Delta Beverages’ sorghum beer volumes fell by 10% in the last quarter, as Chibuku faces heat from drought and the rise of competitors like Innscor’s Nyathi brand.
In the three months to June, Chibuku sales volumes were affected by drought and a cut on exports to other Delta regional units, which can now supply their own markets. Some drinkers are also switching to lager, while competition is coming from cheap illicit brews, and the rise of competition.
“The category is also impacted by competition from hard spirits, our own increased lager beer supply, and investments by competitors in the same category. The sorghum beer category is the most affected by the drought due to lower consumer disposable incomes in rural markets and cost pressures on key cereals such as maize and sorghum,” Delta reports in a quarterly report.
Innscor launched Nyathi beer in 2022, providing direct competition to Delta. While Delta has a far larger capacity and superior distribution, Nyathi appears to have started nibbling away at Delta’s market dominance. In May, Delta estimated that it held a 93% market share in the masese market. It has built a new Chibuku Super plant, and sales last year were at near-record levels. CEO Matlhogonolo Valela has previously said, based on data from distributors who supply both Delta and Nyathi, Innscor had capacity of around 30,000 hectolitres per month, a fraction of Delta’s sales of up to 400,000 hectoliters per month. Valela said Innscor was yet to hit full capacity, and he was not yet worried that they posed a major threat to Delta’s market command.
Lager beer volume grew by 9% for the quarter, driven by strong demand and improved supply, after Delta invested in new plants and distribution. Soft drinks volumes were up 11%, but Delta is concerned about the impact that a sugar tax introduced this year will have on sales. Traders are now importing cheaper soft drinks into Zimbabwe.
Delta’s revenue for the three months rose by 23% to US$190 million from US$154.8 million over in the same quarter in 2023.
Last year, 80% of Delta’s sales were in USD. Now, after the introduction of the Zig in April, sales are now 65% in USD. Delta says companies still face trouble accessing USD in the forex market.
The company is facing a major hit from a US$54.7 million tax bill after the Supreme Court ruled recently in the tax agency’s favour. Delta is still hopeful that parts of the claim can be settled. Delta may use Treasury Bills to settle the claim.
“We believe any revisions to the payment plan will be rational, taking into account the financial health of the business and the fact that the principal amounts were fully paid in legal tender at the relevant periods, based on the best available interpretation of the legislation,” Delta said. “There are also engagements with authorities on trading off some financial instruments that could offset the part of the final amount that becomes payable.”
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