- South Africans are consuming less milk, mainly because its dairy products have become more expensive.
- Fresh milk, long-life milk, yoghurt, and cream cheese have posted the most significant consumption declines.
- Products in these categories have also seen the most significant price increases.
Sharp price increases in the price of dairy products have led to South Africans consuming less milk, a new report by Milk SA, the industry body for the country’s dairy industry, has shown.
Throughout 2021, South Africa’s dairy industry saw weak demand for dairy products, with products in eight out of its nine categories posting reduced sales, Milk SA said in its latest report tracking trends in the dairy industry.
Fresh milk consumption levels (measured by the number of retail sales), which decreased by 6.7% in 2021, dropped the most, also fuelled by consumers moving to UHT or long-life milk. However, even sales for UHT milk saw a decline of 4% when compared to the year before. Yoghurt and cream cheese also posted weakened demand, with consumption dropping 6% and 5.6%, respectively.
The price of fresh milk rose 6% between December 2020 and December 2021 and 9% in two years, while UHT or long-life milk increased by 2.5% and 7%, respectively, the report said. Over a year, prices for yoghurt rose 6.9% and cream cheese by 6%, the report said.
The weakening of consumer demand can be fundamentally linked to increases in the prices of a wide range of products, Alwyn Kraamwinkel, CEO of the South African Milk Processors Organisation (SAMPRO), told the Business Insider South Africa.
“Consumer purchasing power has weakened in the past, and it appears that it will be the same in the immediate future,” he said.
SAMPRO said some major increases in commodities and other input costs had not been seen in the last 63 years. Some food commodities reached all-time high prices on the back of Russia’s war in Ukraine, and some have been rising since the beginning of 2021, partly due to the pandemic’s impact on supply and demand dynamics. The industry has also had to grapple with energy prices increasing at an alarming rate.
Kraamwinkel flagged rising input costs as a risk to the price of dairy products in the short to medium term.
“We are in an uncertain territory as far as the prices of inputs [are concerned]. Prices of certain inputs have increased significantly. We also do know that there will be further fuel price increases. In the immediate future, we see a continuation of price increases on the input side,” he said.
He said the consumer would remain under pressure due to the increases in prices for basic foodstuffs.
The dip in dairy consumption in 2021 comes after the dairy industry saw an increase in 2020 consumption levels when people hunkered down at home and were at liberty to eat whatever they wished at intervals they chose.
“If we look at the numbers for 2020, we saw a huge movement out of the offices to homes, that coincides with the increase in the use of dairy products. It relates more to the fact that people [were] at home and can eat when they want, and most likely, they consume more than what they would consume in a normal office day,” Kraamwinkel said.
“[But] given the general price increases, people are simply consuming less, whether they are in the office or staying at home,” he said.