Delta Corporation's sales surge as stronger rand boosts Zimbabwe's beer market

A stronger rand and firm mineral commodity prices drove up beer and soft drinks volumes for Zimbabwe’s Delta Corporation during the quarter to December while also boosting sales for African Distillers (Afdis), in which South Africa’s Distell has an interest.

Prices for gold and PGMs - which are key commodities produced in Zimbabwe - prices have appreciated over the past few months, boosting consumption patterns and economic activity in regional countries.

Delta Corporation brews alcoholic products in Zimbabwe, South Africa and Zambia and also manufacturers soft drinks and ready to drink cordials. It said this week that consumer spending during the quarter to December and which encompasses the festive season was firm.

This has been attributed to “firm mineral prices, increased mining activity, and improved agricultural” performance.

“Diaspora remittances also increased, benefiting from stronger cross exchange rates in key source markets such as South Africa (rand) and the United Kingdom (pound),” said Faith Musinga, company secretary for Delta Corporation.

More than 85% of the company’s sales during the period were mainly in US Dollars. The stability of trading currencies enabled the business “to fully reinstate customary festive season trade, consumer promotions, and marketing activities, leveraging the prevailing stable pricing” environment.

While the prevailing currency dynamics provided some protection against informal imports for Delta Corp, this also exerted cost pressures on imported materials and capital projects. Moreover, the US dollar’s weakening presented both opportunities and risks as reflected in the company’s higher rand denominated import costs.

During the period under review, market conditions however eased, facilitating  the staging of musical, sporting, and cultural events that typically stimulate beverage consumption. Consequently, lager beer volumes for Delta grew by 16% for the quarter and by 19% for the nine months to December compared to the prior year.

“Demand remained strong, supported by increased consumer incomes and stable pricing, with thebusiness exceeding historical sales levels. We are investing behind demand to afford customers their preferred choice of the brands,” said the company.

The soft drinks sector, under which it manufacturers Coca-Cola Company beverages was affected by cheaper imports and the prevalence of other emerging alternative product offerings. Dela said it would continue to promote the soft drinks category’s portfolio of low and zero sugar offerings, while availing packs at more accessible price points.

“The Group remains hopeful that the sugar tax regime will be reviewed to ensure a more equitable balance between producer value share and fiscal contribution.”

The ready to drink segment nonetheless recorded exceptional volume growth of 92%, supported by firm demand for cider packs.

The spirits and wines segment under Afdis “delivered a robust performance as volume grew by 64% for the quarter and 51% for the nine months” compared to the previous contrasting year.

The company has attributed this to “strong consumer demand during the festive” period. Afdis raised wine volumes by 49%, driven by affordable range offerings.

In South Africa, Delta Corp’s United National Breweries registered volume growth of 10% for the quarter under review and 4% for the nine months, reflecting the promising market penetration of the Chibuku Super offerings into formal trade channels.

The company expects to experience “disruptions during the year arising from labour unions and pressure groups over some contentious shopfloor and national issues” which have however subsided.

Delta is planning to re-establish its production Traditional African Beer (TAB), with the scheduled resuscitation of the KwaZulu-Natal brewery by March this year. This initiative is expected to extend the company’s market coverage and reduce logistical costs.

“South Africa reflects modest but meaningful growth, with discernible spending on fast moving consumer goods, value goods and online channels supported by lower fuel prices and interest rate cuts. The Rand has stabilised below 17 to the US Dollar driven by the firmer gold prices, and softer US Dollar,” said Musinga.

However, structural constraints such as high unemployment, fiscal pressures, broader global economic factors and geopolitical dynamics continue to weigh on consumer sentiment and demand for South Africa.

Nonetheless, operating conditions were showing signs of improvement, supported by ongoing operational streamlining, enhanced route-to-market execution, and a more stable trading environment.

BUSINESS REPORT