- Wine volumes decreased by 13%
- This was due to competition from cheap imports
- However, overall volumes grew by 11%
Harare- African Distillers (AFDIS), a prominent manufacturer of wine and spirits, experienced a 13% downturn in wine volumes during the quarter ended 30 June 2023, with spirits registering a meagre uptick of 1%.
The primary drivers of this contraction WAS attributed to the intensifying competition from affordable imported brands and a sluggish consumer footfall in critical account retail chain stores, which has had a detrimental effect on demand levels.
The phenomenon of AFDIS recording low sales volumes due to intense import competition is indicative of underlying economic issues: porous borders which are failing to save local industries, challenges related to competitiveness, market penetration, and consumer demand. The competitive pressure exerted by cheaper and/or superior-quality imported goods is posing a significant hurdle to the ability of local industries to capture market share and generate sales revenue which requires government attention to safeguard local producers.
The dearth of sales volumes may further signify a contractionary trend in economic activity and consumer demand, which can be attributed to factors such as inflationary pressures, exchange rate disparities and elevated borrowing costs.
Porous borders and high levels of corruption can pose significant challenges to the effectiveness of measures aimed at protecting local industries from external competition. Porous borders can allow smugglers to bring in cheaper imported goods without paying tariffs or going through regulatory processes.
This proliferation of low-cost imports has engendered an inequitable milieu for domestic industries, precipitating a concomitant erosion of market share and profitability.
However, ZIMRA is on record saying they have upgraded their systems to monitor movement of goods in and out and if so, the only room for intensive penetration of cheap products, sometimes of lower quality is corruption.
Corruption can exacerbate this problem by enabling the entry of goods that do not meet regulatory standards or evading tariffs through bribery. This can create an uneven playing field for local industries, making it more difficult for them to compete with imported goods.
To address these challenges, the government needs to take measures to strengthen border security and crackdown on corruption. This can include investing in technology and personnel to monitor and secure borders, conducting regular audits and investigations to detect and punish corrupt practices, and implementing policies to promote transparency and accountability in the public and private sectors.
However, the Company registered an overall volume growth of 11% above prior year mainly driven by Ready-to-Drink (“RTD”) segment which grew by 26%, owing to improved product availability.
In turn, the company recorded revenue growth of 143% for the quarter grew by 143% ahead of prior year.
USD, turnover grew by 15% to 12.5 million.
“Revenue growth was due to increased volume and inflation related price adjustments,” said the company.
To achieve sustained market share, revenue, and profitability growth, AFDIS can focus on several strategic initiatives, AFDIS can optimize its production processes to reduce costs and increase output, such as by investing in new equipment, adopting lean manufacturing principles, and improving supply chain management.
The company can further invest on implementing measures to control costs, by reducing overhead expenses, negotiating better supplier contracts, and optimising inventory management.
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