Potatoes within the staple food consumption of the South African middle class Mrs Hester Vermeulen, Consumer economist, Bureau for Food and Agricultural Policy (BFAP) (www.bfap.co.za)

Who is the South African middle class? Various approaches could be applied to define the middle class. One option is to define the middle class as being represented by LSM (Living Standards Measure) market segments 5 to 8 (South African Audience Research Foundation (SAARF)). Within these four LSM segments a representative of SAARF recently described LSM 5 to 7 as the ‘emerging middle class’ and LSM 8 as part of the ‘emerging-affluent class’. Some sources view the South African middle class (in particular the black middle class) as the ‘engine’ of the South African economy in the light of their strong purchasing power. These consumers typically have a strong drive to achieve more and better things – often through ‘window dressing’ through selected aspirational Page 22 •

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purchases (often of a more luxurious nature). It is also argued that middle class consumers typically have access to credit given their improved wealth levels, which allows them to obtain ‘aspirational purchases’, fuelling increasing debt levels in this group – particularly in cases where the necessary debt management skills have not been established yet within these households. However, it is very important to keep in mind that: • •

The middle class is not a homogenous group (e.g. as evident from the information presented in Table 1 from a socio-economic perspective, but also in terms of differing consumer behaviour and preferences); The middle class is an evolving group (as is shown below in terms of class mobility but also in terms of evolving behaviour and preferences).

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Table 1 Key characteristics of the middle class LSM 5

LSM 6

LSM 7

LSM 8

Share of SA adult population (15 years+)

16%

24%

12%

9%

Average household monthly income 2013 (self-reported)

R4 344

R6 822

R11 882

R16 754

Estimated contribution to total purchasing power in South Africa

Around 50% for these middle class LSM segments combined

Estimated share of total expenditure allocated to food and non-alcoholic beverages

Varies from about 32% (lower middle class segments) to about 15% (wealthier middle class segments)

Typical education levels

Some high schooling (48%) Matric (33%)

Some high schooling (46%) Matric (37%)

Some high schooling (35%) Matric (45%)

Some high schooling (27%) Matric (44%)

Typical age groups

15-24 (29%) 25-34 (26%)

15-24 (26%) 25-34 (27%)

25-34 (28%) 35-49 (26%)

35-49 (26%) 50+ (26%)

Typical location (rural/urban)

Dominantly urban, but some rural dwellers among lower middle class segments

Dominant provincial location

KZN (18%) Limpopo (18%) Gauteng (15%)

Gauteng (30%) KZN (15%) W Cape (14%)

Gauteng (37%) W Cape (21%) KZN (14%)

Gauteng (38%) W Cape (20%) KZN (15%)

Unemployment rate (selfreported)

38%

35%

24%

17%

Dominant dwelling type

House/cluster house/ town house: 69% (lower middle class) to 87% (wealthier middle class) Matchbox / Improved matchbox house (up to 15% of lower middle class) Flats (up to 12% of wealthier middle class)

Share with access to in-home electricity

Varies from about 98% (lower middle class segments) to 100% (wealthier middle class segments)

Share with access to tap water in home / on plot

Varies from about 82% (lower middle class segments) to 100% (wealthier middle class segments)

(Sources: BFAP 2014, based on data from SAARF AMPS® 2013; StatsSA 2012)

Socio-economic dynamics of the South African middle class: Class mobility, where consumers move towards higher LSM groups driven by factors such as economic growth and socio-economic empowerment, has been prominent in South Africa for many years. For example, from 2004 to 2013 the share of South African adults within

SAARF LSM® segments 1-4 declined by more than 50%, accompanied with an increase in the share of the adult population classified within wealthier segments, in particular the middle class segments: LSM 5 (+25%), LSM 6 (+69%), LSM 7 (+99%), LSM 8 (+82%). In 2013 the total number of adults in the emerging middle class were estimated at around 20 million.

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25 +69%

% of SA adult population

20 +25% -21%

15

+99% -59%

10

+68%

-72%

+82% +22%

5

0

-85%

LSM 1

LSM 2

LSM 3

LSM 4

LSM 5

2004

LSM 6

LSM 7

2009

LSM 8

LSM 9

LSM 10

2013

Figure 1 Class mobility trends among the LSM® segments from 2004 to 2013 (Source: BFAP 2014, based on data from SAARF AMPS® 2004, 2009, 2013)

Figure 1 Class mobility trends among the LSM® segments from 2004 to 2013 (Source: BFAP 2014, based on data from SAARF AMPS® 2004, 2009, 2013) Comparing household-level consumption expenditure values obtained from the Statistics South Africa Income and Expenditure Surveys 2010/2011 and 2005/2006 it is interesting to note that for that particular five year period real expenditure (i.e. after removing the effect of inflation) increased by about 50%, while real food expenditure increase by 12%. General food expenditure behavior of the South African middle class: The food expenditure patterns of South African middle class consumers, estimated from the Statistics South Africa Income and Expenditure Survey 2010/2011 (see Figure 2) indicate the dominance of staple food items (±28% of total expenditure on food and non-alcoholic beverages) and meat (±26%) followed by vegetables (±10%).

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When considering the expenditure shares presented in Figure 2 the following important points should be kept in mind: • Potatoes are included in the ‘vegetable’ category in Figure 2 according the classification applied by Statistics South Africa. • The total monthly expenditure of households on food and non-alcoholic beverages reported for 2010/11 within this middle class group varied from R632 (i.e. R21 per household per day) to R1049 (i.e. R35/ household per day). Despite the fact that the reported values apply to a time period about four years ago, it still shows that these consumers do not have generous food budgets. • Moving from the lower middle class consumers towards the wealthier middle class segments expenditure patterns evolve somewhat, e.g.: o The share of food expenditure allocated to bread and cereals decreases from 33% to 26%; o The share of food expenditure allocated to meat increases from 22% to 26%.

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Staple food expenditure behavior of the South African middle class: The staple food expenditure of the middle class is dominated by maize meal (estimated 26% contribution to total staple food expenditure), followed by brown bread (20%), rice (14%), white bread (11%) and potatoes (8%) (Figure 3). However, when considering the estimated portions represented by these expenditure levels maize meal contributes an estimated 60% of these consumers staple portions obtained from maize meal, bread, cake flour, rice and potatoes combined, followed by brown bread (16% contribution), white bread (8%), cake flour (7%) and rice (5%). From this point of view potatoes moved to position six, contributing only about 3% of the staple food portions represented by households’ reported expenditure levels in 2010/11.

Figure 2 Estimated food expenditure composition of the middle class in South Africa (Source: Calculations based on data from StatsSA Income and Expenditure Survey 2010/11)

Figure 3 Estimated staple food expenditure composition of the middle class in South Africa (Percentages in graph indicates the estimated share contribution of the expenditure on the particular staple food product, to total staple expenditure by the middle class consumers) (Source: Calculations based on data from StatsSA Income and Expenditure Survey 2010/11)

But, how did staple food consumption patterns change over time, when comparing the household-level staple food expenditure values reported in StatsSA Income and Expenditure Surveys 2005/06 and 2010/11? Figure 4 displays the real change (i.e. changed expenditure levels after removing the effect of inflation) in middle class households’ staple expenditure from 2005/06 to 2010/11. The ‘big winner’ according to the data in Figure 4 is maize meal (real growth of 65%) – being the dominant staple commodity and showing the most significant real growth in household expenditure during this period, followed by rice with real growth of around 18%. Slight negative real growth (i.e. suggesting reduced consumption levels or consumption not keeping track with rising prices due to inflation) was observed for brown bread and white bread among the middle class consumers. Now looking at potatoes significant negative real growth is suggested by the analysed household-level expenditure data (-18%). BFAP (2014) reported a significant reduction in potato consumption in South Africa during this period (in particular around 2008/2009 in response to a price spike. It could be argued that consumers might have ‘over reacted’ to these price increases and rather moved to alternative staples during this period (e.g. maize meal with little price inflation). Nevertheless, BFAP (2014) projects the per capita consumption of potatoes for South Africa to increase by 20% from the current level of 36kg/capita to 42kg/capita per annum by 2023, despite slower growth than in the past decade.

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Figure 4 The real change (i.e. changed expenditure levels after removing the effect of inflation) in middle class households’ staple expenditure from 2005/06 to 2010/11. (Source: Calculations based on data from StatsSA Income and Expenditure Surveys 2005/06 and 2010/11) BUT…. Do consumers view potatoes as a staple food or as a vegetable within meals? Ideally we would like to answer this question for the middle class by means of detailed scientific research evidence shedding light on the way in which consumers from various socio-economic and cultural backgrounds perceive and consume potatoes in various consumption settings. However, in the light of limited evidence this section presents some pointers in this regard: • Consumer research for the South African potato industry (as reported in CHIPS of August 2014) indicated that consumers’ favourite potato dish was ‘In a stew with other food’. When preparing a stew it could be argued that potatoes might not be viewed as a staple, but rather as another vegetable type adding variety to the stew and making it more filling – as it might still be eaten with another staple (e.g. maize porridge or rice). The same study also indicated that 69% of the total sample used potatoes to prepare potato salad. It could be argued that a dish like potato salad might be viewed a side dish in a meal and not necessarily as the main staple component. • When considering certain official national food Page 26 •

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information sources, potatoes are still classified within the vegetable category, e.g. in the official South African food composition tables, as well as in the Statistics South Africa Income and Expenditure Surveys. From a potato marketing perspective a key question arising from this point is to determine the positioning of potatoes in the minds of South African consumers (and the middle class in particular), e.g. as a nutritious staple option or vegetable option – or maybe both depending on the consumption setting and consumer needs? This is a critical strategic research question for the industry.

The alluring purchasing power of the South African middle class has contributed to fuelling a rapid expansion of the fast food industry in South Africa. For example, one prominent multi-national fast food chain has opened 30 outlets in 23 months recently. According to SANHANES-1 60% of adolescents consumed fast food or street food at least three times a week on average. The rise of obesity among the South African middle class could present the potato industry with an opportunity to promote potatoes as a healthy and versatile component of a nutritious and balanced diet. C

A final thought on the middle class: The issue of rising obesity

In a recent press article (Foodstuffsa, 2014), based on the 2014 Discovery Vitality ObeCity Index, stated that:

‘Middle class South Africans are getting fatter and lazier, despite having access to discounted gyms and knowing the dangers of being overweight’. According to the 2012 SANHANES-1 survey of the Human Sciences Research Council 64% of women and 31% of men in South Africa are overweight or obese. The obesity ‘epidemic’ is fuelled by changing dietary patterns, including the consumption of more processed food and fast food – leading to the increased consumption of sugar, salt and fat in particular.

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