Competition: Varun’s plea to curb imported energy drinks goes flat

Competition regulators have turned down a request by Varun Beverages, the bottler of Pepsi in Zimbabwe, to restrict imported energy drinks.

Imports of energy drinks have surged by over 7000% since 2019, according to data from Zimstat. Varun, which supplies the Sting energy drink, approached the Competition and Tariff Commission (CTC) in May this year seeking restrictions on such imports. But CTC says there is no threat to local companies.

“The (Varun) request was to ban imports of energy drinks into the country. As alleged, Zimbabwe imports energy drinks from Zambia and South Africa using SADC preferential rates and/or COMESA,” CTC says in its latest quarterly report. “It (CTC) undertook a preliminary inquiry to determine whether the alleged increased importation of energy drinks constitutes an unfair trade practice consistent with the Competition Act that could warrant launching of investigations.”  

Zambia’s Big Tree Beverages, part of the Trade Kings group, has increased supplies of its Mojo and Wild Cat energy drinks brands into Zimbabwe. The company is targeting the same market segment that Varun’s Sting is addressing.  

Zimstats trade figures show that Zimbabwe’s imports of energy drinks rose from 416 528 to 29 869 862 units between 2019 and 2022. In response, in the 2022 budget, Finance Minister Mthuli Ncube imposed a tax of 5 US cents for every litre of energy drink imported into the country.

According to CTC, “traditional trade defence tools” such as import prohibitions, quotas, and tariff hikes violate trade agreements under SADC and COMESA.

“Assessment of the facts established that there was no possibility of dumping or subsidization as the imported product prices are higher than the local prices. It therefore follows that anti-dumping duties and countervailing measures cannot be applied in the case under consideration.”

There was no evidence “to prove injury to the local industry”, CTC concluded.

Varun is a major competitor of Delta, which has previously suggested that the Pepsi bottler got an unfair advantage from tax holidays and access to foreign currency via the RBZ auction.