Beverages maker, Delta Corporation Limited, is expanding its regional footprint in traditional beer after completing the acquisition of a South African traditional beer brewer recently.
The acquisition of the United National Breweries (Pty) Limited (UNB), was completed last month with Delta acquiring a 100 percent equity in the South African brewer.
UNB is the leading brewer of traditional beer in South Africa and owns the Chibuku brand.
“The company finalised the acquisition of 100 percent equity in UNB effective 1 April 2020,” said chairman Canaan Cube.
The transaction was completed at a time both South Africa and Zimbabwe were implementing national lockdowns as efforts to limit the spread of the virus.
In South Africa, strict prohibitions on the sale and consumption of alcohol were implemented during the period.
The transaction comes as Delta also recently completed the acquisition of National Breweries of Zambia, which specialises in traditional sorghum beer as the beverages maker consolidates it’s market share in the region.
Traditional sorghum beer has a strong market base due to affordability as consumers seek value for money.
For the financial year to March 31, 2020, sorghum beer sales volumes, however, fell both in Zimbabwe and Zambia markets due to waning demand.
The economic conditions in Zimbabwe have been challenging for businesses due to poor utilities supplies, limited foreign currency, and inflationary pressures that eroded consumer spending.
As such, sorghum beer sales dropped 25 percent on last year.
The pricing of the category was driven by the escalation in the cost of imported inputs such as packaging and brewing cereals. Under this category, Chibuku Super remains the largest contributor to volume in line with the group’s strategy.
In Zambia, sorghum beer volume also went down 27 percent on last year and there are ongoing measures to reverse the volume loss to other alcoholic beverage categories and return the business to profitability.
Dube highlighted that the Zambian National Breweries has been recording losses in the last two financial years mainly to declining demand following increases in pricing driven by input cost escalation.
“The unit has recently witnessed a recovery in volume as management implement various business recovery measures. The entity is expected to return to profitability in the near term,” said Dube.
Apart from declines in sorghum beer sales volumes, the beverages giant also suffered volume decrease for lager beer and sparkling beverages.
Lager volumes went down 42 percent while sparkling beverages eased 17 percent compared to last year on the back of foreign currency shortages, utility challenges especially water supply and reduced consumer spend.
Generally, weak economic environment had a knock on effect on businesses across sectors.
The outbreak of the Covid-19 has also added to an already existing challenging business environment.