Consumers are paying on average 28% more for a litre of vegetable oil since the war started in Ukraine, according to data from market research and global consulting company NielsenIQ which reveals how the war is causing severe food inflation.
The monthly retail report by Nielsen IQ is based on sales data from 10,000 stores of the main retailers Woolworths Spar, Pick n Pay and Checkers — as well as 143,000 independent stores and spaza shops — and measures more than 80% of grocery sales in SA.
Ukraine is one of the world’s largest producers of edible oil, but there and in its Black Sea ports stopped exports, with farmers reluctant to risk their lives planting new crops.
To make matters worse Indonesia, the world’s largest producer of palm oil, banned the export of the oil in April to protect its consumers from rising food prices with inflation a global concern and countries worried about unrest.
Palm oil is used in many consumer goods including biscuits, snacks, sweets, breakfast cereals, coffee creamers, instant noodles and ready-made foods as well as shampoo and body creams.
As small talk daily analyst Anthony Clark puts it: “Indonesia has now banned the export of this key raw material that goes into pretty much every consumer-related good from soap, shampoo, KitKat, ice cream, cereal and myriad products — and the price of palm oil has been soaring.”
Other products that saw price rises were frozen chicken, margarine, mayonnaise, two-minute noodles, coffee creamers and viennas, according to NielsonIQ. These are among the 25 most common products bought by SA consumers.
NielsenIQ found that consumers paid on average R42.76 a litre for cooking oil in the week of February 20 before war broke out in Ukraine. This rose to R54.70 a litre in the first week of May.
“Given that vegetable oil is a raw ingredient in a wide range of products, varying from prepared meals to personal care, we are likely to see a negative knock-on effect of rising oil input costs,” said NielsenIQ SA MD Ged Nooy.
Nielsen said rising inflation “has become a hallmark of the Covid-19 era and has been exacerbated by the perfect storm of the war in Ukraine and the floods in KwaZulu-Natal — a key SA manufacturing and logistics hub”.
Consumers will probably face far worse food inflation as “fuel prices rose by an eye watering 33.2% in the 12 months to March as petrol prices soar 32.6%”. With the rand weakening and oil prices rising, analysts predict a petrol-price spike n June.
From 2011 to 2021, the petrol price rose an average of 8.2% a year, putting strain on all sectors of the economy and consumers, according to Treasury budget documents.
NielsenIQ also says that private-label goods — including home brands and no-name brands such Pick n Pay’s No Name, Shoprite’s Rite goods and Spar-branded products — now sell more than that of the two largest food manufacturers in SA.
NielsenIQ analysis shows that the private-label sector now commands 15% of all grocery sales in SA, about R77bn in annual sales to April 3 2022. For example, 28% of Pick n Pay discount retailer Boxer products are private-label goods, according to the retailer’s most recent interim results presentation.
The continued focus on private labels by retailers and customers does not bode well for food-producing stocks such as Tiger Brands, which makes processed and prepared foods and sells branded Jungle Oats and Tastic rice at higher prices.
The squeeze on food producers is reflected in food producers’ stock prices. The index representing six food-producing stocks is on average down 14.76% in the year to date and 24.47% since the beginning of 2021.
The Tiger Brands share price is down 19.47% year to date.
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