Delta 2018 beer sales match record highs – and it could have been more

A binge disrupted by austerity: Delta's lager volumes at par with 2013 highs

Zimbabwe’s beer drinkers would have set new national lager records in 2018, had Finance Minister Mthuli Ncube not crashed the party with his austerity measures late in the year, latest figures from the country’s biggest brewer show.

In its full year-results released Wednesday, Delta Corporation said its lager volumes in 2018 matched record highs achieved in 2013, and the company could have sold even more clear beer had the Zimbabwe economy not suffered a sharp collapse in consumer spending in the last quarter of the year. Lager volumes grew 31% on prior year, the company said.

“The volume achieved was at par with the historical peak of F13. This was achieved through stable pricing, steady production output and extensive distribution. Both the mainstream and premium categories registered growth driven by Zambezi Lager and Castle Lite,” Delta said.

Sorghum beer saw volume growth of 5% above prior year, despite Delta facing strong pricing pressure from imported packaging materials, spares and the price hikes of cereals. Chibuku Super remained Delta’s star performer, accounting for 85% of the amount of Chibuku sold. Chibuku Super sales have been so good that demand now beats capacity, and Delta plans to build a new brewery.

“The demand for Chibuku Super exceeded the installed production capacity. There are plans to build a modern brewery at a new site at Rusape in the coming year.”

Flat beer

Delta’s results show the sharp collapse of consumer spending in the last quarter of the year, which started with Finance Minister Mthuli Ncube announcing “austerity measures”, a set of reforms he said were meant to cut the budget deficit and end expensive subsidies.

The first half of the year had been marked by strong consumer demand, says Delta, but this was reversed in the second half.

“The last year was one of two trading halves. The first half, which covered the pre- and post-election period, was characterised by initial positive consumer sentiment, expansionary monetary and fiscal policies that drove consumer spending,” the company says.

Agriculture, mining, and “visible election spending” drove disposable incomes through the bulk of 2018, while “liberal fiscal and monetary policies provided liquidity and encouraged consumption”.

However, this changed in the second half, which saw weak demand.

“Of particular note is the 2% transaction tax, the adoption of the local currency RTGS$ as the functional currency and the introduction of an exchange rate on the RTGS$.”

Delta’s soft drinks plant was forced to shut down for three months, in a period that covers the traditionally buoyant festive season. Facing consumer resistance to high prices, Delta says it has made an arrangement with the Coca Cola Company (TCCC) that has allowed the company to cut prices.   

“A new trading framework (was) introduced in May 2019 in collaboration with TCCC to address foreign currency and affordability challenges,” Delta said. Talks are still ongoing between Delta and Coca-Cola that could see the global firm reversing its decision to cancel bottling arrangements with Delta. The decision was made following the 2016 merger of SAB Miller and AB InBev.

The company says foreign currency shortages remain despite the introduction of the interbank market in February. The company now plans to grow more barley for exports to meet its forex needs. “We have outstanding foreign creditors and loans, the bulk of which is overdue. We remain engaged with our counter parties in this regard. The Board is concerned about the Company’s ability to access foreign currency in order to meet its external obligations. Strategies to mitigate this challenge are ongoing including contracting for additional barley to generate exports

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