Simbisa fast food customer numbers down 33.7% as inflation eats into incomes, but company continues expansion

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

Customer numbers at Simbisa Brands, the country’s largest fast-food company, dropped 33.7% in the year to June, the latest evidence of the collapse of disposable incomes.

The company, which operates brands such as Chicken Inn, opened 14 new outlets in the country over the past year. However, as inflation hits incomes, fewer Zimbabweans are eating out. The impact of inflation was made worse by the COVID-19 lockdown, Simbisa says in its annual financial report to June.

“A sustained erosion of consumer spending power in Zimbabwe continues to impact the group in terms of reduced footfall and lower real average spend. This was exacerbated by the COVID-19 pandemic which saw Zimbabwe embark on a three-week hard lockdown on the 30th March 2020 which was extended for an additional four weeks thereafter,” Simbisa says.

To counter falling customer numbers, Simbisa has introduced value products.

The currency crisis has seen suppliers charge a premium for their goods, expecting the local currency to fall.

“Market uncertainty and inflationary pressures have resulted in challenging trading conditions as many local suppliers and service providers have taken a stance of pegging prices to a USD price and using a forward-hedge rate above the market rate,” says the company.

Simbisa is now talking to suppliers and pre-funding raw materials to “lock in” prices and protect margins. On rentals, a big cost factor for a company with over 200 sites, Simbisa is now negotiating with landlords so that fixed rentals are switched to a turnover-based model.

Inflation-adjusted revenue for the period increased 8.9% to Z$3.57 billion.

Simbisa sticks to expansion

Despite the tough economy, the company is still expanding operations. In addition to adding 14 new sites, which brought the total number to 221, Simbisa plans a further 17 outlets over the coming year.

Last year, after customer counts fell 5%, Simbisa said it would focus on a strategy to grow  its presence in the higher end market in Zimbabwe. As part of this plan, Simbisa announces in its latest update that it will soon launch the Spur franchise in Zimbabwe, to “strengthen our position in the casual dining segment”.

In its regional operations, the customer count fell an average 12.1% from the previous year, of which all occurred in the fourth quarter due to COVID-19. Revenues from regional operations fell 7.3% year-on-year in USD terms.