By Judith Gale, National Head of Marketing at Encore at The SPAR Group

As South Africans continue to face economic strains, the repercussions of global events are felt deeply in household budgets across the country. The ongoing cost of living crisis, exacerbated by the 2022 Ukraine conflict and its ripple effects on global food prices, has left many vulnerable groups struggling to afford essentials.

South Africa, despite its self-sufficiency in food production for domestic use, remains vulnerable to international grain price fluctuations dictated by global supply-demand dynamics, particularly from major producers like Russia and Ukraine. This has significantly affected the affordability of staple foods, especially for vulnerable populations, with the effects typically lasting 12 to 18 months.

While food inflation has moderated to mid-single digits from a peak of 14% in April 2023, the substantial increase of 475 basis points in interest rates between November 2021 and May 2023 has squeezed consumers' disposable incomes. Despite a recent 25 basis point rate cut, the relief has been insufficient to alleviate financial burdens effectively. Looking ahead, although further rate cuts may be forthcoming, economists caution that household finances will require time to recover fully from the prolonged cost-of-living crisis. The Reserve Bank's approach will be cautious, closely monitoring economic indicators and inflation trends as it navigates future rate adjustments. However, stimulating consumer spending, which drives about two-thirds of South Africa's GDP, will require more than just monetary policy adjustments. In response to these challenges, The SPAR Group has made substantial investments in its manufacturing and private label product lines. This strategic shift not only supports affordability for the consumer but also aligns with broader sustainability goals and market adaptability.

SPAR's private label products, which include ranges from convenience foods to liquor and pharmaceuticals, have grown significantly, bolstering its position in the market. Following the acquisition of Encore, SPAR has expanded and tiered its private label offerings, anticipating continued growth ahead of its wholesale business.

Euromonitor data indicates a 30% growth in private labels since 2020, with SPAR's private label products now constituting approximately 24% of its core grocery turnover in Southern Africa, projected to rise to 28% by 2030. This growth underscores SPAR's commitment to offering competitive pricing and quality control through its private label lines, supporting local suppliers and enhancing consumer choice. By sourcing from over 200 suppliers, many of them Small, Medium, and Micro Enterprises (SMMEs) across South Africa, SPAR ensures fresh, quality supplies while maintaining agility in responding to market demands. This flexibility contrasts with national brands constrained by rigid supply chains, allowing SPAR to capitalise on emerging consumer trends and growth opportunities.

NielsenIQ reports that private label products now represent 24% of total basket value sales in South Africa, underscoring their significant role in consumer preferences and market dynamics. SPAR's strategy includes expanding its footprint and enhancing its Rural Hub initiatives, such as in Limpopo, where it supports local farmers through skills development and product marketing under its Freshline and Country Value labels.

Looking forward, The SPAR Group remains committed to empowering independent entrepreneurs and creating value within local communities, emphasising sustainable business practices over value extraction in rural areas. While South Africa navigates ongoing economic challenges stemming from global food price volatility and interest rate fluctuations, SPAR's strategic focus on private label expansion and community-centric initiatives positions it to mitigate consumer hardships and foster long-term economic resilience.

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