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CityPress - - Business - LETI­TIA WAT­SON busi­ness@city­press.co.za

The retail in­dus­try is stuck be­tween the devil and the deep blue sea, but sec­tor bosses say dif­fi­cult trad­ing con­di­tions will not get the bet­ter of them.

On the one hand, there is the pres­sure of ris­ing food prices and in­put costs. On the other, con­sumers are tight­en­ing their purse strings.

Over the past week, the Sho­prite Group, Mass­mart, RCL Foods and the Spur Cor­po­ra­tion all an­nounced their re­sults.

Al­though all four show sales growth, the chal­leng­ing trad­ing con­di­tions in South Africa took their toll.

In ad­di­tion, the eco­nomic en­vi­ron­ment is fore­cast to get tougher this year, with lo­cal growth ex­pected to be just below 1%.

With the drought and the weak rand ex­change rate push­ing im­port prices sky high, dou­ble-digit food in­fla­tion is in the off­ing for South Africa.

This comes at a time when con­sumers’ pur­chas­ing power is al­ready be­ing hurt by higher in­ter­est rates on debt, ris­ing ser­vice costs and un­em­ploy­ment.

“It will be a tough year. Con­sumers are re­ally suf­fer­ing,” said Rob Field, fi­nan­cial di­rec­tor of RCL Foods.

“Feed­back from the retail in­dus­try is that con­sumers are spend­ing less. Neg­a­tive growth in real con­sumer spend­ing is ex­pected over the next 12 to 18 months.”

Ac­cord­ing to Abri du Plessis, CEO of Gryphon As­set Man­age­ment, busi­ness will be­come even more dif­fi­cult when the rip­ple ef­fect of the huge rand weak­en­ing in De­cem­ber works its way through to in­fla­tion.

In­fla­tion for Jan­uary 2016 is sit­ting at 6.2%, which means in­ter­est rates will rise fur­ther.

“The av­er­age con­sumer usu­ally feels an in­ter­est rate rise first in his pocket be­cause his debt level is so high,” said Du Plessis.

“This will put fur­ther pres­sure on his pur­chas­ing power.”

Du Plessis said that this year, the in­dus­try would also not get the ben­e­fit of the strong growth in civil ser­vants’ salaries and so­cial al­lowances that it en­joyed over the past few years.

Both th­ese fac­tors were cur­tailed by the re­cent bud­get.

“The coun­try is sit­ting in the middle of one of the worst droughts, which puts mas­sive pres­sure on food in­fla­tion, while the volatil­ity of the rand just makes im­port prices more ex­pen­sive,” said Pierre van Ton­der, the CEO of Spur.

“Food in­fla­tion of 15% to 20% can­not be passed on to the con­sumer. That’s when the mar­ket­ing and prod­uct of­fer­ings must be­come more in­no­va­tive.”

He said the com­pe­ti­tion in the restau­rant in­dus­try was even tougher be­cause many new brands are en­ter­ing the mar­ket.

“How­ever, they all feel the same pain.”

Given the ag­gres­sive com­pe­ti­tion that ex­ists be­tween retail groups, con­sumers can ex­pect more in­no­va­tive pro­mo­tions and prod­uct pack­ag­ing.

Whitey Bas­son, CEO of Sho­prite, said the group would con­tinue to sub­sidise ba­sic food­stuff and use tac­ti­cal pro­mo­tions to boost its sales.

He said while a sig­nif­i­cant in­crease in red meat prices was ex­pected, there would also be a stronger fo­cus on white meat, which would sup­port its prod­uct sales.

RCL’s Field said they also ex­pected that more ex­pen­sive red meat would lead to a shift to more af­ford­able pro­tein.

How­ever, this will not off­set the ex­cess of poul­try im­ports that the in­dus­try is fac­ing.

Du Plessis said re­tail­ers of durable and semidurable goods were ex­pected to suf­fer acutely. “But the ex­pe­ri­enced play­ers in the in­dus­try will not be brought to their knees,” he added.

Bas­son said al­though it would not be an out­stand­ing year for the over­all retail in­dus­try, he ex­pected rea­son­able re­sults from Sho­prite.

To achieve growth, Field said, much at­ten­tion would be given to cost-ef­fi­ciency by in­dus­try syn­ergy, prod­uct in­no­va­tion and sav­ings on over­heads.

Groups such as Spur, Mass­mart, RCL and Sho­prite are also fo­cus­ing on greater ge­o­graph­i­cal di­ver­si­fi­ca­tion, fur­ther into Africa, to sup­port long-term growth.

“Spur is 50 years old and has sur­vived three re­ces­sions and dif­fi­cult trad­ing con­di­tions. We will do it again,” Van Ton­der said.

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