Consumer-focused companies bank on festive season

Listed consumer-focused companies are banking on festive season spending to boost their earnings as consumer spending has remained resilient, despite numerous challenges.

During the festive mood, people tend to make more purchases and spend more money, and companies usually benefit from these periods.

In Zimbabwe, consumer spending resilience has largely been driven by increased mining activities for some minerals, the expansionary effect of Government infrastructure projects, and the steady flow of diaspora remittances.

Recently published financials indicate that most companies invested in capacity, resulting in steady volume growth, which is aimed to grow on increased demand.

Delta has spent over US$100 million to alleviate supply-side constraints, while Innscor Africa, a group with various consumer-focused segments, sunk in US$157 million targeted at capacity building, product extensions, and the introduction of new categories.

Beverage giant Delta Corporation for the six-month period ended September 30, 2024, saw lager volumes growing 9 percent on firmer demand as well as the consistent supply of brands and packs.

However, sorghum beer volumes in the Zimbabwean market weakened 11 percent due to cessation of exports.

Equities research and stockbroking firm IH Securities, in its review, said volume growth for Delta has largely been supported by recent capacity investments, which have aided a steady supply of product into the market.

“Volumes in the second half of FY25 will likely be propelled by the traditional holiday spend. However, the downside is that of dampened demand as the impact of the El Nino-induced drought lingers on,” it said.

Delta’s Sparkling Beverages segment volume grew by 10 percent for the half year, which reflected a recovery in market share and the benefit from a delayed implementation of the sugar tax-induced price increases as well as intense marketing campaigns.

African Distillers (Afdis) recorded a volume growth of 11 percent compared to the prior year, mainly driven by ready-to-drink (RTD) and wine segments, which grew by 22 percent and 13 percent, respectively.

Economist Dr. Prosper Chitambara said in an interview that the expected growth in volumes and strong consumer spending could be on account of a number of factors that include bonus payments.

“During the festive season, consumer behaviour changes and people tend to spend more, and the diaspora residents send more to their families while others come to spend the festive season in the country.

“That will obviously cause aggregate demand to increase, and that drives the consumer trends that the companies would want,” he said.

FBC Securities, in its review, said the company’s performance during HY25 underscores its ability to sustain growth through operational agility and strategic market positioning, despite the restrictive external environment.

It said Delta’s effective management of its beverage segments, coupled with its willingness to absorb certain regulatory costs, reflects a focus on maintaining market share.

Experts believe that higher levels of consumer spending are critical for economic growth as spending stimulates demand for goods and services, leading to increased production, and higher production levels boost business development and investment and create job opportunities.

Fitch Solutions, a global rating agency, forecast Zimbabwe’s real household spending to maintain a positive level on the back of an uptick in remittance inflows that will provide some relief to a strained consumer base.

Dairibord Holdings’ overall sales volume for the quarter to September 30, 2024 experienced a 29 percent growth, anchored by milks and foods product categories.

Liquid milk volume recorded a 32 percent year-on-year growth during the quarter, attributed to an increase in raw milk intake.

Concurrently, the Foods category demonstrated a significant 81 percent increase, while beverages recorded a 22 percent growth compared to the previous year.

“Cumulative sales volume for the nine-month period exhibited an 11 percent increase compared to the corresponding period last year,” the company said.

Clothing retailer Edgars Stores said the group’s segmented retail propositions cater broadly for the entire local consumer spectrum, and these propositions are continually reviewed to ensure that the respective offerings effectively meet the needs and desires of our customers.

The group said it seeks to expand its geographic footprint through the opening of new stores in strategic locations.-ebsinessweekl