Strong Brands

 
With the 2010 World Cup just months away, South Africa has become a major focus in discussions of the next global foodservice growth hotspots. Yet strong foodservice expansion is nothing new for Africa’s largest economy, which has seen demand flourish over the last five years thanks to a stable economy and growing purchasing power among the country’s fast-expanding black middle class. Country portrait by Michael Schaefer, Consumer Foodservice Industry Analyst, Euro-monitor International. www.euromonitor.com 
 
Total consumer foodservice sales approached €4 bn in 2009, with the strongest growth coming in quickservice categories such as fast-food and street stalls, both of which have averaged better than 10% annual sales growth over the last five years. While last year’s recession negatively affected sales in all sectors, fast-food growth stayed positive, supported by strong expansion through international chains such as KFC as well as local players like Spur and Nando’s. Though poverty and income inequality stay high, and crime and infrastructure both remain continuing issues, steady disposable income growth since 2004 has fuelled a broad-based expansion in consumer spending as well as strong demand for global foodservice brands.
 
One area that sets South Africa apart from other emerging markets of similar income levels is the size and quality of its local chains. The international isolation of the apartheid era, coupled with the sharply two-tiered nature of South African society contributed to the development of a number of chains which remain important players to this day. There has been a core of relatively highincome consumers supporting the emergence of chains like Nando’s, Steers, and Wimpy. While global giants KFC and McDonald’s have long been present in South Africa (KFC, in particular, is the most popular chain in South Africa by sales), local players remain formidable competitors, with several becoming international brands in their own right. Grilled chicken chain Nando’s, for instance, operates approximately 600 outlets internationally, with a particularly strong presence in the UK, where it is a pioneering player in the fast-growing fast-casual segment. Likewise, local operator Famous Brands maintains a commanding presence with three brands in the top ten, including fast-growing coffee shop chain Mugg & Bean.
 
The types of outlets which have achieved popularity in South Africa are to some degree a reflection of the country’s highly diverse population. Chicken is by far the most popular protein, with local chicken fast-food chains Nando’s and Chicken Licken joining KFC in the top ten. Grilled beef is also a strong seller, as indicated by the success of chains like Steers, a grilled burger chain, as well as Spur Steak Ranches, a steakhouse chain with 240 South African outlets and €30 m in sales in 2008. British-influenced dishes are also popular, led by value-priced meat pie chain King Pie, which operates more than 300 local outlets. In other areas, however, the country hews more closely to global trends: specialist coffee shops, for instance, lead all sectors in growth, with 2008 sales of €13 m more than doubling sales of two years before. Pizza outlets have also seen demand soar, with total pizza sales doubling since 2003 to approach €500 m, placing it second only to chicken fastfood in terms of sales.
 

 
| 2 June 2010 | Barbara Mecke |