HomeBusiness DigestFirms repackage products as economy sinks deeper

Firms repackage products as economy sinks deeper

Low disposable incomes have forced local manufacturing companies to come up with smaller and low-value packaged products amid accelerated economic decline.

By Fidelity Mhlanga

CCZ executive director Rosemary Siyachitema
CCZ executive director Rosemary Siyachitema

Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for.

The need for small packages is coming at a time the majority of Zimbabweans are languishing in abject poverty, surviving on an average US$1 a day for food and US$3,23 on both food and non-food items, the national statistical agency, Zimstat, says.

Low DPI has been exacerbated by a lack of mainstream and formal jobs as company closures become the order of the day in Zimbabwe. Almost 229 companies in the first half of 2016 were shut down, leaving hundreds jobless as the country’s economic implosion continues to worsen.

The July 17 2015 Supreme Court ruling precipitated the loss of nearly 30 000 jobs as companies and state entities moved to rationalise operations and cut costs in an environment characterised by a crippling liquidity crunch, low capacity utilisation, falling productivity and deflation.

As survival became difficult, Zimbabweans were forced to venture into informal jobs which do not offer reliable income.

Milk and dairy products producer Nestle Zimbabwe MD Ben Ndiaye last week told delegates at the retailers and buyers’ conference that the company had come up with a 40 grammes package of creamer to cater for the low-end market.

“We just realised that people were not affording this 1kg packet and we introduced the 40 grammes one for 25 cents. This is the innovation we are doing,” he said.

Bakeries like Lobel’s Bread have also joined the bandwagon introducing a packaged half loaf costing 50 US cents with Bakers Inn, which recently commissioned a pie plant, now selling a smaller wrapped pie at 25 cents.

Beverage manufacturers Delta Beverages and Schweppes Zimbabwe have also introduced cheaper drinks in smaller bottles of 350ml and 250ml respectively.

The packaging of products in smaller units may be the way to go for local industry, whose 2015 capacity utilisation stood at 34,3%.

Consumer Council of Zimbabwe executive director Rosemary Siyachitema this week said manufacturing companies were adopting tactics which began informally when small-scale traders would buy big packages of products such as sugar and washing powder and on-sell in smaller units in what has been locally termed as tsaona (repackaged emergency food products).

She said initially informal traders were charging unfair prices for small-packaged products, but this has changed after local manufacturers adopted the small unit packaging.

“So far the cost has been fair. It’s a good thing, now that its now formalised. It is now being done for people to afford. We are generally going to monitor the market to make sure that it won’t end up being more expensive than buying a bigger packet,” she said.

Economist Eddie Cross weighed in, saying this provided relief to impoverished Zimbabweans living in a shrinking economy.

“I think this is a good move and will help the very poor in our midst who cannot afford larger sizes. It is more costly for companies but helps people with very little cash. Might be helpful in today’s money economy. It tells you that the economy is in dire circumstances,” he said.

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