News

Industries

Companies

Jobs

Events

People

Video

Audio

Galleries

My Biz

Submit content

My Account

Advertise with us

MICE News South Africa

Demand hits sweet spot for Cadbury

Cadbury's nearly 90-year-old factory sits in front of the North End Lake in Port Elizabeth. Now an industrial hub, much has changed in the area over the years, but the original façade of the building and the faint smell of melted chocolate wafting through the air remain a constant in the precinct...
Demand hits sweet spot for Cadbury
© akulamatiau – 123RF.com

The brand's owner, Mondelez International, has spent close to $50m on capacity upgrades and expansion of the site over the past two years as demand for chocolate increases in SA - an industry valued at more than R5bn.

For Nasdaq-listed Mondelez, Southern, central and East African markets represent a compelling investment case with their burgeoning middle class that is increasingly becoming brand aware. Recent market research from Frost & Sullivan predicts that the chocolate market in SA will grow at a rate of more than 10% per annum over the next five years, far exceeding the global average of 6%.

"We want to double the output of the site over the next few years," says Peter Edmondson, section and manufacturing capability manager at the global snacks company.

Edmondson, also known as "Doctor Chocolate" hails from Bournville, a village near Birmingham, England, best known for its connections with the Cadbury family and chocolate. A chemical engineer by profession, he also completed a doctorate focusing on the manufacture of chocolate crumb, a base product for all Cadbury chocolate.

Its facility in Port Elizabeth delivers to nearly half of the total South African chocolate market through more than 100 stock-keeping units including moulded slabs such as Dairy Milk, and countlines such as Lunch Bar and P.S. bar, as well as candy and assortments such as Astros and Endearments.

It is also a private label producer for various local companies. Other products such as Crunchie are imported from Poland and Flake is imported from Egypt.

"There are two areas where we're taking pressure: we're sitting with very sluggish economic growth and then cost pressure due to constant inflation and that's being driven by the exchange rate which is weakening as well and that puts a squeeze across all FMCG (fast-moving consumer goods) companies," MD of Mondelez SA Daniel Lombard says.

In SA, the company raked in 381m in 2013 and $211m last year. A drop-off in volume was seen during the spate of xenophobic attacks last year - particularly with the group's miniranges which are sold by hawkers and informal traders.

Still, South Africans are big chocolate eaters.

About 300,000 Cadbury Lunch Bar chocolates are sold each day. From a unit perspective, the local brand, which this year celebrated its 50th birthday is its best-selling line. In SA its other "power brands" are Dairy Milk Wholenut and Dairy Milk Top Deck.

According to Euromonitor, Mondelez leads South African chocolate confectionery, posting a value share of 42% last year. Bar One owner Nestlé SA was ranked second with a 23% value share and Tiger Brand's Beacon came third overall with an 8% share.

Mondelez installed its new Lunch Bar line in 2010 to include more automation - ultrasonic guillotines and robots that stack boxes. Along with a six-month intensive training programme on confectionery, operators were sent to Bosch, Switzerland to learn how to operate machinery.

"What we're seeing is a propensity for an increase in purchasing premium brands in the South African market, which is growing quite ahead of the normal affordability segment, and specifically in that gifting and premium space is the opportunity to optimise margins," Lombard says.

Cadbury is doing this through its Marvellous Creations range and its imported Dairy Milk slabs that have additions such as Oreo, Daim and Ritz crackers.

"At R30 a bar, Marvellous Creations aren't that cheap but people seem to be willing to pay a lot more for chocolate.

"Where you have a fairly flat base, innovation is driving a lot of the growth with these new novelty-type chocolates," Edmondson says.

In terms of volume, the group also sees huge opportunity in SA's lower end of the market where it has pushed more affordable options such as an 11g pencil-shaped Cadbury Dairy Milk sold by hawkers.

"There is a lot of opportunity in the previously disadvantaged and rural areas. Sometimes the first time a consumer tries a Cadbury product at the lower end they'll say oh, that's nice ... and they will then move on to buy the big bars," Lombard says.

The growing chocolate market has seen a proliferation of local niche players, as well as premium global players such as Lindt and Ferrero expanding aggressively in SA.

"While the rising cost of raw materials, and fuel, will continue to drive up costs, price rises are likely to be tempered by competitive pricing among the leading manufacturers who are using this strategy to drive volume sales.

"Retailers such as Pick n Pay and Shoprite will also intensify the number of offers as customers become aware that nongrocery retailers such as Clicks offer wide ranges," Euromonitor says.

Source: Business Day

Source: I-Net Bridge

For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.

We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.

Go to: http://www.inet.co.za
Let's do Biz