The shocking truth about toilet paper. Are South African consumers getting a bum rap?

 

A landmark study* done in the United States which focused on toilet paper because it’s non-perishable and steadily consumed, concluded that poor people pay more for toilet paper (and many other things) simply because they cannot always afford to go to the cheapest stores or buy bulk deals or end-of month specials, for example.

The consumer website Retail Price Watch investigated whether the same is true in South Africa.

“It’s extraordinarily difficult to tell which brands and stores are cheaper because of the miasma which hangs over the industry – a trip in the dark to the dunny without a torch would be easier than sorting through the various brands, pack sizes and rolls to find the true cost of a sheet of toilet paper to consumers,” says Retail Price Watch’s Viccy Baker.

“Nevertheless in the first two weeks of March our intrepid team waded through the mire and priced more than 100 items on the market individually, adjusting the price of each roll to what it would cost if it were 500 sheets, to ensure an apple for apple comparison.

“We then worked out what a consumer who bought a basket consisting of one brand each of single and double ply rolls in the store, would pay. “

 

Expensive for everyone

“Boxer which says it targets the lower LSM section seems to live up to its slogan “Never pay more than the Boxer Price”  while Choppies which targets “the lower to middle-income sectors”  mainly in smaller towns comes fourth out of seven in single ply and is the most expensive in its 2 ply rolls.”

“What is perhaps more surprising given their supposed competition, is the very small differential there is in pricing among the majors Checkers, Makro, Pick n Pay and Shoprite – less than 12% between the cheapest and the most expensive single ply and less than 9% on the cheapest and most expensive double ply.

“In fact, if the price per sheet is rounded up to cents, all South African consumers are paying roughly 1c a sheet for single ply and about 2c a sheet for double ply whether the household seeks to impress guests with Dinu and Twinsaver or if they are content with Ritebrand, and whether they live in rural areas or have easy access to the majors.

“The exceptions to this are the Makro brand Bunny Soft, or Bummy Soft as it is affectionately known amongst the toilet paper cognoscenti which comes in at about half a cent a sheet as long as you can afford to buy 36 at a time, and some Baby Soft two ply products which come in at 3c a sheet.

“We attempted to reach two of the major manufacturers Kimberley-Clark and Nampak without success despite repeated attempts to speak either to their PR person or managing director, to discuss the reason for this.

“Sadly, in line with the American research it is true that in general you pay more for a single roll than for a large pack, although many of the stores leave a bit of a bad smell with the price manipulation of really large packs (18 Checkers House Brand single ply cost R4.82 each while 15 are R3.88 each for example).

“We were especially interested in the Choppies pricing strategy.

“A pack of ten Choppies single ply rolls costs more than 10 individual rolls (R4.50 each as opposed to R4.29 each). A pack of 4 double ply rolls containing only 250 sheets each is R24.99. The price for one 250 sheet roll is therefore R6.25. The price of a pack of nine double ply rolls with 350 sheets each is R49.99, or R5.55 each. If we were a company listed on The JSE, we might be more careful about getting a smear on our reputation with this sort of practice.

“Did we hear you say that 250 sheets in a 2 ply roll is not in accordance with the SA Tissue Manufacturers Association (SATMA) code of conduct, which specifies 200 or 350 sheets in a double ply roll?

“Well SATMA itself has disbanded, a fact that it curiously forgets to mention on its website (sorry it is there but under the Resources and Downloads section of the PAMSA website) allegedly due to non-payment of members fees, so Choppies is well within its rights to print 250 sheet rolls.

“It is clear that as in other areas of South African business, manufacturers and retailers can proceed unafraid that the s*** might hit the fan, because somebody turned it off and left the building.

“A common question is whether you are getting more value for money out of a two-ply or a single ply roll. This depends on a number of factors including your family’s bum habits.

“If you believe that a two-ply roll is double the thickness of a single ply roll, and if your family is disciplined in its use of toilet paper, a two-ply roll represents better value for money than single ply.  This is despite the fact that 2-ply rolls come in sheets of 350 and not 500.

“If they are prone to diarrhoea/you are toilet training a youngster/you have a puppy in the house rather find the time to go to Makro and buy plenty of Bummy Soft, secure in the knowledge that you are getting ripped off by a much smaller amount than normal …

*http://yesimorhun.com/wp-content/uploads/sites/18/2015/01/Orhun_Palazzolo.pdf

 

Will Mr Gordhan’s sugar tax go far enough?

Sugary Drinks

A lowering of obesity rates in Mexico has been attributed to the introduction of a 10% tax on sugary drinks in 2014.

However, simultaneously Mexico introduced a sales tax of approximately 8% on a wide range of non-essential foods high in sodium, added sugars, or solid fats: “junk food”.

Minister of Finance Pravin Gordhan proposed a tax for 2017 on sugary drinks in South Africa. He did not state the proposed tax rate, although a 20% tax has been estimated to bring in R7 billion annually to the national coffers.  http://mg.co.za/article/2016-02-04-tax-on-soft-drinks-could-benefit-obese-sa

Such a tax, ironically named a pigouvian tax is reasonably common among governments which perceive that the standard taxes on a market activity (in this case sales of sugary drinks) is not enough to outweigh the negative effects (high rates of obesity). Our current ‘sin’ taxes on alcohol and cigarettes, and taxes on polluting industries in other countries, are examples of this.

The consumer website Retail Price Watch which has data on household foods going back to 2012,  looked at the inflation rate on the cost of sugary drinks over the period 2012 – 2015, as well as inflation on three common local confectionery products ( Graph above). It appears that the rate of inflation has been kept artificially low on sugary drinks by the massive influence of Coca Cola. Because Coca Cola has kept its prices low, presumably to maintain its 60% market share, competing products have had to price themselves in the same range.  In the case of Oros and Cooee, a sugary drink popular in KZN, the price has actually decreased since 2012.

It could be argued that a 10% tax will in effect make very little difference to a price that is already artificially low in order to tempt unwary consumers to suck in a bottle a day. This low price extends to diet colas as they are generally priced similarly to their more sugary counterparts.  A sugar tax will at least have the benefit of making diet colas less expensive which is in line with the aims of a pigouvian tax.

While Mr Gordhan is clearly aware that we all need a 2l Coke to watch the soccer on a Saturday afternoon, he has perhaps forgotten that this must be accompanied by a packet of chips, no matter how poor the household.

A further point to ponder is that “local is lekker” when it comes to sugary drinks but South Africans have an unabated desire for imported confectionery. Brands such as Lindt, Toblerone and Royal Dansk continue to grace our supermarket shelves despite their high costs.

If The Treasury were to introduce a tax on junk foods simultaneously with the one on sugary drinks, there could be a real and measurable benefit to the population in terms of lower levels of obesity as there was in Mexico, pigouvian tax revenue would soar, imported confectionery might be taxed out of the picture, which would improve our balance of payments and benefit the local confectionery industry. In addition, the sugar industry would not be the only one to bear the brunt of the tax.

Incidentally, Mexico is using the tax revenue for specific social purposes, a great public relations stunt which has made it more palatable for consumers and sours industry counter-attacks. South Africa could consider putting the money to fund early childhood development, for example, or broadband for country areas.

While nobody wants to pay extra taxes, there is at least some point to a pigouvian tax. Each individual can decide on a case by case basis if he or she wants to pay it.   Not paying it has a benefit in reduced obesity. A win-win situation?