E-Malt.com News article: Zimbabwe & South Africa: Delta Corporation sees beer volumes dip, soft drinks increase in Q2 this year

COVID-19 restrictions and the economic crisis combined to cause a dip in the consumption of beer for Delta Corporation, but soft drink are up, The Zimbabwe Mail reported on July 31.

Delta says Zimbabweans drank 18% less lager beer in the three months to June than they did over the same time last year, a period that itself had low consumption. Drinkers had 51% less sorghum beer in the last quarter. However, there was more consumption of soft drinks, up 35% in the quarter.

Beer sales were already under pressure due to the economic crisis. The lockdown measures, announced in March, made things worse as bars and many bottle stores were closed.

“Trading in alcoholic beverages was restricted to off-premise outlets for home consumption in line with the COVID-19 guidelines,” Delta said in a statement on July 31.

For sorghum drinkers, there was even less incentive to drink as prices rose higher than in any other drinks category. This was due to an increase in the cost of imported inputs, such as packaging and brewing cereals.

But it was good news for soft drinks. Sparkling beverages volume grew by 35% for the quarter compared to prior year, a time when soft drinks were recovering after 2018’s shortages. However, the growth in the last quarter could have been higher had it not been for the lockdown.

“The recovery momentum has been slowed by the limited market access and limited activity in key sales channels. The category has benefited from a stable market supply with the sales mix shifting to one-way packs and take-home offerings,” says Delta.

African Distillers, which sells spirits, recorded an overall 8% volume growth for the quarter.

“In Zimbabwe, the impact of COVID-19 was exacerbated by an underperforming economy, hyperinflation, an unstable exchange rate, shortages of foreign currency and food deficiencies arising from persistent droughts among other factors. Inflation and the depreciation of the Zimbabwe dollar accelerated during the quarter leading to more frequent price increases at a time when consumer disposable incomes were constrained.”

Delta’s recently acquired South African business, United National Breweries, also suffered from a tough ban on beer sales under the lockdown there.

“The South Africa entity, United National Breweries traded for a few weeks during the quarter as the authorities implemented very strict prohibitions on the sale and consumption of alcohol under the COVID-19 national lockdown measures. The prohibition was partially lifted in June but reintroduced on 16 July 2020. The ban could remain in place for an extended period due to the escalation in COVID-19 infections.”

Volumes at Schweppes, maker of the popular Mazoe brand, fell by 32% for the quarter reflecting the constrained trading under COVID-19 conditions. Because currencies in Zimbabwe’s neighbours weakened, Schweppes’ exports suffered as they became more expensive.

“Exports have been affected by the depreciation of regional currencies which reduces competitiveness,” Delta reports. However, the company says there has been an improved intake of juicing and processing fruit.

On how the rest of the year will look, Delta says there are “many uncertainties” that make it impossible to assess the full impact of the pandemic on the business.

However, trading conditions in the current quarter have remained largely unchanged. The company is upbeat that the new forex auction system and trading in forex will help the business.

“The business will benefit from the improved access to foreign currency through the new auction system and domestic sales in foreign currency. The supply of key raw materials is stable although there could be logistical challenges arising from the COVID-19 restrictions. The maize deficit in Zimbabwe will be covered by imports from regional markets.”

30 July, 2020