South African food retailers brought home the bacon with onset of COVID-19

SOUTH AFRICA – Food retailers in South Africa are seen to be the biggest winners during the COVID-19 pandemic as most businesses have reported sales volumes growth or increased revenue in their latest financial statements.

This is according to the latest Essential Food Pricing Monitoring report, prepared by the Competition Commission, which highlighted that the bullish sales were as a result of most people resorting to preparing food at home and thus bought the necessary groceries to do so.

“The introduction of the national lock-down saw panic buying behavior and a switching of consumption from restaurants and other food services prohibited under lock-down to home prepared food,” indicated the report.

Citing as an example, the food division of Woolworths, with its well-heeled customer base that could absorb the shock of the lockdown, saw increased sales revenue growth of 10.7% for the year and 13.3% revenue growth in the second half of the financial year, reports Sunday Times.

This period coincides with the lockdown, and the report says that Woolworths’s higher revenue growth in this period was a result of a shift in consumption patterns.

Other retailers saw an increase in revenue margins of between 2% and 9%.

“The introduction of the national lock-down saw panic buying behavior and a switching of consumption from restaurants and other food services prohibited under lock-down to home prepared food.”

Essential Food Pricing Monitoring report

To increase their sales and provide seamless services, the food retailers also resorted to the use of delivery services.

Supermarket chain Pick n Pay acquired on-demand online delivery app Bottles to strengthen its e-commerce operations earlier in October.

In the same country, Uber Eats partnered with Game Stores, a subsidiary of South Africa’s retail giant Massmart Holdings, to deliver food and essential products to customers during the nation-wide level four lockdown.

This came after Checkers, a supermarket chain owned by Shoprite entered an exclusive partnership with Mr D Food for delivery of alcohol to customers’ homes.

According to a recent Mastercard study on consumer spending, 68% of South Africans are shopping more online since the onset of the pandemic.

With the uptick of online shopping in the country, the study has indicated that 54% of the online shoppers bought groceries since the pandemic started.

Another trend the Competition Commission’s report looked at was its concern around conduct of retailers over the lockdown as prices of certain basic items increased out of proportion to wholesale prices. Meat in particular was of concern.

“Barring some exceptions, across the different meats wholesale prices have largely remained stable even with the introduction of the national lockdown, while there were increases in retail prices entering into lockdown, especially for chicken, beef, pork and lamb/mutton,” highlighted the report.

The researchers’ assessment of meat “shows that the pandemic and lockdown had a significant effect with clear market disruption evident.”

The gap between retail and wholesale prices for a number of products is yet to return to pre-lockdown levels, with retailers clearly being reluctant to pass on savings to the consumer.

On the other side, staples such as potatoes and onions did not raise concerns of the researchers.

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