Why lockdown butchered pie sales in South Africa
- Lockdown has hit pie sales hard, as South Africans - who often used to buy hot pies while out shopping - stay out of stores and malls.
- RCL Foods, which owns SA's biggest pie brand, reports that sales are starting to recover at petrol station shops.
- The sale of hot sales were banned for a couple of weeks during hard lockdown last year.
- For more articles, go towww.BusinessInsider.co.za.
Almost a year on from the start of South Africa’s lockdown, the humble pie turns out to be one of its many casualties.
In its half-year results, food producer RCL Foods – which owns the country’s biggest pie brand, Pieman’s and sells 316 000 pies a day – said that pie sales were the main negative contributor to its groceries unit’s performance. The company also owns brands like 5 Star maize meal, Bobtail, Rainbow and Farmer Brown.
The biggest blow came in April last year, when government specifically outlawed the sale of hot pies. But even after that restriction was lifted the following month, demand for pies was subdued.
This is due to a change in shopper habits, says Paul Cruickshank, chief operating officer at RCL Foods. “The frequency of people going to shop is less. Pies fall within the on-the-go consumption category thus volumes have been impacted.”
Pie sales are presumably also affected by the work-from-home trend, with fewer office dwellers buying pies for lunch. Also, late-night pie-buying may have taken a hit from the various alcohol bans, and early curfews.
But the company says sales of pies at petrol station shops have started to recover in recent months, and overall pie volumes are gradually moving towards pre-lockdown levels.
In total, RCL's revenue from groceries grew by almost 5% to R2.8 billion, with its underlying EBITDA (a measure of profit) falling by 6.5% to R301.6 million.
RCL says pet food sales continues to be resilient, but that customers are opting for cheaper products, “resulting in aggressive price-based competitive activity”.
The company – which owns the Sunbake bread brand – saw a sharp 15% increase in bread revenue, to R2.9 billion, and underlying EBITDA spiked more than 40%. This was thanks to price increases, and a turnaround at its Benoni bakery.
RCL also saw a strong performance from its Selati sugar brand, with revenue from its sugar business up 15.9% to R4.4 billion. This was thanks to stronger sales, higher prices, and lower sugar imports in South Africa.
“Domestic demand [for sugar] continued to be stronger on the back of the large-scale distribution of Covid-hampers, as well as increased home-based cooking and baking since the start of the pandemic,” RCL said.
But RCL’s chicken division saw a 62% EBITDA slump, even as revenue grew 4% to R4.9 billion. Poor genetics among its chickens have “manifested” in sub-standard egg production numbers as well as poor hatchability. This is expected to impact results for the next twelve months. RCL also warned that salmonella is of emerging concern for the whole industry. “Protocols have been reviewed and confirmed across the industry and stringent testing is being done to manage the risks.”
Across the group, Remgro-controlled RCL Foods saw its half-year revenue up 10.5% to R15.7, while headline profit jumped 12%. Its share price gain half a percent following the results announcement, but is still 20% down compared to a year ago.
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