Big shift hitting restaurants and fast food in South Africa

Restaurants in South Africa are still struggling to get back to pre-Covid-19 levels of income – but it is clear that a pandemic-induced shift in eating habits is playing out in the fast food sector, which is thriving.

The latest food and beverages statistics from Stats SA show that measured in real terms (constant 2019 prices), total income generated by the food and beverages industry increased by 18.6% in September 2022 when compared with September 2021.

While the main contributor to the 18.6% year-on-year increase still comes from restaurants and coffee shops, the sector is still some way off from levels seen before the Covid-19 pandemic in 2020/2021.

Fast food, while an overall smaller contributor to the sector, has quickly returned to normal and even exceeded those previous levels.

The sector as a whole is showing a rocky path to recovery. Total sales recorded in September 2022 were at R5.6 billion, only 85% of the R6.5 billion recorded in September 2019, but this is still showing a general trend upwards.

Restaurants pulled in R2.6 billion in September, down slightly from August, while fast food and takeaway enterprises recorded income of R2 billion for the month.

Food and restaurant sales are also boosting revenue in related sectors, with the accommodation sector also reporting R630 million in sales as part of its R3.9 billion haul for the month.

Big shifts

South Africa is seeing a wider shift to convenience foods and quick service restaurants and takeaways – a trend which has not gone unnoticed.

Analysts have pointed to a growing ‘structural’ trend towards a greater take-away/fast food/convenience culture in the country, which was likely boosted by the improved delivery capability of many outlets during the Covid-19 pandemic.

Post-Covid 19 lockdowns, consumers appear to be far keener on convenience and speed, and take-away/fast food outlets cater more for this.

While some of the shift is being driven from a service standpoint, consumers are also under increasing financial pressure due to economic headwinds, which make them far more discerning when it comes to how and where they spend their money.

According to FNB strategist John Loos, negative economic events are starting to force consumers to reprioritize their budgets – partly at the expense of eating out.

“These (economic) events include rising general inflation, especially in the area of petrol prices, as well as rising interest rates, and a slowing economy constraining household income growth,” he said.

Red flags

Despite a more muted showing for restaurants and coffee shops, the Bureau for Economic Research’s (BER) analysis of third-quarter data for the sector shows that the hospitality sector, in general, is on the path to recovery and is expected to continue along this line into 2023.

The last quarter of the year is typically a strong performer for the sector, given the elevated number of travellers and tourists making their way to various parts of the country, along with festive season spending over Black Friday and the holidays.

However, there are some red flags, according to Nedbank economists.

Data published by Stats SA earlier in November showed that real retail sales contracted by 0.6% year on year, compared to growth of 2.1% in August. This performance was weaker than market forecasts which indicates that South African consumers remain under pressure.

“Retail trade will pick up relative to September in the months to come as consumers take advantage of Black Friday specials and maintain higher levels of spending during the festive season,” the bank said.

“Volumes are, however, unlikely to be significantly higher than in the same period in 2021 as the challenges of higher prices, dismal labour markets and tighter financial conditions squeeze disposable incomes and weigh on consumer sentiment. These conditions will continue to dampen retail sales in the new year.”

Read: Black Friday South Africa 2022 – links to all the sales happening this week