South Africans showed a significant switchover to smaller shops and businesses as the rising fuel, food prices and transportation costs forced households to cut down on expensive shopping trips.
South Africa’s fast-moving consumer goods (FMCG) recorded improved sales in 2022, with smaller retailers showing resilience despite ongoing power cuts.
According to the NielsenIQ State of the Retail Nation analysis based on a Retail Measurement Survey (RMS) – which records monthly and annualised data to the beginning of January 2023 – the FMCG sector grew to R547 billion in sales in 2022 – a 14% increase from the previous year.
NielsenIQ said that alcohol rebounded after successive bans over the last couple of years, with an increase of 36% compared to 2021. However, this must be viewed in a greater context of nil monthly bases in previous years due to alcohol bans.
Alcohol producers had a strong 12 months, with South African Breweries, Distell and Diageo all achieving more than a 30% increase in sales year-on-year (y-o-y).
Cooking oil (34%) achieved the highest increase in annual value sales, followed by bread (26%), flour (21%) and Mazie meal (17%).
However, the increase in sales value for cooking oil is understandable, given that it experienced the highest inflation levels (38% in September 2022) during the year.
Bread also experienced high inflation (17% in Q3 2022), linked to the electricity costs for mills and bakeries running on generators. Low-margin categories like bread make it difficult for companies to absorb increased costs.
This resulted in consumers moving towards rice and maise meal, which experienced lower inflation and had a longer shelf life.
Despite the smaller retail manufacturers and outlets struggling to absorb emergency power generation costs, manufacturers were ranked in the top 20 to 50 in sales value performance, including many smaller and local manufacturers. This contributed 14% toward overall FMCG sales value growth.
NielsenIQ said that smaller businesses benefitted from being less reliant on global supply chains, meaning they could adapt quickly to the local energy crisis.
In addition, traditional outlets, such as spazas, also benefitted, as they stock shelf staples and do not have fridges, making them more agile in terms of what they stock.
NielsenIQ said that consumers favour these outlets given their location is convenient for their target consumers. Shoppers are trying to avoid high transportation costs associated with trips to the store.
There was also a shift in consumer spending to shelf-staple goods. This significantly differs from earlier global recessions, such as in 2008, when consumers stockpiled perishables and frozen foods by keeping them in household freezers.
This is because 40% of South Africans do not have refrigerators, meaning they cannot store perishable foods.
NielsenIQ’s data also showed that consumers are changing their shopping frequency, with lockdown-induced behaviour continuing. The data showed a 40% decline in shopping trips compared to the end of 2019.
This shows a new consumption pattern around home-based consumption, as it is an easier part of life and expenditure to manage.
NielsenIQ predicts there will be far less spending on entertainment, eating out, takeaways, clothing and apparel, as consumers will have to absorb those expenses to afford the staples.