Record beer volumes drive Delta to US$713m annual revenues, company spends US$70m on expansion

Infrastructure, farming and mining drive Delta sales

Zimbabweans drank record amounts of lager beer in 2022, handing the country’s biggest brewer Delta Beverages revenues of US$713 million in the year.

Demand for beer was driven by government construction projects, miners, farmers, and workers who were paid more in foreign currency, the company says. But the company says the exchange rate crisis, poor infrastructure, inflation and even traffic jams are major risks to business.

The company says 67% of its sales are in US dollars, and the company uses its own internal measures to gauge real inflation and prepare its unaudited accounts. Indicative USD profit was US$140.6 million for the year.

“We have hit record volumes, the highest ever the company has achieved, and with it follows the profitability driven by volumes. We sweated our available capacity, improved productivity to achieve that volume. It’s higher than the theoretical capacity that we have. We were pushing our machines,” CEO Matlhogonolo Valela said at a briefing for its results on Thursday.

Sorghum beer broke past the four million hectolitre market.

“This is territory last seen in 1998 when the war vets got their 50 000 hectolitres (gratuities),” Valela quipped. “In that year, we did about 4.5 million hectolitres.”

The company spent US$70 million on capital expenditure last year to increase capacity and sell more beverages. Current projects include adding 33% more capacity in the returnable glass production line by June, “which should allow us to supply the market better”, Valela said.

Infrastructure is a major drawback for the company, he said.

“The road network is terrible outside the main cities. It is compromising our ability to supply our customers” said Valela. In the cities, traffic jams are making it hard for the company to supply its customers fast enough.

Maize supply was also a concern in 2022, so the company is expanding the hectarage that it contracts so that it can secure its own maize without having to rely on GMB.

“We are the biggest land bank in the country,” Valela says, referring to the large number of maize farmers who grow maize on Delta contracts.

According to Delta, its own measure of prices shows that Zimbabwe’s annual inflation is 204%. Earlier this year, the government stopped releasing ZWL inflation, preferring a “blended” rate that businesses says does not adequately measures price trends.

Delta does not see Heineken’s takeover of Distell, which owns its associate Afdis, as a threat, saying it in fact sees this as an area of cooperation.

The Heineken deal will see the Dutch brewer taking over Distell, a transaction that also includes Namibia Breweries, brewer of the Windhoek lager. The deal means Heineken will complete against AB InBev, which owns SABMiller, Delta’s main shareholder.

“We do not expect any adverse relationships (with Heineken). We think we have put sufficient mechanisms to make sure that we can work together at Afdis,” Valela said.