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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

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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

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

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:
„ Identify the nature and determinants of competitiveness, often assessing a group of
interconnected producers rather than narrowly focussing on individual producers
„ 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)
„ 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:

„ Providers of seed and seedlings „ Wholesalers


„ Growers „ Distributors/exporters
„ Processors „ Retailers
„ Fresh produce markets „ Regulators and support services
„ 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:


„ Northern KZN (Pongola and Makhathini Flats)
„ North coast (Ilembe/Stanger area, Empangeni)
„ Weenen and Tugela Valley

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

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

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:
„ Chillies are relatively easy to establish and grow
„ Chillies are less susceptible to loss from grazing than some crops
„ 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
Thai: Skyline 3, and Star
3. Empangeni area 1-4 90,000 80 – 100
6603, Star 6604, Star 6602,
4. Mandeni 2* 9,600 Thai: Skyline 8*
Mainly Star 6004, some
5. Pongola area 2 40,000 34
Jalapeno
Thaibo, Guntur Hope, and
6. Pongola area 2 50,000 18
previously did Star 6601
7. Pongola area 5 130,000 Thaibo, Star varieties 175**
Skyline 3, also Habanero,
8. Weenen area 40*** 1,200,000 700
Jalapeno, Peppadew
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:
„ Robertsons Herbs and Spices (Unilever)
„ Allifa Spices
„ Natpro Spicenet
„ Pakco
„ 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.

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

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:
„ Nando’s
„ Crown National / Continental Spiceworks
„ Cape Herb and Spice Company
„ Freddy Hirsch

Trends in processing activity in the chilli value chain include:


„ Presence of traders who contract growers and sell onto processors which leads to
downward pressure on growers’ margins
„ Greater imports of whole, dried chillies by processors – quality can be better monitored
in whole chillies rather than powdered
„ 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:

„ SA is a net exporter of basic chilli products (fresh and dried), with Mauritius, Spain, Brazil
and the United States as primary destination markets
„ Exports of fresh products are stagnating, whereas exports of dried products show
considerable growth
„ 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
„ 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.
„ 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:

„ Dried products are the most heavily traded type of chilli product across all provinces
„ 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
„ KZN is not a significant exporter of fresh chillies, but also imports relatively low volumes
of fresh products
„ KZN is a strong provincial performer in the export of dried products and curries
„ 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.

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

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.

Import Import SA
Unit CAGR for
value quantity share
value value
Product imported, imported, Major markets in
(US$/ 2000-2004
2004 (US$ 2004 exports
ton) (%)
000) (tons) (%)
HS 070960 Peppers of
US (26%)
the genus Capsicum
2,355,086 1,606,960 1,466 10 Germany (20%) 0
or Pimenta, fresh or
UK (9%)
chilled
090420 Fruits of the
US (24%)
genus Capsicum or
506,368 - - 7 Germany (8%) 2
Pimenta, dried,
Spain (7%)
crushed or ground
HS 091050 Curry UK (17%)
44,380 21,365 2,077 13 United States (18%) 3
Singapore (7%)
HS 091091 Mixtures
of two/more of the Russia (9%)
products of different 130,914 40,118 3,263 9 Belgium (9%) 0
headings to this Germany (8%)
chapter

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:


„ Proximity of production to market due to transport costs
„ Colour, measured in colour units or ASTA values, and pungency levels measured as
capsaicin content
„ 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.

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

Dried and further processed chillies

Markets for dried and further processed chillies are driven by:
„ Large or growing food processing industries
„ Large paprika processing industries, such as in Spain, Hungary and Germany
„ New food product development, which drives demand for paprika powder and
oleoresins
„ 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:
„ Natural flavourants and colourants will increasingly substitute artificial flavourants and
colourants, as food manufacturers increasingly insist on natural products
„ Dried paprika is sourced rather than dried and crushed or ground paprika due to safety
concerns
„ 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:
„ Fennel
„ Cumin
„ Coriander
„ Turmeric
„ Cloves
„ Cinnamon
„ Bay leaves
„ Star aniseed
„ Curry leaves
„ Cardamom

Underlying the strong growth in both curries and spice mixtures/blends are some major
demand trends:

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

„ Growth in processed food consumption in some developing markets, such as Eastern


European countries
„ Increased use of spices in food manufacturing driven by the growing popularity of
prepared foods and ready-to-use mixtures
„ Increased demand for ethnic foods
„ Growing awareness of diverse cultural cuisine
„ 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:
„ Presence of a large consumer market with high or rapidly increasing disposable incomes
„ Large existing ethnic populations or increase in ethnic populations with preference for
spicy food products
„ 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:
„ Tomato
„ Garlic
„ Onion
„ Other vegetables and fruit (e.g. pineapple, red and green peppers etc.)
„ Spices and seasoning
„ Vinegar
„ 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:

„ 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
„ 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

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

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:


„ Provision of sauces and mixtures based on chilli varieties
„ Greater value added products, such as cooking sauces that offer a specific “meal
solution”, including:
o Marinades
o Pasta sauces
o Curry sauces
„ Products that have an appealing story, which may be based on ethnicity and origin
„ 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:

„ 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

„ 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

„ 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:


„ Concentration of supplier efforts by major retailers

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

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

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


„ Established speciality importers, in particular in hot sauces
„ Price pressure
„ 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:

„ 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
„ 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
„ 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:


„ Major retailers increasingly concentrating supply
„ Well-established spice trade with established supplier relationships
„ Sophistication of food processing sector and tendency to manufacture products locally
restricts opportunities to supply finished products such as sauces
„ 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:
„ Exhibits at major food shows, such as ANUGA in Germany and SIAL in France
„ In-store promotions
„ 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:
„ Fresh chillies
o Limited opportunity due to high production costs and strong competition, although
some small niche opportunities may exist
„ Dried/further processed

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

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

oLimited opportunity due to reliance on uncompetitive fresh chillies production, and


difficulty in accessing opportunities for more advanced processes such as milling
„ Curries/spice mixtures
o Niche opportunities for curries and spice mixtures, in particular through a branding
approach
„ 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.

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

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.

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

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:
„ Identify the nature and determinants of competitiveness, often assessing a group of
interconnected producers rather than narrowly focussing on individual producers
„ 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)
„ 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:

VALUE CHAIN PROGRESSION

INDUSTRIAL BLENDS/
“BASIC PRODUCTS” CONSUMER GOODS
INPUTS/INTERMEDIATES MIXES e.g.

Fresh Chillies (Capsicum) Chilli Paste Branded Chilli Spices Spice & curry mixes
Fresh Bell Peppers (Pimenta) Chilli Powder (ground) Chilli Paste Hot sauces
Chilli Seed Dehydrated Chillies Chilli Sauces (Mixed) Mixed pickles/chutneys
Chilli Dried Oleoresins Sundried Chillies Ready meals
Pickles and Jams
PROCESSES

n Sun Drying n Milling n Mixing Pharmaceuticals


n Sterilising n Mixing n Seasoning
KEY

n Dried Within Controlled n Pulping n Cooking Processed foods


using natural
Environment n Dehydration n Preservation in
colourants &
n Dry Milling n Extraction with solvent vinegar/acetic acid 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

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

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:

„ Providers of seed and seedlings „ Wholesalers


„ Growers „ Distributors/exporters
„ Processors „ Retailers
„ Fresh produce markets „ Regulators and support services
„ Traders

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

3 Methodology

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

Step 3:
Global market Step 5:
analysis Analysis of
Step 2:
opportunities,
High-level analysis of
Step 1: comparative advantages,
current
Project initiation competitiveness challenges
SA & KZN
&
chilli value chain
Step 4: recommended
Global competitor development framework
assessment

ONGOING CAPACITY TRANSFER

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:


„ Reports
„ Articles
„ Trade publications
„ Government publications
„ 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:
„ Mapping the location of current primary production
„ Developing estimates of the volume of primary production
„ Uncovering the key constraints and opportunities facing producers
„ Exploring market opportunities and requirements to access these opportunities
„ Understanding key factors contributing to competitors’ success

3.3 Quantitative analysis of trade flows and markets

The key objectives of this workstream were to:

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

„ Identify the main categories of chilli products that are traded in the value chain, and
determine the associated HS codes (best fit)
„ Analyse South Africa’s current exports and imports for the main product categories
„ Identify the primary markets for chilli products
„ 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.

Relevant HS Trade data


HS Chapter Definition
Codes analysed
Ch 7: Edible
Fruits of the genus Capsicum (peppers) or of the
vegetables
genus Pimenta (Note: includes chilli and bell
and certain 070960 07096000
peppers, SA tariff code book does not
roots and
disaggregate this category further)
tubers
Ch 9: Coffee, Fruits of the genus Capsicum (peppers) or of the
tea, mate and 090420 genus Pimenta (Note: includes chilli and bell
spices peppers), dried or crushed or ground
- fruits of the genus capsicum, neither crushed nor
09042010 ground
09042020 - fruits of the genus capsicum, crushed or ground
09042030 - fruits of the genus capsicum 09042030
09042032 - unspecified 09042050
Curry (SA tariff code book does not disaggregate
091050 091050
this category further)
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:
„ 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
„ Mixed sauces (potentially capturing hot sauces) under HS 210390 within Chapter 21:
Miscellaneous edible preparations
„ 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:


„ 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.
„ 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.
„ 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.

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

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:
„ Seed suppliers
„ Nurseries (and seedling suppliers)
„ Growers

4.1.1 Seed suppliers

Four major seed companies in KZN supply nurseries and seedlings services. These
companies are:
„ 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.
„ Starke Ayres - supplies mainly chilli seeds (not paprika) such as Star 6604.
„ McDonalds Seeds – supplies Long Slim Cayenne, and Rajah I F1. McDonalds is an
agent for Mayford.
„ 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 75% Thaibo
800,000 Pongola
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 varieties, lots of paprika
500,000* Eshowe
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

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

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:
„ Star 6601 - Starke Ayres
„ Thai – Mayford / McDonalds
„ Skyline 3 – Mayford / MacDonalds
„ PSR 2391 – Hygrotech
„ NS101 – Hygrotech
„ Guntur Hope (imported from India) – Hygrotech
„ 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

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

4.1.3 Growers

Structure and distribution of growing

The following types of chilli growers are operating in KZN:


„ Medium-sized commercial growers
„ Commercial farmers putting a small portion of their land under chilli production as a
diversification strategy or cash crop
„ Community gardens and developmental projects

Chillies are seen as a cash crop of high potential for the following reasons:
„ KZN growing conditions reasonably well suited to chilli production
„ Relatively rapid period from planting to harvest (70 – 80 days after transplanting)
„ Less susceptible to loss through grazing than some crops – animals do not like the taste
of chillies
„ 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
Thai: Skyline 3, and Star
11. Empangeni area 1-4 90,000 80 - 100
6603, Star 6604, Star 6602,
12. Mandeni 2* 9,600 Thai: Skyline 8*
Mainly Star 6004, some
13. Pongola area 2 40,000 34
Jalapeno
Thaibo, Guntur Hope, and
14. Pongola area 2 50,000 18
previously did Star 6601
15. Pongola area 5 130,000 Thaibo, Star varieties 175**
Skyline 3, also Habanero,
16. Weenen area 40*** 1,200,000 700
Jalapeno, Peppadew
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

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

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

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

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:
„ One crop during the summer in the Midlands area
„ Two crops per year in warmer areas with light frosts (Muden and Weenen - Riverine
Bushveld)
„ 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

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

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.

6,000

5,000

4,000
Price (R/ton)

3,000

2,000

1,000

0
JANUARY

MARCH

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER
APRIL

AUGUST
FEBRUARY

MAY

JUNE

JULY

2004 2005

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

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

10,000

9,000

8,000

7,000

6,000
Price (R/ton)

5,000

4,000

3,000

2,000

1,000

0
JANUARY

MARCH

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER
APRIL

AUGUST
FEBRUARY

MAY

JUNE

JULY
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

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

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

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

5 Processing activity

As discussed in section 2, chillies are processed into a variety of products, which typically
include:
„ Industrial inputs and/or final products
o Chilli pastes
o Chilli powders (ground/crushed chillies)
o Dehydrated/dried chillies
o Oleoresins
„ 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:


„ Basic processes
o Outdoor shade drying
o Drying in drying machines
o Basic grinding
o Pickling
„ 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:
„ Pests and diseases – humidity and longer drying times make chillies more susceptible
to pests and diseases such as aflatoxins
„ 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

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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:
„ Nando’s (case study follows below)
„ Crown National / Continental Spiceworks
„ Cape Herb and Spice Company (a case study follows below)
„ 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:


„ Peri-peri sauces
„ Cooking sauces

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

„ Marinades
„ Salad dressings
„ “Perinaise” – peri-peri mayonnaise
„ Table sauces
„ 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:
„ 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”
„ 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.

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

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.

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

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

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

Trend in value

quantity 1999-
Quantity 2003

countries (by
Top supplier
2003 (%pa)
Value 2003

Unit value

1999-2003
(US$/unit)
(US$ 000)

Trend in

value)
(tons)

(%pa)
Product

070960 Peppers of Zimbabwe


the genus Capsicum (93%)
or Pimenta, fresh or 14 71 211 10 102
chilled

090420 Fruits of the India (39%)


genus Capsicum or Zimbabwe
4,410* 5,903 747 48 47
Pimenta, dried, (34%)
crushed or ground 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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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March 2006

1,600,000

1,400,000

1,200,000

1,000,000
Value (R)

800,000

600,000

400,000

200,000

0
Gauteng KwaZulu-Natal Mpumalanga Western Cape

Zimbabwe Mozambique Zambia Other

Figure 6.1: Imports of HS 070960 (fresh chillies) by province and supplying country, 2004

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.

18,000,000

16,000,000

14,000,000

12,000,000
Value (R)

10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0
North West Gauteng KwaZulu-Natal Mpumalanga Western Cape Free State

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.

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

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

Top supplier
value 1999-
2003 (tons)

2003 (%pa)
Value 2003

Unit value

1999-2003
(US$/unit)
(US$ 000)

countries
Quantity

Trend in

Trend in
quantity

(%pa)
Product

091050 Curry India (94%)


389 513 758 45 83 China (3%)
Thailand (3%)
091091 Mixtures of Germany
two/more of the products of (61%)
231 72 3,208 0 -25
different headings to this UAE (9%)
chapter 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.
250,000

200,000

150,000
Value (R)

100,000

50,000

0
KwaZulu-Natal North West Gauteng Western Cape Eastern Cape

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

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

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

450,000

400,000

350,000

300,000
Value (R)

250,000

200,000

150,000

100,000

50,000

0
KwaZulu-Natal Gauteng Western Cape Eastern Cape

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


Quantity 2003

destinations
value 1999-
2003 (%pa)
Value 2003

Unit value

1999-2003
(US$/unit)
(US$ 000)

Trend in

Trend in
quantity
(tons)

(%pa)

Top

Product

070960 Peppers of the Mauritius (46%)


genus Capsicum or 209 153 1,366 13 -18 Seychelles (19%)
Pimenta, fresh or chilled United Kingdom 11%)
090420 Fruits of the Spain (42%)
genus Capsicum or Brazil (22%)
9,640* 6,682 1,443 41 30
Pimenta, dried, crushed United States (15%)
or ground
*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

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

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.

1,400,000

1,200,000

1,000,000

800,000
Value (R)

600,000

400,000

200,000

0
Gauteng Mpumalanga Western Cape KwaZulu-Natal

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.

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

25,000,000

20,000,000

15,000,000
Value (R)

10,000,000

5,000,000

0
KwaZulu- Gauteng Free State North West Northern Mpumalanga Western Cape
Natal Cape

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


destinations
2003 (% pa)
value 1999-
2003 (tons)
Value 2003

Unit value

1999-2003
(US$/unit)
(US$ 000)

Quantity

Trend in

Trend in
quantity

(% pa)

Top

Product

091050 Curry Mozambique


1,091 449 2,430 -8 -1 Zambia
Ghana
091091 Mixtures of United Kingdom
two/more of the (37%)
1,046 191 5,476 63 26
products of different Canada (35%)
headings to this chapter United States (4%)
Source: ITC Trade Statistics

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

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.
6,000,000

5,000,000

4,000,000
Value (R)

3,000,000

2,000,000

1,000,000

0
KwaZulu-Natal Gauteng Western Cape Eastern Cape

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.

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

4,000,000

3,500,000

3,000,000

2,500,000
Value (R)

2,000,000

1,500,000

1,000,000

500,000

0
Western Cape Gauteng KwaZulu-Natal

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

„ SA is a net exporter of basic chilli products (fresh and dried), with Mauritius, Spain, Brazil
and the United States as primary destination countries
„ Exports of fresh products are stagnating, whereas exports of dried products are showing
considerable growth
„ The unit value of chilli products exported is significantly higher than the value of products
imported
„ Exports of dried products dominate exports of fresh/chilled products
„ Imports of both fresh and dried products are growing; with growth in fresh products
double that of dried products
„ 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
„ 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
„ South Africa is a net exporter of mixes, with the UK and Canada being the primary
destination countries

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

Provinces 15

„ Dried products are the most heavily traded type of chilli product across all provinces
„ 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
„ KZN is not a significant exporter of fresh chillies, but also imports relatively low volumes
of fresh products
„ KZN is a strong provincial performer in the export of dried products and curries
„ 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.

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

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:
„ Presence of a large consumer market with high or rapidly increasing disposable incomes
„ Large existing ethnic populations or increase in ethnic populations with preference for
spicy food products
„ Increases in the consumption of convenience food and ready-to-eat food products
„ 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


„ United States of „ France „ China „ general
America „ Germany
„ United Kingdom

United States of America

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Second largest „ Ageing population „ Strong competition „ Highly competitive
importer of „ Relatively high from Mexico - food sector
agricultural goods levels of leading global characterised by
(after EU) population growth exporter of fresh consolidation
„ Leading importer related to chillies „ Increased direct
of fresh, dried and immigration and „ India, Spain and procurement of
further processed high fertility rates Brazil are major products from food
chillies of immigrants suppliers of dried suppliers
„ Second biggest „ Strong growth of or further „ Increased
importer of curries Hispanic processed chillies purchase volumes
population – competing on by retail and
„ Preferences for cost or proximity wholesale buyers
ethnic food related – reliance on
to immigration larger suppliers
„ Increasing able to supply
emphasis on volume and wide
quality of food ranges of products
products „ Sophisticated food
„ High prevalence of manufacturing
convenience sector accounts
eating – almost for one-sixth of US
50% of food manufacturing
expenditure away activity
from home „ Over 80% of
processed food
nationally or
regionally sourced

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

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

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Significant „ Reduction in food „ Spain and UK are „ Mandatory,
importer of fresh preparation time major suppliers of stringent customs
and dried/ground and increased use fresh, dried or duties, sanitary
chillies and curries of easy to further processed inspections and
and mixes use/easy-to-cook chillies and mixes labelling
„ France’s per food and curries – requirements
capita income is „ High prevalence of competing on „ 75% of total
close to that of the convenience proximity French retail food
United States eating sales comes from
„ European Union’s „ Imports are for mass distribution
(EU) most new-to-market, „ Price competition
competitive innovative foods is fierce and there
producer, that are not is heavy pressure
processor, and produced in to observe
exporter of France suppliers’ norms
agricultural and „ Increasing interest „ Retailers are
other food in foreign cuisine looking for well
products and products known branded
products with
promotional
backing
„ Small independent
stores are
contractually
receiving supplies
from central
purchasing offices
„ Importers are
taking less and
less risk
„ 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.

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

Germany

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Western Europe’s „ Increases in the „ Netherlands, „ Very competitive
biggest market for number of working Spain and United market combined
consumer-oriented women and the Kingdom are with stagnant
foods and number of single- major suppliers of growth in retail
beverages person fresh, dried or sales
„ Europe’s largest households further processed „ Retailers often
market for organic „ Large immigrant chillies and mixes charge high listing
products population and curries – fees for products
„ Major importer of „ Strong growth in competing on „ Stringent
fresh, dried and the consumption proximity German/EU food
further processed of convenience law requirements
chillies foods „ EU internal market
„ South Africa „ People spend less results in food
already an time preparing products from the
important supplier meals, which has other EU member
of agricultural increased the states having a
products frequency of competitive
dining out and advantage in the
eating “on the run” German market
„ 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
„ Consumer
concerns about
the environment
and the safety of
the food supply

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

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Significant „ Ageing population „ Netherlands is the „ Concentration of
importer of fresh „ Strong growth of leading supplier of supplier efforts by
chillies ethnic population fresh products – major retailers
„ Leading importer „ Preferences for competing on „ Dominance of a
of curries ethnic food related proximity small group of
„ Major exporter of to immigration „ India is a major local producers in
curries „ Increasing supplier of curries mainstream retail
„ South Africa emphasis on – competing on „ Established
already a major quality of food cost speciality

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

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
trade partner products importers, in
„ High prevalence of particular of hot
convenience sauces
eating „ Significant price
pressure in the
retail sector
„ 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

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Largest producer „ Rapid urbanisation „ Strong competition „ Increasing
of chillies globally „ Rapidly maturing from Asian presence of
„ Leading exporter retail sector countries with foreign brands –
of dried, crushed „ Increasing similar tastes high prevalence of
or ground chillies demand for „ Preference for procuring
convenience and locally sourced ingredients locally
ready-to-cook raw materials for „ Localised
foods processed procurement of
„ Increasing products processed
concerns „ Incentives and products prevalent
regarding food protections to „ Suppliers often
safety domestic obliged to pay
„ Consumers highly participants slotting fees to
price-sensitive growing
hypermarket
sector
„ High cost of
moving produce
domestically
„ Complex food
distribution system
and associated
mark-ups between
layers
„ Large number of
players in fiercely
competitive
market
„ 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.

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

Africa

Size and
Issues related to
characteristics of Consumer trends Competition
market access
market
„ Insufficient „ Strong tastes for „ Countries such as „ “Hassle factor” of
information to hot food in some Malawi, Uganda, supplying African
quantify market countries Ethiopia and countries
„ Some South „ Taste preferences Ghana grow „ Possibility to
African supply of vary from region to chillies leverage off South
spice mixes to region, and „ Zambia and African companies
African markets knowledge of local Mozambique are which distribute to
tastes may be gaining African countries,
required competitiveness in such as Shoprite
„ Widespread fresh chilli
poverty and low production
levels of income „ Investment in
„ Growing pockets paprika projects
of affluence in by aid agencies in
some countries some countries
such as Nigeria

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.

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

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

SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity
Market 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004
000) (tons) exports
ton) (%) (%)
(%)

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

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

Production of green chillies and peppers


CAGR
Country 2002 (tons) 2004 (tons)
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
SA
Value, Unit CAGR in CAGR for
Quantity, share
2004 value value quantity
Supplier 2004 Major markets in
(US$ (US$/ 2000-2004 2000-2004
(tons) imports
000) ton) (%) (%)
(%)
US (26%)
World* 2,296,959 3,192,313 720 10 22 Germany (20%) <0.5
UK (9%)
Germany (35%)
Netherlands 819,165 337,828 2,425 15 5 UK (22%) 0
US (10%)

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

Top exporters and South African supply of HS 070960 Peppers of the genus Capsicum or Pimenta,
fresh or chilled
SA
Value, Unit CAGR in CAGR for
Quantity, share
2004 value value quantity
Supplier 2004 Major markets in
(US$ (US$/ 2000-2004 2000-2004
(tons) imports
000) ton) (%) (%)
(%)
Germany (33%)
France (16%)
Spain 752,913 411,038 1,832 15 3 0
Netherlands
(9%)

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

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

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

Germany (20%)
France 53,505 25,954 2,062 13 2 UK (18%) 0
Italy (15%)

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

Germany (40%)
Netherlands
Turkey 46,196 50,684 911 25 11 0
(21%)
Greece (8%)
Netherlands
(47%)
Belgium 42,647 21,621 1,972 17 12 0
Germany (13%)
UK (8%)
Germany (49%)
Czech Republic
Hungary 35,110 31,192 1,126 12 -6 0
(18%)
Austria (15%)
Japan (59%)
New
16,040 5,254 3,053 20 20 Australia (39%) 0
Zealand
Fiji (1%)
Austria (26%)
Germany 15,891 6,917 2,297 20 6 Finland (17%) 0
Sweden (15%)
Germany (68%)
Greece 15,595 9,093 1,715 54 28 Austria (19%) 0
Albania (8%)
Austria (32%)
Italy 15,293 7,798 1,961 10 -5 Germany (21%) 0
Slovenia (12%)
South Korea
(51%)
China 15,194 66,518 228 110 93 Hong Kong 0
(24%)
Russia (15%)

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

Top exporters and South African supply of HS 070960 Peppers of the genus Capsicum or Pimenta,
fresh or chilled
SA
Value, Unit CAGR in CAGR for
Quantity, share
2004 value value quantity
Supplier 2004 Major markets in
(US$ (US$/ 2000-2004 2000-2004
(tons) imports
000) ton) (%) (%)
(%)
Mauritius (45%)
Seychelles
South Africa 309 340 909 22 2 (18%) N/A
Mozambique
(11%)
*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:


„ Colour
„ Pungency levels
„ Variety
„ 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:


„ South African provinces – Limpopo, North West, Mpumalanga
„ Mozambique
„ 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.

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

The barriers to increased KZN competitiveness relative to regional competitors in fresh


chilli supply can be summarised as follows:
„ High labour costs and labour intensity of harvesting
„ 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
„ Market information on varieties in demand is not readily available to, or used by, growers
„ Unsuitable climate due to greater humidity means lower yields and increased prevalence
of diseases and aflatoxins

The potential comparative advantages for KZN are:


„ 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
SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity
Market 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004
000) (tons) exports
ton) (%) (%)
(%)

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

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

Top import markets and the South African market for HS 090420 Fruits of the
genus Capsicum or Pimenta, dried, crushed or ground
SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity
Market 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004
000) (tons) exports
ton) (%) (%)
(%)

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

*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:
„ Dried paprika rather than ground paprika is increasingly being sourced for further
processing, to avoid contamination of products during the milling stage.
„ 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.

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

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

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

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

SA
Value, Unit CAGR for CAGR for
Quantity, share
2004 value value quantity
Supplier 2004 Major markets in
(US$ (US$/ 2000-2004 2000-2004
(tons) imports
000) ton) (%) (%)
(%)
US (24%)
World* 451,910 - - 10 16 Germany (8%) <0.5
Spain (7%)
Malaysia (25%)
South Korea
China 154,013 98,479 1,564 31 13 (22%) <0.5
Indonesia
(12%)
US (28%)
India 93,082 - - 9 14 Malaysia (19%) 2
Sri Lanka (18%)
US (16%)
Spain 53,737 28,395 1,892 8 6 Germany (11%) 0
France (9%)
Spain (51%)
Peru 50,385 27,543 1,829 59 58 US (33%) 0
Mexico (11%)
Netherlands
(18%)
Germany 18,389 3,756 4,896 19 12 1
UK (11%)
Austria (9%)
Germany (65%)
Brazil 17,254 8,391 2,056 15 16 US (15%) 0
Spain (15%)
Mexico (43%)
US 15,095 7,175 2,104 1 4 Canada (32%) <0.5
UK (5%)
Germany (39%)
Netherlands
Hungary 13,242 3,513 3,769 9 -5 0
(15%)
Austria (14%)
US (95%)
UK (2%)
Mexico 12,728 31,191 408 -7 14 0
Guatemala
(1%)
Germany (21%)
Netherlands 12,168 3,533 3,444 16 8 UK (14%) 2
Austria (9%)
France (56%)
Tunisia 11,372 5,243 2,169 30 28 Libya (30%) 0
Belgium (5%)
Thailand (74%)
Indonesia
Malaysia 7,166 26,468 271 37 53 0
(18%)
Singapore (6%)

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

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

SA
Value, Unit CAGR for CAGR for
Quantity, share
2004 value value quantity
Supplier 2004 Major markets in
(US$ (US$/ 2000-2004 2000-2004
(tons) imports
000) ton) (%) (%)
(%)
Spain (39%)
South Africa 6,418 4,342 1,478 19 8 UK (12%) N/A
Russia (10%)
Japan (70%)
Hong Kong
South Korea 5,439 1,323 4,111 -4 -2 0
(8%)
Taiwan (6%)
*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

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

Stage in value chain


Primary production Average production per hectare (kg/ha) 1,000.00

Farm gate price (US$/kg) 0.80


Total gross farm revenue per hectare 800.00
(US$)
Production Cost (US$/ha)* Seed: 13%
Fertilizer: 47%
Chemicals: 19%
Drying and packing: 13%
Transport: 8%
Total 320.00
Simple gross margin (US$) 480.00
Simple gross margin as percentage of 60
total revenue (%)
Transport to factory Ex Factory price(US$/kg) 0.90
and packaging Ex factory and farm gate price 0.10
differential
Price differential as % of farm gate 12.50
price
Financing costs, Retail price at export destination 2.80
agent’s commissions, US$/Kg)
freight charges, Export retail and ex-factory price 1.90
unloading and terminal differential (US$/Kg)
charges, Price differential as % of ex-factory 211.11
documentation and price for unprocessed paprika
clearance
* 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:
„ Chilli oleoresin: 85 tons
„ Capsicum oleoresins: 204 tons
„ 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

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

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:


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

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

„ 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
SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity
Market 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004
000) (tons) exports
ton) (%) (%)
(%)

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
83 60 1,383 12 16 N/A
Africa

*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

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

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
SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity
Market 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004
000) (tons) exports
ton) (%) (%)
(%)

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

*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:
„ Increased demand for ethnic foods
„ Growing awareness of diverse cultural cuisine
„ Increased use of spices as flavourings rather than artificial flavourings
„ Growth in processed food consumption in some developing markets, such as Eastern
European countries
„ 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

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

Top exporters of HS 091050 Curry


SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity Major
Supplier 2004 (US$ 2004 in
(US$/ 2000- 2000- markets
000) (tons) import
ton) 2004 (%) 2004 (%)
s (%)
UK (17%)
United States
World* 28,827 11,302 2,551 11 11 (18%) <0.5
Singapore
(7%)
UK (34%)
Hong Kong
India 8,189 5,548 1,476 9 6 1
(8%)
US (8%)
Ireland (13%)
Germany
UK 6,675 1,805 3,698 5 5 0
(13%)
France (12%)
US (31%)
Australia
Thailand 5,051 1,737 2,908 19 15 9
(26%)
UK (15%)
Nigeria
(86%)
Switzerland
France 3,317 667 4,973 20 15 0
(6%)
Cote d’Ivoire
(1%)
Singapore
(61%)
Malaysia 3,131 1,376 2,275 5 0 Japan (14%) 0
Australia
(6%)
China (53%)
Taiwan
Japan 2,448 406 6,030 8 17 (16%) 0
South Korea
(11%)
Germany
(36%)
Belgium
Netherlands 1,482 414 3,580 29 17 0
(17%)
Switzerland
(12%)
France (25%)
Netherlands
Germany 1,399 287 4,875 29 15 (22%) 0
Switzerland
(8%)
Mozambique
(67%)
Zambia
South Africa 951 357 2,664 -4 -3 N/A
(13%)
Mauritius
(4%)

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

Top exporters of HS 091050 Curry


SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity Major
Supplier 2004 (US$ 2004 in
(US$/ 2000- 2000- markets
000) (tons) import
ton) 2004 (%) 2004 (%)
s (%)
Denmark
(67%)
Sweden 923 102 9,049 95 11 0
France (8%)
Japan (7%)
Saudi Arabia
(59%)
Pakistan 819 454 1,804 - - 0
UAE (33%)
UK (4%)
Maldives
(27%)
Brunei
Singapore 693 268 2,586 -12 -18 Darussalem 2
(20%)
Malaysia
(12%)
China (47%)
Macau (36%)
Hong Kong 648 232 2,793 5 6 0
Canada
(12%)
UK (18%)
Australia
Sri Lanka 577 215 2,684 5 - 0
(14%)
France (13%)
France (58%)
Netherlands
(14%)
Belgium 414 181 2,287 26 23 Areas not 0
elsewhere
specified
(13%)
*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:

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

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

SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity Major
Supplier 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004 markets
000) (tons) imports
ton) (%) (%)
(%)
Russia (9%)
World* 112,274 31,544 3,559 9 5 Belgium (9%) <0.5
Germany (8%)
Russia (51%)
Austria 28,450 4,443 6,403 61 44 Poland (8%) <0.5
Romania (7%)
Denmark
(11%)
Germany 27,056 5,172 5,231 16 7 1
France (9%)
Romania (9%)
Belgium (30%)
Germany
Netherlands 22,813 6,029 3,784 23 7 0
(28%)
UK (12%)
UK (24%)
India 6,131 3,071 1,996 18 12 US (19%) 1
Canada (10%)
US (38%)
Saudi Arabia
France 7,504 1,051 7,140 14 -1 0
(25%)
Belgium (11%)
Belgium (47%)
Norway (22%)
Denmark 3,480 934 3,726 -1 -8 0
Germany
(13%)
Netherlands
(23%)
Spain 3,274 743 4,406 51 24 0
France (22%)
Italy (17%)
Netherlands
(34%)
Belgium 3,102 691 4,489 54 45 Germany 0
(25%)
France (22%)
Ireland (20%)
US (10%)
UK 3,063 940 3,259 -1 -3 1
Switzerland
(8%)
Canada (48%)
US 2,679 723 3,705 -13 -14 Thailand (9%) 0
Malaysia (5%)
New Zealand
(28%)
Australia 1,594 861 1,851 34 8 Malaysia 0
(22%)
UK (10%)

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

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

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

SA
Unit CAGR for CAGR for
Value, Quantity, share
value value quantity Major
Supplier 2004 (US$ 2004 in
(US$/ 2000-2004 2000-2004 markets
000) (tons) imports
ton) (%) (%)
(%)
US (24%)
Italy 1,283 419 3,062 27 38 UK (17%) 0
Germany (9%)
Australia
(31%)
South Africa 731 938 779 54 73 N/A
Belgium (16%)
Nigeria (12%)
*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:


„ Unique, local recipes and flavours for curries and spice mixtures/blend
„ Capacity advantages over African countries
„ Trade linkages with India through the Indian community and to the UK

The barriers to increasing KZN’s competitiveness can be summarised as follows:


„ 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

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

„ Local production tends be highly seasonal to serve increases in consumption around


fasting months and Christmas
„ 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:


„ India
„ Thailand
„ 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:


„ Austria
„ Germany
„ 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:


„ Table sauces, to be used as an addition to prepared food
„ 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
„ 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:
„ Indian
„ Cajun
„ “Tex-Mex” or Mexican
„ Thai
„ North African

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

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:


„ 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

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

„ Chipotle sauces – has recently become a popular sauce in the US, and is made from a
smoked red jalapeno
„ Jalapeno sauces – used for a wide range of jalapeno sauces and as a base for other
sauces
„ 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.

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

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
„ Winter production possible in „ The basis for competition is „ Overall limited opportunity for
the Makhatini flats area price and proximity to fresh chillies
„ Lack of competitiveness due markets, where inter-regional „ Opportunity to improve quality
to humid climate trade is inefficient due to of supply through providing
„ Lack of market information to transport costs market information and
producers consolidating supply by small
„ Growing competition from and community growers
regional competitors that „ Small market opportunity to
face lower labour costs supply through winter to local
markets
„ 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
„ Lack of competitiveness due „ The basis of competition is „ Limited opportunity for KZN
to humid climate, therefore price, with important quality to be competitive in the
lower quality product where characteristics being colour production of dried chillies,
drying takes longer for paprika and pungency for due to its less suitable
„ KZN cannot compete with other chilli varieties climate, and higher cost of
countries such as India and „ Greater health concerns are production
China that produce on large driving demand for whole „ Potential opportunity exists
scale at low costs dried chillies rather than to increase paprika
„ Furthermore KZN is at a crushed or ground chillies processing capacity due to
disadvantage in comparison „ Demand for high quality the demand for high quality
to countries such as Mexico paprika powder and powder and oleoresins in the
and India which are closer to oleoresins in the EU and US US and EU
major markets
„ Advantage over African
countries in milling
„ South African paprika is
perceived as being of a high
quality
Spice mixtures/curries
„ KZN has strong knowledge „ Due to the wide range of „ Opportunity to supply niche,
of curries and spice quality, competition is driven high quality spice mixtures
mixtures, and has by price in the lower end, and curries to Germany and
developed unique recipes mass market, and by quality the UK
and flavours at the higher end „ Potential opportunity to
„ Well developed trading, „ Growth in consumer demand supply to South Africa and
blending and mixing is driven by new product other African countries due
capacity, often through development and recipes in to milling and blending
outsourcing more developed markets capacity
„ Trade links with Indian „ Strong growth in demand for „ Possibility to use
suppliers and the UK ethnic foods in the EU and Durban/KZN as a brand
the US
„ Growing demand for
convenience foods means
that spices will increasingly
be sourced as a processed
food ingredient rather than

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

KZN competitiveness Market opportunity Conclusions


an end consumer product
„ Consumer demand for niche,
high quality products,
particularly in the UK and
Germany
Sauces/pickles
„ Well developed local agro- „ Strong growth in demand for „ Branded sauces in niche
processing industry ethnic foods in the EU and export markets, including UK
„ Some success in export of the US, particularly in and Germany
branded sauce indicates emerging ethnic cuisines
competitiveness such as Thai, Caribbean and
„ Competitiveness limited for African
pickles, as fresh chillies or „ Growth in developed
chillies in brine are required, markets is driven by new
therefore increasing product development and
transport costs new recipes
„ Consumer demand for niche,
high quality products,
particularly in the UK and
Germany

Based on the analysis above, the following markets for spice mixtures and sauces were
prioritised for further research:
„ United Kingdom
„ Germany
„ 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.

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

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:

„ 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

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

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.

„ 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.

„ 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

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

(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:
„ Large multiples
„ Small multiples
„ Discounters
„ 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.

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

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:
„ 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.
„ 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.
„ 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

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

500

450

400

350

300
Imports (€m)

250

200

150

100

50

0
Lettuce

Sweet maize

Spinach

Fennel
Tomatoes

Mushrooms

Capsicum

Onions

Cabbages

Cucumbers

Peas, beans

Carrots

Courgettes

Asparagus

Egg plants

Artichokes

Truffles
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


CAGR
Unit CAGR
Value Quantity (value)
value (quantity)
Product 2004 2004 2000-
(US$/to 2000-2004
(US$ 000) (tons) 2004
n) (%)
(%)
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

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

Imports of chilli products into the UK


CAGR
Unit CAGR
Value Quantity (value)
value (quantity)
Product 2004 2004 2000-
(US$/to 2000-2004
(US$ 000) (tons) 2004
n) (%)
(%)
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

16,000

14,000

12,000
Imported value (US$ 000)

10,000

8,000

6,000

4,000

2,000

0
HS 07096091 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

2002 2003 2004

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

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

7,000

6,000

5,000
Imported volume (tons)

4,000

3,000

2,000

1,000

0
HS 07096091 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

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.

„ 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.

„ 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

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

­ 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.

„ 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).

Retail price Retail price –


range – multiple deli/speciality
Predominant Preferred
Product type retailers (R store
unit size packaging
equivalent at (R equivalent at
£1:R11.2) £1:R11.2)
Hot table sauces 110ml – 150ml Glass bottle £0.59 - £1.4553 £0.95 - £4.99
(R6.61 – R16.24) (R10.64 –
R55.89)
250ml – 480ml Glass jar £1.85 - £3.50
(R20.72 –
R39.20)
740ml – 1l Glass bottle £1.50 - £2.35
(some items (R16.80 –
measure in g) 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

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

Retail price Retail price –


range – multiple deli/speciality
Predominant Preferred
Product type retailers (R store
unit size packaging
equivalent at (R equivalent at
£1:R11.2) £1:R11.2)
Cook-in sauces 150g – 225g Primarily glass £1.28 - £1.45 £1.60 - 1.80
jars; some cans, (R14.34 – (R17.92 –
plastic tubs and R16.24) R20.16)
420g - 540g foil sachets £0.85 - £2.99 £1.15 - £3.20
(R9.52 – R33.49) (R12.88 –
R35.84)
Dry curry and spice 28g – 46g Various - glass £0.59 - £1.34 -
mixes jars, cylinders/ (R6.61 – R15.01)
60g – 100g drums, plastic £0.44 - £1.92 £1.00 - £2.75
packets, foil (4.92 – R21.50) (R11.20 –
sachets, grinders R30.80)
1kg £2.99 -
(R33.49)
Curry and spice 80g – 150g Glass jars , some £1.37 - £1.40 £1.40
pastes tins (R15.34 – (R15.68)
R15.68)
280g – 425g £1.40 - £1.50 £1.75 - £2.05
(R15.68 – (R19.60 –
R16.80) R22.96)
Chilli pickles/in 95g – 375g Glass jars £1.05 - £2.19 £1.00 - £2.55
brine (sliced or (R11.76 – (R11.20 –
whole) R24.53) R28.56)

Dried chilli – 42g – 190g Packets, boxes, £1.48 - £1.79 £0.95 - £2.85
crushed or glass jars (R16.57 – (R10.64 –
powdered R20.05) R31.92)
Spicy ready-meals / 550g – 620g Cartons or boxes £2.65 - £2.99 -
meal packs (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:
„ Hot sauces:
110ml – 150ml: R4.29 – R10.54
„ Cook-in sauces:
150g – 225g: R9.31 – R10.55
420g – 540g: R6.18 – R21.70
„ 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:
„ 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

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

o Previous sales locations and performance


„ A product sample
„ Trial order: small batch of products, value of £100 (R1,120)
„ Minimum sales to continue product (for sauces): 12 bottles in 6 weeks
„ 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


Specialist vs.
Country of Hot Curries, Recipe
Major Brands Cook-in wider food
Origin table mixtures types/ ethnic
sauces? company
sauces? & pastes? cuisines
Bart Spices Various Specialist – dry
www.bartspices.com Bristol, UK ü ü spice mixes and
curries
Oriental/ Thai Speciality
Oriental
Far East
Blue Dragon condiments &
(incl. ü ü ü
www.bluedragon.com sauces for retail
China)
& food
ingredients
Encona Sauces Primarily Specialist hot
www.enconasauces.co. Cajun and sauces
UK ü
uk Thai

No particular Generalist food &


ethnic recipe condiments -
focus ketchup,
condiments and
US MNC,
Heinz sauces; infant
UK ü
www.heinz.com feeding; and
presence
convenience
meals, frozen
snacks, dried
soups
Homepride, part of No particular Generalist food
Campbell Soup ethnic recipe company
www.homepride.co.uk UK ü focus

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

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

Relevant product types


Specialist vs.
Country of Hot Curries, Recipe
Major Brands Cook-in wider food
Origin table mixtures types/ ethnic
sauces? company
sauces? & pastes? cuisines
Foods group, which sauce
includes Amoy, Rajay,
Lea & Perrins brands)
www.hpfoods.com

Maggi (part of Nestle Generalist food &


Group) condiments
www.nestle.com/Our_B
ü ü ü
rands/Prepared_Foods/
Maggi

Old El Paso (part of Mexican Specialist


Betty Crocker Group) Mexican ready-
www.bettycrocker.com/ ü ü ü to-cook meals
products/prod_oldelpas
o.asp
No particular McCormick –
ethnic recipe herbs, spices,
McCormick focus food service &
www.mccormick.com US MNC industrial
Schwartz subsidiary Canada/ ü ü flavourants
www.schwartz.co.uk UK Schwartz –
specialist in
herbs, spices &
seasonings
Patak’s (family owned) Indian Specialist Indian
UK ü ü ü
www.pataks.co.uk & ethnic foods
Premier Foods No particular Generalist food
(produce private label ethnic recipe products
for retailers) focus
UK ü ü
www.premierfoods.co.u
k

Unilever Bestfoods No particular Generalist food


(including Colmans, ethnic recipe products,
Knorr, Bird’s Eye, focus condiments &
US/UK ü ü
“Chicken Tonight” sauces
brands)
www.unilever.com

Relevant product types


Curries, Recipe Specialist vs.
Country of
Secondary Brands Hot table Cooking mixtures types / wider food
Origin
sauces? sauces? & ethnic company
pastes? cuisines
Hong Asian Specialists in
Amoy
Kong, UK ü ü ü Asian condiments
www.amoy.co.uk
marketing
Cajun & Specialist hot
Mexican sauces, also
Crystal (part of Baumer US (New
ü produce for
Foods Group) Orleans)
retailer private
label
Discovery Foods, main Primarily Specialists –
UK ü Cajun, spicy foods
brand is Elephant Atta

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

Relevant product types


Curries, Recipe Specialist vs.
Country of
Secondary Brands Hot table Cooking mixtures types / wider food
Origin
sauces? sauces? & ethnic company
pastes? cuisines
(family-owned) Mexican,
www.discoveryfoods.co
.uk
Dunns River (part of Caribbean Specialist hot
Jamaica ü
Beasley’s brand) sauces
- Specialist
Fiddes Payne seasonings
UK ü
www.fiddespayne.co.uk (particular focus
on grinders)
Geeta’s Indian Specialist ethnic
(part of Rhamar group) UK ü ü ü ambient foods
www.rhamar.com
Sauce specialists
Lea & Perrin’s (best know for
UK ü
www.leaperrins.com Worcestershire
Sauce)
Malaysia/ Eastern Hot sauce
Lingham’s ü
UK specialist
Food service
Lion Foods UK ü ü
specialists
Oriental Specialist –
Loyd Grossman (Hong Kong, cooking sauces &
Sauces, part of Premier Thai, accompaniments
UK ü
www.loydgrossmansau Singaporean,
ces.com Malaysian),
Indian, Italian
Nando’s Portuguese / Specialist
www.Nando’s.co.uk SA ü ü African

Asian Specialist in
ethnic chilled &
Northern Foods frozen ready
www.northern- UK ü meals &
foods.co.uk convenience
foods – own label
& branded
Indian, SE
Sharwoods Asian (Malay
ü ü
& Thai)
Chinese
Indian Specialised
Shere Khan (head chef
UK ü “authentic”
sauces)
recipes
“South African Specialist
SA ü
Sauces””
Indian cooking
Tilda Tilda ü
sauces
Uncle Ben’s, part of Specialist hot
ü
Masterfoods sauces
Specialist hot
Walkers Wood Caribbean ü Caribbean
sauces
Caribbean Specialist hot
Windmill Barbados ü
sauces

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

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

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

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
Medium
283g

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:


„ UK independent grocery stores distributor – Petty Wood (www.pettywood.co.uk)
„ Netherlands distributor – Boas (www.boas.nl)
„ US – World Food (www.worldfood.com)
„ Australia and New Zealand – General Mills (www.genmills.com)
„ Ireland distributor – BR Marketing (www.brmark.ie)
„ Canada – Patak’s Canada (www.pataks.ca)
„ France distributor – Distriborg (www.distriborg.com)
„ Austria distributor – Winkelbauer (www.winkelbauer.com)
„ Spain distributor – Ofistrade SA (www.ofistrade.com)
„ 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.

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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

Export agent in
source market

UK–based agent
Co-operative Retail
Trading Group –
Superstores/ central buying office
Supermarkets

Independent Co-ops
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

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

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:
„ Concentration of supplier efforts by major retailers
„ Dominance of a small group of local producers in mainstream retail
„ Established speciality importers, in particular in hot sauces
„ Price pressure
„ 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:
„ Have greater diversity of suppliers
„ Demonstrate a greater range of country of origin
„ Have higher price points for the same types of products

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

„ 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

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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:
„ Hypermarkets - 25% of market share
o There is an emphasis on self-service, and a significant amount of nonfood products
„ 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.
„ Discounters - 37% of market share
o These stores offer a limited range of products at low prices, with a high turnover
rate.
„ 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

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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:
„ Vierlinden, owned by Rewe-Group
„ Alnatura
„ 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:

Leisure
7%
Full service
9%

Retail
9%

Fast food
52%

Travel
23%

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

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Other
School, universities
4%
4%

Nursing/retirement homes
12%

Company restaurants
53%

Hospitals
27%

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:

800

700

600

500

400
Imports (€m)

300

200

100

0
Fennel
Capsicum
Tomatoes

Cucumbers

Mushrooms

Onions

Cabbages

Carrots

Asparagus

Courgettes

Egg plants

Peas, beans

Artichokes

Truffles
Lettuce

Spinach

Sweet maize

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

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Imports of chilli products into Germany


CAGR
Unit CAGR Growth
Value Quantity (value)
value (quantity) (value)
Product 2004 2004 2000-
(US$/to 2000-2004 2003-2004
(US$ 000) (tons) 2004
n) (%) (%)
(%)
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

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

35,000

30,000

25,000
Imported value (US$ 000)

20,000

15,000

10,000

5,000

0
HS 07096091 HS 07096099 HS 09042030 HS 09042090 HS 09109110 HS 09109190 HS 091050

2002 2003 2004

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

14,000

12,000

10,000
Imported volume (tons)

8,000

6,000

4,000

2,000

0
HS 07096091 HS 07096099 HS 09042030 HS 09042090 HS09109110 HS 09109190 HS 091050

2002 2003 2004

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

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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.

„ 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.
„ 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.
„ 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).

Retail price
range – multiple
Predominant
Product type Packaging retailers (R
unit size
equivalent at
€1:R7.85)
Hot table sauces 85ml – 250ml Glass bottle, jars €1.09 – €2.49
for salsa (R8.56 – R19.55)
400ml Glass bottle €1.09 (R8.56)

Cook-in sauces 88g Glass jars and €0.69 (R5.42)


200ml sachets, glass €1.79 – €2.09
bottles (R14.05 –
R16.41)
Dry curry and spice 90g Various - glass €2.69 (R21.12)
mixes jars, cylinders/
drums, plastic
packets, foil
sachets, grinders

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

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

Retail price
range – multiple
Predominant
Product type Packaging retailers (R
unit size
equivalent at
€1:R7.85)
Curry paste 110g Glass jar €2.49 (R19.55)

Dried chilli – 60g Packets €2.69 (R21.12)


crushed or
powdered

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:
„ Hot sauces:
85ml – 250ml: R5.49 – R12.53
400ml: R5.49
„ Cook-in sauces:
88g: R3.47
200ml: R9.01 – R10.52
„ 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:
„ Nestle
„ Kraft
„ Moksel (produces spices for use in the meat industry)
„ 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

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

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:
„ National tastes are distinctive, and local manufacturers are best placed to produce the
most appropriate flavours
„ 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
„ Industrial food manufacturers require reliable delivery and consistent quality, and
therefore prefer to source from EU processors
„ 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.

Exporters Domestic suppliers

Importers, agents,
distributors

Buying groups, wholesalers

Hypermarkets

Supermarkets

Discounters

Traditional stores

Figure 10.10: German retail food distribution sector for export products

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10.2.5 Challenges to entering the German market and implications for KZN

Challenges to entering the German market are the following:


„ Concentration of supplier efforts by major retailers
„ Well-established spice trade with established supplier relationships
„ Sophistication of food processing sector and tendency to manufacture products locally
restricts opportunities to supply finished products such as sauces
„ 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:
„ Measurements in metric
„ Ingredients and additives
„ Shelf-life date
„ Name and address of manufacturer or importer within the EU
„ 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:
„ Exhibits at major food shows, such as ANUGA in Germany and SIAL in France
„ In-store promotions
„ 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

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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:
„ African/Black: 75%
„ White: 14%
„ Coloured: 9%
„ 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:
„ Unilever
„ Nestle
„ Kellogg
„ HJ Heinz
„ 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

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

„ 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:
„ Convenience stores
„ General dealers
„ Specialty stores that handle one product line
„ Boutiques
„ Chain stores, including supermarkets and hypermarkets
„ Department stores
„ Cash and carry wholesale-retail outlets
„ Co-operative stores in rural areas
„ 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:

Target market
Retailer Market share (%)
(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

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

350,000

300,000

250,000
Imported value (US$)

200,000

150,000

100,000

50,000

0
Peas, beans

Peppers

Asparagus

Mushrooms

Onions

Truffles

Tomatoes

Cucumbers
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


CAGR
Unit CAGR
Value Quantity (value)
value (quantity)
Product 2004 2004 2000-
(US$/ton 2000-2004
(US$ 000) (tons) 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

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6000

5000
Imported value (US$ 000)

4000

3000

2000

1000

0
HS 070960 HS 090420 HS 091091 HS 091050

2002 2003 2004

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

7000

6000

5000
Imported volume (tons)

4000

3000

2000

1000

0
HS 070960 HS 090420 HS 091091 HS 091050

2002 2003 2004

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

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10.3.2 Product–specific trends

„ 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
„ 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:

Retail price –
Retail price
Predominant Preferred deli/speciality
Product type range – multiple
unit size packaging store
retailers (R)
(R)
Hot table sauces79 60ml – 125ml Glass bottles 11.69 – 13.49* 14.95 – 29.95**
250ml – 375ml Glass or plastic 9.29 – 18.29 16.15 - 38.00
bottles
Cook-in sauces 200ml – 250ml Glass bottles, 9.99 – 19.99 14.20 – 34.95
plastic pouches
500ml – 750ml Plastic bottles 13.99 -
410g – 500g Glass jars 12.99 - 17.69 -
Dry curry and spice 7g Paper sachets 0.99 -
mixes 10g – 100g Plastic sachets 1.99 – 7.55 8.95
and/or boxes
200g Boxes 13.99 -
100ml Grinders/shakers 15.35 – 19.49 10.85 – 22.95
72 - 116g Tins 19.75 – 33.80
Curry and spice 50g – 150g Sachets, glass 6.99 – 14.49 12.55
pastes 280g – 430g jars 13.99 27.40 – 29.80

Chilli pickles/in 95g – 375g Glass jars 16.99 – 18.39 -


brine (sliced or
whole)

Dried chilli – 100ml Glass shakers, 6.99 – 11.29 -


crushed or boxes for refills
powdered
* 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

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„ 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
„ 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
„ 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:

„ Hot sauces
o 60ml – 125ml: R10.83 – R21.70
o 250ml – 375ml: R11.70 – R27.54
„ Cook-in sauces
o 200ml – 250ml: R10.29 – R25.33
„ 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:


„ Order sizes would be approximately 12 items
„ 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:

Relevant product types


Specialist vs.
Country of Hot Curries, Recipe
Major Brands Cook-in wider food
Origin table mixtures types/ ethnic
sauces? company
sauces? & pastes? cuisines
South Mexican Specialist sauce
Bandito’s P P
Africa company
Portuguese Wider food
South
Nando’s P P company
Africa
Part of Unilever,
South
Robertson’s P wider food
Africa
company
Eastern Sauces
Suree Thailand P P

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

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

Relevant product types


Specialist vs.
Country of Hot Curries, Recipe
Major Brands Cook-in wider food
Origin table mixtures types/ ethnic
sauces? company
sauces? & pastes? cuisines
Specialist, owned
Tabasco US P by McIllhenny
Company
Specialist herb
The Cape Herb and South
P and spice
Spice Company Africa
company
South Part of SAD, part
Wellington’s P P
Africa of Pioneer Foods

Relevant product types


Curries, Recipe Specialist vs.
Country of
Secondary Brands Hot table Cooking mixtures types / wider food
Origin
sauces? sauces? & ethnic company
pastes? cuisines
Thai Wider foods
company,
A Taste of Thai Thailand P P P
specialising in
Thai products
South Specialist
Bushman’s P P
Africa
Part of Nestle,
South
Crosse & Blackwell P wider food
Africa
company
Paarman Foods,
wider sauces,
South
Ina Paarman P P P dressings and
Africa
seasonings
company
Part of Unilever,
South
Knorr P P wider food
Africa
company
KZN, South Wider foods
Pakco P P company
Africa
KZN, South Thai Specialist
Taste of Thailand P
Africa
South African Specialist
Ukuva iAfrica P P P
Africa

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

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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

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

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.

Exporters Domestic suppliers

Importers, agents, Wholesalers, cooperatives


distributors

Supermarkets

Convenience stores

Independent stores

Informal stores

Source: South Africa Retail Food Sector Report, USDA FAS


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

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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:


„ Provision of sauces and mixtures based on chilli varieties
„ Greater value added products, such as cooking sauces that offer a specific “meal
solution”, including:
o Marinades
o Pasta sauces
o Curry sauces
„ Products that have an appealing story, which may be based on ethnicity and origin
„ Innovative spice mixtures and curry blends with appealing packaging

81
Food price report, Competition Commission, 2004

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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:


„ Broad-Based Black Economic Empowerment Framework for Agriculture (AgriBEE)
„ Land Redistribution for Agricultural Development (LRAD) programme
„ 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:
„ Regional arrangements of SACU and SADC
„ Trade agreements including the Trade, Development and Co-operation Agreement
(TDCA) between the European Community and South Africa
„ Planned trade agreements between the US and SACU, AGOA
„ Planned preferential trade agreement between SACU and MERCOSUR
„ Proposed free trade agreements between SACU and India, and SACU and China
„ 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:
„ Regulations around packaging – materials, labelling, traceability, recycling
„ 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.

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

11.1.2 Economic environment

The South African economic climate is broadly characterised by the following:


„ Increasing openness to neighbouring countries and regional markets, and other major
economies such as the EU and US
„ Steady macroeconomic growth, increasing disposable incomes and a growing middle
class
„ Current strength of the Rand that encourages imports
„ Dual agricultural sector consisting of both well-established commercial farms and large
numbers of subsistence farmers
„ 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:


„ A high level of diversity of industrial activities
„ Increasing importance of business and financial services
„ Its role as a logistics gateway, through well developed transport and logistics
infrastructure
„ Concentration of economic activity in Durban, Pietermaritzburg and Richards Bay
„ 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:
„ 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
„ Chillies are often grown speculatively as a cash crop, therefore leading to price
fluctuations and uncertainty in the market
„ Furthermore, contractions in supply due to factors such as drought and contamination
lead to price fluctuations
„ The market for dried and ground chillies is driven by colour and heat level
„ Due to low costs for transporting dried chillies, producers in KZN are in direct
competition with low-priced Indian imports
„ 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:


„ 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
„ Concerns about contaminants and artificial dyes, particularly following the Sudan Red
scare, mean that consumers are more conscious of health and food safety
„ Growing demand for convenience foods amongst the general population and rapid
growth in ready-meals offered by higher end South African retailers
„ This growth in convenience foods is driving demand for spices and sauces as
ingredients for industrial food production rather than as end consumer goods
„ Growing demand for ethnic products in overseas markets, including Indian, Thai and
African foods, which is driving demand for spice mixtures, curries, ethnic sauces
„ 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

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

Social trends that affect the production of chilli products include the following:
„ 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
„ Community growers lack skills and growing infrastructure, and therefore the quality of
produce may be of a lower standard than that of commercial farmers
„ 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 „ Seeds are developed and supplied by major seed companies such
as Starke Ayres, Hygrotech and Mayford
„ Most commercial farmers plant hybrid varieties, which produce
higher yields and higher quality of fruit, and have a higher
resistance to disease
„ New hybrids are developed and introduced to the market regularly
Chemicals „ Use of chemicals increase the yield of chillies; chemicals used
include:
o Herbicides
o Insecticides
o Fungicides
o Adjuvants
o Fertilisers
Irrigation „ Irrigation is mostly required for contract growing
„ Preferred method is drip irrigation
„ Chillies should receive about 600mm per season
„ High installation costs – at least R12 000/ha
Harvesting „ Harvesting is highly labour-intensive
„ In most countries, harvesting is done by hand, especially in
countries such as India and China in which labour is relatively
cheaper
„ However some countries such as Australia have sought to develop
methods whereby fruit may be harvested by machine
„ 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 „ Drying machines can increase quality in humid conditions
„ Drying machines can serve about 15 ha
„ The use of drying machines is inhibited where 3 phase electricity is
not available in rural areas
„ There are lower cost alternatives available that make use of solar
power, however these may not be sufficient in humid conditions
„ Alternatively, coal and gas dryers can be developed
Further processing
Milling „ KZN has a large capacity for milling
„ Milling may often be outsourced where a particular manufacturer
does not have sufficient capacity
„ Furthermore, milling of chillies may often be outsourced as it

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

creates an unpleasant work environment


„ Milling equipment can cost between R20,000 and R100,000,
depending on capacity and quality
Oleoresin extraction „ This is done through extraction using a solvent such as hexane
„ Supply from approximately 500ha of paprika production is needed
to make an extraction plant viable
Sauce production „ Can be done on a fairly small scale, e.g. home based industry
Packaging „ Glass bottles can be imported at a lower price than at which they
are domestically available
„ Currently a wide range of packaging is used, depending on a the
product’s quality and target market
Quality and colour testing „ Inspection of colour of dried pods done by eye
„ A spectrophotometer is used to test a product’s colour
„ Irradiation is used to remove bacteria and organisms
„ 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:

Marketing
Industry Skills
Finance Technical and export
coordination development
assistance
Government
KZN Department of P P
Economic Development
Municipalities P P
TIKZN P
National and Provincial P P P
Departments of
Agriculture
Agricultural Research P
Council
AgriSETA P
National Agricultural P
Marketing Council
(NAMC)
Standards South Africa P
CSIR Biosciences P
PPECB P P
Department of Health P
Industry
NAFU P
Kwanalu P
Community growing P
groups (e.g. Spice
Growers Association)
AgriSA P
SA Veg P P
Individual commercial
entities
Retailer associations P
(e.g. SA Council of
Retailers)

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

Marketing
Industry Skills
Finance Technical and export
coordination development
assistance
Food processor P
associations (e.g. SA
Agricultural Processors
Association)
FAWU P
Development Finance Institutions
Land Bank P
IDC P
Ithala Development P
Corporation
DBSA P
Other
Promoting Agribusiness P
Linkages (PAL) / South
African International
Business Linkages
(SAIBL)
Universities and training P P
colleges
Agricultural training P
colleges (e.g. Cedara
and Owen Sithole)
Durban Institute of P P
Technology

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:
„ Providing economic information
„ Contributing to the formulation of economic policy and strategy
„ Facilitating local economic development
„ Promoting rural economic development
„ Developing tourism as a key sector of the economy
„ Facilitating an increase in trade between the province and other economic regions
„ Promoting fixed investment into the province
„ 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

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coordination of support to emerging farmers. The organisation provides support to farmers in


terms of:
„ Technical advice on growing
„ Information on inputs and liaising with input suppliers, including nurseries and chemicals
companies
„ Budget planning for growers
„ Liaising with market and facilitating contract growing
„ 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.

„ 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.
„ 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.
„ 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.
„ 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.
„ 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:
„ 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

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Increasing humidity levels associated with climate change affect the efficiency of
o
drying chillies and necessitate the use of drying machines
o Changes in microclimates may render areas currently suitable for production
unsuitable
„ 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
„ Well developed fresh produce markets, „ Possible production of organic chillies - demand
especially the Durban market likely to continue increasing
„ Local Indian community is a robust market with „ Greater development of cash crop growing
a taste for hot foods and chillies in particular o More informed timing of planting
o Varieties consumed tend to be hotter than o Better awareness of varieties in demand
other local markets (e.g. Gauteng) „ Contract growing – more lucrative and
„ Winter growing and all-year harvesting is sustainable than cash crop growing
possible in certain areas such as the o Opportunities for facilitation of contracting
Makhathini Flats „ Growing for processors requiring fresh rather
than dried inputs – less competition from other
countries
„ Growing and supplying of niche varieties –
processors source smaller input amounts
locally if available
Weaknesses Threats
„ General climate disadvantages – high humidity, „ Increasing imports from neighbouring producers
inland frosts, inconsistent rainfall such as Mozambique
„ High labour costs „ Possibility of increasing dominance of other
o Labour intensity of harvesting further provinces – closer proximity to main domestic
increases costs markets
„ Growers lack market knowledge – poor „ Foreign market standards and regulations for
decisions regarding planting times and varieties agricultural produce and products further down
„ Possible lack of long term commitment of the value chain
farmers and cash crop approach to growing o Increasingly technical and complex
o Volatile prices on fresh markets further regulations could further inhibit the industry
discourage growing commitments
„ Lack of irrigation infrastructure inhibits cash
crop growers and limits contract growing
opportunities
„ Few benefits filter upstream (from processors to
growers)

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

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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
„ Some advanced processing capacity already „ Further contracting for products of basic on-
exists, e.g. milling facilities farm processing
„ Some established growing contracts for basic o Opportunities for facilitation of contracts
processed products such as dried chillies „ Value in more advanced processing systems on
farms (e.g. drying machines)
„ Grouping growers for combined drying/milling
o Capture more value for growers
o Create economies of scale
„ Paprika markets – supply of dried/ground
paprika for manufacture of oleoresins locally
and internationally
„ Lack of trust in Asian imports post-Sudan Red
scare
„ Trend of more imports from Asia in a whole
dried form, due to quality concerns (local milling
opportunity)
Weaknesses Threats
„ Humid coastal climates „ Continued growth of Indian imports of dried
o Susceptibility to moulds and aflatoxins chillies
o Longer drying times and decreased quality „ Future regional processing capacity
„ Lack of equipment and supporting infrastructure „ Shift of processing chillies to overseas markets,
o Basic processing equipment such as drying due to lower cost of packaging and proximity to
machines markets
o Three phase electricity
„ Lack of basic growing infrastructure (such as
irrigation) limits contract opportunities for on-
farm basic processors (see SWOT for fresh
chillies)
„ Lack of finance for equipment and infrastructure
„ Growers do not consider dried prices as
justifying investment in drying machines for
basic on-farm processing
„ Processing facilities generally located closer to
growing sites – KZN at possible disadvantage
„ SA logistical disadvantage due to location for
entrance into EU and US 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

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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
„ Vibrant, developed local spice industry „ Further development and growth in exports of
o Many spice traders and spice works blends, mixtures, and curries
o Active home industry o Niche opportunities for branded products in
„ Unique local recipes/flavours and skills (through foreign markets
the Indian community) o Marketing of unique local flavours and
„ Some existing milling, mixing/blending capacity recipes
„ Capacity advantages for SA over other African „ Further brand development:
countries o African/Indian brand internationally
„ Trade linkages with UK and India through o Durban/KZN brand for SA market
Indian community „ Wider trading linkages, relationships
Weaknesses Threats
„ Currently low export penetration (although „ Difficulty of matching products to specific
growing) and little experience in export markets foreign tastes and preferences
„ Lack of competitiveness further up value chain o Fast changing trends and tastes create
increases costs additional risks
o High cost of locally produced chilli inputs o Local flavours and recipes may be
relative to imported product unpalatable for foreign markets
„ Local demand extremely seasonal – fasting „ Exporting risks arising from use of distributors,
months and religious days, festivals required scale, exchange rate fluctuations, etc.
„ Risks of importing of inputs (e.g. dried chillies) –
global price shifts, exchange rate fluctuations,
etc.
„ 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

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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
„ Some existing local sauce production capacity „ Further development and growth in exports of
„ Some KZN and SA companies successful hot sauces and cook-in sauces
globally in sauces production and export o Niche opportunities for branded products in
foreign markets (e.g. UK, Germany)
„ Further development of convenience food and
ethnic foods for local and export market
„ Production of sauce domestically to be bottled
at market
Weaknesses Threats
„ Limited understanding of global markets „ Difficulty matching products to specific foreign
„ Low levels of market penetration tastes and preferences
„ Limited scale of production currently – local o Fast changing trends and tastes create
market is relatively small additional risks
„ Lack of competitiveness further up value chain o Local flavours and recipes may be
increases costs unpalatable for foreign markets
o High cost of locally produced chilli inputs „ Exporting risks – distributors, required scale,
relative to imported product currency value, etc.
„ Limited recipe development, lack of „ Importing of inputs (e.g. dried chillies) risks –
professional development of flavours/recipes global price shifts, currency value changes, etc.
„ Weight of pickles – higher freight costs a barrier o Increased costs of packaging (e.g. locally
to export produced bottles) can raise prices
significantly
„ 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

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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:
„ 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)
„ 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
„ 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
„ 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

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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

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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
„ Farrow Irrigation and no electricity costs
„ No equipment or capital costs repayment
„ All practices are contracted out; no insurance and no profit tax
„ Plant own seedlings from hybrid seed (Thai, Skyline and Serrano. Indigenous African Bird's Eye seed is also planted via seedlings)

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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:

„ General inspection on the identity of certain herbs & spices at macroscopic and
microscopic levels
„ Inspection for any foreign substances or materials that could be accidentally mixed with
the products
„ Inspection on major chemical elements or solutions used to extract the core ingredients
of herbal medicine, i.e. alcohol / water extractive solution
„ Inspection on moisture retained-evaporated ratio, or the drying loss, after the drying
process. The evaporated moisture must not exceed the stated ratio.
„ 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.
„ Inspection for any insecticides, metallic chips, or chemical elements that may be mixed
in with the product
„ Inspection for contamination and other unclean substances

European Union

Phytosanitary Certificate
„ The phytosanitary certificate is required for imported plants and agricultural product.
Canned goods and frozen food are exempted.
„ 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:

„ Chemical and physical analysis


„ Contaminants/residues
„ Purity
„ Sensory properties
„ Packaging
„ 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:
„ Country of origin of the product
„ Nature of the material (e.g. whole, ground or crushed)
„ Type of spice
„ 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

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Sampling where this is deemed necessary following the assessment of risk:


„ 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.
„ 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.
„ 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:
„ 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:


„ Any non-conforming materials must be clearly labelled, segregated and accounted for
„ The supplier should be informed
„ The relevant regulatory authorities must be notified
„ The affected materials should be disposed of appropriately, taking into account any
potential insurance requirements
„ 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:


„ Butter Yellow
„ Orange II
„ Para Red
„ Rhodamine B
„ Sudan I
„ Sudan II
„ Sudan III
„ Sudan IV
„ Sudan Orange G
„ Sudan Red B

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Appendix D: Map of the UK with distribution of Indian population

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Appendix E: Price points for chilli-based products in selected UK retailers

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
distributor of
54%
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
Hong Kong,
Sainsbury’s UK marketing
Thai Chilli Sauce, Amoy 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
Contains chilli puree and
Thai Chilli Sauce, Sharwoods Malaysia 150ml £1.05 R 11.76 R 7.64 paprika extract
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%)
142ml glass
Hot Pepper Sauce, Encona UK bottle £0.95 R 10.64 R 6.91
Contains Cayenne Pepper,
125ml glass Paprika, Serrano Chillies,
Waitrose Hot Peri-Peri Sauce, Nando’s South Africa bottle £1.45 R 16.24 R 10.55 African Birds Eye Chillies
57ml glass
Pepper Sauce, Tabasco US bottle £1.39 R 15.57 R 10.11
Chilli Sauce, WTR Cook's 155g glass
Ingredients UK bottle £1.39 R 15.57 R 10.11

Tesco EU, UK 226g glass


Hot Salsa, Old El Paso distributor jar £1.48 R 16.58 R 10.76
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Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
distributor of
54%

500g glass
Chilli Sauce Hot, Uncle Ben's US 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

150ml glass
Red pepper Sauce, Tabasco US 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, 142ml glass


Encona UK bottle £0.89 R 9.97 R 6.47

West Indian Hot Papaya Sauce, 142ml glass


Encona UK 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

Asda Red pepper Sauce, Tabasco, G


Costa US 60ml £1.68 R 18.82 R 12.22

Chilli Sauce, HP UK 415g £1.33 R 14.90 R 9.67

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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

135g glass
Hot Peri-Peri Sauce, Nando’s South Africa 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
142ml glass
Thai Sweet Chilli Sauce, Encona UK 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
Wally's Sambal oelek, Conimex 200g £2.05 R 22.96 R 14.91
Delicatessen,
Cardiff 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
Scotch Bonnet Sauce, Scorchin' 118ml £2.60 R 29.12 R 18.91

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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
Lupe Pinto's
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
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

Food Ferry 57ml glass


Tabasco US bottle £1.59 R 17.81 R 11.56
Thai Sweet Chilli Dipping Sauce,
Blue Dragon Far East 190ml £1.45 R 16.24 R 10.55
Cooking/stir-in sauces – major retailers

Sainsbury’s 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
Chilli Con Carne Cooking Sauce -
Own Label- Be Good to Yourself
Range UK 500g jar £1.29 R 14.45 R 9.38
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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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, Includes both curry paste
Patak UK 425g jar £1.99 R 22.29 R 14.47 and red chillies (0.2%)
includes both curry paste
Mexican Sauce, Discovery UK 360g jar £1.59 R 17.81 R 11.56 and red chillies
Contains both paprika
Texan Fajitas Seasoning & Sauce, extract (as colourant) and
Discovery UK 360g jar £1.79 R 20.05 R 13.02 dried crushed chilli
Includes 5% jalapeno
Hot Peri-Peri Cooking Sauce, chillies, as well as dried
Nando’s South Africa 125ml £1.43 R 16.02 R 10.40 chilli and paprika
500g
Spicy Durban Curry Cooking vacuum
Sauce, Something South African South Africa sachet £1.49 R 16.69 R 10.84 Contains dried chilli
Contains bird's eye chilli,
350g plastic cayenne pepper, serrano
Arrabiata Stir-In Sauce, Own Label UK pot £1.99 R 22.29 R 14.47 chillies and paprika
Waitrose Jalfrezi Cooking Sauce, The Curry 475g plastic
Sauce Co. UK pot £2.99 R 33.49 R 21.75
Thai Green Curry Cooking Sauce, 475g plastic
The Curry Sauce Co. pot £2.99 R 33.49 R 21.75 0.4% red chilli
Contains red and green
Tesco jalapeno peppers - dried
Spice & Stir Jalfrezi, Geetas 350g £1.29 R 14.45 R 9.38 and pureed
Balti Sauce, Loyd Grossman UK 425g jar £1.96 R 21.95 R 14.25 Contains green chillies
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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
distributor of
54%
Madras Sauce, Loyd Grossman UK 425g jar £1.96 R 21.95 R 14.25
540g glass
Jalfrezi Cooking Sauce, Patak’s UK 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 - 350g glass Chilli powder (3%) and
"Finest" Range UK jar £1.49 R 16.69 R 10.84 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) 425g glass
Sharwoods jar £1.48 R 16.58 R 10.76
Chillies (2%), paprika
Red Thai Curry Sauce, own label, 350g glass extract as a colourant,
"Finest" range UK jar £1.49 R 16.69 R 10.84 kibbled chilli (0.5%)
Asda 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
Concentrated hot Madras curry
sauce, Patak's UK 283g can £0.71 R 7.95 R 5.16
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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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
226g glass
Hot thick salsa sauce, Old El Paso US jar £1.48 R 16.58 R 10.76
500g glass
Hot Chilli Sauce, Uncle Ben's US 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
Wally's
Delicatessen, Madras Curry Sauce,
Cardiff Veeraswamy's 390g £1.85 R 20.72 R 13.45
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
Lupe Pinto's Red jalapeno salsa Mexico 465g £3.20 R 35.84 R 23.27

Food Ferry Chilli con carne Sauce, Discovery 370g jar £2.29 R 25.65 R 16.65
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
Sainsbury's 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
EU, UK
Chilli Seasoning Mix, Old El Paso 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
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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
distributor of
54%
Contains paprika, chilli
113g glass powder (5%) and cayenne
Indian Curry Powder, Sharwoods UK Company jar £1.15 R 12.88 R 8.36 pepper
283g glass 3.9% chilli pepper, also
Madras Curry Paste, Patak's UK jar £1.40 R 15.68 R 10.18 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
Tesco 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, 100g
Dunns River US cylinder £0.89 R 9.97 R 6.47
Hot & Spicy Chicken Fry Mix
(Caribbean), Tropics 300g £1.99 R 22.29 R 14.47
Asda 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
Cajun rub - Fiddes Payne 70g £1.68 R 18.82 R 12.22

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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 408g plastic
Tiger tub £2.05 R 22.96 R 14.91
Wally's
Delicatessen, Asian special curry powder, own
Cardiff 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
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
Lupe Pinto's
Caribbean Hot Curry Powder,
Dunns River 100g £1.00 R 11.20 R 7.27
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
Sainsbury's Sliced Jalapenos, pickled,
Discovery Foods UK 200g jar £1.09 R 12.21 R 7.93
EU, UK
Jalapenos, pickled, Old El Paso distributor 215g jar £1.29 R 14.45 R 9.38

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
distributor of
54%
Enchilada meal kit (corn tortillas,
spice mix, tomato sauce), Old El EU, UK
Paso 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
Spice mix includes rusk,
salt, spices (chili powder,
paprika, cayenne pepper,
cumin, black pepper),
brown sugar, onion powder,
garlic powder, anti-caking
Ready meals - Chilli Con Carne, agent: E551, paprika -
own label UK 550g carton £2.99 R 33.49 R 21.75 extract, herb.
Ready meals - chicken fajitas, own
label UK 550g carton £3.99 R 44.69 R 29.02
Waitrose
includes jalapeno and
Fresh hot chilli, Bart Spices UK Company 95g glass jar £1.39 R 15.57 R 10.11 chipotle chillies
Contains jalapeno chillies,
Chopped chilli WTR Cooks 180g glass chilli sauce and paprika
ingredients UK jar £1.69 R 18.93 R 12.29 extract
Piri piri chillies in brine WTR Cooks 130g glass Red chillies, including
ingredients UK jar £1.05 R 11.76 R 7.64 seeds, in sunflower oil
Sliced Jalapenos, pickled,
Discovery Foods UK 200g jar £1.29 R 14.45 R 9.38
Basque Hot Peppers, Rioverde 300g jar £1.09 R 12.21 R 7.93
Tesco 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 EU, UK
Paso distributor 620g box £2.65 R 29.68 R 19.27
Red chillies, English Provender
Very Lazy 190g £1.78 R 19.94 R 12.95

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
R
landed price,
equivalent
Country of based on total
UK retail price @ Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(£) exchange content (where available)
available) retailer &
rate of
importer/
£1:R11.2
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 Pepperdillo's - sweet chilli peppers Southern
Gourmet (pickled) Africa 420g jar £2.19 R 24.53 R 15.93
Jalapenos, pickled Mexico 200g jar £1.59 R 17.81 R 11.56

Food Ferry Chipotle dried chillies Mexico 60g packet £2.75 R 30.80 R 20.00
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
Wally's
Delicatessen,
Cardiff Extra hot curry chilli powder 100g packet £0.85 R 9.52 R 6.18

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
Lupe Pinto's
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
Whole serrano peppers Mexico 312g £1.75 R 19.60 R 12.73

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Appendix F: Price points for chilli-based products in selected German retailers

Estimated
required landed
R equivalent price, based on
Country of Comments on chilli
German retail @ exchange total mark-ups
Retailer Product and brand origin (where Unit size content (where
price (€) rate of by retailer &
available) available)
€1:R7.85 importer/
distributor of
56%
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


Tengelmann
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

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

Tengelmann Fuego Taco Sauce milde


Wurzsauce 200ml jar €1.79 R14.05 R9.01

Fuego Fajita Sauce 200ml jar €2.09 R16.41 R10.52


400g glass
Barilla Arrabbiata sauce bottle €1.99 R15.62 R10.01
Curries & mixtures

Tengelmann
Fuchs Curry 90g sachet €2.69 R21.12 R13.54

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required landed
R equivalent price, based on
Country of Comments on chilli
German retail @ exchange total mark-ups
Retailer Product and brand origin (where Unit size content (where
price (€) rate of by retailer &
available) available)
€1:R7.85 importer/
distributor of
56%

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

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Appendix G: Price points for chilli-based products in selected South African retailers

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Hot table sauces/dressings – major retailers

Tabasco Pepper Sauce US 60ml 19.95 14.46


Woolworths
750ml
Sweet chilli sauce, own label South Africa plastic bottle 23.99 17.38
295ml glass
Suree Chilli & garlic sauce Thailand bottle 12.99 9.41
295ml glass
Suree Thai hot chilli sauce Thailand bottle 12.55 9.09

Wellington’s chilli chutney Thailand 375ml 10.99 7.96

Spar (Western Wellington’s garlic chilli sauce Thailand 375ml 11.29 8.18
Cape)
Taste of Thailand Hot chilli pepper KZN, South 250ml glass
sauce Africa bottle 12.89 9.34 Fresh chillies used
Taste of Thailand Sweet chilli KZN, South 250ml glass
sauce & pineapple Africa bottle 9.95 7.21 Fresh chillies used
Taste of Thailand Hot chilli pepper KZN, South 250ml glass
sauce Africa bottle 12.89 9.34 Fresh chillies used
Taste of Thailand Hot chilli pepper KZN, South 250ml glass
sauce Africa bottle 12.89 9.34 Fresh chillies used
Pick n Pay 60ml glass
Family Tabasco Pepper sauce US bottle 17.95 13.01
60ml glass
Tabasco Garlic pepper sauce US bottle 17.95 13.01

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
60ml glass
Tabasco Green pepper sauce US bottle 17.95 13.01
150ml glass
Tabasco Green pepper sauce US bottle 26.95 19.53

Louisiana Gold pepper sauce US 57ml 16.99 12.31


122ml glass
Bandito’s Jalapeno sauce South Africa bottle 13.49 9.78
122ml glass
Bandito’s Peri peri sauce South Africa bottle 13.49 9.78
122ml glass
Bandito’s Habanero sauce South Africa bottle 13.49 9.78
Melissa’s The Food Shop Tomato 410g glass
salsa South Africa jar 24.95 18.08

Melissa’s The Food Shop Chilli 420g glass


peppers with sundried tomatoes South Africa jar 33.95 24.60

Melissa’s The Food Shop Jalapeno 410g glass


peppers South Africa jar 21.95 15.91

Melissa’s The Food Shop Sweet 315g glass


chilli sauce South Africa bottle 25.95 18.80

Western Cape, 375ml


Wellington’s Peri peri sauce South Africa plastic bottle 8.95 6.49

Western Cape, 375ml


Wellington’s Hot chilli sauce South Africa plastic bottle 8.95 6.49

Western Cape, 375ml


Wellington’s Sweet chilli sauce South Africa plastic bottle 8.95 6.49

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%

375ml glass
Steers Peri peri sauce South Africa bottle 11.29 8.18

375ml glass
Steers Spicy tikka sauce South Africa bottle 11.29 8.18

375ml glass
Steers Sweet chilli sauce South Africa bottle 11.29 8.18

Crosse & Blackwell Original chilli 250ml glass


sauce South Africa jar 8.29 6.01

Crosse & Blackwell Chilli garlic 250ml glass


sauce South Africa jar 8.29 6.01

Crosse & Blackwell Sweet chilli 250ml glass


sauce South Africa jar 8.29 6.01

Crosse & Blackwell Sauce it up!


Chakalaka South Africa Plastic bottle 14.99 10.86

250ml glass
Knorr Sweet & spicy sauce South Africa bottle 8.39 6.08

250ml glass
Knorr Sweet chilli sauce South Africa bottle 8.39 6.08

250ml glass
Knorr Peri peri sauce South Africa bottle 8.39 6.08
200ml
Ina Paarman Ready to serve plastic
Tomato & chilli sauce South Africa pouch 10.59 7.67
200ml
Ina Paarman Ready to serve plastic
Creamy curry sauce South Africa pouch 10.59 7.67

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%

KZN, South 250ml glass


Pakco Pepper sauce Africa bottle 9.29 6.73

250ml glass
Veri peri, hot South Africa bottle 12.99 9.41

250ml glass
Veri peri, mild South Africa 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 250ml glass


sauce South Africa bottle 12.99 9.41

Pick n Pay Choice Mild peri peri 250ml glass


sauce South Africa bottle 12.99 9.41

250ml glass
Nando’s Hot sweet peri peri sauce South Africa bottle 15.39 11.15

125ml glass
Nando’s Extra hot peri peri sauce South Africa bottle 11.69 8.47

125ml glass
Nando’s Hot peri peri sauce South Africa bottle 11.69 8.47

125ml glass
Nando’s Garlic peri peri sauce South Africa bottle 11.69 8.47

Nando’s Extra mild lemon peri peri 125ml glass


sauce South Africa bottle 11.69 8.47

125ml glass
Nando’s Medium peri peri sauce South Africa bottle 11.69 8.47

375g glass
Old El Paso Thick n chunky salsa jar 18.99 13.76
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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Hot table sauces/dressings - speciality/delicatessen independents
Giovanni’s 60ml glass
Tabasco Pepper sauce US bottle 24.50 17.75
60ml glass
Tabasco Green pepper sauce US bottle 24.50 17.75
Fynbos Fine Foods Chilli dream 250ml glass
sauce Malmesbury bottle 24.95 18.08
Fynbos Fine Foods Habanero 250ml glass
sauce Malmesbury bottle 24.95 18.08
250ml glass
Fynbos Fine Foods Pepperdrop Malmesbury bottle 24.95 18.08
250ml glass
Fynbos Fine Foods Peri peri Malmesbury bottle 24.95 18.08
Cape Town, 125ml, glass
Ukuva Africa Mombassa PeriPeri SA bottle 29.95 21.70
Ukuva Africa Malawi Gold Cape Town, 125ml, glass
SA bottle 29.95 21.70
Ukuva Africa Zulu Fire Sauce Cape Town, 125ml, glass
SA bottle 29.95 21.70
150ml glass
Charlie’s Hot n Tasty Nashville, US bottle 14.95 10.83
Burchell’s Gourmet Africa Harissa 125 ml glass
Spicy Chilli Worcester, SA bottle 19.75 14.31
Burchell’s Gourmet Africa Mama 125 ml glass
moto chilli, coriander and lime Worcester, SA bottle 19.75 14.31
125 ml glass
Mama Africa’s Zulu Sauce South Africa bottle 20.50 14.86
125 ml glass
Bushman’s Revenge South Africa bottle 40.50 29.35 15 heat rating
125 ml glass
Bushman’s Hot az hell South Africa bottle 20.50 14.86

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
125 ml glass
Bushman’s Hot chilli South Africa bottle 22.50 16.30
125 ml glass
Bushman’s Dynamite South Africa bottle, boxed 125.50 90.94 21 heat level
Andiamo Fynbos Fine Foods Chilli dream 250ml glass
sauce Malmesbury bottle 23.70 17.17
Fynbos Fine Foods Jalapeno mild 250ml glass
chilli sauce Malmesbury bottle 23.70 17.17
Fynbos Fine Foods Peri peri 250ml glass
medium chilli sauce Malmesbury bottle 23.70 17.17
250ml glass
Afrique Peri peri sauce South Africa bottle 22.75 16.49
250ml glass
Afrique chilli sauce South Africa bottle 22.75 16.49
125ml glass
Garlic Tobago Peppa sauce South Africa bottle 16.65 12.07
Burchell’s Gourmet Africa Mamba 125ml glass
smokey chilli sauce Worcester, SA bottle 16.70 12.10
125ml glass
Burchell’s Gourmet Africa Kali kali Worcester, SA bottle 16.70 12.10
125ml glass
Bushman’s Jalapeno pepper sauce South Africa bottle 19.00 13.77
125ml glass
Bushman’s Hot az hell South Africa bottle 19.00 13.77
125ml glass
Bushman’s Hot chilli South Africa bottle 19.00 13.77
Bushman’s Smoked jalapeno chilli 125ml glass
sauce South Africa bottle 19.00 13.77
125ml glass
Bushman’s Peperoncino South Africa bottle 19.00 13.77
Cape Town 250ml glass
Bandito’s chilli mint South Africa bottle 16.15 11.70

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Cape Town 250ml glass
Bandito’s Habanero sauce South Africa bottle 16.15 11.70
Cape Town 250ml glass
Bandito’s Guadala gunpowder South Africa bottle 16.15 11.70
Cape Town 250ml glass
Bandito’s Sweet & hot sauce South Africa bottle 17.45 12.64
Cape Town 250ml glass
Bandito’s Jalapeno sauce South Africa bottle 16.15 11.70
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 125 ml glass
peri South Africa bottle 17.45 12.64
U-kuva i-Africa Swazi mamma 125 ml glass
mambo South Africa bottle 25.85 18.73
125 ml glass
U-kuva i-Africa Malawi gold South Africa bottle 25.85 18.73
125 ml glass
U-kuva i-Africa Mombassa periperi South Africa bottle 25.85 18.73
125 ml glass
U-kuva i-Africa Zulu fire sauce South Africa bottle 25.85 18.73
A taste of Thai Sweet red chilli 200ml glass
sauce Thailand bottle 14.20 10.29
340ml glass
Indofood Sweet chilli sauce Indonesia bottle 12.50 9.06
Indofood Hot chilli sauce Indonesia 340 ml 12.50 9.06
250ml glass
Outsauce Chilli & lime South Africa bottle 20.00 14.49

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
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
250ml glass
Bushman’s Sweet chilli sauce South Africa bottle 20.00 14.49
226g glass
Lee kum kee Fine chilli sauce China bottle 18.25 13.22
226g glass
Lee kum kee Sweet chilli sauce China bottle 24.70 17.90
250ml glass
Chill out Hill billy Pepper sauce Knysna, SA bottle 38.00 27.54
200ml glass
Thai heritage Dipping sauce Thailand bottle 16.10 11.67
200ml glass
Thai Foods Mango chilli sauce Thailand bottle 15.35 11.12
Cooking/stir-in sauces – major retailers
200ml
Sweet chilli & lime basting sauce, plastic
own label South Africa pouch 9.99 7.24
200ml
Sweet chilli & lime Grill, bake & plastic
braai sauce South Africa pouch 9.99 7.24
Woolworths
Mozambican style peri peri 750ml
marinade South Africa plastic bottle 13.99 10.14

Durban curry cook in sauce South Africa 400g pouch 12.99 9.41

Cape Malay curry cook in sauce South Africa 400g pouch 12.99 9.41

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Fatti’s & Moni’s Pasta sauce 510g glass
Picante, Tiger Brands Foods South Africa jar 13.99 10.14
Taste of Thailand Yellow curry KZN, South
SPAR
Cook in sauce Africa 400g 16.29 11.80 Fresh chillies used
(Western
Cape) Cape Town, 45g foil
Royco Cape malay chicken curry South Africa sachet 6.79 4.92
Cape Town, 62g foil
Royco Sweet Thai chilli South Africa sachet 4.99 3.62
Pick n Pay Fatti’s & Moni’s Pasta sauce 510g glass
Family Picante, Tiger Brands Foods South Africa jar 13.99 10.14
Ina Paarman Pasta sauce, tomato, 400g glass
olive, chilli South Africa jar 17.69 12.82
200ml
Ina Paarman Coat & cook Peri peri plastic
sauce South Africa pouches 7.99 5.79
200ml
Ina Paarman Coat & cook Tikka plastic
curry sauce South Africa pouches 7.99 5.79
500ml
Knorr Honey & chilli marinade South Africa plastic bottle 13.99 10.14
Steers Lemon, herb & chilli
marinade South Africa 1l bottle 16.59 12.02
Bandito’s Cook mint, lime & 250ml glass
coriander sauce South Africa bottle 19.99 14.49
Bandito’s Braai apricot, red pepper 250ml glass
& rosemary sauce South Africa bottle 19.99 14.49
Nando’s Roasted reds Cooking
sauce South Africa Glass jar 19.79 14.34
Nando’s Sweet apricot with
medium per peri Cooking sauce South Africa Glass jar 19.79 14.34

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%

Nando’s Curry coconut Cooking


sauce South Africa Glass jar 19.79 14.34
Cooking/stir-in sauces - speciality/delicatessen independents
255g glass
Ong’s Sweet Thai Chilli Sauce Singapore bottle 14.95 10.83
Conimex Sambal oelek hot chilli
Giovanni’s paste Netherlands 33.95 24.60
Bushmen’s Chilli paste - hot South Africa 250g jar 34.95 25.33
Bushmen’s Chilli paste -mild South Africa 250g jar 34.95 25.33
Suree Sweet chilli sauce for 200ml glass
chicken Thailand bottle 14.20 10.29
Andiamo
226g glass
Lee kum kee Chilli garlic sauce China jar 22.20 16.09
Curries & mixtures (dry and pastes) – major retailers
Paprika powder, Spice basics, own 50g glass
label South Africa shaker 7.99 5.79
Woolworths

Volcano, spicy food, own label South Africa 32g grinder 19.49 14.12
SPAR KZN, South 430g glass
(Western Pakco Curry paste Africa jar 14.99 10.86
Cape)
Cape Town, 50g plastic
Golden star Chicken tandoori South Africa sachet 1.99 1.44
Cape Town, 50g plastic
Golden star Chicken tikka South Africa sachet 1.99 1.44
Cape Town, 50g plastic
Golden star Durban curry South Africa sachet 2.25 1.63
Cape Town, 50g plastic
Golden star In one masala mix South Africa sachet 2.25 1.63
Cape Town, 50g plastic
Golden star Breyani mix South Africa sachet 2.65 1.92

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Cape Town, 50g plastic
Golden star Mild curry South Africa sachet 2.65 1.92
Golden star Mother in laws hot Cape Town, 50g plastic
masala mix South Africa sachet 2.59 1.88
Rajah mild & spicy curry powder, KZN, South 7g paper
Robertson’s Africa sachet 0.99 0.72
Rajah medium curry powder, KZN, South 7g paper
Robertson’s Africa sachet 0.99 0.72
Rajah hot curry powder, KZN, South 7g paper
Robertson’s Africa sachet 0.99 0.72
Rajah mild & spicy curry powder, KZN, South
Robertson’s Africa 100g box 7.55 5.47
Rajah medium curry powder, KZN, South
Robertson’s Africa 100g box 7.55 5.47
Rajah hot curry powder, KZN, South
Robertson’s Africa 100g box 7.55 5.47
Rajah mild & spicy curry powder, KZN, South
Robertson’s Africa 200g box 13.99 10.14
Rajah medium curry powder, KZN, South
Robertson’s Africa 200g box 13.99 10.14
Rajah hot curry powder, KZN, South
Robertson’s Africa 200g box 13.99 10.14
KZN, South 7g paper
Robertson’s Peri peri Africa sachet 0.99 0.72
KZN, South 7g paper
Robertson’s Cayenne pepper Africa sachet 1.09 0.79
Robertson’s Flavours Piquant peri KZN, South 15g foil
peri chicken seasoning Africa pyramid 2.69 1.95
KZN, South
Pakco Masala Africa 50g 3.65 2.64

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
KZN, South
Pakco Masala Africa 100g 5.69 4.12
Cape Town,
Cartwright’s Medium Curry powder South Africa 50g 4.29 3.11
Cape Town,
Cartwright’s Hot Curry powder South Africa 50g 4.29 3.11
Cape Town,
Cartwright’s Medium Curry powder South Africa 100g 7.55 5.47
Cape Town,
Cartwright’s Hot Curry powder 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


100ml glass
Robertson’s Paprika South Africa shaker 10.25 7.43
100ml glass
Robertson’s Crushed chillies South Africa shaker 10.25 7.43
100ml glass
Robertson’s Cayenne pepper South Africa shaker 8.45 6.12
Pick n Pay Melissa’s The Food Shop Cook’s 125g glass
Family salt with chilli, lime & coriander South Africa 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
200ml
Ina Paarman Chilli & garlic plastic
seasoning South Africa shaker 11.59 8.40
KZN, South 430g glass
Pakco Curry paste Africa jar 13.99 10.14

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
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
KZN, South
Robertson’s Paprika refill Africa 100ml box 9.49 6.88
KZN, South
Robertson’s Peri peri refill Africa 100ml box 9.29 6.73
Robertson’s Freshly ground Spicy KZN, South 100ml
chilli & garlic blend Africa grinder 15.35 11.12
KZN, South 100ml glass
Robertson’s Cayenne pepper Africa shaker 7.99 5.79
KZN, South 100ml glass
Robertson’s Crushed chilli Africa shaker 8.99 6.51
KZN, South 100ml glass
Robertson’s Peri peri Africa shaker 11.59 8.40
KZN, South 100ml glass
Robertson’s Louisiana Cajun Africa shaker 11.29 8.18

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
KZN, South 8g paper
Rajah Curry powder, Robertson’s Africa sachet 0.99 0.72
Rajah Medium curry powder, KZN, South
Robertson’s Africa 50g 4.45 3.22

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Rajah Hot curry powder, KZN, South
Robertson’s Africa 50g 4.45 3.22
Rajah Medium curry powder, KZN, South
Robertson’s Africa 100g 6.69 4.85
Rajah Hot curry powder, KZN, South
Robertson’s Africa 100g 6.69 4.85
KZN, South 8g paper
Robertson’s Cayenne pepper Africa sachet 0.99 0.72
Cape Town, 50g paper
Cartwright’s Hot curry powder South Africa sachet 4.45 3.22
100ml glass
Pick n Pay choice Cayenne pepper South Africa shaker 6.99 5.07
Cape Town, 50g plastic
Spice Mecca Tandoori masala South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Chicken masala South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Fish masala South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Yellow curry South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Medium curry powder South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Hot curry powder South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Breyani masala South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Leaf masala South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Mother in law South Africa sachet 4.25 3.08

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%
Cape Town, 50g plastic
Spice Mecca Paprika South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Pure chilli powder South Africa sachet 4.25 3.08
Cape Town, 50g plastic
Spice Mecca Crushed chillies South Africa sachet 4.25 3.08
Curries & mixtures (dry and pastes) - speciality/delicatessen independents
Giovanni’s Cedar Mountain Chilli Rub South Africa 21.95 15.91
Plastic
Chefs@work Thai rub 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 100ml
Company Malay spice Constantia, SA grinder 13.95 10.11
The Cape Herb and Spice 100ml
Company Cajun spice Constantia, SA grinder 12.95 9.38
The Cape Herb and Spice
Company Peri peri chicken 100ml
seasoning Constantia, SA grinder 12.95 9.38
Humewood, 10-25g,
Nice n spicy Tandoori chicken SA sachets 8.95 6.49 Recipe included on board
Humewood, 10-25g,
Nice n spicy Nasi Goreng SA sachets 8.95 6.49 Recipe included on board
Humewood, 10-25g,
Nice n spicy Chilli con carne SA sachets 8.95 6.49 Recipe included on board
Humewood, 10-25g,
Nice n spicy Spiced lamb pot SA sachets 8.95 6.49 Recipe included on board
Humewood, 10-25g,
Nice n spicy Balti chicken curry SA sachets 8.95 6.49 Recipe included on board

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%

Humewood, 10-25g, Recipe included on board


Nice n spicy Biriyani SA sachets 8.95 6.49
Andiamo Asian home gourmet Dry chilli stir 50g foil
fry Kung Pao Thailand sachet 12.55 9.09
Asian home gourmet Sambal 50g foil
stirfried rice Nasi Goreng Thailand sachet 12.55 9.09
Asian home gourmet Thai green 50g foil
curry Kaong Kiewhan Thailand sachet 12.55 9.09
The Cape Herb and Spice 100ml glass
Company Malay rice spice South Africa shaker 10.85 7.86
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 100ml glass
Company Cajun spice South Africa shaker 11.85 8.59
314g glass
Bushman’s Mild chilli paste South Africa jar 29.80 21.59
314g glass
Bushman’s Hot chilli paste South Africa jar 27.40 19.86
314g glass
Bushman’s Mild curry paste South Africa jar 29.80 21.59
Spice art Durban curry South Africa 125ml 18.25 13.22

Spice art Cape Malay curry South Africa 125ml 18.25 13.22

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KZN DED Chilli Value Chain Analysis Steps 2-4 – 8 March2006

Estimated
required
landed price,
Country of based on total
SA retail price Comments on chilli
Retailer Product and brand origin (where Unit size mark-ups by
(R) content (where available)
available) retailer &
importer/
distributor of
38%

Gourmet Africa Smoked red pepper All ingredients certified


& chilli pesto 125g jar 20.80 15.07 organic
Other – major retailers
Peppadew pickled sweet piquante 350g glass
Woolworths pepper, mild South Africa jar 16.99 12.31
Peppadew pickled sweet piquante 350g glass
pepper, hot South Africa jar 16.99 12.31
KZN, South 385g glass
Pakco Hot atchar Africa jar 13.45 9.75
KZN, South 430g glass
Pakco Mango atchar Africa jar 13.45 9.75
Spar (Western 400g glass
Cape) Pakco Curried chillies South Africa jar 13.75 9.96
Peppadew Mild whole sweet 420g glass
piquante pepper South Africa jar 18.39 13.33

Peppadew Hot whole sweet 420g glass


piquante pepper South Africa jar 18.39 13.33
Melissa’s The Food Shop Tomato 340g glass
& chilli jam South Africa jar 26.95 19.53
Melissa’s The Food Shop Chilli 315g glass
ginger jam South Africa jar 26.95 19.53
Pick n Pay KZN, South 385g glass
Family Pakco Hot atchar Africa jar 12.99 9.41
KZN, South 430g glass
Pakco Mango atchar Africa jar 12.99 9.41
KZN, South 385g glass
Pakco Hot mixed vegetable pickle Africa jar 12.49 9.05

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

Appendix H: Legislation affecting the production of chillies

Legislation
Agriculture „ Agricultural Laws Rationalisation Act
„ Agricultural Pests Act
„ Agricultural Produce Agents Act
„ Agricultural Product Standards Act
„ Agricultural Research Act
„ Agriculture Laws Extension
„ Fertilizers, Farm Feeds, Agricultural Remedies and Stock Remedies Act
„ Genetically Modified Organisms Act
„ Marketing of Agricultural Products Act
„ Perishable Products Export Control Act
„ Plant Breeders' Rights Act
„ Plant Improvement Act
Land „ Communal Land Rights Act
„ Land Administration Act
„ Land Reform Act
„ Provision of Land and Assistance Act
„ Restitution of Land Rights Act
Environment and water „ Environmental Conservation Act
„ Environmental Laws Rationalisation Act
„ National Environmental Management Act
„ National Water Act
„ Conservation of Agricultural Resources Act
Trade, finance and „ Agricultural Credit Amendment Act
corporate entities „ Agricultural Debt Management Act
„ Land and Agricultural Development Bank Act
„ Customs and Excise Act
„ International Trade Administration Act
„ Commercial entities and products
„ Cooperatives Act
„ Competition Act
„ Intellectual Property Rights Act
„ Standards Act
„ Merchandise Marks Act
Labour „ Basic Conditions of Employment Act
„ Labour Relations Act
„ Agricultural Labour Act

Prepared by Kaiser Associates Economic Development Practice 145

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