- Significant Cost Reductions: Reduced operating costs by 33%
- Declining Revenue: 8% decline in sales volumes and a 37% drop in domestic cigarette revenue
- Strategic Responses to Market Challenges: Implemented dual currency billing for customer flexibility and revamped its Route-to-Consumer operations
Harare- British American Tobacco Zimbabwe, a prominent manufacturer and distributor of tobacco products, has sustained its comprehensive cost reduction initiative aimed at optimizing operational efficiency and maximizing earnings in the 9 months to September 2024.
In the first half of 2024, the company successfully reduced production costs to ZWG 47 million from ZWG 60 million and administrative expenses to ZWG 33 million from ZWG 42 million.
This trend continued into the cumulative 9-months period, with operating costs reduced by 33%.
This cost management strategy is particularly crucial as the company navigates one of its most challenging phases, characterized by the influx of new cigarette brands, the dumping of low-cost alternatives, and an inflationary environment that erodes consumer disposable income.
Sustaining a rigorous cost initiative is essential given Zimbabwe’s tough operating landscape, which is burdened by high overheads including taxes, electricity tariffs, export surrender requirements, and frequent power outages.
These factors complicate profitability in a highly competitive market where the smuggling of inexpensive tobacco products poses an additional threat.
During the nine-month period ended September 30, sales volumes experienced an 8% decline compared to the same period last year, largely due to inflationary pressures and currency volatility.
As a result, domestic cigarette revenue plummeted by 37% year-on-year, driven by decreased consumer spending and lower disposable income.
“In response to the economic challenges, we implemented dual currency billing, offering flexibility to customers and ensuring business continuity.
“We also reviewed our Route-to-Consumer operations, creating a robust and future fit model that is responsive to evolving consumer and market trends,” said the company.
This strategic focus on cost reduction and operational adaptability positions British American Tobacco Zimbabwe to overcome current challenges while laying the groundwork for future growth and profitability.
