Lichtenburg Nut Company Business Plan — Market Analysis
Market size, demand drivers, pricing and the addressable volume this plant targets.
Section 8 of 37
Market Analysis
Jump to section
- 0. Basis of Preparation and Important Notice
- 1. Executive Summary
- 2. Investment Thesis
- 3. The Company
- 4. Problem, Customer Need and Value Proposition
- 5. Products and Services
- 6. Industry Analysis
- 7. Market Analysis
- 8. Customer Analysis
- 9. Competitive Landscape
- 10. Business Model
- 11. Go-to-Market Strategy
- 12. Operating Model
- 13. Raw Material Supply and Contract Farming
- 14. Quality, Food Safety and Aflatoxin Control
- 15. Management and Organisation
- 16. Strategic Plan
- 17. SWOT Analysis and Strategic Implications
- 18. Risk Analysis
- 19. ESG and Development Impact
- 20. Implementation Roadmap
- 21. Financial Model and Assumptions
- 22. Projected Income Statement
- 23. Projected Balance Sheet
- 24. Projected Cash Flow
- 25. Capital Expenditure
- 26. Working Capital
- 27. Funding Requirement and Structure
- 28. Debt Serviceability
- 29. Break-even Analysis
- 30. Scenario and Sensitivity Analysis
- 31. Valuation and Investment Returns
- 32. Key Performance Indicators and Management Dashboard
- 33. Conclusion and Recommendation
- A. Appendix A: Detailed Assumption Register
- B. Appendix B: Ten-Year Financial Summary
- C. Appendix C: Glossary and Sources
7.1 Category sizing and the divergence between methods
Published data on the South African peanut butter category is inconsistent, and a plan that quotes a single number without explaining the divergence is not being straight with the reader. Three methods produce materially different answers.
Table 18. Category size: three methods and the reason they disagree
|
Method |
Approach |
Result |
Why it may be wrong |
|---|---|---|---|
|
Measured formal retail |
Tiger Brands disclosed that the peanut butter category represents 50%, or R1.7 billion, of the South African spreads market excluding margarine. At an estimated blended retail price of R95/kg this implies roughly 17,900 tonnes. |
17,900 to 19,800 t |
Measured retail scan data excludes informal and spaza trade, which is a very large channel for staples in South Africa, and excludes food service and industrial use entirely. |
|
Groundnut supply balance |
A crop of approximately 62,000 tonnes in shell implies roughly 43,000 tonnes of kernels. Allocating an estimated 40% to peanut butter, adjusting for roasting and blanching losses and adding imported product gives 24,000 to 28,500 tonnes. |
24,000 to 28,500 t |
The allocation between edible nuts, peanut butter, crushing, seed and export is an estimate. Import and export volumes swing significantly by season. |
|
Per capita consumption |
A population of approximately 63 million at an estimated 0.48 to 0.56 kg per person per year gives 30,000 to 35,500 tonnes. |
30,000 to 35,500 t |
Per capita consumption is inferred rather than measured and is highly sensitive to the assumed rate. |
|
Adopted for this plan |
Mid-point of the supply balance and per capita methods, weighted toward the supply balance |
27,500 t |
The adopted figure is an estimate. All market share percentages in this document should be read with a plus or minus 20% band around them. |
The adopted figure of 27,500 tonnes corresponds to approximately R3.0 billion at retail and R1.95 billion at the factory gate. The category is estimated to be growing at 4% to 5% a year in volume, driven by population growth and trade-down from more expensive protein sources rather than by rising per capita consumption.
7.2 Addressable market and the company's share
Table 19. Market sizing funnel
|
Level |
Definition |
Volume |
Value at ex-factory prices |
Derivation |
|---|---|---|---|---|
|
Total addressable market |
All peanut butter consumed in South Africa across retail, informal, food service and industrial channels |
27,500 t |
R1.95bn |
Adopted mid-point of the triangulation above |
|
Serviceable available market |
Retail private label and second-tier brands, certified industrial and institutional supply, and the value and natural own-brand tiers |
11,800 t |
R730m |
Private label estimated at 22% of retail; industrial and institutional at 18% of category; value and natural brand tiers at 12% |
|
Serviceable obtainable market |
Year 5 planned peanut butter volume |
2,770 t |
R191m |
23% of SAM; 10.1% of TAM |
A 10.1% national category share in Year 5 is an aggressive assumption for a greenfield entrant and is treated as such in the scenario analysis. The downside case assumes 82% of planned volume, equivalent to an 8.3% share.
7.3 Bottom-up build of the Year 5 volume plan
Table 20. Bottom-up derivation of the Year 5 volume plan
|
Stream |
Bottom-up logic |
Year 5 volume |
Share of stream’s SAM |
|---|---|---|---|
|
Retail private label |
One anchor national retailer contract at 900 to 1,000 t, one second national account at 400 to 500 t, and third-party brand contract manufacture at 200 to 300 t |
1,420 t |
Approximately 32% of the estimated 5,200 t private label segment |
|
Own brand |
Regional distribution in North West, Free State, Northern Cape, Gauteng and Limpopo; an estimated 1,900 outlets at an average of 33 kg per outlet per month |
690 t |
Approximately 5% of the branded retail segment |
|
Certified bulk and industrial |
Six to nine industrial accounts averaging 90 t a year, plus two institutional or nutrition programme contracts |
660 t |
Approximately 16% of the estimated 4,950 t industrial segment |
|
Snack nuts |
Regional retail listings plus forecourt and wholesale distribution |
230 t |
A small share of a separate snack nut category |
|
Total |
3,000 t |
7.4 Seasonality
Peanut butter demand is mildly seasonal, peaking through the South African winter and school terms and falling sharply in December. The model applies a monthly demand index ranging from 0.82 in December to 1.12 in June and July. This matters less for revenue than it does for working capital: the demand trough in December and January coincides with the period in which the previous season’s contracted groundnut inventory is still being drawn down, which is why the revolving facility peaks in the middle of the calendar year.
