INSIGHT | What are the numbers from Zimbabwean retail companies telling us about the state of our pockets?

Retail demand under pressure (pic: Jekesai Njikizana/AFP)

What are the recent financial reports by companies in the consumer business are telling us about the state of people’s pockets? Under pressure, but surprisingly resilient.

The past year saw inflation rise above 800%, while COVID-19 made an already bad situation worse for consumers.

Morgan & Co, the broking and research firm, offered a sobering assessment in a recent outlook report on 2021. Company closures worsened, and things got worse for many, whether they were in formal jobs or in the informal market.

“As a result, we are seeing the emergence of a ‘new poor’. This new class is different from the existing poor,” Morgan and Co say.

As a result, whatever income people have, “is being directed towards essentials such as food and rentals (60%), debt repayments – mostly microfinance debt – take up to 20% while transport costs take 15%”.

What will this do to companies in retail? Demand will fall, “consumer facing companies offering mass market oriented goods could be able to surf the tide”.

What do the consumer-facing companies say? Overall, consumers have so far surprised by spending more than anticipated, despite inflation and lockdowns. The farming season carries some hope, but as COVID-19 continues, caution remains for prospects over the coming year.

A large proportion of retail is now in the informal market, but commentary by listed firms is an indicator of retail trends. Looking forward, companies are stocking up on equal stocks of optimism and caution.

Here, we collate commentary by large corporates on how the past year went, and their outlook for 2021.

Simbisa: Not much money, but still luv dat chicken

Simbisa Brands is the biggest fast foods company in Zimbabwe, running outlets such as Chicken Inn.

In the six months to December, the company saw a 56% increase in average spend. The company said the foreign exchange auction system resulted in “a more stable foreign exchange system”, but warned that “pressure on disposable incomes persisted over the period”.

Simbisa plans new outlets, despite pressure on consumer spending (pic: S&D)

Despite reduced trading hours because of lockdown restrictions, customer counts in Zimbabwe fell by just 7% year on year, but grew 166% between the company’s fourth quarter and its second quarter of its current year.

So, while money is tight, Zimbabweans still love their fast food.

Simbisa’s expansion strategy also reveals that the richer neighbourhoods are still in the money. The company is reintroducing Spur and expanding the Ocean Basket and RocoMamas franchises.

Innscor: More protein, more rice, and a hunt for bargains

Numbers from Innscor, whose businesses are in everything from maize meal to milk, are a good indicator of retail trends.

Natfoods is the country’s biggest maize meal producer. Maize meal sales fell 23% in the six months to December, but groceries were strong. Sales of maize meal fell because government stopped the maize meal subsidy programme, while there was increased competition from South African imports.  

But sales in Natfoods groceries rose by 98%. Even sales of snacks went up 57%. Colcom volumes rose 31%.

The bakery division recorded a 26% increase in loaf volumes against the comparative period.

But, there is caution: “Notwithstanding the improvements recorded, volumes are still considerably lower than historical normal levels.”

Probrands shows the continued rise of demand for rice. The company, which sells a wide variety of grocery items, recorded a 43% rise in volumes. Much of this was driven by rice. Revealing what hard-pressed customers are going for, Probrands sales were also driven by demand for down-packed products, those cheaper products sold in smaller packs.

Delta: Who’s buying the rounds? Miners and builders

Zimbabwe Delta
Delta: Strong beer sales in two economic sectors

Delta Beverages, the country’s biggest brewer, says Zimbabweans drank 48% more lager beer over the quarter covering the festive period. More importantly, Delta’s trade update told us who is doing the most spending amid the hardship; it is the guys in the mining and construction sectors.

“Consumer disposable incomes remain constrained due to restricted economic activity under COVID-19 conditions. There were positives from the payment of year-end bonuses, increased mining activity and infrastructure projects that are injecting liquidity into the market,” Delta reports.

Afdis: Praying in the spirit for farmers

Afdis, Zimbabwe’s biggest maker and distributor of spirits, wines and ciders, says sales volumes grew 39% in the six months to December. The company is also hoping the harvests bring more money.

Says Afdis: “The anticipated good agricultural season is expected to benefit the economy by increasing the disposable incomes and improved food supplies resulting in net savings on the food import bill.”

Edgars: New clothes? Not now

In times of crisis, buying clothing takes a backseat, especially at relatively upmarket stores. At Edgars, sales in the year to January 10 were down 36.5%. At low-cost store, Jet, sales fell 29%. Business was not only affected by low incomes, but also lockdowns. Edgars has been pushing online sales, but volumes are low.

According to Edgars, the increase of utility costs, such as fuel, will “limit customer demand” this year.

Credit sales have always been the hallmark of Edgars’ business. But a tough first half of 2020 threatened to upend this model. Credit sales fell in the second quarter of last year, and made up just 25.1% of total sales, from the previous 71.2%, “as both management and customers took precaution on the level of credit exposure”.

Results from Truworths were more stark in showing the impact of COVID-19: the company sold 57.5% less items in the year to July than in 2019.

Axia: Spending on homes remains a priority

No skimping on home improvement? (pic: S&D)

TV Sales & Home is the country’s biggest furniture and household appliances retailer. In the six months to December, the company saw volumes 40% up compared to the same period in 2019. This, the company said, was because of the reintroduction of credit, as well as new stores. The results show that, in the segment served by the company, there is still money to spare for home improvement.

Supermarkets: Tough year, but standing

The two largest formal retailers had a tough year, marked by COVID-19 closures and low demand. Still, they showed resilience.

In the last quarter of 2020, traditionally good for retailers, sales volumes at OK Zimbabwe were 7% better than in 2019’s last quarter. But over nine months, sales were 15% lower. OK said in an update: “While year to date volume is negative this is an improvement from the 26.9% retreat reported for the half year ended 30 Sept 2020”.

Like other businesses, OK hopes the harvest will put some money in customer’s pockets, saying “good rainfall received this agricultural season points to a good harvest and this is expected to result in improved consumer spending”.

TM Pick n Pay’s sales volumes fell 4% in the December third quarter. Over the nine months to December, sales were down by 22%. For Pick n Pay SA, the Zimbabwe business outperformed all its other African businesses, outside of SA.