SA’s ferocious fast food appetite

Forget German cars and luxury watches, fast-food consumption could be the most reliable indicator of prosperity of the middle class in South Africa.

The local fast-food industry brings in more than R300-billion every year, according to Insight Survey, a South African-based market research company. Statistics South Africa recorded income from the “takeaway and fast-food outlet” sector as R170-billion in 2015.

The percentage of adults who buy fast-food at least once a month increased from 66% in 2009 to more than 80% in 2015.

A Euromonitor report estimates that the number of consumers in this sector will increase to 42-million people in the next two years.

In its highest month last year, April income in the fast-food and takeaway industry surged by 13.3%, according to StatsSA, more than double the rate of inflation. Analysts believe that investments in the sector will continue to grow even more quickly than the waistbands of those who keep it in business.

An obvious sign of this is the number of new entrants. Burger King opened its first South African doors in 2013. Domino’s Pizza followed in 2014. Pizza Hut came shortly after, re-entering the market after a six-year hiatus. Coffee giant Starbucks now has a local presence, Krispy Kreme doughnut stores are popping up around the country, local chain RocoMamas opened 16 stores in the past year, and Dunkin Donuts recently announced an aggressive entrance and expansion plan.

Price wars have begun as a result and pizza lovers, in particular, are enjoying a wide range of specials.

A Euromonitor report predicts that fast-food in South Africa will witness an annual growth rate of 9% for the 2014 to 2019 period. In 2014, there were 134 new takeaway stores. That figure is set to increase by 4% every year, according to Insight Survey.

“Fast-food is experiencing exponential growth with local consumers,” said Insight Survey. “[The number of] individuals who have purchased fast-food over a four-week period has risen by close to 10-million within the last five years.”

Business Monitor International (BMI), a Fitch research company, published an investor note last year describing the South African fast-food industry as “piping hot”.

This favourable outlook contrasts starkly with other African countries, where many international fast-food brands have limited or decreased their involvement.

So what has allowed South African growth to take place, in the face of waning incomes, rising food prices and a weak and volatile currency? Pundits say it has to do with several factors, including:

• A broadening black middle class;
• A strong meat-eating and dining-out culture;
• An increase in the number of women in the labour force; and
• Fast-food outlets increasing their footprints in townships and rural areas.