Delta: Drink sales hit new records over Christmas, but that new sugar tax is leaving a bitter taste

Delta's Bon Accord plant in Bulawayo: the company says route-to-market a key 2024 priority

Delta Corporation enjoyed record sales of soft drinks and beer over Christmas, but the company is worried about the impact of a “sugar tax” and an anticipated drop in spending this year.

Consumer spending over the festive period was “buoyant”, says Delta, driven by stable US Dollar pricing and liquidity. Much of the spending came from mining activities, farmers, government infrastructure projects, diaspora remittances and year-end bonuses, the company says.

Lager beer volumes in the three months to December “surpassed historical monthly peak volumes to achieve a growth of 15% for the quarter and 14% for the nine months compared to prior year”, Delta says in a trading update.

A new lager packaging line that Delta commissioned in August improved supplies, while consumer demand remained strong.

Delta sold more soft drinks it has ever sold in December. “The Sparkling Beverages volume recovery momentum persisted, registering a growth of 38% for the quarter and 25% for the nine months compared to the prior year. The unit recorded its highest-ever monthly volume in December 2023,” Delta reports.

But a new tax of US$0.001 per gramme of sugar may hit sales this year.

Says Delta: “The sector will be adversely affected by the unavoidable price increases arising from the introduction of the sugar tax. This will be in addition to the pricing distortions that have prevailed in the market.”

The business may also suffer from regulations that limit how manufacturers supply goods to informal traders, a big market for Delta. “The measures adopted in the 2024 budget will have a far-reaching impact on the business and the market in general. The beverages sector will be affected by the sugar tax and the restrictions arising from policies impacting the route to market.”

The company sees demand slowing this year: “Aggregate demand may be impacted by the high inflation and reduced foreign currency inflows arising from lower mineral prices and the anticipated reduction in agricultural output resulting from the forecasted below normal rainfall.”

Volumes of Chibuku fell by 5% over the quarter. Delta says this was because drinkers switched to more available lagers. The company opened a new Chibuku Super plant last year to push supplies.

Delta’s revenues grew by 19% in US Dollar terms over the three months and by 12% for the nine months. Sales are now 70% in forex, and the company will present its results in USD going forward.