Delta Shining Light Post Dollarization
Zimbabwe's Delta Corporation, which dominates the Zimbabwean beer and soft drinks landscape, has been one of the main benefactors of the economic turnaround that began in earnest back in 2009 when the country dollarized and subsequently rid itself of the hyperinflationary spiral that had decimated the economy. Zimbabwe's commercial beer industry was amongst most developed in Africa in the pre-crisis era with per capita consumption levels significantly higher than all but a few markets. At about 14-15 litres per capita, there is still more commercial beer consumed in Zimbabwe than in Kenya and Tanzania, although the gap has narrowed considerably over the past few years. However, since 2009, Delta has been coming back nicely as consumers have started to spend again within the sphere of the formal economy.
|Zimbabwe Ahead Of Several Regional Markets|
|Selected African Countries Estimated Per Capita Commercial Beer Consumption (litres)|
Delta has invested considerable sums in Zimbabwe (believed to be in the vicinity of US$200mn) since 2009 with SABMiller, which owns about 36% of its equity, among its main backers. Moreover, Delta is believed be more immune to the credit shortfall that continues to beset a lot of Zimbabwe's private sector. Given its size, its allegiance and how well it has done post 2009, Delta has been able to access credit internationally at affordable rates. Significantly, both beer and soft drinks have been performing very well with both units registering annual volume growth in excess of 20% in the year to March 2012.
Our Africa team continue to hold an above consensus view of Zimbabwean economic growth, with GDP forecast to increase by 7.5% in 2012 which, if the political situation continues to remain broadly stable, should provide impetus for Delta to continue growing strongly. While it will be difficult to sustain such strong volume growth going forward, growing margins might also be a major area of focus.
While top line growth in particular is likely to be led by beer, which generally has higher margins, we retain a very positive outlook for soft drinks. Low-income consumers drive the soft drinks market in Southern Africa and growth is usually closely linked to income appreciation, and Delta dominates the soft drinks sector in Zimbabwe with a volume share of more than 95%.