Zimbabwean beer brewer and soft drinks maker, Delta Corporation, has flagged the prohibitive operating environment and currency instability obtaining in South Africa’s northern neighbour, arguing that policy changes were occasioning challenges that rendered operators uncompetitive and supply chains ineffective.
Over the past few weeks, retail and wholesale companies have been closing down in Zimbabwe as they bulk under the heavy saddle of currency instability. The Zimbabwean government enforces that formal companies also take the local unit of exchange for purchases while informal players mostly trade in US dollars, leaving retailers at a disadvantage.
“The operating environment in Zimbabwe remains complex, influenced by policy changes and currency instability. The beverages sector faces further challenges relating to uncompetitive retail prices arising from high input costs and taxes which attract lower priced imports from the region and policy driven changes to the route to market,” said Delta Corp secretary, Faith Musinga.
Delta Corp cited fluctuations in exchange rates, disruptions in utilities supply (electricity and water), and varied consumer spending patterns during the traditional summer and festive peak period as the key developments that marred the operating environment during the quarter period to the end of December 2024.
During the period under review, Delta managed to lift lager beer volumes by 4% over prior year same period. This was despite some “disruptions to supply arising from prolonged water and power” outages.
Interestingly, demand remained firm and this had resulted in “some mismatches in the supply” of key brands and packs. The uplift in lager beer volumes was a consequence of the company’s recent investments into capacity.
Delta Corp’s sorghum based opaque beer volume for Zimbabwe grew by 2% for the quarter, but declined by 2% for the nine months compared to prior year.
Volumes for the company’s sparkling beverages (that includes brands such as Coca-Cola, Fanta and others) declined by 16% during the quarter compared to prior year.
“The volume loss is attributed to the impact of sugar tax-induced price increases and the surge in imports from the region,” explained Musinga.
“The sector’s competitiveness was affected by the relatively high sugar tax and cost differentials, leading to an increase in imports of similar offerings from neighbouring countries.”
Zimbabwe introduced a sugar content surtax in January 2024.
Musinga further said that the exchange rate disparities that dogged the quarter contributed to pricing misalignment in the formal sectors while the tight liquidity conditions that prevailed during the quarter resulted in sub-optimal stocking patterns in key retail channels.
Group revenue for the quarter only marginally increased by 1% compared to prior year and grew by 7% for the nine months. The company said this reflected “the mixed volume performance” across its business units.
Part of the revenue increase in soft drinks was also related to the sugar tax induced price increases.
Nonetheless, the proportion of sales in US dollars varied month-to-month in response to the exchange rate and changes to the route to market but remained above 70% for the year.
BUSINESS REPORT