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The Trend

The South African fast food market is projected to grow at a compound annual growth rate (CAGR) of 7.9% from 2019 to 2026. According to Allied Market Research, a global research consultancy, the country’s fast food market was worth $2.7 billion in 2018, and is estimated to reach $4.9 billion by 2026.

They forecast that the processed chicken segment will remain the most dominant, while the smaller sandwich sector will achieve the fastest rate of growth. The 20-35 year old demographic accounts for over half of market spend and will continue to drive growth

The fast food sector accounts for around 13.3% of South Africa’s GDP (Humboldt quoted in the Media Online).

An in-depth survey of the SA Fast Food Landscape by analysts, Insight Survey (2018), found that the major players were achieving growth by continuing to broaden their menus to offer a wide variety of meals at different price points. By doing this, they can appeal to consumers across the budget range. In particular, many players began offering value for money to consumers in the form of promotional pricing, targeted meal time deals, weekly specials, and loyalty programmes, with some fast food players continuing to offer a value menu with smaller items at lower prices.

It is an attractive market sector due to its size and growth, but it is also subject to high demand elasticity and fierce competition.

The South African fast food market is projected to grow

Your Business Application

Creative marketing strategies pulling on all the levers of price, promotion, distribution and product, can gain market share. Below are a few ideas to stimulate your thinking.

Customer Loyalty Programmes

Customer Loyalty Programmes

Mia Morkel, a South African-based Customer Loyalty specialist, quotes from a Bond Loyalty report that 66% of customers said they modify the amount they plan to spend in order to qualify for rewards.

The sophistication of loyalty programmes is increasing as more customer data becomes available and new technology enables faster, quicker customised implementation.

Loyalty reward options within the foodservice market are wide open for creative marketers. Morkel offers an example of a tiering strategy, in which members’ experience and interaction with the programme varies, based on their level of engagement and activity.

In this strategy, rewards also change: the higher the tier, the better the value offered through loyalty rewards. For example, a quick-service restaurant offering free fruit smoothies as a reward may also add the occasional breakfast wrap to the more engaged higher-tier members.

With the correct data, operators can also introduce value that is only redeemable during times when the customer wouldn’t typically make a purchase. For example, if a weekly two-for-one special is on a Wednesday, the outlet can send a voucher on a Friday or Saturday to encourage additional store visits and spend.

Promotional Pricing

Promotional Pricing

South Africa is home to a nation of discount-obsessed shoppers. According to a Nielsen report, 31% actively search for promotions and 16% go so far as changing stores from a brand they prefer, based on the best promotions on offer. The Price of Promoting Report shows that 75% of South Africans claimed to know the prices of the grocery items they buy and notice changes in price, versus 69% in 2017.

The report suggests this purchasing behaviour stems from the fact that there is massive strain on essential living costs. Discretionary spending only takes place after prices have been scrutinised.

The intensity of discounting within the local retail market becomes apparent when one considers that in 2018, 30% of the total volume of products in South Africa were sold at a discounted price. This has increased by 3% since 2017.

A significant relationship has also been found, where more frequent promotions lead to higher consumer sensitivity to regular prices which means in effect, consumers are being trained to buy on promotion.

Communication Strategies

Communication Strategies

Communication strategies provide the crucial link between the consumer and your outlet. Johannesburg-based digital marketing strategist, Zanthe Agrelan, shares her ideas.

  • Capitalise on brand love and awareness channels such as social media. On average, the fastest growing pages within the retail food category grow at about 2 000 new followers a month on Facebook, and around 4 000 followers on Twitter. Utilise this in ways such as making use of the top hashtags within the fast food sector, or owning a hashtag on Twitter for a day. Dedicated meal times will help you capitalise on this even more.
  • Invest in good food photography to help your food look as mouth-watering as it is, and don’t forget to include video content.
  • Invest in above and below the line channels with special attention to billboards and signage within a 3 km radius around each franchise.
  • Own a certain special such as ‘Wacky Wednesday’ and advertise this fiercely – this works out to cost effective cost-per-click within Google Search as well as capitalising on cheaper generic terms that no other competitor should be bidding on.
  • Utilise geo-location digital marketing platforms that help get your ad in front of desired target audiences when they are in your vicinity- be sure to dedicate more spend to mobile first.
  • If you’re limited by budget, keep paid media spend on max before and during meal times.
  • Provide specials, coupons and loyalty programmes that are time-limited to keep loyal consumers back for more, and converting customers to purchase before the deal is up.
  • Make social responsibility a core focus through your packaging.

Final Thoughts

The size and growth of SA’s fast food sector makes it attractive. But it is also a challenging market requiring clever marketing strategies suited to the prevailing environment, intimate knowledge about customers and the capacity to execute plans.

Sources

Insight Survey (2018). South African Fast Food/QSR Industry Landscape Report
https://www.globenewswire.com/news-release/2020/04/09/2014443/0/en/South-Africa-Fast-Food-Market-to-Reach-4-9-Billion-by-2026-Allied-Market-Research.html 

Agrelan, Zanthe (2019) Why the ‘fast food craver’ market is on the rise in South Africa. Retrieved at
https://themediaonline.co.za/2019/08/why-the-fast-food-craver-market-is-on-the-rise-in-south-africa/

Morke, Mia (2020) #BizTrends2020: Experience, value and convenience underpin successful QSR loyalty programmes. Retrieved at
https://www.bizcommunity.com/Article/196/731/199425.html

Nielsen (2019) Discount-obsessed South Africans being trained to buy on promotion. Retrieved at
https://www.bizcommunity.com/Article/196/168/193078.html