Harare - Delta Corporation experienced unprecedented sales of soft drinks and beer during the Christmas season, setting new records. However, the company is concerned about the potential impact of a "sugar tax" and the anticipated decrease in spending for the upcoming year.
According to Delta, consumer spending was robust throughout the festive period, driven by stable US Dollar pricing and overall liquidity. The significant expenditures were attributed to mining activities, farmers, government infrastructure projects, diaspora remittances, and year-end bonuses.
In the three months leading up to December, the volume of lager beer surpassed previous monthly peak volumes, resulting in a remarkable 15% growth for the quarter and an impressive 14% growth over the nine-month period compared to the previous year.
Delta Corporation's strategic move to commission a cutting-edge lager packaging line in August paid off splendidly, bolstering supplies while maintaining a robust consumer demand.
December witnessed an extraordinary milestone as Delta achieved record-breaking sales of soft drinks. The Sparkling Beverages division continued its impressive growth trajectory, showcasing a phenomenal 38% surge for the quarter and an exceptional 25% increase over the nine-month period compared to the previous year. Notably, December 2023 marked a historic milestone with the division's highest-ever monthly volume.
However, a new sugar tax of US$0.001 per gram poses a potential threat to sales in the upcoming year. Delta anticipates adverse effects from the unavoidable price hikes resulting from the implementation of this tax. This challenge adds to the existing market pricing distortions, presenting Delta with additional hurdles to overcome.
The business may also suffer from regulations that limit how manufacturers supply goods to informal traders, a big market for Delta. The measures adopted in the 2024 budget will have a far-reaching impact on the business and the market in general. The beverages sector will be affected by the sugar tax and the restrictions arising from policies impacting the route to market.
The company sees demand slowing this year. Aggregate demand may be impacted by the high inflation and reduced foreign currency inflows arising from lower mineral prices and the anticipated reduction in agricultural output resulting from the forecasted below normal rainfall.
Delta Corporation faces potential setbacks due to regulations that impose limitations on manufacturers supplying goods to informal traders, a significant market for the company. The impact of measures outlined in the 2024 budget is expected to reverberate throughout the business and the market at large. The implementation of the sugar tax and market access restrictions will particularly affect the beverages sector, impacting the route to market.
Anticipating a slowdown in demand, Delta recognizes the potential challenges ahead. High inflation, reduced foreign currency inflows due to lower mineral prices, and an anticipated decline in agricultural output resulting from below-normal rainfall forecasts may collectively impact aggregate demand.
While overall volumes of Chibuku decreased by 5% during the quarter, Delta attributes this decline to consumers shifting their preferences towards more readily available lagers. To address this, the company established a new Chibuku Super plant last year to bolster supplies and meet consumer demand.
Delta Corporation's revenues experienced substantial growth, increasing by 19% in US Dollar terms over the three-month period and by 12% over the nine-month period. With sales now predominantly conducted in foreign currency, accounting for 70% of total sales, the company will present its financial results in USD moving forward.
Equity Axis News