In SA, international brands dominate via formal retail outlets such as Woolworths, Pick ’n Pay, Checkers, Shoprite and Spar which all have similar strategies to the USA or Europe with innovative flavours leading the way, rather than new products. Potato and corn chips dominate with unique flavours such as Mrs Balls chutney, Steers spare rib, Caribbean onion & balsamic vinegar, Mexican chilli, sweet chilli pepper, Nando’s peri peri, Chakalaka and more. Pellet snacks, fabricated potato chips and kettle style chips hold smaller market shares and are sold at a premium. The reason for this smaller share is often a result of prohibitive import duties on raw materials or significant equipment investment, rather than consumer preference. SA companies face limitations for export growth to neighbouring countries, as these products are landed at premium price.
Informal retail in SA channel is either through wholesalers, such as Cash & Carry, Metro, Makro, Trade Centre, or spaza shops, and there also street vendors. In this market corn chips are often the snack of choice, as corn is a staple in Southern Africa. These snacks include fried and baked extrudes. With no formal distribution channels in informal areas and often poor road conditions, baked extrudes which are prone to breakage do not travel well and in-bag product damage is common.
Shelf time for informal product is often only a few days, whereas producers in formal retail use nitrogen gas flushing, and so the products last longer. In certain countries where temperatures are extremely hot, processors often use thicker BOPP film to overcome quality problems. Fierce competition and price wars are common, with new processors starting up every year. As a result retail pricing has remained almost stable for the last 10 years.
Outside of SA and especially in East and West Africa, homemade snacks are sold through street vendors and the home style snacks do not lend themselves to commercial processing. Commercially viable volumes can only be produced if quality is ensured through proper agronomy. As of yet, farming is not on a commercial scale, and contract farmers produce raw materials such as potato, cassava, yam, tarro and plantain, therefore quality control is still an issue.
Prohibitive import duties on raw materials or significant equipment investment, rather than consumer preference, determine future trends in Africa. Raw pellet snacks are, for example, taxed between five and 20% depending on the raw materials it contains.
Capital tied up as stock in transit when shipping raw pellets from abroad, is another barrier. The potential for pellets are huge as equipment investment is reasonably low and the producer can run any number of different raw pellets as well as offer a basket of products with bases such as corn, potato, rice and multigrain, off one machine.
Barriers have been mentioned, but there are fantastic opportunities. For example, with an Indian influence throughout Africa, Namkeens (traditional Indian snacks) and spicy coated nuts, could do very well with an African twist. Tree nuts (macadamias and cashews), are exported to other emerging countries, where it is further processed to add value, but if this trend can be reversed, a whole new industry can be established, with all the socio economic benefits that go with it. Already it is obvious that Egypt has become a major player in the snacks market, antdhere are signs that markets in Mozambique, Zambia, Nigeria, Ghana, Cameroon and Angola are ready to be developed.
Original product innovations from the USA have shaped the global snack market. However, today, different regions develop their own products and flavours, Tex-Mex style corn products, Indian Namkeens and even SA’s Chakalaka snack seasoning are flavouring the worldwide markets.
For more information on Heat and Control SA click here or contact Jeff Rossouw: T +27 (0) 21 948 5934
