Grocery price inflation continues to rise in South Africa, despite the best efforts of retailers not to pass on costs to shoppers, with some items faring worse than others, according to the latest NielsenIQ monthly State of the Retail Nation report.

Price hikes on staple items including bread and oil have been particularly noticeable following global supply issues and a weaker local currency.

NielsenIQ’s report highlights annual consumer packaged goods sales of R527 billion, an 11% increase for the last 12 months, and monthly sales ending 8 July 2022  of R54 billion, an 11% increase on 2021.

Bread continues to rise

NielsenIQ’s data showed that bread value sales have increased by 33% in the latest month with continued acceleration, despite the category’s inflation sitting at 14%.

NielsenIQ South Africa MD Ged Nooy said: “This is the third month we have seen a significant rise in bread sales indicating that consumers continue to forgo more expensive protein options in favour of cheaper staples.”

This buoyancy in bread sales is also reflected in NielsenIQ’s Top 20 Manufacturer ranking which shows, for example, Premier Foods has increased sales by 31% in the latest month.

This might indicate that consumers buying more bread and also the ingredients to make their own bread, the information services company said.

Price pain

Price increases remain an obvious concern with overall basket inflation sitting at 8.1% versus a year ago, calculated across 580 categories, weighted to their size in the basket.

NielsenIQ said its monthly inflation figures are based on the difference between rand value sales growth versus unit sales growth – namely how much more consumers are spending in terms of Rands paid per pack than they were the month before.

Top 5 products showing the highest levels of inflation

• Cooking oil’s latest month inflation versus a year ago is at 45%, due to raw material increases. Its value sales have increased by 43% while the number of units sold has decreased by 2% as consumers react to the increased price of a product at the frontline of price increases.
• Frozen chicken is up 17% due to avian flu.
• Laundry detergent is up 16%.
• Bread is up 14% due to raw material increases.
• Maize meal is up 12% due to raw material increases.

Alcohol sales have a different flavour

The liquor sector continues to see a significant rebound with 30% annual growth in the Alcoholic Beverages supergroup category and 25% latest months growth.

NielsenIQ said that the trend toward the purchase of longer-lasting bottles of spirits during South Africa’s prohibition era has continued as a ‘new liquor palate’ becomes entrenched.

This is evidenced in the latest State of the Retail Nation report with sustained annual sales growth – albeit off a liquor ban base – in categories such as gin (38%), wine (38%), vodka (36%) and whisky (28%). Beer retains its best seller top spot amongst alcohol sales at 22% growth but it’s clear that a new era has dawned within the alcohol sector.

Fewer packs, more price

In the face of cost pressures, consumers are not buying more but are paying more for less, said the information services provider.

This is reflected by total basket value sales (excluding liquor & tobacco) up by 7.6%, but with a very sluggish 1.1% increase in the number of units sold over the same period, it said.

Increased price sensitivity & willingness to switch brands

Adding to NielsenIQ’s analysis of the local market is its latest Shopper Graphics report which reveals interesting broader changes in the in-home consumption and shopping behaviour of South African households.

It shows that while there has been a steady increase in value per buyer over the past two years, this has not been accompanied by a rise in volume/unit sales – a clear indication of inflationary pressures at play.

It also found that local consumers are shopping less frequently and at fewer retailers, but when they are in-store they are spending more per trip with increased overall basket spend is being driven by LSM 1-4 due to the introduction of social grants, said NielsenIQ.

“We have also seen increased price sensitivity across multiple categories, with disloyalty growing when it comes to brand preference versus the cheapest available price. South Africa is already one of the most price-sensitive countries in the world, so it will be interesting to evaluate the role of promotions, for example, within this new shopping environment,” said Nooy.

Turning an inflation corner

NielsenIQ predicts a plateauing of price increases in the next three months.

“This view is based on further decreases in the petrol price leading to lower input costs. In addition, as the Reserve Bank continues to increase the cost of credit this will curb the purchasing power of consumers and lead to less demand for products resulting in a reduction in overall inflation over the coming months,” said Nooy.