DELTA Corp, Zimbabwe’s largest beverage maker, has reported a massive decline in volumes across all its segments for the quarter ended September 30, 2019 as consumers cut spending on less basic commodities on the back of reduced disposable incomes.
Zimbabwe has been grappling with rocketing inflation since the liberalisation of the exchange rate in February last year, but consumer prices somehow cooled in November due to a relative stability of the exchange rate resulting from tight control of broad money supply growth.
Data from Zimbabwe National Statistical Agency, showed that Zimbabwe’s inflation slowed to 17,5 percent month on month in November, from 38,75 percent in October, the lowest rate in five months.
Zimbabwe suspended the publication of annual inflation figures last year but some independent analysts believe year on year inflation could have reached 467 percent in November.
Lager beer volumes declined 48 percent compared to the same period last year, sorghum beer volumes declined by 15 percent, while sparkling beverages were down 56 percent.
Delta said the pricing of lagers was moderated to maintain affordability given the prevailing challenges. The premium category has held its contribution driven by Zambezi lager.
The prices of the major inputs such as maize and imported packaging materials rose ahead of disposable incomes, which put pressure on the sorghum beer prices.
This led consumers switching to more affordable brands and packs within the category.
Consumer acceptance of the recently launched returnable pack has been encouraging. Product supply is constrained by capacity and power supply disruptions. Chibuku Super and Shake Shake were the dominant packs, said Delta.
While sparkling beverages volume has recovered in the last quarter on the back of improved product supply and moderated retail pricing, raw material supply, which are largely imported remains a challenge. Volume at National Breweries PLC (Zambia) went down by 20 percent from last year’s record, which is partly due to higher pricing on the back of a steep increase in maize prices and the depreciation of the Kwacha.
African Distillers recorded a soft volume out-turn at 41 percent below prior year due to limitations in accessing foreign currency. It also recorded a decline in volumes.
The group’s associate entity, Schweppes Holdings Africa, experienced reduced volume performance at 33 percent below prior year, which was a result of limited foreign currency supply for packaging material and reduced demand due to higher pricing.
Delta’s revenue slightly dropped by 2 percent to $1,5 billion earnings before interest and tax increased by 53 percent to $464 million driven by replacement cost pricing in response to inflationary pressures. The group said that overheads have remained under control in spite of the foreign exchange induced cost escalations. The business remains cash generative with a closing cash balance of $296 million.
Foreign currency exposure of US$72 million remains a concern.
“The economy is yet to settle from the turbulence caused by transition from the multi-currency system to the Zimbabwe dollar and the accompanying policy measures in line with the Government Stabilisation Programme. The company will manage the emerging risks while striving to capture all available opportunities,” said Delta.