Price crisis sees South African shoppers reach affordability tipping point

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Cooking oil, which saw the highest product inflation* (38%) in the “past month” (4 weeks ending June 1, 2022), saw a corresponding drop in the number of units sold for the first time since the start of the war in Ukraine. This trend is also reflected in other products experiencing high inflation such as frozen meat which experienced 22% inflation and a 17% decline in unit sales and snacks which experienced 19% inflation and subsequent decline. units sold.

Annual FMCG retail sales total R523 billion

Overall, the report also shows total annual FMCG retail sales of R523 billion at South African outlets, representing a 12% year-on-year increase (12 months to end). June 2022 against 12 months until the end of June 2021). In the last month, the data shows sales of R41 billion, which represents an increase of 9% (May 2022 compared to May 2021).

This information comes from NielsenIQ’s Market Track, the country’s largest food retail data source and the only currency used by all major retailers in South Africa. This benchmark data includes over 10,000 branded outlets (eg supermarkets and garages) and over 143,000 independent stores (eg spazas and taverns) across the nine provinces of South Africa. In total, it measures over 80% of all retail grocery transactions.

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NielsenIQ Data Analysis South Africa MD Ged Nooy says; “Consumers have reached an affordability tipping point in the face of the higher prices they are currently facing. It is also evident that consumers are becoming increasingly wary of what constitutes a ‘must have’ in their baskets. with fresh milk, Vienna sausages, breakfast cereals, margarine, cheese, soaps, skincare and deodorants all on the chopping block.”

Interestingly, one product that has seen a positive impact as consumers forgo other staples is bread, which despite its 10% inflation rate for the past month has seen its unit sales increase 17%. Surprisingly, this contrasts with another staple – maize flour – which also saw price inflation, but this led to a 2.3% drop in sales of packs and fresh milk which saw a drop in 9% of units sold.

Consumers back off

These key data points from the NielsenIQ panel are complemented by findings from the NielsenIQ Mid-Year Consumption Outlook Update – Enduring Inflationary Times study, which surveyed consumers in 17 countries, including South Africa.

The study found that 85% of South Africans say they are “consciously monitoring what they spend compared to a year ago”, compared to 76% who said so in December 2021. It is therefore not surprising that the proportion of consumers who agree that their weekly consumption at the store has increased “compared to six months ago” increased from 70% to 80%

To cope with these pressures, consumers are reducing their consumption, the main action being “cooking at home”. This is followed by less spending on discretionary items such as clothing and grooming and less takeout/dining out and socializing.

Nooy comments; “As South Africans face a tsunami of price hikes for utilities and groceries, our research also shows that consumers are also spending less on discretionary items such as home-delivered meal kits, instant prepared meals and snacks or luxury or novel products.”

Food prices: food crisis

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The study also showed that more than half of respondents said they chose the product at the best price. South Africa’s long-standing ranking as one of the most price-sensitive countries in the world also holds, with half of South Africans buying any brand on sale, while 44% have gone as far as to stop buying certain products to reduce the cost of their basket.

Nooy comments; “The current portfolio squeeze means shoppers are looking for genuine, known and reliable products that represent ‘shopping security’ in terms of providing everything they need at the lowest possible price. Now is not the time for sweeping, knee-jerk reactions or rushed product executions, but rather a measured, data-driven response that provides consumers with consistency, certainty and value amid the current price crisis.

* Monthly NielsenIQ inflation is based on the difference between sales growth in rand value and unit sales growth, i.e. how much more consumers spend in terms of rand paid per pack compared to the last month.