INNOVATION

Weak Rand drives foodservice innovation

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Rand weakness is driving a wave of innovation across the South African food manufacture and distribution sector as B2B customers refuse to compromise on quality, no matter how intense supply-side pricing pressures become.

Quality remains key for South Africa’s hospitality industry, retailers and foodservice companies, says Costas Vayanos, CEO of BM Food Manufacturers, distributors of chilled and fresh products in the Mediterranean Delicacies range.

He says refusal to sacrifice quality in the face of 35% to 50% cost increases on imports has led to greatly increased focus on product development while manufacturers and importers explore new sources of supply.

The combined impact of an ailing Rand, poor crop yields and drought can be considerable, notes Vayanos. Some of the ways in this is presenting are as follows:

  • The general level of price increases on imports ranges from 20 to 35%, depending on the commodity;
  • Poor crops compound euro-denominated pricing pressure for imported green Spanish olives and sundried tomatoes (up 20% in price from offshore suppliers);
  • Imported cheeses – all subject to currency market effects – are up 25 to 30%, depending on the date of arrival in South Africa;
  • Local cheese prices have firmed by 5-6% as the first effects of drought are felt by dairy producers, with more pricing pressure to come;
  • Spices have rocketed in price by up to 50% – almost all stocks are sourced overseas; and 
  • Local food and ingredient supplies cost 8 to 15% more – affected by higher input costs, rising utility charges and labour costs

“Quality has to be maintained while making products as affordable as possible,” says Vayanos. “Switching to cheap ingredients of low quality won’t work. B2B customers expect smarter solutions than that.

“With delicacies such as deli products, dips, patés, olives, pickles, meze products, cheeses and pastries it can take decades to build your reputation. Cutting corners to save costs because the Rand is weak is not an option.”

Though price sensitivity has grown, quality remains the biggest driver of sales volumes in the market for fresh and chilled produce, he points out.

Volumes at BM Food Manufacturers continue to grow, despite recent price increases.

“The challenge,” says Vayanos, “is to control input costs as far as possible without reducing quality. This is possible for a well-established manufacturer and distributor like BM Food as we can source comparable products from a range of countries and various suppliers, enabling us to shop for the best possible deal for our customers.

“Our product development team can innovate by increasing the local content, thereby reducing our exposure to the risk of Rand weakness. Another benefit is that enhanced local content supports local suppliers who provide the requisite quality.

“It is also important in such challenging times that we do everything we can to improve service levels. Customers are confronted by so many negative factors, it’s important to make them feel special. Enhanced service standards are a good way to do it.”

 

 

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