Delta volumes slump on weak demand

Delta Corporation Head Office in Borrowdale, Harare

DELTA Corporation, Zimbabwe’s largest beverages producer, has reported a massive decline in volumes across all its segments as consumers cut spending due to shrinking disposable income.

In a trading update for the fourth quarter and full year ended March 31, 2020, the beverages manufacturing concern said the inflationary environment has impacted negatively on consumer disposable incomes, thereby reducing discretionary household spending.

“Lager beer volume declined 27 percent for the quarter and 42 percent for the full year compared to the same period last year.

“There was a prioritisation of returnable bottle packs in an effort to conserve foreign currency and drive affordability,” said the company.

“The trading environment has remained turbulent due to hyperinflation, an unstable exchange rate, limited availability of foreign currency in the formal banking channel and the drought induced shortage of cereals used in the brewing processes.”

Delta also attributed the subdued trading performance to the continued erratic supply of fuel and key utilities such as water and electricity, thereby disrupting production and distribution operations across its segments.

The company said the later part of the quarter was severely impacted by the restrictions to human and economic activity in response to the advent of the novel coronavirus (Covid-19) pandemic.

This led to the declaration of national disaster in Zimbabwe on 17 March 2020, which was scaled up to a lockdown from 30 March 2020.

The measures implemented to contain and manage the possible spread of the virus include restrictions and prohibitions on travel and social gatherings including the closure of most channels of distribution, which drive the consumption of our beverages.

“This impacts the levels of demand, product packs and sales mix,” said Delta.

In the sorghum segment, the beverages producer said its beer volume in Zimbabwe declined by 27 percent for the quarter and 25 percent for the full year.

It said the pricing of the category was driven by the escalation in the cost of imported inputs such as packaging and brewing cereals.

The sparkling beverages volume grew by 368 percent for the quarter off a low base in 2019 when the business was virtually closed.

“The volume declined 17 percent for the full year. The business continues to work collaboratively with The Coca-Cola Company to maintain consistent product supply whilst optimising the value chain and product offerings,” said Delta.

At African Distillers (Afdis), the total volume also declined 12 percent for the quarter. The beverages volume at Schweppes Holdings declined by 24 percent for the quarter due to low consumer demand.

However, Delta said the supply of the Mazoe Orange Crush improved during the quarter following a period of shortages.

Meanwhile, the firm’s revenue for the fourth quarter grew by 20 percent in inflation adjusted terms(720 percent historical).

“The revenue increased 14 percent for the full year (historical 480 percent) compared to the average inflation of 363 percent,” it said. —