South Africans eating less but paying more

The South African fast-moving consumer goods (FMCG) sector has experienced a significant increase in annual sales over the past year. However, this growth has been driven by higher prices rather than increased consumption.

This is according to the latest NIQ State of the Retail Nation analysis, which revealed that the South African FMCG sector, including liquor and tobacco, experienced a 13.4% increase in annual sales. The industry reached annual sales of R593 billion by the end of March 2023. 

According to the report, while South Africa’s overall CPI is at 6.3%, food inflation remains high at 12.2%. This has started to normalise in April and May. 

The report revealed that staples like cooking oil, maize meal and chicken have experienced the highest annual inflation rates.   

In particular, cooking oil saw an inflation rate of 40% and contributed significantly to overall FMCG inflation, despite accounting for less than 2% of total sales.

The high cooking oil prices have led to changes in consumer consumption patterns, with volumes purchased steadily decreasing. The increased cost of cooking oil has also affected the consumption of complementary products like frozen chicken. 

However, cooking oil prices have stabilised in recent months, and inflation is expected to ease in this category and across the range of the top 40 products measured by NIQ.

As South African consumers are increasingly under pressure, they will likely consider alternatives such as pork, which is now similarly priced to frozen chicken, or tinned protein with a longer shelf life. 

Rice could also be seen as a better alternative to maize meal, which has experienced a 17.6% annual increase in inflation compared to 1.0% for rice.

According to the NIQ report, increased promotional intensity and consumer demand for promotions can lower inflation in specific categories. 

For example, rice has seen reduced inflation due to increased promotion, while coffee has experienced high inflation – 15.5% – due to decreased promotion and higher everyday prices.

NIQ’s findings support those of the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD), which recently said the prices of basic staples remain stubbornly high with no sign of coming down soon. 

The PMBEJD food basket of 44 basic goods declined by R15 in June to a total price of R5,056. However, while the overall price declined, essentials such as maize meal, rice, onions, potatoes, and chicken remained high. 

South Africa is experiencing a peculiar phenomenon with high prices for food being driven by deteriorating infrastructure and intermittent power supply. 

Thus, while global food prices are declining, South Africa’s remains high and, in some cases, are increasing.