The Manufacture and Wholesale of Non-Alcoholic Beverages in South Africa 2022

Introduction

This report focuses on the manufacture and wholesale of non-alcoholic beverages which include carbonated soft drinks, bottled water, energy drinks, sports drinks, cordials and concentrates, health and functional beverages (drinks with a health benefit) and dairy and fruit blends.

Beverage sales, including alcoholic drinks, which were negatively affected by the pandemic and associated liquor restrictions, began to recover in 2021. Manufacturing sales of non-alcoholic and alcoholic beverages grew by 29.9% to R151.7bn between January and November 2021 over the same period in 2020. Producers have reported that energy drinks and functional (health) drinks are experiencing significant growth since the onset of the pandemic, while fruit juice exports continue to see marked growth despite challenges such as port delays and market access. The sugar tax, which took effect in April 2018, has had a negative effect on soft drink consumption and is likely behind a 38.8% increase in the price of 2l fizzy drink bottles between January 2017 and November 2021.

Opportunities

Demand for larger packaging formats and sustainable packaging.

Growing interest in cannabis-infused drinks. Growing move towards a healthier lifestyle, which has been boosted by the pandemic, provides opportunities for product innovation in areas such as no-alcohol drink substitutes and low calorie and low sugar options. Growth in the African consumer segment with disposable income. South African has experienced significant growth in energy drinks. The African Continental Free Trade Area (AfCFTA) which offers producers an opportunity to enter Africa tariff-free.

Outlook

While beverage manufacturing sales have recovered since 2019, the outlook for non-alcoholic beverages remains uncertain while the pandemic and the threat of further variants loom.

Lockdown measures have, however, continued to be relaxed. Nampak reported in December that the eased restrictions on large events would likely improve demand for beverages, while revealing that it had seen significant growth in aluminium can sales to energy drink producers. Functional (health) drinks, as well as no-alcohol and low sugar alternatives are also expected to see strong growth between 2022 and 2025.

Report Coverage

This report focuses on the manufacture and wholesale of non-alcoholic beverages which include carbonated soft drinks, bottled water, energy drinks, sports drinks, cordials and concentrates, health and functional beverages and dairy and fruit blends.

It includes comprehensive information on the size and state of the industry, the effect of the pandemic, sugar tax and other influencing factors, developments and corporate actions. There are profiles of 27 companies including major players such as Pioneer Foods, RFG and Clover, which dominate fruit juice production, Coca-Cola Beverages, which dominates the soft drink market, and niche players such as Red Bull, BOS and Pure Soda.

Strengths

Competitive industry where small players and market leaders launch new products and compete on price.

Improvements in packing technology that reduces the environmental impact of the manufacturing sector. Strong brand recognition of major players. Trade volumes increasing, particularly fruit juice exports. Well-regulated sector.

Threats

A push by health activists to double the effective tax on sugary drinks to 20% could raise costs for producers and further discourage consumption of such drinks.

Extended producer responsibility measures which came into effect in 2021 could push up costs for producers, particularly in recycling and packaging. Increasing cost of raw materials and other inputs, as well as a shortage of some inputs such as glass. Insecurity of water supply due to aging infrastructure and the drought. Interruptions to electricity supply. The threat of further lockdowns could put further pressure on already high household debt and weak household consumption.

Weaknesses

A few large players dominate the sector. Complex regulatory environment. Environmental concerns about the industry’s contribution to climate change.