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The Competition Commission has published its latest essential food price monitor, which shows how the Covid-19 lockdown affected the cost of food in South Africa.
The onset of the Covid-19 health crisis and associated lockdowns triggered panic buying behavior in both the wholesale and retail markets.
Regarding the fresh produce wholesale markets, initially there were price increases in vegetables such as carrots, onions and tomatoes.
In cereal commodity markets, price increases were initially observed due to exchange rate movements, as well as actions by various governments such as limiting exports to ensure food security.
While food prices appeared to normalize at the wholesale level, the commission said there was greater concern in retail markets.
“Previous food price tracking reports identified price shocks during the initial Covid-19 and lockdown period, likely driven by panic buying behavior,” he said.
The report found that retail-level pricing responded quickly to cost increases and more slowly to cost decreases.
“Most importantly, prices had not returned to normal levels after the initial price spike, with the price differential between wholesalers and retailers even higher than before the start of the pandemic.”
Benefited retailers
Aside from the Massmart group of stores, all retailers reported an increase in sales volumes or an increase in sales revenue in their latest financial statements, the Competition Commission said.
“The effects can be even more pronounced than what is presented in financial statements, as sales reports are generally aggregated and consist of all grocery items rather than just food,” he said.
Woolworths reported that its food division saw sales revenue increase 10.7% for the full year and revenue growth of 13.3% in the second half of its financial year.
The second half of the financial period coincides with the pandemic and the lockdown period and the fact that Woolworths experienced higher revenue growth in this period is consistent with the view that the lockdown resulted in higher volumes at the retail level given the change. in consumption patterns.
Other than Pick n Pay, all retailers, including Massmart, reported higher gross profit margins, the commission said.
“The metrics provided by retailers in their financial statements related to price changes are average internal price inflation or product inflation15 in some cases.
“These measures (price inflation and product inflation) provide an indication of the average price increases at different retailers. These are between 3% and 6.5% “.
Although these measures are aggregated, the commission said this is consistent with the price increases seen in this and previous food price monitoring reports.
Meat prices are one of the biggest offenders
While some markets, like onions and potatoes, suggest declining prices and concerns, the commission said the meat assessment shows that price concerns persist.
“The meat assessment shows that the pandemic and the shutdown had a significant effect with a clear market disruption evident,” the Competition Commission said.
“Retail prices and wholesale-retail spreads for a number of products have not yet returned to pre-lock levels.”
An examination of the financial performance of the retail companies shows that, in general, both margins and volumes have increased relative to previous periods, which is consistent with the analysis carried out by the Commission using previously the general data of Stats SA.
Results for food manufacturers / processors are more mixed with variable results in terms of margins compared to prior periods.
“However, overall profitability is generally higher than in previous periods, driven by higher sales volumes following higher demand at the retail level.
“This is consistent with the view that there were panic buying and changes in consumption patterns from eating out to cooking to eating at home.”
Read: Why wealthy South Africans are less optimistic about their finances for 2021
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