LISTED beverages producer, Delta Corporation, has recorded subdued volume performance across all its products due to depressed aggregate demand.
In its latest trading update for the quarter and half year ended September 30, 2019, the group’s secretary, Mr Alex Makamure, said consumer spending remains low as incomes do not match the price escalation of goods and services in the market.
“Consumer spending remains low as incomes have lagged due to the escalation in prices of goods and services. The southern region has been adversely impacted by shortages of potable water, electricity and fuel,” said Mr Makamure.
“Lager beer volume declined by 40 percent for the quarter and 48 percent for the six months compared to the same period last year. The pricing of this category has been moderated to maintain affordability given the prevailing economic challenges,” he said.
Sorghum beer volumes also declined by 29 percent for the quarter and 15 percent for the six months.
“The prices of the major inputs — maize, sorghum and packaging materials rose ahead of disposable incomes. This has led to sharper price increases, which have resulted in some consumers switching from the category.
“The sparkling beverages volume declined by 36 percent for the quarter and 56 percent for the six months,” he said.
Mr Makamure also said the volumes at Schweppes Holdings declined by 33 percent for the half year due to falling consumer demand arising from the pass-through effects of cost push inflation.
He said although volumes started recovering slowly in the last quarter on the back of improved product supply and moderated retail pricing, raw material supply for the sparkling beverages remains a challenge as the category has a high import content.
In light of the prevailing macro-economic conditions, Mr Makamure said his company has had to implement modest but frequent price increases while taking into account the affordability issues affecting consumers. He said the company still faces challenges in sourcing imported raw materials and services due to the mixed performance of the interbank market and difficulties in accessing materials as foreign supplies remain jittery on account of overdue payables.
During the period under review, only the African Distillers unit recorded a soft volume outturn due to limitations in accessing and the high cost of foreign currency. The entity continues to launch products with a lower foreign currency content, he said.
Meanwhile, Mr Makamure reminded shareholders that Delta Corporation was trading under a cautionary issued with respect to the notice received from The Coca-Cola Company (TCCC) advising of an intention to terminate the Bottler’s Agreements with the group entities.
“This followed the merger of AB InBev and SABMiller Plc in October 2016 and the subsequent agreement in principle reached between TCCC and AB InBev to explore options to restructure the bottling operations in a number of countries.
“The parties are finalising the renewal of the Bottlers Agreement for a three-year term to September 2022,” he said.