'Skyrocketing food prices force families to downgrade'

Earlier last week, the Competition Commission released its latest edition of the Essential Food Pricing Monitoring (EFPM) quarterly report.

In this report, which details are now available on our website www.compcom.co.za, the commission gives a low-down of how consumers swiftly turned to canned pilchard, substituting beef and chicken as traditional sources of protein.

Coincidentally, in my next instalment of this update, I will delve deeper into the survey that the commission undertook to uncover how households relied on alternative energy in the wake of exponential demand for energy, which inevitably led to greater proportions of power cuts.

In this week's column, I am highlighting the observations the commission has made on buying patterns that you, the consumer, has shown in the recent past.

What you need to know about the latest EFPM report

The Competition Commission has been monitoring the price of essential foods since the advent of the Covid-19 pandemic in March 2020.

In the first quarter of 2024, we looked into how prices of staple food items such as sunflower oil, brown bread, individually quick frozen (IQF) chicken and maize meal skyrocketed.

Our analysis took a deep dive into the canned pilchards value chain. This, in our view, was indicative of how consumers face financial constraints and higher food prices.

We then observed that consumers are shifting their buying patterns in search of more affordable foods.  Therefore, substituting traditional sources of protein like beef and pork has led to an increased demand for canned pilchards.

Let’s further unpack this research and other key observations we have made. 

How did the commission identify an increase in the popularity of canned pilchards?

While chicken is still SA’s favoured protein source, canned pilchards have gained renewed popularity as consumers adjust their food expenditure in response to the rising cost of living and the effects of blackouts on their ability to store perishable foods. This renewed popularity is reflected in the sales figures of the listed canned pilchard producers, Oceana (which owns Lucky Star) and Premier Fishing.

In addition, we observed features of canned pilchards that might influence consumers’ decision-making such as the availability of and flexibility in quantity sizes, easy storage, various flavours and zero-rated for value-added tax (VAT), which may help them remain more affordable.

Has the increased popularity of canned pilchards translated into higher prices for consumers?

Despite this increased demand, there is evidence that producers and retailers have absorbed some of the cost increases throughout the canned pilchards value chain. This cost absorption is likely to support the continued affordability of this staple food.

For several months the price of eggs has been high for consumers. Has this changed?

In this report we provide an update about the price of eggs following the outbreak of avian flu first detected in the Western Cape in April 2023. We believe the poultry industry has put significant measures in place to stabilise the supply of eggs.

This is likely to result in the gradual return of normal egg prices. We will however continue to monitor the price of eggs as interventions to control the avian flu outbreak continue to stabilise supply. We do wish to encourage the public and retailers to contact the commission should they suspect any anti-competitive conduct by retailers or the industry.

Please explain the methodology the commission follows in its compilation of the report?

We employ what is called an early warning system developed by Consumers International. This is used alongside our usual monitoring data throughout the value chain for selected essential food items.

The early-warning system compares food prices over time at different points in the value chain in the same way that EFPM has done. Specifically, the spread between prices is compared each month to the six-month average for the previous six months.

If the spread is within a typical range (which we define as one standard deviation) we assign them a green indicator. However, where spreads rise by more than one standard deviation, we assign an orange indicator and for two or more standard deviations we assign a red indicator.

The early warning system therefore serves as a high-level or quick glance indicator and should be read considering the context in which prices and spreads prevail. A more detailed methodology is unpacked in our report.

The report lists that rising food prices present a threat to food security, please explain.

Numerous actors and costs throughout food value chains have an impact on prices. Food value chains remain vulnerable to existing pressures stemming from logistics disruptions and load shedding. In addition to existing pressures, other challenges such as El Nino and water concerns have emerged as new risks to stable food prices.

We have, however, seen faster corrections in the last several months than we have seen historically. For example, in the egg value chain, retailers on average, absorbed some of the pricing pressure from the producer level which has contributed to insulating consumers from the effects of the avian flu outbreak.

The commission remains committed to play its part ensuring transparency regarding the profit margins set by producers and retailers.

* Makunga is the spokesperson for the Competition Commission of SA