eBusiness Weekly
Enacy Mapakame
Consumer stocks are expected to remain strong albeit the challenging environment on the back of firm demand for consumer staples supported by the informal sector.
This puts consumer stocks on the equities markets like Delta, Hippo, National Foods, Dairibord, Simbisa and Innscor at an advantage as demand for food and beverages remain firm.
For Simbisa, it has already seen volumes growth as total customer count increased by 12,6 percent from 13,51 million during the third quarter of financial year 2022 to 15,21 million during the same quarter in 2023 in line with analysts’ projections, driven primarily by new store growth.
Industrial behemoth Innscor’s overall volume trajectory remains strong, underpinned by diversification and expansion of product ranges and continued focus on affordable pricing.
The target for volumes to full year is set at 19 percent growth supported by firm demand.
A 2023 consumer sector report by research firm, IH Securities, notes the consumer sector is expected to remain strong as activity remains firm in the informal sector.
The World Bank says Zimbabwe’s informal sector is one of the biggest in the world as a share of total economic activity.
Following decades of economic embargoes that put a strain on the economy, businesses downsized operations while others eventually closed, leaving the economy largely informal.
Trading in the informal sector is skewed towards the US dollar, with the statistics from the Reserve Bank of Zimbabwe (RBZ), showing over 75 percent of transactions in the country are now US dollar based.
IH Securities notes that with the majority of the population employed in the informal sector where currency of trade is US dollar, effects of the obtaining currency volatility will be minimal, but affect mainly those in the formal sector.
“With the majority of the population employed in the informal sector, where the currency of trade is US dollar, we are of the view that currency headwinds will affect mainly those in the formal sector.
“Despite an anticipated firm consumer demand, we are skewed towards consumer-facing stocks that have the ability to generate revenue in US dollar, the capacity to penetrate the informal sector, the ability to adjust prices in line with inflation and exchange rate movements, and good management,” said the research firm.
Although consumers have seen a dramatic rise in their cost of living, from the price of foods and fuel to rising interest rates and higher utility costs, forcing them to adjust their spending patterns, the likes of Delta are expected to hold the pressure.
According to IH Securities, volumes for the beverages giant have been responsive to bottom of the pyramid liquidity as the company has the advantage of being a consumer facing entity.
“The company has established inroads into the cash rich informal sector with a good spread of customers,” said the research firm.
Efforts by consumer stocks to enhance productivity and consolidate market share are also critical in staying relevant in a volatile economic environment.
At Dairibord, the business aims to continuously grow volumes of high-quality raw milk through its Milk Supply Development Unit (MSDU) by providing support to farmers in critical areas which include feed formulation and nutrition.
Volume growth in 2023 will also be underpinned by the recently completed capital investment projects which include a third maheu (Pfuko) line, a drinking yoghurt (Yoggie) line and a third blow moulder for Steri milk bottles.
IH Securities also pointed to the role of remittances in bridging the gap between incomes and consumption and poverty reduction in Zimbabwe with more than 30 percent of the population in the diaspora.
“They provide a cushion from economic shocks for local consumers, making up 6 percent of gross domestic product (GDP),” the research firm.
