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Shop Talk is our monthly newsletter that provides commentary on major themes emerging from Insights' monthly dashboards. This month, we turn our attention to the Food category…

Spending trends from the Food category: Grocery, Delivery and Eating Out

By

Simon Anderssen

There are already multiple data points available in the market that highlight the extent of consumer stress in 2023. While our data shows that this trend deteriorated further in May, it also offers a valuable barometer of relative performance between retail categories. In a negative climate where almost all spending categories suffered over the past three months, Eating Out and Takeout was the biggest loser. Growth in spending by 22seven users declined the most in this category.  Spending growth in the Apparel category stabilised in May (see here) but the outright winner was the Prepared Food Delivery category. This category mostly captures spending at aggregators like Uber Eats and Mr D Food; and while the uptick might seem at odds with a weakening consumer, it’s part of a broader trend that is evident across many other categories. As we’ll show below…

Slicing the data by income shows that retailers have nowhere to hide. Total spending by 22seven users across all listed retail categories and within all income segments weakened in May. And, with the exception of Prepared Food Delivery, spending growth also reached a low point in every category and income bracket during the same period.

While the market share data in this dashboard highlights outperforming retailers, market share is a relative measure and doesn’t tell us what users are actually spending each month. When we look at this metric – actual spend per user per month – the key problem for grocery retailers comes into focus. User spending has not increased in real terms since the Covid boom in 2020. As the chart below shows, this is true on average for the ~50,000 22seven users across all income brackets. Growth in monthly spend per user at the major grocery retailers has lagged food inflation since mid-2021, and the gap has only widened as food inflation increased from late 2022. Also, for the first time since 2021 when annual growth lapped the high Covid base, spending on grocercies declined in May across all income brackets. 

But visiting a grocery store is just one way that shoppers buy food. As 

this dashboard

 shows, we measure a user’s total spending in the Food category as spending across various sub-categories: Grocery In-store; Grocery Delivery; Prepared Food Delivery; and Eating Out & Takeout. Over the past two years, total food spend has grown at low single-digit rates across most income brackets, whereas spending at grocery stores (in-store and delivery) has grown ~3-5% slower. 

As the very first chart indicates, the recent increase in spending growth on prepared food delivery (Uber Eats and Mr D Food etc.) might explain some of the decline in grocery spending in the last few months. 

The acceleration of 22seven user spending on food delivery platforms like Uber Eats and Mr D Food has coincided with an increase in loadshedding intensity since December 2022. It seems that consumers are unable to cook without electricity and they’re spending more of their already-stretched budgets on prepared meals instead. 

There is evidence of this trend not only in the Grocery category, but also in Apparel and General Retail. As the chart below shows, the main online retaliler in each category has gained a meaningful share of spending over the past three months. In all categories, such retailers rank in the top three gainers of market share over the period. 

In summary, grocery retailers must navigate an environment where consumer spending is the weakest it has been for a long time, and where their customers’ monthly spend is not keeping pace with inflation. Added to this, grocery retailers’ share of the food wallet is being lost to online channels like prepared food delivery and on-demand delivery. 

Oh, and they must also spend more on emergency power sources to keep the stores open… Ouch!

That’s it for this month. There are many more insights available from our spending dashboards. Please set up a time to discuss these in more detail to ensure you get the most from this unique data set. 

If you want to know more about data-driven consumer trends in South Africa, sign up for Nugget, our bi-weekly newsletter. You can also follow Insights on LinkedIn and Twitter.

The 22seven Insights spending dashboards offer investors and retailers a detailed, real-time view of the aggregated spending decisions of more than 50,000 actual consumers across South Africa. 

Insights tracks spending across seven major categories such as Food, Apparel, and Home. Every major category is further segmented into sub-categories, and a specific dashboard is available for each one. We have updated and expanded the dashboards and we’ll continue to do so over the next few months. 

The dashboards provide a market overview that includes changes in market share for each retailer, as well as an estimate of growth in user spending. Users are segmented into six income brackets that allow for detailed tracking. In addition, the dashboards include five years of historic information and other metrics, such as average transaction value and median monthly spend per user. 

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