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Pioneer Foods's MD

Pioneer Foods has ambitious plans for biscuit market

Pioneer Foods plans to take 10 percent of the country’s biscuit market, led by AVI’s National Brands, as a “first step”, said  MD Andre Hanekom (left) at the recent official opening of its new bakery plant in Clayville, Johannesburg.

The company, which will drop the Kwalilty Biscuit brand it bought in 2004 and start introducing an expanded biscuit range under a new brand from the middle of next year, will then seek to increase this share to eventually capture at least a quarter of the market, reports Business Report. “We don’t want to be smaller than that,” said Hanekom.

South Africa’s biscuit market has annual sales of as much R3 billion ($412 million), he said. Pioneer, which owns the Sasko wheat products and Bokomo breakfast brands, has spent R150-million on the factory in Johannesburg that will produce sweet and savoury biscuits, said Hanekom.

AVI’s NBL makes biscuit brands Pyotts, Provita and Bakers.

Abri du Plessis, the chief investment officer at Gryphon Asset Management, said the biscuit category was lucrative, but in the past five years local producers had faced a lot of international competition.

But while imported products competed on price they did not always compete on quality and so had not made significant inroads. “If you can build a good brand and a good product you can do well in this category,” Du Plessis said.

Biscuit sales were more cyclical than cereals, which indicated that Pioneer had taken a longer view on this category.

Pioneer has also spent R350m on its beverages unit to create a fruit juice facility in Wadeville, Johannesburg, while extending production of PepsiCo’s Pepsi to Ceres in the Western Cape. The investment would be offset by cost savings from trucking water between Johannesburg and Ceres once the project was completed by the middle of next year, Hanekom said. Also produced at Wadeville is Lipton Ice Tea – Pioneer’s Ceres Beverages acquired the rights to this product from Unilever in September last year (prior to this, it had been the contract packer of the product).

Du Plessis said Pioneer’s investments were a good strategy as the middle-income consumer market was still growing, meaning the food and liquor market was expanding.

This was one of the few industries in South Africa that would continue to do well and these same factors of a growing black middle market were also helping food retailers do relatively well.

Pioneer, which is also South Africa’s largest producer of pasta, owns 17 bakeries and last year bought a chicken abattoir business. This current capex programme has also included the expansion of the Duens bakery in Cape Town as well as its Polokwane bakery.

Source: Business Report

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