Transcript Slide 1
Food Bites
Margarine and Baking Fats
Annual Market Quantification December 2011
Setting the scene
Margarine was developed as a substitute for butter and has gained appeal over the years.
It is made from vegetable oil and is higher in poly-unsaturated and mono-unsaturated fats than butter.
The margarine sector is characterised by ongoing product innovations all geared at improving taste and health benefits.
Baking fat is used in a variety of baking applications, mostly in the industrial and foodservice sectors of the market.
Baking fats are not as popular as margarine in the South African market as their applications are more specialised.
Both the margarine and baking fats markets are well established with strong brands.
Channel distribution of margarine is retail inclined while that of baking fats is more industrial and foodservice inclined. Regional distribution of both these products has a metropolitan area skew with Gauteng, KwaZulu-Natal and Western Cape consuming about three quarters of the industry’s output.
Generally, smaller pack sizes (500g or less) dominate margarine packaging while larger pack sizes are used for the most part in baking fats. Packaging types used across the two industries include foil/metalised film, cardboard/ corrugated, rigid plastic and paper.
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Baking Fats 22,5%
2010 Category Breakdown
Margarine 77,5%
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2010 Category Distribution
Foodservices Direct 9,9% Export 1,9% Industrial 21,6% Wholesale 18,4% Retail 48,2% Margarine usage in the retail sector dominates the overall demand for margarines and baking fats with almost half the volume being channelled there directly whereas the baking fats components is more responsible for the fifth of the volumes channelled into the industrial market.
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Annual Growth Rates
8,0% 7,0% 6,0% 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% -1,0% 2000 2005 Volume Growth 2010
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Growth in baking fats fuelled by new products
The baking fat category saw good volume increases in 2009 and 2010, with growth rates of 7.6% and 4.6% recorded for these two years respectively.
Much of this growth resulted from increased market activity and competition as players entered the category and new products were launched.
Baking fats are becoming increasingly specialised with products available for very specific baking applications, such as pies or light pastries. The extended repertoire of products available to the market served to bolster category volumes for 2010.
However, the changing format of product offerings has brought with it a new challenge.
The level of product specificity is making it more difficult for new players to enter the market without first building up a level of expertise and a viable product range. This can best be accomplished by players already active in the oils sector who possess a level of expertise, sufficient raw materials and a brand that can transfer to the category. This barrier to entry may hamper potential volume growth in future.
The growth is expected to taper off in the medium term as the market stabilises.
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Margarine market flat
Looking at the 2010 year, there was no volume growth in margarines for the first time in more than a decade despite new players and products in the category.
Both the wholesale and retail channels saw declines in volume, balanced by growth in volumes sold direct to foodservices and the export sector.
Margarine manufacturers have taken note of the consumer’s increased demand for healthier products and have expanded the niche range of products available for specific medical conditions such as heart conditions, diabetes and obesity, as well as an increased vitamin content for the younger consumer. This diversification has allowed established players to gain more value in the category despite lower volumes in the year under review.
Nevertheless, this continues to form a small portion of the overall market.
Competition within the market was most evident in the lower priced, established bricks and the larger tubs. Consumers also seem to have been more conscious of their spending, choosing the larger pack sizes.
Congruent with the reduced growth seen for 2010, only limited increases are expected for margarine volumes in the short term.
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