LISTED beverages company Delta Corporation Limited has described the operating environment in Zimbabwe as “complex”, with no easy solutions to the headwinds afflicting the economy.
The local economy is characterised by economic headwinds resulting in shifts in policies as authorities respond to the currency and inflation developments. These phases have resulted in liquidity mismatches, divergent exchange rates and swings in inflation.
“The operating environment in Zimbabwe remains complex, with no easy solutions to the numerous economic challenges such as the currency and inflation dynamics,” Delta’s company secretary Faith Musinga said in a trading update for the third quarter ended December 31 2023.
“The measures adopted in the 2024 budget will have a far-reaching impact on the business and the market in general. The beverages sector will be affected by the sugar tax and the restrictions arising from policies impacting the route to market.
“Aggregate demand may be impacted by the high inflation and reduced foreign currency inflows arising from lower mineral prices and the anticipated reduction in agricultural output resulting from the forecasted below normal rainfall.”
In the period under review, group revenue increased by 19% in US dollar terms compared to prior year and grew by 12% for the nine months. This, according to Musinga, reflects the volume growth across business units, with the proportion of US dollar sales averaging above 70% for the year.
The lager beer business maintained the volume growth momentum and has surpassed historical monthly peak volumes to achieve a growth of 15% for the quarter and 14% for the nine months compared to prior year.
She said the new packaging line commissioned in August 2023 has assisted in stabilising overall product supply, with further benefits from the injection of returnable glass, a stable supply of key raw materials and a reliable manufacturing platform.
“The focus remains on aligning brand and pack availability to demand and optimising the route to market. Our brands remain active in the market, through sponsorships of sport and culture and other worthy causes,” Musinga said.
In the sorghum beer segment, Delta said in Zimbabwe, the total volume inclusive of exports grew by 3% for the quarter and is up 4% for the nine months, off a high prior year base.Volume, however, declined by 5% for the quarter in Zimbabwe as the category was impacted by the improved availability of lager beer.
The volume at United National Breweries South Africa grew by 10% during the quarter, up 3% over prior year for the nine months. Musinga said Chibuku Super continues to penetrate the formal liquor stores and retail chains ahead of the local production of Chibuku Super which is now rescheduled to the fourth quarter.
Natbrew Plc (Zambia) recorded a volume growth of 23% for the quarter and grew by 50% for the nine months. Musinga said there was a slowdown in volume following the cost-induced price increase effected in October 2023.
“The market has been impacted negatively by the measures adopted to contain the cholera outbreak. The business has also been adversely affected by the shortages and high prices of maize and the depreciation of the kwacha,” she said.
The sparkling beverages volume recovery momentum persisted, registering a growth of 38% for the quarter and 25% for the nine months compared to the prior year. Musinga said the volume drive is anchored on keener retail pricing and improved supply of flavours and packs.
“The unit recorded its highest ever monthly volume in December 2023. The sector will be adversely affected by the unavoidable price increases arising from the introduction of the sugar tax. This will be in addition to the pricing distortions that have prevailed in the market,” Musinga said.
African Distillers registered a sluggish performance in the quarter with volume declining by 12% compared to prior year due to an increase in grey trade on key brands and reduced uptake by the formal trade partners due to account management issues and distorted pricing.
Product supply, Musinga noted, was adversely affected by plant breakdowns and utility supply disruptions.Schweppes Holdings Africa recorded a volume growth of 16% over prior year for the quarter benefiting from the commissioning of the new plant supplying bottled water and Minute Maid Juice Drinks in November 2023.
Musinga said the sugar tax will result in price increases which will consequently impact the volume recovery efforts.Nampak Zimbabwe volumes were 8% ahead of prior year across all businesses, benefitting from increased exports of paper products and the higher pull of plastic packaging from the beverages sector.
She said the business continues to be affected by shortages of key raw materials and power supply disruptions.