HomeBusiness DigestBeer Sales Cheer up Delta

Beer Sales Cheer up Delta

ZIMBABWEANS spent US$23 million on beer and consumed 76 000 hectolitres in April, according to figures released by Delta.

Delta said this was a rare sales feat traditionally achieved in the last quarter of the year or during the festive season.

This is the highest consumer spending the company has experienced since the economy was dollarised.

April consumption numbers more than doubled those of 32 000 hectolitres achieved in November, which is traditionally a very good sales month for Delta.

In February a total of 55 000 hectolitres worth US$16 million were consumed. In March the company recorded the same amount of money from 60 000 hectolitres.

While analysts say the rise in consumer spending between March and April could just be Delta reclaiming its old market share and not a dramatic improvement in the economy, others believe it was a key indicator that more ordinary Zimbabweans now have “slightly improved disposable incomes”.

Delta CEO Joe Mutizwa downplayed the beer consumption numbers saying Zimbabweans were still drinking a conservative 10 litres of beer per year compared with 60 litres in South Africa and 250 litres in the Czech Republic.

Delta uses general figures of beer consumed as a percentage of the population rather than individual consumption numbers.

“We look at the total number of the population and divide by the number of litres consumed. This also includes non-drinkers, occasional and habitual drinkers. It is rather general,” he said.

Mutizwa believes the group could have sold 25% more in April had its production plants been “more operational” with no shortage of disposable cans.

This would have seen Delta’s sales rise to around US$30 million.

Mutizwa said Zimbabweans in urban areas were drinking the bulk of the booze, contributing 65% of beer sales while the rural folk contributed the balance.

Low-end customers in April consumed 249 000 hectolitres of sorghum (opaque) beer, the best month since September 2007 as maize supplies improved at its 14 breweries.

Contrary to popular belief that Zimbabweans were now drinking more canned beer, Mutizwa said returnables (bottled beer) constituted 96% of lager beer volumes in March, although this eased to 86% in April.

Despite an apparent lack of packaging appeal of the local bottled beer, Delta has managed to keep its loyal brand customers.

The company said management was however willing to improve the company’s product packaging but analysts say Delta would be better off driving volumes than investing in packaging.

“People care less for the packaging and would prefer to buy four Cokes for a dollar rather than a pretty can. People would rather pay a dollar for a litre of tonic than get a can and half of the imported stuff (300ml) for the same price,” an analyst said.

Capital expenditure amounting to US$26 million in the year ahead would be raised through equity (through the issue of 40 million shares to parent SABMiller) and internal resources.

Although reports of the availability of credit lines have been welcome by Delta, management believes that there was very little credit available and none of it was competitively priced.

Mutizwa said demand would grow in line with any improvements in the economy.

Analysts have forecasted that Delta would achieve sales of around US$50 million in the third quarter of this year while turnover of around US$300 million would be recorded this financial year.

“If Delta achieves US$50 million during the traditional peak third quarter, it appears they will probably achieve turnover of around US$300 million this financial year. Given the operating margins will probably improve from single digits currently and average out at around 15% over the year, Delta is probably looking at pretax earnings of around 3,5 cents – 4 cents in the current year.”


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