Packaged cheese manufacturers are focusing on creating new consumption occasions, encouraging consumers to snack on their products instead of confectionery, such as chocolate. For some players, this has involved adapting the packaging of their hard cheeses to make them more suitable for on-the-go consumption.
The average unit price of cheese increased by a rate slightly under inflation in 2018. This was despite the rising costs of raw materials and the increase in VAT from April 2018, as players sought to avoid alienating the rising middle-classes in the country, as cheese is already regarded as an expensive product.
Cheese remains out of the financial reach of many consumers, whilst the rising health trend could prove a double-edged sword for this category. Many consumers continue to associate excess weight with affluence.
Parmalat was the clear leader in cheese in value terms in 2018; well ahead of its nearest competitor, Dairybelle. Parmalat increased its sales during 2018 thanks to the good growth of its Italian brand Galbani in mozzarella and mascarpone, which was launched in 2015.
Parmalat’s progression in cheese partly stems from the rebranding of its Simonsberg brand as Président; thus, taking advantage of the premium image enjoyed by the latter and the wide awareness enjoyed by Simonsberg. The brand was relaunched with packaging featuring both the Simonsberg and Président logos, with this including Feta, Camembert, Creamy Blue and a range of other cheeses, butter and margarine.
Cheese is led in GBO terms by the multinational Groupe Lactalis, which owns Parmalat. However, this player is followed by a number of strong domestic players, with Dairybelle, Clover and Lancewood Cheese all being South African companies.
Growth in milk in 2018 was supported by its healthy image and by strong supply compared with the previous year as a result of favourable farming conditions, as recovery from drought saw lower grain prices which resulted in lower feed prices. Shelf stable milk has slightly higher sales of milk in retail value terms.
Health trends, increasing awareness of lactose intolerance and a desire to reduce fat or cholesterol in the diet are leading more consumers to try soy milk. Local consumers are becoming more familiar with the taste of soy milk.
Drinking milk products is expected to continue to benefit from increased milk production in South Africa in the forecast period, with this driving down prices. Large players such as Clover are likely to continue to expand their production, thus improving their economies of scale.
Clover maintained its lead in drinking milk products in 2018, although it saw a decline of two percentage points from the previous year. The company benefits from its large size, which enables it to achieve economies of scale and a wide and strong distribution presence.
Private label held a very strong share within drinking milk products in value terms in 2018, although this was down marginally compared with the previous year. Private label enjoys strong consumer trust, with Pick 'n' Pay Retailers notably ranking second in drinking milk products with a double-digit value share in 2018.
Both chilled and ambient flavoured milk drinks are present in the country; however, the majority of products are chilled. Although some brands, such as Clover's Tropika, offer ambient variants, most offer chilled.
The health and wellness trend continued to support the growth of yoghurt and sour milk products in 2018, as these products are perceived to be highly nutritious and particularly good at boosting digestive health. In addition, consumers are increasingly prioritising quality in this category, and are trading up to the leading brands.
The average unit price of yoghurt and sour milk products continued to rise in 2018, due to increases in the prices of input costs. Although due to a production surplus raw milk prices dropped during the review period, these cost reductions were counterbalanced by the rising cost of fuel and an increase in VAT from 1 April 2018.
Yoghurt is most often consumed as a snack; consumed on its own. However, it is also increasingly used in cooking or with breakfast cereals; the latter trend is particularly strong amongst affluent health-conscious consumers.
Danone Southern Africa was the clear leader in yoghurt and sour milk products in value terms in 2018. The company benefits from its extensive product range and strong brands, with Nutriday and Inkomazi Maas accounting for impressive value shares in yoghurt and sour milk products respectively.
Clover, in second place in yoghurt and sour milk products in 2018, recorded the strongest value share increase of nearly two percentage points. Much of this growth stemmed from the company’s purchase of Dairybelle's yoghurt operations in 2014, with new brands continuing to shift to its portfolio because of the terms of the acquisition.
Private label is strong in yoghurt and sour milk products, accounting for a double-digit value share in 2018. Private label ranges benefit from strong consumer trust and were boosted by increasing price-sensitivity at the end of the review period.
Growth in chilled and shelf stable desserts can be attributed to the popularity of shelf stable dairy desserts, due to their lower unit price and lack of need for refrigeration, with around 30% of households in South Africa still lacking fridge-freezers at the end of the review period. Shelf stable products also continue to be allocated more shelf space in retailers, with Danone Southern Africa’s strong brand Ultra Mel custard dominating this category.
Other dairy saw below-inflation unit price growth in current terms in 2018. This was partly due to the decline in the cost of raw milk, due to surplus production, but was also linked to growing price competition and the strength of private label in many categories, which saw manufactures largely unable to increase unit prices, absorbing costs such as the increase in VAT.
Segments within other dairy are expected to experience mixed performances. Soy desserts is expected to see growth, benefiting from the healthy image of soy, the widening availability of more affordable options in supermarkets and growing awareness of lactose intolerance.
Nestlé South Africa continued to lead other dairy in value terms in 2018. Its strength was chiefly due to wide brand awareness and distribution for Nestlé Cremora, which held a strong lead in coffee whiteners.
National Brands recorded the strongest value share increase of two percentage points in 2018, cementing its second position. Its Ellis Brown brand in coffee whiteners is available in a wide range of affordable formats.
Danone Southern Africa held third position in other dairy in 2018, thanks to its popular Ultra Mel brand, which dominated shelf stable desserts and accounted for a notable value share in overall other dairy.
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This industry report originates from Passport, our Packaged Food market research database.