SOURCE: Frost & Sullivan

March 15, 2011 01:30 ET

Southern African Food and Beverage Chemicals Market Adopts Novel Technologies to Keep Pace With Increased Demand, Finds Frost & Sullivan

CAPE TOWN, SOUTH AFRICA--(Marketwire - March 15, 2011) - Rising disposable incomes in Southern Africa have allowed the middle class to gravitate toward foods that promise health and wellness benefits. This trend has boosted the demand for processed foods and consequently, food and beverage chemicals, which are added to almost every food that undergoes any type of processing.

However, despite this widening market for products aimed at the middle- to upper-income population, market growth depends on the economic production of these foods.

New analysis from Frost & Sullivan (http://www.food.frost.com), Strategic Analysis of the Southern African Food and Beverage Chemicals Market, finds that the market earned revenues of $205.3million in 2009 and estimates this to reach $273.3 million in 2016. The developments in nanotechnology and encapsulation are driving changes in almost all product segments, which will either lead to improvements in current technologies or to a shift in an industry. The developments in nanotechnology are expected to largely reduce the demand for traditional preservative chemicals.

The demand for natural ingredients has, thus far, influenced only the manufacturers catering to the higher income group. This is because the chemicals are often difficult to manufacture, and it is especially challenging to infuse these compounds with the ability to endure different and trying manufacturing conditions.

"Chemicals manufacturers are focusing their development efforts on improving their technologies, as food and beverage companies are willing to pay a premium for these improved products," says Frost & Sullivan Chemicals, Materials and Food Research Analyst Laura Peinke. "There is a constant need for chemicals that are more effective in their functionality, offer new features, withstand different production processes and can be used in more applications."

Chemicals manufacturers are increasingly using nanotechnology and encapsulation to significantly decrease the use of chemicals and thereby, lower the overall production costs. Enhanced product shelf life and sensory- and quality-related properties are expected to bolster manufacturers' production capacity as well as export potential, as these properties will help maintain product integrity during transport and storage.

Currently, the majority of the chemicals used in Africa are manufactured internationally, imported and distributed locally. The market in Zambia is driven by foreign as well as government investment to enable it to supply to the neighbouring countries. These foreign investments can help the Zambian market become a regional leader in production of low-cost products.

The advantages of novel technologies notwithstanding, the market has to battle issues such as high fuel costs, which, in turn, hikes product prices. The market's growth is also hindered by the low levels of technical expertise, fluctuating exchange rates and the effects of the economic slowdown, which have made it harder to obtain loans.

Further, other companies are reluctant to invest in an uncertain market. The price pressures and the prohibitive costs of imported raw materials have constricted manufacturers' margins.

Nevertheless, the failure of some business due to the economic slowdown has opened up opportunities for companies that can either offer cost-effective products or add unique value to their products and services.

"Innovative growth strategies that rely more on market positioning and are less affected by price will be more successful in the short to medium term," notes Peinke. "Such strategies will ensure sufficient revenue as they do not compete directly with other mainstream low-cost manufacturers."

Strategic Analysis of the Southern African Food and Beverage Chemicals Market is part of the Food & Beverage Ingredients Growth Partnership Services program, which also includes research in the following markets: South African market for automotive plastics, Southern African plastics packaging market and Southern African market for paints and coatings. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

If you are interested in more information on this study, please send an e-mail to Christie Cronje, Corporate Communications, at christie.cronje@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.

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Strategic Analysis of the Southern African Food and Beverage Chemicals Market
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