Consumer focused firms sip strong volume growth

LISTED consumer-focused companies continue to record growth in volumes, reflecting strong consumer spending within the economy.
Consumer spending is the total amount of money spent on final goods and services by individuals and households for personal use and enjoyment in an economy.

Economist Dr Prosper Chitambara said in an interview that the growth in volumes and strong consumer spending could be on account of several factors.

“One such factor could be the increase in wages. I was looking at the numbers last year; the average minimum wage was around US$240, but as of March this year, there has been an increase to around US$330 per month at the average wage.

“So, that also obviously causes aggregate demand to increase, and that drives the consumer trends that we see,” he said.Innscor Africa, whose operations span across various sectors of the economy, registered volume growth across most of its business units.

The group engages in the manufacture, distribution and retailing of household commodities and fresh produce. In addition to strong consumer sentiment, the group’s volume is being buoyed by investments in capacity across its operations in the past two years, which have, however, reached a mature stage.

The extensive capital expansion programme, which totalled US$125 million in the past two financial years, combined with a further US$32 million during the interim period to December 31, 2023, was spread across eight business units as the group sought to maintain its dominance across the market.

In the quarter to March 31, 2024, the Group said volume performance was underpinned by a firm recovery in the mill-bake value chain, complemented by strong volume growth in the stock feed and protein businesses, as well as the beverage and light-manufacturing segments.

The group’s bakeries division’s loaf volumes closed the quarter 16 percent ahead of the comparative nine-month period, enhanced by a consistent flour price and the maintenance of a convenient exit price point for the consumer, notwithstanding the change in the VAT status of the product.

From a manufacturing perspective, the recently commissioned Bulawayo bakery operation is now operating at full capacity and has yielded significantly improved loaf quality and consistency. At Prodairy, the group’s milk processor, volumes were 33 percent ahead of the comparative period, mainly concentrated in the “Revive” dairy blend category, which delivered 36 percent volume growth.

The milk category, operating under the “Life” brand, continued to benefit from increased raw milk supply, and on a cumulative nine-month basis, volumes closed 17 percent ahead of the comparative period. Similar growth was recorded in the steri-milk, butter and cream categories.

Innscor said the operation’s maheu offering, under the “Revive” brand, continues to grow in popularity and will benefit from the addition of further production capacity in the quarter ahead.

National Foods, a manufacturer and processor of food responsible for iconic brands such as Gloria, Pearlenta, Mahatma and Zap Nax, saw its cumulative volume performance for the nine months to March 31, 2024, four percent ahead of the comparative prior year.

The company’s flour division continued to record positive volume momentum, closing marginally ahead of the comparative period on the back of firm demand in the bakers’ flour category and consistent wheat pricing across the supply chain.

Volume within the stock feeds division, on a cumulative nine-month basis, closed 10 percent ahead of the comparative period and the company said demand remained robust across both the poultry and beef categories.

The group’s maize division recorded a strong volume recovery in the quarter and, on a cumulative nine-month basis, closed 11 percent ahead of the comparative period.

Economist, Mr Eddie Cross, said growth in consumer spending is reflective of growth in volumes and the economy.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.

Analysts are also forecasting growth.Fitch Solutions, a global rating agency, said it forecast real household spending to maintain a positive level on the back of an up-tick in remittance inflows that will provide some relief to a strained consumer base.

Dairibord Holdings’ overall sales volumes for the quarter to March 31, 2024, increased by 2 percent, anchored by the milk and foods categories.
Liquid milk volumes grew by 14 percent in the quarter compared to the prior year, aided by an increase in raw milk intake. The foods category recorded a seven percent growth from the prior-year comparative quarter.

The growth in volumes spread even to some companies that produce and sell non-essential products, such as alcohol and fast foods.Delta Corporation’s lager beer volumes reached a record high of 2,46 million hectoliters in 2023 from 2,17 million hectoliters in the prior year and the growth is on the back of market execution and improved brand and pack availability of its products.

Simbisa Brands, which runs fast-food chain restaurants that include popular brands Chicken Inn, Baker’s Inn, and Steers, said real average spending increased by three percent in the third quarter of FY 2024 compared to the prior year.

The turnover increased 4 percent from US$46,5 million in the third quarter of 2023 to US$48,3 million in Q3 FY 2024, and in the nine-month year-to-date period to March 31, 2024, revenue increased 8 percent year-on-year, driven by an increase in average spend, while customer counts remained flat.

The company said the delivery segment remains a key focus area, and delivery volumes increased by 10 percent to 73,856 in Q3 FY 2024 from 66,976 in the prior year.

The increased demand in the economy goes beyond fast-moving consumer goods with companies such as Turnall Holdings, Axia and others enjoying double-digit volume growth.

Roofing and building material company Turnall Holdings’ sales volumes for the quarter to March 31, 2024, went up by 21 percent compared to the same period last year, largely driven by improved sales of concrete tiles.

The company’s revenue for the quarter increased by 13 percent compared to the same quarter last year mainly due to the improved product availability in the current year and the relatively high demand experienced on the concrete products.

Axia unit, TV Sales & Home’s volumes were eight percent up for the same period. Year-to-date the company recorded an 11 percent growth in volumes over the same period attributed mainly to a growing store network as well as maintaining the brand as the trusted quality provider of household furniture and appliances.

The group’s other unit, Transerv, saw revenue grow by 10 percent in Q3 FY2024 compared to Q3 FY2023. The company said revenue growth was attributable to an increase in the store network and the introduction of credit sales and solar products to the portfolio of products.

The story was the same for transport and logistics company Unifreight Africa where volumes for the first quarter of FY2024 grew by 58 percent from the prior year largely as a result of the company’s strategic fleet expansion and increased capacities.

Group chief executive Mr Richard Clarke in a trading update said aggressive marketing efforts within the Full Truck Load (FTL) market segment have paid off, despite a 17 percent reduction in total yield per kilometre due to the nature of the segment.

“This reduction is offset by the increased volumes being moved. We will continue to focus on wholesale consumer goods, the market segment least affected by the currency introduction,” he said.-chronicle