But it’s not what it seems, largely a base effect, and apart from the “booming” take-aways category of Food Retail the sales performances are still very weak.
Yesterday’s release of June 2022 StatsSA Restaurant, Take-Aways and Catering Income data showed an acceleration in year-on-year growth in revenues after prior months of growth slowdown. Total Food and Beverage Income for the Sector grew by 28.6% year-on-year in June, which is an acceleration on the growth rate of 13.2% in May.
This renewed acceleration in year-on-year growth comes after prior months of slowing growth. This year-on-year growth acceleration likely largely reflects a lower June 2021 base effect, after a significant -13.5% monthly decline in June 2021 sales on the prior month. That drop was probably caused largely by a tightening of lockdown and curfew measures at a stage of that month, leading to a sharp decline in sales.
Such is the nature of the past 2 years’ worth of data, with regular distortions caused by periodic changes in lockdown levels. Therefore, we revert to comparing monthly sales with the corresponding pre-lockdown month of 2019.
Here, one gets a better idea of how weak this component of retail still is. Total Restaurant, Take-Away and Catering Retail income for June 2022 was still -9% below the value of sales in June 2019. This is a deterioration on May 2022 which was a lesser -8.1% down on May 2019. In inflation-adjusted “real” terms, this is still a very significant -18.5% below the June 2019 level (inflation adjusting using a Hotels and Restaurants CPI).
Splitting it up into the 3 sub-sectors provides further insight, pointing to a strong shift towards a far greater “take-aways” culture over the Covid-19 lockdown period. All 3 sub-sectors, i.e., “Restaurants and Coffee Shops”, “Take-Aways and Fast Food” and “Catering”, have been growing positively of late.
As the sub-sectors are smaller data samples, and thus can be more volatile, we use a 3-month moving average growth rate for smoothing purposes.
In a reflection of some move towards the “normalization” of social interaction following the end of lockdown restrictions, it has been the Catering sub-sector that has been growing the fastest of the 3 sub-sectors of late, catering being largely about in-person functions and events.
For the 3 months to June 2022, this sub-sector’s sales grew year-on-year by 33.8%. This was followed by the Take-Away and Fast-Food Outlet sales growth rate of 19.4%, this category having shown some slowing in its recently rampant growth rate. The slowest growth remained in the area of Restaurants and Coffee Shops, to the tune of 16.1%.
Once again, however, recent growth rates are of limited importance following the massive distorting effect of lockdowns, so we compare June 2022 with the corresponding pre-lockdown month in 2019.
When inflation-adjusting the sectors’ revenues and comparing with June 2019, we see starkly contrasting pictures between the 3 sub-sectors.
From this it emerges that Take-Away and Fast-Food outlets’ incomes remain by far the outperforming category, having massively outperformed Restaurants and Coffee Shops, as well as the Catering category. Real income of the Take-Away and Fast-Food category is a strong 35.6% up from June 2019 in real terms.
Restaurants and Coffee Shops by comparison are -33.7% down in real terms from June 2019, while Caterers are an even more extreme -35.6% down over the same period.
Conclusion
Following large base effects in the data, and various distortions from periodic adjustments to lockdown levels in recent years, the data must be interpreted with caution.
The year-on-year growth rate for the Restaurant, Take-Aways and Catering Sector does appear strong, and did accelerate in June 2022 compared to the May growth rate. However, this had much to do with a lower base effect caused by a very significant monthly drop in sales in June a year ago, that probably being due to a tightening of lockdown measures and curfew times. Until May, year-on-year sales growth was showing signs of slowing, and that seems the more likely trend in the recently weakening economic and consumer environment.
Recently negative economic events would more likely begin to force consumers to reprioritize expenditure partly away from non-essential spend such as eating out and take-aways. June CPI inflation rose to 7.4%, while July saw the SARB hike interest rates by a further 75 basis points. Various high frequency data points to an economic slowdown, which in turn constrains employment and household income growth.
While the Take-Away and Fast Food category has recently not shown the strongest year-on-year growth, much of this can be attributed to its high base effect, this category having grown far faster than the other 2 categories in recent years. There appears to be a strong longer term “structural” shift towards a greater take-away/fast food/convenience culture, probably boosted by a combination of convenience, aided by improved delivery capability of many outlets, and perhaps relative affordability (compared to restaurants) too.
Following the end of Covid 19 lockdowns, therefore, consumers appear far more about the convenience and speed of the take-away/fast food outlets. However, this shift is not new, having been in play well before Covid-19.
Being largely non-essential in nature, we would expect the recently deteriorating economic and consumer environment to slow the growth in the “Restaurant, Take-Aways and Catering” area of retail in the coming months.
The very weak performance in sit-down restaurants and coffee shops, compared to pre Covid-19 performance, continues to place retail centres with a greater focus on this at a relative disadvantage. Focus on the Fast Foods and Take-Aways category appears to have become significantly more advantageous.
