Zimbabwe: Delta Beer Volumes Decline, Profits Remain Afloat

25 April 2019

Delta Corporation recorded a significant decline in beer volumes, both lager and sorghum by three percent and two percent points respectively during fourth quarter 2018, as aggregate demand weakened on account of depreciating exchange rates and inflation.

Volumes however rallied 31 percent stronger for lager beer and gained five percent for sorghum beer for the full year 2018 as compared to the previous year.

The sparkling beverages business was virtually closed during the quarter due to non-availability of imported raw materials resulting in an 89 percent decline in volumes.

'Demand has reduced due to the increase in RTGS $ wholesale and retail prices. The value of the RTGS $ deposits continues to be eroded by the fast depreciating exchange rates and cost push inflation. Resultantly, there has been a severe decline in aggregate demand," company secretary Alex Makamure said, in a statement preluding the company's detailed full year results to be published on the 16th of May 2019.

Despite headwinds in the operating environment leading to depleted volumes in last quarter, the company remained profitable, as price hikes of beer have provided sufficient cushion for the company.

Prices of a pint of brown bottle beer has moved up from around $ 0.89 beginning of fourth quarter and closed the year at around $ 1.50. Currently it has sprung to $ 3.00.

"The Group revenue will reflect an increase of 33 percent for the quarter and 26 percent for the full year. It is noted that the financials are distorted by the changes in the reporting currency from USD to RTGS $ noting that the Group maintained stable pricing for the nine months and only partially rebased prices in the fourth quarter," added Makamure.

However, shortages of foreign currency on the market remain the biggest obstacle for the beer and beverage manufacturer which has to import packaging materials and spares.

Market watchers predict a bleak year ahead as exchange rates largely remain vulnerable to shocks and inflationary pressures are unrelenting on the macro-economic front with high probability of further erosion of consumer spending on beer and beverages.

Despite the introduction of the inter-bank foreign exchange market meant to improve sourcing of foreign currency for companies at willing-buyer, willing-seller basis, the market has fallen short of supporting fiscal and monetary policy levers for its effectiveness.

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