Zimbabwe’s Stock Exchange-listed beverage manufacturing company with footprints in Southern Africa, Delta Corporation, performed dismally with regard to sales volume across main segments and subsidiaries, the company indicated in a trading update for the second quarter and half year to September, 30 2019.
A myriad of factors contributed to volumes decline which entail potable water, electricity, fuel and foreign currency shortages among other challenges.
These headwinds, some of which are reportedly still taking a toll, were given precedence by monetary policy changes and the surge in inflation which resulted further in low disposable incomes and compressed consumer spending as the company resorted to frequent price increases.
“The policy changes have led to a surge in inflation and a fast depreciating exchange rate. Consumer spending remains low as incomes have lagged behind the escalation in prices of goods and services. The Southern Africa region has been adversely impacted by shortages of potable water, electricity and fuel.
“The company has had to implement modest but frequent price increases in response to the inflationary pressures whilst taking into account the affordability issues affecting consumers,” reads the trading update.
Lager beer volume declined 40 percent for the quarter and 48 percent for the six months compared to the same period last year. The pricing of this category has reportedly been “moderated to maintain affordability given the prevailing economic challenges”.
Sorghum beer volume in Zimbabwe fell 29 percent for the quarter and 15 percent for the six months. This was attributable to a rise in prices of inputs (maize, sorghum, and packaging materials), way beyond disposable incomes. To cover the gap, prices of beer were also increased, resulting in some customers “switching from the category”.
Sorghum beer volumes at Natbrew Zambia also declined 13 percent partly due to higher pricing on the back of a steep increase in maize prices and the depreciation of the Kwacha. Capacity and power supply further constrained product supply.
Volumes for sparkling beverages also fell by 36 percent for the quarter and 56 percent for the six months to September 30, 2019. The challenge of raw material supply was contributory given that the category “has a high import content”.
Another associate, African Distillers, recorded a soft volume out-turn due to difficulties in accessing foreign currency. As a reactive measure, the entity “continues to launch products with a lower foreign currency content”.
Further, Schweppes Holdings recorded a 33 percent beverage volumes fall for the half year on the back of ailing consumer demand and difficulty in accessing imported raw materials.
The difficulty in accessing raw materials is reportedly still taking a toll on operations across segments.
“There are still challenges in sourcing imported raw materials and services due to the mixed performance of the interbank market and difficulties in accessing materials as foreign suppliers remain jittery on account of overdue payables,” said the company.