Harsh macro environment pelts a tough blow on Delta Beverages

  • Volumes decline across all segments recorded
  • Customers downtrade on low disposable incomes
  •  UNB acquisition nears completion

Harare- ZSE-listed beverage manufacturer, Delta Corporation Limited whose products are consumer facing, bear the brunt of a melting down economy after recording a successive recurring decline in volumes across all its business segments

 According to a results publication for the period ended 30 September 2019 (HY2020) lager beer recorded a 48% decline in volumes compared to the same period last year, a result of the moderating of prices to maintain affordability given the prevailing economic challenges and the premium category has held its contribution driven by Zambezi lager.

The economic environment in the country has been characterized by low consumer spending due to the low disposable incomes, a result of hyperinflation.

Volumes for sorghum beer declined by 15% in the period under review, a drop attributed to the shift by consumers to more affordable brands and packs within the category.

The switch has been caused by the rise in the prices of maize and imported packaging materials ahead of disposable incomes, putting pressure on the sorghum beer prices.

The shortage and high cost of accessing foreign currency has largely impacted the Company’s production and that of other manufacturers in the country as well.

The Sparkling beverages volumes in the period declined by 56% compared to the prior year due to prolonged stock outs at the beginning of the financial year.

On a positive note, “volumes recovered in the last quarter on the back of improved product supply and moderated retail pricing”, the company said.

However, raw material supply remains a challenge as the category has a high import content.

National Breweries PLC (Zambia) recorded 20% volumes decline compared to the same period last year which is partly due to higher pricing on the back of a steep increase in maize prices and the depreciation of the Kwacha.

The Company said consumer acceptance of the recently launched returnable pack has been encouraging while Chibuku Super and Shake Shake were the dominant packs.

Product supply is constrained by capacity and power supply disruptions which have mainly been attributed to low production as a result of low dam water levels at the Kariba hydro power station, an effect of the El Nino induced drought.

African Distillers recorded a soft volume outturn at 41% below prior year due to limitations in accessing and the high cost of foreign currency but the business continues to successfully launch products that are less foreign currency hungry.

Schweppes Holdings Africa, an associate entity of the Company experienced reduced volume performance at 33% below prior year on limited foreign currency supply for packaging material and reduced demand from higher pricing.

Plastic products manufacturer, Nampak Zimbabwe continues to trade profitably constrained by the falling demand from its customers on account of their depressed volume and foreign currency challenges.

Delta is looking into acquiring the 100% stake currently held by Diageo plc in United National Breweries Proprietary Limited (South Africa), (UNB) as per its announcement on 21 December 2018, a transaction which is still pending.

UNB is the leading brewer of traditional beer and owns the Chibuku brand in that country.

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