Consumers spent R637bn on fast-moving consumer goods (FMCG) in 2024, but growth remained muted as households continued to grapple with rising living costs and unemployment, according to NIQ’s latest State of the Retail Nation report.
Retail sales grew just 3.4% year on year, with most of the growth driven by higher prices rather than increased consumption, the report says.
Private label brands stood out as a key growth engine in an otherwise sluggish market, recording 7.1% growth and reaching R98.7bn in sales. NIQ said with consumers increasingly seeking value for money, private labels’ broader category presence and competitive pricing have helped them outpace the overall FMCG market.
“Consumers are still focusing on essential spending and taking advantage of loyalty programmes, private label brands and promotions to stretch their rand further,” said NIQ SA MD Zak Haeri.
Discounts and bulk shopping
“Macroeconomic conditions are steering households towards perceived value, with the term ‘discount’ now encompassing more than mere price reductions. Depending on their cash flow, consumers are buying large packages to take advantage of lower bulk costs or buying small packages to reduce immediate spending. On the flip side, we also see healthy growth in superpremium segments, indicating that some consumers are not feeling the pinch.”
The festive season added R78bn in December retails sales, up 9% from the previous year. According to NIQ, food and liquor dominated the season, accounting for 58% of the total.
Haeri cautioned that aggressive discounting and fierce price competition were suppressing real growth across the FMCG and technology & durables (T&D) sectors.
Retail expert Lwazi Nxumalo, however, argues that discounting is a crucial part of the retail business helping retailers increase “feet in stores” and attract existing and new customers.
Brand value
He suggested that consumers, having grown dependent on discounts, associate them with brand loyalty and eventually normalise them. As a result, when prices return to their original rates, they start to question the brand’s value.
NIQ reported that consumers spent R359bn on food and liquor for the full year, while R278bn was allocated to other essential goods, including nonalcoholic beverages, personal care, healthcare products, snacks, home and pet supplies, baby care and tobacco.
Despite social grant increases and reduced load-shedding improving consumer sentiment, most spending remained focused on essentials, with households making careful trade-offs to manage stretched budgets, Haeri said.
The country’s unemployment rate was 31.9% in the fourth quarter of 2024.
Retailer confidence hit a three-year high in the same period, boosted by lower inflation, rate cuts and improved consumer sentiment. The country also marked about nine months without load-shedding. Retail trade sales grew 3.1% year on year in December. However, inflation accelerated to 3.2% in January, up from 3% in December.
The T&D market painted a grim picture, growing just 1.8% for the year. According to NIQ the sector was weighed down by a 2% drop in telecom sales value, a category that makes up more than half of the T&D market.
The telecom segment’s stagnation stems from market saturation and longer smartphone replacement cycles, with 3G phones phasing out and 5G devices remaining unaffordable for many, priced 55 times higher than 2G phones, NIQ said. 4G devices now dominated the market, comprising more than 60% of unit sales.
Yet, Black Friday 2024 delivered record-breaking sales for the sector, with unit sales up 12% and sales value up 7% from 2023, despite smaller average discounts, NIQ said.
NIQ SA market intelligence leader Thomas Woods said recent policy changes, including the two-pot retirement system, may have temporarily boosted consumer spending, particularly in the fourth quarter. However, risks such as a possible VAT hike and global trade instability loomed over the retail outlook.
“We anticipate that mainstream consumers will remain adaptable as macroeconomic conditions change. Retailers that strike the right balance — offering value through rewards and promotions to the mainstream market while taking advantage of the opportunities in the premium segment — will be best positioned to thrive in the year ahead,” said Haeri.
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