Organic Packaged Food in South Africa

PROSPECTS

Strong growth from low base

Organic products comprised by far the fastest-growing category in health and wellness packaged food in 2018 and are expected to remain the most dynamic area over the forecast period. The dynamism of organic packaged food is largely attributable to the low base from which it is growing – it is expected to remain the smallest category by some distance at the end of the forecast period.

Demand undermined by pricing and lack of convincing differentiation

While organic packaged food is expected to expand strongly over the forecast period, the category’s high prices and consumer scepticism that it can justify them by providing significant benefits over and above standard products are set to act as considerable constraints on growth. With the South African market characterised by low levels of purchasing power and consumer confidence still affected by a challenging economic environment, sales of organic packaged food are set to remain limited to a small group of affluent consumers, despite the fact that the economic outlook is improving slightly heading into the forecast period.

Manufacturers need to clarify positioning in line with demand trends

Manufacturers need to work to convincingly differentiate organic products from standard equivalents, potentially targeting rising consumer awareness of both health and environmental issues. Grown without use of synthetic fertilisers and pesticides or genetically modified organisms, organic products have the potential to fit well with the growing demand for natural products.

COMPETITIVE LANDSCAPE

Private label dominates thanks to Woolworths

Private label continued to dominate organic packaged food value in South Africa at the end of the review period, with Woolworth Holdings’ Woolworth Organic label alone responsible for 70% of sales, while, in Woolworths Foods and Woolworths, the retailer owned two more of the five largest brands in the category. The Woolworths Organic label dominates sales in organic dairy, organic confectionery, and organic sweet biscuits, snack bars and fruit snacks.

Organic products struggle amongst Pick ‘n’ Pay’s core consumer base

After Woolworths Holdings, Pick ‘n’ Pay is the largest private label player in organic packaged food, though its Pick ‘n’ Pay Organic label accounted for less than 1% of category value in 2018. Pick ‘n’ Pay’s efforts to expand in the organic segment have been constrained by the fact that it has a more mainstream positioning than Woolworths, with its core base of middle-income consumers less able to afford organic products and less informed about them than Woolworths’ core consumers.

Brands strong in baby food

Tiger Consumer Brands’ Purity and Allganix Foods’ Olli Organic are the two leading non-private label brands in organic packaged food in South Africa. Both these brands are entirely focused on the organic baby food category, in which they jointly accounted for more than 90% of value sales in 2018.

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