NIQ State of the Retail Nation Q1 2026: South African retail benefits from benign inflation

NielsenIQ (NIQ) South Africa has released its State of the Retail Nation analysis* for the first quarter of 2026, reflecting robust above-inflation growth in retail sales value and volume. South African consumers spent more than R173.6bn on fast-moving consumer goods (FMCG) through traditional and modern trade channels during the period under review. Sales value increased 6.5% compared to the same quarter last year, while unit sales were up 9.1%.

Zak Haeri, MD for NIQ in South Africa

In the technology and durables (T&D) market, unit sales growth outpaced value growth during the quarter as average selling prices declined. Affordability became the most important factor in consumers’ purchasing decisions, bringing sales value down across nearly all categories. Volumes showed a recovery in segments such as IT and panel televisions, but weak sales in the telecoms category contributed to a disappointing quarter for the overall T&D market.

“Softer inflation, reflecting a combination of more stable food prices and lower fuel costs, gave consumers and retailers some breathing room in the early months of 2026,” says Zak Haeri, MD for NIQ South Africa. “But that window may be closing. Inflation is expected to accelerate through the second half of 2026, driven by increasing input costs and spillovers from the conflict in the Middle East. Brands and retailers must make well considered price increases in response.”

Snacks outperform, while baby food and care declines

Food, the largest FMCG category, recorded a 4.5% increase in sales volume and a 7.2% increase in value terms, reaching sales of R28.1bn year-over-year for the quarter. Snacking was among the fastest-growing segments, with volumes up 16.2% and sales value increasing 11.9% to R925m. Baby food and care was the only category to record a decline, with sales value falling 2.1% to around R3.4bn.

Most other key categories delivered respectable growth:

Excluding tobacco and liquor, private labels accounted for sales valued at around R26.7bn, an increase of 1.3% for the quarter and representing around 17.5% of FMCG sales value for the quarter. Independent brands achieved R125.9bn in sales (excluding tobacco and liquor), representing 82.5% of sales value. Private labels’ share of the market declined 1.1% compared to the same period in the previous year, due to the outperformance of traditional trade outlets and aggressive brand promotions.

Traditional trade continues its winning streak

In line with trends observed throughout 2025, traditional trade channels outstripped modern trade channels in many categories, generating R43.1bn in sales during Q1. Traditional trade refers to independent (non-chain, non-franchised) stores that stock consumer packaged goods with a fixed, physical location. Examples include taverns, spaza shops and independently owned superettes.

Modern trade channels – which include online retailers, franchised stores and outlets which form part of a retail chain – saw a unit volume increase of just 1.7% for the quarter. Sales value for modern trade was up 4% to R127.8m, accounting for the bulk of FMCG sales value. Forecourt retail saw a 1.3% increase in volume and 4.2% increase in sales value to R5.8bn. Traditional trade benefitted from lower inflation, while forecourts felt high effects from inflation.

“Lower inflation provided a modest tailwind for traditional trade, particularly among highly price-sensitive consumers. However, demand remains constrained by weak income growth and elevated unemployment. Traditional outlets retain a structural advantage through proximity and flexible purchasing, enabling smaller, more frequent transactions that help households manage cash flow and transport costs. While easing price pressure supports stabilisation, especially in food staples, growth remains uneven and highly contested,” says Haeri.

“Modern trade retailers, meanwhile, are generally well positioned to absorb inflation through scale, promotions and private-label offerings. Forecourts are more exposed to inflation because their baskets are weighted toward convenience and impulse purchases. This sector is also feeling the effects of rising operational costs and falling fuel revenues – which, in turn, means that competition is intensifying as fuel station owners turn to retail to increase their profitability.”

Price pressures accelerate in T&D sector

Weak performance from the telecoms sector dragged the T&D market down during the quarter. The telecoms segment, which includes the smartphone market, saw unit sales fall 7.5% and sales value drop by 3.1%. Consumers in the postpaid sector delayed replacement of their devices in the absence of new features or product innovations to drive premium demand. Average selling prices continue to decline as the market moved towards prepaid and mid-tier devices.

Major domestic appliances was the only T&D segment to see growth in both value (up 1.2%) and unit sales (up 6.7%) terms. Freezers (+6.9% units, +12.9% value) and washing machines (+13% units, +4.1% value) were among the strongest performers in a market where declining prices helped to drive sales. The majority of sales occurred at normal prices rather than on promotions, indicating that consumers were trading down rather than waiting for promotions.

Small domestic appliances saw a 6.6% drop in sales value, while unit sales were up 5.8%. Growth is slowing down as categories such as air fryers and coffee machines reach saturation. In information technology, sales of laptops, monitors and routers drove a 5.8% increase in unit sales. However, average sales prices declined, bringing total sales value down by 9.4%. Panel televisions saw sales value decline 2.4%, despite an 8.8% increase in unit sales. Office machines continued a secular decline, with sales value down 9.2% and unit sales down 6.4%, largely due to diminished demand for printing.

Fuel prices dim the outlook for the rest of the year

The benign inflation environment that supported FMCG growth in the first quarter has already run to an end. Consumer inflation jumped to 4% in April, the highest reading since August 2024, driven mainly by sharp fuel price increases. The pressure is set to intensify as government fuel levy relief is phased out, and many forecasters are expecting oil prices to remain elevated for longer. Consumers are likely to cut back on spending to cater for renewed inflation.

In the T&D market, memory and storage shortages are driving prices up for phones, laptops and other devices. South African consumers, already cautious on big-ticket purchases, are likely to hunt for promotions and specials, delay non-essential upgrades and gravitate toward mid-tier devices as premium prices become harder to justify. Rising component costs will make it harder for T&D retailers to stimulate demand through price alone.

"These factors will put real pressure on household budgets for the rest of the year,” says Haeri. “Promotions, pack architecture and loyalty programmes are important levers in a price-sensitive market like South Africa. Retailers and brands will need to balance protecting their margins with targeted value offerings to sustain volumes in this constrained environment. Those that fail to adapt their value proposition risk losing share as consumers become increasingly selective in their spending priorities.”

* Data is based on NIQ’s comprehensive Retail Measurement Service (RMS), which is the largest retail (grocery) data source in the country and the only currency used by all of South Africa’s major retailers. This benchmark data comprises more than 11,000 branded retail outlets (e.g. supermarkets and garage forecourts) and more than 140,000 independent stores (e.g., spazas and taverns) across South Africa’s nine provinces and measures more than 80% of all retail grocery transactions.

About NIQ

NielsenIQ (NYSE: NIQ) is a leading consumer intelligence company, delivering the most complete and trusted understanding of consumer buying behavior and revealing new pathways to growth. By combining an unmatched global data footprint and granular consumer and retail measurement with decades of AI modeling expertise, NIQ builds decision systems that help companies turn complex data into confident action.

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