Deflation takes toll on lager beer sales

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CONSUMER demand for lager beer continues on a downward trend as imbibers opt for cheaper and affordable sorghum beer in the face of a challenging business and economic environment, Delta Corporation has reported.

BUSINESS REPORTER

Delta has traditionally enjoyed booming product line growth and sales especially in the lager line, but the deflationary environment has taken its toll on consumer spend and demand.

Speaking at a briefing for the company’s full year results on Wednesday, Delta chief executive officer Pearson Gowero expressed optimism that policy improvements by the government would yield better results for the economy.

“Consumer demand and spend continues on a downward trend over the last quarter. The trends that we were seeing post-Christmas are the same that we are trading in at the present moment,” he said adding that there was no ray of hope on the horizon.

The company reported that the second half of last year was difficult with the festive season recording subdued performance.

Lager sales were down by 10% to $315 million in the comparative period.

Zimbabwe’s economy faces an acute liquidity crunch characterised by deflation, a scenario which has contributed to low disposable incomes for the majority of people.

The number of farmers under the company’s barley contract scheme has been substantially reduced, as 46 000 tonnes of barley delivered last year and consequent lower lager volumes recorded have led to overstocking.

The viability of this scheme is linked to lager beer volume growth.

Revenue declined by 1% to $625,5 million and this was against volume losses in the higher margin lager beer and soft drinks mitigated by improved value capture in sorghum beer and alternative beverages.

Sparkling beverages during the period under review were also down 2% to $225 million, a scenario attributed to an out of stock situation occasioned by extended water supply disruption at the main factory in Harare and softening demand.

However, Chibuku sales went up by 24% to $146 million as more consumers turn to cheaper and affordable sorghum beer.

Chibuku Super contributed 10% of the sorghum line volume growth.

Stakeholders were told that commissioning of the second Chibuku Super line is on schedule to be in full production in the first quarter of the new financial year.

Earnings Before Interest Taxation (EBIT) were down by 1% to $134,2 million while Earnings Before Interest Taxation Depreciation and Armortisation (EBITDA) went up by 2% to US$165,2 million.

EBITDA is better utilised when analysing firms within the same industry, where capital expenditure to revenue ratios are alike.

The company noted that continued investment behind its brands, production capacity, market execution and innovation worked to spur growth in sorghum beer and alternative beverages which partially offset declines in lager beer and soft drinks.

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