SA’s biggest grocers are trying to protect consumers from rising food prices

South Africa’s major JSE-listed food retailers continue to play a role in trying to protect already compromised consumers from rising food costs by keeping internal food inflation levels low.

Shoprite Group, Pick n Pay and Woolworths reported in trading updates released on Tuesday that internal sales price movements remained below recorded consumer price index (CPI) food inflation, which came in at 8.6% for June.

For Pick n Pay, internal selling price inflation for the 18-week period ending July 3 was held at 5% in its South African operations.

Rival Woolworths says it managed to hold its price movement steady at 3.5% and its underlying product inflation at 3.9% in the 52 weeks ending June 26.

Africa’s biggest food retailer Shoprite reported internal retail price inflation for the 52-week period ending July 3 was 3.9%, despite an acceleration in the fourth quarter, with inflation in the second half of the period approaching 5% .

But it might not last long

The consumer in South Africa has for the past few months had to contend with increasing price pressures, mainly driven by Russia’s ongoing invasion of Ukraine, which triggered a global rise in fuel prices and supply chain disruptions.

Sasfin equity analyst Alec Abraham warns that if the inflationary environment continues on its current trajectory, the country’s merchants may lose the ability to protect the consumer against future price shocks.

“The longer these increased prices go on, the more difficult it will be for both the retailer and the manufacturer. At some point, if high inflation continues for an extended period, you will start to see more of the price increases being pushed to customers.”

In the meantime, Abraham says that to feel the retailer’s price protection, consumers will have to start paying more attention to their shopping basket by making cheaper and more affordable choices.

As he says, retailers offer much of the price value in bulk products – which give customers greater value per item. kilogram – and in-house brands, which retailers often buy at a cheaper negotiated price from the manufacturers.

“You have to be a smart shopper to identify the value they have [retailers] provides. It won’t be completely obvious that customers who just walk in and buy what they always buy can see that retailers are cutting them some slack,” he adds.

Read: The prices of these 15 food staples have risen over 15% from last year

Shoprite performance

In its full-year 2022 operational update, Shoprite says it has seen a 9.6% increase in total sales to around 184.1 billion.

The pleasing performance was, it said, partly boosted by the 44.5% increase in alcohol sales as well as the 10.1% increase in sales in its SA supermarket operations.

As a result of the home improvement rush that most retailers have seen in the 2020/2021 periods, the group’s furniture business is experiencing a decline, with sales in the current period falling by 1.4%.

Shoprite’s other operating segments – including OK Franchise, Transpharm, MediRite Pharmacies, Computicket and Checkers Food Services – experienced an 8.5% increase in sales.

The group also managed to increase its footprint by 127 stores, bringing its total store count – excluding those closed as a result of the July unrest – to 2,476.

Woolworths performance

Exclusive food, beauty, home and clothing retailer Woolworths reported in its trading update for the full year ending June 2022 a 1.4% rise in group revenue and concession sales.

The improved result for the year was helped by the improvement in trading conditions in the second half of the year, when the group’s turnover grew by 4.9%.

“This was despite the volatile global backdrop, supply chain disruptions exacerbated by the Russian invasion of Ukraine, the impact of rising inflation and interest rates and severe load shedding in South Africa,” the group said.

The group’s Fashion Beauty Home (FBH) business also saw an improvement this time around, with full-year sales growth of 5.4% – boosted by “new winter ranges, increased market share in ‘must win’ categories and a stronger performance from the rest of Africa”.

The food business registered an increase of 4.2% for the year. The group noted that this segment’s performance reflected a return to out-of-home spending by the consumer and low product inflation across key categories.

Read: Woolworths annual sales helped by improvement in second half

Pick n Pay performance

With its quarterly update, Pick n Pay reported 10.7% growth in sales for the 18 weeks ending 2 July 2022.

According to the group, the period saw a 97.3% increase in total online sales – which covers sales facilitated through scheduled delivery, click and collect and its on-demand app Asap!

Earlier this year, the group announced a partnership with Takealot’s delivery app Mr Delivery, which will see customers access the retailer’s products with greater ease. The project will be piloted in a few stores in August and is expected to go national by the end of 2023.

Looking ahead to the rest of the year, in light of rising inflation and interest rates, Pick n Pay says it remains committed to protecting its consumers from rising cost pressures.

“The group’s goal is to maintain price investments at a particularly challenging time for consumers.”

“We expect CPI Food to accelerate further (June CPI Food was 8.6%) and will continue to invest in price to support consumers,” the group adds.

Read: What took Pick n Pay so long?

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