Delta sales volume in sharper decline on affordability challenges

Harare – In a trading update for the second quarter and half year period ended 30 September 2019, Delta reported that volumes across its product offering fared worse off to the prior comparable period last year as well as the preceding quarter.

In a scourge that has become a common characteristic in a market with depressed demand, volumes of lager and sorghum beer eased coupled with a softening in sparkling beverages.

The beer segment whose value is overweight on lager, has seen dampening volumes in successive quarters since the beginning of the financial year.

Depressed affordability proved a stumbling block as a combination of high inflation, currency changes has further eroded consumer’s disposable incomes in the face of the existing deteriorating economy.

The Company reported 40% decline in lager beer sales volumes for the quarter and 48% decline for the half year compared to the same period last year.

“The pricing of this category has been moderated to maintain affordability given the prevailing economic challenges,” Company secretary Alex Makamure said in a statement.

Sorghum beer volume in Zimbabwe declined by 29% for the quarter and 15% for the half year.

This was exacerbated by the rising prices of the major inputs; maize, sorghum and packaging materials ahead of disposable incomes.

Resultantly, the increase in production costs led to sharper price increases which have resulted in some consumers switching from the category.

Elsewhere, Delta’s subsidiary, National Breweries Plc (Natbrew) Zambia, recorded a volume decline of 13% for the quarter compared to last year, partly due to higher pricing on the back of a steep increase in maize prices and the depreciation of the Kwacha.

Mr Makamure said whilst consumer acceptance of the recently launched returnable pack has been encouraging, product supply is constrained by capacity and power supply disruptions.

Likewise, the sparkling beverages volume declined 36% and 56% for the quarter and half year respectively, partly offset by foreign currency shortages leading to raw material supply challenges as the category has a high import content.

Meanwhile, African Distillers (Afdis) recorded “a soft volume outturn due to limitations in accessing and the high cost of foreign currency.”

“The entity continues to launch products with a lower foreign currency content,” Mr Makamure said.

The subdued consumer demand also had a knock on effect on beverages volume at Schweppes Holdings which declined by 33% for the half year due.

“There are challenges in accessing raw materials,” Mr Makamure said.

The Company said that the publication of the half year interim results has been deferred pending clarifications and guidelines from the Public Accountants and Auditors Board (PAAB) on the implementation of IAS 29: Financial reporting in hyperinflationary economies.

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. He can be contacted through the following email links, rayjnr.mhotseka@gmail.com and raynoldm@equityaxis.net.

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