NATIONAL Foods Limited has reported a 36% decline in sales volumes in the first quarter ended September 2019 owing to reduced consumer spending power.
BY TAFADZWA MHLANGA
Zimbabwe has been facing hyperinflation and liquidity challenges, forcing consumers to opt for less value products as prices of basic commodities have been rising almost on a daily basis. In June, annual inflation reached an all high of 175,66% before the publication of inflation figures was banned. In September, month-on-month inflation reportedly decelerated by 0,35 percentage point to 17,72% from 18,07% in August.
“Volumes were subdued, closing 36% below the same period last year. The sustained inflation further restrained consumer spending power, impacting volumes across all categories,” said National Foods in a trading update.
“Flour volumes were most heavily impacted, closing 50% below last year, on the back of intermittent supply and increased cost of wheat. Volume performance in the remaining categories was largely reflective of consumers downing in favour of more affordable commodities, with groceries (mainly rice and salt) closing 47% down, snacks and treats 37% down and stockfeeds 25% down.”
The maize category was least affected with volumes falling by 5% lower than the previous comparable period due to subsidies on raw maize, which assisted maize meal affordability and drove consumption.
The company’s profitability met expectation, driven by the lag in both raw materials and operating costs.
Last week another blue chip company Delta Beverages recorded a plunge in all beverages volumes, the highest being lager beer which declined by 40%.
Economist Christopher Mugaga recently said the decline in companies’ volumes reflected their struggle in the current economic environment, as it shows the shrinking consumer earnings, pushing citizens to go for cheaper products.
National Foods has initiated a programme for both white and yellow maize to cover the expected maize deficit for the first half of 2020. The company said it has a solid pipeline for raw materials, but its replacement will need to be a key focus area for management in the months ahead as subdued local liquidity and devaluation continue to affect them. National Foods launched a new cereal product under the Pearlenta nutri-active brand in October which has been well-received in the market. The company also launched Allegros popcorn and Iris cream biscuits under the snacks and treats category which have also been well-received by consumers.