Little cheer, as Delta Beverages sings the blues

By Thabani Zwelibanzi

As the economy continues to face massive headwinds, one of the country’s biggest companies, Delta Beverages is feeling the effects, with lager volumes declining by 43% in the last quarter of 2019. 

The last quarter of the year includes the December holidays, which are characterised by an increase in alcohol consumption, but Delta felt the pinch of an underperforming economy.

Between April and December 2019, lager volumes declined by 46% compared to the similar period in 2018, an indication that all was not well.

“Consumer spending is constrained by low disposable incomes as salary and wage adjustments continue to lag the increases in prices of goods and services,” Delta said in a trading update.

Sorghum beer, which often performs well, also suffered a heavy knock with volumes declining by 41% for the three months to December and 25% over nine months.

Delta said sorghum beer, which includes opaque beer, had been affected by the constrained supply of maize and a rise in the cost of imported inputs such as packaging materials.

Delta introduced a disposable two-litre bottle for its popular Chibuku brand, but now the company is saying it is strongly considering a return to the “scud” container.

There were further drops in other revenue heads, with spirit make, African Distillers recording a drop of 10% for the last quarter.

However, Delta was confident that the demand for spirits and ciders remained strong.

The company, however, worried that there was growing illicit trade in spirits and this could affect its business.

Schweppes Holdings, the producers of Mazoe, suffered a decline of 23%, which Delta said was due to an outage of key imported raw materials. 

Delta scored big on sparkling beverages, known as soft drinks, with the revenue head growing by 38% for the last quarter, although over nine months it suffered a 40% downturn. 

“There is a notable volume recovery in response to improved supply and moderated retail pricing,” the company said.  

Looking forward, Delta warned that the company’s financial performance may be adversely affected by any policy changes regarding the payment of legacy foreign liabilities.

The Supreme Court recently ruled that all debt acquired before February 2019 could be paid at the 1:1 rate, with many describing this as a heist.

Delta said it expected the operating environment to remain challenging for the rest of 2020 and this was likely to be exacerbated by the shortage of maize and an anticipated drought.

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