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Beverages - Wesgro.co.za

Beverages Executive Summary Soft drinks are forecast to be the largest sales category in South Africa reaching in 2020f, followed by alcoholic Beverages at The largest beverage companies in South Africa include SABM iller, Pioneer Foods, Tiger Brands etc. South Africa has the highest beer consumption in Africa with billion litres consumed. Value growth is expected to reach in 2016 according to Euromonitor, 2016. South Africa and the Western Cape are net exporters of Beverages exporting and (66% of national) respectively. The top three beverage exports from South Africa on HS 6 level were: Bottled wine ( ) Bulk wine ( ) Undenatured ethyl alcohol ( ) The top three beverage exports from the Western Cape were: Bottled wine ( ) Bulk wine ( ) Cider, perry & mead ( ) South Africa is a net recipient of investment in the Beverages sector receiving in the last decade (2005-2015).

Beverages Executive Summary Soft drinks are forecast to be the largest sales category in South Africa reaching ZAR16.6bn in 2020f, followed by alcoholic beverages

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Transcription of Beverages - Wesgro.co.za

1 Beverages Executive Summary Soft drinks are forecast to be the largest sales category in South Africa reaching in 2020f, followed by alcoholic Beverages at The largest beverage companies in South Africa include SABM iller, Pioneer Foods, Tiger Brands etc. South Africa has the highest beer consumption in Africa with billion litres consumed. Value growth is expected to reach in 2016 according to Euromonitor, 2016. South Africa and the Western Cape are net exporters of Beverages exporting and (66% of national) respectively. The top three beverage exports from South Africa on HS 6 level were: Bottled wine ( ) Bulk wine ( ) Undenatured ethyl alcohol ( ) The top three beverage exports from the Western Cape were: Bottled wine ( ) Bulk wine ( ) Cider, perry & mead ( ) South Africa is a net recipient of investment in the Beverages sector receiving in the last decade (2005-2015).

2 There was one investment made into the Western Cape by Vina Concha y Toro into the wine sector worth ZAR223m. South Africa invested in 12 projects in the global beverage sector with three quarters of these investments being made by Western Cape companies, namely Distell, Origin Wines, Lourensford Wines and Bright World. 2 Contents 1. Sector Overview .. 3 Global overview .. 3 South Africa Overview .. 4 Key Companies in South 7 2. Trade .. 9 Global trade of Beverages .. 9 South African beverage trade .. 11 Western Cape Trade of Beverages .. 13 3. Foreign Direct Investment (FDI) .. 16 Global FDI .. 16 South Africa s FDI in the Beverages sector .. 19 Inward investment .. 19 Outward investment .. 20 3 1. Sector Overview Global overview Global beverage sales have been driven by alcoholic drinks followed closely by soft drinks. America and Western Europe are drinking less mainstream beer on average, the wider beer industry seems to have been re-invigorated by the success of craft beer, which as an industry has had more success in capturing the evolution of consumers' tastes and preferences.

3 The ability of craft beer to register sales growth despite this trend reflects its favourable performance. While commercial beer is on the decline in developed countries, beer has generally done quite well across most of the big developing economies over recent years (with the exception of Russia), which has been supported SABM iller's emerging-markets-centric business. While the average Sub-Saharan African and Asian consumer is either drinking more beer or drinking more expensive beer, the average Western European is drinking less beer than in recent years. Premium whisky has been alcohol's best performing global areas over the past few years. It is no surprise that global spirits giants, Diageo and Pernod Ricard, are increasing their investment into whisky. Premium blends of Scotch whisky are particularly popular in countries such as China and India. Soft Drinks Despite volatility in leading markets and an accelerating trend towards healthier Beverages , the global soft drink industry demonstrated stable volume growth in 2015.

4 Global soft drinks volumes expanded by 4% in 2014, in line with the industry s performance since 2011 and a rate that is expected to continue over the foreseeable future. In the simplest terms, bottled water is sustaining the soft drinks industry. The majority of all ready-to-drink (RTD) volume growth experienced in 2014-2015 was the result of bottled water sales. Premium brands and enhanced waters are creating value opportunities in this category. Markets in Southeast Asia, the Middle East and Africa will be an important part of volume growth over the long term. Carbonated soft drinks are in a tail spin. Global growth reached its lowest point of the historic review period in 2015. Consumers are flocking to waters, teas and alternative beverage options perceived as both healthy and natural. Fruit Juice The global juice industry is facing a two-track growth story, as Asian demand for flavourful and functional juice drinks offsets declining volumes of 100% juice in many developed markets.

5 Flavour and function-driven innovation in low juice content Beverages as well as premium superfruit 100% juices will sustain growth in the category. Total juice volumes grew by less than 1% in 2014, with a decline in 100% juice and a significant slowdown in the growth of juice drinks. While fruit flavours were the main area of growth in flavoured water and carbonates, traditional juices failed to benefit from the consumer interest in fruit Beverages . Alcoholic Drinks In 2014, emerging markets continued to account for the majority of global volumes (around 63%), while developed markets contributed the most to total value sales (around 55%). This emphases the need for emerging market expansion, but highlights the continuing importance of developed countries and that a balance should be maintained. Source: Euromonitor, 2016 4 Source: Euromonitor, 2015 South Africa Overview South Africa s beverage sales follow a similar trend as global sales, with soft drinks and alcoholic drinks being the most sold Beverages .

6 Fruit/vegetables and bottled water started off at a low base in 2008 and have been showing steady growth since. In the future, higher value products such as energy drinks are likely to become more important players across the soft drinks industry. The weakening of South Africa's consumer outlook will put pressure on growth in the drinks industry in 2016. There are likely to be higher industry risks in the soft drinks segment as the market is exposed to the growing global sugary drinks tax debate. The coffee retail industry as well as the alcohol industry will remain resilient on the back of a growing on-the-go breakfast culture as well as the alcohol industry's exposure to export markets. In his 2016 budget speech, Finance Minister Pravin Gordhan announced that a sugar tax will be levied with effect from 1 April 2017. A sugar tax has been mooted to help curb the tide of obesity in SA. Sweetened Sugar Beverages (SSBs) include the following: still and carbonated soft drinks, fruit juices, sports drinks, energy drinks and vitamin waters, sweetened ice tea, lemonade, cordials and squashes (Fin24, 2016).

7 The purchase of sugar drinks does not form part of a consumer's staple food, and can thus be avoided by low-income consumers, while higher income consumers would be relatively less price-sensitive. Nevertheless, there is likely to be a negative effect on South Africa's carbonated soft drinks industry in 2017. The table below shows South African beverage sales from 2008 forecast to 2020. Carbonated drinks follow closely on alcoholic beverage sales with a forecast worth of sales in 2020. Alcoholic Beverages were the largest drinks category with sales forecast to be worth in 2020. 2007200820092010201120122013201420152016 Soft Drinks (USDm)380 131415 569414 351450 551498 389531 248562 085595 390630 431667 548 Hot Drinks (USDm)88 61498 86698 774109 143125 920133 972141 533149 761158 260167 470 Alcoholic Drinks (USDm)491 924539 475526 444564 820612 416644 415677 054714 096754 851802 00402004006008001 0001 2001 4001 6001 800 Value (USDbn)GLOBAL beverage RETAIL VALUE RSP, 2007-2016 5 Source: Business Monitor International, 2016 Alcoholic drinks South Africa's alcoholic drinks industry is dominated by the wine and beer sectors with these sectors estimated to experience the highest value growth in 2016 of and respectively (Euromonitor, 2016).

8 Sawis attributed some of the growth in wine value to new consumers in the sweet red and ros sector. According to Sawis, South Africans consumed a combined 4 billion litres of alcohol in 2015, totalling billion worth of alcohol, this is up from about billion litres in 2006, worth billion. South Africa remains a beer drinking nation, though, with beer sales totalling billion in 2015, with billion litres consumed. of all alcohol consumed in 2015 was beer while it accounts for of the market share in terms of value. The beer market, in terms of both volume and value is larger than all other alcohol categories combined (SAWIS, 2016). South Africa's wine industry, based almost exclusively in the Western Cape, has a global reputation for output and quality. The top five high-priced brands all come from the Distell Group. Distell Group currently has around a 40% share of South Africa's premium and super-premium wine markets.

9 It has an annual production capacity of around 180million litres. SABM iller dominates the beer industry with a market share of nearly 90% through its South African Breweries unit with competition coming from Heineken and Diageo. In early 2009, Heineken joined forces with alcoholic drinks major Diageo in a 75:25 joint venture to enter South Africa. Although it is not very well documented craft beer has seen an increase availability, consumption and marketing, also suggesting the evolving tastes of the higher income consumers. Despite being a large exporter of alcoholic Beverages , producing some of the most globally recognised brands, domestic consumption of alcohol remains relatively low, and the prominence of the informal sector continues to be a concern. Rising household incomes over the long term should feed through to the beer sector in particular, especially since SABM iller is making a concerted effort to lure low-income consumers.

10 The growth of the middle class should also provide domestic impetus to the wine industry. BMIR esearch (2016) forecast steady increase in both volume and value sales of alcoholic drinks in South Africa. Short-term sales will remain dependent on the wider economic situation, with consumer spending impacted by elevated unemployment levels, among other 200820092010201120122013201420152016f201 7f2018f2019f2020fAlcoholic and vegetable or spring (ZARbn)SOUTH AFRICAN beverage SALES, 2008-2020f 6 factors. On a positive note, marketing and advertising is well developed, as is the mass grocery retail industry, which will continue to support the market's development. According to SAWIS (2013), currently there are 100,568 hectares of vines producing wine grapes under cultivation in South Africa over an area some 800 kilometres in length. White varietals constitute of the plantings for wine, while red varietals account for of the national vineyard.


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