Savanna, as the slogan goes, is dry, but you can drink it, unless of course there is a shortage of the glass bottles in which the cider is sold.
Savanna marketing manager Eugene Lenford says a shortage of the drink in some bottle stores in SA is due to a global glass shortage caused by shipping and production delays as a result of the Covid-19 pandemic.
SA consumers seem largely to have escaped supply-chain shortages caused by delays at ports that began during Covid-19 shutdowns. Port closures led to shipping containers piling up in North America and not arriving back in Chinese harbours on time, leading to further delays.
SA retailers and producers have been scrambling, pre-ordering and stockpiling goods and even hiring extra warehouse space to make sure stores are full of product ahead of Black Friday and the festive season.
This means consumers should be able to purchase what they want, but buying in bulk ahead of time may add costs to retailers and reduce operating margins or affect shareholder returns.
Savanna, in part, is a victim of its own success. The brand has a huge spontaneous following on social media and has enjoyed record demand in the past year.
Says Lenford: “The enormous love and support from South Africans means the brand has doubled in size in the past 12 months, creating pressure on demand and supply.”
In August, Distell CEO Richard Rushton warned that suppliers of glass bottles were feeling “enormous stress and pressure” and he expected constraints to continue until early 2022. “We are working continuous shifts and running like mad to attempt to meet the demand,” he said.
Distell, already the second-largest producer of cider in the world, is opening a new factory to produce more of the stuff.
Other SA companies have faced challenges too. Minister of trade, industry and competition Ebrahim Patel noted last week at a conference organised by the Competition Commission that “SA companies themselves have been disrupted by shortages and gaps in global supply chains, due to the aftershocks of the pandemic”.
TFG, owner of Sportscene, Foschini and Markham, recently said it had been warned months ago by its shipping agents in Hong Kong to order extra fabric and rented further warehouse space to store the imported fabric it uses in the local manufacture of clothing. It makes 70% of its clothing locally.
Pick n Pay CEO Pieter Boone was asked at the retailer’s half-year results last week how it is coping. He said 95% of products were bought locally so it only had to worry about delays on imported products like general merchandise. This could include kettles, electronics and kitchen and bathroom products, but the buying team had ordered well in advance to ensure there was enough stock for the Christmas shopping rush. Increasing its local manufacture of clothing to 40% of all goods also meant it was better prepared.
Sarah le Roux, an investment analyst with Kagiso Asset Management, said: “To date, none of the large food or clothing retailers have raised any major concerns around shortages in imported product and overall have been confident in their ability to manage through this period.”
Perhaps the unluckiest is Massmart’s Makro, whose entire warehouse burnt down during the civil unrest in KwaZulu-Natal in July. But Massmart CEO Mitchell Slape said in August that new goods would arrive from abroad in time for Black Friday.
Around the world, companies have not just faced delays but have had to order ahead and stockpile and have also paid much higher shipping rates “due to congestion and bottlenecks”, as shipping company Maersk described it.
Maersk’s shipping rates were 59% higher from June to August compared to the same period in 2020, just one example of how expensive shipping has become.
Luckily for SA, the rand has firmed.
Le Roux says: “The stronger rand has offset some of the pressure from a cost point of view. Shipping container shortages are expected to normalise in the first half of next year, so while there may be some margin pressure in the short term from higher shipping costs, this should be temporary.”
Woolworths said in a recent presentation that shipping costs might add one percentage point to the prices of fashion and homeware, pushing product inflation from 3%-4% at present to 4%-5% in the next six months.
In some countries, shortages generally benefit retailers who push up the prices of high-demand goods. But in the case of the pandemic, they may have to absorb some of these costs, which is likely to affect margins, with consumers already under pressure due to job losses and the economic slowdown.
SA entrepreneur Brian Joffe, CEO of Long4Life, which owns Sportsmans Warehouse and Outdoor Warehouse, said he did not foresee any shortages in the short term but may encounter problems if supply-chain constraints continue for the next six months.
Either way, the company won’t be pushing prices up. “Our customers aren’t flush with money. So we may not be in a position to pass on increased costs.”
While the situation may not be dire for some businesses, one reason SA has largely escaped widespread shortages is because of how much lower our demand is compared with other economies, says Ninety One analyst Unathi Loos.
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