Consumers are rapidly returning to traditional trade outlets – report

Cooking oil has seen highest inflation across all retail categories at 36%, followed by frozen chicken at 16% and laundry detergent at 11%; that really affects the consumer – Jon-Jon Emary of NielsenIQ.


NZINGA QUNTA: Thanks so much for being with us tonight. NielsenIQ has released its monthly State of the Retail Nation report, which shows total annual sales of R519 billion at South African retail outlets, and gives us such interesting insights into how we are spending money in South Africa.

Jon-Jon Emary, who’s the retail intelligence strategy lead at NielsenIQ, joins me now. A very good evening to you. Thanks so much for your time tonight. Just explain how the State of the Retail Nation report gathers its data, and what retail outlets it gets that data from.

JON-JON EMARY: Good evening. Thanks for having me on the show tonight. At NielsenIQ we track retail sales across both the informal and the formal sectors. We do this through our market-track solution. We track over 10 000 branded retail outlets, so your supermarkets, grocery stores, garage forecourts – and we track more than 143 000 independent stores. Those are the likes of the spaza independent grocery stores, and even taverns across South Africa. What we cover measures approximately 80% of all grocery retail transactions, so we don’t look at clothing and those sort of categories. We’re really looking at the stuff that we consume in homes or our fast-moving consumer goods.

NZINGA QUNTA: What did you find in terms of sales for the four weeks ending May 1?

JON-JON EMARY: In the latest months, that would be April sales, we saw R42 billion of sales throughout South Africa. That’s up 10% on the like-for-like year four years ago. We’re seeing quite healthy growth in the retail sector and, if we’re looking at CPI at 6%, and food inflation at 6.8%, we are seeing that retail sales are going ahead, which really speaks to the fact that consumers are re-evaluating where they spend their money.

We’re not going out as much. We’re not eating out as much. We’re spending more money on for-consumption in the home, and that’s really brought some buoyancy back into the retail sector.

There’s obviously inflation at play as well. But we are seeing some healthy recovery within the retail space; liquor and tobacco sales are stabilising now and no longer affected as much by all the bans and things we had to deal with last year.

NZINGA QUNTA: We’ll come to the liquor quite shortly, because I found the statistics on that very interesting. But there was a sharp increase in the sale of bread this year compared to last year. Do we know why?

JON-JON EMARY: I think one of the interesting things we’ve seen is around bread, yes.

We’ve seen a significant increase in bread sales, but what’s really interesting is that when we look at in-home consumption of bread, it has actually reduced slightly, which is quite an interesting thing considering what I’ve just said about us moving back to spending in-home.

But with people working, going to the office again, or being on building sites and all sorts of other things, we’ve definitely seen an uptick in absolute bread sales, and a lot of that looks like it’s being consumed out of home, so for people at lunchtime and all those sort of meal occasions. It’s an affordable meal alternative, so we’re seeing quite nice, healthy growth within the bread environment.

NZINGA QUNTA: Something else that had sharp increases was liquor sales, although that’s beginning to taper out.

JON-JON EMARY: Yes. We’ve got to put context onto the liquor sales growth. As I mentioned, there were bans. So if we’re looking at longer periods, we have to understand that there are bans and effects at play there. But we’re seeing that now that’s stabilising; it’s moving into a period of normalcy, if we can use that word.

I don’t know if we know what ‘normal’ is in our lives any more, but we are seeing it stabilise.

And we’re seeing that with the absolute basket, where there’s a 10% growth year on year. Liquor sales are obviously still growing ahead of the basket.

We know beer is still the number one liquor category, and in fact the number one category in South Africa.

What I think is really interesting in liquor is that post the bans we shifted what we were buying. We were referring to longer-lasting bottles. It was easier to stock up on spirits and wine during the uncertainty periods, because buying lots of beer takes up a lot of space. That seems to be a trend that’s continued post the Covid ban periods.

We’ve actually seen gins that pass vodka in terms of category importance, which is really interesting to think.

I was looking at it earlier and gin sales within townships have almost doubled since 2019.

Having said that, total liquor is not quite back to 2019 or pre-pandemic levels, but it’s interesting to see that within certain categories our palate has changed and we really are looking at different categories that are our preference now versus what they were pre-Covid.

NZINGA QUNTA: That’s very interesting, Jon-Jon, that you’re saying gin sales have now surpassed vodka, and you also believe that it’s partly as a result of Covid-19.

JON-JON EMARY: Well, I won’t say it’s a result of the virus, but it’s a result of …

NZINGA QUNTA: The lockdowns and what’s around those, yes.

JON-JON EMARY: A hundred percent – the effect on our lifestyle that the pandemic brought to light.

I think we all had to make strategic and tactical decisions when there were imminent bans or rumours of bans.

We saw lots of spikes and dips in sales, and as we thought there was going to be a ban, everyone rushed out and bought whatever they could. Having that change in what was in our homes and what we were consuming obviously has a lasting effect.

We see that across multiple categories, but when we start trialling things, trial is the start of that change in our consumption, and the pandemic really did force us to trial different things in our lives.

NZINGA QUNTA: There’s data in that report that reflects how prices are shooting up. The one that shocked me quite a lot was that cooking oil experienced 36% inflation over the last month alone, with value sales of cooking oil up 43% in the last month. What other types of products are seeing this kind of increase?

JON-JON EMARY: In terms of inflation, cooking oil is right up there, the highest inflation across all the categories. We track all the big categories. The ones that follow on which are quite scary are frozen-chicken inflation at 16%. laundry detergent at 11%. So we are seeing high double-digit inflation in really important categories within the baskets, and that really does have an effect on the consumer.

We do know that retailers and manufacturers are investing as much as they possibly can to reduce this. If we look at the gap between CPI [consumer price inflation] and PPI [producer price inflation], it’s sitting at 7% now.

That really indicates how much the producers, as well as retailers, are investing in keeping the prices low, or as low as possible.

We’re looking at the data, and 35% of sales of the top 50 categories in South Africa are sold on promotion. So we know that there’s a lot of investment going into promoting and reducing prices as much as possible for consumers.

NZINGA QUNTA: What kind of consumer changes are you seeing as a result of Covid-19 and the lockdowns? I’m asking this because we spoke a little earlier about alcohol, but in terms of other goods what are we seeing?

JON-JON EMARY: I think the biggest thing we’ve really seen is that we are shopping in [fewer] retailers. We’re consciously not going to the shops as often, either. But as a result of that we know that the average basket has increased. It doesn’t sound like the last, but it’s gone up R131, that food trip. That’s an 11% increase in the basket cost.

What is of concern there, though, is that the volume of that basket has not increased at the same rate.

Again, that speaks to the fact that people are getting far less for their money and they’re having to spend a lot more, so we are tactically stretching our rands and cents.

What that means is we are re-evaluating our protein portfolio. We are re-evaluating our staples portfolio. We’re seeing people moving out of frozen chicken with the high inflation in that space, and looking for [alternatives] – and that’s really the big shift.

We’re seeing some things that are interesting. Now we are looking at more people going back to offices, we’re seeing things like coffee and long-life milk starting to stabilise, whereas we saw really high growth during the pandemic.

Interestingly, in the inverse of that, in things like personal care and particularly deodorant, as people are going back to the office I’ve seen an uptick in sales and seeing some growth as people go back into the workspace and their needs for what they have to have change.

NZINGA QUNTA: Thank you so much, Jon-Jon. Jon-Jon Emary, retail intelligence strategy lead at NielsenIQ, was speaking to us about how consumer behaviour is changing.

Harry Byrne

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