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Year-on-year food inflation accelerated to 10.7 percent in November from zero percent in June 2010.
Consumers are relatively happy with the service at local retailers but shoppers and analysts say food prices are spiralling – possibly because of a lack of competition and high input costs.
Most customers the Cape Argus spoke to about the service from SA’s main food retailers Pick n Pay, Shoprite/ Checkers, Spar and Woolworths, were by and large satisfied.
Retailers pointed to the sheer size of their industry and said they had good channels of communication open with their customers. They said most complaints from consumers were successfully dealt with via their call centres and at individual stores.
However, some consumers interviewed said stores should be doing more to maintain their customer base.
Others said they were battling to keep their heads above water and believed prices were increasing alarmingly. Analysts said this was due to the high costs of electricity and fuel, and to crops failing due to adverse weather conditions, among other factors.
Economists warned that consumers were in for a bumpy ride next year as food prices would continue to rocket. The most recent consumer price inflation figures show food inflation on an upward trajectory, above normal inflation.
Adenaan Hardien, chief economist at Cadiz Asset Management, said food prices had steadily increased over the past year and consumers would only receive some respite by the middle of next year. Even then, prices would not drop but would rise more slowly.
Analysts said the entrance of Wal-Mart, via Mass Mart, should bring competition which would result in some relief to shoppers. However, Wal-Mart’s effects on the economy would not be overnight. The international retail giant is slowly edging into the market via Makro and Game, with more food stores in the pipeline.
Right now, however, this news is of little comfort to local shopper Vivianne Jacobs, who has a family of seven to feed. Her rand has to stretch further and every time she goes to the store her shopping bags are lighter. She is also fed-up with having to check and double-check expiry dates on goods, as sometimes her local store does not remove expired goods.
Her frustration is coupled with the fact that her retailer does not offer loyalty points. She is planning on shopping at another retailer that does offer a loyalty card, even though it is further away.
Jacobs’s story is borne out by statistics that show food inflation creeping up. Year-on-year food inflation accelerated to 10.7 percent last month from zero percent in June 2010.
This is the result of a surge in global and local agricultural prices and retailers have been passing on a portion of these cost increases to the consumer.
Hardien said food inflation had been higher at times in the past but what was of concern, was how food price inflation had shot through the roof.
John Loos, First National Bank household sector and property strategist, said he was seeing “various warning signs” suggesting that retailers were gradually moving into a tougher trading environment as 2012 approached.
He expected to see real retail sales growth slow considerably.
“Food prices appear to be the ‘troublespot’ in the retail sector at present and have arguably been a reason for general dealers, and specialised food, beverage and tobacco retailers, experiencing below-average real sales growth of 4.5 percent and -0.8 percent year-on-year respectively,” Loos said.
Cadiz equity analyst Warren Buys added: “South African retailers’ return on equity is high and points to there not being enough competition. I think Wal-Mart will put pressure on the local retailers to keep their prices competitive.”
However, retailers said they were doing all they could to mitigate high food prices, including offering more specials, showing unit prices on items, absorbing some of the costs and offering store loyalty cards. They also said complaints were dealt with to the satisfaction of their customers.
However, Jacobs, who lives in Mitchells Plain where she does the bulk of her shopping, also shops in Mowbray and Canal Walk. She said there was a difference in service. In Mitchells Plain, goods often were not always refrigerated immediately. There were expired goods on shelves and by the time she realised this it was too late to return the goods as she no longer had the receipt.
The SA National Consumer Commission said competition between food retailers and manufacturers was almost non-existent.
Retailers’ “own brands” were often from the same manufacturer but differing prices made consumers believe they were buying better quality.
However, the SA National Consumer Union (Sancu) believes the new National Consumer Commission is incapable of coming to the rescue
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Sancu vice-chairman Cliff Johnston said Sancu had received many complaints about the commission.
“Their telephone call centre is not working properly, and the welcome message simply repeats over and over, or the line is cut off after a long wait. This is a symptom of insufficient capacity or efficiency. In addition, consumers are complaining of email messages being returned undelivered.
“The National Consumer Commission’s website gives the wrong telephone and fax numbers, and the wrong email address. Consumers who have managed to get through then complain that there is no follow-up within the promised timeframes.”
The Cape Argus could not reach the commission for comment despite repeated attempts. The call centre was not working well, getting through to the office proved fruitless and getting the commission to respond to email questions proved impossible.
Johnston said Sancu re-ceived about 800 consumer complaints a month, but was toothless and referred complaints to supplier companies or trade associations.
“This process achieves a high success rate but we have no powers of enforcement, so in some cases we have to refer the complainant to a provincial consumer affairs department, or an ombudsman.
“We only refer complainants to the National Consumer Commission when other avenues have been exhausted, or where our experience in dealing with similar complaints at a lower level has proved futile,” Johnston said
Massmart spokesman Brian Leroni said: “Massmart-Walmart has prioritised retail food expansion through Game (Foodco), Cambridge Food and introduction of a fresh food category into Makro.”
The group’s intention was to establish a viable competitive presence in the retail food market, Leroni said. – Cape Argus