South Africa’s cost of living is spiraling out of control and I have spoken many times about starting a business to cater to this multi-billion rand market who are struggling to make ends meet and I say multi-billion rand as targeting people who receive social grants is a hundred billion rand industry opportunity in its own.

I have spoken about  food outside of traditional stores, and I say outside of because even “low-cost” Shoprite no-frills Usave brand is too expensive for most South Africans.  I have spoken about salvage and clearance supermarkets, ugly produce and even fresh food surplus,  which has become – due to its competitive nature hard to source enough stock to scale into a major operation. I have also spoken about smaller portions and unique sizes.

Today I present you with the next billion rand business: food manufacturing and retail aimed at lower-income earners. In Cape Town (the Monaco of SA according to people from Soweto) we have seen the emergence and growth of businesses like Visfabriek and DC Meat both of which produce food products that come in a price-point BELOW the pricing of even the cheapest no name brand from PicknPay or Shoprite. And how do they beat the economies of scale that these corporations have? 1. They control a larger part of the manufacturing process/supply chain and 2. they have stores in places where rent are way cheaper than malls (where most multi-nationals have gravitated to.). A central warehouse manufactures, packs and ships to owned and operated stores.

Let me give you an example:
Sea Harvest fish fingers R80  for 600g
I&J fish fingers R77 for 600g
Visvabriek R45 for 700g (I bought just a few days ago)

Now we look at the problem/opportunity:
Picknpay no name fish fingers R40 for 300g!!!!!!!!!!!!!!!!!!!!!!! for R5 extra you can get 400g more than that at Visfabriek.

How is it done:
Cheaper packaging: a styrofome base with cling wrap and black and white printed label. Vs. a full colour glossy box.
Cosmetics: Visvabriek does not look as good as their more expensive rivals maybe a lesser quality crumb/batter.
Taste: I guess this is subjective, but all fish fingers is a processed food maybe we can say Visvabriek is not as nice as the others?  (Don’t worry I will rage on this point later on)
Vertical integration: If Visvabriek is using a central facility to manufacture and pack and are supplying their own stores, they can control the prices – and keep it as low as possible by tweaking the things they control. If they had to supply another retail outlet they have no control over the margins that the other store will add to cover their rent in expensive malls and staff standing around twiddling their thumbs. I want to be clear here, I am not saying vertical integration from farm to process to retail such as chicken. This does not suit that model, that depends on high-margin retail such as fried chicken, this you will need to source cheap chicken such as the type that gets “dumped” here from Brazil or Europe. There is nothing special about companies that have walked that path -> farm -> process -> retail look at Kekkel en Kraai that have virtually zero competitive advantage. Not once have I left my house specially to visit a Kekkel en Kraai like I do with Visvabriek.
Location: These places are almost always in locations in which the majors have long abondoned. In the Cape’s northern suburbs they are in Vootrekker road Goodwood (fish and chicken combined) and they have two stores few meters apart in Vootrekker road Parow (one fish and one chicken) close to the Foschini Group headquarters. As for DC Meat they are situated in **GULP** Station Road, Parow. They also have a branch in Maitland and Mitchells Plain.

These are the future majors in SA. I can see both Shoprite Group and PicknPay making acquisitions here. These companies come in below even their budget brands. Shoprite, Boxer too expensive for most South Africans. This is not your grandmothers South Africa, the days of eating brand name food are long gone. The irony of me growing up on the Cape Flats under apartheid, eating I&J and Sea Harvest and now living in an expensive suburb eating Visvabriek is not lost on me.

My thoughts on imperfect and “processed” foods
Many people will have a grievance with companies like Visvabriek because we can almost be certain that their ingredients will be “stretched” a bit. If I&J uses 700g of fish per 1kg of fish fingers, then they may be using say 500g. But what is most surprising of all is that South Africans can still afford to buy any type of meat processed or not. It is a MIRACLE that the UN World Food Programme is not feeding our communities yet with rice and bean rations considering the clowns that run the country. The umthakathi is strong in Loothuli House. With most of the country either unemployed or on SASSA welfare only witchcraft can explain South Africa not collapsing by now already, there is no more economic sense propping up the country. Thank your local sangoma if you can still afford meat!

Image cred: Wolfgang1018