Delta Q1 hit by falling consumer demand

BY MISHMA CHAKANYUKA

BEVERAGE manufacturer Delta Corporation says lager beer and sparkling beverages volumes fell by 57% and 79% respectively in the first quarter to June 30, 2019, as the company felt the brunt of Zimbabwe’s failing economy.

“Lager beer volumes declined by 57% compared to prior for the quarter. Demand was subdued on account of affordability issues as market players adopted varied pricing models…The sparkling beverages volume declined by 79% for the quarter. The business has resumed full production following an extended period of shutdown due to shortages of imported raw materials,” said company secretary Alex Makamure in a trading update.

“The macro-economic changes have led to a surge in inflation and a fast depreciating exchange rate, which have resulted in the erosion of disposable incomes
and reduced consumer spending. The board notes the Reserve Bank of Zimbabwe policy to ring-fence legacy foreign liabilities for settlement at the 1:1 exchange
rate.”

He said the group’s products had not yet factored in the full impact of the depreciation of the exchange rate as the recent fiscal and monetary policy changes
had significantly affected its business.

However, Delta’s sorghum beer volumes increased by 2% in the period under review.

“Product supply has been consistent despite the difficulties in accessing imported packaging materials and services. There are concerns about the supply of
agricultural cereals arising from the drought and recent changes to the marketing policies,” Makamure said.

At its National Breweries Plc in Zambia, there were some “encouraging volume trends in the recent months” following the introduction of a returnable pack and
enhanced product formulation.

Makamure said the on-going foreign currency shortages to import critical raw materials were threatening its value chain.

“Foreign suppliers remain cautious about Zimbabwe country-risk, thus compromising the smooth flow of imported raw materials. The availability of foreign
currency remains a challenge, disrupting imported supplies into the value chain,” Makamure said.

The company is trading under a cautionary that was issued in 2016 with respect to a notice that was received from the Coca-Cola Company (TCCC), advising of its
intention to terminate the Bottler’s agreements with 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 ongoing discussions among the parties are slower than anticipated in light of the
significant changes to the macro economic factors in Zimbabwe,” Makamure said.

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