Delta beverages have reported a sharp decline in sales volumes. With beer sales being reported at a 57% decline in volume from the previous year. Opaque beer sales were 2% up in the period. The sparkling beverages also recorded a sharp decline of 67% bringing the evidence of the reported reduction in aggregate demand in the economy.
Delta is Zimabawes largest beverage manufacturer and as the locals used to say if you are drinking something it’s likely from Delta is a testament to Deltas market share. So looking at Delta as an indicator of economic performance is important. Delta is also one of Zimbabwe’s largest companies by any measure, one of the largest manufacturing companies in the country and a company that is closely linked to retail. A few months ago the Confederation of Zimbabwe retailers spoke about a decline in aggregate demand linked with the reduced purchasing power of Zimbabweans.
Among its challenges, Delta cited the usual suspects. They have had difficulty accessing foreign currency for their imported components and this situation has not largely improved. Though they did mention they were able to access some money on the interbank market months ago. They also cited the lack of confidence from external suppliers which made their negotiating position weaker when it comes to payment arrangements. The overall lack of confidence in the economy makes Delta a greater credit risk. Delta also cited the stiff competition they face due to smuggled beverages.
With the case in the energy sector it is interesting to see how this will affect Delta going forward. While their operations may not be directly affected their distribution network and transport network may be affected heavily by the circumstances. In the same breath, the new exchange rules may allow more foreign currency to flow in the market.
The anomaly in opaque beer volumes going up while others were done can be explained by looking at the income elasticity of demand which we wrote on before would suggest that with tighter incomes consumers have settled for the opaque beer which sells at roughly half the price while others have stopped altogether. Deltas position likely reflects the rest of the economy or at the very least most of it.