Afdis feels heat from cheaper, illegal dealers

WINE and spirits producer, African Distillers (Afdis) Limited says despite registering a significant
volume growth and an increase in foreign currency transactions, cheaper and illicit products
continue to raid its market share.

In a trading update for the third quarter ending 31 December 2020, the listed firm said it
registered a volume growth of 10 percent for the quarter and 11 percent for the nine months
compared to the prior year.

In the spirits section, 19 percent growth was achieved.
“Spirits category grew by 19 percent benefiting from the focus on the affordable market segment as
the business sought to regain share from cheaper and illicit products,” said the firm.

While the Zimbabwe Republic Police routinely bust illicit alcohol distribution networks, the
practice persists under shady deals on the streets.

“Njengu’, a street name for illicit spirits that are produced illegally within and without Zimbabwe,
is sold outside of the approved and regulated production process of registered and legitimate
manufacturers. The alcohol does not comply with standards that ensure the quality and safety of
products.

It is believed that roughly 25 percent of all alcohol consumed around the world is illicit and health
experts warn that drinking it can make one sick or even cause death.

In its report, Afdis said wine volume grew by 16 percent mainly driven by locally produced brands
despite intense competition from imports.

Ready to Drink (“RTD”) volumes only grew by three percent due to stock supply gaps caused by
power outages and regional bottle shortages.

On financial performance, in the period under review, revenue for the quarter grew by 29 percent
and 39 percent for the nine months in inflation-adjusted terms over last year, whilst in historical
terms, it increased by 355 percent for the quarter and 360 percent for the nine months.

“Revenue growth in both inflation and historical terms was due to increased sales volume,” the
firm said, adding that management has put in place measures to exploit available opportunities to
sustain market share, revenue, and profitability growth.

It applauded a cocktail of economic measures introduced by the authorities, which resulted in a
relatively stable foreign currency exchange rate in the quarter.

The listed firm witnessed a significant increase in foreign currency transactions, which aided in the
funding of foreign supplies.-The Chronicle