The total FMCG market had an estimated value of R655bn* as at end 2021 and is divided up into three contributing channels – corporate retail, formal independents and direct to supplier – with the corporates contributing 65% to the total market.
It goes without saying that it has been tough out there for businesses and consumers alike, and although FMCG retailers have generally fared better than other retailer types thanks to the essential nature of the products they sell, the headwinds have been strong, and seemingly incessant.
It is hard to believe that one year has passed since that week in Jul 2021 when civil unrest rocked KwaZulu-Natal (KZN) and parts of Gauteng (GP) disrupting trade and so much more in our country. Although affected businesses were generally quick to rally and return to operation, there were still stores that had not yet reopened at the end of the period under review here – and in fact they may never reopen.
How are the seven major FMCG retailers performing against the background in which they trade?
Trade Intelligence bi-annually compares the performance of Shoprite Holdings, The SPAR Group, Massmart Holdings, Pick n Pay Stores, Woolworths Holdings, Clicks Group and Dis-Chem Pharmacies in its Corporate Retail Channel Report, working off a database of over a decade’s worth of metrics.
Some of the key information uncovered in the latest Corporate Retail Channel Report includes:
- Combined Group turnover across the seven retailers was up +5.0% year-on-year for FY2021. This total growth hides mixed results as retailers managed varying internal and external challenges and opportunities. Part of this growth can be attributed to the loosening of liquor trading restrictions, which meant trade was halted for ‘only’ 110 days during 2021, versus almost twice that at ±200 days in 2020
- Turnover growth from Checkers has been ahead of Woolworths food growth since FY2020 – Checkers does roughly +R20bn more per year in turnover, pointing to market share gains among more affluent shoppers
- 23 million people have Checkers or Shoprite loyalty cards – impressive since there are 41 million adults living in South Africa
- Total corporate retail store footprint growth has been supressed over the last few years with unprofitable stores closing. CAPEX was cut to preserve cash flow and challenges around opening new stores during a pandemic resulted in store footprint growth of +1.5% for FY2021 (FY2020: +3.8%)
- However, after two years of CAPEX cuts (FY2020: -15%, FY2021: -12%), planned CAPEX going forward signals a return to ‘normality’ – expansion and maintenance CAPEX is going full steam ahead and a significant amount is being allocated to IT for systems and digital enhancement. New stores and formats to retain and gain market share and meet shifting shopper needs were the order of the day (especially in Shoprite), as were refurbishments to keep existing shoppers loyal
But where to now? Just as we hoped for a turn in the tide, a major European war struck, impacting the supply of energy, food and other commodities across the globe, thus causing input prices to skyrocket.
We cannot underestimate the impact this will have on operating expenses. Since shop floors are where shoppers will first see and experience rising prices – influencing their decisions on what groceries to buy and where to buy them – the pressure is on FMCG retailers to somehow find a way to hold prices. This could be achieved as more price investment, less margin and more pressure on supply chain efficiencies and suppliers, or a combination of all of these.
However it may play out, the hope is that South Africa’s most constrained consumers will not bear the brunt of the commercials – and that this may be a time upon which we look back in future with a certain level of pride at the resourcefulness employed by our industry to bring affordable food to South African dinner tables.
FMCG suppliers and service providers: Align your resources with the winners
For suppliers or service providers to corporate FMCG retailers, the starting point when planning resource allocation for best ROI is a thorough understanding of their retailer customers’ performance and strategy.
Trade Intelligence’s Corporate Retail Comparative Report will provide insights into who is winning (and losing) in corporate FMCG retail, as well as a view on shifting dynamics within the market.
Who will use the report? Executive and management teams across key functions – customer, commercial, brand, operations and supply chain.
Click here for more information on the report.
For more information, or to order your report, contact Shelley van Heerden on shelley@tradeintelligence.co.za or +27 [0] 31 303 2803.
Note: *Trade Intelligence market size estimates based on sales of FMCG including:
- Edible and non-edible groceries, perishables/fresh, tobacco, health and beauty, bakery, butchery, liquor
- Exclusions: Dispensary, hardware and general merchandise
About Trade Intelligence:
Trade Intelligence is South Africa’s leading source of consumer goods retail research, insights and training solutions, focusing on the industry’s corporate and independent retailers and wholesalers. We are the trusted voice of the sectors in which we operate, aggregating information to amplify knowledge, grow capability, and enable collaboration that drives profitable trading relationships and sustainable sector growth. For more information on Trade Intelligence service offering visit www.tradeintelligence.co.za