In Southern Africa and West Africa, industrial and small-scale bakeries are carving out niche markets, vital to feeding a continent that increasingly turns to bread as a key morning breakfast meal component.
Industrial and large scale bread manufacturers are dominant in supermarkets and official delivery channels in countries such as South Africa, Zimbabwe and Mozambique. This comes at a time analysts say “bread is a major staple” in Africa as a cheap “nutritionally rich food item”.
The informal or small scale bakeries are entrenched in informal retail locations, including street corner shops, known as spazas, and tuckshops, maintaining significant relevance in their niche. This is a trend that is also prevalent in the west African countries of Nigeria and Ghana, according to regional bakery industry players.
For Ephraim Mbanaso, Nigeria ambassador for Bakery Initiatives, industrial and small scale informal bakeries have “both have carved niche markets for themselves and are devising strategies to keep afloat in the midst of competition and changing” operating environment factors.
“In Nigeria the small scale bakeries service the lower rung in the social strata, with smaller loaves of bread, mostly unbranded at very affordable prices. The industrial bakeries serve the middle and upper classes who are more health and hygiene conscious with well packaged and branded loaves and these of course come at premium cost,” Mbanaso says.
Although the informal and small bakeries produce lesser volumes individually, catering for the immediate market although they still serve a significant market. The industrial bakeries obviously produce more because of the bigger scale they have.
The smaller bakeries in Nigeria are nonetheless stepping up their game as a way of ensuring survival. These smaller players are now branding and packaging their bread products.
The big bakeries of Africa
Equally the big bakeries, in order to reach the population in the lower rung of the social strata are coming up with smaller and affordable loaves of bread.
“The informal/small scale bakeries will remain in business so long as their customer base remains. Many of them equally try to adapt to changing environment in order to survive,” explains Mbanaso.
While Nigeria has clearly defined and identifiable informal bakeries, the situation is slightly different in Mozambique and elsewhere in Southern Africa, where toll manufacturing is prevalent. According to Isabel Messias Tonela, an informal player in the snacks business in Mozambique, private bakeries work with resellers such as informal traders who buy bread from them for reselling in their communities.
But there are challenges with the government’s control of the bread price. The informal resellers. Most of whom sell unbranded bread struggle to get reduced prices from the private bakeries to enable them to have better margins when they resell.
“These informal traders who are mostly women sell in markets and door-to-door, making contracts with households, and sometimes they are not paid or are paid late. And the profit margin they make per loaf of bread is very small,” said Tonela.
In neighbouring Zimbabwe, a senior manager with one of the top three bakery companies in the country said the industry classifies bread manufacturers in terms of their capacities and outlook. This brings out two distinct groups that include large-scale industrial bakeries with a national outlook and small bakeries that have low priced bread offerings aimed at specific towns and markets.
Thus in Zimbabwe, the small bakeries basically “serve a specific geographical area, use price as their strategy and have lean structures, producing less than 50,000 loaves a day” under tailored product mixes.
Private label bakeries in Africa
Even in mature markets such as South Africa where there have been heavy investment by industrial bakeries in boosting capacity to cater for growing demand and export potential, informal bakeries and instore bakeries by supermarkets still command a sizable market share.
Sean Culverwell, investment analyst at Anchor Capital believes the South African bread market is “mature and has high competition” amongst industry participants as well as against informal players and private label manufacturers.
The private label bread bakeries manufacture products on behalf of retailers as well as food service companies, offering an alternative to national brands under partnerships that yield customized bread products such as sliced white bread and artisanal loaves.
“Retailers require excellent service delivery due to bread being a staple food for the majority of the population. Early morning stock is key for retailers, as many consumers will pick up a loaf on their way to work,” says Culverwell.
Failure to make early morning deliveries will affect sales volumes, a key dynamic that “is even more important in the informal channels,” as ‘Spaza’ shops favour bread products that are reliably delivered early in the morning.
The bigger industrial players in most African countries are also entrenching their competitive advantages over the smaller players.
With access to capital for investment into expanding manufacturing infrastructure, automation, capacity upgrades, efficiency improvements, and delivery driver route optimisation industrial bakeries in South Africa and elsewhere on the continent continue to have a slight edge over smaller informal players in terms of volumes and revenues.
