Tawanda Karombo|Published
As the festive season approached, Zimbabwe’s Delta Corporation experienced increased beer and soft drink sales, bolstered by a stronger rand and stable mineral commodity prices. This positive momentum extended to African Distillers (Afdis), which is partly owned by South Africa’s Distell.
The rise in prices for gold and platinum group metals, key exports for Zimbabwe, has contributed to enhanced consumer spending and economic growth in neighboring regions.
Delta Corporation, known for brewing alcoholic beverages in Zimbabwe, South Africa, and Zambia, along with manufacturing soft drinks and ready-to-drink cordials, reported that consumer spending during the December quarter, coinciding with festive celebrations, remained strong.
This uptick in spending is linked to “firm mineral prices, rising mining activity, and improved agricultural performance.
“There was also an increase in diaspora remittances, benefiting from favorable exchange rates in key markets such as South Africa (rand) and the United Kingdom (pound),” noted Faith Musinga, company secretary for Delta Corporation.
During this period, over 85% of the company’s sales were predominantly in US Dollars. The stability of trading currencies allowed the company to restore traditional festive season trading, consumer promotions, and marketing activities, taking advantage of the prevailing stable pricing environment.
While the current currency dynamics offered some protection against informal imports for Delta Corp, they also created cost pressures on imported materials and capital projects. Furthermore, the US dollar’s depreciation brought both opportunities and challenges, evident in the company’s increased rand-denominated import costs.
However, the overall market conditions improved, making it possible to host musical, sporting, and cultural events, which typically increase beverage consumption. As a result, Delta experienced a 16% growth in lager beer volumes for the quarter and a 19% increase over the nine months leading to December compared to the previous year.
“Demand remained robust, bolstered by higher consumer incomes and stable pricing. Our company has surpassed historical sales levels, and we are investing in meeting consumer preferences for our brands,” declared the company.
The soft drinks sector, which includes Coca-Cola products, faced challenges from cheaper imports and growing alternative products. Nevertheless, Delta aims to promote its portfolio of low and zero sugar offerings while providing packages at more competitive prices.
“The Group is optimistic that a review of the sugar tax will create a fairer balance between producer value and fiscal contributions,” they added.
The ready-to-drink segment significantly surged, registering an impressive 92% volume growth, driven by strong demand for cider products.
Afdis reported a “robust performance in the spirits and wines segment with volumes increasing by 64% for the quarter and 51% over the nine months,” in comparison to the previous year.
This growth has been attributed to “strong consumer demand during the festive” period. Afdis boosted its wine volumes by 49%, thanks to a range of affordable offerings.
In South Africa, Delta’s United National Breweries reported a 10% volume growth for the quarter and a 4% increase for the nine months, reflecting the successful market penetration of Chibuku Super products into formal trading channels.
The company anticipates “disruptions during the year due to labor union activities and pressure groups concerning contentious workplace and national issues,” which have since subdued.
Delta is preparing to revive its production of Traditional African Beer (TAB), with plans to resuscitate the KwaZulu-Natal brewery by March. This initiative is expected to enhance the company’s market presence and lower logistical expenses.
“Growth in South Africa is modest but significant, marked by increased spending on fast-moving consumer goods, value products, and online channels, supported by lower fuel prices and interest rate reductions. The Rand has stabilized below 17 to the US dollar, influenced by stronger gold prices and a softer US dollar,” stated Musinga.
However, persistent structural challenges such as high unemployment, fiscal pressures, and broader global economic factors continue to affect consumer sentiment and demand in South Africa.
Nonetheless, operating conditions are improving, aided by ongoing operational streamlining, enhanced market execution, and a more stable trading environment.
BUSINESS REPORT
Key Takeaways
- Delta Corporation reported increased beer and soft drink volumes, boosted by a stronger rand.
- Consumer spending was firm during the festive season, aided by improved agricultural performance and mining activity.
- The ready-to-drink segment saw exceptional growth of 92%, driven by cider demand.
- Despite soft drink competition, Delta aims to promote low and zero sugar offerings.
- Delta’s wine segment under Afdis experienced significant growth, attributed to strong festive period demand.
FAQ
What factors contributed to Delta Corporation’s growth?
The company’s growth was driven by a stronger rand, stable mineral prices, and increased consumer spending during the festive season.
How is Delta Corporation addressing competition in the soft drinks market?
Delta plans to promote its portfolio of low and zero sugar beverage options while offering more competitively priced packages.
What does Delta Corp’s future look like in terms of operations?
The company anticipates some disruptions but remains focused on operational improvements and market expansion.
