Chilli Value Chain Analysis Steps 2-4 Final

KZN Department of Economic Development

Chilli value chain analysis: Current KZN and SA value chain,

global market and competitor analysis Deliverable for Steps 2-4

Final March 2006

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TABLE OF CONTENTS EXECUTIVE SUMMARY............................................................................................1

Current KZN and SA chilli value chain ........................................................................... 1 Growing activity ............................................................................................................. 1 Processing activity ......................................................................................................... 2 Market for chillies and chilli products.............................................................................. 3 Global market and competitors ...................................................................................... 4 Selected markets in greater detail.................................................................................. 6 South Africa................................................................................................................... 6 United Kingdom............................................................................................................. 7 Germany........................................................................................................................ 8 Overview of comparative advantages, opportunities, and threats................................... 8

A INTRODUCTION..................................................................................................10 1 Purpose...............................................................................................................10 2 Overview of the chilli value chain ........................................................................11 3 Methodology........................................................................................................13

3.1 Review of secondary resources............................................................................ 13 3.2 Interviews ............................................................................................................. 13 3.3 Quantitative analysis of trade flows and markets .................................................. 13

B CURRENT KZN AND SOUTH AFRICA SITUATIONAL ANALYSIS....................15 4 Growing activity...................................................................................................15

4.1 Current chilli production in KwaZulu-Natal ............................................................ 15 4.1.1 Seed suppliers............................................................................................... 15 4.1.2 Nurseries (and seedling suppliers)................................................................. 15 4.1.3 Growers......................................................................................................... 17 4.2 Future chilli growing potential within KZN ............................................................. 21 4.3 Current production in South Africa ........................................................................ 22

5 Processing activity...............................................................................................23 5.1 Types of processing.............................................................................................. 23 5.2 Trends in the value chain...................................................................................... 24 5.3 Case study............................................................................................................ 24

6 Market for chillies and chilli products...................................................................26 6.1 Domestic market................................................................................................... 26 6.1.1 Basic and intermediate products.................................................................... 26 6.1.2 Consumer products ....................................................................................... 29 6.2 Exports ................................................................................................................. 30 6.2.1 Basic and intermediate products.................................................................... 30 6.2.2 Consumer products ....................................................................................... 32 6.3 Synthesis of imports and exports .......................................................................... 34

C GLOBAL MARKET AND COMPETITOR ANALYSIS ..........................................36 7 High-level overview of markets ...........................................................................36 8 High-level overview of products ..........................................................................41

8.1 Fresh chillies......................................................................................................... 41 8.1.1 Global market overview ................................................................................. 41 8.1.2 Global production and competition................................................................. 41 8.1.3 Assessment of opportunity for KZN ............................................................... 44 8.2 Dried/further processed chillies............................................................................. 45 8.2.1 Global market overview ................................................................................. 45 8.2.2 Global production and competition................................................................. 47 8.2.3 Assessment of opportunity for KZN ............................................................... 51 8.3 Spice mixtures/curries .......................................................................................... 52 8.3.1 Global market overview ................................................................................. 52 8.3.2 Global production and competition................................................................. 53



8.3.3 Assessment of opportunity for KZN ............................................................... 57 8.4 Sauces/pickles...................................................................................................... 58 8.4.1 Global market overview ................................................................................. 58 8.4.2 Global production and competition................................................................. 59 8.4.3 Assessment of opportunity for KZN ............................................................... 60

9 Prioritised product and market opportunities .......................................................61 10 Detailed analysis of selected markets and competitors.......................................63

10.1 Detailed analysis of UK market and competitors................................................... 63 10.1.1 Overview of the UK market............................................................................ 63 10.1.2 Product–specific trends ................................................................................. 69 10.1.3 Competitors ................................................................................................... 72 10.1.4 Understanding the UK food retail distribution structure .................................. 77 10.1.5 Challenges to entering the UK market and implications for KZN.................... 78 10.2 Detailed analysis of the German market and competitors ..................................... 79 10.2.1 Overview of the German market .................................................................... 79 10.2.2 Product–specific trends ................................................................................. 85 10.2.3 Competitors ................................................................................................... 86 10.2.4 Understanding the German food retail distribution structure .......................... 87 10.2.5 Challenges to entering the German market and implications for KZN............ 88 10.3 Detailed analysis of the South African market and competitors............................. 89 10.3.1 Overview of the South African market............................................................ 89 10.3.2 Product–specific trends ................................................................................. 93 10.3.3 Competitors ................................................................................................... 94 10.3.4 Understanding the South African food retail distribution structure .................. 97 10.3.5 Challenges to entering the South African market and implications for KZN.... 98

11 Analysis of comparative advantages, opportunities, and threats.........................99 11.1 PESTOLE analysis ............................................................................................... 99 11.1.1 Policy environment ........................................................................................ 99 11.1.2 Economic environment ................................................................................ 100 11.1.3 Social environment ...................................................................................... 100 11.1.4 Technological environment.......................................................................... 101 11.1.5 Organisational environment ......................................................................... 102 11.1.6 Legislative environment ............................................................................... 104 11.1.7 Environmental considerations...................................................................... 104 11.2 SWOT and gap analysis ..................................................................................... 105 11.2.1 Fresh chillies................................................................................................ 105 11.2.2 Dried/further processed chillies.................................................................... 106 11.2.3 Spice mixtures/curries ................................................................................. 107 11.2.4 Sauces/pickles............................................................................................. 108 11.3 Conclusions from the SWOT .............................................................................. 108

Appendix A: Interviews ...........................................................................................110 Appendix B: Scenario analysis ...............................................................................111 Appendix C: Standards, regulations and guidelines ...............................................112

World Health Organisation ......................................................................................... 112 European Union......................................................................................................... 112

Appendix D: Map of the UK with distribution of Indian population ..........................114 Appendix E: Price points for chilli-based products in selected UK retailers ............115 Appendix F: Price points for chilli-based products in selected German retailers ....126 Appendix G: Price points for chilli-based products in selected South African retailers

..........................................................................................................................128 Appendix H: Legislation affecting the production of chillies ....................................145



KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March 2006

Prepared by Kaiser Associates Economic Development Practice 1

EXECUTIVE SUMMARY Current KZN and SA chilli value chain The value chain describes the full range of activities which are required to bring a product from initial primary production, through the different phases of production (involving a combination of physical transformation and the input of various producer services) to delivery to final consumers. Primary production per se is only one of a number of value added links. Value chain analysis is a systematic approach to examining the development of competitive advantage for an operation or production activity. Value chain analysis is used to1: Ñ Identify the nature and determinants of competitiveness, often assessing a group of

interconnected producers rather than narrowly focussing on individual producers Ñ Identify which activities are subject to increasing returns, and which are subject to

declining returns by focusing on all links in the chain (not just on production) and on all activities in each link (for example, the physical transformation of primary products in the production link)

Ñ Assist policymakers to formulate appropriate strategies and interventions based on the distinctions regarding the nature and dynamics of returns throughout the various links in the chain

The scope of the chilli value chain analysis is ‘farm to the fork’. Within this value chain there are 3 main categories of activity that have been examined from the supply side, i.e.:

1. Primary production (growing, drying and milling) 2. Intermediate processing 3. Production of final consumer goods (including mixing, cooking and preservation)

Roleplayers in the chilli value chain include: Ñ Providers of seed and seedlings Ñ Wholesalers Ñ Growers Ñ Distributors/exporters Ñ Processors Ñ Retailers Ñ Fresh produce markets Ñ Regulators and support services Ñ Traders

Growing activity The majority of growers grow from seedlings sourced from nurseries and seedling suppliers. The four main seed companies: Hygrotech, Starke Ayres, McDonalds Seeds, and Ferax Seeds supply nurseries and seedling suppliers. It is estimated that there are less than ten major nurseries in KwaZulu-Natal, producing approximately 4 million seedlings per season. Seedlings sales indicate a preference for hybrid varieties over open-pollinated varieties due to higher yields, better quality, and resistance to diseases. Growing is concentrated in three main areas of KZN: Ñ Northern KZN (Pongola and Makhathini Flats) Ñ North coast (Ilembe/Stanger area, Empangeni) Ñ Weenen and Tugela Valley

1 Raphael Kaplinsky and Mike Morris, A handbook for value chain research, 2000





Although there are several commercial chilli farms, the majority of growers grow chillies as a cash crop, selling into local fresh produce markets. Chillies are a useful cash crop for the following reasons: Ñ Chillies are relatively easy to establish and grow Ñ Chillies are less susceptible to loss from grazing than some crops Ñ Reduced concerns regarding theft in comparison to other cash crops Although the exact number of growers in KZN is not know, and the number of small chilli growers may be in the order of hundreds, and this number is increasing due to perceived market opportunities in chillies. The membership of the KZN Spice Growers Association is made up of over 350 small-scale farmers (greater than 0.5ha) currently active or interested in growing chillies. Additionally, there is a large number of growers who have less than 0.5ha under chilli production. Very few commercial growers cultivate more than 10ha. The following table shows key information obtained from a sample of the larger growers: Farm Location Hectares # plants Varieties Volume (tons)

1. Pongola area 1 28,000 Thaibo, green chillies 20 2. Pongola area 10 - 15 250,000* Jalapeno 200

3. Empangeni area 1 - 4 90,000 Thai: Skyline 3, and Star 6603, Star 6604, Star 6602, 80 – 100

4. Mandeni 2* 9,600 Thai: Skyline 8*

5. Pongola area 2 40,000 Mainly Star 6004, some Jalapeno 34

6. Pongola area 2 50,000 Thaibo, Guntur Hope, and previously did Star 6601 18

7. Pongola area 5 130,000 Thaibo, Star varieties 175**

8. Weenen area 40*** 1,200,000 Skyline 3, also Habanero, Jalapeno, Peppadew 700

TOTAL 63 – 58 1,884,000 1,235 – 1,255 * These values were estimated based on research and other information provided by each farmer ** This figure is based on the estimated yields of 35 – 45 tons per hectare quoted by the growers; however this appears to be an overestimation based on other yield estimates found by Kaiser. ***Figure includes outgrowers, can be as much as 60 hectares depending on outgrowers Nationally, the areas of Limpopo, Mpumalanga, and the North West Province are reported to produce higher yields and larger volumes of chillies than KZN. For example, in the North West Province yields may reach up to 7 tons/ha (dried), while in KZN yields reach about 3 tons/ha (dried). Processing activity Processing activity ranges from the very basic (e.g. shade drying on farms) to very capital-intensive processes (e.g. milling, irradiation). Processes include machine drying, basic grinding and powdering, oleoresin extraction using solvents, mixing, packaging operations, etc.. Major processors in KZN include: Ñ Robertsons Herbs and Spices (Unilever) Ñ Allifa Spices Ñ Natpro Spicenet Ñ Pakco Ñ Foods of the World (branded under Taste of Thailand and African Farm) Growers contracted to agents sourcing inputs for processors are usually required to produce dried chillies. The relatively humid climate of KZN is not particularly suitable for shade drying and results in lower quality products. Drying machines would greatly improve the quality of KZN’s dried chillies. The cost of purchasing and operating these machines is prohibitive for small-scale growers, and machine drying is rare in KZN.





More advanced forms of processing activity are also evident in KZN. Robertsons, Allifa, Natpro, and Pakco all have milling operations, as well as packaging. Robertsons is possibly the biggest processor of chilli products in South Africa, and outsources some of its milling to Allifa. A particular characteristic of the KZN chilli processing industry is the proliferation of spice works and spice trading companies, many of which rely on unique recipes and flavours, but outsource the actual processing to companies such as Allifa, which mill and package for numerous other companies. Processors of final/consumer products typically manufacture their products using chilli powders (or purees/pastes). However, Foods of the World (Taste of Thailand and African Farm brands) uses fresh chillies in manufacturing various sauces. Notable large processors of final consumer products in the South African chilli industry include: Ñ Nando’s Ñ Crown National / Continental Spiceworks Ñ Cape Herb and Spice Company Ñ Freddy Hirsch Trends in processing activity in the chilli value chain include: Ñ Presence of traders who contract growers and sell onto processors which leads to

downward pressure on growers’ margins Ñ Greater imports of whole, dried chillies by processors – quality can be better monitored

in whole chillies rather than powdered Ñ Processors more likely to import chilli varieties that are needed in larger quantities, due

to greater consistency of supply Market for chillies and chilli products An analysis of trade data for South Africa revealed the following key observations: Ñ SA is a net exporter of basic chilli products (fresh and dried), with Mauritius, Spain, Brazil

and the United States as primary destination markets Ñ Exports of fresh products are stagnating, whereas exports of dried products show

considerable growth Ñ Imports of fresh and dried products are supplied mainly from Zimbabwe, India and

China, with neighbouring and nearby countries being the primary origin countries for fresh products

Ñ SA is a net importer of curry by volume, however the average unit price obtained for products exported is much higher than the unit price of imported products, and hence the value derived from curry exports exceeds that of the value paid for imported products. India is the primary country of origin for curry products.

Ñ South Africa is a net exporter of mixes, with the UK and Canada being primary destination markets

The analysis of the province-specific2 trade data revealed the following: Ñ Dried products are the most heavily traded type of chilli product across all provinces Ñ Gauteng, KZN, the North West, Western Cape, Mpumalanga and Free State appear to

be most active in terms of the import and export of chilli products Ñ KZN is not a significant exporter of fresh chillies, but also imports relatively low volumes

of fresh products Ñ KZN is a strong provincial performer in the export of dried products and curries Ñ Gauteng is a net importer of both fresh and dried products, but a net exporter of curries

and mixes

2 Postal code definitions of provincial boundaries differ from the administrative boundaries.





Global market and competitors The market for chillies has been growing, due to increasing popularity of ethnic foods in major markets such as the US and the EU, and an increased use of spices as ingredients in food manufacturing, as food offerings become more sophisticated. Market opportunities and competitors vary for the different products along the chilli value chain. Import statistics for various chilli products are shown in the table below. The markets for these products are discussed in further detail below, as well as the market for sauces, which cannot be accurately captured by import trade statistics.

Product

Import value

imported, 2004 (US$

000)

Import quantity

imported, 2004

(tons)

Unit value (US$/ ton)

CAGR for value

2000-2004 (%)

Major markets

SA share

in exports

(%)

HS 070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled

2,355,086 1,606,960 1,466 10 US (26%) Germany (20%) UK (9%)

0

090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground

506,368 - - 7 US (24%) Germany (8%) Spain (7%)

2

HS 091050 Curry 44,380 21,365 2,077 13

UK (17%) United States (18%) Singapore (7%)

3

HS 091091 Mixtures of two/more of the products of different headings to this chapter

130,914 40,118 3,263 9 Russia (9%) Belgium (9%) Germany (8%)

0

Fresh chillies Markets for fresh chillies are driven by tastes for consumption of hot food, and supply relationships are determined by proximity, due to relatively high transport costs and perishability of fresh chillies. Markets are therefore often served by domestic supply or by neighbouring countries. Furthermore, competitiveness in fresh chillies is driven by: Ñ Proximity of production to market due to transport costs Ñ Colour, measured in colour units or ASTA values, and pungency levels measured as

capsaicin content Ñ Variety of chillies Major producing countries are China, India and Mexico, which supply mostly internal markets and neighbouring countries. Yields of chilli production in China are similar to those in KZN, at about 3 tons/ha (dried), while yields in India are much lower, at about 1.1 tons/ha (dried), however production is on a large scale.





Dried and further processed chillies Markets for dried and further processed chillies are driven by: Ñ Large or growing food processing industries Ñ Large paprika processing industries, such as in Spain, Hungary and Germany Ñ New food product development, which drives demand for paprika powder and

oleoresins Ñ A global taste trend towards spicy and exotic foods Chinese and Indian producers dominate dried, crushed and ground chilli production and trade, by producing on a large scale, and, largely due to low labour costs, are the global price leaders in markets where trade patterns are driven by price. For example, dried chillies imported from India can be up to 50% cheaper than domestically produced chillies. However, processors have noted that powdered chillies from China and India have been found to contain various additives and dyes, some illegal and hazardous, such as the Sudan Red dyes. These dyes are most often added once the chillies have been ground. A number of key European and US importers are therefore increasingly importing chillies in a whole or crushed form. Competition in the paprika market is largely on the basis of colour quality. Prices of dried paprika, paprika powder and oleoresins are directly related to their colour values, which are measured by ASTA values and colour units. The United States is the largest consumer of paprika, and major markets, such as Spain and Germany, exist in the EU as well. Trends in the paprika value chain related to increasing awareness of health and safety concerns include: Ñ Natural flavourants and colourants will increasingly substitute artificial flavourants and

colourants, as food manufacturers increasingly insist on natural products Ñ Dried paprika is sourced rather than dried and crushed or ground paprika due to safety

concerns Ñ Oleoresins are expected to increasingly substitute paprika powder, as oleoresins are a

higher quality input Traditionally, Spain and Hungary dominated paprika production, however newer producers such as Peru, Brazil, and South Africa now produce the majority of dried whole paprika. The United States and Zimbabwe are significant producers as well. Curries and spice mixtures The largest importer of curries is the UK, followed by the US. These markets have shown strong growth, although UK consumption of curry powder is expected to decline. Ingredients other than chillies used in the production of curries and spice mixtures include: Ñ Fennel Ñ Cumin Ñ Coriander Ñ Turmeric Ñ Cloves Ñ Cinnamon Ñ Bay leaves Ñ Star aniseed Ñ Curry leaves Ñ Cardamom Underlying the strong growth in both curries and spice mixtures/blends are some major demand trends:





Ñ Growth in processed food consumption in some developing markets, such as Eastern European countries

Ñ Increased use of spices in food manufacturing driven by the growing popularity of prepared foods and ready-to-use mixtures

Ñ Increased demand for ethnic foods Ñ Growing awareness of diverse cultural cuisine Ñ Increased use of spices as flavourings rather than artificial flavours Drivers of competitiveness for the production of spice mixtures include quality of inputs, development of unique offerings, and a reputation for reliability of quality. Sauces Demand for hot table and cooking sauces is driven by the following factors: Ñ Presence of a large consumer market with high or rapidly increasing disposable incomes Ñ Large existing ethnic populations or increase in ethnic populations with preference for

spicy food products Ñ Innovation in food product development Chillies generally make up only a very small proportion of hot sauces, up to 5% of the total content of sauces, although for chilli sauces this can increase to 40%. Other ingredients commonly used in the production of sauces include: Ñ Tomato Ñ Garlic Ñ Onion Ñ Other vegetables and fruit (e.g. pineapple, red and green peppers etc.) Ñ Spices and seasoning Ñ Vinegar Ñ Water Hot table sauces are expected to lose market share to cooking sauces, as consumers’ eating habits change and they increasingly seek more convenient foods. Drivers of competitiveness in the sauces market include branding and packaging, tailoring the product to consumer needs, and effective distribution channels. Selected markets in greater detail South Africa Demand for chilli products in the South African market follows the following trends: Ñ Spices and seasonings

o Amongst the Indian community, there is a trend towards blending spice mixtures at home, due to distrust in the composition of spice mixtures sold in shops

o Newer products such as smoked paprika may gain popularity Ñ Condiments and sauces

o Curry sauces are becoming very popular o Hot sauces are used sparingly, and therefore do not sell quickly o Mild sauces may be more popular than hot sauces

Consumers are increasingly buying products that have a greater added value, or offer a “meal solution” such as cooking sauces, rather than table sauces. Supplying to South African chain stores poses a significant challenge, as retailers have strong links to existing suppliers. Furthermore, a large proportion of products is sourced





directly from manufacturers, therefore retailers prefer to source from manufacturers that can provide a broad range of products. This means that producers aiming to supply products to major retailers would most likely need to produce a range of sauces or spice mixtures that would contain flavours other than chilli based flavours. Delicatessens offer an opportunity to retail on a smaller scale and with more product focus, however there is strong competition from both domestic and imported manufacturers. The market for hot table sauces and lower end spice mixtures and curries appears to be fairly saturated, with a wide range of products and brands available. However, opportunities in the following areas may exist: Ñ Provision of sauces and mixtures based on chilli varieties Ñ Greater value added products, such as cooking sauces that offer a specific “meal

solution”, including: o Marinades o Pasta sauces o Curry sauces

Ñ Products that have an appealing story, which may be based on ethnicity and origin Ñ Innovative spice mixtures and curry blends with appealing packaging United Kingdom The UK is a major market for hot sauces, spice mixtures and curries. Major demand trends include: Ñ Spices and seasonings

o Demand for herbs, spices and seasonings has grown at 3% per year from 2002 to 2005, driven by new product development, particularly at the higher value market segments, and consumers using new recipes in cooking

o Curry powder retail sales are valued at £6m, and have been declining due to the increased popularity of ready meals and cooking sauces

Ñ Condiments and table sauces

o Growth of table sauces has been driven by3: § New product launches and relaunches § Promotional expenditure on brand extensions into new areas § Organic and low-fat variants of existing products

o However, this market segment faces long-term decline due to4: § Changing eating habits that are moving away from traditional family

meals § Old-fashioned image of some products § Lower priced own label products

Ñ Cooking sauces

o Cooking sauces are well placed to gain from the trend towards convenience and easy meal options

o There is an ever expanding range of cooking sauces available as consumers become increasingly adventurous

o There are strong trends towards ethnic, spicier foods There are significant challenges in entering the UK market in terms of: Ñ Concentration of supplier efforts by major retailers

3 UK Condiments and sauces, Keynote, 2004 4 UK Condiments and sauces, Keynote, 2004





Ñ Dominance of a small group of local producers in mainstream retail Ñ Established speciality importers, in particular in hot sauces Ñ Price pressure Ñ Quality and non-tariff barrier compliance In addition, traceability is becoming a major issue for exporters when supplying (UK-based) supermarket chains as their clients. The most suitable area of opportunity may be supplying speciality stores and delicatessens, in particular those with an Indian ethnic focus or established South African ties. Germany Major demand trends in Germany include: Ñ Spices and seasonings5

o Germany is the largest market for herbs and spices in Europe o Paprika and curry are among the most popular spices o Ready-to-use spice mixtures have been increasing in popularity, as more varieties

become available and consumers demand greater convenience o There is also a rising demand for organic spices and full ranges of organic spices are

available Ñ Condiments and sauces

o New product varieties are being launched that include chilli and curry flavours o Curry ketchup has become popular o Organic sauces are emerging in the German market

Ñ Cooking sauces o Cooking sauce sales are expected to increase, driven by the trend towards greater

convenience and the growing number of single person households6. Challenges to entering the German market are the following: Ñ Major retailers increasingly concentrating supply Ñ Well-established spice trade with established supplier relationships Ñ Sophistication of food processing sector and tendency to manufacture products locally

restricts opportunities to supply finished products such as sauces Ñ Concerns regarding food safety and quality of inputs into imported finished products The most suitable area of opportunity may be supplying speciality stores and delis, in particular those with an ethnic focus or established South African ties. Products could be marketed through the following methods: Ñ Exhibits at major food shows, such as ANUGA in Germany and SIAL in France Ñ In-store promotions Ñ Market acceptance of a new product may be tested over a 12 to 18 month time period Overview of comparative advantages, opportunities, and threats Initial analysis through a PESTOLE and SWOT show that the broad chilli sector is generally a low-opportunity sector for KZN, with restricted opportunities. The SWOT analysis revealed the following specific assessments of opportunity in each product category of the value chain: Ñ Fresh chillies

o Limited opportunity due to high production costs and strong competition, although some small niche opportunities may exist

Ñ Dried/further processed

5 Spices and herbs, EU market survey, CBI, 2002 6 Sauces, Dressings and Condiments in Germany, Euromonitor International, March 2005





o Limited opportunity due to reliance on uncompetitive fresh chillies production, and difficulty in accessing opportunities for more advanced processes such as milling

Ñ Curries/spice mixtures o Niche opportunities for curries and spice mixtures, in particular through a branding

approach Ñ Sauces/pickles

o Niche opportunities for the production of branded hot table sauces, and cook-in sauces

This analysis suggests that the KZN DED focus its development initiatives and interventions on the chilli value chain’s downstream activities, focusing on processing and the production of final consumer products.





A INTRODUCTION 1 Purpose Although the KZN agriculture and food processing sector makes a substantial contribution to employment and GGP in the province, the performance of the food sector in the province has been declining. Recent increases in consumer spending have resulted in optimism about the opportunities for food products in the domestic market. The KZN Department of Economic Development has observed an increased uptake of chilli production and processing in the province. Limited official information regarding the growth potential, comparative advantage and market opportunities for chilli production in KwaZulu-Natal is currently available. The KZN Department of Economic Development therefore commissioned Kaiser Associates to undertake an investigation into the chilli value chain for the province. This document captures the outputs of Steps 2 to 4 of the project, and aims to provide an analysis of the KZN supply-side context and trends along the chilli value chain, an overview of the global chilli market from the demand side, and assess key competitors within the market. It also identifies potential opportunities for the KwaZulu-Natal chilli industry, focusing on prioritised product-market combinations. This document is followed by a document capturing the output s of Step 5, recommendations for supporting the chilli industry.





2 Overview of the chilli value chain The value chain describes the full range of activities which are required to bring a product from initial primary production, through the different phases of production (involving a combination of physical transformation and the input of various producer services) to delivery to final consumers. Primary production per se is only one of a number of value added links. Value chain analysis is a systematic approach to examining the development of competitive advantage for an operation or production activity. Value chain analysis is used to7: Ñ Identify the nature and determinants of competitiveness, often assessing a group of

interconnected producers rather than narrowly focussing on individual producers Ñ Identify which activities are subject to increasing returns, and which are subject to

declining returns by focusing on all links in the chain (not just on production) and on all activities in each link (for example, the physical transformation of primary products in the production link)

Ñ Assist policymakers to formulate appropriate strategies and interventions based on the distinctions regarding the nature and dynamics of returns throughout the various links in the chain

The scope of the chilli value chain analysis is ‘farm to the fork’. Within this value chain there are 3 main categories of activity that have been examined from the supply side, i.e.:

4. Primary production (growing, drying and milling) 5. Intermediate processing 6. Production of final consumer goods (including mixing, cooking and preservation)

Kaiser Associates has identified the following progressions in chilli products along the value chain:

n Sun Dryingn Sterilisingn Dried Within Controlled

Environmentn Dry Milling

INDUSTRIAL INPUTS/INTERMEDIATES“BASIC PRODUCTS” CONSUMER GOODS

n Millingn Mixingn Pulpingn Dehydrationn Extraction with solvent

n Mixingn Seasoningn Cookingn Preservation in

vinegar/acetic acid

Fresh Chillies (Capsicum)

Chilli Powder (ground)Fresh Bell Peppers (Pimenta)

Oleoresins

Pickles and Jams

Chilli Seed

Sundried Chillies

Chilli Sauces (Mixed)Dehydrated Chillies

Branded Chilli Spices

Chilli Paste

Chilli Paste

KE

YPR

OC

ESS

ES

Chilli Dried

BLENDS/ MIXES e.g.

Ready meals

Mixed pickles/chutneys

Spice & curry mixes

Hot sauces

VALUE CHAIN PROGRESSION

PharmaceuticalsProcessed foods

using natural colourants & flavourants

Figure 2.1: Chilli product progression

The far right of the diagram extends into more general processing, primarily the food industry (for colourants and flavourants in products such as meats, margarines and sauces), and to a lesser degree the pharmaceutical and cosmetics industry), where multiple inputs are used and it becomes increasingly difficult to trace and measure the processing of chillies in particular. Furthermore, at this end of the value chain, competitiveness is far more related to

7 Raphael Kaplinsky and Mike Morris, A handbook for value chain research, 2000





factors other than chilli inputs. For example, they may require the availability of a range of other competitive inputs such as other spices, vegetables, natural extracts or chemicals. Roleplayers in the chilli value chain include: Ñ Providers of seed and seedlings Ñ Wholesalers Ñ Growers Ñ Distributors/exporters Ñ Processors Ñ Retailers Ñ Fresh produce markets Ñ Regulators and support services Ñ Traders





3 Methodology In terms of the agreed project plan, the project has following the steps shown in the figure below:

Figure 3.1: Overall project plan and progress to date

The analysis has been built on three key research workstreams, namely:

1. Review of secondary resources 2. Interviews with key industry players across the chilli value chain in KZN and globally 3. Quantitative analysis of South African chilli trade flows

Availability of information for products along the value chain is unequal, and varies in quality. Therefore information gathered for industry structure, market characteristics and competitors differs across the various products included in this report. 3.1 Review of secondary resources The following types of secondary sources were reviewed and analysed: Ñ Reports Ñ Articles Ñ Trade publications Ñ Government publications Ñ Websites Sources are referenced throughout the document. 3.2 Interviews Kaiser Associates conducted interviews with key roleplayers across the chilli value chain in KZN, in South Africa, and globally (see Appendix A for a list of interviews conducted). The interviews focused on the following aspects: Ñ Mapping the location of current primary production Ñ Developing estimates of the volume of primary production Ñ Uncovering the key constraints and opportunities facing producers Ñ Exploring market opportunities and requirements to access these opportunities Ñ Understanding key factors contributing to competitors’ success 3.3 Quantitative analysis of trade flows and markets The key objectives of this workstream were to:

Step 1:Project initiation

Step 3:Global market

analysis Step 5:

Analysis of opportunities,

comparative advantages, competitiveness challenges

& recommended

development frameworkStep 4:

Global competitor assessment

Step 2:High-level analysis of

current SA & KZN

chilli value chain

Step 1:Project initiation

Step 3:Global market

analysis Step 5:

Analysis of opportunities,

comparative advantages, competitiveness challenges

& recommended

development frameworkStep 4:

Global competitor assessment

Step 2:High-level analysis of

current SA & KZN

chilli value chain

ONGOING CAPACITY TRANSFER





Ñ Identify the main categories of chilli products that are traded in the value chain, and determine the associated HS codes (best fit)

Ñ Analyse South Africa’s current exports and imports for the main product categories Ñ Identify the primary markets for chilli products Ñ Identify primary competitors for chilli products The analysis considered trade flows for the following chilli commodity groups identified at HS 6-digit level based on data from ITC TradeMap as per the agreed scope.

HS Chapter Relevant HS Codes Definition Trade data

analysed Ch 7: Edible vegetables and certain roots and tubers

070960 Fruits of the genus Capsicum (peppers) or of the genus Pimenta (Note: includes chilli and bell peppers, SA tariff code book does not disaggregate this category further)

07096000

Ch 9: Coffee, tea, mate and spices

090420 Fruits of the genus Capsicum (peppers) or of the genus Pimenta (Note: includes chilli and bell peppers), dried or crushed or ground

09042010 - fruits of the genus capsicum, neither crushed nor

ground

09042020 - fruits of the genus capsicum, crushed or ground 09042030 - fruits of the genus capsicum 09042030 09042032 - unspecified 09042050

091050 Curry (SA tariff code book does not disaggregate this category further) 091050

091091 Other spices (mixtures of two or more spices) 09109110 - neither crushed nor ground (dried) 09109100 09109120 - crushed or ground Note 1: South Africa’s tariff code book does not disaggregate the following in terms of chillies, although some other country tariff codes do specify capsicum content at the HS 8 or HS 10 digit level: Ñ Pickled chillies or otherwise prepared chillies under Heading HS 2001 and 2005

respectively within Chapter 20: Preparations of vegetables, fruit nuts or other parts of plants

Ñ Mixed sauces (potentially capturing hot sauces) under HS 210390 within Chapter 21: Miscellaneous edible preparations

Ñ Extracted oleoresins under HS330190 within Chapter 33: Essential oils and resinoids, perfumery, cosmetics or toilet preparations

Note 2: On further analysis of the trade flow data, we found that only one or two tariff codes in each of the main 6 digit code analysis of trade flow data were relevant. These codes are indicated to the far right of the table. Technical note on trade flow analysis: Ñ Trade flow analysis allows an examination of export markets according to value, size,

and growth, and therefore gives an indication of potential product market opportunities. It is also useful for identifying a country’s position in world exports and imports and therefore leading competitors and supply capacity.

Ñ Trade flow analysis is usually the first step of deeper market opportunity analysis, and it has therefore been followed by an assessment of market drivers and opportunities on the demand side and an assessment of competitiveness on the supply side.

Ñ Furthermore, the HS approach of categorising products does not clearly differentiate chilli products at the end use stage of the value chain, and therefore opportunities and growth areas for beneficiation cannot be clearly identified through trade flow analysis. Therefore further research into the market was conducted to reveal opportunities for these end use products.





B CURRENT KZN AND SOUTH AFRICA SITUATIONAL ANALYSIS 4 Growing activity 4.1 Current chilli production in KwaZulu-Natal The section below provides an overview of current production within KZN based on the information available from the following roleplayers: Ñ Seed suppliers Ñ Nurseries (and seedling suppliers) Ñ Growers 4.1.1 Seed suppliers Four major seed companies in KZN supply nurseries and seedlings services. These companies are: Ñ Hygrotech – supplies paprika and chillies seeds, mainly Guntur Hope and Thaibo

varieties. It is recognised as a supplier of quality seeds, conducting research to improve on its seed quality.

Ñ Starke Ayres - supplies mainly chilli seeds (not paprika) such as Star 6604. Ñ McDonalds Seeds – supplies Long Slim Cayenne, and Rajah I F1. McDonalds is an

agent for Mayford. Ñ Ferax Seeds – supplies the Skyline 3 variety. Some seed companies have the capacity to provide technical support, and may provide this support free of charge to their customers. 4.1.2 Nurseries (and seedling suppliers) Many farmers prefer to buy seedlings rather than seeds, in order to increase the survival rate of their crop and improve yields. Nurseries typically supply the chilli growers with chilli seedlings that have been cultivated for anywhere between four and ten weeks. Large orders of seedlings are delivered directly to the customers (growers). The nurseries supply both larger commercial growers as well as the numerous small-scale growers. With respect to small-scale growers, it is not always evident what is grown for personal use or to generate additional income. It is estimated that there are less than ten major nurseries in KwaZulu-Natal. The following table provides a brief overview of the nurseries and seedlings suppliers in KZN from whom information could be obtained.

Nursery Seedlings per season Region / Location Main varieties Die Hoek Nursery 800,000 Pongola 75% Thaibo

25% Skyline 3 Top Crop Nursery 300,000 – 350,000 Midlands (Albert Falls) 80% Skyline 3, 20% Fury Sunshine Seedlings 250,000 – 300,000 Midlands (Near PMB) Mainly Skyline Meyers Nursery 400,000 Pongola Sutherland Seedlings 750,000 Ixopo 99% long slim cayenne Zululand Nurseries 500,000* Eshowe varieties, lots of paprika

recently Skye Seedlings 350,000 – 450,000 Durban Skylines, *653 Watersmeet Seedlings 500,000 Richmond 80% Serrano CPS Seedlings Not available Greytown - TOTAL 3,850,000 – 4,050,000

*Zululand sold 2,000,000 seedlings in 2004/2005 due mainly to large paprika orders





Sales indicate that there is a preference for hybrids rather than open-pollinated varieties. Hybrids produce higher yields, are of better quality and more resistant to diseases. The following varieties are the most popular as per the research of the KZN Spice Growers Association: Ñ Star 6601 - Starke Ayres Ñ Thai – Mayford / McDonalds Ñ Skyline 3 – Mayford / MacDonalds Ñ PSR 2391 – Hygrotech Ñ NS101 – Hygrotech Ñ Guntur Hope (imported from India) – Hygrotech Ñ Long Slim Cayenne (open-pollinated) – Hygrotech Kaiser’s research also revealed the popularity of the Thaibo and Jalapeno varieties. The map below indicates that nurseries and seedling suppliers are relatively dispersed across the province, with some clustering in the area of eThekwini/Mfunduzi.

Figure 4.1: Distribution of chilli seedling suppliers in KZN8 Most nurseries in KZN are relatively territorial. Concerns regarding protection of market share are likely to inhibit any collaborative activity.

8 Die Hoek Nursery and CPS Seedlings could not be located precisely - locations have been estimated





4.1.3 Growers Structure and distribution of growing The following types of chilli growers are operating in KZN: Ñ Medium-sized commercial growers Ñ Commercial farmers putting a small portion of their land under chilli production as a

diversification strategy or cash crop Ñ Community gardens and developmental projects Chillies are seen as a cash crop of high potential for the following reasons: Ñ KZN growing conditions reasonably well suited to chilli production Ñ Relatively rapid period from planting to harvest (70 – 80 days after transplanting) Ñ Less susceptible to loss through grazing than some crops – animals do not like the taste

of chillies Ñ Reduced concerns regarding theft in comparison to other cash crops such as cabbages

o The product is physically difficult to steal because of its numerous fruits o It is not a food staple o As a result, there are reduced costs for fencing, security etc

As a cash crop, the production volumes and area of land under production are highly variable. Depending on market prices for chillies and other cash crops, farmers will use different amounts of land for chilli production. While it is therefore difficult to develop an accurate assessment of the number of growers in KZN, it is estimated that the number of small chilli growers is increasing and may be in the order of hundreds if not thousands. The vast majority of these growers are growing on land of less than 0.5ha, and very few commercial growers cultivate more than 10ha. Because of the involvement of community gardens, developmental projects and small growers, there is some contribution to broad-based BEE and women’s empowerment through the sector. The following table shows key information gathered from a sample of the larger growers. Farm Location Hectares # plants Varieties Volume (tons)

9. Pongola area 1 28,000 Thaibo, green chillies 20 10. Pongola area 10 - 15 250,000* Jalapeno 200

11. Empangeni area 1 - 4 90,000 Thai: Skyline 3, and Star 6603, Star 6604, Star 6602, 80 - 100

12. Mandeni 2* 9,600 Thai: Skyline 8*

13. Pongola area 2 40,000 Mainly Star 6004, some Jalapeno 34

14. Pongola area 2 50,000 Thaibo, Guntur Hope, and previously did Star 6601 18

15. Pongola area 5 130,000 Thaibo, Star varieties 175**

16. Weenen area 40*** 1,200,000 Skyline 3, also Habanero, Jalapeno, Peppadew 700

TOTAL 63 – 58 1,884,000 1,235 – 1,255 * These values were estimated based on research and other information provided by each farmer ** This figure is based on the estimated yields of 35 – 45 tons per hectare quoted by the growers; however this appears to be an overestimation based on other yield estimates found by Kaiser. ***Figure includes outgrowers, can be as much as 60 hectares depending on outgrowers





Growers are located in three main areas of KZN, as indicated in the map below: Ñ Northern KZN (Pongola and Makhathini Flats) Ñ North coast (Ilembe / Stanger area, Empangeni) Ñ Weenen and Tugela Valley

Figure 4.2: Distribution of identified large growers in KZN The largest commercial farmer is located at Weenen. Combined with smaller growers in the area, approximately 40-60ha are under chilli production at any time. These smaller growers in the vicinity supply the commercial farmer with fresh produce for the on-farm processing activities (chilli drying and crushing). Growing conditions and seasons Chillies are a warm-climate crop requiring an extended, frost-free growing season. Most chilli cultivars grow well in areas where the average temperature is 24°C for at least four to five months of the year. The optimal temperature is between 22°C and 30°C. At temperatures below 15°C growth becomes progressively poorer and despite being a warm season crop, at temperatures above 32°C coupled with dry winds, excessive flower drop may become a





problem. The temperature range in KZN lends itself to extensive chilli cultivation where in certain areas production is possible throughout the year. Temperatures dictate the time of planting. Three distinct planting patterns can be identified in KZN: Ñ One crop during the summer in the Midlands area Ñ Two crops per year in warmer areas with light frosts (Muden and Weenen - Riverine

Bushveld) Ñ Year-round planting in the hot (frost-free) areas e.g. the Coastal belt and particularly

Northern Zululand Northern KZN, especially the Pongola and Makhathini Flats areas, are considered prime areas for growing due to the longer growing season and the ability to command higher prices during winter and spring. Pests and diseases Typical pests affecting chillies are nematodes, aphids, thrips, red spider mites, the spotted maize beetle, and the American bollworm. Important diseases include bacterial spot and powdery mildew. Viral diseases include potato virus Y, tomato spotted wilt virus, tobacco mosaic virus and cucumber mosaic virus. Using an effective preventative pest and disease and pest programme should allow farmers to achieve adequate control. The sample of farmers in KZN that were interviewed did not report problems with diseases or pests. Chillies are considered to be less susceptible to humidity-related diseases than tomatoes. Despite the fact that farmers do not regard pests and diseases as a significant production issue, fruit diseases have important safety implications for the final spice product and therefore warrant additional discussion. Capsicum products are known to be susceptible to contamination with mycotoxins. In particular aflatoxins are of concern, as they are the most common mycotoxin found in chilli products around the world and are possibly the most potent liver carcinogen known. Health effects include acute toxicity and long-term development of cancers. Aflatoxins will only be produced if the right fungal strain meets the correct environmental conditions. Conditions that inhibit aflatoxin production on whole fruit are a relative humidity (RH) of 80% or below and temperatures above 37°C. Therefore, holding, drying and storage conditions for chillies and chilli spice should fall within these parameters to minimise fungal growth and aflatoxin contamination. To this end, diseased fruit from the field should be excluded through sorting as they potentially contain aflatoxin-producing moulds. Drying should occur quickly at low humidity or at temperatures above 37°C9. Besides pests and diseases, the quality of the chilli post-harvest needs to be assessed before it can be sold. Green chillies, however, are not often graded except to remove diseased and damaged fruit10. Harvesting techniques Based on interview responses, almost all harvesting in KZN is done by hand. Though this is a labour intensive process, and contributes significantly to costs, harvesting by hand produces significantly higher yields, and better quality chillies. Harvesting machines tend to damage the crops, and harvesting by hand also allows each fruit to be harvested at the correct time. Each harvest period can last two to three months.

9 RIRDC, Chilli spice production in Australia, 2000 10 KZN Spice Growers Association





Cost structure, sales and prices

Sales channels It appears that the majority of smaller growers sell their product in unprocessed form, primarily to the fresh produce market, but secondarily directly to “hawkers” or local communities. However, a few smaller producers grow on a contract basis. For example, 35 small farms who are members of the community gardens project, supply Foods of the World, owners of the African Farm and Taste of Thailand brands. A large proportion of the medium-sized commercial growers grow on contract or conduct their own basic processing e.g. Nairn and Hojem Driver Estate. Statistics for the fresh produce markets show that 327 tons of chillies were traded at the Durban fresh produce market in 2004, and 254 tons were traded at the Pietermaritzburg fresh produce market. Prices Interviews with growers revealed that the Skyline 3, Star 6604, and Jalapeno varieties attract higher prices (R6 to R8 per kg) while Thaibo, and similar varieties, attract lower prices (R2 to R4 per kg). The following two graphs show the movement in average prices for the Durban and Pietermaritzburg fresh produce markets respectively.

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2004 2005 Figure 4.3: Movement of prices in the Durban fresh produce market





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2004 2005 Figure 4.4: Movement of prices in the Pietermaritzburg fresh produce market

These graphs reveal two things. Firstly, price movements are seasonal with spikes in prices over the late winter months. This reinforces the hypothesis of an additional opportunity in areas such as the Makhathini Flats for all year growing. Secondly, prices were significantly higher during 2004, indicating a growth in supply in the current year. Lower than average rainfall during 2004 could also be partly to blame for the relatively low supply and associated higher prices. Cost structure Research by the KZN Spice Growers Association shows than even a 0.5ha farm could be profitable, whether producing green or dry chillies. A detailed breakdown of small-scale growers’ costs and potential income is detailed in Appendix B. Labour tends to be a large portion of costs, and above basic wages, transport of labour is often costly. 4.2 Future chilli growing potential within KZN The following map, produced by the Bioresource Programme11 of the KZN Department of Agriculture, is a basic approximation of potential for chilli cultivation in KZN. It is based only on soil and temperature. Green areas indicate high potential areas, whereas the orange and yellow shading represents areas of medium potential. White areas do not have good temperature and soil combinations.

11 Map provided by Piers Whitwell, KZN Department of Agriculture





Figure 4.5: Potential for chilli cultivation (based on soil and temperature)

Although limited, the map does confirm expert opinions (including Rob Osborne of the KZN Department of Agriculture) that there is potential for particularly high yield production in the Makhathini Flats. Due to the warm, maritime climate of the area, it is possible to grow chillies throughout the year. The success of growers in the Weenen and Tugela valleys is related to suitable micro-climates prevalent in these valleys. 4.3 Current production in South Africa There is a lack of reported statistics regarding chilli production in South Africa. Our research indicates that the dominant areas of chilli production in South Africa are Mpumalanga, Limpopo, North West, and KwaZulu-Natal. Further insights into the patterns and volumes of production and comparative advantages of the different areas will be gained in Step 4 of the value chain analysis. For example, one dried chilli trader sourced 80% of his product from Limpopo and Mpumalanga and only 20% from KZN. He noted that the chillies he sourced from Limpopo were superior to other areas, although due more to the quality of the farmers than the climatic conditions. Sweet paprika production has declined substantially in recent years for a range of reasons, including the strong Rand, high labour costs, project failures and the “Sudan Red” scare. It does leave a void in the supply of high quality sweet paprika pods as South Africa was renowned for its ability to produce and supply high ASTA colour to the international markets12. 12 http://www.sagric.net/capsicom/2005.htm


http://www.sagric.net/capsicom/2005.htm




5 Processing activity As discussed in section 2, chillies are processed into a variety of products, which typically include: Ñ Industrial inputs and/or final products

o Chilli pastes o Chilli powders (ground/crushed chillies) o Dehydrated/dried chillies o Oleoresins

Ñ Final consumer goods o Spice mixtures and seasonings o Curries o Hot sauces, table sauces, and other dressings o Pickles o Other products: ready meals, rubs, etc

The various processes used to create these products include: Ñ Basic processes

o Outdoor shade drying o Drying in drying machines o Basic grinding o Pickling

Ñ More advanced processes o Milling o Mixing o Extracting using solvents o Sauce manufacturing o Irradiating o Pulping o Dehydrating

5.1 Types of processing The most common form of processing in KZN is shade drying, which is performed by the growers themselves. After harvesting, the chillies are simply placed outdoors, under shade. However, shade drying in KZN has particular risks and disadvantages: Ñ Pests and diseases – humidity and longer drying times make chillies more susceptible

to pests and diseases such as aflatoxins Ñ Quality – longer drying times decrease quality through loss of colour Another form of processing is machine drying. Simple drying machines would typically be owned and operated by growers, however this is not common in KZN - Kaiser found just one grower, the largest in KZN, using drying machines. Drying machines typically cost in the region of R20,000 to R25,000, and one machine can comfortably serve 15ha of land. These driers can also be used for a variety of other crops. However there are limitations in the cost of operation and need for three-phase electricity, as well as the actual cost of the driers. While machine driers improve the quality of the processed product considerably, the scale of the vast majority of growers in KZN is too small to make investment in driers viable. A potential alternative is the use of old tobacco driers, however it is unclear how viable this is. KZN also has some milling capacity, including Allifa Spices, Robertson’s Herbs and Spices (Unilever), Pakco, and Natpro Spicenet. Robertson’s is one of the biggest processors of chilli products in South Africa, if not the biggest. It imports approximately 1,000 tons of whole dried Cayenne and Bird’s Eye from India per year and sources approximately 500 tons of Paprika locally. The Indian chillies are imported dried and whole so that Robertson’s can monitor the quality of the chillies (when importing the powdered form, other substances are added to add weight to the product). Robertson’s/Unilever has insufficient capacity to mill its





own chillies, and outsources some milling to Allifa. In addition to manufacturing its own spice mixtures, blends, and curries, Allifa uses its mill to serve the vibrant spice trading industry in Durban – it does milling, mixing, and packaging for numerous spice companies. These spice companies have their own particular recipes and supply their inputs directly to Allifa. Natpro Spicenet is a miller of paprika. A particular characteristic of the Durban processing industry is the proliferation of spice works companies, many of which rely on unique recipes and flavours and outsource the actual processing. Besides Allifa Spices and Robertson’s/Unilever other notable large processors in the South African chilli industry include: Ñ Nando’s (case study follows below) Ñ Crown National / Continental Spiceworks Ñ Cape Herb and Spice Company (a case study follows below) Ñ Freddy Hirsch Processors of final/consumer products typically manufacture their products using chilli paste, powders or puree. However, Foods of the World (Taste of Thailand and African Farm brands) buys the fresh produce and uses that directly in manufacturing various sauces. The export market for branded and well marketed final goods (such as sauces) was good, but since the Rand’s appreciation, volumes have dropped significantly. Foods of the World exports only 36,000 bottles a year (R150,000) currently. However there still appear to be opportunities for branded or marketed products. 5.2 Trends in the value chain Robertson’s/Unilever notes that it can import its chillies from India at “half the cost” of buying locally produced chillies. The larger the amount of a particular variety of chilli that a processor needs, the more likely that processor will import its inputs as opposed to sourcing locally. Importing carries risks (e.g. the quality of samples often do not match the final product), so small amounts of chillies will still be sourced within South Africa. The Cape Herb and Spice Company noted the need to import more specialised (mostly non-chilli) spices, as these are often not produced in South Africa. The majority of growers are contracted to produce dried chillies. The contracting party requires that growers have irrigated land in order to ensure that supply is reliable. This proves to be an obstacle to further contract growing. Quality assessments (grading) of the product are also required – farmers are sometimes trained by the buyers to grade their own produce. 5.3 Case study Nando’s Nando’s is one of South Africa’s greatest global success stories in the food sector. Nando’s began as a fast-food restaurant franchise selling Portuguese style peri-peri chicken. Since 1987, it has grown considerably. There are more than 180 Nando’s restaurants in South Africa, and a total of approximately 600 similar restaurants around the world in 33 countries. Riding on the growth and strength of the Nando’s brand, Nando’s retail products have recorded notable successes. Nando’s retail product range includes: Ñ Peri-peri sauces Ñ Cooking sauces





Ñ Marinades Ñ Salad dressings Ñ “Perinaise” – peri-peri mayonnaise Ñ Table sauces Ñ Spice range Various combinations of these products are available in 34 countries. Adjustments to the range are made according to local demand and small changes to the recipes are sometimes made to suit local tastes. Nando’s retail sales have grown to the extent that 40% of its production is for the retail market, and the remaining 60% serves its own franchise restaurants. African Bird’s Eye and Serrano chillies are the major chilli inputs of Nando’s sauces. Bird’s Eye chillies are the essence of the peri-peri flavour. Currently, Nando’s sources chilli powder through Crown National. Crown sources these chillies from a variety of countries, processes the chillies in Cape Town, and sells these on to Nando’s. The actual processing and manufacture of the sauces and dressings is performed at the Nando’s plant in Johannesburg. An interesting development in Nando’s supply chain management is its intention to move all its primary Bird’s Eye chilli production to farms in South Africa. Pilot projects are under way in Muden (KZN), Plettenberg Bay, and Stellenbosch (organic growing for the purposes of eventually manufacturing an organic sauce). This move to local production is for two reasons: Ñ Branding - Nando’s markets itself as an African brand and would prefer that its input

were in fact grown in Africa and “kissed by the African sun” Ñ Quality – growing of chillies can be better managed in-house:

o Heat levels and flavour of the chillies can be better controlled and managed o The possibility of another Sudan Red contamination can be avoided

Nando’s requires approximately four tons of dried Bird’s Eye chillies per month, and the consistency and reliability of supply is also important. Although Nando’s is a global, multinational company, almost all of its production is done locally, although some packing is done closer to the market (i.e. a sauce could be exported in bulk, possibly hydrated, and then bottled). Although Nando’s success is based primarily on its brand, the extent of production that is done in South Africa indicates that the processing of sauces and spices in South Africa can be competitive. The success of Nando’s retail products is related to the strength of its Afro-Portuguese brand that was first built through its restaurants. Other factors that influence its success include Black Economic Empowerment (BEE) and Fairtrade certifications, which are good selling points in foreign markets. Nandos also attends the ANUGA food show to promote its products, much like other successful processors in South Africa.





6 Market for chillies and chilli products This section provides an analysis of the supply of chilli products to various domestic and international markets, and shows how the chilli supply chain in South Africa is currently working. South Africa does not have a strong tradition of record-keeping of production of chillies – we have presented as comprehensive and accurate analysis of the supply chain as possible with the available data. Information was drawn mainly from the fresh produce market data held by the Department of Agriculture and from import and export data held by the South African Revenue Service. 6.1 Domestic market 6.1.1 Basic and intermediate products A total of 4,810 tons of chillies were sold on South Africa’s fresh produce markets in 2004, at an average price of R3.30 per kg. As indicated in the table below, the Johannesburg fresh produce market sells the vast majority of chillies, with 64% of volume, compared to 7% and 6% for the Durban and Pietermaritzburg markets respectively. However, growers indicate that fresh produce markets in KwaZulu-Natal are not always the major channel for distribution, with a fair amount of sales through agents or on contract. Average prices range from R1.62 in Nelspruit to R11.96 at the Port Elizabeth market. This may indicate a few things, e.g. that the supply of chillies or varieties produced may not be meeting demand at markets such as Port Elizabeth, Bloemfontein, and East London. Low prices in Mpumalanga markets may indicate that the markets are oversupplied, or that the cost of production is significantly lower.

Market Value 2004( R ) Volume 2004 (tons) Price (R/kg) % Value % Volume

Johannesburg 8,789,727 3,062 2.87 55.2% 63.6% Tshwane 2,101,939 483 4.36 13.2% 10.0% Cape Town 1,391,337 251 5.53 8.7% 5.2% Durban 1,152,303 327 3.52 7.2% 6.8% Pietermaritzburg 1,007,355 254 3.97 6.3% 5.3% Springs 605,849 262 2.31 3.8% 5.4% Klerksdorp 166,506 34 4.88 1.0% 0.7% Port Elizabeth 164,551 14 11.96 1.0% 0.3% Vereeniging 158,076 52 3.02 1.0% 1.1% Bloemfontein 120,280 14 8.88 0.8% 0.3% East London 86,951 9 9.59 0.5% 0.2% Kimberley 68,022 15 4.40 0.4% 0.3% Welkom 38,399 10 3.71 0.2% 0.2% Witbank 28,810 14 2.06 0.2% 0.3% Mpumalanga 19,042 8 2.50 0.1% 0.2% Uitenhage 5,453 1 3.96 0.0% 0.0% Polokwane 5,020 2 2.26 0.0% 0.0% Nelspruit 3,956 2 1.62 0.0% 0.1% Kei 580 0 3.87 0.0% 0.0% George 0 0 0.00 0.0% 0.0% Total KZN 2,159,658 581 3.72 14% 12%





Market Value 2004( R ) Volume 2004 (tons) Price (R/kg) % Value % Volume

Total South Africa 15,914,155 4,816 3.30 100% 100% Source: National Department of Agriculture The centre of South Africa’s chilli demand is Johannesburg. This is likely due to the larger population, higher incomes, as well as the use of basic chilli products as industrial inputs for the manufacture of consumer goods such as branded spices, pastes, sauces, and various blends and mixes. Johannesburg’s low price indicates a high supply of basic chillies products. In fact, growers in KZN occasionally supply fresh produce onto the Johannesburg market rather than the local KZN-based markets. A breakdown of South African imports of basic chilli products is provided in the table below:

Product

Valu

e 20

03

(US$

000

)

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ntity

200

3 (to

ns)

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3 (%

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y 19

99-

2003

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s (b

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070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled

14 71 211 10 102

Zimbabwe (93%)


4,410* 5,903 747 48 47

India (39%) Zimbabwe (34%) China (12%)

*97% of this is due to imports of the genus Capsicum (chillies) Source: ITC Trade Statistics Imports of fresh or chilled peppers amounted to 71 tons in 2004, with Zimbabwe supplying the bulk (at US$200 per ton). India, Zimbabwe and China are the main suppliers of crushed or ground chilli peppers to South Africa. Imports also appear to have grown substantially over the 1999 to 2003 period. Increased imports could possibly be driven by both more cost competitive supply and changing tastes and demand in South Africa. The following graph shows the major importing provinces and country of origin for HS 070960 (fresh chillies). Although Gauteng sources a fair proportion of imports from Mozambique, Zimbabwe is the primary exporter of fresh and chilled peppers into South Africa. The data suggest that fresh and chilled chillies are likely to be sourced from neighbouring countries. This indicates, as one would expect, that it is far less costly to source chillies in their more perishable form (fresh and chilled) over short distances. Neighbouring countries such as Mozambique and Zimbabwe have a logistical advantage over countries further afield such as China and India.





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However, this cost advantage is reduced in the case of dried products (HS 090420). The dried product has a shelf life of up to two years and is thus more cost competitive to transport internationally than fresh chilli products. The following graph shows the division of the major importing provinces by country of origin for HS 09042030 for 200413.

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Zimbabwe India Malawi Other Figure 6.2: Imports of HS 09042030 (dried products) by province and supplying country, 2004

India is the primary exporter of dried chilli products to South Africa, followed by Zimbabwe and Malawi. 13 Note that this analysis was only done for HS 09042030 as this was the only relevant product line that was imported under the 6-digit 090420 classification.





The graph suggests that the North West province was the largest importer of dried, crushed, and ground chillies in 2004. 6.1.2 Consumer products

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091050 Curry 389 513 758 45 83

India (94%) China (3%) Thailand (3%)

091091 Mixtures of two/more of the products of different headings to this chapter

231 72 3,208 0 -25

Germany (61%) UAE (9%) Pakistan (7%)

Source: ITC Trade Statistics Imports of curry products amounted to 513 tons, or US$389,000, in 2003. Imports of mixtures of products in the chapter classification amounted to US$231,000 in 2003. The data suggest that imports of curry are growing substantially, with the majority coming from India. This points to either changes in domestic demand (income and taste) or reductions in the cost. The data also suggest that imports of other mixtures are stagnating or falling slightly. The following graph reveals that KwaZulu-Natal was the biggest importer of curry in South Africa, with most of the imports coming from India. Demand for these imports is likely stimulated by the presence of a large local Indian population.

0

50,000

100,000

150,000

200,000

250,000

KwaZulu-Natal North West Gauteng Western Cape Eastern Cape

Valu

e (R

)

India Thailand Singapore Other

Figure 6.3: Imports of HS 091050 (curry) by province and supplying countries, 2004

Imports of the various mixes are also dominated by KZN, a clear indication of the particular tastes and demand within KZN. The following graph shows the imports of HS





091091 (other mixes) by the main provinces sectioned by the country of origin. Once again India is the main source of imports.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

KwaZulu-Natal Gauteng Western Cape Eastern Cape

Valu

e (R

)

India Pakistan Great Britain Other

Figure 6.4: Imports of HS 091091 (other mixes) by province showing supplying country, 2004

6.2 Exports The section below provides a description of the current supply of chilli from South Africa into export markets. 6.2.1 Basic and intermediate products

Product

Valu

e 20

03

(US$

000

)

Qua

ntity

200

3 (to

ns)

Uni

t val

ue

(US$

/uni

t)

Tren

d in

va

lue

1999

-20

03 (%

pa)

Tren

d in

qu

antit

y 19

99-2

003

(%pa

)

Top

dest

inat

ions

070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled

209 153 1,366 13 -18 Mauritius (46%) Seychelles (19%) United Kingdom 11%)


9,640* 6,682 1,443 41 30

Spain (42%) Brazil (22%) United States (15%)

*98% of this is due to exports of the genus Capsicum (chillies) Source: ITC Trade Statistics The ITC statistics above show stagnation in South Africa’s exports of fresh and/or chilled peppers. Valued at US$209,000 in 2003, the export market for South African fresh basic chillies products is small in comparison to China and India. Exports of dried, crushed, and





ground chillies are promising, and have grown steadily, if not substantially, over the period 1999 to 2003. The target markets are varied, with Spain being the biggest export destination. The following graph shows the breakdown of export of HS 070960 – fresh and chilled peppers – per country and South African province.

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Gauteng Mpumalanga Western Cape KwaZulu-Natal

Valu

e (R

)

Mauritius Great Britain Kenya Other

Figure 6.5: Exports of HS 070960 (fresh chillies) by province and destination country, 2004

The graph shows that KwaZulu-Natal is not currently a significant exporter of fresh and/or chilled peppers. Mpumalanga exports to the United Kingdom while the largest exporter, Gauteng, exports mainly to Mauritius. The following graph shows a breakdown of exports of HS 0904203014.

14 HS 09042030 refers specifically to the genus capsicum rather than the genus pimento and is the only relevant product under the 6-digit code of 090420. Thus only HS 09042030 is analysed here.





0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

KwaZulu-Natal

Gauteng Free State North West NorthernCape

Mpumalanga Western Cape

Valu

e (R

)

Spain Great Britain Russia Other

Figure 6.6: Exports of HS 09042030 (dried products) by province and destination country, 2004

The data presents KZN as a leader in the export of dried, crushed, and ground chillies in South Africa, exporting to Spain, Great Britain, and Russia. This indicates that KZN is a competitive producer of chilli products that have undergone some basic processing and that there is some demand for KZN chillies. 6.2.2 Consumer products

Product

Valu

e 20

03

(US$

000

)

Qua

ntity

20

03 (t

ons)

Uni

t val

ue

(US$

/uni

t)

Tren

d in

va

lue

1999

-20

03 (%

pa)

Tren

d in

qu

antit

y 19

99-2

003

(% p

a)

Top

dest

inat

ions

091050 Curry 1,091 449 2,430 -8 -1

Mozambique Zambia Ghana

091091 Mixtures of two/more of the products of different headings to this chapter

1,046 191 5,476 63 26

United Kingdom (37%) Canada (35%) United States (4%)

Source: ITC Trade Statistics





The export markets for curry and mixtures are limited, with both valued at approximately US$1m in 2003. Exports of curry appear to be declining with the main target markets being African countries. The export market for mixtures appears to be more promising with a steady growth in exports over the period 1999 to 2003. The graph below presents a breakdown of HS 091050 by province and country of destination.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

KwaZulu-Natal Gauteng Western Cape Eastern Cape

Valu

e (R

)

Mozambique Zambia Mauritius Other

Figure 6.7: Exports of HS 091050 (curry) by province and destination country, 2004 KwaZulu-Natal appears to be the strongest provincial performer in the export market. The data suggest that KZN manufactures quality curries and is a definite strength of the province. The declining export market share, however, points to a possible need for increased quality and efficiency in production, or an expansion into new markets. The graph bellows shows the exports of HS 091091 (mixtures), once again broken down by (major) provinces and export countries.





0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Western Cape Gauteng KwaZulu-Natal

Valu

e (R

)

Australia Belgium Great Britain Other

Figure 6.8: Exports of HS 091091 (mixtures) by province and destination country, 2004 The Western Cape performs well in comparison to Gauteng and KZN. Typical destinations for exports of mixtures are Australia, Belgium, and the United Kingdom. In a growing export market such as this, there is a possible opportunity for KZN to develop its production of mixes. 6.3 Synthesis of imports and exports This section presents the most pertinent findings of the analysis of exports and imports of chilli products. South Africa Ñ SA is a net exporter of basic chilli products (fresh and dried), with Mauritius, Spain, Brazil

and the United States as primary destination countries Ñ Exports of fresh products are stagnating, whereas exports of dried products are showing

considerable growth Ñ The unit value of chilli products exported is significantly higher than the value of products

imported Ñ Exports of dried products dominate exports of fresh/chilled products Ñ Imports of both fresh and dried products are growing; with growth in fresh products

double that of dried products Ñ Imports of fresh and dried products are supplied mainly from Zimbabwe, India and

China, with neighbouring and close-in countries being the primary origin countries for fresh products

Ñ SA is a net importer of curry by volume, however, the average unit price obtained for the products exported is much higher than the unit price of imported products and hence the value derived from curry exports exceed that of the value paid for imported products. India is the primary country of origin for curry products

Ñ South Africa is a net exporter of mixes, with the UK and Canada being the primary destination countries





Provinces 15 Ñ Dried products are the most heavily traded type of chilli product across all provinces Ñ Gauteng, KZN, the North West, Western Cape, Mpumalanga and Free State appear to

be most active in terms of the import and export of chilli products Ñ KZN is not a significant exporter of fresh chillies, but also imports relatively low volumes

of fresh products Ñ KZN is a strong provincial performer in the export of dried products and curries Ñ Gauteng is a net importer of both fresh and dried products, but a net exporter of curries

and mixes

15 Postal code definitions of provincial boundaries differ from the administrative boundaries.





C GLOBAL MARKET AND COMPETITOR ANALYSIS 7 High-level overview of markets Initial scans of market research regarding the consumption of ethnic food products revealed that a combination of the following market characteristics could be conducive to the introduction of imported ethnic food products: Ñ Presence of a large consumer market with high or rapidly increasing disposable incomes Ñ Large existing ethnic populations or increase in ethnic populations with preference for

spicy food products Ñ Increases in the consumption of convenience food and ready-to-eat food products Ñ High urbanisation levels or rapid urbanisation and resultant changes in dietary

preferences and consumption styles Various factors related to the structure of food distribution systems, non-tariff barriers and competitiveness of other suppliers may however restrict an exporter’s ability to access markets which exhibit favourable market characteristics. In order to identify potential markets for chilli products originating in KwaZulu-Natal, we have undertaken a rapid review of the following regional groups of countries:

Americas European Union Asia Pacific Africa Ñ United States of

America Ñ France Ñ Germany Ñ United Kingdom

Ñ China

Ñ general

United States of America

Size and characteristics of

market Consumer trends Competition Issues related to

market access

Ñ Second largest importer of agricultural goods (after EU)

Ñ Leading importer of fresh, dried and further processed chillies

Ñ Second biggest importer of curries

Ñ Ageing population Ñ Relatively high

levels of population growth related to immigration and high fertility rates of immigrants

Ñ Strong growth of Hispanic population

Ñ Preferences for ethnic food related to immigration

Ñ Increasing emphasis on quality of food products

Ñ High prevalence of convenience eating – almost 50% of food expenditure away from home

Ñ Strong competition from Mexico - leading global exporter of fresh chillies

Ñ India, Spain and Brazil are major suppliers of dried or further processed chillies – competing on cost or proximity

Ñ Highly competitive food sector characterised by consolidation

Ñ Increased direct procurement of products from food suppliers

Ñ Increased purchase volumes by retail and wholesale buyers – reliance on larger suppliers able to supply volume and wide ranges of products

Ñ Sophisticated food manufacturing sector accounts for one-sixth of US manufacturing activity

Ñ Over 80% of processed food nationally or regionally sourced





Implications for KZN Strong competition from neighbouring and low cost suppliers of chilli products as well as the highly competitive structure and supply requirements of the food sector severely limit opportunities in the US market. France



market access

Ñ Significant importer of fresh and dried/ground chillies and curries and mixes

Ñ France’s per capita income is close to that of the United States

Ñ European Union’s (EU) most competitive producer, processor, and exporter of agricultural and other food products

Ñ Reduction in food preparation time and increased use of easy to use/easy-to-cook food

Ñ High prevalence of convenience eating

Ñ Imports are for new-to-market, innovative foods that are not produced in France

Ñ Increasing interest in foreign cuisine and products

Ñ Spain and UK are major suppliers of fresh, dried or further processed chillies and mixes and curries – competing on proximity

Ñ Mandatory, stringent customs duties, sanitary inspections and labelling requirements

Ñ 75% of total French retail food sales comes from mass distribution

Ñ Price competition is fierce and there is heavy pressure to observe suppliers’ norms

Ñ Retailers are looking for well known branded products with promotional backing

Ñ Small independent stores are contractually receiving supplies from central purchasing offices

Ñ Importers are taking less and less risk

Ñ Large retailers set up and develop their own import channels and supplies

Implications for KZN Strong competition from close-in suppliers of chilli products as well as the highly competitive structure and supply requirements of the food sector severely limit opportunities in the French market.





Germany



market access

Ñ Western Europe’s biggest market for consumer-oriented foods and beverages

Ñ Europe’s largest market for organic products

Ñ Major importer of fresh, dried and further processed chillies

Ñ South Africa already an important supplier of agricultural products

Ñ Increases in the number of working women and the number of single-person households

Ñ Large immigrant population

Ñ Strong growth in the consumption of convenience foods

Ñ People spend less time preparing meals, which has increased the frequency of dining out and eating “on the run”

Ñ As “world class” travellers, many Germans have been exposed to a large variety of different cultures, which has been translated into rapidly growing consumption of ethnic foods

Ñ Consumer concerns about the environment and the safety of the food supply

Ñ Netherlands, Spain and United Kingdom are major suppliers of fresh, dried or further processed chillies and mixes and curries – competing on proximity

Ñ Very competitive market combined with stagnant growth in retail sales

Ñ Retailers often charge high listing fees for products

Ñ Stringent German/EU food law requirements

Ñ EU internal market results in food products from the other EU member states having a competitive advantage in the German market

Implications for KZN: There is strong competition from close-in suppliers of chilli products and competitive retail structure. However, opportunities exist in food processing, spice mixes and curries, sauces and condiments, cooking sauces and organic products. United Kingdom



market access

Ñ Significant importer of fresh chillies

Ñ Leading importer of curries

Ñ Major exporter of curries

Ñ South Africa already a major

Ñ Ageing population Ñ Strong growth of

ethnic population Ñ Preferences for

ethnic food related to immigration

Ñ Increasing emphasis on quality of food

Ñ Netherlands is the leading supplier of fresh products – competing on proximity

Ñ India is a major supplier of curries – competing on cost

Ñ Concentration of supplier efforts by major retailers

Ñ Dominance of a small group of local producers in mainstream retail

Ñ Established speciality







market access

trade partner products Ñ High prevalence of

convenience eating

importers, in particular of hot sauces

Ñ Significant price pressure in the retail sector

Ñ Quality and non-tariff barrier compliance

Implications for KZN Opportunities exist in food processing, spice mixes and curries, sauces and condiments, cooking sauces and organic products. China



market access

Ñ Largest producer of chillies globally

Ñ Leading exporter of dried, crushed or ground chillies

Ñ Rapid urbanisation Ñ Rapidly maturing

retail sector Ñ Increasing

demand for convenience and ready-to-cook foods

Ñ Increasing concerns regarding food safety

Ñ Consumers highly price-sensitive

Ñ Strong competition from Asian countries with similar tastes

Ñ Preference for locally sourced raw materials for processed products

Ñ Incentives and protections to domestic participants

Ñ Increasing presence of foreign brands – high prevalence of procuring ingredients locally

Ñ Localised procurement of processed products prevalent

Ñ Suppliers often obliged to pay slotting fees to growing hypermarket sector

Ñ High cost of moving produce domestically

Ñ Complex food distribution system and associated mark-ups between layers

Ñ Large number of players in fiercely competitive market

Ñ Low margins in food retail

Implications for KZN Strong competition from domestic and regional suppliers of chilli products as well as the highly complex and competitive food sector structure severely limit opportunities.





Africa



market access

Ñ Insufficient information to quantify market

Ñ Some South African supply of spice mixes to African markets

Ñ Strong tastes for hot food in some countries

Ñ Taste preferences vary from region to region, and knowledge of local tastes may be required

Ñ Widespread poverty and low levels of income

Ñ Growing pockets of affluence in some countries such as Nigeria

Ñ Countries such as Malawi, Uganda, Ethiopia and Ghana grow chillies

Ñ Zambia and Mozambique are gaining competitiveness in fresh chilli production

Ñ Investment in paprika projects by aid agencies in some countries

Ñ “Hassle factor” of supplying African countries

Ñ Possibility to leverage off South African companies which distribute to African countries, such as Shoprite

Implications for KZN The market for chilli products is mainly low end, with high barriers to entry, although some potential exists to leverage existing South African business linkages.





8 High-level overview of products 8.1 Fresh chillies 8.1.1 Global market overview The following table summarises world trade statistics, and South African shares of trade, for HS 070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled. Note that this category captures all peppers, including bell peppers (genus Pimenta).

Top import markets and the South African market for HS 070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled

Market Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

SA share

in exports

(%)

World* 2,355,086 1,606,960 1,466 10 6 0

US

742,838

445,997 1,666 9 9 0

Germany 558,874 282,177 1,981 12 2 0

UK 268,672 115,981 2,317 14 6 0

South Africa 192 456 421 105 180 N/A

*This is based on 2003 data, growth rates are for 1999 to 2003 The global taste trend towards more spicy and exotic food is evident in the strong growth of volumes and value of peppers imported. Strong growth is also observed in the major importers, the US, Germany, and the UK. These three economies account for approximately 61% of the world market in terms of value, and 23% in terms of world import volumes. Of the US$192,000 of fresh chillies imported into South Africa, imports into KZN accounted for 1.6%. Imports from Zimbabwe and Mozambique accounted for 97% of South Africa’s total fresh pepper imports. 8.1.2 Global production and competition The following table lists the largest chilli and pepper producers globally, with associated production volumes. Note that this includes production of both chillies and bell peppers, and excludes India. Indian production of fresh chillies is estimated to be about 7m tons per year16, which would place it just below China.

16 Based on Spice India Magazine information





Production of green chillies and peppers

Country 2002 (tons) 2004 (tons) CAGR 2002–2004

China 10,534,871 12,028,000 6.9 Mexico 1,784,540 1,853,610 1.9 Turkey 1,750,000 1,790,000 1.1 Spain 1,056,184 1,006,000 -2.4 US 868,260 977,760 6.1 Nigeria 720,000 720,000 0.0 Indonesia 635,089 629,076 -0.5 South Korea 381,156 340,000 -5.6 Netherlands 310,000 318,000 1.3 Ghana 270,000 270,000 0.0 Tunisia 210,000 255,000 10.2 Romania 197,442 237,240 9.6 Morocco 156,240 182,340 8.0 Argentina 123,000 125,000 0.8 Israel 116,400 118,000 0.7 Hungary 116,916 110,000 -3.0

Source: FAOSTAT data, 2005 The following figure shows harvesting seasons for various countries. Harvesting in India occurs all year round.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec India Morocco Sri Lanka Tanzania KZN*

*In areas where crops are planted over the winter season, harvesting is extended to December

Figure 8.1: Harvest times for various chilli producing countries

The following table shows export figures for the largest exporters of peppers globally, as well as South African exports:

Top exporters and South African supply of HS 070960 Peppers of the genus Capsicum or Pimenta, fresh or chilled

Supplier Value, 2004 (US$ 000)

Quantity, 2004

(tons)


CAGR in value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

World* 2,296,959 3,192,313 720 10 22 US (26%) Germany (20%) UK (9%)

<0.5

Netherlands 819,165 337,828 2,425 15 5 Germany (35%) UK (22%) US (10%)

0







Quantity, 2004

(tons)


CAGR in value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

Spain 752,913 411,038 1,832 15 3

Germany (33%) France (16%) Netherlands (9%)

0

Mexico 576,690 1,971,595 292 9 20 US (99%) Canada (1%) 0

US 126,234 93,701 1,347 11 3 Canada (93%) Mexico (4%) 0

Canada 106,028 49,206 2,155 19 16 US (100%) 0

France 53,505 25,954 2,062 13 2 Germany (20%) UK (18%) Italy (15%)

0

South Korea 49,002 17,426 2,812 19 23 Japan (99%) 0

Turkey 46,196 50,684 911 25 11

Germany (40%) Netherlands (21%) Greece (8%)

0

Belgium 42,647 21,621 1,972 17 12

Netherlands (47%) Germany (13%) UK (8%)

0

Hungary 35,110 31,192 1,126 12 -6

Germany (49%) Czech Republic (18%) Austria (15%)

0

New Zealand 16,040 5,254 3,053 20 20

Japan (59%) Australia (39%) Fiji (1%)

0

Germany 15,891 6,917 2,297 20 6 Austria (26%) Finland (17%) Sweden (15%)

0

Greece 15,595 9,093 1,715 54 28 Germany (68%) Austria (19%) Albania (8%)

0

Italy 15,293 7,798 1,961 10 -5 Austria (32%) Germany (21%) Slovenia (12%)

0

China 15,194 66,518 228 110 93

South Korea (51%) Hong Kong (24%) Russia (15%)

0







Quantity, 2004

(tons)


CAGR in value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

South Africa 309 340 909 22 2

Mauritius (45%) Seychelles (18%) Mozambique (11%)

N/A

*This is based on 2003 data, growth rates are for 1999 to 2003 Netherlands and Spain are gaining share in higher value products, while Mexico has kept pace with overall market growth, focusing on lower value products. Competitive growers of fresh peppers appear to supply mostly within their regional economies. As the above table shows, trade tends to be intraregional – the Netherlands supplies mainly to Germany and the UK (57% of total pepper exports); Spain supplies mainly to Germany and France (49% of total pepper exports); and Mexico supplies mainly to the US (99% of pepper exports). This trend is confirmed by the data for South Africa. Pepper exports to Mauritius and Seychelles make up 63% of the total South African export for this product category. Clearly, there are much greater efficiencies in importing fresh chillies from neighbouring countries, or a country with preferential access, than from markets further away. Furthermore, global inter-regional trade is usually in dried or powdered chillies rather than fresh chillies. Chillies are less costly to transport in dried form over long distances, as the dried product is approximately one-seventh of the weight of the fresh product, and has a much longer shelf life (as much as two years depending on drying techniques and storage). Therefore, any particular market’s primary competition to fresh chillies is likely to come from neighbouring or nearby countries, rather than the world’s largest producers of fresh chillies such as China and India. Quality considerations for fresh chillies include: Ñ Colour Ñ Pungency levels Ñ Variety Ñ Free from blemishes, unless chillies are to be processed further 8.1.3 Assessment of opportunity for KZN KZN’s competitors in supplying fresh chillies are: Ñ South African provinces – Limpopo, North West, Mpumalanga Ñ Mozambique Ñ Zimbabwe Other provinces such as Limpopo, North West, Northern Cape and Mpumalanga, appear to have a growing advantage in comparison to KZN, achieving much higher yields of chillies. For example, yields of Paprika in the North West.reach as high as 7 tons per ha (dried) in comparison to 3 tons in the Pongola area This is mainly due to less suitable climatic conditions (humidity and lower temperatures) in KZN. In addition, South Africa is faced with increasing competition from countries such as Mozambique and Malawi (and Zimbabwe historically, although the current situation is unclear), which have similar or more suitable climates and lower labour costs – a major advantage in producing a labour intensive crop.





The barriers to increased KZN competitiveness relative to regional competitors in fresh chilli supply can be summarised as follows: Ñ High labour costs and labour intensity of harvesting Ñ Volatile prices and cash crop nature means farmers grow chillies as a supplementary

crop, as opposed to projects and farms which are dedicated to chilli production Ñ Market information on varieties in demand is not readily available to, or used by, growers Ñ Unsuitable climate due to greater humidity means lower yields and increased prevalence

of diseases and aflatoxins The potential comparative advantages for KZN are: Ñ Winter growing is possible in the Makhathini Flats area. This means that year round

yields can be improved, and production can be timed to expected movements in market demand and/or drops in market supply, as indications are that KZN can begin harvesting earlier than other provinces.

Due largely to KZN’s unsuitable climate in comparison to other South African provinces, there is no significant opportunity to supply to neighbouring provinces and countries, with the exception of winter production in the Makhatini flats area. There is however an opportunity to improve supply to the local market, through providing access to information on varieties in demand, and consolidating production by small-scale and community growers. Further stimulation of this market segment may occur through support to downstream elements of production, which would in turn stimulate upstream supply through contract growing, where fresh chillies are a main input to downstream products. 8.2 Dried/further processed chillies 8.2.1 Global market overview The following table summarises world trade statistics, and South African shares of trade, for HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground. Again, this product category captures all peppers rather than just chilli peppers (genus Capsicum) and includes all whole dried, crushed, ground, and powdered chillies. However, Pimenta peppers form only a small, largely insignificant, portion of trade and thus the figures can be treated as representing chilli peppers fairly accurately.

Top import markets and the South African market for HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground

Market Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

SA share

in exports

(%)

World* 506,368 - - 7 12 2

US 139,303 88,321 1,577 10 11 1

Malaysia 44,898 40,616 1,105 6 6 0

Germany 41,517 15,702 2,644 8 4 1





Top import markets and the South African market for HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground

Market Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

SA share

in exports

(%)

South Africa 5,285 5,927 892 52 46 N/A

*This is based on 2003 data, growth rates are for 1999 to 2003 Demand for dried or crushed chillies is driven by the processing industry. A global taste trend towards spicy and exotic foods such as those containing chilli is driving downstream demand and in turn there is strong demand for dried and crushed chillies – both the value and volume of global imports have grown strongly over the 1999 to 2003 period. Spice manufacturers in Europe tend to import spices directly from the country of origin, or through the key trading centres, including London, Hamburg and Rotterdam. Other major trading centres globally are Singapore and New York. A major proportion of the trade in dried, crushed and ground chillies is expected to be that of paprika; therefore countries with large paprika processing industries such as Germany and Spain are major markets. The market for paprika, paprika powder and paprika oleoresins is discussed in greater detail below. Global market overview for paprika, paprika powder and paprika oleoresins Paprika powder and paprika oleoresin are used as a colourant and flavourant in the food, beverage, pharmaceutical, and cosmetic industries, and paprika powder is also sold as an end consumer good. The US is the largest consumer of paprika, consuming 40,000 tons in 2005. The world import market for oleoresins is estimated at 3,500 tons, with major markets for paprika oleoresins being Europe, US, Canada and Japan. Growth in these developed markets is stable, as population growth is minimal, and any growth is driven by new product launches that use oleoresins or paprika powder. China, Russia and India are potential growth markets where rising disposable incomes are driving demand for processed foods. Industry players have identified the following trends in demand relating to growing health and safety awareness: Ñ Dried paprika rather than ground paprika is increasingly being sourced for further

processing, to avoid contamination of products during the milling stage. Ñ Natural flavourants and colourants will increasingly substitute artificial flavourants and

colourants, as food manufacturers increasingly insist on natural products. The market for natural colourants is expected to grow by 10 to 15% in Europe, compared to 1% for the overall market.

Furthermore, oleoresins are expected to increasingly substitute paprika powder, as oleoresins are a higher quality input. This is because food manufacturers are driven by quality rather than cost issues when purchasing colourants, as colourants are a relatively small input into the finished product.





Dried paprika is sourced by processors that manufacture paprika powder and paprika oleoresins. Distribution of paprika and paprika oleoresin is through wholesalers in importing markets, major flavour and fragrance companies, as well as direct to major food manufacturers such as Unilever, where larger quantities are required. Major flavour and fragrance companies include Givaudan, International Flavors & Fragrances, Firmenich, Symrise, and Quest International. These companies may purchase directly from exporting producers where they concentrate on a particular product, and they may have strong links with exporting producers (e.g. Fuchs’ relationship to paprika plantations in Brazil). Flavour and fragrance houses are also developing stronger forward links with food manufacturers, where they are developing particular flavours specifically for certain food manufacturers. Product safety concerns are a key market access issue, particularly for the EU market. Major requirements relate to the moisture content, aflatoxin level, and adulteration and contamination by non-permitted substances (see Appendix C). 8.2.2 Global production and competition Global production of dried chillies is closely tied to the global production of the fresh product discussed in 8.1, as drying facilities are usually located at the point of production. Further processing such as crushing and powdering tends to be less concentrated at sites of primary production. Estimated yields for key producing countries of dried chillies are as follows:

Location Dry yield (tons/ha) North West Province, South Africa 5 US, China, South Korea and Taiwan 3 - 4 Korea and Indonesia 2 - 3 KwaZulu-Natal, South Africa 2 - 2.5 New Mexico, US 1.58 India 1.1 Ethiopia (paprika) 0.617

Although KwaZulu-Natal does have a favourable yield relative to India, the cost basis for this yield is higher than low cost producers such as India and China. In addition to lower labour costs, the Indian production cost is lower due to harvesting and planting of seeds rather than purchasing new seeds or seedlings, as in KZN. In addition, India and China produce chillies on a much larger scale. The following table shows export figures for the major exporters of dried, crushed and ground chillies globally, as well as supply by South Africa.

17 Export potential of Ethiopian oleoresins, CBI, Dr Worku, Ethiopian Promotion Department, January 2005





Top exporters and South African supply of HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground


Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

World* 451,910 - - 10 16 US (24%) Germany (8%) Spain (7%)

<0.5

China 154,013 98,479 1,564 31 13

Malaysia (25%) South Korea (22%) Indonesia (12%)

<0.5

India 93,082 - - 9 14 US (28%) Malaysia (19%) Sri Lanka (18%)

2

Spain 53,737 28,395 1,892 8 6 US (16%) Germany (11%) France (9%)

0

Peru 50,385 27,543 1,829 59 58 Spain (51%) US (33%) Mexico (11%)

0

Germany 18,389 3,756 4,896 19 12

Netherlands (18%) UK (11%) Austria (9%)

1

Brazil 17,254 8,391 2,056 15 16 Germany (65%) US (15%) Spain (15%)

0

US 15,095 7,175 2,104 1 4 Mexico (43%) Canada (32%) UK (5%)

<0.5

Hungary 13,242 3,513 3,769 9 -5

Germany (39%) Netherlands (15%) Austria (14%)

0

Mexico 12,728 31,191 408 -7 14

US (95%) UK (2%) Guatemala (1%)

0

Netherlands 12,168 3,533 3,444 16 8 Germany (21%) UK (14%) Austria (9%)

2

Tunisia 11,372 5,243 2,169 30 28 France (56%) Libya (30%) Belgium (5%)

0

Malaysia 7,166 26,468 271 37 53

Thailand (74%) Indonesia (18%) Singapore (6%)

0





Top exporters and South African supply of HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground


Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

South Africa 6,418 4,342 1,478 19 8 Spain (39%) UK (12%) Russia (10%)

N/A

South Korea 5,439 1,323 4,111 -4 -2

Japan (70%) Hong Kong (8%) Taiwan (6%)

0

*This is based on 2003 data, growth rates are for 1999 to 2003 Global exports of dried, crushed, and ground chillies are dominated by China and India. Additional secondary research, and interviews with local industry players as well as food manufacturers in Europe show that China is becoming an even larger force in the global dried, crushed and ground chilli trade since the above data was collected. For example, China now accounts for one third of all chilli peppers consumed in Mexico, traditionally a major producer of chillies18. The Chinese and Indians produce on a large scale, and, largely due to low labour costs, are the global price leaders in markets where trade patterns are driven by price. However, processors have noted that powdered chillies from China and India often contain various additives and dyes, some illegal and hazardous, such as the Sudan Red dyes. These dyes are most often added once the chillies have been ground. A number of key European and US importers are therefore increasingly importing chillies in a whole or crushed form, as a precautionary measure. Global production and competition in paprika, paprika powder and paprika oleoresins Traditionally Spain, Hungary and Morocco have been the main exporters of paprika. However, as labour costs in developed markets increase, newer exporters are gaining market share, including India, Mexico, Chile, Argentina, Peru, Ethiopia, Zambia, and Israel. Growth of exports of dried paprika from Peru is an example of rapid development of producing countries’ paprika industries. Exports grew from US$6m in 2000 to US$50m in 2004, and are expected to reach US$80m in 200519. However, low cost producers may produce lower quality paprika products, and there is seen to be a “global shortage of supply of good quality oleoresins and paprika powder”20. Within Africa, Zambia is a key competitor in the production of dried paprika. Zambia produced 2,000 tons of dried paprika in 2003, with exports worth US$1,165,000. This followed a 22% decrease in value from 2002, due to poorer grades of paprika. The following is an analysis of profitability at various stages in the value chain21: 18 http://www.azcentral.com/arizonarepublic/business/articles/1112peppers12 19 http://www.aacb.com/publications/ed/view.asp?type=economic&newsletterID=104 20 Paprika processor 21 Short-term assignment of a consultancy, value chain analysis of selected crops, Institute of Economic and Social Research, October 2005


http://www.azcentral.com/arizonarepublic/business/articles/1112peppers12

http://www.aacb.com/publications/ed/view.asp?type=economic&newsletterID=104




Stage in value chain Average production per hectare (kg/ha) 1,000.00

Farm gate price (US$/kg) 0.80 Total gross farm revenue per hectare (US$)

800.00

Production Cost (US$/ha)*

Seed: 13% Fertilizer: 47% Chemicals: 19% Drying and packing: 13% Transport: 8% Total 320.00

Simple gross margin (US$) 480.00

Primary production

Simple gross margin as percentage of total revenue (%)

60

Ex Factory price(US$/kg) 0.90 Ex factory and farm gate price differential

0.10 Transport to factory and packaging

Price differential as % of farm gate price

12.50

Retail price at export destination US$/Kg)

2.80

Export retail and ex-factory price differential (US$/Kg)

1.90

Financing costs, agent’s commissions, freight charges, unloading and terminal charges, documentation and clearance

Price differential as % of ex-factory price for unprocessed paprika

211.11

* Labour is provided by growers family, and therefore at zero cost The majority of Zambian paprika (90%) was exported to South Africa for further processing for the wholesale colourants market, with other destinations being Spain, Zimbabwe and the DRC. The remainder is consumed locally as spice22. India is a major producer of powder and oleoresins. Dried paprika is supplied from within India, however this is supplemented with imported raw material should domestic production be reduced due to adverse conditions. India supplies 80% of the total world oleoresin import market, and about 50% of the world’s import demand for oleoresins derived from chillies. Exports of oleoresins are estimated as follows23: Ñ Chilli oleoresin: 85 tons Ñ Capsicum oleoresins: 204 tons Ñ Paprika oleoresins: 740 tons Growth of oleoresin exports is currently about 15 to 20%. Indian production is seen to be of a relatively lower quality, and may be mixed with artificial dyes. This is leading to distrust in powdered paprika from India, however market share does not seem to have been affected by the recent food safety and health scares related to illegal dyes. The cost of production is substantially less than other producing countries, and is expected to drop by a further 5 - 8% in 2005. Strong competition between the seven producing units of spice oils and oleoresins has led to price undercutting and low margins24.

22 Short-term assignment of a consultancy, value chain analysis of selected crops, Institute of Economic and Social Research, October 2005 23 http://www.infobanc.com/emsum130.htm 24 http://www.thehindubusinessline.com/2005/02/18/stories/2005021800941200.htm


http://www.infobanc.com/emsum130.htm

http://www.thehindubusinessline.com/2005/02/18/stories/2005021800941200.htm




Synthite Industrial Chemicals is the leading Indian producer of oleoresins, and produces “750 tons of colour and 60 tons of capsaicin, from about 15,000 tons of chillies”25. Ninety-five percent of this is exported, and the remainder is sold domestically. Furthermore, Synthite is developing various flavours for food manufacturers. Competition is largely on the basis of colour quality. Prices of dried paprika, paprika powder and oleoresins are directly related to their colour values, which are measured by ASTA values and colour units. For example, where dried paprika is 50 ASTA, it may fetch R12.50 per kg, while paprika measuring 375 – 400 ASTA may sell at R25 per kg. Paprika sold for end use as a spice is typically between 65 and 180 ASTA in Western European and US markets, while paprika oleoresin is most commonly sold at 40,000, 60,000, 80,000 and 100,000 colour units26. Within Spain, further value added is created by smoking paprika, which enhances the flavour, as well as through Designation of Origin labelling. Two Designations of Origin are available to qualifying Spanish producers; these are smoked Pimentón de la Vera and sun-dried Pimentón de Murcia (Murcia Paprika), of which there are 20 certified producers27. 8.2.3 Assessment of opportunity for KZN Within KZN, contracted chilli growers are usually required to deliver chillies with some basic processing already completed. Usually this is only basic drying (under a covering) in KZN, although KZN’s largest grower performs some better quality drying (using drying machines). This basic processing is done at the place of production. These chilli growers are contracted mainly to local processors as well as some national traders/agents who in turn sell on to domestic processors. The processors/agents themselves also typically grade the produce rather than the farmers. The largest processor in KZN, Unilever/Robertson’s, sources about 1,000 tons of whole, dried chillies (Bird’s Eye, Cayenne) from India and 500 tons of dried paprika from around South Africa (including KZN) every year. Chillies are imported from India “at half the cost” of the locally produced dried chillies. South Africa, and KZN, is at a distinct cost disadvantage in the production of dried and further processed chillies. In order to produce powdered chillies for use in the production of products such as sauces, and spice mixes/blends, it is necessary to mill the dried chillies. Milling facilities are costly and many spice traders in KZN buy dried chillies of a desired quality and variety and outsource the milling to other processors that have these facilities. Even the largest processor in KZN outsources some of its milling to other spice mixture manufacturers, as it has insufficient capacity. KZN faces the following barriers to competitiveness: Ñ The climate in humid coastal areas is not well suited to drying, and dried products are

susceptible to moulds and aflatoxins, although some areas such as Weenen are drier. Drying also takes longer due to the humid conditions, and the quality of the product declines as the time to dry increases.

Ñ Lack of competitiveness upstream in the production of fresh chillies Ñ Drying machinery is costly, and farmers feel that the dried chilli prices do not justify

investing in drying machines Ñ Basic processing facilities tend to be situated closer to the growing sites and thus KZN is

at a disadvantage to other provinces

25 http://www.thehindubusinessline.com/2005/02/18/stories/2005021800941200.htm 26 http://www.ffnmag.com/NH/ASP/strArticleID/749/strSite/FFNSite/articleDisplay.asp 27 http://www.marketuno.com/products/paprika_article.htm


http://www.thehindubusinessline.com/2005/02/18/stories/2005021800941200.htm

http://www.ffnmag.com/NH/ASP/strArticleID/749/strSite/FFNSite/articleDisplay.asp

http://www.marketuno.com/products/paprika_article.htm




Ñ KZN has a logistical disadvantage in comparison to producers such as Mexico, Morocco, and Turkey in accessing US and European markets

The global dried, crushed and ground chillies market is driven by price and minimum quality standards. Competitors such as India and China produce at a large scale that cannot be easily matched. Furthermore, South African processing of paprika cannot compete with lower cost producers such as India, China and Peru on a cost basis. For example, paprika sourced from India by a central purchasing arm in the Netherlands, and then distributed to South Africa, may be 18% cheaper than locally produced paprika28. Therefore, there is very little opportunity for KZN to supply the market for dried, crushed or ground chillies. There may be an opportunity however for KZN to expand its capacity to process paprika powder and oleoresins for the high end of the market. This is because South African paprika is perceived to be of a higher quality than competitors such as India, and there is strong demand for high quality paprika powder and oleoresins. 8.3 Spice mixtures/curries 8.3.1 Global market overview The following table summarises world trade statistics, and South African shares of trade, for HS 091050 Curry. The table captures information on the largest importers of this product, as well as South Africa.

Top import markets and the South African market for HS 091050 Curry

Market Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

SA share

in exports

(%)

World* 44,380 21,365 2,077 13 13 3

UK 8,036 3,884 2,069 28 17 0

US 4,895 1,579 3,100 16 13 0

Singapore 3,785 1,903 1,989 10 6 0

South Africa 83 60 1,383 12 16 N/A

*This is based on 2003 data, growth rates are for 1999 to 2003 The UK import market is growing at an exceptional rate, although indications are that growth has slowed recently as the market matures. The development of the market has been driven by “Indian” restaurants (95% of which are actually Bangladeshi) in the UK. Curry restaurants are estimated to serve 2.5 million customers a week, and generate sales of £3.2bn a year. The UK taste for curries has developed into a unique taste that is influenced by Indian,

28 Paprika processor





Bangladeshi and local preferences29, for example Tikka chicken masala is a unique flavour that has been developed in the UK. The following table details world trade statistics and South African shares of trade for HS 091091 Mixtures of two/more of the products of different headings to this chapter.

Top import markets and the South African market for HS 091091 Mixtures of two/more of the products of different headings to this chapter

Market Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

SA share

in exports

(%)

World* 130,914 40,118 3,263 9 6 0

Germany 15,153 3,662 4,138 28 18 1

Belgium 13,769 3,618 3,806 17 4 4

Russia 12,178 2,150 5,664 21 -4 0

South Africa 209 74 2,824 -4 -24 N/A

*This is based on 2003 data, growth rates are for 1999 to 2003 Underlying the strong growth in both curries and spice mixtures/blends are some major demand trends: Ñ Increased demand for ethnic foods Ñ Growing awareness of diverse cultural cuisine Ñ Increased use of spices as flavourings rather than artificial flavourings Ñ Growth in processed food consumption in some developing markets, such as Eastern

European countries Ñ Increased use of spices in food manufacturing driven by the growing popularity of

prepared foods and ready-to-use mixtures Within the EU, it is estimated that the industrial food processing sector accounts for 55-60% of the herbs and spices market, the retail sector 35-40%, and the catering sector 10-15%30. 8.3.2 Global production and competition The following table details top major exporters of curry globally, and South African exports.

29 http://www.jancisrobinson.com/articles/nick051001 30 CBI


http://www.jancisrobinson.com/articles/nick051001




Top exporters of HS 091050 Curry

Supplier Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value 2000-

2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports (%)

World* 28,827 11,302 2,551 11 11

UK (17%) United States (18%) Singapore (7%)

<0.5

India 8,189 5,548 1,476 9 6

UK (34%) Hong Kong (8%) US (8%)

1

UK 6,675 1,805 3,698 5 5

Ireland (13%) Germany (13%) France (12%)

0

Thailand 5,051 1,737 2,908 19 15

US (31%) Australia (26%) UK (15%)

9

France 3,317 667 4,973 20 15

Nigeria (86%) Switzerland (6%) Cote d’Ivoire (1%)

0

Malaysia 3,131 1,376 2,275 5 0

Singapore (61%) Japan (14%) Australia (6%)

0

Japan 2,448 406 6,030 8 17

China (53%) Taiwan (16%) South Korea (11%)

0

Netherlands 1,482 414 3,580 29 17

Germany (36%) Belgium (17%) Switzerland (12%)

0

Germany 1,399 287 4,875 29 15

France (25%) Netherlands (22%) Switzerland (8%)

0

South Africa 951 357 2,664 -4 -3

Mozambique (67%) Zambia (13%) Mauritius (4%)

N/A





Top exporters of HS 091050 Curry

Supplier Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value 2000-

2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports (%)

Sweden 923 102 9,049 95 11

Denmark (67%) France (8%) Japan (7%)

0

Pakistan 819 454 1,804 - -

Saudi Arabia (59%) UAE (33%) UK (4%)

0

Singapore 693 268 2,586 -12 -18

Maldives (27%) Brunei Darussalem (20%) Malaysia (12%)

2

Hong Kong 648 232 2,793 5 6

China (47%) Macau (36%) Canada (12%)

0

Sri Lanka 577 215 2,684 5 -

UK (18%) Australia (14%) France (13%)

0

Belgium 414 181 2,287 26 23

France (58%) Netherlands (14%) Areas not elsewhere specified (13%)

0

*This is based on 2003 data – growth rates here are 1999-2003 India appears to be a low cost, high volume supplier, dominating the market in volume (nearly half the entire export market for curries). Thailand is a growing producer, supplying mainly the US, Australia, and the UK. Worldwide exports are increasing, and the markets are likely to become increasingly competitive. The following table details the top exporters/suppliers of spice mixtures/blends:





Top exporters and South African supply of HS 091091 Mixtures of two/more of the products of

different headings to this chapter

Supplier Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

World* 112,274 31,544 3,559 9 5 Russia (9%) Belgium (9%) Germany (8%)

<0.5

Austria 28,450 4,443 6,403 61 44 Russia (51%) Poland (8%) Romania (7%)

<0.5

Germany 27,056 5,172 5,231 16 7

Denmark (11%) France (9%) Romania (9%)

1

Netherlands 22,813 6,029 3,784 23 7

Belgium (30%) Germany (28%) UK (12%)

0

India 6,131 3,071 1,996 18 12 UK (24%) US (19%) Canada (10%)

1

France 7,504 1,051 7,140 14 -1

US (38%) Saudi Arabia (25%) Belgium (11%)

0

Denmark 3,480 934 3,726 -1 -8

Belgium (47%) Norway (22%) Germany (13%)

0

Spain 3,274 743 4,406 51 24

Netherlands (23%) France (22%) Italy (17%)

0

Belgium 3,102 691 4,489 54 45

Netherlands (34%) Germany (25%) France (22%)

0

UK 3,063 940 3,259 -1 -3

Ireland (20%) US (10%) Switzerland (8%)

1

US 2,679 723 3,705 -13 -14 Canada (48%) Thailand (9%) Malaysia (5%)

0

Australia 1,594 861 1,851 34 8

New Zealand (28%) Malaysia (22%) UK (10%)

0

UAE 1,589 1,327 1,197 -22 -14 Oman (99%) 0





Top exporters and South African supply of HS 091091 Mixtures of two/more of the products of different headings to this chapter

Supplier Value,

2004 (US$ 000)

Quantity, 2004

(tons)


CAGR for value

2000-2004 (%)

CAGR for quantity

2000-2004 (%)

Major markets

SA share

in imports

(%)

Italy 1,283 419 3,062 27 38 US (24%) UK (17%) Germany (9%)

0

South Africa 731 938 779 54 73

Australia (31%) Belgium (16%) Nigeria (12%)

N/A

*This is based on 2003 data – growth rates here are 1999-2003 The European Union’s market structure consists of a small number of major brokers and importers, although direct trade between producing exporters and food manufacturing companies has increased. Manufacturers are however moving away from dealing with small producers and are buying instead from companies that can provide high quality, high volume, consistent supply, such as flavour houses, and may have agreements with suppliers in terms of specific quality standards and specifications. The major competition in the global spice mixes/blends market is from developed, European countries. Strong trade and supply linkages created by large firms characterise these supply chains. For example, within Germany, Fuchs dominates the market, with an 80% share of supply to the retail market. Five to 10 other spice manufacturers supply the remainder of the retail market. 8.3.3 Assessment of opportunity for KZN The Durban curry and spice mixing industry has unique mixtures, blends, and recipes. There is a strong local knowledge and experience in mixing spices (e.g. biryani, which is exported). This represents a potential opportunity for KZN to market differentiated flavours and recipes globally to the fast growing curry and spice mixture/blend markets. Currently, the majority of spice and curry production is sold through local retailers. Only some of the curry and spice mixture/blend companies in KZN have milling (and packaging) facilities. Other spice companies source their inputs locally or by importing, and outsource the milling, blending (to a certain recipe), and packaging to another company. It is clear that KZN has capacity for milling and blending but it does not necessarily hold any comparative advantage over other South African provinces. Notably, Freddy Hirsch in the Western Cape is a large processor of spice powders and mixtures, and export statistics suggests it exports to Australia and Belgium in addition to serving spice traders and processors nationally. Other processors include Crown National and the Cape Herb and Spice Company. The potential comparative advantages for KZN can be summarised as: Ñ Unique, local recipes and flavours for curries and spice mixtures/blend Ñ Capacity advantages over African countries Ñ Trade linkages with India through the Indian community and to the UK The barriers to increasing KZN’s competitiveness can be summarised as follows: Ñ High costs of locally grown chillies mean a reliance on imports as a significant portion of

inputs, therefore producers are susceptible to global price and exchange rate fluctuations





Ñ Local production tends be highly seasonal to serve increases in consumption around fasting months and Christmas

Ñ Marketing new tastes internationally may need time and large investments Interviews with industry experts revealed that opportunities for KZN lie within the UK and German markets for both curries and spice mixtures. Both are growing markets and show a tendency towards innovative, niche products (especially Germany). Research also revealed a potential opportunity in Africa, due to a lack of capacity for milling and blending processes in other African countries. Kaiser therefore considers there to be an opportunity for the exporting of high value, high quality niche curry products to the UK and Germany, using recipes specific to the Durban/KZN region. There would also appear to be an opportunity for KZN to supply spice mixtures and blends to both Germany and the UK. An additional opportunity for spice mixtures is Africa, perhaps linking into the markets through a distributor or large supermarket chain. Global competitors for KZN in curries are: Ñ India Ñ Thailand Ñ China and Cyprus (suppliers to the UK) India and China are both low cost producers, and India dominates the low end of the market. Thailand has become more competitive, though is likely to market its products around the Thai flavour. Global competitors for KZN in spice mixtures are: Ñ Austria Ñ Germany Ñ Netherlands These countries compete in the high end of the market and likely cater to specific European tastes. 8.4 Sauces/pickles 8.4.1 Global market overview Types of sauces that make use of chilli include the following: Ñ Table sauces, to be used as an addition to prepared food Ñ Cooking sauces, which can be classified as follows:

o Prepared mixes and blends for cooking o Cook-in sauces o Pour-over sauces o Furthermore, these can be classified as either wet or dry, with wet cooking sauces at

ambient temperature or chilled Ñ Dips Flavours or styles of sauces that include chilli as an ingredient tend to be ethnic rather than traditional sauces, including the following flavour profiles: Ñ Indian Ñ Cajun Ñ “Tex-Mex” or Mexican Ñ Thai Ñ North African





Trade flow data is not available for this category at the required level of disaggregation, therefore qualitative information has been used to inform the assessment of this market. There is an increasing trend towards spicy and ethnic foods in major world markets, which is driving increased consumption of hot sauces. Use of hot sauces has become more widespread, with an estimated 37% of US households using a hot sauce or salsa in 2000, and more widespread availability of hot meals in restaurants and institutions. In the US, this growth is driven by an increasing Hispanic share of population, and an increasing desire for new, spicy flavours. There is high growth in both Mexican and salsa style sauces, and Cajun style hot sauces, with growth in Cajun sauces at 6.5% in 2002. Within the Cajun style market, young males are key growth consumers, rather than families. In addition, tastes are becoming more diversified, evidenced by companies launching milder sauces, such as Tabasco’s Chipotle Pepper Sauce. In the UK, spicy dips, hot relishes and hot chutneys are becoming increasingly popular. Indian food is the largest sector of the UK ethnic cuisine market, and Thai food is the fastest growing. Market segments of hot sauces include table sauces and cooking sauces. In the US, the table sauces market is fragmented, with most products sold through supermarkets. Novel offerings in table sauces are an important driver of growth in table sauces. Within the UK market for sauces, the bottled sauces market is also driven by new product development. Within this there has been strong past growth in cooking sauces, but this has been slowing perceptibly, possibly due to the growth in the ready-to-cook foods market. Market drivers for cooking sauces include: a rising proportion of working women, demand for greater convenience, smaller household sizes, growing variety and experimentation, and growing popularity of foreign food. Distribution of sauces and pickles in the UK is increasingly through delicatessens and specialty shops, and therefore UK companies have to produce smaller, more frequent batches of fresh products31. 8.4.2 Global production and competition Major exporters of sauces to UK and US markets are Mexico and Thailand. Within the UK, competitors include Premier Foods (its brand, Branston, is the leading supplier of pickles), and James Ross & Son (pickles and relishes). Within the US market for hot sauces, Tabasco leads the market with 27% of the market share, with Frank’s Red Hot Cayenne Pepper Sauce following with 16%. There are also more than 200 boutique hot sauces on sale with names such as Butt Twister Butt-Blazin Fire Sauce, Colon Cleaner, and Dave’s Insanity Sauce, which records sales of about 1 million bottles a year32. Major differentiating characteristics of hot sauces are their heat level, and the variety of chilli from which they are made. Examples of sauces with different heat levels are Tabasco Green Pepper Sauce which measure 600 to 1,200 Scoville units, conventional Tabasco Pepper Sauce at 2,500 to 5,000 units, and Tabasco Habanero Sauce which scores 7,000 to 8,000 units. Sauce types based on variety include: Ñ Habanero sauces – amongst the hottest sauces with heat levels ranging from 7,000 to

300,000 Scoville heat units

31 Something hot on the side, Food manufacture, June 2005 32 Trend analysis by Michael Tchong, August 2005





Ñ Chipotle sauces – has recently become a popular sauce in the US, and is made from a smoked red jalapeno

Ñ Jalapeno sauces – used for a wide range of jalapeno sauces and as a base for other sauces

Ñ Cayenne-based sauces – ranging from garlic to fruit based, these sauces have relatively high salt levels, and therefore sodium content may be a consideration

8.4.3 Assessment of opportunity for KZN Comparative advantages for KZN include logistical advantages in accessing export markets, and a fairly well developed agroprocessing industry. In addition, due to the broad range of agricultural goods produced in KZN, raw materials for sauce production would be locally available. However, barriers to production include the high cost of locally sourced chilli inputs in comparison to cheaper imports. Opportunities for KZN in the sauces market lie within the production of branded consumer sauce for export to developed markets, for purchase by end consumers. There is a possibility to brand according to ethnic cuisine, demonstrated by the success of Taste of Thailand sauces, which exports to Europe, US and Japan. Key competitors within these markets are locally produced sauces, and imported Mexican and Thai sauces. In addition, potential linkages with successful manufacturing companies such as Nando’s and Peppadew may offer sustainable opportunities.





9 Prioritised product and market opportunities Market opportunities for chilli products and product market combinations for more detailed analysis have been identified as follows:

KZN competitiveness Market opportunity Conclusions Fresh chillies

Ñ Winter production possible in the Makhatini flats area

Ñ Lack of competitiveness due to humid climate

Ñ Lack of market information to producers

Ñ Growing competition from regional competitors that face lower labour costs

Ñ The basis for competition is price and proximity to markets, where inter-regional trade is inefficient due to transport costs

Ñ Overall limited opportunity for fresh chillies

Ñ Opportunity to improve quality of supply through providing market information and consolidating supply by small and community growers

Ñ Small market opportunity to supply through winter to local markets

Ñ Opportunity to stimulate production of fresh products through development of downstream industry where inputs to downstream products require fresh chillies as an ingredient

Dried/further processed chillies Ñ Lack of competitiveness due

to humid climate, therefore lower quality product where drying takes longer

Ñ KZN cannot compete with countries such as India and China that produce on large scale at low costs

Ñ Furthermore KZN is at a disadvantage in comparison to countries such as Mexico and India which are closer to major markets

Ñ Advantage over African countries in milling

Ñ South African paprika is perceived as being of a high quality

Ñ The basis of competition is price, with important quality characteristics being colour for paprika and pungency for other chilli varieties

Ñ Greater health concerns are driving demand for whole dried chillies rather than crushed or ground chillies

Ñ Demand for high quality paprika powder and oleoresins in the EU and US

Ñ Limited opportunity for KZN to be competitive in the production of dried chillies, due to its less suitable climate, and higher cost of production

Ñ Potential opportunity exists to increase paprika processing capacity due to the demand for high quality powder and oleoresins in the US and EU

Spice mixtures/curries Ñ KZN has strong knowledge

of curries and spice mixtures, and has developed unique recipes and flavours

Ñ Well developed trading, blending and mixing capacity, often through outsourcing

Ñ Trade links with Indian suppliers and the UK

Ñ Due to the wide range of quality, competition is driven by price in the lower end, mass market, and by quality at the higher end

Ñ Growth in consumer demand is driven by new product development and recipes in more developed markets

Ñ Strong growth in demand for ethnic foods in the EU and the US

Ñ Growing demand for convenience foods means that spices will increasingly be sourced as a processed food ingredient rather than

Ñ Opportunity to supply niche, high quality spice mixtures and curries to Germany and the UK

Ñ Potential opportunity to supply to South Africa and other African countries due to milling and blending capacity

Ñ Possibility to use Durban/KZN as a brand





KZN competitiveness Market opportunity Conclusions an end consumer product

Ñ Consumer demand for niche, high quality products, particularly in the UK and Germany

Sauces/pickles Ñ Well developed local agro-

processing industry Ñ Some success in export of

branded sauce indicates competitiveness

Ñ Competitiveness limited for pickles, as fresh chillies or chillies in brine are required, therefore increasing transport costs

Ñ Strong growth in demand for ethnic foods in the EU and the US, particularly in emerging ethnic cuisines such as Thai, Caribbean and African

Ñ Growth in developed markets is driven by new product development and new recipes

Ñ Consumer demand for niche, high quality products, particularly in the UK and Germany

Ñ Branded sauces in niche export markets, including UK and Germany

Based on the analysis above, the following markets for spice mixtures and sauces were prioritised for further research: Ñ United Kingdom Ñ Germany Ñ South Africa An analysis of consumer trends, market structure, trade data, product specific trends, the structure of the food retail sector and challenges to market entry for each of the prioritised markets is presented in Section 10.





10 Detailed analysis of selected markets and competitors 10.1 Detailed analysis of UK market and competitors 10.1.1 Overview of the UK market UK population trends The typical UK consumer may be described as relatively affluent, sophisticated and well informed. UK disposable income has risen, along with a rise in dual income families (71% of families in 2000). Information about food safety, ethics of food production, perceived health benefits or riskiness of different types of food is readily available in the UK. The high level of awareness of food issues by the general public, the ageing of the UK population, as well as the rise in one-person households has had a major impact on the purchasing habits of UK consumers. The trend towards a time-poor lifestyle (average time spent on cooking is 47 minutes per day) and breakdown of the traditional family structure has affected and will continue to drive innovation in packaging, convenience and choice. The UK resident population in 2001 was estimated at 58.8 million of which 49.1 million lived in England, 5.1 million in Scotland, 2.9 million in Wales and 1.7 million in Northern Ireland. 33 The South East of England, including London, is the UK’s largest population centre, accounting for just over 15.2 million people. This area also has the highest disposable household income per head; London has an average of $17,734 while the South East is close behind at $16,894. This is in sharp contrast to the North East which has an average disposable household income per head of $12,928. The UK population is expected to peak at 62.9 million in 2036 due to the baby boom effect and then gradually decline. The UK has an ageing population with around 20% (12 million) at age 60 or older. It is estimated that by 2041 the UK population over age 60 will have increased to make up 30% of the UK population (on account of the “baby boom” generation reaching retirement age). The UK market has a relatively large interest in ethnic products due in part to the large Indian/Pakistani/Bangladeshi and Afro-Caribbean populations. In particular, the Indian/Pakistani population has a direct influence on the imports of several food ingredients supplied by developing countries. (Please refer to Appendix D for a map of the UK indicating the distribution of the Indian population.) General consumer tastes and preferences In 2003, consumers in the UK spent €238bn on food and drink, representing 21% of total UK national consumer's expenditure. In general, the UK food market is a sophisticated one - there is strong interest in innovative products, and interest is particularly high in organic, health, specialty and ethnic food categories. Key trends driving the consumption of food and beverages are: Ñ Increasing popularity of ethnic foods

The UK leads the EU ethnic food market, and is the only market in which ethnic food holds over 1% of the total packaged food market. Between 1998 and 2002, sales grew by 44.1% to a value of £1.07bn34. This strong growth is due to increased travelling, greater numbers of ethnic restaurants and consumers' curiosity.

33 National Statistics, Census 2001 34 Ethnic foods, UK, Keynote, 2003





Indian food is the most popular ethnic cuisine in the UK, with 43% of the market35, with retail sales valued at €895m on 200436. “UK consumers have a long and passionate love affair with Indian food but want to be tempted by new taste experiences”37. Mexico also holds a large portion of the market, with sales of €294m in 200438. The emerging ethnic food market was valued at £173m in 2005, more than double its 2000 level. Thai food is the fastest growing niche, worth an estimated £69m in 2004. The increasing demand for ethnic food is leading to new products that incorporate chilli flavours, such as Lay’s Thai Sweet Chilli chips, being introduced. The Indian food market is well established, and 70% of UK consumers eat Indian food. A quarter of the £2.4bn Indian food market is through retail sales, of which ready meals accounts for 67% of value. Curry powder accounts for about 1% of this market, and has lost share while chilled ready meals and accompaniments have been gaining share.

Ñ A need for convenience With increasing levels of disposable income, and an increase in working adults, the demand for premium convenience food continues. As core cooking skills diminish, demand for ready meals and convenience foods such as cooking sauces increases. More single people are living alone with more disposable income than ever before, and this social change has lead to an explosion in the ready-meal sector. Increasingly, UK consumers want to prepare easy to cook meals that are also a little bit exotic.

Ñ A focus on health Sales of organic food are booming with the UK market for organic food products increasing by 68% between 2000 and 2004, to a value of €1.65bn in 2004. Average growth of 11% annually until 2007 is expected39. The growth is maintained by a growing number of intensive buyers, who buy organic food every week. The number of these buyers is forecast to increase from 2.4 million in 2002 to 11.4 million in 2007. The market share of organic food is estimated at 1-2.5% of the total UK food market. Although grocery multiples such as Tesco, Sainsbury, and Waitrose, supplied by the major food manufacturers such as Unilever and Heinz, hold the major share of the organic market, the main supermarkets saw their share of organic food sales fall from 81% to 75% in 2004, as consumers become more concerned about food miles, packaging and origin. Organic food sales through box schemes, farm shops and farmers' markets increased by 33% in the UK in 2004, and through independent shops by 43%40. As a result of several food scares, consumers increasingly pose questions about the production process and demand open, honest, and informative labelling, thereby stimulating growth of farm assured products, organic ranges, farmers markets, etc.

UK travel to South Africa UK tourists to KZN numbered approximately 131,027 of the 1.4 million foreign tourists to KwaZulu-Natal in 2004. They were consistently the largest group of European tourists over the four quarters, with a share of between 8.8% and 10.8% of total foreign tourists, with larger numbers in the 1st and 3rd quarters. Major reasons for visiting KZN were for holiday and to visit friends and relatives, and a particularly high number of tourists had visited a number of times or had previously lived in South Africa. A large proportion of UK tourists stayed with friends or family while visiting

35 Datamonitor, 2005 36 The European Ethnic Foods Market, Leatherhead Food International, March 2004 37 Indian sauce jar promises convenience and exotica, Foodnavigator.com, December 2004 38 http://www.foodnavigator.com/news-by-product/news.asp?id=62404&k=food-makers-to 39 US Department of Agriculture 40 Supermarkets Losing Share in Booming Organic Market, www.organicmonitor.com


http://www.foodnavigator.com/news-by-product/news.asp?id=62404&k=food-makers-to

http://www.organicmonitor.com




(26% to 38% over the 4 quarters), with hotels and backpackers also being popular forms of accommodation. The vast majority of tourists visited Durban, and are interested in cultural elements including Indian restaurants and the Victoria Market.

Market structure and trends Structure of the food industry The food and drink manufacturing industry is the largest manufacturing sector in the UK, with an annual turnover of about €110bn, accounting for 15% of the total manufacturing sector. It is dominated by large multinational players such as Unilever and Premier Foods, but also has examples of smaller, sometimes family-owned firms that have expanded over time into established players within more specialised markets. Structure of the retail market Retailing is one of the major economic sectors of the country, with retail sales of £221bn, employing around 3 million people, and operating over 300,000 shops. Within the sector there is a scale polarisation at both the business and the store level. The leading retailers are huge, multinational businesses which dominate the sector. They operate a range of stores from major hypermarkets and supercentres through to small convenience stores41. The UK food retail market can be broken down into the following major types: Ñ Large multiples Ñ Small multiples Ñ Discounters Ñ Independents Multiple retailers have grown from a market share of 23% in 1950 to over 65% by 1995. This has been at the expense of independent retailers (market share has declined from 65% to 31% over the same period) and co-operative retailers (12-4%). In some sectors, for example food and grocery, this process of dominance has gone even further42. The food market is dominated by the top food retailers. Tesco, Asda, Sainsbury and Morrisons hold an almost 75% share of the UK's food retail market. Tesco holds a 30.5% share of the market as at 1 January 2006 according to figures from market analysts TNS. Asda holds a 16.7% share, Sainsbury a 16.2% share, and Morrisons an 11.3% share. Some of the retail chains have attempted to provide greater convenience through online shopping, including Sainsbury’s, Asda, Waitrose and Tesco (through its affiliate Ocada). Fifty percent of fresh produce (by volume) is sold through retail outlets, the remainder through the wholesale trade and for processing. Multiples account for an increasing share of the fresh fruit and vegetables trade in the UK. Around 75% of trade at retail level is sold in supermarkets43. Supermarkets do not buy directly, but from preferred suppliers in the UK, who source and deliver the produce according to the supermarkets’ requirements. Smaller retailers, such as greengrocers and independent stores, often buy from wholesale markets as they buy smaller quantities and are more flexible with their product offer. Some (larger) retailers have a buyer located at the bigger wholesale markets, such as New Covent Garden in London or Rungis in Paris, France. This wholesale sector tends to be more price conscious than the retail channel. Many small and specialist companies located in these wholesale markets supply

41 Institute for Retail Studies, Competitive analysis of the retail sector in the UK, 2003 42 Ibid 43 EU Market Survey 2005. Fresh fruit and vegetables.





restaurants and independent retailers. These companies buy mostly in small quantities through spot purchases. Own brands have been increasing, and 34% of the market is held by own labels. This means that often retailers will stock only the leading brands and own brands, and large food manufacturers have even started producing for own labels. Although the growth rate of UK food retail sales appears low, there is real volume growth within these figures as the UK market has been affected by negative inflation in the food sector. Value growth is expected to remain slow, with continuing pressure on prices and fierce competition for market share, leading to retailers trying to differentiate themselves through focusing on marketing angles such as supporting organic, British farmers and other ethical concerns. In terms of product expenditure, there has been more growth in the non-food than the food market, and food sales are falling as a proportion of overall expenditure. Food retailers have responded by expanding their product ranges, first within food and now increasingly into non-food products and services. Competition from ‘eating out’ in all its guises has affected the food retail market and retailers have responded by redefining parts of their offer as “food to go”44. The UK retail market is subject to three major forces, i.e. concentration, price and cost pressures, and complication: Ñ Concentration emerges in the sense of business concentration as the larger retailers

continue to develop and the country engages more fully in the global retail economy. Ñ Price and cost pressures are inevitable given the operating parameters of retailing and

their need for a variety of inputs. Being efficient in use and operation is one response, but seeking out the best sources of supply is another.

Ñ Complication arises from the fragmentation of consumers and their volatility. This in turn adds to pressures on retailers to be rapidly responsive to changing consumer preferences.

Demographic changes (ageing population, increase in working women) and declining meal preparation (eating out is now the UK’s favourite leisure time pursuit) mean that the UK retailers are also focusing on value-added products such as the booming “food to go" sector, premium products, increasing own labels’ share of their business mix, and on supply chain and other operational improvements to reduce costs. Trade information Between 2001 and 2003, total fresh vegetable imports into the UK increased by 9% in value and by 10% in volume, reaching about €1.9bn, or 1.6m tons, in 2003. In 2003, developing countries supplied 12% of total vegetable imports in terms of value45. Mushrooms and capsicum are major import products, each representing more than 10% of total vegetable imports into the UK in 2003. Germany is the leading EU importer of capsicum, accounting for 34% of the import value in 2003 with the UK in second place at 16%.

44 Institute for retail studies, Competitiveness of the retail sector in the UK, 2003 45 EU Market Survey 2005 Fresh fruit and vegetables





0

50

100

150

200

250

300

350

400

450

500

Tom

atoe

s

Mus

hroo

ms

Cap

sicu

m

Lettu

ce

Oni

ons

Cab

bage

s

Cuc

umbe

rs

Pea

s, b

eans

Car

rots

Cou

rget

tes

Sw

eet m

aize

Asp

arag

us

Egg

pla

nts

Spi

nach

Fenn

el

Arti

chok

es

Truf

fles

Figure 10.1: Imports of selected vegetables into the UK, 200346

Imports of further chilli products are detailed in the table below:

Imports of chilli products into the UK

Product Value 2004

(US$ 000)

Quantity 2004 (tons)

Unit value

(US$/ton)

CAGR (value) 2000-2004 (%)

CAGR (quantity) 2000-2004

(%)

HS 070960 Peppers of the genus Capsicum or of the genus Pimenta, fresh or chilled 268,672 115,981 2,317 14 6

HS 07096091 Fresh or chilled fruits of genus Capsicum for industrial manufacture of capsaicin or capsicum oleoresin dyes 2,145 670 HS 07096099 Fresh or chilled fruits of genus Capsicum or Pimenta (excl. for industrial manufacture of capsaicin or capsicum oleoresin dyes, for industrial manufacture of essential oils or resinoids, and sweet peppers) 32,673 12,724

HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground 16,911 6,985 2,421 7 4

HS 09042030 dried fruits of genus Capsicum or Pimenta, neither crushed or ground (excl. sweet peppers) 1,382 446 HS 09042090 Crushed or ground fruits of genus Capsicum or Pimenta 14,034 6,057

HS 091091 Mixtures of two/more of the prods of different headings to this chapter 6,686 2,103 3,179 16 2

HS 09109110 Mixtures of different types of spices (excl. crushed or ground) 964 298 HS 09109190 Crushed or ground mixtures of different types of spices 5,734 1,804

46 Ibid

Impo

rts (€

m)





Imports of chilli products into the UK

Product Value 2004

(US$ 000)


Unit value

(US$/ton)

CAGR (value) 2000-2004 (%)


(%)

HS 091050 Curry 8,036 3,884 2,069 28 17 Growth in value and volume of these chilli products is shown in the figures below, where the HS codes represent the following products:

HS Code Product 07096099 Fresh or chilled fruits of genus Capsicum or Pimenta (excl. for industrial

manufacture of capsaicin or capsicum oleoresin dyes, for industrial manufacture of essential oils or resinoids, and sweet peppers)

07096091 Fresh or chilled fruits of genus Capsicum for industrial manufacture of capsaicin or capsicum oleoresin dyes

09042030 Dried fruits of genus Capsicum or Pimenta, neither crushed or ground (excl. sweet peppers)

09042090 Crushed or ground fruits of genus Capsicum or Pimenta 09109110 Mixtures of different types of spices (excl. crushed or ground) 09109190 Crushed or ground mixtures of different types of spices 091050 Curry

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

HS 07096091 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

Impo

rted

val

ue (U

S$ 0

00)

2002 2003 2004 Figure 10.2: Value of chilli product imports to the UK, 2002-2004





0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

HS 07096091 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

Impo

rted

vol

ume

(tons

)

2002 2003 2004 Figure 10.3: Volume of chilli product imports to the UK, 2002-2004

10.1.2 Product–specific trends Market research does not track chilli-specific trends, but is organised into categories such as condiments and cook-in sauces; it is therefore not possible to get accurate market sizes for particular chilli-based products. The following information is therefore only indicative. Ñ Spices and seasonings

o Demand for herbs, spices and seasonings has grown at 3% per year from 2002 to 2005, driven by new product development, particularly at the higher value market segments, and consumers using new recipes in cooking.

o Major competitors are local producers, and Mexico and Thailand. o Curry powder retail sales are valued at £6m, and have been declining due to the

increased popularity of ready meals and cooking sauces. Further decline is expected to a forecast value of £3m by 200847.

Ñ Condiments and sauces

o The table sauces market is estimated at £223m. o The thick table sauces market is estimated at £2m. o Growth in the total market for sauces was 5% in 2003, with further growth of 4-5% per

year forecast for 2004 to 2008. o Hot sauces are a growing segment within this market, while pickles and chutneys are

showing slower growth. o Growth has been driven by48:

New product launches and relaunches Promotional expenditure on brand extensions into new areas Organic and low-fat variants of existing products

o However, this market segment faces long-term decline due to49: Changing eating habits that are moving away from traditional family meals Old-fashioned image of some products

47 The European Ethnic Foods Market, Leatherhead Food International, March 2004 48 UK Condiments and sauces, Keynote, 2004 49 UK Condiments and sauces, Keynote, 2004





Lower priced own label products o 59% of the table sauce market is held by 8 manufacturers. o Organic sauces are beginning to emerge, produced by smaller producers.

Ñ Cooking sauces

o Cooking sauces are well placed to gain from the trend towards convenience and easy meal options.

o There is an ever expanding range of cooking sauces available as consumers become increasingly adventurous.

o There are strong trends towards ethnic, spicier foods. o The Indian sauce market is the leading ethnic cuisine segment, valued at £67.3m50:

The market is growing again after a decline in 2002, as the market matured and lost share to chilled ready meals. Continued growth is expected, however at a slower rate, as Indian sauces face competition from Thai sauces.

The leading supplier of Indian sauces, Patak’s, is increasingly targeting younger, single consumers that are driving growth in the ready-meal market. Cooking sauces are also being sold in smaller packs and pouches, which is increasing their appeal to smaller households.

The Indian sauce market is particularly segmented with many different varieties and recipes, reflecting restaurant offerings, with varieties that include korma, balti and masala. Sales of korma sauce are estimated at £20m, holding a quarter of the market. Newer varieties that are gaining popularity are bhuna and karia.

o The trend towards healthy eating has lead to the continued introduction of organic and low-fat sauces51.

o The distribution of sauces is dominated by the major multiple grocery outlets. Some products have some distribution through the independents to serve local ethnic communities and high-end deli consumers.

o While major brands lead the market, consumers are demanding more authentic food, and the emergence of newer cuisines such as African and Jamaican is driven by smaller brands52.

Product packaging and pricing The table below provides an indication of preferred unit sizes, packaging types and price ranges for hot table sauces, cook-in sauces, curry mixtures and pastes, as well as pickles, in UK retailers (please refer to Appendix E for a detailed table of products and price points).

Product type Predominant unit size

Preferred packaging

Retail price range – multiple

retailers (R equivalent at

£1:R11.2)

Retail price – deli/speciality

store (R equivalent at

£1:R11.2) 110ml – 150ml Glass bottle £0.59 - £1.4553

(R6.61 – R16.24) £0.95 - £4.99 (R10.64 – R55.89)

250ml – 480ml Glass jar £1.85 - £3.50 (R20.72 – R39.20)

Hot table sauces

740ml – 1l (some items measure in g)

Glass bottle £1.50 - £2.35 (R16.80 – R26.32)

50 Indian sauce jar promises convenience and exotica, Foodnavigator.com, December 2004 51 UK Cooking sauces and seasonings, Keynote, 2003 52 UK Cooking sauces and seasonings, Keynote, 2003 53 These prices exclude the “outlier of Tabasco”, which due to its high concentration and established brand retails at up to £2.99 for a 150ml bottle






Preferred packaging



£1:R11.2)


store (R equivalent at

£1:R11.2) 150g – 225g £1.28 - £1.45

(R14.34 – R16.24)

£1.60 - 1.80 (R17.92 – R20.16)

Cook-in sauces

420g - 540g

Primarily glass jars; some cans, plastic tubs and foil sachets £0.85 - £2.99

(R9.52 – R33.49) £1.15 - £3.20 (R12.88 – R35.84)

28g – 46g

£0.59 - £1.34 (R6.61 – R15.01)

-

60g – 100g

£0.44 - £1.92 (4.92 – R21.50)

£1.00 - £2.75 (R11.20 – R30.80)

Dry curry and spice mixes

1kg

Various - glass jars, cylinders/ drums, plastic packets, foil sachets, grinders

£2.99 (R33.49)

-

80g – 150g £1.37 - £1.40 (R15.34 – R15.68)

£1.40 (R15.68)

Curry and spice pastes

280g – 425g

Glass jars , some tins

£1.40 - £1.50 (R15.68 – R16.80)

£1.75 - £2.05 (R19.60 – R22.96)

Chilli pickles/in brine (sliced or whole)

95g – 375g Glass jars £1.05 - £2.19 (R11.76 – R24.53)

£1.00 - £2.55 (R11.20 – R28.56)

Dried chilli – crushed or powdered

42g – 190g Packets, boxes, glass jars

£1.48 - £1.79 (R16.57 – R20.05)

£0.95 - £2.85 (R10.64 – R31.92)

Spicy ready-meals / meal packs

550g – 620g Cartons or boxes £2.65 - £2.99 (R29.68 – R33.49)

-

The implication of these price points is that a supplier importing into the UK would need to be able to land product for no more than the following, based on an estimated total mark-up of 56% from importers and retailers54: Ñ Hot sauces:

110ml – 150ml: R4.29 – R10.54 Ñ Cook-in sauces:

150g – 225g: R9.31 – R10.55 420g – 540g: R6.18 – R21.70

Ñ Spice mixes: 28g – 46g: R4.29 – R9.75 60g – 100g: R3.20 – R13.96 1kg: R21.75

Indications are that speciality stores and delicatessens would be willing to trial new products, based on quality of product, particularly for a higher end deli, as well as price. Delicatessens have indicated the following requirements for trialling a new product: Ñ Information on the product including:

o Ingredients o Manufacturing process o Length of time for which it has been on the market

54 Based on CBI estimates of mark-ups for the EU – “Preserved Fruit and Vegetables”, EU Market Survey, CBI, 2005





o Previous sales locations and performance Ñ A product sample Ñ Trial order: small batch of products, value of £100 (R1,120) Ñ Minimum sales to continue product (for sauces): 12 bottles in 6 weeks Ñ Estimated mark-up on cost: 30% - 60% Delis and specialty stores may however prefer to source products locally where available, and would require substantial differentiation to import goods. 10.1.3 Competitors UK-based brands have a very strong foothold in their own market, providing both “traditional” and ethnic recipe items. In addition, products from the Far East (including Hong Kong, Thailand, Malaysia and China), the US, Mexico and Caribbean (hot sauces only) are evident in the market. Large companies have been launcing new products in their sauces ranges that include flavours such as curry sauce and hot sauces. These product launches may be backed by advertising campaigns, for example, Unilever’s £8m launch of a range of sauces under its Hellmann brand in 2004. The tables below provide an overview of key brands already competing in the UK market for chilli-based foods. In addition to the below, own labels hold a significant portion of the market, with some leading suppliers manufacturing own label sauces for supermarkets.

Relevant product types Major Brands Country of

Origin Hot

table sauces?

Cook-in sauces?

Curries, mixtures

& pastes?

Recipe types/ ethnic

cuisines

Specialist vs. wider food company

Bart Spices www.bartspices.com

Bristol, UK ü ü Various Specialist – dry

spice mixes and curries

Blue Dragon www.bluedragon.com

Far East (incl. China)

ü ü ü

Oriental/ Thai Speciality Oriental condiments & sauces for retail & food ingredients

Encona Sauces www.enconasauces.co.uk

UK ü

Primarily Cajun and Thai

Specialist hot sauces

Heinz www.heinz.com

US MNC, UK presence

ü

No particular ethnic recipe focus

Generalist food & condiments - ketchup, condiments and sauces; infant feeding; and convenience meals, frozen snacks, dried soups

Homepride, part of Campbell Soup www.homepride.co.uk

UK ü


Generalist food company

HP Sauces (part of HP UK ü “Traditional” Specialist table


http://www.bartspices.com

http://www.bluedragon.com

http://www.enconasauces.co

http://www.heinz.com

http://www.homepride.co.uk





Origin Hot

table sauces?

Cook-in sauces?

Curries, mixtures

& pastes?


cuisines


Foods group, which includes Amoy, Rajay, Lea & Perrins brands) www.hpfoods.com

sauce

Maggi (part of Nestle Group) www.nestle.com/Our_Brands/Prepared_Foods/Maggi

ü ü ü

Generalist food & condiments

Old El Paso (part of Betty Crocker Group) www.bettycrocker.com/products/prod_oldelpaso.asp

ü ü ü

Mexican Specialist Mexican ready-to-cook meals

McCormick www.mccormick.com Schwartz subsidiary www.schwartz.co.uk

US MNC Canada/ UK

ü ü


McCormick – herbs, spices, food service & industrial flavourants Schwartz –specialist in herbs, spices & seasonings

Patak’s (family owned) www.pataks.co.uk UK ü ü ü Indian Specialist Indian

& ethnic foods Premier Foods (produce private label for retailers) www.premierfoods.co.uk

UK ü ü


Generalist food products

Unilever Bestfoods (including Colmans, Knorr, Bird’s Eye, “Chicken Tonight” brands) www.unilever.com

US/UK ü ü


Generalist food products, condiments & sauces

Relevant product types

Secondary Brands Country of Origin Hot table

sauces? Cooking sauces?

Curries, mixtures

& pastes?

Recipe types / ethnic

cuisines


Amoy www.amoy.co.uk

Hong Kong, UK marketing

ü ü ü Asian Specialists in

Asian condiments

Crystal (part of Baumer Foods Group)

US (New Orleans) ü

Cajun & Mexican

Specialist hot sauces, also produce for retailer private label

Discovery Foods, main brand is Elephant Atta UK ü

Primarily Cajun,

Specialists – spicy foods


http://www.hpfoods.com

http://www.nestle.com/Our_B

http://www.bettycrocker.com/

http://www.mccormick.com

http://www.schwartz.co.uk

http://www.pataks.co.uk

http://www.premierfoods.co.u

http://www.unilever.com

http://www.amoy.co.uk







Curries, mixtures

& pastes?


cuisines


(family-owned) www.discoveryfoods.co.uk

Mexican,

Dunns River (part of Beasley’s brand) Jamaica ü Caribbean Specialist hot

sauces

Fiddes Payne www.fiddespayne.co.uk UK ü

- Specialist seasonings (particular focus on grinders)

Geeta’s (part of Rhamar group) www.rhamar.com

UK ü ü ü Indian Specialist ethnic

ambient foods

Lea & Perrin’s www.leaperrins.com UK ü

Sauce specialists (best know for Worcestershire Sauce)

Lingham’s Malaysia/ UK ü Eastern Hot sauce

specialist

Lion Foods UK ü ü Food service specialists

Loyd Grossman Sauces, part of Premier www.loydgrossmansauces.com

UK ü

Oriental (Hong Kong, Thai, Singaporean, Malaysian), Indian, Italian

Specialist – cooking sauces & accompaniments

Nando’s www.Nando’s.co.uk

SA ü ü Portuguese / African

Specialist

Northern Foods www.northern-foods.co.uk

UK ü

Asian Specialist in ethnic chilled & frozen ready meals & convenience foods – own label & branded

Sharwoods ü ü

Indian, SE Asian (Malay & Thai) Chinese

Shere Khan (head chef sauces) UK ü

Indian Specialised “authentic” recipes

“South African Sauces”” SA ü Specialist

Tilda Tilda ü Indian cooking sauces

Uncle Ben’s, part of Masterfoods ü Specialist hot

sauces

Walkers Wood Caribbean ü Caribbean Specialist hot sauces

Windmill Barbados ü Caribbean Specialist hot sauces


http://www.discoveryfoods.co

http://www.fiddespayne.co.uk

http://www.rhamar.com

http://www.leaperrins.com




Patak’s Patak’s is a family owned business that produces exclusively Indian-style food products. Started in England in 1957 to sell authentic Indian food to UK Indians, its products are now distributed to over 40 countries worldwide including the UK, Europe, Japan, Australia, New Zealand, the US, and Canada. Products are manufactured in England and the company is showing consistent growth. The company continues to expand with a manufacturing facility in Dundee (frozen food), a factory in Glasgow (bread), and an £18m food processing factory opened in Leigh, Lancashire, in 2002 – one of the largest Indian food manufacturing facilities in the world at 164,000 square feet55. In addition, Patak’s purchased an ethnic snacks business in Glasgow in January 2005. Patak’s currently employs more than 700 people. Production levels include production of 30 million jars of sauce per year, over 1.5 million ready meals per year, and over 1 million snacks per year. Patak’s uses 2,700 tons of spice from around the world per year. The Patak’s brand’s market penetration stood at approximately 15% of households in 200356. The popularity of the brand also extends to restaurants, with Patak’s curry pastes in over 75% of Britain’s 8,000 Indian restaurants57. The brand is also the second largest in Britain with an estimated 21% share in ambient Indian foods and 22% of the own label sector. Patak’s is especially strong in the cooking pastes, sauces, and accompaniments sectors. Patak’s drives growth through the development of new products and expansion into new markets. A recent product innovation is the development of products that are specific to regions within India such as Kashmir, Bombay, and Punjab. In order to attract North American consumers in the growing ethnic foods market, product packaging was redesigned to give a more ethnic, modern appeal with bold new colours and glass jars. The following table details Patak’s relevant products:

55 www.pataks.co.uk 56 Leatherhead Food International – The European Ethnic Foods Market, March 2004 57 www.pataks.co.uk







Product Heat Patak's Original Korma Curry Paste Coconut & Coriander 290g Medium mild

Patak's Original Balti Curry Paste Tomato & Coriander 283g Medium

Patak's Tikka Masala Paste (Medium) 283g Medium mild

Patak's Mild Curry Paste 283g Mild

Patak's Rogan Josh Curry Paste 283g Medium

Patak's Garam Masala Curry Paste 283g -

Patak's Tikka Curry Paste 300g Medium

Patak's Tandoori Paste 312g Medium

Patak's Madras Curry Paste Hot 283g Hot

Patak's Jalfrezi Curry Paste 283g Medium hot

Patak's Tikka Masala Medium Sauce 540g Medium mild

Patak's Original Korma Coconut & Cream Sauce 540g Medium Mild

Patak's Original Rogan Josh Tomato & Cardamom Sauce 540g Medium hot

Patak's Original Balti Tomato, Onion & Coriander Sauce 540g Medium

Patak's Madras Sauce 540g Hot

Patak's Dopiaza 540g Medium

Patak's Pasanda 540g Mild

Patak's Jalfrezi 540g Medium

Patak's Karai 540g -

Patak's Vindaloo 540g Hot

Patak's Hot & Spicy Tikka Masala 540g Medium hot

Patak's Madras Chilli & Cumin Canned Cooking Sauce 283g Medium hot

Patak's Tikka Masala Lemon & Coriander Canned Cooking Sauce 283g Medium

Patak’s sell a range of other Indian products including pickles, poppadoms, wraps, naan bread, chutneys, and frozen ready meals. Some of Patak’s distributors and/or partner companies are: Ñ UK independent grocery stores distributor – Petty Wood (www.pettywood.co.uk) Ñ Netherlands distributor – Boas (www.boas.nl) Ñ US – World Food (www.worldfood.com) Ñ Australia and New Zealand – General Mills (www.genmills.com) Ñ Ireland distributor – BR Marketing (www.brmark.ie) Ñ Canada – Patak’s Canada (www.pataks.ca) Ñ France distributor – Distriborg (www.distriborg.com) Ñ Austria distributor – Winkelbauer (www.winkelbauer.com) Ñ Spain distributor – Ofistrade SA (www.ofistrade.com) Ñ Switzerland distributor – Haecky (www.haecky.ch) Patak’s competes strongly in the market for Indian style foods through scale and product quality. With Patak’s brand strength, product quality, and capacity, it is unlikely that a KwaZulu-Natal manufacturer could compete directly. Innovative marketing and brand building strategies would be key to any KZN company intending to break into this market.


http://www.pettywood.co.uk

http://www.boas.nl

http://www.worldfood.com

http://www.genmills.com

http://www.brmark.ie

http://www.pataks.ca

http://www.distriborg.com

http://www.winkelbauer.com

http://www.ofistrade.com

http://www.haecky.ch




10.1.4 Understanding the UK food retail distribution structure Overview The distribution of imported food products through the UK retail food sector supply chain is illustrated in the diagram below.

Suppliers/Exporters

UK–based agent

Superstores/ Supermarkets

Export agent in source market

Co-ops

Co-operative Retail Trading Group –

central buying office

Independent retailers

Department stores

Suppliers/Exporters

UK–based agent

Superstores/ Supermarkets

Export agent in source market

Co-ops

Co-operative Retail Trading Group –

central buying office

Independent retailers

Department stores

Source: United Kingdom Retail Food Report

Figure 10.4: UK food retail food sector distribution sector for export products

Superstores and supermarkets UK supermarket chains prefer to let importers and distributors handle the detail and specialist nature of international importing. Exporters generally require the services of a UK broker or agent to access this segment of the retail market. It is difficult to maximise long-term, export business without a local ‘representative’ who can also provide guidance on business practices and trade related laws. Exporters may also find success in contacting retailers first, who will then appoint a UK importer with whom they already have a relationship. Some retailers, who deal in large volumes of produce, occasionally import directly. In these cases the retailer has a buyer or produce technician in the source market. Some of the largest agencies will only consider a product if it has large volume potential in the multiple supermarkets and is backed by substantial marketing support. Others specialise entirely in independent grocer or food service distribution. To maintain and reinforce their position, UK superstore/supermarket retailers make stringent demands on their suppliers. Market forces lead them inevitably to prefer doing more business with a small band of suppliers with whom they can work most effectively in the pursuit of economies of scale and efficiency. Co-ops Co-ops operate under a number of formats, ranging from smaller shops to superstores. The largest organisation CWS (Co-op Wholesale Services) has 640 food stores. Packaged





grocery is the strongest category in this market segment. Virtually all co-operative societies use a central food procurement agency: the Co-operative Retail Trading Group (CRTG), however all Co-op brand product negotiations are conducted by CWS Retail buying. Outside the buying group, three societies continue to purchase independently: Plymouth and South Devon, Tamworth and United Norwest. Convenience stores/independent retailers Access to this sector hinges on local representation and personal contact, coupled with commitment from the exporter in terms of resources such as personnel time and promotional money. This retail sector may also provide opportunities for exporters to deal direct, particularly for consolidation companies and export agents who can provide a wider portfolio of products. Department stores The UK department stores receive their imported product lines either from small UK importers or via consolidated shipments through export agents. 10.1.5 Challenges to entering the UK market and implications for KZN Based on the analysis above, there are significant challenges in entering the UK market in terms of: Ñ Concentration of supplier efforts by major retailers Ñ Dominance of a small group of local producers in mainstream retail Ñ Established speciality importers, in particular in hot sauces Ñ Price pressure Ñ Quality and non-tariff barrier compliance The British Retail Consortium (BRC) has introduced stringent standards on foods, packaging, consumer products and non-genetically modified products. Food producers must meet and follow the standards if they want to continue supplying the UK retail and food service markets. In addition, retailers in other European countries have been adopting the BRC's standards for their domestic suppliers, whether or not they sell to the UK market. The standards address the following aspects: metal detection, product recalls, low acid canning, pasteurisation, pest control, internal audits, traceability, quality measurement, complaint handling and shelf-life determination. Traceability is becoming a major issue for exporters when supplying (UK-based) supermarket chains as their clients. Consequently, delis favour sourcing products locally where products from overseas are not sufficiently differentiated. Furthermore, growers and exporters in developing countries delivering to this type of customer have to participate in their controlled supply chain. However, the existence of some South African brands in the market is evidence that it is not impossible to enter the market successfully e.g. Nando’s, “Something South African” and Peppadews. Opportunities may also open up with respect to organic sauces, although the trend is too recent to determine how intense competition will be in this area. The most suitable area of opportunity may be supplying speciality stores and delis, in particular those with an Indian ethnic focus or established South African ties. These speciality stores are more suited to supply by KZN, as they: Ñ Have greater diversity of suppliers Ñ Demonstrate a greater range of country of origin Ñ Have higher price points for the same types of products





Ñ Will require smaller volumes of supply For example, Wally’s Delicatessen in Cardiff (see table in Appendix E), an award-winning small retailer, already carries a diverse range of chilli-based products as well as South African products and brands. 10.2 Detailed analysis of the German market and competitors 10.2.1 Overview of the German market German population trends Germany has a population of 82 million, and is the largest consumer market in Europe. There are about 7 million foreign residents, of which the largest nationality is Turkish58. The population is stable, with no growth in 2004, and ageing, due to lower birth and death rates. Other key population trends include an increase in the number of working women and an increase in the number of single person households (currently about 14.4 million). The German economy has been characterised by relatively high unemployment, at 10.7% in 2003, and the economy has been slow to recover from a down turn. Germany does however have high levels of education, technological development, and economic productivity, and the per capita income level is about $27,00059. Monthly German household expenditure on food is about €282 on average, approximately 11% of total income. General consumer tastes and preferences Besides quality and price, German consumer spending patterns are influenced by convenience. Small neighbourhood stores are therefore popular, particularly if they are open for longer hours. However, new laws that allow all retail food stores to stay open until 8pm on weeknights and 6pm on Saturdays may impact convenience sales. The increase in working women and single person households has contributed to the growth in demand for convenience foods such as frozen foods, snacks, and prepared foods. Furthermore, people are dining out and “eating on the run” more frequently60. Ethnic foods are a fast growing sector. While European ethnic foods, including Italian, Greek, and Spanish foods, have been popular in Germany for years, Asian and Mexican or “Tex-Mex” foods are growing in popularity, in part due to extensive travel. These foods are now being produced domestically and adapted to local tastes. German travel to South Africa Germans travel extensively, and therefore experience a broad range of cultural and ethnic cuisine, for which they may develop a taste. Of the 6.7 million foreign tourists to South Africa in 2004, 1.4 million visited KwaZulu-Natal, and about 88,500 were from Germany (a share of 6.3%). Germans took a greater share of the tourist market in the 1st and 4th quarters (8.1% and 8.2%), with a lower share in the 2nd and 3rd quarters (4.3% and 4.9%). The KZN tourist market is also gaining share of the South African market, and is increasingly attracting higher end tourists due to upmarket resort developments. The majority of German tourists visiting SA in 2004 were between 25 and 64 years old, and were either married, and living together with no children or no children under 18, or single,

58 http://en.wikipedia.org/wiki/Demographics_of_Germany 59 http://en.wikipedia.org/wiki/Demographics_of_Germany 60 Germany, HRI Food Services Sector, GAIN Report, USDA FAS, 2004


http://en.wikipedia.org/wiki/Demographics_of_Germany

http://en.wikipedia.org/wiki/Demographics_of_Germany




divorced or widowed with no children. Monthly incomes were typically from R20,000 upwards, and average spend within South Africa ranged from R9,526 in the 2nd quarter to R13,009 in the 4th quarter. The vast majority of these tourists visited Durban, and visited KZN for holiday purposes. Most tourists are interested in cultural elements of the tourist experience, and Indian restaurants in particular are growing in popularity. The Victoria Market is also a popular destination for tourists to experience the Indian culture. As hotels, bed & breakfasts, backpackers and self-catering units are the most popular forms of accommodation; these may provide entry points to the German tourist market, in addition to Indian restaurants and Victoria Market. Additionally curio stores may provide good entry points to the German tourist market for attractively packaged and positioned products. Market structure and trends Structure of the food industry The food and beverage industry is the fourth largest sector, with manufacturing turnover of €100bn in 2003. The German food retail market was valued at €150bn in 2003, and accounted for 67% of total retail sales. Structure of the food retail market Food and beverage retail through organised retail outlets was estimated at €123.4bn in 2003, showing recovery from €120.5bn in 2002. An additional €36bn was spent at restaurants, canteens and snack shops, and €27bn at bakeries, pastry shops and butcher stores. Food and beverage retailing in Germany is increasingly dominated by a small number of large retailers as the market consolidates. Discount stores have captured the largest share of the market, at 38% in 2003. Despite the government’s efforts to protect small retailers, their market share is dropping. In 2002, small traditional shops made up less than 13% of sales in the food retail market. Germany's leading retail groups vary in business structure. Retailers can have multiple chains, which vary from hypermarkets to discount stores, or even deli outlets. Organised retail stores (excluding convenience formats) tend to follow these profiles: Ñ Hypermarkets - 25% of market share

o There is an emphasis on self-service, and a significant amount of nonfood products Ñ Supermarkets - 25% of market share

o Nonfood items make up less than 25% of sales. o In-store promotions for food products are often based on international themes, for

example “Mexican week” or Chinese week”. These may be coordinated by an importer of goods from the specific company, for example CMC The Food Company.

Ñ Discounters - 37% of market share o These stores offer a limited range of products at low prices, with a high turnover

rate. Ñ Traditional shops - 13% of market share

o These are small independent food stores that concentrate on a limited range of products. They may focus on quality, including specialty or gourmet products; or convenience products with high turnover61.

The organic food retail industry reported growth of 15% for the 1st quarter of 2005, with fresh produce growing at 19%. There are over 20,000 organic companies in Germany, located

61 Discounters driving Germany's grocery sector, U.S. Department of Agriculture, 2004





mostly in Badem-Württemberg and Bavaria62. There were 250 organic supermarkets in Germany at the end of 2004, with an average turnover of €1.4m a year. The focus is on fresh foods, with dry products making up about 37% of this, while fresh products makes up 53%. Organic product ranges include an average of 5,800 items. Organic supermarkets are drivers of growth in this niche market, with sales of organic products through organic supermarkets increasing by 20% in the first quarter of 2005, and 27 new store openings in the first half of 2005. Organic supermarkets have the most potential in larger cities. Compared to organic specialty stores, the focus is on pricing, with prices on average 5% lower than in specialty stores. Organic supermarkets include: Ñ Vierlinden, owned by Rewe-Group Ñ Alnatura Ñ Erdkorn GmbH Structure of the food service industry German consumers purchase food and beverage products primarily at the retail level, and approximately 15% of German food and beverage expenditures are within the food service sector. Food service sector turnover was approximately at €55.5bn in 2003; a 5.1% decrease from 2002, attributed largely to Germany’s economic slow down. The German food service sector is highly fragmented. It can be broken down into commercial food service, including restaurants, hotels, etc. and institutional food service, serving hospitals, schools, etc. The following table shows market shares for segments within these two categories:

Fast food52%

Travel23%

Retail9%

Full service9%

Leisure7%

Figure 10.5: Market shares of segments within Germany’s commercial food service sector, 2003

The prevalence of convenience eating is evident from the dominant market share of fast food.

62 Organic market, Agri-food news from Germany, Austria and Switzerland, October 2005





Company restaurants53%

Hospitals27%

Nursing/retirement homes12%

School, universities4%

Other4%

Figure 10.6: Market shares of segments in Germany’s institutional food service sector, 2003

Trade information Fresh capsicum imports into Germany are high compared to imports of other vegetables:

0

100

200

300

400

500

600

700

800

Tom

atoe

s

Cap

sicu

m

Cuc

umbe

rs

Lettu

ce

Mus

hroo

ms

Oni

ons

Cab

bage

s

Car

rots

Asp

arag

us

Cou

rget

tes

Egg

pla

nts

Pea

s, b

eans

Fenn

el

Spi

nach

Sw

eet m

aize

Arti

chok

es

Truf

fles

Figure 10.7: Imports of selected vegetables into Germany, 200363

Germany is a major importer of spices, with Hamburg being one of the main trading centres for spices in the world; this is shown in category HS 090420 below:

63 Ibid

Impo

rts (€

m)





Imports of chilli products into Germany

Product Value 2004

(US$ 000)


Unit value

(US$/ton)

CAGR (value) 2000-2004 (%)


(%)

Growth (value)

2003-2004 (%)

HS 070960 Peppers of the genus Capsicum or of the genus Pimenta, fresh or chilled 558,874 282,177 1,981 12 2 16

HS 07096099 Fresh or chilled fruits of genus Capsicum or Pimenta (excl. for industrial manufacture of capsaicin or capsicum oleoresin dyes, for industrial manufacture of essential oils or resinoids, and sweet peppers) 10,396 5,702 1,823 -22 HS 07096091 Fresh or chilled fruits of genus Capsicum for industrial manufacture of capsaicin or capsicum oleoresin dyes 1,171 501 2,337 -52

HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground 41,517 15,702 2,644 8 4 -6

HS 09042030 Dried fruits of genus Capsicum or Pimenta, neither crushed or ground (excl. sweet peppers) 4,059 1,071 3,790 8 HS 09040290 Crushed or ground fruits of genus Capsicum or Pimenta 27,080 10,755 2,518 -5

HS 091091 Mixtures of two/more of the products of different headings to this chapter 15,153 3,662 4,138 28 18 31

HS 09109190 Crushed or ground mixtures of different types of spices 14,569 3,536 4,120 5 HS 09109110 Mixtures of different types of spices (excl. crushed or ground) 514 125 4,112 67

HS 091050 Curry 2,050 1,029 1,992 30 28 -22 Growth in value and volume of these chilli products is shown in the figures below, where the HS codes represent the following products:

HS Code Product 07096099 Fresh or chilled fruits of genus Capsicum or Pimenta (excl. for industrial

manufacture of capsaicin or capsicum oleoresin dyes, for industrial manufacture of essential oils or resinoids, and sweet peppers)

07096091 Fresh or chilled fruits of genus Capsicum for industrial manufacture of capsaicin or capsicum oleoresin dyes

09042030 Dried fruits of genus Capsicum or Pimenta, neither crushed or ground (excl. sweet peppers)

09042090 Crushed or ground fruits of genus Capsicum or Pimenta 09109110 Mixtures of different types of spices (excl. crushed or ground) 09109190 Crushed or ground mixtures of different types of spices 091050 Curry





0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

HS 07096091 HS 07096099 HS 09042030 HS 09042090 HS 09109110 HS 09109190 HS 091050

Impo

rted

val

ue (U

S$ 0

00)

2002 2003 2004 Figure 10.8: Value of chilli product imports to Germany, 2002-2004

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

HS 07096091 HS 07096099 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

Impo

rted

vol

ume

(tons

)

2002 2003 2004 Figure 10.9: Volume of chilli product imports to Germany, 2002-2004





10.2.2 Product–specific trends Market research does not always track chilli-specific trends, but is organised into categories such as condiments and cook-in sauces; it is therefore not possible to show accurate market sizes for particular chilli-based products. The following information is therefore only indicative. Ñ Spices and seasonings64

o Germany is the largest market for herbs and spices in Europe, and has one of the highest per capita consumptions of herbs and spices – 850g per year.

o Paprika and curry are among the most popular spices, while spice mixtures for chicken, mince meat, French fries, tomato, onion and pizza are the most popular amongst ready-to-use spice mixtures.

o Ready-to-use spice mixtures have been increasing in popularity, as more varieties become available and consumers demand greater convenience.

o There is also a rising demand for organic spices and full ranges of organic spices are available.

Ñ Condiments and sauces o New product varieties are being launched that include chilli and curry flavours. Curry

ketchup has become popular. o Organic sauces are emerging in the German market, with launches of products such

as Eupro Nahrungsmittel Bio ketchups sauces and seasonings, which include the following flavours: curry, hot chilli, tomato, grill sauce and ketchup with garlic65.

Ñ Cooking sauces o Cooking sauce sales are expected to increase, driven by the trend towards greater

convenience and the growing number of single person households66. Product packaging and pricing The table below provides an indication of preferred unit sizes, packaging types and price ranges for hot table sauces, cook-in sauces, curry mixtures and pastes67 (please refer to Appendix F for a detailed table of products and price points).

Product type Predominant unit size Packaging



€1:R7.85) 85ml – 250ml Glass bottle, jars

for salsa €1.09 – €2.49 (R8.56 – R19.55)

Hot table sauces

400ml Glass bottle €1.09 (R8.56)

88g €0.69 (R5.42) Cook-in sauces 200ml

Glass jars and sachets, glass bottles

€1.79 – €2.09 (R14.05 – R16.41)


90g

Various - glass jars, cylinders/ drums, plastic packets, foil sachets, grinders

€2.69 (R21.12)

64 Spices and herbs, EU market survey, CBI, 2002 65 http://www.foodanddrinkeurope.com/news/ng.asp?n=17690-european-organic-food 66 Sauces, Dressings and Condiments in Germany, Euromonitor International, March 2005 67 Please note that these prices are based on limited information, and therefore are merely an indication


http://www.foodanddrinkeurope.com/news/ng.asp?n=17690-european-organic-food




Product type Predominant unit size Packaging



€1:R7.85) Curry paste 110g Glass jar €2.49 (R19.55)


60g Packets €2.69 (R21.12)

The implication of these price points is that a supplier importing into Germany would need to be able to land product for no more than the following, based on an estimated total mark-up of 56% from importers and retailers68: Ñ Hot sauces:

85ml – 250ml: R5.49 – R12.53 400ml: R5.49

Ñ Cook-in sauces: 88g: R3.47 200ml: R9.01 – R10.52

Ñ Spice mixes/curries 90g: R13.54 110g: R12.53

10.2.3 Competitors The main spice company in Germany is Fuchs-Gewürze, which controls approximately 80% of the German retail market, and is a major player in the European market. Ubena is also a major spice processor. Large food processing companies in Germany that produce sauces and spice mixtures include: Ñ Nestle Ñ Kraft Ñ Moksel (produces spices for use in the meat industry) Ñ Hermann Laue (Hela sauces) Examples of products available in German supermarkets include the following:

Product type Unit size Packaging

Fuego Hot Pepper Sauce 85g Glass bottle Hela Curry Gewürz Ketchup 800ml Plastic bottle Kühne Curry Sauce 250ml Glass bottle Kühne Mexico Sauce 250ml Glass bottle Kühne Hot Chilli Sauce 250ml Glass bottle Knorr Gourmet Curry Sauce 1kg Bamboo Garden Sambal Sauce 140ml Glass bottle Fuchs whole chillies 500g Packet Fuchs Paprika 60g

68 Based on CBI estimates of mark-ups for the EU – “Preserved Fruit and Vegetables”, EU Market Survey, CBI, 2005





10.2.4 Understanding the German food retail distribution structure Overview Retailers and wholesalers rarely import directly from outside the EU, so most imports from non EU countries are through import agents. These importers tend to specialise in certain products, and have a national reach. For spices, imports into the EU are usually in the whole, dried form, cleaned but not processed further, due to the following reasons: Ñ National tastes are distinctive, and local manufacturers are best placed to produce the

most appropriate flavours Ñ Stricter quality regulations for ground spices, as contaminants are usually added in the

processing stage, and are more difficult to remove from ground spices than from whole spices

Ñ Industrial food manufacturers require reliable delivery and consistent quality, and therefore prefer to source from EU processors

Ñ Local major brands supplying to retailers perform services such as stock control, shelf maintenance, and are also better positioned to monitor consumer trends and preferences, and adjust their products accordingly

Buying groups play an important role for independent retailers. The largest is Markant, which supplies about 20,000 retail outlets, and had a sales turnover of $47.5bn in 2002. There are also several large wholesalers which supply convenience outlets. Lekkerland-Tobaccoland is the largest of these, and supplies about 10,000 products to over 70,000 stores. Once an important product becomes popular, production may be located within Germany, with local producers contracted to supply retailers. The Tex-Mex segment is an example of this, and many products are being produced in Germany and other European countries. Figure 10.10 below illustrates the structure of the German food retail distribution sector.

Domestic suppliers

Supermarkets

Discounters

Hypermarkets

Exporters

Importers, agents, distributors

Traditional stores

Buying groups, wholesalers

Domestic suppliers

Supermarkets

Discounters

Hypermarkets

Exporters


Traditional stores


Supermarkets

Discounters

Hypermarkets

Exporters


Traditional stores


Figure 10.10: German retail food distribution sector for export products





10.2.5 Challenges to entering the German market and implications for KZN Challenges to entering the German market are the following: Ñ Concentration of supplier efforts by major retailers Ñ Well-established spice trade with established supplier relationships Ñ Sophistication of food processing sector and tendency to manufacture products locally

restricts opportunities to supply finished products such as sauces Ñ Concerns regarding food safety and quality of inputs into imported finished products In addition to the above constraints, all imported foods must conform to German and EU regulations for ingredients, packaging and labelling. Labels should provide the following information69: Ñ Measurements in metric Ñ Ingredients and additives Ñ Shelf-life date Ñ Name and address of manufacturer or importer within the EU Ñ Special requirements for nutritional value, vitamin-enriched and dietetic foods The most suitable area of opportunity may be supplying speciality stores and delis, in particular those with an ethnic focus or established South African ties. Products should be marketed through the following methods: Ñ Exhibits at major food shows, such as ANUGA in Germany and SIAL in France Ñ In-store promotions Ñ Market acceptance of a new product may be tested over a 12 to 18 month time period Relationships with buying groups supplying convenience and speciality stores are also important.

69 http://www.findarticles.com/p/articles/mi_m3723/is_7_15/ai_106865032


http://www.findarticles.com/p/articles/mi_m3723/is_7_15/ai_106865032




10.3 Detailed analysis of the South African market and competitors 10.3.1 Overview of the South African market South African population trends The size of the South African population is approximately 45 million people. There are four main population groups, in the following proportions70: Ñ African/Black: 75% Ñ White: 14% Ñ Coloured: 9% Ñ Indian/Asian: 3% 74% of South Africa’s Indian population resides in KZN, and Durban accounts for 80% of KZN’s Indian population71. The Indian population in Durban is the largest concentration of Indians outside of India. Although South Africa is a middle income country, it is characterised by high inequality and a dual economy. Spending power of consumers is concentrated in Gauteng and the Western Cape, where 54% of national retail sales occur72. The number of households is expected to increase from 9.8 million currently, to 11.2 million in 200873, therefore driving increased spending. The growth of an emerging black middle class will also drive consumer spending. General consumer tastes and preferences In general, South African consumers are price conscious, and price sensitivity drives their purchasing behaviour. However, health information is becoming more important, with consumers increasingly concerned about health, nutritional and weight loss information. A key concern is the level of added colourants and preservatives, and nutritional values. Demand is increasing for products that are more authentic, fresher, greater value for money, and of a higher quality. Demand for convenience food is also growing, due to longer working hours, and more working couples74. Market structure and trends Structure of the food industry Total food consumption was valued at US$17.8bn in 2002, and is expected to increase to US$26bn by 2007. However, expenditure on food is expected to decline as a share of household spending75. Along with numerous domestic companies, several major international food processing companies operate in South Africa, both to serve the domestic market and the export market, including: Ñ Unilever Ñ Nestle Ñ Kellogg Ñ HJ Heinz Ñ Cadbury-Schweppes 70 2001 census 71 http://www.kzn.org.za/kzn/124.xml 72 Spend trends, Exploring retail, consumer and category changes, www.fastmoving.co.za 73 South Africa Retail Food Sector Report, GAIN Report, USDA FAS, 2005 74 Packaged Food in South Africa, Euromonitor International, 2005 75 South Africa Food & Drink Report Q4 2004, Business Monitor International


http://www.kzn.org.za/kzn/124.xml

http://www.fastmoving.co.za




Ñ McCain Foods South African food companies are beginning to outsource manufacturing, while retaining brand ownership76. Structure of the retail market Grocery retail sales in 2002 were approximately US$15.8bn. Types of retail outlets include the following: Ñ Convenience stores Ñ General dealers Ñ Specialty stores that handle one product line Ñ Boutiques Ñ Chain stores, including supermarkets and hypermarkets Ñ Department stores Ñ Cash and carry wholesale-retail outlets Ñ Co-operative stores in rural areas Ñ Informal retail outlets such as spaza shops and hawkers The food retail sector is highly concentrated, with the top 4 retailers holding a large share of the market, although these serve different Living Standard Measure (LSM) groups77:

Retailer Market share (%) Target market (LSM group)

Pick n Pay 40 3 – 8 Shoprite 25 1 – 6 Spar 23 3 – 8 Woolworths 6.5 7 – 10

The food retail market has a 2-tier structure, with highly sophisticated retail chains such as Woolworths and Pick ‘n Pay catering to the high end, and informal retail outlets such as spaza shops, vendors, hawkers and corner stalls catering to the lower end of the market. The food and beverage sector is however becoming increasingly sophisticated; particularly at the high end, where products such as organic food and ready meals are offered. In contrast, the informal sector generally stocks staple foods and a limited range of products. Another trend in supermarkets is towards own labels, with growth of 11% in own label products. This has been driven by preferences for both price and quality, with the greatest growth seen in prepared foods78. It is expected that hypermarkets’ and discount stores’ shares of the market will grow at the expense of supermarkets. The role of convenience stores and forecourts is also increasing, providing better access and convenience. Currently, online sales make up just 0.14% of total sales, and this is also expected to grow. Online retailing is strongly linked to established retailers and wholesalers. Trade information In relation to other fresh vegetables, the value of South African fresh pepper imports is high:

76 All Joy cooking with over R9.5m profit, Business Today, July 2005 77 Food price report, Competition Commission, 2002 78 http://www.factsfiguresfuture.com/archive/october_2005.htm


http://www.factsfiguresfuture.com/archive/october_2005.htm




0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Pea

s, b

eans

Pep

pers

Aspa

ragu

s

Mus

hroo

ms

Oni

ons

Truf

fles

Tom

atoe

s

Cuc

umbe

rs

Impo

rted

val

ue (U

S$)

Figure 10.11: Imports of selected fresh vegetables into South Africa, 2004

Imports of other chilli products are detailed in the table below:

Imports of chilli products into South Africa

Product Value 2004

(US$ 000)


Unit value

(US$/ton)

CAGR (value) 2000-2004 (%)


(%)

HS 070960 Peppers of the genus Capsicum or of the genus Pimenta, fresh or chilled 192 456 421 105 180 HS 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground 5,285* 5,927 892 52 46 HS 091091 Mixtures of two/more of the prods of different headings to this chapter 209 74 2,824 -4 -24 HS 091050 Curry 83 60 1,383 12 16

*97% of the 2003 value for this category was attributed to HS 09042030 dried or crushed or ground fruits of the genus Capsicum Growth in value and volume of these chilli products is shown in the figures below, where the HS codes represent the following products:

HS Code Product 070960 Peppers of the genus Capsicum or of the genus Pimenta, fresh or chilled 090420 Fruits of the genus Capsicum or Pimenta, dried, crushed or ground 091091 Mixtures of two/more of the prods of different headings to this chapter 091050 Curry





0

1000

2000

3000

4000

5000

6000

HS 070960 HS 090420 HS 091091 HS 091050

Impo

rted

val

ue (U

S$ 0

00)

2002 2003 2004 Figure 10.12: Value of chilli product imports to South Africa, 2002-2004

0

1000

2000

3000

4000

5000

6000

7000

HS 070960 HS 090420 HS 091091 HS 091050

Impo

rted

vol

ume

(tons

)

2002 2003 2004 Figure 10.13: Volume of chilli product imports to South Africa, 2002-2004





10.3.2 Product–specific trends Ñ Spices and seasonings

o Amongst the Indian community, there is a trend towards blending spice mixtures at home, due to distrust in the composition of spice mixtures sold in shops

o Newer products such as smoked paprika may gain popularity Ñ Condiments and sauces

o Curry sauces are becoming very popular o Hot sauces are used sparingly, and therefore do not sell quickly (e.g. Woolworths

sells about 400 units of hot sauce a week nationally) o Mild sauces may be more popular than hot sauces o Consumers are increasingly buying products that have a greater added value, or offer

a “meal solution” such as cooking sauces, rather than table sauces Product packaging and pricing The following table provides an analysis of product prices and packaging for a sample of stores:


Preferred packaging


retailers (R)


store (R)

60ml – 125ml Glass bottles 11.69 – 13.49* 14.95 – 29.95** Hot table sauces79 250ml – 375ml Glass or plastic

bottles 9.29 – 18.29 16.15 - 38.00

200ml – 250ml Glass bottles, plastic pouches

9.99 – 19.99 14.20 – 34.95

500ml – 750ml Plastic bottles 13.99 -

Cook-in sauces

410g – 500g Glass jars 12.99 - 17.69 - 7g Paper sachets 0.99 - 10g – 100g

Plastic sachets and/or boxes

1.99 – 7.55 8.95

200g Boxes 13.99 - 100ml Grinders/shakers 15.35 – 19.49 10.85 – 22.95


72 - 116g Tins 19.75 – 33.80

50g – 150g 6.99 – 14.49 12.55 Curry and spice pastes

280g – 430g

Sachets, glass jars 13.99 27.40 – 29.80

Chilli pickles/in brine (sliced or whole)

95g – 375g Glass jars 16.99 – 18.39 -


100ml Glass shakers, boxes for refills

6.99 – 11.29 -

* Tabasco sauce is an outlier, retailing for between R17.95 and R19.95 for 60ml ** Tabasco sauce is an outlier, retailing for between R24.50 for 60ml Delicatessens indicate that packaging is extremely important, and that products should be attractively presented. Packaging of products sold in both delicatessens and supermarkets shows the following trends: 79 Some items are measured in grams





Ñ Hot table sauces o Hot sauces are mostly packaged in small (125ml) glass bottles, while milder and

sweet sauces are often packaged in larger bottles o Innovative packaging is used to reinforce the brand image, e.g. Ukuva iAfrica bottles

that use wire work to enhance its products’ African image Ñ Cook-in sauces

o Cook-in sauces are generally in larger size packaging, with packaging varying according to the image and quality of the product

Ñ Spice mixes, curries and pastes o Lower end spice mixtures and curries are sold in plastic sachets o Higher end dry spice mixtures and rubs tend to be sold in tins and grinders o Imported products tend to be sold in lighter packaging such as foil sachets

The implication of the price points above is that a supplier to South African delicatessens and specialty stores would need to supply for no more than the following, based on estimated total mark-up on cost of 38% from retailers80: Ñ Hot sauces

o 60ml – 125ml: R10.83 – R21.70 o 250ml – 375ml: R11.70 – R27.54

Ñ Cook-in sauces o 200ml – 250ml: R10.29 – R25.33

Ñ Spice mixes o Dry curry and spice mixes

10g – 100g: R6.49 100ml grinders/shakers: R7.86 – R16.63 72 - 116g tins: R14.31 – R24.49

o Curry and spice pastes 50g – 150g: R9.09 280g – 430g: R19.86 – R21.59

Further requirements indicated by delicatessens include: Ñ Order sizes would be approximately 12 items Ñ Sales volumes should be between 3 and 4 items a week 10.3.3 Competitors The following provides an overview of major and secondary brands that are present in the market:


Origin Hot

table sauces?

Cook-in sauces?

Curries, mixtures

& pastes?


cuisines


Bandito’s South Africa P P Mexican Specialist sauce

company

Nando’s South Africa P P

Portuguese Wider food company

Robertson’s South Africa P

Part of Unilever, wider food company

Suree Thailand P P Eastern Sauces

80 Estimated markups range from 25% to 50% in delicatessens, and 30% for Woolworths






Origin Hot

table sauces?

Cook-in sauces?

Curries, mixtures

& pastes?


cuisines


Tabasco US P Specialist, owned

by McIllhenny Company

The Cape Herb and Spice Company

South Africa P

Specialist herb and spice company

Wellington’s South Africa P P Part of SAD, part

of Pioneer Foods




Curries, mixtures

& pastes?


cuisines


A Taste of Thai Thailand P P P

Thai Wider foods company, specialising in Thai products

Bushman’s South Africa P P Specialist

Crosse & Blackwell South Africa P

Part of Nestle, wider food company

Ina Paarman South Africa P P P

Paarman Foods, wider sauces, dressings and seasonings company

Knorr South Africa P P

Part of Unilever, wider food company

Pakco KZN, South Africa P P

Wider foods company

Taste of Thailand KZN, South Africa P

Thai Specialist

Ukuva iAfrica South Africa P P P

African Specialist

The Cape Herb & Spice Company The Cape Herb & Spice Company, started in Cape Town in 1994, has grown into a company with a global reach that is internationally recognised. The Cape Herb & Spice Company produces mainly innovative spice mixtures and blends packaged in grinders. Rubs, salts, and sugars also form part of the product range, in packaging such as tins and shakers. The company produces few primarily chilli products and chillies are present only in small amounts, in some items of their product range. The Cape Herb & Spice Company buys inputs locally where possible, due in part to cost considerations. Products not available in South Africa are imported though, in bulk purchases where there are significant cost savings. Sourcing from local suppliers has distinct advantages in that the logistics are more manageable and no up front payment is





required, unlike international spice purchases. Furthermore, samples from international suppliers are often vastly different from the actual product. Unsatisfactory products are difficult to return and obtaining refunds can be problematic. Raw spices are purchased internationally through spice traders and locally from farmers. The company is planning to expand its capacity. It currently has two lines at its factory, and is building a new factory next year, which would add one line of production to their capacity. The company currently employees approximately 50 people. The success of the company thus far has been driven by the quality of the products and innovative marketing. The company distinguishes itself from larger competitors such as Robertson’s by emphasising quality of product (products have no colourants, flavourants, preservatives, etc.) as well as the quality of the actual mixing, blending, and packaging processes. Therefore, the company targets higher-income customers who are more quality conscious. The Cape Herb & Spice Company is the own label supplier for Woolworths’ range of herbs and spices and supplies into the “Presidents” range of Loblaws in Canada. Through their listing in this range the company gains a near automatic listing with other retailers. An international retailer recently commented that the Cape Herb and Spice Company’s “products are known as the best” in the world. The company is extensively certified to export into foreign markets with HACCP and British Retailers Consortium certifications amongst others. Only two farms in South Africa are sufficiently certified to supply the company with organic products. Innovative marketing that differentiates their products includes glass grinders and innovative/trendy names such as “Earth’s Energy” and “Spirit of Fire”. They also hold the worldwide rights for the manufacture (not distribution) of the Jamie Oliver-branded range of rubs, flavoured salts, and sugars. The majority of business is in the export market. Products are distributed globally, and destinations include the UK and Europe, the US, Canada, South America, Japan, New Zealand and Australia. The route into the international food market started at trade shows, an important part of the international food market. The Cape Herb & Spice Company still participates in these trade shows in order to open up new opportunities and markets. One of the most difficult and critical decisions for an exporter in the food sector is the choice of distributor. An open, partner-like relationship is best and the distributor needs to “believe in the product”. Foods of the World (Taste of Thailand and African Farm) The Taste of Thailand product range was developed in South Africa and Thailand and the business was officially established in KZN in 1998. Foods of the World was founded in 2003 and acquired a factory in Durban as well as the Taste of Thailand brand. It also acquired the rights to manufacture and distribute the African Farm brand. Taste of Thailand remains the biggest brand of Foods of the World. Foods of the World currently employs about 30 people. Foods of the World is owned by an international consortium and some of its products are manufactured in Thailand, although the majority of its 35 product range is manufactured in Durban, South Africa. Taste of Thailand sources some special ingredients and final products from Thailand (some products such as fish sauce and galangal are not available in South Africa) while the bulk of fresh produce is sourced locally, from chillies to lemon grass and coriander. Taste of Thailand, and even more so African Farm, operates a local buying policy with the aim of rural development of the local economy. Local farmers are contracted to supply fresh chillies such as Jalapeno and red Thai chillies. The policy of using fresh chillies in the production of all its sauces and other products differentiates it from other





manufacturers/processors. Other manufacturers and processors almost always use the dried product in the production of chilli related products such as sauces, purees, pastes, etc. Taste of Thailand produces a high quality Thai-themed range of sauces, purees, and curry pastes that is sold mainly locally, though also exported to Ireland and the UK. Other export destinations are Lebanon, Scandinavian countries, Germany, India, UAE, Kuwait, and various African countries. Locally, Taste of Thailand products are available in large supermarkets/retailers (such as Pick n Pay, Checkers, Spar) as well as smaller retailers. Taste of Thailand also supplies the food ingredients and manufacturing sectors. Internationally, Taste of Thailand markets its products through a distributor as well as the various international food trade shows such as ANUGA and SIAL. The majority of its business goes through speciality stores as it has insufficient capacity to supply the largest retailers. Its products are however listed in Tescos in Ireland. The African Farm brand has marketed itself in the past on its rural/sustainable development goals; however the international trend for “helping Africa” is declining. Current trends revolve around innovative products and creative packaging. Export performance has decreased markedly over the past few years as the Rand has weakened. Export volumes at the moment lie at approximately 6 containers per year – each container comprises approximately 36,000 bottles at a value of R150,000. Challenges in the international market include certification and a lack of trust in imported products following the Sudan Red scare. This means greater competition in the domestic market for sauces and similar products as imports become less expensive and exporters focus more on the domestic market. 10.3.4 Understanding the South African food retail distribution structure Overview The distribution of food products through the South African retail food sector supply chain is illustrated in the diagram below.

Convenience stores

Independent stores

Supermarkets

Exporters

Wholesalers, cooperatives

Domestic suppliers


Informal stores

Convenience stores

Independent stores

Supermarkets

Exporters

Wholesalers, cooperatives

Domestic suppliers


Informal stores

Source: South Africa Retail Food Sector Report, USDA FAS

Figure 10.14: South African retail food distribution sector for export products





Supermarkets and distributors are continuing to integrate their supply chains, enabling increased traceability of products. Therefore domestic producers are favoured, and about 90% of consumer ready products retailed in South Africa are sourced domestically. Approximately 40% of products bypass wholesalers, and are distributed directly from the manufacturer to the retailer81. This is because most of the major national retailers have their own distribution arms incorporating transport and warehousing facilities, for example, Spar has six distribution centres that service Spar retailers in the area. Spar is currently planning to expand its Western Cape and Eastern Cape distribution centres, following a 6,700m2 extension of its KwaZulu-Natal centre. Furthermore, major food companies may be involved in food distribution, such as the Premier Group, Foodcorp Ltd and the Tongaat Hulett Group. Wholesalers do however play an important role in the distribution of products to informal and independent retail outlets such as spaza shops, hawkers and cafes. 10.3.5 Challenges to entering the South African market and implications for KZN Supplying to South African chain stores poses a significant challenge, as retailers have strong links to existing suppliers. Furthermore, a large portion of products is sourced directly from manufacturers, therefore retailers prefer to source from manufacturers that can provide a broad range of products. This means that producers aiming to supply products to major retailers would most likely need to produce a range of sauces or spice mixtures that would contain flavours other than chilli based flavours. Delicatessens offer an opportunity to retail on a smaller scale and with more product focus, however there is strong competition from both domestic and imported manufacturers. The market for hot table sauces and lower end spice mixtures and curries appears to be fairly saturated, with a wide range of products and brands available. However, opportunities in the following areas may exist: Ñ Provision of sauces and mixtures based on chilli varieties Ñ Greater value added products, such as cooking sauces that offer a specific “meal

solution”, including: o Marinades o Pasta sauces o Curry sauces

Ñ Products that have an appealing story, which may be based on ethnicity and origin Ñ Innovative spice mixtures and curry blends with appealing packaging

81 Food price report, Competition Commission, 2004





11 Analysis of comparative advantages, opportunities, and threats PESTOLE analysis was used to analyse the policy, economic, social, technological, organisational, legislative and environmental issues in the overall environment that affect the chilli industry. Thereafter, a SWOT analysis, an analysis of the strengths, weaknesses, opportunities and threats of the KZN chilli sub-sector, was undertaken. 11.1 PESTOLE analysis 11.1.1 Policy environment The core domestic policies that affect agriculture include: Ñ Broad-Based Black Economic Empowerment Framework for Agriculture (AgriBEE) Ñ Land Redistribution for Agricultural Development (LRAD) programme Ñ Strategic Plan for South African Agriculture Within this policy environment, agriculture is undergoing transformation and emerging farmers are being assisted to develop to commercial standards of farming. Although emerging farmers are being granted access to land and are provided with technical support, they still face the challenge of a lack of skills, experience and finance, and the quality of their output is consequently lower than that of commercial farmers. Another element of domestic policy is the increased emphasis on value additional to agricultural products, resulting in growing support for agroprocessing activities. The international trade policy environment affects trade of agricultural products, with South Africa affected by: Ñ Regional arrangements of SACU and SADC Ñ Trade agreements including the Trade, Development and Co-operation Agreement

(TDCA) between the European Community and South Africa Ñ Planned trade agreements between the US and SACU, AGOA Ñ Planned preferential trade agreement between SACU and MERCOSUR Ñ Proposed free trade agreements between SACU and India, and SACU and China Ñ World Trade Organisation (WTO): Marrakesh Agreement, unresolved issues from Doha

Round (especially agricultural issues) With increasing regional integration through SADC, trade between South Africa and other Southern African countries may increase; therefore South Africa may face increased competition in agricultural goods, but also have easier access to the Southern African market. While South Africa enjoys preferential access to major world markets through trade agreements, and trade opportunities may be increased by planned trade agreements between South Africa and major economies, unresolved issues from the Doha Round of the WTO mean that South Africa faces strong price competition from countries in which agricultural production is subsidised. Furthermore, trade agreements with India, China, and MERCOSUR, mean that competition in the domestic market between South African produce and imports from countries such as India, China and Brazil will be more direct. In addition to trade agreements, the international policy environment is also affected by regulations and standards for exported agricultural goods and foods, including: Ñ Regulations around packaging – materials, labelling, traceability, recycling Ñ Food safety regulations internationally, including EurepGAP and HACCP These strict food safety and packaging standards hamper access to major markets, particularly the EU, which applies more stringent standards than the US.





11.1.2 Economic environment The South African economic climate is broadly characterised by the following: Ñ Increasing openness to neighbouring countries and regional markets, and other major

economies such as the EU and US Ñ Steady macroeconomic growth, increasing disposable incomes and a growing middle

class Ñ Current strength of the Rand that encourages imports Ñ Dual agricultural sector consisting of both well-established commercial farms and large

numbers of subsistence farmers Ñ Dual markets for the food processing and retailing sectors; i.e. low income earners that

purchase staple foods, and higher income earners who demand more diverse and sophisticated products

This macroeconomic environment means that South Africa has greater opportunities to access other markets, as well as a growing domestic market. However, South African producers are also facing increasing competition. The KZN macro-economy is characterised by: Ñ A high level of diversity of industrial activities Ñ Increasing importance of business and financial services Ñ Its role as a logistics gateway, through well developed transport and logistics

infrastructure Ñ Concentration of economic activity in Durban, Pietermaritzburg and Richards Bay Ñ A high level of income inequality Overall, the macro-economy offers a positive enabling environment, and is unlikely to inhibit the chilli sub-sector. Major economic considerations within the chilli value chain include the following: Ñ Fresh chillies are costly to transport relative to dried chillies, therefore the market for

fresh chillies is limited to those markets in close proximity to production Ñ Chillies are often grown speculatively as a cash crop, therefore leading to price

fluctuations and uncertainty in the market Ñ Furthermore, contractions in supply due to factors such as drought and contamination

lead to price fluctuations Ñ The market for dried and ground chillies is driven by colour and heat level Ñ Due to low costs for transporting dried chillies, producers in KZN are in direct

competition with low-priced Indian imports Ñ Markets for existing spice mixtures and sauces offerings are mature in developed

countries, and therefore new product development is needed to drive growth 11.1.3 Social environment Social trends that affect food purchasing include: Ñ Growing demand for organic products - this is more widespread in overseas markets,

however higher end retailers in South Africa are beginning to stock organic products Ñ Concerns about contaminants and artificial dyes, particularly following the Sudan Red

scare, mean that consumers are more conscious of health and food safety Ñ Growing demand for convenience foods amongst the general population and rapid

growth in ready-meals offered by higher end South African retailers Ñ This growth in convenience foods is driving demand for spices and sauces as

ingredients for industrial food production rather than as end consumer goods Ñ Growing demand for ethnic products in overseas markets, including Indian, Thai and

African foods, which is driving demand for spice mixtures, curries, ethnic sauces Ñ Large ethnic populations drive consumption of ethnic and spicy foods, such as the large

Indian community in KZN that creates high demand for chillies and chilli products





Social trends that affect the production of chilli products include the following: Ñ Community grower groups lack resources and therefore produce on a small scale, this

means that supply to larger processors or retailers is difficult and the logistics of sourcing chilli inputs from a number of smaller producers are costly to processors

Ñ Community growers lack skills and growing infrastructure, and therefore the quality of produce may be of a lower standard than that of commercial farmers

Ñ There is distrust for already mixed and blended spices amongst the Indian community, therefore mixing and blending is increasingly being done at home, which may inhibit new commercial recipe development

11.1.4 Technological environment Technology plays a role at various stages in the value chain and can increase yields, improve production processes, and decrease food safety risks. Uptake of available technology is often limited by financial constraints.

Growing Seed technology Ñ Seeds are developed and supplied by major seed companies such

as Starke Ayres, Hygrotech and Mayford Ñ Most commercial farmers plant hybrid varieties, which produce

higher yields and higher quality of fruit, and have a higher resistance to disease

Ñ New hybrids are developed and introduced to the market regularly Chemicals Ñ Use of chemicals increase the yield of chillies; chemicals used

include: o Herbicides o Insecticides o Fungicides o Adjuvants o Fertilisers

Irrigation Ñ Irrigation is mostly required for contract growing Ñ Preferred method is drip irrigation Ñ Chillies should receive about 600mm per season Ñ High installation costs – at least R12 000/ha

Harvesting Ñ Harvesting is highly labour-intensive Ñ In most countries, harvesting is done by hand, especially in

countries such as India and China in which labour is relatively cheaper

Ñ However some countries such as Australia have sought to develop methods whereby fruit may be harvested by machine

Ñ In South Africa, machine harvesting is not seen as favourable: o It is believed to damage plants o Machine harvesting does not distinguish between ripe and

unripe fruits Drying

Drying machines Ñ Drying machines can increase quality in humid conditions Ñ Drying machines can serve about 15 ha Ñ The use of drying machines is inhibited where 3 phase electricity is

not available in rural areas Ñ There are lower cost alternatives available that make use of solar

power, however these may not be sufficient in humid conditions Ñ Alternatively, coal and gas dryers can be developed

Further processing Milling

Ñ KZN has a large capacity for milling Ñ Milling may often be outsourced where a particular manufacturer

does not have sufficient capacity Ñ Furthermore, milling of chillies may often be outsourced as it





creates an unpleasant work environment Ñ Milling equipment can cost between R20,000 and R100,000,

depending on capacity and quality Oleoresin extraction

Ñ This is done through extraction using a solvent such as hexane Ñ Supply from approximately 500ha of paprika production is needed

to make an extraction plant viable Sauce production Ñ Can be done on a fairly small scale, e.g. home based industry Packaging

Ñ Glass bottles can be imported at a lower price than at which they are domestically available

Ñ Currently a wide range of packaging is used, depending on a the product’s quality and target market

Quality and colour testing Ñ Inspection of colour of dried pods done by eye Ñ A spectrophotometer is used to test a product’s colour Ñ Irradiation is used to remove bacteria and organisms Ñ Testing kits are available for testing for microbial activity, including

aflatoxins, and other substances and contaminants 11.1.5 Organisational environment The organisational environment includes the following roleplayers which could contribute to the development of the chilli industry. The following table shows the potential support which these organisations could offer:

Finance Technical Industry coordination

Skills development

Marketing and export assistance

Government KZN Department of Economic Development

P P

Municipalities P P

TIKZN P

National and Provincial Departments of Agriculture

P P P

Agricultural Research Council

P

AgriSETA P

National Agricultural Marketing Council (NAMC)

P

Standards South Africa P

CSIR Biosciences P

PPECB P P

Department of Health P

Industry NAFU P

Kwanalu P

Community growing groups (e.g. Spice Growers Association)

P

AgriSA P

SA Veg P P

Individual commercial entities

Retailer associations (e.g. SA Council of Retailers)

P





Finance Technical Industry coordination

Skills development

Marketing and export assistance

Food processor associations (e.g. SA Agricultural Processors Association)

P

FAWU P Development Finance Institutions

Land Bank P

IDC P

Ithala Development Corporation

P

DBSA P

Other Promoting Agribusiness Linkages (PAL) / South African International Business Linkages (SAIBL)

P

Universities and training colleges

P P

Agricultural training colleges (e.g. Cedara and Owen Sithole)

P

Durban Institute of Technology

P P

The most important organisations for development of the chilli value chain are the KZN Department of Agriculture, the KZN Department of Economic Development, DFIs such as Ithala Development Corporation, and industry participants including growing groups such as the KZN Spice Growers Association. The KZN Department of Agriculture’s main role in the chilli value chain is at the upstream end. The department provides technical support to farmers through its extension services. It also plays an important role in providing financial support for infrastructure such as irrigation and fencing for emerging farmers. The KZN Department of Economic Development has a wide mandate, which includes: Ñ Providing economic information Ñ Contributing to the formulation of economic policy and strategy Ñ Facilitating local economic development Ñ Promoting rural economic development Ñ Developing tourism as a key sector of the economy Ñ Facilitating an increase in trade between the province and other economic regions Ñ Promoting fixed investment into the province Ñ Promoting SMME development The KZN Department of Economic Development is well placed to facilitate supply linkages between various roleplayers in the chilli value chain, provide information to participants in the industry, and facilitate links between the chilli industry and organisations that provide technical and financial support. The KZN Spice Growers Association is a non-profit organisation, made up of more than 350 small-scale farmers in various areas in KZN, that plant about 100ha of chillies in total. The KZN Spice Growers Association is an important industry grouping which allows for





coordination of support to emerging farmers. The organisation provides support to farmers in terms of: Ñ Technical advice on growing Ñ Information on inputs and liaising with input suppliers, including nurseries and chemicals

companies Ñ Budget planning for growers Ñ Liaising with market and facilitating contract growing Ñ Coordinating transport of produce to market There is no shortage of institutions or mechanisms to provide assistance to the chilli sub-sector. However, stakeholders may find it difficult to navigate through this complex institutional landscape. Coordination of information and assistance is therefore important. The DED can play an important role in this regard. 11.1.6 Legislative environment Five main categories of legislation make up the legislative environment which affects agriculture and food processing directly or indirectly. Ñ Agricultural legislation generally deals with the production and marketing of agricultural

produce, research and product development, and quality control of agricultural produce. The Plant Breeders' Rights Act, 1976 (Act No 15 of 1976) which protects plant breeders’ rights as a form of intellectual property rights is of particular relevance to the production of chillies. The holder of plant breeders' rights has the sole right to produce, sell, import, export, etc. the propagating or harvested material in South Africa. Any party wishing to undertake the production or reproduction, sale or any other form of marketing of propagating material or harvested material must obtain authority by way of a licence from the holder of the plant breeders' rights. Peppadews, for example, are currently licensed to Peppadew International (Pty) Ltd under this act.

Ñ Access to land, security of tenure and administration of matters related to land fall under legislation relating to land. In particular, the Communal Land Rights Act, Land Reform Act and Restitution of Land Rights Act create access to agricultural opportunities for historically disadvantaged communities, many of which receive technical and monetary assistance to establish and improve their productive capabilities and are experimenting with crops such as chillies.

Ñ The principal aim of legislation relating to environment and water is the management and conservation of natural resources for long term and sustainable use. For example, regulations under the Environmental Conservation Act govern the conversion or rezoning of uncultivated land to agricultural use. The various acts and legislation could restrict the expansion of cultivated land in sensitive environmental areas.

Ñ Legislation relating to trade, finance and corporate entities relate to the structure of corporate entities, intellectual property and merchandise marks, international trade, and financing of the agricultural sector. For example, the Land and Agricultural Development Bank Act created a financing institution (Land Bank) geared to facilitate more equitable ownership of land and enhancement of productivity, profitability, investment and innovation in agricultural and rural financial systems.

Ñ Labour legislation sets basic conditions for employment, provides for the management of labour relations in general and specifically for agricultural labour.

A comprehensive list of the applicable legislation is provided in Appendix B. 11.1.7 Environmental considerations Environmental considerations affecting the production of chilli products include the following: Ñ Environmental determinants of agricultural potential

o Ongoing droughts and water shortages associated with climate changes may affect the quality of chilli crops and increase the need for irrigation





o Increasing humidity levels associated with climate change affect the efficiency of drying chillies and necessitate the use of drying machines

o Changes in microclimates may render areas currently suitable for production unsuitable

Ñ Concerns regarding environmental management and resource protection o Restrictions on the use of chemicals such as pesticides and fertilisers related to

environmental and human health concerns o Limitations to the expansion of agriculture in sensitive environmental areas with high

biodiversity 11.2 SWOT and gap analysis 11.2.1 Fresh chillies The SWOT analysis for fresh chillies is summarised in the following table.

Strengths Opportunities Ñ Well developed fresh produce markets,

especially the Durban market Ñ Local Indian community is a robust market with

a taste for hot foods and chillies in particular o Varieties consumed tend to be hotter than

other local markets (e.g. Gauteng) Ñ Winter growing and all-year harvesting is

possible in certain areas such as the Makhathini Flats

Ñ Possible production of organic chillies - demand likely to continue increasing

Ñ Greater development of cash crop growing o More informed timing of planting o Better awareness of varieties in demand

Ñ Contract growing – more lucrative and sustainable than cash crop growing o Opportunities for facilitation of contracting

Ñ Growing for processors requiring fresh rather than dried inputs – less competition from other countries

Ñ Growing and supplying of niche varieties – processors source smaller input amounts locally if available

Weaknesses Threats Ñ General climate disadvantages – high humidity,

inland frosts, inconsistent rainfall Ñ High labour costs

o Labour intensity of harvesting further increases costs

Ñ Growers lack market knowledge – poor decisions regarding planting times and varieties

Ñ Possible lack of long term commitment of farmers and cash crop approach to growing o Volatile prices on fresh markets further

discourage growing commitments Ñ Lack of irrigation infrastructure inhibits cash

crop growers and limits contract growing opportunities

Ñ Few benefits filter upstream (from processors to growers)

Ñ Increasing imports from neighbouring producers such as Mozambique

Ñ Possibility of increasing dominance of other provinces – closer proximity to main domestic markets

Ñ Foreign market standards and regulations for agricultural produce and products further down the value chain o Increasingly technical and complex

regulations could further inhibit the industry

Limited growth opportunities exist for KZN in the production of fresh chillies. High labour costs and unsuitable climate are disadvantages driving high production costs relative to the competition. Although there is growing activity currently, the sector is at a clear competitive disadvantage. As a result, high-impact interventions to expand or grow the sector will be costly. Small, niche opportunities could exist for the production of particular varieties, or organic chillies. Furthermore, niche opportunities may exist for the supply of fresh chillies to processors who use fresh inputs, although this appears to be uncommon. In addition, there are opportunities for the further development of cash crop growing overall through provision





of better market information. However, these opportunities do not represent significant growth potential. The lack of competitiveness in fresh chillies, in turn, negatively affects the competitiveness of activities further down the value chain where fresh chillies are a direct, or indirect, input. Therefore any interventions should be focussed on opportunities that would impact the entire value chain. 11.2.2 Dried/further processed chillies The SWOT analysis for the dried/further processed chillies category is summarised in the following table.

Strengths Opportunities Ñ Some advanced processing capacity already

exists, e.g. milling facilities Ñ Some established growing contracts for basic

processed products such as dried chillies

Ñ Further contracting for products of basic on-farm processing o Opportunities for facilitation of contracts

Ñ Value in more advanced processing systems on farms (e.g. drying machines)

Ñ Grouping growers for combined drying/milling o Capture more value for growers o Create economies of scale

Ñ Paprika markets – supply of dried/ground paprika for manufacture of oleoresins locally and internationally

Ñ Lack of trust in Asian imports post-Sudan Red scare

Ñ Trend of more imports from Asia in a whole dried form, due to quality concerns (local milling opportunity)

Weaknesses Threats Ñ Humid coastal climates

o Susceptibility to moulds and aflatoxins o Longer drying times and decreased quality

Ñ Lack of equipment and supporting infrastructure o Basic processing equipment such as drying

machines o Three phase electricity

Ñ Lack of basic growing infrastructure (such as irrigation) limits contract opportunities for on-farm basic processors (see SWOT for fresh chillies)

Ñ Lack of finance for equipment and infrastructure Ñ Growers do not consider dried prices as

justifying investment in drying machines for basic on-farm processing

Ñ Processing facilities generally located closer to growing sites – KZN at possible disadvantage

Ñ SA logistical disadvantage due to location for entrance into EU and US markets

Ñ Continued growth of Indian imports of dried chillies

Ñ Future regional processing capacity Ñ Shift of processing chillies to overseas markets,

due to lower cost of packaging and proximity to markets

The competitiveness and resultant opportunities at this level of the chilli value chain are closely related to the production and competitiveness of the fresh chillies category itself (discussed in the previous section). Growers perform the initial drying of chillies. Production of dried chillies is thus closely linked to the production of fresh chillies, where it has already been shown that KZN does not have a competitive advantage. In addition, whole dry chillies can be imported at a fraction of local prices. The use of drying machines would increase the quality of dried chilli production; however the cost (as shown in the PESTOLE analysis) and





lack of competitiveness upstream limits this opportunity. There is thus limited opportunity for the further development of dried chilli production. More advanced processing activities (such as milling) is potentially more competitive for KZN as the primary input would be whole dried chillies, which can be imported from more efficient producers such as India. With a growing trend towards importing whole, rather than milled/ground fruits (due to quality and safety concerns), milling activities and similar technologies are potentially an area to be developed. However, advanced processing activities such as milling are usually done in-house by processors of final products and as such the opportunity is difficult to target specifically, and realising the opportunity will be a challenge. Furthermore, the opportunity for exporting ground/milled chillies (more advanced processing) for KZN is limited due to the logistical disadvantages inherent in South Africa’s location. 11.2.3 Spice mixtures/curries The SWOT analysis for the spice mixtures/curries product category is summarised in the following table.

Strengths Opportunities Ñ Vibrant, developed local spice industry

o Many spice traders and spice works o Active home industry

Ñ Unique local recipes/flavours and skills (through the Indian community)

Ñ Some existing milling, mixing/blending capacity Ñ Capacity advantages for SA over other African

countries Ñ Trade linkages with UK and India through

Indian community

Ñ Further development and growth in exports of blends, mixtures, and curries o Niche opportunities for branded products in

foreign markets o Marketing of unique local flavours and

recipes Ñ Further brand development:

o African/Indian brand internationally o Durban/KZN brand for SA market

Ñ Wider trading linkages, relationships Weaknesses Threats

Ñ Currently low export penetration (although growing) and little experience in export markets

Ñ Lack of competitiveness further up value chain increases costs o High cost of locally produced chilli inputs

relative to imported product Ñ Local demand extremely seasonal – fasting

months and religious days, festivals

Ñ Difficulty of matching products to specific foreign tastes and preferences o Fast changing trends and tastes create

additional risks o Local flavours and recipes may be

unpalatable for foreign markets Ñ Exporting risks arising from use of distributors,

required scale, exchange rate fluctuations, etc. Ñ Risks of importing of inputs (e.g. dried chillies) –

global price shifts, exchange rate fluctuations, etc.

Ñ EU, US legislation and regulations on health, environment, safety, labelling, etc. o Changing policies and regulations, and

increasingly technical requirements could create risk for the processors

Production at the downstream end of the value chain (i.e. consumer products) typically adds more value than at the value chain’s upstream portion. Opportunities exist for the production of spice mixtures and/or curries for local and export markets. Niche successes, especially in the export market, could prove lucrative and thus there is a definite opportunity for the further development of production. Success would be brand and possibly taste/flavour driven. This part of the value chain is less reliant on the fresh and dried/further processed sectors upstream and as such is more competitive. Although niche opportunities exist, realising these opportunities will prove more challenging. Brand development of either an African/Indian brand or a Durban/KZN brand would require





the involvement of a multitude of stakeholders and effective leadership and initiative. Co-ordination of the marketing of the brand, as well as any changes to the strategy, is key to accessing this opportunity. 11.2.4 Sauces/pickles The SWOT analysis for the sauces/pickles product category is summarised in the following table.

Strengths Opportunities Ñ Some existing local sauce production capacity Ñ Some KZN and SA companies successful

globally in sauces production and export

Ñ Further development and growth in exports of hot sauces and cook-in sauces o Niche opportunities for branded products in

foreign markets (e.g. UK, Germany) Ñ Further development of convenience food and

ethnic foods for local and export market Ñ Production of sauce domestically to be bottled

at market Weaknesses Threats

Ñ Limited understanding of global markets Ñ Low levels of market penetration Ñ Limited scale of production currently – local

market is relatively small Ñ Lack of competitiveness further up value chain

increases costs o High cost of locally produced chilli inputs

relative to imported product Ñ Limited recipe development, lack of

professional development of flavours/recipes Ñ Weight of pickles – higher freight costs a barrier

to export

Ñ Difficulty matching products to specific foreign tastes and preferences o Fast changing trends and tastes create

additional risks o Local flavours and recipes may be

unpalatable for foreign markets Ñ Exporting risks – distributors, required scale,

currency value, etc. Ñ Importing of inputs (e.g. dried chillies) risks –

global price shifts, currency value changes, etc. o Increased costs of packaging (e.g. locally

produced bottles) can raise prices significantly

Ñ EU, US legislation and regulations on health, environment, safety, labelling, etc. o Changing policies and regulations, and

increasingly technical requirements could create risk for the processors (e.g. more stringent traceability regulations)

Production of final consumer products such as sauces and pickles captures more value than activities further upstream. The production of sauces is less reliant on activities higher up the value chain and as such is potentially more competitive. There are opportunities for the development of niche, branded sauces, especially for the export market. While the scale of the opportunity is limited by the relatively low volumes at which products such as hot sauces are sold, scale of production does not appear to be critical factor for competitiveness and thus opportunities exist for home-based industries. Pickles, however, require fresh chilli inputs and are thus less likely to be competitive, especially on the global markets, due to the lack of competitiveness in the production of fresh chillies. Opportunities here are small. Once again, accessing this opportunity (for sauces) will be challenging, although the opportunity itself is significant. 11.3 Conclusions from the SWOT The SWOT analysis shows that the broad chilli sector is generally a low-opportunity sector for KZN. The chilli value chain’s upstream activities are economically unattractive, while





some niche opportunities downstream are more evident. The downstream markets potentially offer more value. The lack of competitiveness in the production of fresh chillies in turn negatively affects the competitiveness of downstream industries. Processors that are less reliant on the upstream side of the KZN chilli value chain are likely to be more competitive. The SWOT analysis suggests that the KZN DED focuses its development initiatives and interventions on the chilli value chain’s downstream activities, concentrating on processing and the production of final consumer products. The SWOT analysis revealed the following specific assessments of opportunity in each product category of the value chain: Ñ Fresh chillies

o Limited opportunity for growth due to high production costs and strong competition (although some small niche opportunities may exist in particular varieties and organic production)

Ñ Dried/further processed o Limited opportunity due to reliance on uncompetitive fresh chillies production, and

difficulty in accessing opportunities for more advanced processes such as milling Ñ Curries/spice mixtures

o Niche opportunities for curries and spice mixtures, in particular through a branding approach – African/Indian brand globally, and Durban/KZN brand for South Africa

Ñ Sauces/pickles o Niche opportunities for the production of branded hot table sauces, and cook-in

sauces o Limited opportunity for pickles due to reliance on uncompetitive fresh chillies

production and transport costs involved in exporting





Appendix A: Interviews 1. Mr Ahmed, Atlas Trading 2. Danie Barnard, Lelieshoek 3. Kevin Berndt, Skye Seedlings 4. Gilbert Bouizar, Unifine Sauces and Spices (Netherlands) 5. Ferdi Brecher, Meijershoek 6. Riaan Breedt, South African International Business Linkages/Promoting Agribusiness

Linkages 7. Dave Caras, Woolworths 8. Giles Chaplin, Foods of the World 9. Gareth Chittenden, Zululand Nurseries 10. Dawood Chohan, Allifa Spice Works 11. Bruce Colepeper, Mayford Seeds / McDonalds Seeds 12. Hupert de Haas, Nairn 13. Herman Deckers, Empangeni Bird Farm 14. Hetthau Desai, agent at the Johannesburg Fresh Produce Market 15. Sandeep Desai, Unilever 16. David Dlamini, KZN Spice Growers Association 17. Mike Driver, Hojem and Driver Estate 18. Brian du Plessis, Keiskammashoek paprika project 19. Jim Farrell, Delta Crown Fooks & French 20. Fruit and Veg City (Warehouse) 21. Mr Gwala, Mthonsi Divine 22. Chris Hansman 23. EP Hoon, Hoon Trust Farm 24. Peter Horner 25. Hygrotech 26. Estia Joubert, Agricultural Research Council 27. Floris Kotze, Hygrotech 28. Leon Krauze, Watersmeet Nursery 29. Dave Launder, Sutherland Seedlings 30. Dave Lawry, Laughing Pumpkin 31. Dr Robin Learmonth, Biosys 32. Brendan Longhurst, South African International Business Linkages/Promoting

Agribusiness Linkages 33. Meyer’s Nursery 34. Nick Midgley, Cape Herbs and Spices Company 35. Saschen Naidoo, Pride of Durban 36. Rob Osborne, KZN Department of Agriculture 37. Phil Ovens, Peppadew 38. Richard Parker, Top Crop 39. Herman Pheiffer, Crown National/Continental Spiceworks 40. Kiru Pillay, Starke Ayres 41. Terry Schefferman, Pietermaritzburg Fresh Produce Market 42. James Seymour, KZN Tourism 43. Dale Shipman, Natpro Spicenet 44. Rob Stock, Segoma Farm 45. Mariette Strydom, National Department of Agriculture 46. Ian Sumner, Sunshine Seedlings 47. Chris Thorpe, Nando’s 48. Marianne van der Laarse, SA Veg 49. Ewald Viljoen, Newlands Mashu Permaculture Learning Centre 50. Gerhard Weber, European Spice Association 51. Maudi Welken, Die Hoek Nursery 52. Piers Whitwell, KZN Department of Agriculture



KZN DED – Chilli value chain analysis Step 2-4 – 8 March 2006


Appendix B: Scenario analysis Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7

LAND AREA 0.25ha 0.5ha 0.75ha 1ha 2ha 3ha 4ha PRODUCTION Number of plants (30,000/ha) 7,500 15,000 22,506 30,000 60,000 90,000 120,000 Total output (kg) - Green Chillies 3,375 6,750 10,128 13,500 27,000 40,500 54,000 Total output (kg) - Dry Chillies 850 1,700 3,400 4,250 8,500 12,750 17,000 PRODUCTION COSTS Variable operational costs 2,001 2,668 5,336 8,000 16,000 24,000 32,000 Fixed Costs 1,875 1,250 1,668 2,500 5,000 7,500 10,000 Transaction Costs 581 588 1,051 1,575 3,150 4,725 6,300 VAT Cost 543 549 980 1,470 2,940 4,410 5,880 Gross costs 5,000 5,054 9,035 13,545 27,090 40,635 54,180

PROFITS – GREEN CHILLIES Price/kg (Green) 4.50 4.50 4.50 4.50 4.50 4.50 4.50 Gross Income 15,188 30,375 45,574 60,750 121,500 182,250 243,000 Net Profit 10,187 25,321 36,539 47,205 94,410 141,615 188,820 Manager's Fee + Interest on VC 1,770 3,540 7,306 7,081 14,162 21,242 28,323 Net margin- Green 8,417 21,780 29,233 40,124 80,249 120,373 160,497

PROFITS – DRY CHILLIES Price/kg (Dry) 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Gross Income 8,500 17,000 34,000 42,500 85,000 127,500 170,000 Net Profit 3,500 11,946 24,965 28,955 57,910 86,865 115,820 Manager's Fee + Interest on VC 1,770 3,540 7,306 7,081 14,162 21,242 28,323 Net margin – Dry 1,730 8,406 17,659 21,874 43,748 65,623 87,497

ASSUMPTIONS Ñ Farrow Irrigation and no electricity costs Ñ No equipment or capital costs repayment Ñ All practices are contracted out; no insurance and no profit tax Ñ Plant own seedlings from hybrid seed (Thai, Skyline and Serrano. Indigenous African Bird's Eye seed is also planted via seedlings)





Appendix C: Standards, regulations and guidelines World Health Organisation The World Health Organization (WHO) sets up a global standard for herbs and spices, which require the following: Ñ General inspection on the identity of certain herbs & spices at macroscopic and

microscopic levels Ñ Inspection for any foreign substances or materials that could be accidentally mixed with

the products Ñ Inspection on major chemical elements or solutions used to extract the core ingredients

of herbal medicine, i.e. alcohol / water extractive solution Ñ Inspection on moisture retained-evaporated ratio, or the drying loss, after the drying

process. The evaporated moisture must not exceed the stated ratio. Ñ Inspection on the ash content in order to identify and match it with the original herb. This

process could also filter out such foreign substances as soil and pebbles. Ñ Inspection for any insecticides, metallic chips, or chemical elements that may be mixed

in with the product Ñ Inspection for contamination and other unclean substances European Union Phytosanitary Certificate Ñ The phytosanitary certificate is required for imported plants and agricultural product.

Canned goods and frozen food are exempted. Ñ Every plant and agricultural product that falls under the EU Plant Passport list must be

accompanied by a phytosanitary certificate. The European Spice Association sets out quality minima requirements for spices imported into the EU, which buyers of spices should demand, and offers guidelines for the following: Ñ Chemical and physical analysis Ñ Contaminants/residues Ñ Purity Ñ Sensory properties Ñ Packaging Ñ Traceability The European Spice Association also provides advice to importers to minimise the risk of importing spices coloured with non-permitted dyes. This includes the following: Assessment of risk where materials are imported from the point of origin, done on a positive release system, based on: Ñ Country of origin of the product Ñ Nature of the material (e.g. whole, ground or crushed) Ñ Type of spice Ñ Supplier selection and approval:

o Raw material control o History of supply o Capability of meeting EU legislative requirements o Adherence to Good Manufacturing Practice (GMP) o Adherence to HACCP principles o Traceability o Third party certification o Testing capabilities and accreditation to ISO17025





Sampling where this is deemed necessary following the assessment of risk: Ñ For each supplier batch received, the square root of the number of packing units (e.g.

box or bag) delivered should be randomly sampled, up to a maximum of 10 sub-samples. If the delivery is of less than 5 packaging units, all of them should be sampled. Each sample should consist of a minimum of 100ml or 100g. The samples should be combined and well mixed to produce a composite sample for analysis and be regarded as representative of the supplier batch from which they came.

Ñ A retained sample should be kept for the shelf life of the product. This sample must be representative of the whole batch, must be adequately labelled to identify the batch from which it was drawn, and stored in such a manner as to protect its integrity.

Ñ If materials are accepted from approved suppliers under a certificate of analysis, it is recommended for due diligence purposes that a level of surveillance testing commensurate with the outcome of the risk assessment and available historical data be undertaken. This need not follow the above sampling plan.

Analysis: Ñ Analytical methodology to cover the list of non-permitted colourants is currently under

development Actions to be taken in the case of non-conforming materials are as follows: Ñ Any non-conforming materials must be clearly labelled, segregated and accounted for Ñ The supplier should be informed Ñ The relevant regulatory authorities must be notified Ñ The affected materials should be disposed of appropriately, taking into account any

potential insurance requirements Ñ Disposal methods should be according to the local authority, and a certificate of disposal

should be retained List of non-permitted colours found in spices since 2003: Ñ Butter Yellow Ñ Orange II Ñ Para Red Ñ Rhodamine B Ñ Sudan I Ñ Sudan II Ñ Sudan III Ñ Sudan IV Ñ Sudan Orange G Ñ Sudan Red B





Appendix D: Map of the UK with distribution of Indian population



KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006


Appendix E: Price points for chilli-based products in selected UK retailers

Retailer Product and brand Country of

origin (where available)

Unit size UK retail price (£)

R equivalent

@ exchange

rate of £1:R11.2

Estimated required

landed price, based on total mark-ups by

retailer & importer/

distributor of 54%

Comments on chilli content (where available)

Hot table sauces/dressings – major retailers

Chilli Sauce, HP UK 415g £1.39 R 15.57 R 10.11

Chilli Top Down Sauce, Heinz US/UK 570g £1.39 R 15.57 R 10.11

Thai Sweet Chilli Sauce, Encona UK branch 142ml £0.89 R 9.97 R 6.47

Thai Chilli Sauce, Amoy

Hong Kong, UK marketing co. 150ml £0.89 R 9.97 R 6.47 40% chilli

Thai Chilli Dipping Sauce (own label) UK 150ml £0.99 R 11.09 R 7.20

Thai Chilli Sauce, Sharwoods Malaysia 150ml £1.05 R 11.76 R 7.64 Contains chilli puree and paprika extract

Sainsbury’s

Sundried Tomato & Paprika Dressing, Own label, "Be Good To Yourself" Range UK 245g £0.89 R 9.97 R 6.47 Smoked Paprika (0.3%)

Hot Pepper Sauce, Encona UK 142ml glass bottle £0.95 R 10.64 R 6.91

Hot Peri-Peri Sauce, Nando’s South Africa 125ml glass bottle £1.45 R 16.24 R 10.55

Contains Cayenne Pepper, Paprika, Serrano Chillies, African Birds Eye Chillies

Pepper Sauce, Tabasco US 57ml glass bottle £1.39 R 15.57 R 10.11

Waitrose

Chilli Sauce, WTR Cook's Ingredients UK

155g glass bottle £1.39 R 15.57 R 10.11

Tesco Hot Salsa, Old El Paso

EU, UK distributor

226g glass jar £1.48 R 16.58 R 10.76








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Chilli Sauce Hot, Uncle Ben's US 500g glass jar £1.43 R 16.02 R 10.40

Chilli Sauce with garlic, Maggi UK 305g £1.09 R 12.21 R 7.93

Masala Chilli Sauce, Maggi UK 400g £1.09 R 12.21 R 7.93

Red pepper Sauce, Tabasco US 150ml glass bottle £2.99 R 33.49 R 21.75

Jamaican Style Hot Sauce, Dunns River US 85ml bottle £0.59 R 6.61 R 4.29

Hot Pepper Sauce Cajun Style, Encona UK

142ml glass bottle £0.89 R 9.97 R 6.47

West Indian Hot Papaya Sauce, Encona UK

142ml glass bottle £0.75 R 8.40 R 5.45

Jerk Seasoning, Walkers Wood US 280g £1.89 R 21.17 R 13.75

Jonkanoo Pepper Sauce, Walkers Wood US 150ml £0.85 R 9.52 R 6.18

Thai Sweet Chilli Dipping Sauce, Blue Dragon Far East 190ml £0.75 R 8.40 R 5.45

Red pepper Sauce, Tabasco, G Costa US 60ml £1.68 R 18.82 R 12.22

Asda

Chilli Sauce, HP UK 415g £1.33 R 14.90 R 9.67








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Curry Sauce, HP UK 415g £1.33 R 14.90 R 9.67

Sweet Thai Chilli Sauce, HP UK 415g £1.33 R 14.90 R 9.67

Hot Peri-Peri Sauce, Nando’s South Africa 135g glass bottle £1.42 R 15.90 R 10.33

Chilli & Garlic Sauce, Lea & Perrin's Cook's Helper 150ml £1.45 R 16.24 R 10.55

Hot table sauces/dressings - speciality/delicatessen independents Louisiana Hot Pepper Sauce, Crystal US 355ml £1.95 R 21.84 R 14.18

Thai Sweet Chilli Sauce, Encona UK 142ml glass bottle £1.45 R 16.24 R 10.55

Chilli & Garlic Sauce, Lea & Perrin's Cook's Helper 150ml £1.05 R 11.76 R 7.64 Ginger chilli sauce, Linghams Malaysia 280ml bottle £1.85 R 20.72 R 13.45 Peri-peri sauce, Steers South Africa 375ml £2.35 R 26.32 R 17.09 Sambal oelek, Conimex 200g £2.05 R 22.96 R 14.91 Chilli sauce, Spiracha Thailand 740ml £2.35 R 26.32 R 17.09 Tabasco US 60ml £1.75 R 19.60 R 12.73

Hot Barbados pepper sauce (yellow), Windmill Caribbean 480ml £2.45 R 27.44 R 17.82 Hot Chilli Sauce, Yeos Malaysia 375ml £1.85 R 20.72 R 13.45

Insanity Sauce (very hot), Dave's Gourmet 142ml £4.99 R 55.89 R 36.29 Hot Sauce, Who Dares Burn 148ml £4.99 R 55.89 R 36.29

Wally's Delicatessen,

Cardiff

Scotch Bonnet Sauce, Scorchin' 118ml £2.60 R 29.12 R 18.91








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Tongues of Fire, Hot Headz 148ml £3.00 R 33.60 R 21.82 Pyromania, Hot Headz 148ml £4.00 R 44.80 R 29.09 Cajun hot sauce (with mustard), Encona UK 142ml £0.95 R 10.64 R 6.91 Original hot sauce, Crystal US 177ml £0.85 R 9.52 R 6.18 Big Top Fantasy, Pepper Girl 147ml £3.75 R 42.00 R 27.27 Hot sauce, Pickapeppa Jamaica 889ml £1.50 R 16.80 R 10.91 Hot Sauce (habanero, serrano, chipotle, jalapeno), California chile co. US 148ml £3.00 R 33.60 R 21.82

Green devil (jalapeno & apple), Chile Man Sauces 250ml £3.50 R 39.20 R 25.45 Chilli pepper relish, Kari Mix 185g £2.20 R 24.64 R 16.00

Lupe Pinto's

Hot jerk seasoning (Caribbean), Dunn's River Jamaica R 0.00 R 0.00

Spiced up extra tomato sauce, Pollen Organics 250ml £2.99 R 33.49 R 21.75

Tabasco US 57ml glass bottle £1.59 R 17.81 R 11.56

Food Ferry

Thai Sweet Chilli Dipping Sauce, Blue Dragon Far East 190ml £1.45 R 16.24 R 10.55

Cooking/stir-in sauces – major retailers

Arrabiata Stir-In Sauce, Own Label- Be Good to Yourself Range UK 150g bottle £3.00 R 33.60 R 21.82 Creamy Curry Cooking Sauce, Own Label- Be Good to Yourself Range UK 500g jar £1.29 R 14.45 R 9.38

Sainsbury’s

Chilli Con Carne Cooking Sauce - Own Label- Be Good to Yourself Range UK 500g jar £1.29 R 14.45 R 9.38








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Mexican Cooking Sauce -Own Label- Be Good to Yourself Range UK 500g jar £1.29 R 14.45 R 9.38 Cook in Chilli Sauce, Homepride UK 500g jar £1.35 R 15.12 R 9.82

Madras Sauce, Loyd Grossman UK 425g jar £1.99 R 22.29 R 14.47 Rogan Gosh Sauce, Loyd Grossman UK 425g jar £1.99 R 22.29 R 14.47

Keralan Cashew Chilli Masala, Patak UK 425g jar £1.99 R 22.29 R 14.47

Includes both curry paste and red chillies (0.2%)

Mexican Sauce, Discovery UK 360g jar £1.59 R 17.81 R 11.56 includes both curry paste and red chillies

Texan Fajitas Seasoning & Sauce, Discovery UK 360g jar £1.79 R 20.05 R 13.02

Contains both paprika extract (as colourant) and dried crushed chilli

Hot Peri-Peri Cooking Sauce, Nando’s South Africa 125ml £1.43 R 16.02 R 10.40

Includes 5% jalapeno chillies, as well as dried chilli and paprika

Spicy Durban Curry Cooking Sauce, Something South African South Africa

500g vacuum sachet £1.49 R 16.69 R 10.84 Contains dried chilli

Arrabiata Stir-In Sauce, Own Label UK 350g plastic pot £1.99 R 22.29 R 14.47

Contains bird's eye chilli, cayenne pepper, serrano chillies and paprika

Jalfrezi Cooking Sauce, The Curry Sauce Co. UK

475g plastic pot £2.99 R 33.49 R 21.75

Waitrose

Thai Green Curry Cooking Sauce, The Curry Sauce Co.

475g plastic pot £2.99 R 33.49 R 21.75 0.4% red chilli

Spice & Stir Jalfrezi, Geetas 350g £1.29 R 14.45 R 9.38

Contains red and green jalapeno peppers - dried and pureed

Tesco

Balti Sauce, Loyd Grossman UK 425g jar £1.96 R 21.95 R 14.25 Contains green chillies








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Madras Sauce, Loyd Grossman UK 425g jar £1.96 R 21.95 R 14.25

Jalfrezi Cooking Sauce, Patak’s UK 540g glass jar £1.40 R 15.68 R 10.18

Madras Curry Sauce, Patak’s UK 540g jar £1.99 R 22.29 R 14.47

Vindaloo Tomato & Chilli Cooking Sauce, Patak’s UK 540g jar £1.40 R 15.68 R 10.18

Spicy Tikka Masala Medium Hot Sauce, Sharwoods 420g £1.38 R 15.46 R 10.04

Jalfrezi Piri Piri Sauce, Own Label - "Finest" Range UK

350g glass jar £1.49 R 16.69 R 10.84

Chilli powder (3%) and paprika extract

Two Step Fajitas Sauce, Discovery UK 370g £1.74 R 19.49 R 12.65

Two Step Season & Sauce Cajun Chicken, Discovery UK 370g £1.74 R 19.49 R 12.65 Chilli Cook in Sauce, Homepride UK 500g £1.35 R 15.12 R 9.82 Red Thai Curry Sauce, Loyd Grossman UK 350g £1.60 R 17.92 R 11.64

Sweet Chilli & Lemon Grass Stir-fry Sauce (Thai) Loyd Grossman UK 195g £1.28 R 14.34 R 9.31

Sweet Chilli & Pepper Sauce (Thai) Sharwoods

425g glass jar £1.48 R 16.58 R 10.76

Red Thai Curry Sauce, own label, "Finest" range UK

350g glass jar £1.49 R 16.69 R 10.84

Chillies (2%), paprika extract as a colourant, kibbled chilli (0.5%)

Chilli con Carne dry mix - Colmans 45g packet £0.64 R 7.17 R 4.65 Jalfrezi Cooking Sauce, own label UK 750g jar £0.85 R 9.52 R 6.18

Sizzle and stir - bhuna sauce, Chicken Tonight UK 460g jar £1.28 R 14.34 R 9.31

Asda

Concentrated hot Madras curry sauce, Patak's UK 283g can £0.71 R 7.95 R 5.16








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Balti cooking Sauce, Shere Khan 425g jar £1.58 R 17.70 R 11.49

Texmex cooking Sauce, Hot Chilli -Own Label UK 570g jar £0.98 R 10.98 R 7.13 Two step chilli sauce, Discovery UK 370g £1.74 R 19.49 R 12.65

Hot thick salsa sauce, Old El Paso US 226g glass jar £1.48 R 16.58 R 10.76

Hot Chilli Sauce, Uncle Ben's US 500g glass jar £1.43 R 16.02 R 10.40

Cooking/stir-in sauces - speciality/delicatessen independents Madras Cooking Sauce, Patak's UK 283g can £1.15 R 12.88 R 8.36 Madras Curry Sauce, Veeraswamy's 390g £1.85 R 20.72 R 13.45


Cardiff Hara Masala Sauce, Geeta's 190g £1.60 R 17.92 R 11.64 Hot enchilada sauce Mexico 283g £1.80 R 20.16 R 13.09 Red jalapeno salsa Mexico 465g £3.20 R 35.84 R 23.27 Lupe Pinto's

Chilli con carne Sauce, Discovery 370g jar £2.29 R 25.65 R 16.65 Food Ferry

Texan Salsa Sauce, Discovery 370g jar £1.95 R 21.84 R 14.18 Curries & mixtures (dry and pastes) – major retailers

Vindaloo Paste, Patak's UK 283g jar £1.49 R 16.69 R 10.84 Jalfrezi Paste, Patak's UK 283g jar £1.49 R 16.69 R 10.84 Rogan Gosh Paste, Patak's UK 283g jar £1.49 R 16.69 R 10.84 5% chilli Madras Paste, Patak's UK 283g jar £1.49 R 16.69 R 10.84 Contains paprika Stir it up Mexican Fajita - Knorr UK 80g plastic £1.16 R 12.99 R 8.44 Contains paprika

Sainsbury's

Chilli Seasoning Mix, Old El Paso EU, UK distributor 39g £0.79 R 8.85 R 5.75 Chilli, hot

Waitrose Harissa paste, Bart Spices UK Company 82g glass jar £1.49 R 16.69 R 10.84 Contains paprika and chilli








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Indian Curry Powder, Sharwoods UK Company 113g glass jar £1.15 R 12.88 R 8.36

Contains paprika, chilli powder (5%) and cayenne pepper

Madras Curry Paste, Patak's UK 283g glass jar £1.40 R 15.68 R 10.18

3.9% chilli pepper, also includes cayenne

Texan Fajitas Seasoning, Discovery UK 30g packet £0.73 R 8.18 R 5.31 Includes paprika and chilli Cajun Seasoning, Schwartz 44g jar £1.34 R 15.01 R 9.75 Hot Curry Powder, Schwartz 85g cylinder £0.99 R 11.09 R 7.20 R 0.00 R 0.00

Big Value Hot Chilli Powder Drum, Schwartz 85g cylinder £1.92 R 21.50 R 13.96 Jamaican Jerk Seasoning, Schwartz 51g jar £1.34 R 15.01 R 9.75 Piri-piri chicken grill & sizzle, Schwartz 39g jar £1.34 R 15.01 R 9.75 Balti curry powder, own label 80g £0.55 R 6.16 R 4.00 Gondal Chilli powder, Fudco 1kg £2.99 R 33.49 R 21.75 Quick Curry Paste, Patak’s UK 283g jar £1.40 R 15.68 R 10.18

Caribbean Everyday Seasoning, Dunns River US

100g cylinder £0.89 R 9.97 R 6.47

Tesco

Hot & Spicy Chicken Fry Mix (Caribbean), Tropics 300g £1.99 R 22.29 R 14.47 Cajun Seasoning, own label UK 35g sachet £0.59 R 6.61 R 4.29 Cajun Seasoning, own label UK 92g £0.94 R 10.53 R 6.84 Thai Stir Fry Paste, Bart Spices 90g £1.37 R 15.34 R 9.96

Fire eater grinder, fresh seasoning, Fiddes Payne 46g £1.88 R 21.06 R 13.67

Asda

Cajun rub - Fiddes Payne 70g £1.68 R 18.82 R 12.22








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Madras Curry Powder, Rajah 100g sachet £0.44 R 4.93 R 3.20

Big Value Hot Chilli Powder Drum, Schwartz 85g cylinder £1.92 R 21.50 R 13.96 Hot Curry Powder drum, Schwartz 85g cylinder £0.99 R 11.09 R 7.20

Curries & mixtures (dry and pastes) - speciality/delicatessen independents Extra hot curry paste, Patak's UK 283g jar £1.75 R 19.60 R 12.73 Vindaloo Paste, Ferns 380g jar £1.85 R 20.72 R 13.45

Vindaloo Curry Concentrate, Tiger Tiger

408g plastic tub £2.05 R 22.96 R 14.91

Asian special curry powder, own label 125g packet £0.80 R 8.96 R 5.82 Original hot chilli powder, Bolsts 425g tin £3.85 R 43.12 R 28.00 Cajun spice mixture, own label 125g packet £0.95 R 10.64 R 6.91


Cardiff

Smoked cajun seasoning, Dunns River 80g drum £1.20 R 13.44 R 8.73 Chile seasoning Mexico 28g £0.75 R 8.40 R 5.45

Hot jerk seasoning (Caribbean), Dunn's River 500g £0.75 R 8.40 R 5.45

Caribbean Hot Curry Powder, Dunns River 100g £1.00 R 11.20 R 7.27

Lupe Pinto's

West Indian Curry Paste, Walkerswood 150ml £1.40 R 15.68 R 10.18

Food Ferry New Mexico Red Powder Mexico 60g packet 2.75 R 30.80 R 20.00 Other – major retailers

Sliced Jalapenos, pickled, Discovery Foods UK 200g jar £1.09 R 12.21 R 7.93

Sainsbury's

Jalapenos, pickled, Old El Paso EU, UK distributor 215g jar £1.29 R 14.45 R 9.38








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Enchilada meal kit (corn tortillas, spice mix, tomato sauce), Old El Paso

EU, UK distributor 620g box £2.79 R 31.25 R 20.29

Sweet peppers, Peppadew South Africa 375g jar £2.19 R 24.53 R 15.93

Ready meals - Chilli Con Carne, own label UK 550g carton £2.99 R 33.49 R 21.75

Spice mix includes rusk, salt, spices (chili powder, paprika, cayenne pepper, cumin, black pepper), brown sugar, onion powder, garlic powder, anti-caking agent: E551, paprika - extract, herb.

Ready meals - chicken fajitas, own label UK 550g carton £3.99 R 44.69 R 29.02

Fresh hot chilli, Bart Spices UK Company 95g glass jar £1.39 R 15.57 R 10.11 includes jalapeno and chipotle chillies

Chopped chilli WTR Cooks ingredients UK

180g glass jar £1.69 R 18.93 R 12.29

Contains jalapeno chillies, chilli sauce and paprika extract

Piri piri chillies in brine WTR Cooks ingredients UK

130g glass jar £1.05 R 11.76 R 7.64

Red chillies, including seeds, in sunflower oil

Sliced Jalapenos, pickled, Discovery Foods UK 200g jar £1.29 R 14.45 R 9.38

Waitrose

Basque Hot Peppers, Rioverde 300g jar £1.09 R 12.21 R 7.93

Sliced Red Jalapenos, pickled, Discovery Foods UK 200g jar £1.18 R 13.22 R 8.58 Enchilada meal kit (corn tortillas, spice mix, tomato sauce), Old El Paso

EU, UK distributor 620g box £2.65 R 29.68 R 19.27

Tesco

Red chillies, English Provender Very Lazy 190g £1.78 R 19.94 R 12.95








R equivalent

@ exchange

rate of £1:R11.2

Estimated required



distributor of 54%


Crushed red chilli, Bart Spices UK 190g £1.79 R 20.05 R 13.02

Fresh hot chilli, Bart Spices UK 95g glass jar £1.25 R 14.00 R 9.09 Asda Organic paprika, Bart Spices UK 42g box £1.48 R 16.58 R 10.76

Other - speciality/delicatessen independents Merchant Gourmet

Pepperdillo's - sweet chilli peppers (pickled)

Southern Africa 420g jar £2.19 R 24.53 R 15.93

Jalapenos, pickled Mexico 200g jar £1.59 R 17.81 R 11.56 Chipotle dried chillies Mexico 60g packet £2.75 R 30.80 R 20.00 Food Ferry Sliced Jalapeno peppers, pickled, Mezzetta 473ml £2.55 R 28.56 R 18.55 Chilli Oil, Chiu Chow China 207ml jar £2.25 R 25.20 R 16.36 Chilli Pickle, Patak's UK 283ml £1.85 R 20.72 R 13.45

Extra hot curry chilli powder 100g packet £0.85 R 9.52 R 6.18


Cardiff

Crushed hot red chillies 100g packet £0.95 R 10.64 R 6.91

Dried chillies - ancho, pasilla, guajillo, chipotle, habanero Mexico 60g packet £2.85 R 31.92 R 20.73 Powdered chillies Mexico 80g packet £2.85 R 31.92 R 20.73 Pickled chillies - diced Mexico 113g £1.00 R 11.20 R 7.27 Whole pickled jalapenos hot Mexico 326g £1.90 R 21.28 R 13.82

Lupe Pinto's

Whole serrano peppers Mexico 312g £1.75 R 19.60 R 12.73





Appendix F: Price points for chilli-based products in selected German retailers



Unit size German retail price (€)

R equivalent @ exchange

rate of €1:R7.85

Estimated required landed price, based on total mark-ups by retailer &

importer/ distributor of

56%

Comments on chilli content (where

available)

Hot table sauces/dressings

Knorr Schlemmersauce – Chili 250ml bottle €1.09 R8.56 R5.49

Knorr Schlemmersauce - Curry 250ml bottle €1.09 R8.56 R5.49

Fuego Hot Pepper Sauce 85ml bottle €1.59 R12.48 R8

Fuego Salsa Dip – mild, pikanter Tomaten-Dip 100ml jar €2.49 R19.55 R12.53

Fuego Salsa Dip – mild, scharfer Tomaten-Dip 100ml jar €2.49 R19.55 R12.53

Tengelmann

Werder Tomaten-Gewurz-ketchup 450ml bottle €1.09 R8.56 R5.49 Cooking/stir-in sauces

Maggi Fix fur Chili con Carne 88g sachet €0.69 R5.42 R3.47

Fuego Taco Sauce scharfe Wurzsauce 200ml jar €1.79 R 14.05 R9.01

Fuego Taco Sauce milde Wurzsauce 200ml jar €1.79 R14.05 R9.01

Fuego Fajita Sauce 200ml jar €2.09 R16.41 R10.52

Tengelmann

Barilla Arrabbiata sauce 400g glass bottle €1.99 R15.62 R10.01 Curries & mixtures

Tengelmann Fuchs Curry 90g sachet €2.69 R21.12 R13.54







Unit size German retail price (€)

R equivalent @ exchange

rate of €1:R7.85

Estimated required landed price, based on total mark-ups by retailer &

importer/ distributor of

56%

Comments on chilli content (where

available)

Markplatz Curry-Huhn Bombay 310g box €2.19 R17.19 R11.02

Bamboo Garden Curry Paste 110g jar €2.49 R19.55 R12.53 Other

Fuchs Paprika Rosen – scharf 60g sachet €2.69 R21.12 R13.54 Tengelmann

Fuchs Paprika - Edelsuss 60g sachet €2.69 R21.12 R13.54





Appendix G: Price points for chilli-based products in selected South African retailers



Unit size SA retail price (R)

Estimated required



distributor of 38%


Hot table sauces/dressings – major retailers

Tabasco Pepper Sauce US 60ml 19.95 14.46 Woolworths

Sweet chilli sauce, own label South Africa 750ml plastic bottle 23.99 17.38

Suree Chilli & garlic sauce Thailand 295ml glass bottle 12.99 9.41

Suree Thai hot chilli sauce Thailand 295ml glass bottle 12.55 9.09

Wellington’s chilli chutney Thailand 375ml 10.99 7.96

Wellington’s garlic chilli sauce Thailand 375ml 11.29 8.18

Taste of Thailand Hot chilli pepper sauce

KZN, South Africa

250ml glass bottle 12.89 9.34 Fresh chillies used

Taste of Thailand Sweet chilli sauce & pineapple

KZN, South Africa



KZN, South Africa


Spar (Western Cape)


KZN, South Africa


Tabasco Pepper sauce US 60ml glass bottle 17.95 13.01

Pick n Pay Family

Tabasco Garlic pepper sauce US 60ml glass bottle 17.95 13.01








Estimated required



distributor of 38%


Tabasco Green pepper sauce US 60ml glass bottle 17.95 13.01


Louisiana Gold pepper sauce US 57ml 16.99 12.31

Bandito’s Jalapeno sauce South Africa 122ml glass bottle 13.49 9.78

Bandito’s Peri peri sauce South Africa 122ml glass bottle 13.49 9.78

Bandito’s Habanero sauce South Africa 122ml glass bottle 13.49 9.78

Melissa’s The Food Shop Tomato salsa South Africa

410g glass jar 24.95 18.08

Melissa’s The Food Shop Chilli peppers with sundried tomatoes South Africa

420g glass jar 33.95 24.60

Melissa’s The Food Shop Jalapeno peppers South Africa

410g glass jar 21.95 15.91

Melissa’s The Food Shop Sweet chilli sauce South Africa

315g glass bottle 25.95 18.80

Wellington’s Peri peri sauce Western Cape, South Africa

375ml plastic bottle 8.95 6.49

Wellington’s Hot chilli sauce Western Cape, South Africa


Wellington’s Sweet chilli sauce Western Cape, South Africa









Estimated required



distributor of 38%


Steers Peri peri sauce South Africa 375ml glass bottle 11.29 8.18

Steers Spicy tikka sauce South Africa 375ml glass bottle 11.29 8.18

Steers Sweet chilli sauce South Africa 375ml glass bottle 11.29 8.18

Crosse & Blackwell Original chilli sauce South Africa

250ml glass jar 8.29 6.01

Crosse & Blackwell Chilli garlic sauce South Africa


Crosse & Blackwell Sweet chilli sauce South Africa


Crosse & Blackwell Sauce it up! Chakalaka South Africa Plastic bottle 14.99 10.86

Knorr Sweet & spicy sauce South Africa 250ml glass bottle 8.39 6.08

Knorr Sweet chilli sauce South Africa 250ml glass bottle 8.39 6.08

Knorr Peri peri sauce South Africa 250ml glass bottle 8.39 6.08

Ina Paarman Ready to serve Tomato & chilli sauce South Africa

200ml plastic pouch 10.59 7.67

Ina Paarman Ready to serve Creamy curry sauce South Africa









Estimated required



distributor of 38%


Pakco Pepper sauce KZN, South Africa

250ml glass bottle 9.29 6.73

Veri peri, hot South Africa 250ml glass bottle 12.99 9.41

Veri peri, mild South Africa 250ml glass bottle 12.99 9.41

A Taste of Thai Sweet red chilli sauce Thailand 200ml 18.99 13.76

Pick n Pay Choice Hot peri peri sauce South Africa


Pick n Pay Choice Mild peri peri sauce South Africa


Nando’s Hot sweet peri peri sauce South Africa 250ml glass bottle 15.39 11.15

Nando’s Extra hot peri peri sauce South Africa 125ml glass bottle 11.69 8.47

Nando’s Hot peri peri sauce South Africa 125ml glass bottle 11.69 8.47

Nando’s Garlic peri peri sauce South Africa 125ml glass bottle 11.69 8.47

Nando’s Extra mild lemon peri peri sauce South Africa


Nando’s Medium peri peri sauce South Africa 125ml glass bottle 11.69 8.47

Old El Paso Thick n chunky salsa 375g glass jar 18.99 13.76








Estimated required



distributor of 38%


Hot table sauces/dressings - speciality/delicatessen independents

Tabasco Pepper sauce US 60ml glass bottle 24.50 17.75


Fynbos Fine Foods Chilli dream sauce Malmesbury


Fynbos Fine Foods Habanero sauce Malmesbury


Fynbos Fine Foods Pepperdrop Malmesbury 250ml glass bottle 24.95 18.08

Fynbos Fine Foods Peri peri Malmesbury 250ml glass bottle 24.95 18.08

Ukuva Africa Mombassa PeriPeri Cape Town, SA

125ml, glass bottle 29.95 21.70

Ukuva Africa Malawi Gold

Cape Town, SA


Ukuva Africa Zulu Fire Sauce

Cape Town, SA


Charlie’s Hot n Tasty Nashville, US 150ml glass bottle 14.95 10.83

Burchell’s Gourmet Africa Harissa Spicy Chilli Worcester, SA

125 ml glass bottle 19.75 14.31

Burchell’s Gourmet Africa Mama moto chilli, coriander and lime Worcester, SA


Mama Africa’s Zulu Sauce South Africa 125 ml glass bottle 20.50 14.86

Bushman’s Revenge South Africa 125 ml glass bottle 40.50 29.35 15 heat rating

Giovanni’s

Bushman’s Hot az hell South Africa 125 ml glass bottle 20.50 14.86








Estimated required



distributor of 38%


Bushman’s Hot chilli South Africa 125 ml glass bottle 22.50 16.30

Bushman’s Dynamite South Africa 125 ml glass bottle, boxed 125.50 90.94 21 heat level

Fynbos Fine Foods Chilli dream sauce Malmesbury


Fynbos Fine Foods Jalapeno mild chilli sauce Malmesbury


Fynbos Fine Foods Peri peri medium chilli sauce Malmesbury


Afrique Peri peri sauce South Africa 250ml glass bottle 22.75 16.49

Afrique chilli sauce South Africa 250ml glass bottle 22.75 16.49

Garlic Tobago Peppa sauce South Africa 125ml glass bottle 16.65 12.07

Burchell’s Gourmet Africa Mamba smokey chilli sauce Worcester, SA


Burchell’s Gourmet Africa Kali kali Worcester, SA 125ml glass bottle 16.70 12.10

Bushman’s Jalapeno pepper sauce South Africa 125ml glass bottle 19.00 13.77

Bushman’s Hot az hell South Africa 125ml glass bottle 19.00 13.77

Bushman’s Hot chilli South Africa 125ml glass bottle 19.00 13.77

Bushman’s Smoked jalapeno chilli sauce South Africa


Bushman’s Peperoncino South Africa 125ml glass bottle 19.00 13.77

Andiamo

Bandito’s chilli mint Cape Town South Africa









Estimated required



distributor of 38%


Bandito’s Habanero sauce Cape Town South Africa


Bandito’s Guadala gunpowder Cape Town South Africa


Bandito’s Sweet & hot sauce Cape Town South Africa


Bandito’s Jalapeno sauce Cape Town South Africa


Fu chi Chilli sauce Taiwan 400g jar 28.75 20.83 Louisiana Gold Green sauce with Tabasco peppers US 57ml 20.70 15.00 Mama Africa’s Zulu relish mild South Africa 375ml 20.15 14.60 Mama Africa’s Zulu relish jalapeno South Africa 375ml 20.15 14.60 Mama Africa’s Zulu sauces peri peri South Africa


U-kuva i-Africa Swazi mamma mambo South Africa


U-kuva i-Africa Malawi gold South Africa 125 ml glass bottle 25.85 18.73

U-kuva i-Africa Mombassa periperi South Africa 125 ml glass bottle 25.85 18.73

U-kuva i-Africa Zulu fire sauce South Africa 125 ml glass bottle 25.85 18.73

A taste of Thai Sweet red chilli sauce Thailand


Indofood Sweet chilli sauce Indonesia 340ml glass bottle 12.50 9.06

Indofood Hot chilli sauce Indonesia 340 ml 12.50 9.06

Outsauce Chilli & lime South Africa 250ml glass bottle 20.00 14.49








Estimated required



distributor of 38%


Suree Chilli sauce for seafood Thailand 295ml bottle 12.95 9.38

Suree Thai hot chilli sauce Thailand 295ml bottle 12.95 9.38

Bushman’s Sweet chilli sauce South Africa 250ml glass bottle 20.00 14.49

Lee kum kee Fine chilli sauce China 226g glass bottle 18.25 13.22

Lee kum kee Sweet chilli sauce China 226g glass bottle 24.70 17.90

Chill out Hill billy Pepper sauce Knysna, SA 250ml glass bottle 38.00 27.54

Thai heritage Dipping sauce Thailand 200ml glass bottle 16.10 11.67

Thai Foods Mango chilli sauce Thailand 200ml glass bottle 15.35 11.12

Cooking/stir-in sauces – major retailers

Sweet chilli & lime basting sauce, own label South Africa


Sweet chilli & lime Grill, bake & braai sauce South Africa


Mozambican style peri peri marinade South Africa


Durban curry cook in sauce South Africa 400g pouch 12.99 9.41

Woolworths

Cape Malay curry cook in sauce South Africa 400g pouch 12.99 9.41








Estimated required



distributor of 38%


Fatti’s & Moni’s Pasta sauce Picante, Tiger Brands Foods South Africa

510g glass jar 13.99 10.14

Taste of Thailand Yellow curry Cook in sauce

KZN, South Africa 400g 16.29 11.80 Fresh chillies used

Royco Cape malay chicken curry Cape Town, South Africa

45g foil sachet 6.79 4.92

SPAR (Western

Cape)

Royco Sweet Thai chilli Cape Town, South Africa


Fatti’s & Moni’s Pasta sauce Picante, Tiger Brands Foods South Africa

510g glass jar 13.99 10.14

Ina Paarman Pasta sauce, tomato, olive, chilli South Africa

400g glass jar 17.69 12.82

Ina Paarman Coat & cook Peri peri sauce South Africa

200ml plastic pouches 7.99 5.79

Ina Paarman Coat & cook Tikka curry sauce South Africa

200ml plastic pouches 7.99 5.79

Knorr Honey & chilli marinade South Africa 500ml plastic bottle 13.99 10.14

Steers Lemon, herb & chilli marinade South Africa 1l bottle 16.59 12.02

Bandito’s Cook mint, lime & coriander sauce South Africa


Bandito’s Braai apricot, red pepper & rosemary sauce South Africa


Nando’s Roasted reds Cooking sauce South Africa Glass jar 19.79 14.34

Pick n Pay Family

Nando’s Sweet apricot with medium per peri Cooking sauce South Africa Glass jar 19.79 14.34








Estimated required



distributor of 38%


Nando’s Curry coconut Cooking sauce South Africa Glass jar 19.79 14.34

Cooking/stir-in sauces - speciality/delicatessen independents

Ong’s Sweet Thai Chilli Sauce Singapore 255g glass bottle 14.95 10.83

Conimex Sambal oelek hot chilli paste Netherlands 33.95 24.60 Bushmen’s Chilli paste - hot South Africa 250g jar 34.95 25.33

Giovanni’s

Bushmen’s Chilli paste -mild South Africa 250g jar 34.95 25.33 Suree Sweet chilli sauce for chicken Thailand

200ml glass bottle 14.20 10.29 Andiamo

Lee kum kee Chilli garlic sauce China 226g glass jar 22.20 16.09

Curries & mixtures (dry and pastes) – major retailers Paprika powder, Spice basics, own label South Africa

50g glass shaker 7.99 5.79

Woolworths

Volcano, spicy food, own label South Africa 32g grinder 19.49 14.12

Pakco Curry paste KZN, South Africa

430g glass jar 14.99 10.86

Golden star Chicken tandoori Cape Town, South Africa

50g plastic sachet 1.99 1.44

Golden star Chicken tikka Cape Town, South Africa


Golden star Durban curry Cape Town, South Africa


Golden star In one masala mix Cape Town, South Africa


SPAR (Western

Cape)

Golden star Breyani mix Cape Town, South Africa









Estimated required



distributor of 38%


Golden star Mild curry Cape Town, South Africa


Golden star Mother in laws hot masala mix

Cape Town, South Africa


Rajah mild & spicy curry powder, Robertson’s

KZN, South Africa

7g paper sachet 0.99 0.72

Rajah medium curry powder, Robertson’s

KZN, South Africa


Rajah hot curry powder, Robertson’s

KZN, South Africa



KZN, South Africa 100g box 7.55 5.47











Robertson’s Peri peri KZN, South Africa


Robertson’s Cayenne pepper KZN, South Africa


Robertson’s Flavours Piquant peri peri chicken seasoning

KZN, South Africa

15g foil pyramid 2.69 1.95

Pakco Masala KZN, South Africa 50g 3.65 2.64








Estimated required



distributor of 38%


Pakco Masala KZN, South Africa 100g 5.69 4.12

Cartwright’s Medium Curry powder Cape Town, South Africa 50g 4.29 3.11

Cartwright’s Hot Curry powder Cape Town, South Africa 50g 4.29 3.11

Cartwright’s Medium Curry powder Cape Town, South Africa 100g 7.55 5.47

Cartwright’s Hot Curry powder Cape Town, South Africa 100g 7.55 5.47

Maggi Fondor Chilli seasoning, Nestle South Africa 65g sachet 4.79 3.47

Robertson’s Peri peri South Africa 48g box 9.99 7.24

Robertson’s Paprika South Africa 100ml glass shaker 10.25 7.43

Robertson’s Crushed chillies South Africa 100ml glass shaker 10.25 7.43

Robertson’s Cayenne pepper South Africa 100ml glass shaker 8.45 6.12

Melissa’s The Food Shop Cook’s salt with chilli, lime & coriander South Africa

125g glass jar 24.95 18.08

Melissa’s The Food Shop Meat rub, spicy Cajun, paprika, red chilli, cumin South Africa 95g tin 24.95 18.08

Ina Paarman Chilli & garlic seasoning South Africa

200ml plastic shaker 11.59 8.40

Pick n Pay Family

Pakco Curry paste KZN, South Africa

430g glass jar 13.99 10.14








Estimated required



distributor of 38%


Thai Foods Yellow curry paste Thailand 50g sachet 6.99 5.07

Asian Home Gourmet Dry chilli stir fry Thailand 50g sachet 14.49 10.50

Asian Home Gourmet Laksa coconut noodles Thailand 50g sachet 14.49 10.50

Asian Home Gourmet Indian butter chicken Thailand 50g sachet 14.49 10.50

Robertson’s Paprika refill KZN, South Africa 100ml box 9.49 6.88

Robertson’s Peri peri refill KZN, South Africa 100ml box 9.29 6.73

Robertson’s Freshly ground Spicy chilli & garlic blend

KZN, South Africa

100ml grinder 15.35 11.12


100ml glass shaker 7.99 5.79

Robertson’s Crushed chilli KZN, South Africa


Robertson’s Peri peri KZN, South Africa


Robertson’s Louisiana Cajun KZN, South Africa


A Taste of Thai Red chilli curry Thailand 50g sachet 12.99 9.41 A Taste of Thai Green chilli curry Thailand 50g sachet 12.99 9.41

Rajah Curry powder, Robertson’s KZN, South Africa


Rajah Medium curry powder, Robertson’s

KZN, South Africa 50g 4.45 3.22








Estimated required



distributor of 38%


Rajah Hot curry powder, Robertson’s


Rajah Medium curry powder, Robertson’s


Rajah Hot curry powder, Robertson’s




Cartwright’s Hot curry powder Cape Town, South Africa


Pick n Pay choice Cayenne pepper South Africa 100ml glass shaker 6.99 5.07

Spice Mecca Tandoori masala Cape Town, South Africa


Spice Mecca Chicken masala Cape Town, South Africa


Spice Mecca Fish masala Cape Town, South Africa


Spice Mecca Yellow curry Cape Town, South Africa


Spice Mecca Medium curry powder Cape Town, South Africa


Spice Mecca Hot curry powder Cape Town, South Africa


Spice Mecca Breyani masala Cape Town, South Africa


Spice Mecca Leaf masala Cape Town, South Africa


Spice Mecca Mother in law Cape Town, South Africa









Estimated required



distributor of 38%


Spice Mecca Paprika Cape Town, South Africa


Spice Mecca Pure chilli powder Cape Town, South Africa


Spice Mecca Crushed chillies Cape Town, South Africa


Curries & mixtures (dry and pastes) - speciality/delicatessen independents Cedar Mountain Chilli Rub South Africa 21.95 15.91

Chefs@work Thai rub Plastic cylinder 19.75 14.31

The Cape Herb and Spice Company Elements of spice, Mexican wave rub Constantia, SA 72g tin 33.80 24.49 The Cape Herb and Spice Company Organic chilli bite Constantia, SA 38g grinder 22.95 16.63 The Cape Herb and Spice Company Malay spice Constantia, SA

100ml grinder 13.95 10.11

The Cape Herb and Spice Company Cajun spice Constantia, SA

100ml grinder 12.95 9.38

The Cape Herb and Spice Company Peri peri chicken seasoning Constantia, SA

100ml grinder 12.95 9.38

Nice n spicy Tandoori chicken Humewood, SA

10-25g, sachets 8.95 6.49 Recipe included on board

Nice n spicy Nasi Goreng Humewood, SA


Nice n spicy Chilli con carne Humewood, SA


Nice n spicy Spiced lamb pot Humewood, SA


Giovanni’s

Nice n spicy Balti chicken curry Humewood, SA









Estimated required



distributor of 38%


Nice n spicy Biriyani Humewood, SA

10-25g, sachets 8.95 6.49

Recipe included on board

Asian home gourmet Dry chilli stir fry Kung Pao Thailand


Asian home gourmet Sambal stirfried rice Nasi Goreng Thailand


Asian home gourmet Thai green curry Kaong Kiewhan Thailand


The Cape Herb and Spice Company Malay rice spice South Africa


The Cape Herb and Spice Company Spirit of fire South Africa 32g grinder 18.65 13.51 The Cape Herb and Spice Company Heat wave South Africa 32g grinder 18.65 13.51 The Cape Herb and Spice Company Organic spice route South Africa 32g grinder 19.95 14.46 The Cape Herb and Spice Company Mama Africa rub South Africa 98g tin 28.70 20.80 The Cape Herb and Spice Company Holey smoke rub South Africa 116g tin 29.75 21.56 The Cape Herb and Spice Company Cajun spice South Africa


Bushman’s Mild chilli paste South Africa 314g glass jar 29.80 21.59

Bushman’s Hot chilli paste South Africa 314g glass jar 27.40 19.86

Bushman’s Mild curry paste South Africa 314g glass jar 29.80 21.59

Spice art Durban curry South Africa 125ml 18.25 13.22

Andiamo

Spice art Cape Malay curry South Africa 125ml 18.25 13.22








Estimated required



distributor of 38%


Gourmet Africa Smoked red pepper & chilli pesto 125g jar 20.80 15.07

All ingredients certified organic

Other – major retailers

Peppadew pickled sweet piquante pepper, mild South Africa

350g glass jar 16.99 12.31 Woolworths

Peppadew pickled sweet piquante pepper, hot South Africa

350g glass jar 16.99 12.31

Pakco Hot atchar KZN, South Africa

385g glass jar 13.45 9.75

Pakco Mango atchar KZN, South Africa

430g glass jar 13.45 9.75

Pakco Curried chillies South Africa 400g glass jar 13.75 9.96

Peppadew Mild whole sweet piquante pepper South Africa

420g glass jar 18.39 13.33

Spar (Western Cape)

Peppadew Hot whole sweet piquante pepper South Africa

420g glass jar 18.39 13.33

Melissa’s The Food Shop Tomato & chilli jam South Africa

340g glass jar 26.95 19.53

Melissa’s The Food Shop Chilli ginger jam South Africa

315g glass jar 26.95 19.53

Pakco Hot atchar KZN, South Africa

385g glass jar 12.99 9.41

Pakco Mango atchar KZN, South Africa

430g glass jar 12.99 9.41

Pick n Pay Family

Pakco Hot mixed vegetable pickle KZN, South Africa

385g glass jar 12.49 9.05





Appendix H: Legislation affecting the production of chillies Legislation Agriculture Ñ Agricultural Laws Rationalisation Act

Ñ Agricultural Pests Act Ñ Agricultural Produce Agents Act Ñ Agricultural Product Standards Act Ñ Agricultural Research Act Ñ Agriculture Laws Extension Ñ Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act Ñ Genetically Modified Organisms Act Ñ Marketing of Agricultural Products Act Ñ Perishable Products Export Control Act Ñ Plant Breeders' Rights Act Ñ Plant Improvement Act

Land

Ñ Communal Land Rights Act Ñ Land Administration Act Ñ Land Reform Act Ñ Provision of Land and Assistance Act Ñ Restitution of Land Rights Act

Environment and water

Ñ Environmental Conservation Act Ñ Environmental Laws Rationalisation Act Ñ National Environmental Management Act Ñ National Water Act Ñ Conservation of Agricultural Resources Act

Trade, finance and corporate entities

Ñ Agricultural Credit Amendment Act Ñ Agricultural Debt Management Act Ñ Land and Agricultural Development Bank Act Ñ Customs and Excise Act Ñ International Trade Administration Act Ñ Commercial entities and products Ñ Cooperatives Act Ñ Competition Act Ñ Intellectual Property Rights Act Ñ Standards Act Ñ Merchandise Marks Act

Labour

Ñ Basic Conditions of Employment Act Ñ Labour Relations Act Ñ Agricultural Labour Act



Chilli Value Chain Analysis Steps 2-4 Final

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Transcript of Chilli Value Chain Analysis Steps 2-4 Final