Delta Beverages experienced a 10% decline in sorghum beer volumes in the last quarter, as its Chibuku brand faced challenges from drought and rising competition, particularly from Innscor’s Nyathi brand.
In the three months ending June, Chibuku sales were impacted by drought and a reduction in exports to Delta’s regional units, which are now self-sufficient. Additionally, some consumers have shifted to lager beer and cheaper illicit brews, further affecting Chibuku’s market share.
“The category is also impacted by competition from hard spirits, our own increased lager beer supply, and investments by competitors in the same category. The sorghum beer category is the most affected by the drought due to lower consumer disposable incomes in rural markets and cost pressures on key cereals such as maize and sorghum,” Delta stated in its quarterly report.
Innscor introduced Nyathi beer in 2022, directly competing with Delta. Despite Delta’s larger capacity and superior distribution, Nyathi has begun eroding Delta’s market dominance. In May, Delta estimated it held a 93% market share in the masese market. Delta has built a new Chibuku Super plant, with sales near record levels last year. CEO Matlhogonolo Valela noted that Innscor’s capacity was around 30,000 hectolitres per month, compared to Delta’s 400,000 hectolitres per month. Valela indicated that Innscor had not yet reached full capacity and did not pose a major threat to Delta’s market leadership.
Delta’s lager beer volume grew by 9% for the quarter, driven by strong demand and improved supply following investments in new plants and distribution networks. Soft drinks volumes increased by 11%, but Delta expressed concerns over the impact of a newly introduced sugar tax on sales, as traders import cheaper soft drinks into Zimbabwe.
Delta’s revenue for the quarter rose by 23% to US$190 million, up from US$154.8 million in the same period in 2023. Last year, 80% of Delta’s sales were in USD, but following the introduction of the Zig in April, USD sales have dropped to 65%. Delta noted ongoing difficulties for companies accessing USD in the forex market.
The company faces a significant financial challenge with a US$54.7 million tax bill after a recent Supreme Court ruling in favor of the tax agency. Delta is optimistic that parts of the claim can be resolved and may consider using Treasury Bills to settle the amount.
“We believe any revisions to the payment plan will be rational, taking into account the financial health of the business and the fact that the principal amounts were fully paid in legal tender at the relevant periods, based on the best available interpretation of the legislation,” Delta said. “There are also engagements with authorities on trading off some financial instruments that could offset the part of the final amount that becomes payable.”
Source: NewZwire