SA's instant coffee market sees bitter war for market share
By Helena Wasserman - Mar 13th 2018, 09:58
Nescafé, Ricoffy and Frisco are at war – which means cheaper prices for instant coffee drinkers.
Owner of the Frisco coffee brand, AVI, is reporting "aggressive competitor activity" in South Africa’s instant coffee market. The company released its results for the six months to end-December on Monday morning, reporting that revenue and operating profit from its coffee brands were lower than the first half of last year.
The increased competition has forced AVI to cut instant coffee prices. You can now buy a 750g tin of Frisco at Makro (as part of a bulk deal) for R67.33 – compared to R70 a year ago.
AVI is up against the brands of the Swiss giant Nestlé, which in 2016 estimated that its Ricoffy represents one in every two cups of instant coffee consumed in South Africa. Prices of Ricoffy range from a current offer of R59.99 for 750g at Game to R79 at Makro.
Nestlé also owns Nescafé Gold (currently at R96 for 200g at Makro – unchanged from a year ago.)
Nestlé recently invested R1.2 billion to expand its instant coffee manufacturing plant in Estcourt, KwaZulu-Natal. The company has also invested in chicory farming in Kwa-Zulu Natal and Eastern Cape.
It clearly believes there is money to be made in the SA coffee market. South Africans consume, on average, between 250 and 300 cups of coffee per year – compared to 456 cups in Brazil, and upwards from 500 in Europe. Coffee drinking in SA has gained ground at the cost of black tea, which has declined in recent years, a survey by the marketing company Insight Survey found.
Through its Ciro brand, AVI is the sole distributor of the European coffee brands Douwe Egberts and Jacobs in South Africa. Jacobs Douwe Egberts, owner of the brands, is currently fighting a global instant coffee market share battle with Nestlé. Last year, it pulled even with Nestle in terms of retail coffee volumes, though its sales still lag by value.
South African coffee drinkers can expect cheaper instant coffee for longer thanks to the strong rand and lower coffee bean prices worldwide. Arabica coffee bean prices have slumped by 15% in the past years thanks to expected bumper harvests in South America. Brazil expects that its output of robusta beans, the lower quality bean usually used in instant coffee, will rise 30% this year.
AVI hopes lower prices will help drive volumes and profit margins on its coffee brands in the second half of the year. Still, its share price fell by half a percent following the results on Monday morning. Revenue gained only 2% to R7.3 billion in the past six months, below inflation. Headline earnings rose 7.5% to 325,6 cents, while its interim dividend gained 8.0% to 175 cents per share. Business Insider
Retail sales remain muted with consumers under pressure
20/09/2019 - 14:31
Retail sales for July marginally declined to 2 percent year on year as sales growth continued to reflect a muted demand in South Africa, with consumers’ discretionary income under strain.
Pick n Pay rolls out R4 lifetime reusable bag made from recycled plastic bottles
20/09/2019 - 14:14
Pick n Pay is rolling out its new budget green People n Planet reusable bag nationally after a successful trial with customers earlier this year. The bag is expected to be in all stores by mid-October.
Zara launches online store in South Africa
19/09/2019 - 11:58
Zara has launched its online sales in SA through its dedicated website zara.com/za. This marks an important milestone in the expansion of Zara’s integrated store and online platform into markets where it already has a store presence.
Pick n Pay launches collectable Rugby Super Cards
19/09/2019 - 11:28
Local sports fans can once again feel part of the upcoming rugby tournament thanks to the launch of Pick n Pay’s new Rugby Super Cards.
The V&A Waterfront’s Victoria Wharf is SA’s greenest shopping centre
19/09/2019 - 09:13
The V&A Waterfront’s far-reaching waste management and recycling practices has earned the property a prestigious Green Buildings Council of SA (GBCSA) 5 Star Green Star Existing Building Performance v1 certification (EBP v1) for the popular Victoria Wharf Shopping Centre – the highest rating for any existing shopping centre in South Africa.