South African buying habits have shifted dramatically

South Africans made a substantial shift to smaller stores and companies as rising gasoline, food, and transportation expenses led households to reduce costly shopping excursions.

South Africa’s fast-moving consumer goods (FMCG) sales increased in 2022, with smaller merchants thriving despite persistent power outages.

The FMCG industry expanded to R547 billion in sales in 2022, a 14% rise from the previous year, according to the NielsenIQ State of the Retail Nation report based on a Retail Measurement Survey (RMS) – which collects monthly and annualised data through the beginning of January 2023.

According to NielsenIQ, alcohol consumption has risen following many prohibitions in recent years, with a 36% increase compared to 2021. Yet, this must be regarded in the perspective of past years’ zero monthly basis owing to alcohol restrictions.

Alcohol makers had a successful year, with South African Breweries, Distell, and Diageo all increasing sales by more than 30% year on year (y-o-y).

Cooking oil (34%) had the biggest yearly value sales rise, followed by bread (26%), flour (21%), and Mazie meal (17%).

Yet, considering that cooking oil faced the greatest inflation levels (38% in September 2022), the increase in sales value is acceptable.

Bread inflation has also been substantial (17% in Q3 2022), owing to the high cost of power for mills and bakers that use generators. Companies find it difficult to accept higher prices in low-margin areas such as bread.

As a result, customers gravitated for rice and maise meal, which had lower inflation and a longer shelf life.

Despite the fact that smaller retail manufacturers and outlets are struggling to absorb emergency power generating expenses, manufacturers, including many smaller and local manufacturers, were ranked in the top 20 to 50 in sales value performance. This contributed 14% to the overall increase in FMCG sales value.

According to NielsenIQ, smaller firms benefited from being less reliant on global supply networks, allowing them to respond rapidly to the local energy crisis.

Traditional stores, like as spazas, benefited as well, because they carry shelf essentials and do not have fridges, allowing them to be more flexible in terms of what they stock.

According to NielsenIQ, shoppers like these businesses because their location is handy for their target consumers. Consumers are attempting to avoid the high transportation costs involved with shopping visits.

Consumer spending also shifted to shelf-staple items. This is in stark contrast to previous worldwide recessions, such as the one in 2008, when people hoarded perishable and frozen commodities in family freezers.

This is because 40% of South Africans lack freezers, making it impossible to preserve perishable items.

This demonstrates a new spending pattern centred on home-based consumption, which is a simpler aspect of life and expenditure to control.

According to NielsenIQ, consumers will spend significantly less on entertainment, eating out, takeout, clothes, and apparel since they will have to absorb those costs in order to purchase necessities.