Carry cash central

Check out "cash and carry" in South Africa - includes related article on South Africa's geography - food retail sector

U.S. exporters of consumer-oriented foods are keeping a close eye on the food retail sector in South Africa.

And they like what they're seeing: a market with growth potential galore. Today's customers are the large supermarkets, convenience stores and restaurants that make up the country's formal food retail sector, a sector that caters to an affluent consumer base making up only a seventh of the country's 42 million population.

But tomorrow's best customer might be altogether different - the "cash and carry" wholesale outlets that supply most of South Africa's population through a vast informal network of street hawkers, small grocers and tiny shops in township homes called spazas.

U.S. food exporters haven't yet accessed these outlets, the only link between the formal and informal markets that supply millions of consumers. This vast untapped market holds great promise for what is already an important agricultural export market for the United States.

"Cash and Carry" Supplies Majority

South Africa's largest wholesale chain - Metro Cash & Carry (also known as Trador Cash & Carry) - has 170 outlets with 63 percent of the South African wholesale market. The chain also has opened a unit each in Swaziland, Botswana and Namibia, with a joint venture in Israel.

Most of the outlets, located in or near black townships, are open for business customers only. However, a similar organization, Trade Centre, with seven hypermarkets similar to U.S. large retail shopping club outlets, is open to the public.

Though these outlets do not currently carry imported products, market research would help point the way to market openers. For suppliers interested in this market, there are some basic market conditions to keep in mind:

* Because of cash flow problems, consumers tend to purchase small quantities. Consequently, packaging should be in smaller packs, or products shipped in bulk for packaging in-country.

* Transport charges now add too much to product cost, but increasing shipments to South Africa should eventually remedy this problem.

* An ongoing restructuring of the South African economy is enhancing free trade.

* The rand's continuing decline against other currencies hikes the cost of imports for consumers. What's affordable one month may be out of reach the next.

Supermarkets Dominate Formal Sector

Supermarket stores may be chain-owned, affiliated with a wholesaler or independent.

Shoprite is the largest of the country's four chains, with a 50-percent market share. It sells to lower middle and low-income consumers, although it is aspiring to capture a share of the higher income market. Shoprite has units in Namibia, Lesotho, Swaziland, Zimbabwe, Botswana, Zambia and Mozambique.

Its stores tend to be standalones or are sited in downtown shopping areas. Sixty percent of each store is devoted to food, with 18,000 different food items.

Shoprite's Cape Town headquarters deals directly with foreign suppliers.

No. 2 Pick 'n Pay, with a 30-percent market share, coddles its higher income consumers with in-store dells, espresso bars and ATM machines. Its stores tend to be smaller than Shoprite and located within an enclosed shopping center.

Since other chains tend to follow its lead, Pick 'n Pay is a good venue for launching new tastes and products. Regional managers tend to make import decisions, except for chain-wide items such as private-label brands, which are decided at the company's headquarters in Cape Town.

Third-ranked chain Spar, with 23 percent of the market, has 650 independently owned stores. Seven warehouses make daily deliveries to stores.

Spar stores tend to be smaller than Shoprite, but are usually located in more upscale areas. About a fifth are convenience stores; these also operate as gasoline station mini-marts.

Spar has units in Namibia, Botswana, Mauritius and Zimbabwe. Like Pick 'n Pay, import decisions are generally made at the regional level, except for chain-wide branded products.

The fourth group, Woolworth's (not to be confused with the former U.S. five-and-dimes of the same name), is a chain of clothing and linen department stores that also specializes in upscale fresh meals. It has 67 units and two franchise units in Zimbabwe. The food sections are located inside the department store and carry about 2,000 product lines.

Woolworth's products differ in two ways from competitors: All are private label, and perishables have shelf-life dates. Although market share is small at 5.7 percent, Woolworth's is an important barometer of food product trends, introducing 500 new food lines a year.

The chain recently unveiled a Tex-Mex prepared-meal line to complement its Oriental line. An Indian-style line is coming soon.

Because Woolworth's customers will pay a premium for high-quality products, it's more open to imports. Import decisions are made at Cape Town headquarters.

Gateway to Southern Africa

Its strategic geographic location and leadership role make South Africa key to the economic and agricultural development of the southern African region, with its 137 million inhabitants.

The country's leaders, if successful in securing economic well-being for its own diverse population, will likely promote economic growth in the entire region. This would raise the region's level of development, making for good trading partners with a substantial market for imported food products.