It’s the dry season for Delta Corporation, in more ways that one; Zimbabwe consumers are spending less on beer and soft drinks, while the drought threatens the company’s supply of critical cereals.
Delta sold 57% less beer while soft drink unit sales fell 79% in the quarter to June, Zimbabwe’s country’s largest beverages maker has said, in an quarterly update that paints a grim picture of the collapse in consumer demand.
The company resumed production at its soft drinks business, after being forced to shut down the unit in the last quarter of 2018, but this didn’t reverse the 89% dip in sparkling beverages volumes the company suffered in the previous quarter. While the fall in sales then was due to the scarcity of soft drinks, this time the soft drinks were available, but there were no buyers.
“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 income and reduced consumer spending. Our product prices have not yet factored in the full impact of the depreciation of the exchange rate,” Delta says in its latest update.
“Demand was subdued on account of affordability issues as market players adopted varied pricing models.”
Delta: down from record highs
Last year, Delta’s lager volumes matched record highs achieved in 2013, only slowed down by the dip in consumer spending in the last quarter of the year. The slowdown has continued into the last two quarters. Lager volume beer is down 57% compared to the prior year.
“The fundamental changes in the economy arising from the recent fiscal and monetary policies have significantly affected business. The availability of foreign currency remains a challenge, disrupting imported supplies into the value chain,” the company says.
Only sorghum beer, which has been the company’s mainstay, managed to record some recovery, with volumes up only 2% after falling in the previous quarter. Delta warns that supply of agricultural products – Delta mostly uses barley, maize and sorghum – may be affected by the drought and the recent announcement restoring the GMB’s grain buying monopoly.
“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 the recent changes in marketing policies.”
Foreign suppliers remain cautious about Zimbabwe country risk this compromising the smooth flow of imported materials, Delta reports.
The update by Delta shows how consumer spending is weakening further, under a raft of economic austerity measures that the government has implemented since October last year. Under these measures, Zimbabwe has removed the 1:1 peg on the currency, allowing the rate to partially float. This has set fire to inflation, which has raced to 175% in June and eroded incomes.