Delta’s non-alcoholic beverages segment almost dormant in first 3 months of 2019

HARARE- Continued forex shortages in Zimbabwe into 2019 has resulted in a severe production scale back at Delta Beverages, which is the country’s dominant beverages producer accounting for over 60% in the non-alcoholic beverages market share.

In a trading update released on Wednesday, Delta said its non-alcoholic beverages lines were virtually almost closed in the first 3 months of 2019 due to non-availability of raw materials. A portion of raw materials used in the manufacturing of soft drinks as well as packaging material is imported.

As at 2018, Delta’s full operation demanded a monthly allocation of between USD $5 million to $7 million in forex per months in order to satisfy raw material import demands.

In light of the liquidity and hard currency crisis in Zimbabwe, the entity has been unable to satisfy demand and in the period under review almost operated close to negligible capacity within the sparkling beverages segment.

Delta produces popular soft drinks brands Fanta, Coca Cola and Sprite which are patented by global beverages giant the Coca Cola Company. It also produces own brands in alternative beverages as well as milk based beverages.

Sales volumes of sparkling beverages declined by an alarming 89% in the latest 3 months period to March 2019 when compared to the same period last year. Cumulative 12 months volumes to March 2019 were down 44% compared to the prior comparable period, a representation of gravity.

At first half which is the period between March and September 2018, sparkling beverages volumes were up by 3% only for the trend to be reversed in the second half period as the forex crisis became more severe.

Zimbabwe has since moved from a fixed 1:1 exchange rate between the USD and the local denominations now bundled as RTGS$. A complimentary interbank system is expected to improve efficiency in terms of forex allocation while also helping improve liquidity as well as reduce arbitrage.

Delta said operations have since resumed albeit at a slow pace. The company said there are collaborative efforts with the Coca Cola Company to restore the operation to a sustainable footing.

In February Delta revised prices across its product offering to reflect the varying USD to RTGS$ pricing which ultimately saw prices rise sharply in RTGS$ terms in line with the market exchange rate. This has necessitated the resumption and capacitation of some product lines.

Low liquidity on the interbank however threatens viability as importers are failing to access adequate flows. This has resulted in further run in the exchange rate although equilibrium is yet to be reached.

Demand has on the other hand responded to increases in prices. Hard pressed consumers are forgoing purchases as purchasing power plummets.

 

Equity Axis News

Raynold Mhotseka

Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment.

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