To boldly go

South Africa’s Pioneer Foods

Case study: Name Pioneer Foods Founded 1997 Headquarters Cape Town, South Africa CEO Phil Roux Website

Also on

Breakfast table

On the African continent you would be hard-pressed to find a CEO as fired up as Pioneer Foods’ Phil Roux. His personal vision for the Cape Town-based food and beverages group, after three busy years at the helm, is for it to be “the reference point for FMCG, certainly in South Africa” within five years.

Today, Pioneer is the second-largest listed FMCG player in the country; the official aim is to take the number one spot with a ‘strong African footprint and globally recognized scale’.

The signs are good. In a difficult market, Roux has taken Pioneer to new heights. The business has a current market capitalization of US$2.3 billion. It makes and distributes wholesome, high-quality food and drink products, and owns such popular South African brands as WEET-BIX, Lipton Iced Tea, Ceres, SASKO and Safari.

Although Pioneer has an international outlook, exporting to more than 60 countries and with modest operations in the UK, Namibia and Botswana, it trades primarily in South Africa, an emerging market with many distinct challenges.

“We’re a populous nation but with a growth rate that has slowed significantly,” Roux says. “This has created a lot of social tension.”

"Consumers’ ability to spend is restricted. Unemployment is high and economic inequality has widened. There are also other tensions. “South Africa is very unionized; we’ve seen attempts at wage negotiations and horrific cost creep,” Roux says.

On top of muted consumer spending, El Niño has brought some of the worst drought conditions Africa has ever seen. Political blunders have taken their toll and some 60-70 percent of Pioneer’s cost base is hard-currency influenced. Rising competition has created further pressure as FMCG players battle for their share of a slow-growth market. “As a business we are building shareholder value and growing returns, which isn’t easy in current conditions. It demands hardened resolve,” Roux says.

In such circumstances, Pioneer is doing exceptionally well, driven by Roux’s clear vision and no-nonsense approach. He admits it’s been “quite a journey.” He joined the group in April 2013, bringing experience from Coca-Cola, Sabco and Tiger Brands to the role. Since then he has restructured the operations – divesting underperforming product lines and focusing on those most relevant to today’s customers. These include desirable ‘functional food’ or food/pharma fusion lines, which play to consumers’ growing appetite for healthy eating.

“Reduced sugar and salt are big issues, and there has been a general rise in consumer consciousness, so correct labeling and declarations are very important,” Roux says. “We’re responding to all of that.” This has involved some reengineering of product formulations, though Pioneer was never in the sweet treats business. The main thrust has been to bring more of the inherent health and wellness qualities of the group’s products to the fore, and adding complementary lines. Pioneer’s recent acquisition of a 50 percent stake in FutureLife is a significant part of that strategy – so significant that Kellogg South Africa challenged the joint venture (it was finally approved late last year).

FutureLife takes Pioneer into smart food territory – pharma-licensed breakfast products, with high protein or high vitamin content, that meet customer needs and offer healthy margins. To safeguard those margins, Pioneer has to be hyper-efficient. The company already uses state-of-the-art technologies in manufacturing and distribution, but is always looking to improve.

“Costs and efficiencies are a big focus,”  Roux says. By which he doesn’t mean cutting corners. “We don’t skimp. Our 44 manufacturing and milling operations are world class. We buy the best possible equipment, and then the best operating systems to get the most out of these investments.”The group recently replaced its 750-strong bakery fleet with more efficient, new generation vehicles, which consume less fuel, and whose capacity can be better optimized with “the right vehicles for the given geography or route,” Roux says.

To achieve its performance goals, Pioneer has to be agile and act fast. As part of its restructuring drive, individual business units have been given ‘enormous latitude’ to do what’s required to further their goals. “We changed our operational model and capitalized on some parenting advantages,” Roux says.

He’s picky about who the company hires. “All of our competitors can access the same technology, so our differentiation is down to our brands and our people. Our people are incredibly smart. We have a culture of winning, and we demand the best. Anyone without that mind set won’t be happy here.”

Happy customers matter too, of course, and most South African consumers now have mobile phones. “Connectivity is real, so digital marketing is something we’ve had to address,” he says. The company runs some creative social media campaigns (for example an anchovy paste campaign to support penguins and seabirds), and last year helped the community by pledging US$580,000 to a youth center project in the Mbekweni township outside Paarl.

Connectivity may have raised consumer awareness, but so far it hasn’t changed their fundamental shopping habits: online grocery shopping isn’t as relevant yet in South Africa as in more developed markets. The local distribution structure is different – it’s more large wholesalers and local stores, so online grocery sales haven’t taken off yet.

For a business so deeply embedded in South Africa, these conditions are something Pioneer must work with. “South Africa is our economic engine,” Roux notes. The group’s primary goal is to improve its competitive position and its financial returns at home, by doing more of the same – focusing on cost efficiency and honing its brand differentiation.

Beyond that, Roux is more guarded about the group’s plans – save to hint that its horizons are broadening. “We have some flexibility in the balance sheet to make acquisitions, not only here but elsewhere in Africa and beyond.

At a glance

  1. Pioneer Foods formed in 1997 from a merger between South African bakery business SASKO and breakfast cereal specialist Bokomo.
  2. The group has three main divisions:
    1. Essential Foods produces wheat and maize products, pasta, rice, beans and other dried vegetables. The business includes a large bakery.
    2. Groceries looks after breakfast cereals, rusks, cake mixes, baking aids, dried fruit products, nuts, sweet and savory spreads, processed salads, long-life fruit juices and more.
    3. International. Pioneer Foods International (PFI) is now a distinct business, driving growth outside South Africa. It is based around an export business model, managed across Africa and the Rest of the World.
  3. Pioneer Foods was listed on the Johannesburg Stock Exchange (JSE) in 2008.
  4. Joint venture partners include Heinz, Wellington’s, HP, John West, Lea & Perrin’s, and most recently breakfast health foods specialist FutureLife.
  5. Today Pioneer Foods is the second largest, listed fast-moving consumer goods (FMCG) player in South Africa; its goal is to become number 1 within the next five years.
Read more

Connect with us


Request for proposal



KPMG’s new-look website

KPMG’s new-look website