MARKETING 



Trade 



The canned fruit industry in South Africa hterally is dependent on the export market for survival, selling 

 about 90 percent of its annual pack in countries overseas. This reliance on export trade stems from the high 

 percentage of South Africa's population that cannot afford the luxury of canned goods like an A2¥i can of peaches, 

 which retails for 32-33 cents on the domestic market. Less than 20 percent of South Africa's population of 19.2 

 million people in 1968 were white, with the majority of the remaining persons classed as Bantu. The colored, or 

 mixed, population constitutes roughly 10 percent of the total. They and the Bantu are gradually gaining in 

 affluence, but this market is not expected to exhibit any great surge in purchases in the near future. The per capita 

 disappearance of canned peaches in South Africa is only about 1 pound a year, far below the average in Europe or 

 the United States. Canners are aware of this disparity and are attempting to increase domestic consumption. 

 However, no substantial gains are forecast in the foreseeable future, and South Africa will have to continue its 

 characteristic reliance on export sales to move its annual canned packs. 



Exports of South African canned fruits have expanded rapidly during the last decade, reflecting the 

 increased production. In 1968 canned peaches, pears, and fruit cocktail reached all-time highs in export sales. 

 Canned peach exports totaled nearly 4.8 million cases, compared with less than 2Vi million each year prior to 1963. 

 These exports exceeded production by 6 percent because of large carryover stocks from the previous year. Slightly 

 over 1.2 million cases of canned pears moved into export and also 698,000 cases of fruit cocktail, 160,000 cases of 

 fruit salad, and 614,000 cases of canned apricots. Combined, exports of these canned deciduous products were 

 valued at over $40 million, with peaches alone valued at $26 million. 



The United Kingdom is the traditional outlet for South Africa's exports. In 1968 that country received 

 two-thirds of the exported canned peaches, 87 percent of the canned pears, 55 percent of the canned apricots, and 

 over three-fourths of the fruit cocktail. The reasons for this dependence on one market are primarily historical ties 

 and Commonwealth tariff preferences. South African fruit products enter the United Kingdom duty free, whereas 

 imports from non -Commonwealth suppliers of canned peaches, for example, are currently levied a duty of 9Vi 

 percent. Prior to July 1968, this duty was 12-5/8 percent. By 1972 it will be phased down to 6 percent as a result of 

 the Kennedy Round negotiations. Fruit cocktail from non-Commonwealth sources is assessed a duty of slightly over 

 0.5 cent per pound. This tariff is scheduled to be phased to 0.3 cent by 1972. 



Approximately 75-80 percent of South Africa's sales in the United Kingdom are reported to be under 

 buyers' labels, with the bulk of the sales contracted for at the very beginning of the season. These forward contracts 

 generally are valid for a year, and buyers can call for delivery at any time during the year. In 1967 delivery orders 

 were very slow, resulting in canners carrying extremely heavy stocks of canned peaches into the following season. 



The forward contracts and heavy carryover stocks contributed to the serious financial losses suffered by 

 canners following the devaluation of the British pound in November 1967, an action that was not duplicated by 

 South Africa in the value of its currency. The contracts made at the beginning of the season were not covered 

 through the entire year by forward purchases of sterling. Thus, payments for some sales were received in devalued 

 currency which could not be converted by canners to its value prior to November 1967. In addition, canners were 

 not able in subsequent months to increase prices sufficiently to offset the 14-percent devaluation because of the 

 large stocks and competition from Australia. This is illustrated in the sharp drop in the average f.o.b. price of South 

 African canned peach exports to the United Kingdom from $6.09 per case (basis 24/2^'s) in 1967 to $5.39 in 1968. 



The decline in earnings per case realized in the United Kingdom tended to equalize them with earnings from 

 sales in other markets. This, coupled with South Africa's expanding production and increasing competition in the 

 United Kingdom, stimulated canners to strive for more sales in these markets. This trend began a few years earlier 

 but first achieved strength in 1968, when over a million cases went to EC countries, primarily West Germany; 

 256,000 cases to other continental European markets; and 100,000 cases to Canada. South African canners were 

 able to accomplish this penetration of other markets without sacrificing their strong competitive position in the 

 United Kingdom. Over 60 percent of the United Kingdom's purchases have been supplied by South Africa since 

 1964. Exports of fruit cocktail also have been expanding to countries other than the United Kingdom. In 1968, 

 165,000 cases moved to such countries, primarily to continental Europe, compared with only 41,000 cases 3 years 

 earlier. 



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