Source: Prices slide as ‘customer is king’ kicks back | The Herald May 14, 2019
Tawanda Musarurwa Senior Business Reporter
Prices of some local products appear to have entered a self-correction mode as consumer demand is said to have declined by at least 40 percent. Just last week, listed beverages giant Delta Corporation, announced it was reducing retail prices for its soft drinks, which have been in short supply in the market in the past months.
Delta Corporation indicated that 300ml RGB of coke and other flavours was now selling at RTGS$1,25, 330ml can at RTGS$1,80, 350ml PET (RTGS$1,80), 500ml PET (RTGS$2), while RGB one litre at RTGS$3,60 and a two litre PET at RTGS$6,40.
The prices of these Delta products that were marked imported in most retail shops, were selling at figures beyond the reach of many average families in Zimbabwe.
Nestle product Cerevita that was going for RTGS$8,50 in some retail shops three weeks back is now sold at around RTGS$7,49, while 10kg mealie meal went down from RTGS$14 to around RTGS$11.
A snap survey by The Herald Business has shown that the prices of several products by big local manufacturers, have been on the decline, but there has been little or limited concomitant decline in prices from the smaller producers.
Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu, told this paper that businesses that fail to adjust to consumer concerns may as well find their market share shrunk and eventually pushed out of business.
“Consumer demand has declined by an average 40 percent due to purchasing power pressures. The market is in a price self-correcting mode. Businesses that continue to profiteer will soon find their market share gone,” said Mr Mutashu.
“I was shuttered to discover that a local hotelier buys a 2 litre Mazowe orange crush for RTGS$13,99, sells a ‘shot’ (which is equivalent to the bottle cap) for RTGS$3,00. One gets 20 ‘shots’ from a 2 litre bottle making it RTGS$60,00 just for one bottle. The saddest part was the state of the employees’ welfare who are wallowing in poverty as they earn an average of RTGS$400 per month.”
The CZR boss said the small companies should take a leaf from the bigger corporates if they are going to survive.
“The move by Delta Corporation and Nestle Zimbabwe should be taken as exemplary as leading manufacturers and the small manufacturers and suppliers should follow suit,” he said.
Household consumption had largely been expected to be subdued going forward as over the past few months, bottom-of-the-pyramid disposable incomes have been compromised by spates of speculative pricing by a number of business (both manufacturers and retailers).
The speculative tendencies of local companies have been manifested in price adjustments that do not link with any significant movement in key economic fundamentals, developments that Finance and Economic Development Minister Professor Mthuli Ncube has labelled as “bad economics”.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe concurred with Mr Mutashu, saying market forces had simply begun to “self-correct” the market.
“Market forces are at play. Prices have exceeded the affordable reach of most people and manufacturers have realised that demand of their products is going down.
“Volumes are below 30 to 50 percent of what they were last year and in order to stimulate demand, manufacturers need to make their products reachable to many, so the simple explanation is that you need to reduce prices to stimulate demand so you need to reduce prices for people to buy your products,” said Mr Jabangwe.
The CZI boss said this could only be the beginning of more downward price reviews in the foreseeable future.
“I believe that we will start to see a number of manufacturers following suit in terms of reducing prices, because the prices in Zimbabwe have been pegged against the parallel market exchange rate and we anticipate this rate to go down and surely prices will start going down.”
Only last week Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya said they expect foreign currency shortages to subside going forward as the interbank foreign currency exchange rate should reach equilibrium by July.
Currently the interbank rate is at around 3,3 to the United States dollar, compared to between 4,5 and 5 to the US dollar on the illegal forex market.
“Within the next three months we will have convergence of the illegal rate and the interbank market rate,” he said.
In this respect Mr Mutashu said; “Business should be united in forcing the parallel market rate down by their level of participation because currently it is the forex traders’ market.”
However, at a time when other players are working on reducing prices, there are some that continue to review prices up, but analysts insist that these companies will also start climbing down soon.