Business Maverick


Saffers no longer bringing home the bacon after food prices spike

Saffers no longer bringing home the bacon after food prices spike

Rising inflation, high petrol prices and increased food costs are making South Africans a bit more picky about what they put in their grocery trolleys – with bacon being among the first to get the cut.

NielsenIQ South Africa managing director Ged Nooy says: “South Africa has clearly returned to a time of austerity shopping, much like that experienced during and after World War 2.” 

He says there is no doubt that the events in Ukraine will affect the rest of the world in terms of increased inflation, given the impact on the oil price and the agricultural sector. Ukraine supplies 10% of global wheat exports (UN Food and Agricultural Organisation), which often sees it described as the “breadbasket of Europe”.

About 60% of the top consumer goods product categories experienced price increases ahead of consumer price inflation (CPI) during the fourth quarter of last year, according to a NielsenIQ study of consumer price increases using South African Retailer Measurement service data.

The NielsenIQ data also show that almost half (48%) of the top consumer goods categories – including meat and dairy products, beverages and household cleaning items – which generate almost 80% of sales, saw an average pack price increase of between 5% and 11%  year on year, while 9% of top consumer goods categories saw a leap in pack prices well beyond 11%. 

These increases are a notch above inflation, which is currently sitting at 5.7%, and consumers can expect to see fatter increases ahead.  

“There is a general acceptance that the cost of goods sold will continue to be higher this year and we have to recognise that we are in a hypersensitive consumer environment where Covid has accelerated the polarisation of consumer finances, leading to new trade-offs we haven’t seen before,” says Nooy.

Shoppers could have been forgiven for spluttering with outrage at the 25% increase in the price of cooking oil, although this essential purchase stayed in trolleys regardless of cost. However, South Africans have been buying less frozen chicken after an average R14.75 price increase on the protein, and bacon that costs more than R40 for a 250g packet is now officially a luxury. 

Daily Maverick did a quick cost comparison across three popular grocery retailers. 

While shoppers are opting for lower-priced products, or upsizing to larger packs that offer better value, manufacturers are trying to keep prices constant by reducing package sizes – shrinkflation – or decreasing the quality of their products. 

“We don’t see local consumers being given any relief over the next six months. Within this pressure cooker of prices, something has to give, and it seems as if certain meat products such as those mentioned above, are already being excluded from shopper baskets as a result,” says Nooy. 

“The key lesson is to be aware of shifting channel dynamics and consumer preferences in inflationary environments. Whether consumers change their consumption, stock up or downsize, manufacturers and retailers should not lose sight of the nuanced ways different channels can fulfil consumer needs,” he concludes. BM/DM


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