Two major newcomers plan to spice up SA's FMCG food market

Two major newcomers plan to spice up SA's FMCG food market

FMCG SUPPLIER NEWS

Foodstuffsa.co.za/ Financial Mail - Aug 17th 2011, 15:59

SA’s fast-moving consumer goods (FMCG) market is set for a shakeup. At the retail level Walmart will see to it. At the product-supply level two new foreign entrants, Iffco Worldwide and Diplomat, aim to do the same, reports The Financial Mail. 

“The FMCG market is ripe for change,” says Iffco (SA) CEO Lauren Siebrits. “Local food manufacturing giants have had it their own way for too long. Their position has been largely unchallenged by foreign players and enabled them to build huge brands that sell at premium prices.”

Diplomat (SA) CEO Steve O’Hagan is of the same opinion.

Iffco (SA) comes with the backing of Iffco Worldwide, a Dubai-based food manufacturer and distributor with a presence in over 85 countries.

“Iffco is determined to build a major, sustainable business [in SA] and has the financial muscle to do it,” says Siebrits, who previously headed PepsiCo’s Simba unit in SA.

Also boasting financial muscle, Israel’s largest FMCG distributor, Diplomat, has entered SA under an agreement with Procter & Gamble (P&G), the world’s largest FMCG manufacturer.

“Diplomat has been associated with P&G for 20 years and is one of its top 10 distributors,” says Diplomat group CEO Noam Weiman. P&G, which focuses on the personal care, household products and baby care sectors, reported global sales of US$79bn in 2010.

Occupying two different FMCG segments, Iffco and Diplomat share the goal of aggressively growing their brands’ market shares. “We [Iffco] have started by importing products and will move into manufacturing locally when we have built scale,” says Siebrits.

Iffco’s initial drive is led by its Tiffany biscuit and confectionery range, which has already achieved good penetration in Shoprite stores, says Siebrits. “We intend to expand into areas such as pasta, ice cream and cold drinks,” she says .

AVI controls some 70% of the biscuit market, says Siebrits, adding: “Market shares of this size are not good for consumers. They end up paying more.”

Iffco’s strategy is to supply products which are as good as or of better quality than current leading brands but at an affordable price . Thanks to the recession, consumers are far more aware of costs. Siebrits points to a study by Unilever which found that 65% of SA consumers now compare prices more often and 60% shop around.

Cost awareness, she says, is now a permanent feature of the FMCG market. “The big players felt that when the economy picked up, consumers would come back to their premium brands. But things have changed.”

O’Hagan says Diplomat’s initial focus is on tier-two retailers, which include pharmacies, speciality chain stores and independent wholesalers, and tier-three retailers, which covers small formal and informal retailers.

“We offer full-service distribution covering all aspects including logistics and even debtor admin,” says O’Hagan. “This enables retailers to focus on their business. We see this holistic service as our key differentiator.”

Diplomat has built distribution centres in Gauteng, Cape Town, Durban and Port Elizabeth.

For both Iffco and Diplomat, Walmart’s arrival could not have been better timed.

“Cambridge has accepted us as a supplier,” says Siebrits, referring to the brand Massmart is using to drive its entry into the lower-income FMCG market. She adds: “They are backing our products through TV advertisements. The Walmart spirit has already arrived.”

Diplomat has also forged ties with Cambridge, says O’Hagan. “It has a no-nonsense approach based on quality and price. It is dynamic and keen.” He concludes: “The [FMCG] market is in for an interesting fight.”