South Africans are big chocolate eaters and market research firm Frost & Sullivan predicts the chocolate market there will grow despite market pressures, BusinessDayLive reports.
The country’s chocolate market is expected to grow more than 10 percent a year over the next five years — exceeding the global average of 6 percent — despite a sluggish economy, inflation and a weakening exchange rate.
Peter “Dr. Chocolate” Edmondson is a manufacturing manager at the global snacks company Mondelez International. Edmondson earned a doctorate in the manufacture of chocolate crumb, a base product for all Cadbury chocolate.
U.S.-based Mondelez — formerly Kraft Foods — has spent about $50 million upgrading Cadbury’s 90-year-old chocolate factory in Port Elizabeth. The goal: to increase capacity for more chocolate manufacturing in South Africa.
“We want to double the output of the site over the next few years,” Edmondson said.
The growing chocolate market has seen a proliferation of local niche players as well as premium global players such as Lindt and Ferrero expanding aggressively in South Africa, according to BusinessDayLive.
Mondelez is the No. 1 South African chocolate confectionery, according to Euromonitor. It posted a value share of 42 percent in 2014. Nestlé South Africa ranked No. 2 with a 23-percent value share and Tiger Brand’s Beacon came in No. 3 overall with an 8-percent share.
Demand for chocolate isn’t just increasing in South Africa, where the industry is valued at more than 5 billion rand ($396 million US), BusinessDayLive reports.
Southern, Central and East African markets represent a compelling investment case for Mondelez with their burgeoning middle class that is becoming increasingly brand aware, BusinessDayLive reports.
In spite of the growth, Mondelez is taking pressure in two areas, according to Daniel Lombard, managing director of Mondelez South Africa.
“We’re sitting with very sluggish economic growth and then cost pressure due to constant inflation,” he said. “That’s being driven by the exchange rate which is weakening as well….that puts a squeeze across all (fast-moving consumer goods) companies.”
Innovation is driving a lot of the growth with new novelty-type chocolates, Edmondson said. There are huge opportunities in South Africa’s lower-end market with more affordable options such as a pencil-shaped Cadbury Dairy Milk sold by street hawkers.
“There is a lot of opportunity in the previously disadvantaged and rural areas,” Lombard said. “Sometimes the first time a consumer tries a Cadbury product at the lower end they’ll say ‘oh, that’s nice,’ … and they will then move on to buy the big bars.”
