In a country where malnutrition and inequality are rife, retailers must embrace the challenge to sell the same products at prices that are more broadly affordable if their businesses are to succeed into the future. In fact, addressing poverty - which affects more than a third of the population - is a retailer’s single greatest opportunity to increase their market.
If December felt tighter than usual, then perhaps the 11.7 percent food price increase year-on-year had something to do with it. The impact of such an increase on South Africa’s many poorer households, which already spend close on two thirds of income on food, can be devastating.
While the vast bulk of South Africa’s corporate social investment spend goes to environmental and social concerns, very little goes to economic sustainability - the very issue which often times results in the other two.
The challenge is to address economic inequality in a way that creates employment and actively places more people in the economy. This is no simple feat, and one only within the realm of possibility if expectations for profit are tempered throughout the value chain. Yes, this will require a sacrifice of shareholders in the short term, but it is imperative if we are to address poverty in any meaningful way. And if we don’t, that profit share will inevitably decline in the long term along with the broader economy.
Countless businesses attempt to address significant societal issues alongside normal operations, maximising the marketing benefits thereof, but this approach is opportunistic and less effective as a result. If we truly hope to address the economic well-being of society, we can't just grab what we can get. A strategic approach - at national level - is key.
In the Spar group, we have overlaid the company's business plan and the National Development Plan seeking the touching points between the two. We've done this for two reasons. First we are seriously concerned about the future of food in this country and secondly, we believe the solution to the pending crisis presents significant opportunities for forward-thinking retailers.
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With this broader perspective in mind, it makes sense to work together with other role players to decrease costs along the food value chain. In the long term, this is in everyone's best interests.
What I’m suggesting is that we decrease margins along the value chain to increase customers with access to those products - and a very practical way to do this is by narrowing the supply chain.
As an example of this sort of thinking; there are 27 Spar stores within a 200km radius of the town of Tzaneen in Limpopo. These stores generally source fresh produce from Johannesburg. Much of this produce, however, has been produced in Limpopo, trucked to Johannesburg for packaging and then delivered back to the stores around Tzaneen, adding significant unnecessary expense. It makes no sense.
In seeing this, we’ve developed a pack house in the farming region near Tzaneen. Ownership of the pack house will be devolved to the community themselves and while Spar stores get first option, in the future it is anticipated that opposition retailers will be included in the value chain as purchasers of the product.
The result of this will be the development of local, smallholder farmers, increased employment and the provision of more affordable, nutritious produce to the community. This is simply one example of a brand testing a potential solution to some of these issues.
Arrogant
It would be entirely arrogant to believe that one brand could sufficiently address the issue of South Africa’s food security. On the contrary, the government, other retailers and players along the value chain have to work together if we hope to see real progress in this area.
Organisations like the Southern Africa Food Lab are making significant headway in bringing together seemingly disparate players in our food system to thrash out real solutions and to challenge our nation’s “survival of the fittest” status quo. Dialogue is the starting point to flip our thinking from “what can we get out of it” to “how can we help make this work”.
Kevin O’Brien serves on the Advisory Board of the Southern Africa Food Lab and involved with the Spar group.