Depressed consumer spending hits Delta

HARARE - Listed brewer Delta Corporation (Delta) recorded a slump in volumes almost across its whole beverages portfolio in the third quarter to December 2014 due to depressed consumer spending.

The group, which registers higher sales during the festive season, said “the trading environment remains difficult as reflected by the subdued consumer spending during the traditional holiday peak period”.

Its revenue slumped by 10 percent and six percent for the quarter and the nine months period respectively.

“The losses in economies of scale and the changes in the sales mix will have a bearing on the financial performance,” the SABMiller subsidiary warned.

Delta, however, said its Mahewu and dairy mix beverages recorded an eight percent growth in the quarter.

“The lager beer volume is nine percent below prior year for the quarter down 20 percent for the nine months, indicating some slowdown rate of decline compared to preceding quarter.”

“This is partly due to the interventions on affordability implemented at the beginning of the quarter,” the group said.

The group effected price adjustments beginning of the year to reflect a government reduction in exercise duty from 45 percent to 40 percent on the producer price, a move anticipated to boost sales.

In its half year results to September 2014, Delta said lager beer gross sales went down by 15 percent to $139 million.

While Delta’s sorghum beer, Chibuku Super, drove volumes in the last quarter, it was down one percent due to constrained brewing capacity and utility outages for the quarter to December 2014.

The group, however, said additional capacity for the sorghum beer unit was expected to come on stream by mid-year.

In the half year to September 2014, the brewer saw an increase in sorghum beer demand, with sorghum beer volumes surging by 14 percent driven by affordability.

Sorghum beer sales advanced by 24 percent to $94 million for this period.

Soft drink volumes, comprising both sparkling and alternative beverages, for the period under review were also down by five percent, for the quarter ended December 2014.

In the half year to September 2014, Delta’s attributable income slumped by seven percent to $44,1 million, as depressed economic activity hit lager beer demands.

During this period, the group’s lager beer volumes went down by 25 percent to 695 000 hectolitres from 925 000 hectolitres.

According to Pearson Gowero, Delta’s chief executive, the volumes dropped from a post-dollarisation peak of just over one million hectolitres registered in 2013.

He said the major reason behind the depressed performance was “more economic rather than a competition issue” as Delta held its market share over the period.

He is also on record saying the group had noted a trend that a lot of their consumers were searching for value for money but opting for affordable products.

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