.1        7.8

  August      10.6        14.0        8.3         11.0        13.5

  September   8.2         14.7        10.8        14.5        10.0

  October     10.4        13.0        9.3         16.0        11.6

  November    8.8         14.5        10.2        13.6        11.6

  December    8.5         12.6        11.2        14.3        12.7

  Total       8.5         12.8        10.7        13.1        10.2
  ----------- ----------- ----------- ----------- ----------- -----------

Source: Statistics South Africa

Total retail trade sales according to type of dealer (\$ million): 2005

  ------- -------- ------- ------- ------- ------- ------- ------- --------
  Month   Type A   Type B  Type C  Type D  Type E  Type F  Type G  Total 2/

  Jan     1,369    0,460   0.175   0.657   0.270   0.206   0.511   3,650

  Feb     1,357    0.465   0.183   0.594   0.263   0.228   0.519   3,611

  March   1,456    0.507   0.184   0.635   0.280   0.217   0.577   3,858

  Apr     1,353    0.495   0.207   0.790   0.288   0.231   0.551   3,918

  May     1,388    0.466   0.216   0.828   0.296   0.253   0.571   4,021

  June    1,420    0.482   0.205   0.670   0.327   0.265   0.568   3,940

  July    1,421    0.506   0.186   0.718   0.335   0.264   0.562   3,995

  Aug     1,435    0.487   0.202   0.717   0.335   0.282   0.603   4,064

  Sep     1,543    0.508   0.187   0.726   0.355   0.305   0.522   4,149

  Oct     1,545    0.509   0.195   0.818   0.376   0.324   0.627   4,398

  Nov     1,619    0.532   0.191   0.833   0.450   0.344   0.665   4,638

  Dec     2,132    0.748   0.187   1,410   0.651   0.274   0.736   6,141

  Total   18,043   6,170   2,324   9,401   4,232   3,198   7,017   50,388
  ------- -------- ------- ------- ------- ------- ------- ------- --------

Source: Statistics South Africa

**1.2 WHOLESALERS TRADE STATISTICS:**

Total wholesale trade sales (\$ million): 2001 -- 2005

  ------------ ---------- ------------ ----------- ----------- ------------
  Month        2001       2002         2003        2004        2005

  January      3,970      4,525        4,918       5,148       5,761

  February     4,273      4,768        5,626       5,815       6,030

  March        4,280      5,071        5,788       6,295       6,440

  April        4,157      5.052        5,365       5,622       6,622

  May          4,413      5,147        5,671       6,786       6,887

  June         4,491      5,056        5,859       6,988       7,141

  July         4,348      4,977        5,970       6,694       7,121

  August       4,430      5,130        5,730       6,828       7,336

  September    4,237      5,382        5,854       6,905       7,620

  October      4,852      6,040        6,165       7,476       7,875

  November     5,025      5,961        6,295       7,966       8,439

  December     4,886      5,410        5,380       6,873       7,302

  Total        53,367     62,525       68,627      79,400      84,581
  ------------ ---------- ------------ ----------- ----------- ------------

Source: Statistics South Africa

Percentage change in total wholesale trade sales: 2001 - 2005

  -------------- --------- ----------- ------------ ---------- -----------
  Month          2001      2002        2003         2004       2005

  January        20.5      14.0        8.7          4.7        11.9

  February       15.7      11.6        18.0         3.4        3.7

  March          6.5       18.5        14.1         8.8        2.3

  April          12.1      21.5        6.2          4.8        17.8

  May            10.8      16.6        10.2         19.7       1.5

  June           12.4      12.6        15.9         19.3       2.2

  July           12.5      14.5        19.9         12.1       6.4

  August         8.3       15.8        11.7         19.1       7.4

  September      3.6       27.0        8.8          18.0       10.3

  October        9.8       24.5        2.1          21.3       5.3

  November       10.4      18.6        5.6          26.6       5.9

  December       14.0      10.7        -0.5         27.7       6.2

  Total          11.2      17.2        9.8          15.7       6.5
  -------------- --------- ----------- ------------ ---------- -----------

Source: Statistics South Africa

Total wholesale trade sales according to type of dealer (\$ million):
2005

  ---------- ----------------------------------- ------------------------
  Group Type Wholesale description included in   \$ million
             group type                          

  A          Wholesale trade on a fee contract   4,561
             basis.                              

  B          Wholesale trade in agricultural raw 3,178
             materials and livestock.            

  C          Wholesale trade in food, beverages  15,915
             and tobacco.                        

  D          Trade in textiles, clothing and     2,698
             footwear.                           

  E          Trade in other household goods      8,641
             except precious stones.             

  F          Trade in precious stones, jewelry   2,515
             and silverware.                     

  G          Trade in solid, liquid and gaseous  14,208
             fuels and related products.         

  H          Trade in metals and metal ores.     2,990

  I          Trade in construction and building  4,771
             materials.                          

  J          Trade in other intermediate         3,075
             products, waste and scrap.          

  K          Trade in machinery, equipment and   15,226
             supplies.                           

  L          Trade in other goods.               6,387

             TOTALS                              84,581
  ---------- ----------------------------------- ------------------------

Source: Statistics South Africa

The South African retail market consists of a few major supermarkets
chains, convenience chains, and some independent stores. According to
ACNielsen Research, currently 54% of retail sales occur in the major
supermarkets chains, Shoprite, Pick n Pay, Spar and Woolworths. It is
predicted that this figure will reach 60% in 2008, which will bring
South Africa in line with the global trends. The food retail sector
continues to expand, while supermarkets, convenience stores and
forecourts are rapidly becoming the dominant food retail outlets. A boom
in the franchise sector, convenience stores, and forecourts, which are
good venues for imported products, provide better access and convenience
for consumers.

The economic impact of South Africa hosting 2010 Soccer World Cup is
expected to result in \$350 million in improvements and investment
projects, and will impact the overall growth in the food and beverage
sector. Best prospects for U.S. products include several high value
products including almonds, cultivated ginseng root, canned salmon,
American bourbon whisky, new oak staves for wine barrels, sauces and
frozen food preparations. These items have shown consistent growth over
the last five years and represent important opportunities for U.S.
exporters.

South Africa has a two-tiered economy, one rivaling other developed
countries and the other with only the most basic infrastructure. It can
be characterized as a productive and industrialized economy that
exhibits many characteristics associated with developing countries,
including a division of labor between formal and informal sectors-and
uneven distribution of wealth and income. The formal sector, based on
mining, manufacturing, services, and agriculture, is well developed.

Retail trade outlets in South Africa offer the full spectrum available
in the United States. These range from the neighborhood convenience
drugstore (called cafés), to the small general dealer, specialty stores
handling a single product line (for example, clothing, electronics,
furniture), exclusive boutiques, chain stores (groceries, clothing,
toiletries, household goods), department stores, cash and carry
wholesale-retail outlets, to co-

operative stores serving rural areas. About 90 percent of inventories of
consumer-ready products in these stores are domestically sourced. A
major phenomenon in South Africa has been the evolution of hypermarkets,
which sell large quantities of almost all consumer goods on a self-serve
basis. The hypermarkets, located in suburban shopping centers/malls,
have disrupted the traditional distribution chain by purchasing directly
from manufacturers and

bypassing the wholesaler, and with low margins achieving high turnover,
thereby placing price pressure on all competing outlets.

Many U.S. exporters of consumer goods sell directly to South African
retail organizations, such as department stores, chain stores, and
cooperative groups of independent retailers, which assume the functions
of wholesale buying, selling, and warehousing.

It may be necessary to appoint an official after-sales agent for
products of a technical nature in South Africa. This may be a company
that does not import or market the product in question, but rather,
because of its geographical reach, technical abilities and goodwill in
the market, acts as the certified service agent. Appointing an
appropriate after sales agent is crucial in ensuring that the product
develops a respected reputation in the South African market.

**Retail trends, Consumer Tastes and Preferences**: Despite the variety
of options available to South African consumers, price sensitivity rules
their behavior. A source survey revealed that own brands or private
label -- products that are exclusive to a particular retailer - are
capturing more of the consumer spend. There were 10,500 new Fast Moving
Consumer Goods (FMCG) items launched in South Africa in 2005. The
highest number of new products launched in 2005 was in the personal care
category, followed by dry grocery, confectionery and non-alcoholic
beverages. The highest demand products are non-alcoholic beverages,
followed by personal care products.

Line extensions dominate new product launches in South Africa, with few
brands and little true innovation. Master Foods brand entry into other
product categories included Purity into Infant Milk, Flora into
Mayonnaise, McCain into frozen recipe meals, Boplus into Sweets, Nivea
into Deodorants and Canderel into Chocolate coated lines. Existing brand
offerings include new pack sizes, flavors or variants included Cadbury
launching Mouses and Truffles, Black Cat bringing out a 210g squeeze
tube, All Gold Baked Beans in BBQ, Cheese, Malay Curry and Sweet & Sour
flavors and Selati sugar in shakers. A source survey found that 47.8%
based their decisions on price and 16.9% buy store brand (generic brand)
items because they are good value for money. Only 13.4% mentioned
quality as a motivator, while 4.3% of survey participants perceived the
store brand to be equal to name brand items. Products that are
successful with store brand labels include milk, syrups, dry pasta,
nuts, canned fruits and jellies.

Although many South Africans choose products according to price,
consumers in townships often demonstrate contradictory demands and
characteristics. For example, spazas and other informal shops tend to
only supply leading brand items because their customers demonstrate
strong brand loyalty. Adding to this trend is the fact that the Black
population's buying power is increasing. On the other hand, product
attributes that may help a product succeed in township markets are less
expensive and/or single service package sizes and ambient-stable
products that do not require refrigeration. A local research company
recently reported findings that confirm this, stating, "we have heard
for the past 20 years that the \[low income\] consumer wants smaller
packaging, but it is still amazing how many manufacturers do not heed
that call."

An ACNielsen study reveals that there were 10,500 new FMCG's launched in
South Africa in 2005, including new brands, brand extensions and new
types of products.

South Africa is in a somewhat different position than the US and Europe,
being a developing market. Categories (of which there are 167, according
to ACNielsen) are less crowded, so it is easier to "get in". For this
reason, it is also easier to differentiate one's brand from its
competitor's. In addition, relatively low media costs make it easier to
build awareness of a new product. However, budgets for consumer research
are generally not high and marketers may have a limited understanding of
their target market, in addition the retail trade in South Africa is
consolidated, making it difficult to achieve broad based distribution
quickly. Consumers in South Africa are willing to try new products and
of those who plan their shopping trips, 41% say they always buy
something additional, while 30% say they sometimes by additional
products.

ACNielsen urges South African manufacturers to adopt a new attitude
towards pricing, as South Africa holds a high 35% volume responsiveness
level to a 10% price reduction, in comparison to the USA's 17% or UK's
20%. According to ACNielsen August 2005 studies, the food sector is by
far the most receptive to price reduction nationally, followed by the
beverage sector. Building equity is particularly important in the Food
Sector, as consumers are more inclined to shop around for special offers
on food than they are in other sectors. On an average 750 item basket,
the difference in pricing between the most and least premium major South
African retailers is currently only 5%. This figure has come down from
7% two years ago, and emphasizes the importance of effective product
distribution to all major retailers.

A steady increase in the number of households in South Africa, which is
predicted to increase from the current number of 9.8 million to 11.2
million in 2008, signals a necessary increase in spending. Further good
news for retailers is that South Africans are not great savers of their
income. With a saving ratio of only 0.6%, as much 54% of income goes to
repaying debt, with the rest being spent. Increased growth in all
corporate stores is predicted, as well as increased growth in franchise
and voluntary groups.

**Import and Export trade data**: Exports: South Africa's agricultural
exports for 2005-06 reached a total of \$4.88 billion, up from \$4.81
billion in 2004-05. South Africa's five largest export destinations were
Japan (\$512 million), U.K. (\$498 million), the Netherlands (\$422
million), United States (\$254 million), and Italy (\$219 million).
South Africa's most important exports to the United States are fresh
citrus, wine, tree nuts, fruit juice, lobster, non-coniferous wood
chips, and value-added wood products.

Imports: South Africa's total agricultural imports for 2005-06 rose to
\$3.1 billion from \$2.1 billion in 2004-05. The leading suppliers were
Argentina (\$439 million), Brazil (\$329 million), the United States
(\$202 million), U.K. (\$182 million), and Malaysia (\$161 million).
South Africa's major imported agricultural commodities from the United
States in 2005 were wheat, (sugars, sweeteners & beverage bases), other
intermediate agricultural products, tree nuts, logs and chips, and other
edible fish and seafood.

**Trends in Online Sales**: According to World Wide Worx, leaders in
technology research in South Africa, online retail in South Africa 2006
-- broadband and experience are the keys to online retail. As of January
2006, online retail in South Africa reportedly grew by 20% in 2005, down
from the 25% growth rate of 2004, as the industry finds itself lagging
due to the high cost of broadband internet access in South Africa.

The total spent on online retail goods in South Africa in 2005 was R514
million, up from R428 million in 2004, according to a report from World
Wide Worx, "Online Retail in South Africa 2006." The full report is
available on: [www.theworx.biz](http://www.theworx.biz/)

The most popular goods to purchase online are groceries, apparel and
books. The fastest growing retail categories (in descending order) are
flowers and gifts, apparel, food, beverages and groceries.

**Food Standards and Regulations**: Our office prepared reports for
exporting to South Africa. For further information, please read Gain
Report SF6027, the Food and Agricultural Import Regulations and
Standards (FAIRS), and SF6046, FAIRS Export Certificates.

**1.3 Advantages and Challenges Facing U.S. Products in South Africa**

+-----------------------------------+----------------------------------+
| Advantages                        | Challenges                       |
+-----------------------------------+----------------------------------+
| South Africans are developing a   | Consumers may need to be         |
| taste for western foods and are   | educated in                      |
| willing to try                    |                                  |
|                                   | preparing and eating products.   |
| anything once.                    |                                  |
+-----------------------------------+----------------------------------+
| The growing retail food industry  | Acquired tastes and preferences  |
| needs imported food and beverage  | for traditional, locally         |
| products.                         | produced products.               |
+-----------------------------------+----------------------------------+
| Favorable exchange rate, strong   | Competition from other countries |
| rand with the weak dollar make    | and locally produced products.   |
| American imports more affordable. | 90 percent of products in the    |
|                                   | retail outlets are locally       |
|                                   | produced. South Africa's major   |
|                                   | retailers have joined forces     |
|                                   | with the Proudly South African   |
|                                   | (PSA) campaign, launched by the  |
|                                   | Government, to give PSA          |
|                                   | suppliers preferential tendering |
|                                   | for shelf space, and to promote  |
|                                   | South African products.          |
+-----------------------------------+----------------------------------+
| South Africa is a getaway for     | Consumers are price-conscious    |
| regional markets.                 | and some do not exhibit brand    |
|                                   | loyalty. Products must           |
|                                   | constantly be promoted.          |
+-----------------------------------+----------------------------------+
| South African consumers view U.S. | Retailers and consumers have     |
| products as high quality.         | limited knowledge about the      |
|                                   | variety of U.S. products.        |
+-----------------------------------+----------------------------------+
| South African importers seek      | Challenging for U.S. suppliers   |
| suppliers who can offer reliable  | to respond to trade lead         |
| and quality products,             | inquires in a timely fashion.    |
| consolidators of mixed containers |                                  |
| at competitive prices.            |                                  |
+-----------------------------------+----------------------------------+
| Importers and distributors can    |                                  |
| help develop brand loyalty.       |                                  |
+-----------------------------------+----------------------------------+

# Section 2: Road Map for Market Entry

1.  Supermarket:

2.1.1 [Entry Strategy]{.underline}: Introducing a product successfully
depends on promotion and support from the consumer. In South Africa's
very competitive marketplace it is essential that U.S. exporters choose
the correct agent or distributor. Evidence shows that the most
successful U.S. company ventures are those that have researched their
market thoroughly before engaging in a search for agents and
distributors. Once contacts are established it is advisable to visit
South Africa since firsthand knowledge of the market is highly useful.
Research has shown that a new opportunity in South Africa is aggressive
marketing by sampling and advertising on board local airlines.

In South Africa the terms "Agent" and "Distributor" have a very specific
meaning. Agents work on a commission basis after obtaining orders from
customers. Distributors buy and sell products directly to their
customers. It is common to appoint a single agent capable of providing
national coverage either through one office or a network of branch
offices. In addition to their role as the local representatives of U.S.
exporters, agents should be able to

handle the necessary customs clearance, port and rail charges,
documentation, warehousing, and financing arrangements. Local agents
representing foreign exporters outside South Africa who export goods to
South Africa, are fully liable under the South African Import Control
Law for all regulations and control imposed on imported products. Local
agents are required to register with the Director of Import and Export
Control of the Department of Trade and Industry. It is important for a
U.S. exporter to maintain close contact with the local agent to track
changes in importing procedures and to ensure that the agent is
effectively representing his or her interests.

2.1.2 **[Market Structure]{.underline}**

Basic flow of imported food products:

-   Retail supermarket chains maintain their own distribution systems,
    using warehouses to allocate goods to supermarket branches.

-   Depending on the arrangements, in some instances imports are handled
    by the supermarket chain's head office or by branches themselves.

-   Trends in the distribution channels show that some of the
    supermarkets are moving toward outsourcing the services of
    warehousing and transportation.

**2.1.3 [Major Supermarket profile:]{.underline}**

Below is a chart of South Africa's major supermarket chains. For the
most part, they offer much the same range of products and brands.
Gaining a competitive edge through image and service is their major
preoccupation. The retailers work hard at establishing their own
particular appeal. Some, like Woolworths and Spar, do this by targeting
a particular shopper segment, such as upper income groups. Others, like
Pick n Pay and Shoprite-Checkers group, go head-to-head more on price
and "shopping experience".

One common characteristics among these retail groups is enormous
bargaining power. They are all able to dictate their buying terms to
suppliers who are expected to deliver products to central depots or
warehouses, where the products are then distributed to supermarkets and
retail outlet stores. Shoprite-Checkers and Spar, for example, are very
strong in the black areas (townships) whereas Woolworths is stronger in
the smaller "up-market" segment.

Woolworths and Pick 'n Pay retail chains have entered the township
market and opened a few stores. Most supermarkets sell their own-label
products as well as manufacturer's brands. The retail industry prefers
to buy directly from local manufacturers. For imported products, some
supermarkets prefer to deal directly with U.S. companies, because an
import agent or a distributor acting as a middleman can add up to 30% to
the cost of the product, resulting in less margin for the supermarket.

Supermarkets have recognized the growing demand for prepared food, and
compete with convenience stores or quick service stores and have
increased the offering of fresh, prepared foods, ready-to-eat meals.

**South Africa's Major Retail Chains**

+-----------+----------------+--------+--------+--------+------------+
| Retail    | Ownership      | Sales  | Number | Lo     | Purchasing |
| Name      |                |        | of     | cation | Agent Type |
|           |                | (\$Mi  | O      |        |            |
|           |                | llion) | utlets |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Shoprite  | Local          | Not    | 846    | Nati   | Direc      |
| Holdings: |                | ava    |        | onwide | t/Importer |
|           |                | ilable |        |        |            |
| -Shoprite |                |        |        |        |            |
|           |                |        |        |        |            |
| -Checkers |                |        |        |        |            |
|           |                |        |        |        |            |
| -Checkers |                |        |        |        |            |
| Hypers    |                |        |        |        |            |
|           |                |        |        |        |            |
| -Usave    |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK       |                |        |        |        |            |
| Furniture |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK Power |                |        |        |        |            |
| Express   |                |        |        |        |            |
|           |                |        |        |        |            |
| -House &  |                |        |        |        |            |
| Home      |                |        |        |        |            |
|           |                |        |        |        |            |
| -Hungry   |                |        |        |        |            |
| Lion fast |                |        |        |        |            |
| food      |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK       |                |        |        |        |            |
| Minimark  |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK Foods |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK       |                |        |        |        |            |
| Grocer    |                |        |        |        |            |
|           |                |        |        |        |            |
| -OK       |                |        |        |        |            |
| Minimark  |                |        |        |        |            |
|           |                |        |        |        |            |
| -Sentra   |                |        |        |        |            |
|           |                |        |        |        |            |
| -Megasave |                |        |        |        |            |
|           |                |        |        |        |            |
| -Value    |                |        |        |        |            |
| stores    |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Wo        | Local          | Not    | 300    | Nati   | Direc      |
| olworths: | /international | ava    |        | onwide | t/Importer |
|           |                | ilable |        |        |            |
| -W        |                |        |        |        |            |
| oolworths |                |        |        |        |            |
|           |                |        |        |        |            |
| -Co       |                |        |        |        |            |
| untryRoad |                |        |        |        |            |
|           |                |        |        |        |            |
| -W        |                |        |        |        |            |
| oolworths |                |        |        |        |            |
| (fr       |                |        |        |        |            |
| anchised) |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Spar:     | Local          | Not    | 1133   | Nati   | Direc      |
|           | /International | ava    |        | onwide | t/Importer |
| -         |                | ilable |        |        |            |
| Superspar |                |        |        |        |            |
|           |                |        |        |        |            |
| -Spar     |                |        |        |        |            |
|           |                |        |        |        |            |
| -Kwikspar |                |        |        |        |            |
|           |                |        |        |        |            |
| -Tops     |                |        |        |        |            |
|           |                |        |        |        |            |
| -Build It |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Pick n    | Local          | Not    | 706    | Nati   | Direc      |
| Pay       | /International | ava    |        | onwide | t/Importer |
| Group:    |                | ilable |        |        |            |
|           |                |        |        |        |            |
| \- Pick n |                |        |        |        |            |
| Pay       |                |        |        |        |            |
| Hypers    |                |        |        |        |            |
|           |                |        |        |        |            |
| \- Pick n |                |        |        |        |            |
| Pay       |                |        |        |        |            |
|           |                |        |        |        |            |
| Supers    |                |        |        |        |            |
|           |                |        |        |        |            |
| \- Pick n |                |        |        |        |            |
| Pay       |                |        |        |        |            |
| Family    |                |        |        |        |            |
|           |                |        |        |        |            |
| \-        |                |        |        |        |            |
| Ritevalu  |                |        |        |        |            |
|           |                |        |        |        |            |
| \- Score  |                |        |        |        |            |
|           |                |        |        |        |            |
| \- Pick n |                |        |        |        |            |
| Pay       |                |        |        |        |            |
| M         |                |        |        |        |            |
| inimarket |                |        |        |        |            |
|           |                |        |        |        |            |
| \-        |                |        |        |        |            |
| Boardmans |                |        |        |        |            |
|           |                |        |        |        |            |
| \-        |                |        |        |        |            |
| Franchise |                |        |        |        |            |
|           |                |        |        |        |            |
| \- Pick n |                |        |        |        |            |
| Pay Gas   |                |        |        |        |            |
| Centers   |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| New       | Local          | Not    | 664    | Nati   | Direc      |
| Clicks    |                | ava    |        | onwide | t/importer |
| Holdings  |                | ilable |        |        |            |
|           |                |        |        |        |            |
| -Clicks   |                |        |        |        |            |
|           |                |        |        |        |            |
| -Discom   |                |        |        |        |            |
|           |                |        |        |        |            |
| -Musica   |                |        |        |        |            |
|           |                |        |        |        |            |
| -The Body |                |        |        |        |            |
| Shop      |                |        |        |        |            |
|           |                |        |        |        |            |
| -Style    |                |        |        |        |            |
| Studio    |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Massmart  | Local          | Not    | 706    | Nati   | Direc      |
|           | /international | ava    |        | onwide | t/Importer |
| -Game     |                | ilable |        |        |            |
|           |                |        |        |        |            |
| -Dion     |                |        |        |        |            |
|           |                |        |        |        |            |
| -makro    |                |        |        |        |            |
|           |                |        |        |        |            |
| -Builders |                |        |        |        |            |
| Warehouse |                |        |        |        |            |
|           |                |        |        |        |            |
| -         |                |        |        |        |            |
| Servistar |                |        |        |        |            |
|           |                |        |        |        |            |
| -Feds DIY |                |        |        |        |            |
|           |                |        |        |        |            |
| -Delarex  |                |        |        |        |            |
|           |                |        |        |        |            |
| -CBW      |                |        |        |        |            |
|           |                |        |        |        |            |
| -Jumbo    |                |        |        |        |            |
|           |                |        |        |        |            |
| -Shield   |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+
| Metcash   | Local          | Not    | 618    | Nati   | Direc      |
|           | /international | ava    |        | onwide | t/Importer |
| -Metro    |                | ilable |        |        |            |
|           |                |        |        |        |            |
| -Trade    |                |        |        |        |            |
| Center    |                |        |        |        |            |
|           |                |        |        |        |            |
| -Liquor   |                |        |        |        |            |
| World     |                |        |        |        |            |
|           |                |        |        |        |            |
| -Stax     |                |        |        |        |            |
|           |                |        |        |        |            |
| -Friendly |                |        |        |        |            |
|           |                |        |        |        |            |
| -IGA      |                |        |        |        |            |
|           |                |        |        |        |            |
| -Private  |                |        |        |        |            |
| Labels    |                |        |        |        |            |
|           |                |        |        |        |            |
| -UMS      |                |        |        |        |            |
|           |                |        |        |        |            |
| -Capital  |                |        |        |        |            |
| Tobacco   |                |        |        |        |            |
+-----------+----------------+--------+--------+--------+------------+

Sources: Industries website

**Pick n Pay**: The Pick n Pay Group has been one of Africa's largest
retailers of food, clothing and general merchandise for the past three
decades. Pick n Pay has about 40 percent of the South African retail
food sector. The group operates through three divisions, the Retail
Division; the Group Enterprises Division; and Franklins Australia, each
with their own Managing Director and Management Boards. The Retail
Division manages Pick n Pay branded

businesses such as food, clothing and general merchandise in
Hypermarkets, Supermarkets, Family Franchise Stores, Mini Market
Franchise, Clothing, Butcheries Meat Centers, Home Shopping); and Gas
Centers*.* The Group Enterprises Division operates the Group's other
non-Pick n Pay branded group activities including Score Supermarkets, TM
Supermarkets, property franchises, Go Banking, as well as finding new
investment opportunities for the group worldwide. Pick n Pay has a total
number of 706 stores made up of 14 Hypermarkets, 142 Supermarkets, 127
Family Stores, 11 Liquor Stores, 35 Mini Market Franchise, 18 Clothing
Stores, 115 Score Supermarkets, 57 Boxers, 5 Pick n Pay Auto Centers, 79
Franklins in Australia, and 92 retail stores in the rest of Africa.

In July 2006, Pick n Pay acquired Fruit & Vegetable City stores. Fruit &
Vegetable was established as a family business in 1993, and currently
operates a total of 86 Corporate and Franchise stores nationwide. The 86
corporate franchise stores are excluded in the total of 706 Pick 'n Pay
stores.

According to the research by M+M Planet Retail --
[www.planetretail.net](http://www.planetretail.net/), in 2005 Pick n Pay
was ranked number two of the top 30 retailers in Africa & the Middle
East, with retail sales of

USD5.01 million with a market share of 4.0%. The net sales only reflect
the retailer's shareholdings in the countries where they operate.

The emphasis of the supermarket division is on total convenience and
freshness, with stores trying to add value through the fresh food supply
chain. Traditionally Pick n Pay Score supermarkets have had a presence
in townships when other retailers have stayed away. Pick n Pay is the
most modest of the high-end super market chains. It may be compared to
Publix, Kroger, Victory or Safeway in the United States. Price points
are similar to those in the U.S.

**Shoprite Checkers**: Shoprite Holdings Ltd has about 40 percent of the
market, focusing on the broad middle to lower-end of the market, and is
comprised of the following entities: the Shoprite Checkers supermarket
group, which consists of 348 Shoprite supermarkets, 110 Checkers
Supermarkets, 24 Checkers Hypers, 92 Usave stores, 20 distribution
centers supplying group stores with groceries, non-foods and perishable
lines, 158 Ok Furniture outlets, 13 OK Power Express stores, 27 House &
Home stores, and 74 Hungry Lion fast food. Through its OK Franchise
Division, the Group procures and distributes, stock to 31 OK Minimark
convenience stores, 24 OK Foods supermarkets, 52 OK Grocer stores, 59
Megasave wholesale stores, and 91 Sentra, Value Stores and buying
partners. For more information on this retail chain store visit them on
[www.shoprite.co.za](http://www.shoprite.co.za/)

Checkers Hypers have a special section devoted entirely to imported
foods as well as kosher and halal sections. Catering to middle to higher
income groups. Price points are also comparable to the U.S. Shoprite
Checkers are similar to a Super WalMart or a Shoppers Food Warehouse
type of shopping experience. ACNielsen figures reveals Shoprite had
volume growth of 20% in the prepared food category. The overall growth
of 11% in frozen prepared food sales, and meals solutions 8%.

For incentive purposes, the retail chains normally send their staff
delegation to the FMI show in Chicago. For most of these employees,
their trip is linked to a sales or performance award, but several key
buyers also attend the FMI show. If you are a U.S. company with a
presence at FMI, then it is certainly possible to meet with a Shoprite
Checkers buyer at the FMI show in Chicago.

Among South African retailers, Shoprite has the highest number of stores
in neighboring Southern and Eastern African countries. Shoprite Head
Offices are based in Capetown.

According to the research by M+M Planet Retail --
[*www.planetretail.net*](http://www.planetretail.net/), in 2005 Shoprite
was ranked number one of the top 30 retailers in Africa & the Middle
East, with retail sales of USD5.7 million with a market share of 4.5%.
The net sales only reflect the retailer's shareholdings in the countries
where they operate.

**Woolworths**: Woolworths Holdings Limited (WHL) is a South
African-based retail group chain that operates locally and
internationally through two subsidiaries. Woolworths (Proprietary)
Limited, and Country Road Limited. Woolworths Proprietary operates and
franchises stores in South Africa, Africa and the Middle East; and
Country Road Limited, listed on the Australian Stock Exchange, operates
in Australia, New Zealand and Singapore. Woolworths offers select ranges
of apparel, cosmetics, toiletries, footwear, jewelry and food under its
own brand name. Woolworths has about 300 stores, including Owned
Woolworths, Franchised Woolworths, and Owned and Franchised Country Road
outlets.

Woolworths caters to the wealthiest South African consumers. The
shopping experience isn't as up market as a Dean and Deluca but it's
comparable to the Whole Foods/Fresh Fields or Trader Joe's shopping
experience in the U.S. They carry a relatively small number of branded
products, instead promoting their own Woolworths branded private label
products. For many products, Woolworths only offers two choices, the
leading brand-name product and

Woolworths own private label. Price points are slightly higher than
Checkers and Pick n Pay but relatively comparable to similar retail
markets in the U.S.

# Woolworths supply chain volumes

+--------------------------------------------------+-----+-----+------+
|                                                  | 2   | 2   | ch   |
|                                                  | 004 | 205 | ange |
+--------------------------------------------------+-----+-----+------+
| Food                                             | 3   | 4   | 15%  |
|                                                  | 8.2 | 4.1 |      |
| Total distribution units in food including       |     |     |      |
| franchise (millions)                             |     |     |      |
+--------------------------------------------------+-----+-----+------+
| Clothing and Home                                | 4.2 | 4.7 | 12%  |
|                                                  |     |     |      |
| Total distribution units in clothing and home    |     |     |      |
| (millions)                                       |     |     |      |
+--------------------------------------------------+-----+-----+------+

Source:
[www.woolworthsholding.co.za/retail/operations.asp](http://www.woolworthsholding.co.za/retail/operations.asp)

According to Wendy Hall, Business Day, during 2004/2005 Woolworths
opened a number of forecourt convenience food stores in partnership with
Engen Gas Station to make inroads into the R4-billion equivalent \$0.6
billion 24-hour convenience retail market, which is growing at about 16%
a year. The chain store plans to open at least 24 more by the end of
2008. According to I-Net Bridge, in 2004 three different cards (a store
charge card, a cash card and a visa card) coupled with stores were
launched to boost sales and improve customer relationship.

According to the research by M+M Planet Retail --
[www.planetretail.net](http://www.planetretail.net/), in 2005 Woolworths
was ranked number six of the top 30 retailers in Africa & the Middle
East, with retail sales of USD2.2 million with a market share of 1.8%.
The net sales only reflect the retailer's shareholdings in the countries
where they operate.

**Spar**: The Spar organization is consists of two types of members:
Spar Retailers who are independent store owners, and Spar Distribution
Centers, which provide leadership and services to the Spar Retail
members. Both members belong to the Spar Guild of Southern Africa, a
non-profit company set up to coordinate and develop Spar in Southern
Africa. The members pay subscriptions to the Guild, which uses these
monies to advertise and promote Spar. The Spar grocery chain emerged in
the 1963 when a group of 8 wholesalers was granted exclusive rights to
the Spar name in South Africa to service 500 small retailers. A number
of mergers and take-overs followed, and today all but one of the
wholesalers are owned by the Spar Group Limited which operates 6
distribution centers that supply goods and services to 783 Spar Stores
in South Africa comprising of 104 Superspar, 487 Spar, and 192 Kwikspar,
178 Build It, and 172 TOPS. TOPs are liquor stores, and Build It stores
caters for building materials.

All stores are independently owned, and many of the purchasing decisions
are made at the individual store level. Spar targets high-income
consumers and locates its stores in more up-market neighborhoods.
Shopping at a Spar can be similar to shopping at a really good Giant or
Shaw's in an up-market neighborhood in the U.S. Visit their website at
[www.spar.co.za](http://www.spar.co.za/) for more information of Spar.

According to research by M+M Planet Retail --
[*www.planetretail.net*](http://www.planetretail.net/), in 2005 Spar was
ranked number five of the top 30 retailers in Africa & the Middle East,
with retail sales of USD3.0 million with a market share of 2.4%. The net
sales only reflect the retailer's shareholdings in the countries where
they operate.

**New Clicks Holdings Ltd**: New Clicks is an investment holding
company. Its trading subsidiaries are engaged in discount retailing of
health, beauty and lifestyle products and services on a predominantly
cash basis in Southern Africa through its network of more than 660
stores nationwide. The group operates six multiple brand formats such as
Clicks, Discom, United Pharmaceutical Distributors (UPD), The Body Shop,
Entertainment Division,

and Style Studio. Clicks brand is a specialist retailer of health,
beauty and lifestyle products servicing the middle to upper income
market; Discom provides urban lifestyle brand specializing in African
beauty and decorative homewares; UPD is the largest full-line
pharmaceutical wholesaler in the country and supplies retail pharmacies,
private hospitals, dispensing doctors and retail health stores; the Body
Shop is a high-profile global brand which markets naturally-inspired
beauty products; Entertainment Division which comprises Musica, is the
largest retailer of music and related merchandise in the country; and
Style Studio combines a retail store selling professional hair care
products with a hair salon. For more information visit the store website
at: [www.newclicks.co.za](http://www.newclicks.co.za/)

Company owned stores totals 664 as 308 Clicks, 179 Discom, 145 Musica,
29 The Body Shop, and 3 Style Studio. There are 34 stores planned to be
opened in 2007. According to research by M+M Planet Retail --
[www.planetretail.net](http://www.planetretail.net/), in 2005 New Clicks
was ranked number ten of the top 30 retailers in Africa & the Middle
East, with retail sales of USD1.6 million with a market share of 1.3%.
The net sales only reflect the retailer's shareholdings in the countries
where they operate.

**Massmart Holdings**: Massmast is a managed portfolio of ten
wholesalers and retail chains, each focused on high volume, low margin,
low cost distribution of mainly branded consumer goods for cash, through
228 outlets, and one buying association serving 478 independent
retailers and wholesalers, in 11 countries in sub-Saharan Africa. The
group is the third largest distributor of consumer goods in Africa, the
leading retailer of general merchandise, liquor and home improvement
equipment and supplies, and the leading wholesaler of basic foods.
Wholesale stores includes Makro, Game, Dion, Builders Warehouse, Shield,
Delarex, Feds DIY, Servistar, CBW, and Jumbo. Visit the group website
at: [www.massmart.co.za](http://www.massmart.co.za/) for more
information. The Group anticipate to open 58 new stores in a three year
plan by 2009.

According to research by M+M Planet Retail --
[www.planetretail.net](http://www.planetretail.net/), in 2005 Massmart
was ranked number three of the top 30 retailers in Africa & the Middle
East, with retail sales of USD4.8 million with a market share of 3.9%.
The net sales only reflect the retailer's shareholdings in the countries
where they operate.

**Metcash**: Metcash Africa is the largest distributor of fast moving
goods (FMCG) on the African continent. It has extensive franchise retail
interests in South Africa and operates in other African countries
(Angola, Botswana, Malawi, Namibia, Lesotho, Swaziland, Uganda, and
Zimbabwe). It also has a trading office situated in Hong Kong, and its
office in Thailand handles distribution, wholesale and retail. The brand
stores include Metro Cash and Carry, Trade Centers, Liquor World, Stax,
Friendly Warehouses, Independent Grocers Alliance (IGA), with private
labels (Family Favorite, Astor, and Golden Circle) sold in more than 9
countries and around the world. Unitrade Management Services, and
Capital Tobacco Company. For more information visit the group website at
[www.metcash.co.za](http://www.metcash.co.za/) .

According to the research by M+M Planet Retail --
[www.planetretail.net](http://www.planetretail.net/), in 2005 Metcash
was ranked number four of the top 30 retailers in Africa & the Middle
East, with retail sales of USD3.4 million with a market share of 2.7%.
The net sales only reflect the retailer's shareholdings in the countries
where they operate.

2.2 Convenience Stores

1.  [Entry Strategy]{.underline}:

Convenience is a relatively new trend in the South Africa's fast moving
consumer goods (FMCG) market. Major retailers and wholesalers own most
of the convenience stores.

According to a local publication South Africans love shopping at
forecourt stores (gas stations), perceiving them to be time saving, easy
access, well lit, safe and convenient. Convenience stores operate on
extended hours or in some instances they are open 24 hours. There are
around 2,239 branded forecourt stores in South Africa, of which 1,500
opened in the past 10 years. Recent research by ACNielsen shows that
forecourt stores are fast developing into trendy outlets offering good,
readily available food and beverages 24 hours a day. According to the
study, 30% of the 2,500 respondents used forecourt stores at least once
a week in the past year. As South Africa's cities grow and consumers and
more women enter the workplace and earn more money, the convenience of
the forecourt becomes more important and shows growth. Some of the major
retail chain such as Woolworths, have acquired gas stations and turned
them into Food stops to highlight products in-store. Depending on the
size of the store, other gas stations stores layout are even bigger than
some supermarkets.

Despite requirements for convenience, South African manufacturers are
not yet fulfilling these needs adequately. Product ranges are still
limited and distributed through limited retail outlets targeted at the
higher income consumers. Baby food is another of the four fastest
growing categories with an annual value growth of +24.5%, clearly
influenced by this economic transition.

2.2.2 [Market Structure]{.underline}:

The market structure is covered in detail under the supermarket section
of this report.

2.2.3 [Major Convenience stores profile]{.underline}:

+-------------+----------+---------+----------+----------+------------+
| Retail Name | O        | T       | Number   | Location | Type of    |
|             | wnership | urnover | of       |          | Purchasing |
|             |          |         | Outlets  |          | Agent      |
|             |          | (\$M)   |          |          |            |
+-------------+----------+---------+----------+----------+------------+
| OK          | Con      | Not     | 102      | Na       | Direc      |
| Franchise   | venience | av      |          | tionwide | t/Importer |
| Division:   | stop     | ailable |          |          |            |
|             | shops    |         |          |          |            |
| -Ok Grocer  | owned by |         |          |          |            |
|             | Shoprite |         |          |          |            |
| -OK Foods   | Holdings |         |          |          |            |
|             |          |         |          |          |            |
| -OK         |          |         |          |          |            |
| MiniMark    |          |         |          |          |            |
+-------------+----------+---------+----------+----------+------------+
| Friendly    | Con      | Not     | 53       | Na       | Direc      |
| Shoppe's    | venience | av      |          | tionwide | t/Importer |
|             | stop     | ailable |          |          |            |
|             | shop     |         |          |          |            |
|             | owned by |         |          |          |            |
|             | Metcash  |         |          |          |            |
|             | Wh       |         |          |          |            |
|             | olesaler |         |          |          |            |
+-------------+----------+---------+----------+----------+------------+

For gas stations, here are some of the gas industries websites:

BP, [www.bp.com](http://www.bp.com/)

Shell, [www.shell.com](http://www.shell.com/)

Total, [www.total.com](http://www.total.com/)

**2.3 Traditional Markets**

2.3.1 [Entry Strategy:]{.underline} Food retailers in South Africa range
from highly sophisticated supermarkets at one end to primitive little
street corner stalls at the other. In years past, predominantly black
townships were virtually unserved in terms of retail infrastructure. The
informal retail sector in South Africa is increasingly recognized by
manufacturers and wholesalers as an important delivery channel of goods
to consumers. Informal market retailers cater to the needs of the
residents via independent grocery stores such as cafes, general dealer
stores and several informal South African retail concepts (tuck shops,
shebeens, taverns and spazas) including hawkers (street vendors),
kiosks, take-aways and fast foods. With the end of apartheid, major
retailers have also extended their services to these townships.
Marketers saw the spaza as the beginning of a new form of township
convenience retailing, conveniently close to consumers, and open at
extended hours. Information traders are generally defined as retailers
that are not registered for VAT.

Spaza shops are defined as small retail enterprises operating from a
residential stand or home, engaged in trading consumer goods. Spaza
shops operating mainly in the townships are making their presence felt
in the local retail market. Products traded include food and nonfood
products.

The informal retail market in South Africa is an important player, with
an estimated turnover of \$5 billion. The informal sector is
acknowledged as an important delivery channel of goods to customers.
However, the view is held that this sector may have peaked, as more
formal shopping centers are being developed in disadvantaged areas.
Currently, more stores are trading seven days a week, creating a greater
opportunity to reach shoppers. Sunday trading is becoming increasingly
important as the trend towards convenience continues. End of the month
shopping remains extremely significant.

On average, start-up investment for spaza shops amounts to less than
\$1000. Spazas are mainly financed by private savings or loans from
relatives or friends. Average employment amounts to about 3 employees
per business. Considering that the number of spazas may be 100,000, this
sector of the economy may provide 230,000 to 290,000 jobs, and support
more than one million people. The most important products sold by spaza
shops are (in descending order): soft drinks, cigarettes, paraffin,
candles, maize meal, alcoholic beverages, bread and sugar.

There is now growing awareness among manufacturers and producers of the
importance of the spaza retailers as a marketing channel. More than 20%
of spaza owners report that products such as soft drinks, dairy and
bakery products are now delivered to their shops. The most serious
problems encountered by spaza owners are shortage of trading
stock/finance (38.8%), high levels of crime (robbery 25%), severe
competition (20.6%), expensive transport (19.7%), and bad debt or the
granting too much credit (17.1%). Although spaza retailers are often
seen as survivalist enterprises, it is clear spazas are becoming not
only a permanent phenomenon on the South African economic scene, but
more sophisticated and closely linked to the rest of the economy than
commonly perceived.

2.3.2 [Market Structure]{.underline}: The market structure is covered in
detail under the supermarket section of this report.

2.3.3 [Traditional Market profile]{.underline}: Wet markets in South
Africa have traditionally been similar to those in most developing
countries. Informal market retailers cater to the needs of the residents
via cafes and several informal South African retails concepts (tuck
shops, shebeens, taverns and spazas) including hawkers (street vendors).
With the end of apartheid, major retailers are extending their services
to these townships as well, but spaza shops are still critical for
township convenience retailing.

# Section 3: Competition 

The following table highlights South Africa (SA) key products and
trading partners between 2003 -- 2005:

+--------------+-----------+----+----+----+----+----+----+------------+
| Product      | Major     | SA |    |    | SA |    |    | Advantages |
| Category and | Supply    | E  |    |    | I  |    |    | and        |
| HS Code      | countries | XP |    |    | MP |    |    | dis        |
|              | and       | OR |    |    | OR |    |    | advantages |
|              | strength  | TS |    |    | TS |    |    | of local   |
|              | of supply | to |    |    | fr |    |    | suppliers  |
|              |           | U  |    |    | om |    |    |            |
|              |           | SA |    |    | U  |    |    |            |
|              |           |    |    |    | SA |    |    |            |
|              |           | Mi |    |    |    |    |    |            |
|              |           | ll |    |    | Mi |    |    |            |
|              |           | io |    |    | ll |    |    |            |
|              |           | ns |    |    | io |    |    |            |
|              |           | of |    |    | ns |    |    |            |
|              |           | US |    |    | of |    |    |            |
|              |           | \$ |    |    | US |    |    |            |
|              |           |    |    |    | \$ |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
|              |           | 20 | 20 | 20 | 20 | 20 | 20 |            |
|              |           | 03 | 04 | 05 | 03 | 04 | 05 |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Meat and     | Brazil -- | 0. | 0. | 0. | 4. | 0. | 2. | South      |
| Edible meat  | 63%       | 01 | 04 | 04 | 19 | 80 | 40 | Africa is  |
| offal (02)   |           |    |    |    |    |    |    | a net      |
|              | Australia |    |    |    |    |    |    | importer   |
| South Africa | -- 10%    |    |    |    |    |    |    | of meat    |
| net imports  |           |    |    |    |    |    |    | and meat   |
| from the     | Canada -- |    |    |    |    |    |    | products.  |
| World of     | 6%        |    |    |    |    |    |    | The        |
| US\$ 147.23  |           |    |    |    |    |    |    | pattern of |
| million in   | USA minor |    |    |    |    |    |    | imports in |
| 2005 versus  | supplier  |    |    |    |    |    |    | this       |
| US\$ 113.78  | of 0.7%   |    |    |    |    |    |    | category   |
| million in   |           |    |    |    |    |    |    | is         |
| 2004.        |           |    |    |    |    |    |    | variable   |
|              |           |    |    |    |    |    |    | and        |
| South Africa |           |    |    |    |    |    |    | depends    |
| net exports  |           |    |    |    |    |    |    | largely on |
| to the world |           |    |    |    |    |    |    | local      |
| of US\$ 0.95 |           |    |    |    |    |    |    | c          |
| million in   |           |    |    |    |    |    |    | onditions. |
| 2005 versus  |           |    |    |    |    |    |    | Brazil,    |
| US\$ 0.64    |           |    |    |    |    |    |    | Australia  |
| million in   |           |    |    |    |    |    |    | and Canada |
| 2004.        |           |    |    |    |    |    |    | are        |
|              |           |    |    |    |    |    |    | members of |
|              |           |    |    |    |    |    |    | MFN status |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Fish and     | India-    | 3  | 2  | 3  | 1  | 2. | 2. | South      |
| Seafood (03) | 27%       | 0. | 9. | 2. | .0 | 92 | 88 | Africa is  |
|              |           | 61 | 51 | 34 | 50 |    |    | a net      |
| Net imports  | Japan -9% |    |    |    |    | 1. | 1. | exporter   |
| from the     |           | 0. | 0. | 0. | 0. | 93 | 25 | of fish    |
| world of     | Moz       | 10 | 31 | 43 | 90 |    |    | and        |
| US\$ 19.05   | ambique - |    |    |    |    |    |    | seafood    |
| million in   | 8%        |    |    |    |    |    |    | products.  |
| 2005 versus  |           |    |    |    |    |    |    | Imports in |
| US\$ 14.33   | USA-      |    |    |    |    |    |    | this       |
| million in   | Minor     |    |    |    |    |    |    | category   |
| 2004.        | supplier  |    |    |    |    |    |    | have been  |
|              | of 3%     |    |    |    |    |    |    | increasing |
| Net exports  |           |    |    |    |    |    |    | steadily   |
| to the world | Thailand  |    |    |    |    |    |    | over the   |
| of US\$      | -- 36%    |    |    |    |    |    |    | past       |
| 71.46        |           |    |    |    |    |    |    | years, and |
| million in   | Phi       |    |    |    |    |    |    | thus,      |
| 2005 versus  | lippines- |    |    |    |    |    |    | despite    |
| US\$ 66.18   | 19%       |    |    |    |    |    |    | the fact   |
| million in   |           |    |    |    |    |    |    | that South |
| 2004.        | Zimbabwe  |    |    |    |    |    |    | Africa is  |
|              | -- 8%     |    |    |    |    |    |    | a net      |
| Prepared     |           |    |    |    |    |    |    | exporter,  |
| Meat, Fish   | USA --    |    |    |    |    |    |    | opp        |
| (16)         | Minor     |    |    |    |    |    |    | ortunities |
|              | supplier  |    |    |    |    |    |    | do exist.  |
| Net imports  | of 3% in  |    |    |    |    |    |    | The        |
| from the     | 2005 from |    |    |    |    |    |    | majority   |
| world of     | 5% in     |    |    |    |    |    |    | of imports |
| US\$ 30.39   | 2004.     |    |    |    |    |    |    | are        |
| million in   |           |    |    |    |    |    |    | c          |
| 2005 versus  | US        |    |    |    |    |    |    | rustaceans |
| US\$ 27.37   | imports   |    |    |    |    |    |    | and other  |
| million in   | of (0306) |    |    |    |    |    |    | seafood    |
| 2004.        | cr        |    |    |    |    |    |    | (squid)    |
|              | ustaceans |    |    |    |    |    |    | and fish   |
| Net exports  | declined  |    |    |    |    |    |    | meat.      |
| to the world | from US\$ |    |    |    |    |    |    |            |
| of US\$      | 4 million |    |    |    |    |    |    | Mozambique |
| 13.94        | in 2004   |    |    |    |    |    |    | and        |
| million in   | to US\$   |    |    |    |    |    |    | Zimbabwe   |
| 2005 versus  | 3.6       |    |    |    |    |    |    | are        |
| US\$ 12.15   | million   |    |    |    |    |    |    | amongst 14 |
| million in   | in 2005.  |    |    |    |    |    |    | members of |
| 2004.        | Category  |    |    |    |    |    |    | the        |
|              | (0307)    |    |    |    |    |    |    | Southern   |
|              | Molluscs  |    |    |    |    |    |    | African    |
|              | have      |    |    |    |    |    |    | D          |
|              | shown the |    |    |    |    |    |    | evelopment |
|              | most      |    |    |    |    |    |    | Community  |
|              | growth    |    |    |    |    |    |    | (SADC).    |
|              | from US\$ |    |    |    |    |    |    | SADC       |
|              | 1.3       |    |    |    |    |    |    | committed  |
|              | million   |    |    |    |    |    |    | itself to  |
|              | in 2004   |    |    |    |    |    |    | the        |
|              | to US\$   |    |    |    |    |    |    | creation   |
|              | 1.8       |    |    |    |    |    |    | of a free  |
|              | million   |    |    |    |    |    |    | trade area |
|              | in 2005.  |    |    |    |    |    |    | (FTA) when |
|              |           |    |    |    |    |    |    | a Protocol |
|              | US        |    |    |    |    |    |    | on Trade   |
|              | imports   |    |    |    |    |    |    | was signed |
|              | of (0306) |    |    |    |    |    |    | at the     |
|              | cr        |    |    |    |    |    |    | SADC       |
|              | ustaceans |    |    |    |    |    |    | Summit in  |
|              | declined  |    |    |    |    |    |    | 1996.      |
|              | from US\$ |    |    |    |    |    |    | South      |
|              | 4 million |    |    |    |    |    |    | Africa     |
|              | in 2004   |    |    |    |    |    |    | joined     |
|              | to US\$   |    |    |    |    |    |    | SADC in    |
|              | 3.6       |    |    |    |    |    |    | August     |
|              | million   |    |    |    |    |    |    | 1994.      |
|              | in 2005.  |    |    |    |    |    |    | Japan and  |
|              | Category  |    |    |    |    |    |    | P          |
|              | (0307)    |    |    |    |    |    |    | hilippines |
|              | Molluscs  |    |    |    |    |    |    | are        |
|              | have      |    |    |    |    |    |    | classified |
|              | shown the |    |    |    |    |    |    | as Most    |
|              | most      |    |    |    |    |    |    | Favored    |
|              | growth    |    |    |    |    |    |    | Nations    |
|              | from US\$ |    |    |    |    |    |    | (MFN)      |
|              | 1.3       |    |    |    |    |    |    | status.    |
|              | million   |    |    |    |    |    |    |            |
|              | in 2004   |    |    |    |    |    |    | MFN        |
|              | to US\$   |    |    |    |    |    |    | members    |
|              | 1.8       |    |    |    |    |    |    | pay duty   |
|              | million   |    |    |    |    |    |    | on goods   |
|              | in 2005.  |    |    |    |    |    |    | imported   |
|              |           |    |    |    |    |    |    | into South |
|              | The       |    |    |    |    |    |    | Africa for |
|              | United    |    |    |    |    |    |    | certain    |
|              | States    |    |    |    |    |    |    | categories |
|              | enjoys a  |    |    |    |    |    |    | of goods.  |
|              | dominant  |    |    |    |    |    |    | South      |
|              | position  |    |    |    |    |    |    | Africa and |
|              | in the    |    |    |    |    |    |    | Indica     |
|              | canned    |    |    |    |    |    |    | 1996       |
|              | salmon    |    |    |    |    |    |    | bilateral  |
|              | market    |    |    |    |    |    |    | trade      |
|              | holding a |    |    |    |    |    |    | agreement. |
|              | market    |    |    |    |    |    |    |            |
|              | share of  |    |    |    |    |    |    |            |
|              | 95.6%,    |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | Canada    |    |    |    |    |    |    |            |
|              | 4%. For   |    |    |    |    |    |    |            |
|              | shrimp    |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | prawns,   |    |    |    |    |    |    |            |
|              | horse     |    |    |    |    |    |    |            |
|              | mackerel  |    |    |    |    |    |    |            |
|              | and       |    |    |    |    |    |    |            |
|              | snoek,    |    |    |    |    |    |    |            |
|              | demand is |    |    |    |    |    |    |            |
|              | for       |    |    |    |    |    |    |            |
|              | frozen    |    |    |    |    |    |    |            |
|              | products. |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Dairy        | New       | 0. | 0. | 0. | 0. | 1. | 0. | South      |
| Products     | Zealand   | 03 | 11 | 01 | 27 | 03 | 72 | Africa is  |
| (04)         | -- 20%    |    |    |    |    |    |    | a net      |
|              |           |    |    |    |    |    |    | exporter   |
| Net imports  | France -- |    |    |    |    |    |    | of dairy   |
| from the     | 19%       |    |    |    |    |    |    | products.  |
| world of     |           |    |    |    |    |    |    |            |
| US\$ 11.49   | Ireland   |    |    |    |    |    |    | New        |
| million in   | -- 11%    |    |    |    |    |    |    | Zealand is |
| 2005 versus  |           |    |    |    |    |    |    | a member   |
| US\$ 9.74    | USA a     |    |    |    |    |    |    | of MFN     |
| million in   | minor     |    |    |    |    |    |    | status     |
| 2004.        | supplier  |    |    |    |    |    |    | countries. |
|              | of 0.9%   |    |    |    |    |    |    |            |
| Net exports  |           |    |    |    |    |    |    | France and |
| to the world |           |    |    |    |    |    |    | Ireland    |
| of US\$ 0.42 |           |    |    |    |    |    |    | are        |
| million in   |           |    |    |    |    |    |    | members of |
| 2005 versus  |           |    |    |    |    |    |    | European   |
| US\$ 0.72    |           |    |    |    |    |    |    | Union      |
| million in   |           |    |    |    |    |    |    | (EU). The  |
| 2004.        |           |    |    |    |    |    |    | EU and     |
|              |           |    |    |    |    |    |    | South      |
|              |           |    |    |    |    |    |    | Africa     |
|              |           |    |    |    |    |    |    | signed a   |
|              |           |    |    |    |    |    |    | Free Trade |
|              |           |    |    |    |    |    |    | Agreement  |
|              |           |    |    |    |    |    |    | (FTA) in   |
|              |           |    |    |    |    |    |    | 1999. The  |
|              |           |    |    |    |    |    |    | agreement  |
|              |           |    |    |    |    |    |    | will be    |
|              |           |    |    |    |    |    |    | phased in  |
|              |           |    |    |    |    |    |    | over a ten |
|              |           |    |    |    |    |    |    | to twelve  |
|              |           |    |    |    |    |    |    | year       |
|              |           |    |    |    |    |    |    | period and |
|              |           |    |    |    |    |    |    | will       |
|              |           |    |    |    |    |    |    | e          |
|              |           |    |    |    |    |    |    | ssentially |
|              |           |    |    |    |    |    |    | liberalize |
|              |           |    |    |    |    |    |    | 86% of     |
|              |           |    |    |    |    |    |    | South      |
|              |           |    |    |    |    |    |    | Africa's   |
|              |           |    |    |    |    |    |    | imports    |
|              |           |    |    |    |    |    |    | from EU    |
|              |           |    |    |    |    |    |    | and about  |
|              |           |    |    |    |    |    |    | 95% of EU  |
|              |           |    |    |    |    |    |    | imports    |
|              |           |    |    |    |    |    |    | from South |
|              |           |    |    |    |    |    |    | Africa.    |
|              |           |    |    |    |    |    |    | The        |
|              |           |    |    |    |    |    |    | overall    |
|              |           |    |    |    |    |    |    | agreement  |
|              |           |    |    |    |    |    |    | meets WTO  |
|              |           |    |    |    |    |    |    | re         |
|              |           |    |    |    |    |    |    | quirements |
|              |           |    |    |    |    |    |    | of 90%     |
|              |           |    |    |    |    |    |    | coverage.  |
+--------------+-----------+----+----+----+----+----+----+------------+
| Edible Fruit | Turkey -- | 3  | 4  | 54 | 3. | 5. | 7. | South      |
| and Nuts     | 15%       | 7. | 1. | .6 | 29 | 30 | 58 | Africa is  |
| (08)         |           | 50 | 74 |    |    |    |    | a net      |
|              | United    |    |    |    |    |    |    | exporter   |
| Net imports  | States -  |    |    |    |    |    |    | of dried   |
| from the     | 14%       |    |    |    |    |    |    | fruits and |
| world of     |           |    |    |    |    |    |    | a net      |
| US\$ 15.62   | Brazil -  |    |    |    |    |    |    | importer   |
| million in   | 9%        |    |    |    |    |    |    | of nuts.   |
| 2005 versus  |           |    |    |    |    |    |    | However, a |
| US\$ 12.63   | The       |    |    |    |    |    |    | small      |
| million in   | United    |    |    |    |    |    |    | market     |
| 2004.        | States is |    |    |    |    |    |    | exists for |
|              | a major   |    |    |    |    |    |    | dried      |
| Net exports  | supplier  |    |    |    |    |    |    | exotic     |
| to the world | of        |    |    |    |    |    |    | fruits,    |
| of US\$      | almonds   |    |    |    |    |    |    | and        |
| 486.34       | with a    |    |    |    |    |    |    | opp        |
| million in   | market    |    |    |    |    |    |    | ortunities |
| 2005 versus  | share of  |    |    |    |    |    |    | exist for  |
| US\$ 461.95  | about     |    |    |    |    |    |    | shelled    |
| million in   | 86.9%.    |    |    |    |    |    |    | hazelnuts, |
| 2004.        |           |    |    |    |    |    |    | desiccated |
|              | USA       |    |    |    |    |    |    | coconut,   |
|              | imports   |    |    |    |    |    |    | cashew     |
|              | of US\$   |    |    |    |    |    |    | nuts and   |
|              | 7.2       |    |    |    |    |    |    | shelled    |
|              | million   |    |    |    |    |    |    | almonds.   |
|              | versus    |    |    |    |    |    |    |            |
|              | US\$ 4.8  |    |    |    |    |    |    | Brazil is  |
|              | million   |    |    |    |    |    |    | a member   |
|              | in 2004.  |    |    |    |    |    |    | of MFN     |
|              |           |    |    |    |    |    |    | status     |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Coffee, Tea, | Malawi -- | 2  | 2. | 2. | 0. | 0. | 0. | South      |
| Mate and     | 19%       | .5 | 03 | 84 | 10 | 08 | 16 | Africa is  |
| Spices (09)  |           |    |    |    |    |    |    | a net      |
|              | Vietnam   |    |    |    |    |    |    | importer   |
| Net imports  | -- 15.9%  |    |    |    |    |    |    | of spices. |
| from the     |           |    |    |    |    |    |    | Local      |
| world of     | India --  |    |    |    |    |    |    | production |
| US\$ 7.80    | 9.5%      |    |    |    |    |    |    | of tea,    |
| million in   |           |    |    |    |    |    |    | coffee is  |
| 2005 versus  | US minor  |    |    |    |    |    |    | in         |
| US\$ 8.52    | supplier  |    |    |    |    |    |    | sufficient |
| million in   | of 0.15%  |    |    |    |    |    |    | to meet    |
| 2004.        |           |    |    |    |    |    |    | local      |
|              | Category  |    |    |    |    |    |    | demand.    |
| Net exports  | 0902      |    |    |    |    |    |    | Malawi is  |
| to the world | (pepper)  |    |    |    |    |    |    | a member   |
| of US\$ 7.64 | have      |    |    |    |    |    |    | of MFN     |
| million in   | shown     |    |    |    |    |    |    | status     |
| 2005 versus  | growth    |    |    |    |    |    |    | countries. |
| US\$ 7.61    | from US\$ |    |    |    |    |    |    |            |
| million in   | 4.334 in  |    |    |    |    |    |    |            |
| 2004.        | 2004 to   |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 26.322 in |    |    |    |    |    |    |            |
|              | 2005;     |    |    |    |    |    |    |            |
|              | category  |    |    |    |    |    |    |            |
|              | 0904      |    |    |    |    |    |    |            |
|              | (tea)     |    |    |    |    |    |    |            |
|              | growth    |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 20.814 in |    |    |    |    |    |    |            |
|              | 2004 to   |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 64.690 in |    |    |    |    |    |    |            |
|              | 2005.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Sugars and   | Brazil -  | 1  | 10 | 2  | 3. | 6. | 6. | South      |
| Sugar        | 42%       | 1. | .9 | 1. | 29 | 43 | 63 | Africa is  |
| C            |           | 71 |    | 35 |    |    |    | a net      |
| onfectionery | USA --    |    |    |    |    |    |    | exporter   |
| (17)         | 7.5%      |    |    |    |    |    |    | of sugar.  |
|              |           |    |    |    |    |    |    | The        |
| Net imports  | Colombia  |    |    |    |    |    |    | majority   |
| from the     | -- 7.2%   |    |    |    |    |    |    | of imports |
| world of     |           |    |    |    |    |    |    | are in the |
| US\$ 19.82   | USA       |    |    |    |    |    |    | category   |
| million in   | imports   |    |    |    |    |    |    | of other   |
| 2005 versus  | decline   |    |    |    |    |    |    | sugar      |
| US\$ 17.40   | from US\$ |    |    |    |    |    |    | products   |
| million in   | 5.9       |    |    |    |    |    |    | in solid   |
| 2004.        | million   |    |    |    |    |    |    | form, such |
|              | in 2004   |    |    |    |    |    |    | as cane    |
| Net exports  | to US\$   |    |    |    |    |    |    | and beet   |
| to the world | 5.7       |    |    |    |    |    |    | sugar.     |
| of US\$ 275  | million   |    |    |    |    |    |    |            |
| million in   | US\$ in   |    |    |    |    |    |    | January    |
| 2005 versus  | 2005.     |    |    |    |    |    |    | 2006 saw   |
| US\$ 223.71  |           |    |    |    |    |    |    | customs    |
| in 2004.     | Category  |    |    |    |    |    |    | duty on    |
|              | (1704)    |    |    |    |    |    |    | sugar      |
|              | shown     |    |    |    |    |    |    | con        |
|              | most      |    |    |    |    |    |    | fectionery |
|              | growth    |    |    |    |    |    |    | not        |
|              | from US\$ |    |    |    |    |    |    | containing |
|              | 280.000   |    |    |    |    |    |    | cocoa      |
|              | to        |    |    |    |    |    |    | cl         |
|              | 529.000   |    |    |    |    |    |    | assifiable |
|              | in 2005.  |    |    |    |    |    |    | under the  |
|              |           |    |    |    |    |    |    | tariff     |
|              |           |    |    |    |    |    |    | subheading |
|              |           |    |    |    |    |    |    | 1704.90    |
|              |           |    |    |    |    |    |    | increased  |
|              |           |    |    |    |    |    |    | from 25%   |
|              |           |    |    |    |    |    |    | ad valorem |
|              |           |    |    |    |    |    |    | to 37% ad  |
|              |           |    |    |    |    |    |    | valorem.   |
|              |           |    |    |    |    |    |    | Brazil and |
|              |           |    |    |    |    |    |    | Columbia   |
|              |           |    |    |    |    |    |    | are        |
|              |           |    |    |    |    |    |    | members of |
|              |           |    |    |    |    |    |    | MFN status |
|              |           |    |    |    |    |    |    | countries. |
+--------------+-----------+----+----+----+----+----+----+------------+
| Preserved    | China --  | 24 | 1  | 1  | 1. | 1. | 2. | China      |
| Food (20)    | 21%       | .2 | 9. | 1. | 44 | 31 | 29 | supplies   |
|              |           |    | 68 | 73 |    |    |    | price      |
| Net imports  | Argentina |    |    |    |    |    |    | c          |
| from the     | -- 17.3%  |    |    |    |    |    |    | ompetitive |
| world of     |           |    |    |    |    |    |    | products.  |
| US\$ 12.54   | Italy --  |    |    |    |    |    |    |            |
| million in   | 16.2%     |    |    |    |    |    |    | Argentina  |
| 2005 versus  |           |    |    |    |    |    |    | is a       |
| US\$ 8.54    | USA --    |    |    |    |    |    |    | member of  |
| million in   | Minor     |    |    |    |    |    |    | MFN status |
| 2004.        | supplier  |    |    |    |    |    |    | countries; |
|              | of 3.4%.  |    |    |    |    |    |    | whereas    |
| Net exports  |           |    |    |    |    |    |    | Italy is a |
| to the world | USA       |    |    |    |    |    |    | member of  |
| of US\$      | imports   |    |    |    |    |    |    | EU states. |
| 128.3        | increased |    |    |    |    |    |    |            |
| million in   | from US\$ |    |    |    |    |    |    |            |
| 2005 versus  | 1.3       |    |    |    |    |    |    |            |
| US\$ 95.94   | million   |    |    |    |    |    |    |            |
| million in   | to US\$ 2 |    |    |    |    |    |    |            |
| 2004.        | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Category  |    |    |    |    |    |    |            |
|              | 2008      |    |    |    |    |    |    |            |
|              | jumped    |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 0.60      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2004   |    |    |    |    |    |    |            |
|              | to US\$   |    |    |    |    |    |    |            |
|              | 1.4       |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Other     |    |    |    |    |    |    |            |
|              | c         |    |    |    |    |    |    |            |
|              | ategories |    |    |    |    |    |    |            |
|              | that have |    |    |    |    |    |    |            |
|              | shown     |    |    |    |    |    |    |            |
|              | growth is |    |    |    |    |    |    |            |
|              | 2001,     |    |    |    |    |    |    |            |
|              | 2005 and  |    |    |    |    |    |    |            |
|              | 2007.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| M            | USA --    | 3. | 2. | 4. | 1  | 1  | 2  | South      |
| iscellaneous | 16%       | 68 | 73 | 17 | 3. | 9. | 1. | Africa is  |
| Edible       |           |    |    |    | 82 | 19 | 36 | a net      |
| Preparatio   | Ne        |    |    |    |    |    |    | exporter   |
| ns/Processed | therlands |    |    |    |    |    |    | of         |
| Fruit & Veg  | -- 14%    |    |    |    |    |    |    | processed  |
| (21)         |           |    |    |    |    |    |    | fruits and |
|              | Germany   |    |    |    |    |    |    | v          |
| Net imports  | -- 12%    |    |    |    |    |    |    | egetables. |
| from the     |           |    |    |    |    |    |    | Opp        |
| world of     | USA       |    |    |    |    |    |    | ortunities |
| US\$ 96.52   | imports   |    |    |    |    |    |    | exist for  |
| million in   | jumped    |    |    |    |    |    |    | canned     |
| 2005 versus  | from US\$ |    |    |    |    |    |    | peas, and  |
| US\$ 75.22   | 17.7      |    |    |    |    |    |    | import of  |
| million in   | million   |    |    |    |    |    |    | grape and  |
| 2004.        | to US\$   |    |    |    |    |    |    | apple      |
|              | 19.3      |    |    |    |    |    |    | juice      |
| Net exports  | million   |    |    |    |    |    |    | which are  |
| to the world | in 2005.  |    |    |    |    |    |    | used as a  |
| of US\$ 6    | C         |    |    |    |    |    |    | base for   |
| million in   | ategories |    |    |    |    |    |    | other      |
| 2005 versus  | (2106)    |    |    |    |    |    |    | fruit      |
| US\$ 4.01    | food      |    |    |    |    |    |    | juices,    |
| million in   | pre       |    |    |    |    |    |    | prepared   |
| 2004.        | parations |    |    |    |    |    |    | and        |
|              | shown     |    |    |    |    |    |    | preserved  |
|              | most      |    |    |    |    |    |    | tomatoes,  |
|              | growth    |    |    |    |    |    |    | and fruit  |
|              | from US\$ |    |    |    |    |    |    | pulps.     |
|              | 15.9      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    | N          |
|              | to US\$   |    |    |    |    |    |    | etherlands |
|              | 17.7      |    |    |    |    |    |    | and        |
|              | million   |    |    |    |    |    |    | Germany    |
|              | in 2005;  |    |    |    |    |    |    | are        |
|              | and       |    |    |    |    |    |    | members of |
|              | category  |    |    |    |    |    |    | EU states. |
|              | 2102 from |    |    |    |    |    |    |            |
|              | US\$ 0.34 |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | to US\$   |    |    |    |    |    |    |            |
|              | 0.42      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    |            |
|              | in 2005.  |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+
| Beverages    | UK -- 49% | 3  | 4  | 6  | 6. | 1  | 2  | South      |
| (22)         |           | 2. | 7. | 2. | 31 | 8. | 8. | Africa is  |
|              | US -- 12% | 21 | 86 | 51 |    | 75 | 63 | a net      |
| Net imports  |           |    |    |    |    |    |    | exporter   |
| from the     | Austria   |    |    |    |    |    |    | of         |
| world of     | -- 9.7%   |    |    |    |    |    |    | alcoholic  |
| US\$ 178.31  |           |    |    |    |    |    |    | beverages. |
| million in   | USA       |    |    |    |    |    |    | This       |
| 2005 versus  | imports   |    |    |    |    |    |    | market is  |
| US\$ 144.33  | jumped    |    |    |    |    |    |    | dominated  |
| million in   | from US\$ |    |    |    |    |    |    | by well    |
| 2004.        | 17        |    |    |    |    |    |    | known      |
|              | million   |    |    |    |    |    |    | brands     |
| Net exports  | in 2004   |    |    |    |    |    |    | from the   |
| to the world | to US\$   |    |    |    |    |    |    | UK.        |
| of US\$      | 25.7      |    |    |    |    |    |    |            |
| 596.12       | million   |    |    |    |    |    |    | The South  |
| million in   | in 2005.  |    |    |    |    |    |    | African    |
| 2005 versus  | Category  |    |    |    |    |    |    | appetite   |
| US\$ 537.96  | (2208)    |    |    |    |    |    |    | for        |
| million in   | Ethyl     |    |    |    |    |    |    | American   |
| 2004.        | alcohol   |    |    |    |    |    |    | spirits    |
|              | shown     |    |    |    |    |    |    | has grown  |
|              | most      |    |    |    |    |    |    | over the   |
|              | growth    |    |    |    |    |    |    | last three |
|              | from US\$ |    |    |    |    |    |    | years.     |
|              | 16.6      |    |    |    |    |    |    |            |
|              | million   |    |    |    |    |    |    | UK and     |
|              | in 2004   |    |    |    |    |    |    | Austria    |
|              | to US\$   |    |    |    |    |    |    | are        |
|              | 25        |    |    |    |    |    |    | members of |
|              | million   |    |    |    |    |    |    | EU states. |
|              | in 2005.  |    |    |    |    |    |    |            |
|              | Other     |    |    |    |    |    |    |            |
|              | c         |    |    |    |    |    |    |            |
|              | ategories |    |    |    |    |    |    |            |
|              | that have |    |    |    |    |    |    |            |
|              | shown     |    |    |    |    |    |    |            |
|              | growth    |    |    |    |    |    |    |            |
|              | are 2201  |    |    |    |    |    |    |            |
|              | from US\$ |    |    |    |    |    |    |            |
|              | 28.944 to |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 83.503 in |    |    |    |    |    |    |            |
|              | 2005;     |    |    |    |    |    |    |            |
|              | 2204 from |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 37.854 to |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 70.324 in |    |    |    |    |    |    |            |
|              | 2005; and |    |    |    |    |    |    |            |
|              | category  |    |    |    |    |    |    |            |
|              | 2209 from |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 3.928 to  |    |    |    |    |    |    |            |
|              | US\$      |    |    |    |    |    |    |            |
|              | 9.224 in  |    |    |    |    |    |    |            |
|              | 2005.     |    |    |    |    |    |    |            |
+--------------+-----------+----+----+----+----+----+----+------------+

Source: World Trade Atlas

The table below shows how some South Africa retail chains performs
regionally.

**Africa & Middle-East: Top 30 Grocery Retailers, 2005:**

+----+-----------------+---------------+------------+--------+--------+
| Ra | Company         | Country of    | Retail     | Market | G      |
| nk |                 | Origin        | Banner     |        | rocery |
|    |                 |               |            | Share  | Sales  |
|    |                 |               | Sales      |        | (%)    |
|    |                 |               |            | (%)    |        |
|    |                 |               | (USD mn) e |        |        |
+----+-----------------+---------------+------------+--------+--------+
| 1  | Shoprite        | South Africa  | 5,661      | 4.5    | 74.8   |
+----+-----------------+---------------+------------+--------+--------+
| 2  | Pick 'n Pay     | South Africa  | 5,017      | 4.0    | 86.2   |
+----+-----------------+---------------+------------+--------+--------+
| 3  | Massmart        | South Africa  | 4,827      | 3.9    | 39.5   |
+----+-----------------+---------------+------------+--------+--------+
| 4  | Metcash (RSA)   | South Africa  | 3,370      | 2.7    | 85.5   |
+----+-----------------+---------------+------------+--------+--------+
| 5  | Spar (South     | South Africa  | 2,990      | 2.4    | 85.0   |
|    | Africa)         |               |            |        |        |
+----+-----------------+---------------+------------+--------+--------+
| 6  | Woolworths      | South Africa  | 2,217      | 1.8    | 26.9   |
|    | (RSA)           |               |            |        |        |
+----+-----------------+---------------+------------+--------+--------+
| 7  | Casino          | France        | 2,208      | 1.8    | 69.0   |
+----+-----------------+---------------+------------+--------+--------+
| 8  | Carrefour       | France        | 1,981      | 1.6    | 70.0   |
+----+-----------------+---------------+------------+--------+--------+
| 9  | Supersol        | Israel        | 1,676      | 1.3    | 73.5   |
+----+-----------------+---------------+------------+--------+--------+
| 10 | New Clicks      | South Africa  | 1,592      | 1.3    | 52.5   |
+----+-----------------+---------------+------------+--------+--------+
| 11 | Blue Square     | Israel        | 1,537      | 1.2    | 82.5   |
+----+-----------------+---------------+------------+--------+--------+
| 12 | Emke Group      | UAE           | 1,113      | 0.9    | 64.1   |
+----+-----------------+---------------+------------+--------+--------+
| 13 | Consumer Co-op  | UAE           | 681        | 0.5    | 90.0   |
|    | UAE             |               |            |        |        |
+----+-----------------+---------------+------------+--------+--------+
| 14 | Auchan          | France        | 664        | 0.5    | 70.7   |
+----+-----------------+---------------+------------+--------+--------+
| 15 | Al Safeer       | UAE           | 650        | 0.5    | 75.7   |
+----+-----------------+---------------+------------+--------+--------+
| 16 | Spinneys        | UAE           | 618        | 0.5    | 75.0   |
+----+-----------------+---------------+------------+--------+--------+
| 17 | Panda           | Saudi Arabia  | 609        | 0.5    | 71.9   |
+----+-----------------+---------------+------------+--------+--------+
| 18 | Giant Stores    | Saudi Arabia  | 545        | 0.4    | 60.0   |
+----+-----------------+---------------+------------+--------+--------+
| 19 | Al Othaim       | Saudi Arabia  | 540        | 0.4    | 76.0   |
+----+-----------------+---------------+------------+--------+--------+
| 20 | Clubmarket      | Israel        | 484        | 0.4    | 76.2   |
+----+-----------------+---------------+------------+--------+--------+
| 21 | The Sultan      | Kuwait        | 481        | 0.4    | 70.0   |
|    | Center          |               |            |        |        |
+----+-----------------+---------------+------------+--------+--------+
| 22 | Bin Dawood      | Saudi Arabia  | 423        | 0.3    | 70.2   |
+----+-----------------+---------------+------------+--------+--------+
| 23 | Choitram        | UAE           | 381        | 0.3    | 90.0   |
+----+-----------------+---------------+------------+--------+--------+
| 24 | Tiv Taam        | Israel        | 311        | 0.2    | 98.0   |
+----+-----------------+---------------+------------+--------+--------+
| 25 | Metro Group     | Germany       | 287        | 0.2    | 73.0   |
+----+-----------------+---------------+------------+--------+--------+
| 26 | Abu Dhabi Co-op | UAE           | 274        | 0.2    | 68.3   |
+----+-----------------+---------------+------------+--------+--------+
| 27 | Petronas        | Malaysia      | 265        | 0.2    | 82.5   |
+----+-----------------+---------------+------------+--------+--------+
| 28 | Tamimi          | Saudi Arabia  | 202        | 0.2    | 75.0   |
+----+-----------------+---------------+------------+--------+--------+
| 29 | Total           | France        | 189        | 0.2    | 74.2   |
+----+-----------------+---------------+------------+--------+--------+
| 30 | Al Maya         | UAE           | 159        | 0.1    | 53.9   |
+----+-----------------+---------------+------------+--------+--------+
|    | Subtotal        |               | 41,952     | 33.7   |        |
+----+-----------------+---------------+------------+--------+--------+
|    | Others          |               | 82,534     | 66.3   |        |
+----+-----------------+---------------+------------+--------+--------+
|    | Total MGD Sales |               | 124,486    | 100.0  |        |
+----+-----------------+---------------+------------+--------+--------+

Note: e - estimated

Source: Planet Retail Ltd --
[www.planetretail.net](http://www.planetretail.net/)

**Section 4: Best Products Prospects**

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

Five-year trends show that some U.S. Consumer-Oriented Agricultural
exports to South Africa are growing. Of interest is USDA's statistics on
Other Consumer-Oriented Products sub-category, which reached a 30-year
high in 2005 of \$16.04 million. Within this sub-category, other food
preparations (HS210690) have shown consistent and substantial increases.
Other high value exports that have shown sustained growth are almonds
(HS08021200), pistachios (HS08025000), canned pink salmon (HS16041100),
whiskey (HS220830) and vegetable seeds (HS120991).

According to 2005 data, the United States enjoys a dominant position in
the almond, canned salmon and other food preparations markets, holding
90.10%, 77.54% and 20.19% of market share respectively. The whiskey
market is significantly different. In 2004, the U.K. held 67.02% of
market share while the United States held only 12.69%. However, the
United States increased whiskey exports to South Africa in 2004 and 2005
and now holds 28.21% of the market. The U.S. has seen annual growth
increase over the past 5 years by an average of 21% per year in this
sector. This growth may be due, in part, to a South African preference
for successfully promoted American branded products (Jack Daniels, for
example). This preference is expected to continue and should help other
American products be more competitive in South Africa. This along with
successful marketing techniques and brand awareness may lead to the
growth of other American-branded, high-value products*.*

  -------------- ---------- ----------- --------- --------- ------------- ----------------
  Product        2005 South 2005 U.S.   Annual    Import    Key           Market
  Category       Africa     Exports to  Import    Tariff    Constraints   Attractiveness
                 Market     S.A.        Growth    Rate      Over Market   for U.S.
                 Size       (\$1,000)   U.S.                Development   

  Whiskey        1140.127   25.825      55.04     154c/L    United        U.S. brands are
  HS220830                                                  Kingdom has   considered high
                                                            large market  quality and
                                                            share and a   attract new,
                                                            first mover   younger
                                                            advantage.    consumers.

  Pistachios     0.82       0.672       258.21    Free      Iran has      []{.mark}
  HS08025000                                                69.28% Market 
                                                            Share         

  Almonds        7.040      6.343       52.70%    Free                    U.S. has largest
  HS08021200                                                              market share.

  Canned Pink    1.324      1.026       -44.37%   6c/kg     []{.mark}     U.S. has largest
  Salmon                                                                  market share.
  HS16041100                                                              

  Other Food     90.514     14.749      11.18%    Varied    []{.mark}     U.S. brands are
  Preparations                                                            becoming
  HS210690                                                                increasingly
                                                                          popular given
                                                                          their high
                                                                          quality
                                                                          attributes

  Vegetable      12.630     2.592       -15.52%   Free      Netherlands   []{.mark}
  Seeds HS120991                                            leads sector  
                                                            with 33.09%   
                                                            Market Share  
  -------------- ---------- ----------- --------- --------- ------------- ----------------

Source: World Trade Atlas

B. [Products Not Present in Significant Quantities but Which Have Good
Sales Potential]{.underline}:

The Agricultural Marketing Specialist visited the October 2006 Natural
and Organic Expo held in Johannesburg. The show survey revealed that the
South African natural and organic market sector has grown 300% over the
past two years, and is expected to grow at over 30% per year in the next
five years. There are only 200 certified "Organic" producers in South
Africa, compared to Mexico with approximately 35,000. South Africa has
only 4 organic wine producers -- there were over 750 organic wines
exhibitors at BIOFACH in Germany in 2005.

Retailers are looking for:

\- Natural and Organic food products of all descriptions;

\- Natural and organic beverages;

\- Organic detergents and chemicals for home and industry;

\- Natural & organic cosmetics, make-up and body and skin care;

\- Natural and complimentary medicine;

\- Lifestyle products;

\- Organic and eco-friendly textiles;

\- Sustainable and renewable energy solutions;

\- Organic agricultural products and equipment;

\- Services and consultants;and

\- Packaging and processing.

C. [Products Not Present Because They Face Significant
Barriers]{.underline}:

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.
chicken exports to South Africa.

On September 16, 2005, the International Trade Administration Commission
(ITAC) of South Africa initiated in Notice No. 1737 of Government
Gazette No. 28011 of 2005 a sunset review of anti-dumping duties on
frozen meat of fowls of the species Gallus Domesticus cut in pieces with
bone-in originating in or imported from the United States. The review is
based on prima facie information submitted by South African Customs
Union (SACU) industry indicating that expiry of duty on December 27,
2005 would likely lead to continuation or recurrence of dumping and
material injury*.*

Earlier in 2004, the South African Poultry Association (SAPA) petitioned
the government to increase the general MFN duties on all poultry meat
products, but the government only approved an increase in the duty on
imports of poultry offal. Given the competitive pressures and
protectionist nature of SAPA, we can expect more such appeals to the
government. But it is Brazil that has taken over from the USA as the
leading foreign supplier of frozen chicken and turkey meat to South
Africa during 2001 - 2004, and it will be interesting to see how
effectively the South African poultry industry can lobby its government
to restrict future trade from one of its closest "South-South" allies in
the field of international trade. The prohibitive anti-dumping duty
remains enforced.

At this time the USDA is working with the South African Department of
Agriculture to increase the types of fresh fruit such as apples that can
be shipped from the United States to South Africa. Some Veterinary
officials from the Department traveled to the United States in October
2006 for bilateral meetings, including discussions of market access
issues related to apples.

**Section 5: 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: Retail industry publications
and websites; ACNielsen Reseachers, Global Trade Atlas, and local retail
publications.