Delta leans on Chibuku

Published: 23 July 2014

DELTA Corporation, Zimbabwe's largest listed company said volumes during the first quarter to June rose 1 percent, driven by strong growth in opaque beer.

Sorghum beer volumes increased 15 percent, spurred by Chibuku Super as consumers turned to cheaper opaque beer. Lager and soft drinks volumes fell 21 and 8 percent respectively, Delta said in a trading update for the first quarter ended June 2014. Revenue for the quarter dropped 3 percent despite an increase in overall beverage volumes.

"The stretched consumer is now focusing on value for money products," said Delta.

Disposable incomes have remained depressed due to the tight liquidity environment prevailing in the country and the economy continues facing weak aggregate demand.

Zimbabwe's year-on-year inflation rate for the month of June 2014 stood at -0,08 percent, gaining 0,11 percentage points on the May 2014 rate of -0,19 percent. This means that prices as measured by the all items Consumer Price Index decreased by an average of 0,08 percentage points between June 2013 and June 2014.

Market analyst Mr Jeff Gogo said Delta's performance is reflective of the continuing squeeze on disposable incomes in a shrinking economy. Even when prices of goods are generally declining, consumer spending has not grown due to several hindrances, mainly low incomes.

"Priorities have shifted," he said. "People are becoming selective of what they buy. Items like beer, particularly the premium priced lagers, will not rank at the top of the list. Bread and butter issues come first. This is the second straight quarter of lager declines at Delta, even though sorghum beer volumes have increased."

He however, noted that the difference in lager declines and sorghum increases are much wider to be able to cancel out each other, which explains the overall revenue slump.

"Being a consumer facing stock and being Zimbabwe's biggest company, the declines in revenue and lager consumption reported by Delta depict a story much bigger than the firm itself.

"The story is of an economy in depression pulled down by among other things, weak consumer demand. Clearly, those issues will not be solved by drinking Delta's or any other company's beer," said Mr Gogo.

Delta spent $12 million on the expansion of its Chibuku Super plant in Chitungwiza.

The plant has been commissioned and annual capacity is seen rising to 1,8 million hectolitres.

"Sorghum beer category continues to record growth, spurred by investment in increased Chibuku Super production capacity," said Delta.

Delta said there was an "encouraging uptake in new dairy mix and drinking yoghurt beverages (Super Sip)". Delta has been on an ambitious innovation agenda since the beginning of last year across its various portfolios.

The beverages maker launched Chibuku Super in April last year, introduced a 350ml PET pack on its sparkling beverages business two months later and recently rolled out a brand new non-alcoholic dairy beverage drink.
- The Herald