Heavy concentration of retail power and higher-than-average brand loyalty are just two issues Uncle Ben's, first introduced in February 1993, is still struggling with here.
When Uncle Ben's planned its entry, it had been confident it could reach 3% to 5% of the rice market. But more than a year later, it has made almost no inroads in the $200 million category against local leader Tastic Rice, marketed by Tiger Group.
One reason is black South African consumers' extreme brand loyalty to local companies and multinationals which never left. Rice, therefore, is dominated by Tastic just as the beer category is locked up by South African Breweries with 98% of the market and the soap category is dominated by long entrenched Unilever brands Omo, Skip and Surf.
Even more troublesome is the dichotomy of South Africa's retail distribution channel. Among black communities, many groceries are informal affairs selling such sundries as single cigarettes and whose entire fruit wares may consist of four apples in a bowl. Among the large supermarket chains, however, there is considerable concentration: 1,000 of the country's 31,000 stores control 60% of all grocery sales.
Moreover, suppliers tie up the trade with incentive agreements, paid off in the form of "aftershots" or allowances based on sales performance. Often this payment is the wholesaler's entire profit.
The vagaries of the retail market have also blunted the acceptance of Uncle Ben's which started out priced at a 15% premium to Tastic, but has seen its price decline 30% due to competition and removal of a 14% value added tax on rice.
To reverse the trend and appeal to U.S.-smitten South Africans, Mars and its agency Grey Advertising have tried wrapping Uncle Ben's in the American flag with red-white and blue packaging and a "100% American" flag on its orange box. The company has also spent $575,000 in TV advertising using American themes, a strategy thought to attract black South Africans, but hasn't been able to match Tastic's $1 million plus budget.
And Tastic's rather uninspired ads, from Sonnenburg Murphy Leo Burnett, still work well, demonstrating the versatility of its rice in making exotic dishes. One for example, shows a Hungarian goulash backed by strains of Hungarian music; another showcases paella with background music of a Spanish guitar. Its long running themeline: "Fantastic Tastic cooks perfect every time."
But while Uncle Ben's strategy hasn't paid off, Marketing Manager Stuart Bull said the company is forging ahead with a new line of sauces in May. "We are not there yet," he maintains. "It's early days and we are in for the long haul."