A research note by Business Monitoring International (BMI) has said spending drivers will limit impact of new laws proposed by the department of health on having warning labels of food sold at stores to caution consumers on things such as sugar levels.
The department in April published new draft regulations to the Foodstuffs, Cosmetics and Disinfectants Act.
If passed into law, the new regulations will make changes to the marketing and advertising of foods and non-alcoholic drinks, which are considered to pose health risks, such as obesity.
The new rules will include the introduction of mandatory front-of-package labels (FOPL) which serve as warning signs to consumers of products which contain high levels of saturated fat, sugar and sodium, as well as have artificial sweeteners.
Marketing of these products will also be restricted to children. South Africa is regarded to have one of one of the highest rates of obesity globally, at 27% of all adults.
According to the World Obesity Federation, this number will increase to 46% by 2035. BMI , Fitch Solution Company, said the mooted regulations might not have a negative impact on food producers as some fear.
The research firm said this was because in South Africa, demand for carbonated drinks was primarily driven by lower price points, as well as consumer preference for sugar-sweetened drinks.
“We see the proposed introduction of new rules on food labels and advertising as a move to strengthen public health awareness, as well as improve healthier consumption and spending habits on food and non-alcoholic drinks. These policies will affect producers in the processed foods segment, which includes breakfast cereals, snacks and pre-packaged meals, as well as carbonated drinks,” BMI said.
It said over the medium term (2023-2027), it forecast South African household spending on carbonated drinks to grow at an annual average rate of 9.6%, to reach R44-billion by 2027.
“We believe that new regulations on food and non-alcoholic drinks product labelling and advertising will drive a shift in consumer purchasing patterns, however, this will be limited. In South Africa, consumption habits and purchasing decisions are closely linked with disposable income levels,” the research think tank said.
“Low-income households constitute the largest proportion of households in South Africa, at 40.5% in 2023. We expect the scale of changes in consumption habits will therefore be slow, congruent with the rate of rising income levels. By 2027, low-income households will continue to account for the largest share of total households in the market, which means that new policies around FOPL in the market will lag in efficacy.”
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