Cheap imports drain Afdis wine volumes

African Distillers Limited (Afdis) says wine volumes declined by 13 percent in the quarter to June 30 2023 weighed down by competition from cheaper imported brands.

The company, a manufacturer of wines, spirits and ciders, said in a quarterly trading update the imports reduced consumer traffic in key retail outlets, which resulted in poor demand for its wines.

“Spirits volume grew by 1 percent while wine category volume declined by 13 percent due to competition from cheaper imported brands and reduced consumer traffic in key account retail chain stores which impacted negatively on demand,” Afdis said.

The company said, overall, it registered volume growth of 11 percent compared to last year.

Afdis revealed that the volume growth was mainly driven by the ready-to-drink segment, which grew by 26 percent on account of improved product availability.

“The company registered a volume growth of 11 percent above prior year mainly driven by the ready-to-drink(RTD) segment which grew by 26 percent, owing to improved product availability,” said the company.

Afdis also said the widening of the gap between the official and the parallel market exchange rates affected the general pricing of goods and services in the economy, however, the intervention by the Government brought stability into the market.

Further, Afdis noted that the liberalisation of the foreign currency exchange rate and directing taxpayers to pay taxes in local currency resulted in the mopping up of excess liquidity, which led to the recovery of the Zimbabwe dollar towards the end of the first quarter

“The gap between the official exchange rate and the parallel market rate widened during the quarter and that affected general pricing of goods and services in the economy.

“In response, the Government introduced measures to stabilise the economy, which included liberalisation of the foreign currency exchange market and directing taxpayers to pay taxes in local currency.

“The measures resulted in tightened liquidity and recovery of the Zimbabwean dollar towards the tail end of the quarter,” reads part of the trading update.

The company revealed that the quarter witnessed a shift of business from formal retail stores to smaller traders as the use of USD currency continued to soar while trade in a multi-currency environment enabled the company to meet its foreign currency working capital requirements.

The company secretary, Lydiah Mutamuko, said revenue for the quarter rose by 143 percent in inflation-adjusted terms compared to last year.

“Revenue for the quarter grew by 143 percent in inflation-adjusted terms over last year, whilst in historic cost terms grew by 808 percent.

“In USD, turnover grew by 15 percent to 12,5 million,” she said.

She also said revenue growth was due to increased volume and inflation-related price adjustments.

Going forward the company said despite the exchange rate challenges, the economic environment still presents opportunities for business growth and its focus remains on product innovation and improving production efficiencies.

“Management continues to put measures in place to exploit the available opportunities to sustain market share, revenue, and profitability growth.

“Focus will also be on product innovation, production efficiencies and cost containment measures,” said Afdis.

-herald