Delta’s volume performance reels under COVID-19 and hyperinflation in Zimbabwe

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Lager volumes ease 18% over last year

Sorghum beer volumes plunge 40%

Sparkling beverages volumes recovers 35% albeit from a low base

Delta Beverages’ overall business remained under strain into the first quarter of 2021 after the business reported sustained decline in volumes in key segments of lager and sorghum beer.

In a trading update for the 3 months period to June 2020 (Q1-21), Delta said Lager beer volume for the quarter declined by 18% compared to the same period last year, noting the low outturn in prior year during the transition to the mono-currency system.

“Trading in alcoholic beverages over the period was restricted to off premise outlets for home consumption in line with the COVID-19 guidelines” said the company. The global economy is expected to shrink by about 5% in 2020 while Zimbabwe’s economy is projected to shrink further by about 15% in the current year owing to the pandemic.

In data released on Thursday, the US economy fell by almost 40% in the quarter to June as the nation went under lockdown. Outside of the lockdown, demand for beverages in Zimbabwe has been dragged by a weak macroeconomic environment which has been characterized by hyperinflation and currency depreciation.

Over the period Sorghum beer volume in Zimbabwe declined by 51% for the quarter which the company attributed to limited access to the market particularly in trade channels such as bottle stores and bars. The category however witnessed higher price adjustments driven by escalation in the cost of imported inputs such as packaging and brewing cereals.

At Natbrew Zambia, which Delta recently acquired from parent AB InBev, volumes increased by 17% for the quarter, benefiting from price moderation and the company’s ongoing measures to revive volume. Sales at Natbrew were mostly in Chibuku Super which is more accessible in the off-premise trade channels. The performance was constrained by a tight working capital cycle.

United National Breweries, which is another recent acquisition in South Africa, is reported to have traded for a few weeks only during the quarter as SA authorities implemented very strict prohibitions on the sale and consumption of alcohol under the COVID-19 national lockdown measures. The prohibition was partially lifted in June but reintroduced on 16 July 2020. The ban could remain in place for an extended period due to the escalation in COVID-19 infections.

On a brighter side, the sparkling beverages unit recorded a 35% growth in volumes for the quarter compared to prior year. The company said the category benefited from a stable market supply with the sales mix shifting to one-way packs and take-home offerings. However recovery momentum has been slowed by the limited market access and limited activity in key sales channels. African Distillers (Afdis) volumes grew by 8% for the quarter driven mainly by the spirits category.

The beverages volume at associate Schweppes Holdings declined by 32% for the quarter reflecting the constrained trading under COVID-19 conditions. Exports at the unit slowed down attributed to depreciation of regional currencies which reduces competitiveness.

Overall Delta remains murky waters as FMCGs bear the brunt of slowing down disposable incomes resulting from hyperinflation. In 2020, Delta’s volumes eased by 30% to 4.62 million hector litres against the prior year. This was a first double digit decline since 2009 and the lowest volumes performance over a 11-year period.

While sorghum volumes have countered the decline in lager volumes over the years, profit margins have slowed down as the later attracted superior margins compared to sorghum which is a value offering

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