On A Date with Delta

Dating is a critical stage to any investor considering to take a position on any asset class even shares.

#1. History,

1886, Castle Lager is born birthed by Charles Glass. He had once brewed beer for British troops in India.

1895, Castle Breweries (CB) is founded after Charles Glass secures funding from 2 venture capitalist.

Castle Lager becomes a popular.

1898, Susman and Rosenthal exploit a gap in the market and open the Salisbury Lager Beer Brewery and Ice factory on Cameron Street.

1899, Brewing is started but scarcity of bottles causes the entrepreneurs to charge a deposit fee to elicit bottle returns.

1910, formerly Salisbury Lager Beer Brewery Limited operations are bought by Castle Breweries (CB).

1946, a wealthy farmer and industrialist James Frederick Kapnek list a new company, Rhodesia Breweries Limited (RBL) on the RSE.

1950, RBL builds an ultra-modern brewery in Bulawayo known as Sable.

1951, CB and RBL boards agree to the sale of CB assets in Rhodesia and Nyasaland to RBL.

After the deal RBL becomes majority owned by CB which extends technical and capital support.

1955, The South African government imposes heavy taxes on beer sales and consumers shift to spirits.

1956, Ohlsson the maker of Lion Lager and Chandler Union Breweries are struggling due to shift in demand from lagers. CB pounces to acquire its rivals.

The new business born from CB’s acquisition becomes South African Breweries (SAB).

1962, Brewing at the original site Cameron Street ceases and is moved to Southerton.

RBL sells its assets in Northern Rhodesia to Northern Rhodesia Breweries.

1978, RBL changes name to Delta Corporation

2001, Delta Corporation, a subsidiary of Anglo American Corporation, puts its flagship five-star Kingdom Hotel in Victoria Falls on the market after its parent company recorded a R75.3 million loss in its half-year results.

2002, DELTA Corporation Limited shareholders approve the proposed demerger of the company’s credit retail business J Pelham Limited (Pelhams), tourism outfit Zimsun and retailing business OK Zimbabwe.

#2. Operations,

Delta Corporation is a focused business in the manufacturing and distribution of beverages

It has a diverse portfolio of local and international brands in,

·         Lager Beer

·         Traditional Beer

·         Sparkling

·         Alternative non alcoholic beverages

Lager Beer Business

2 breweries are operated by the unit which make,

·         Castle

·         Castle Lite

·         Golden Pilsener

·         Lion

·         Carling Black Label

·         Zambezi

·         Bollinger’s

·         Eagle

·         Sable (recently launched)

Imported Brands

·         Castle 1895 Draught

·         Castle Milk Stout

·         Redds

·         Flying Fish

·         Carling Blue Label

Traditional Beer Business

9 breweries are operated which supply markets with,

·         Chibuku

·         Chibuku Super

·         Thabani

Sparkling Beverages Business

3 bottling plants are operated which cover all of Zimbabwe

·         Coca-Cola

·         Fanta

·         Sparletta

·         Sprite

·         Schweppes

·         Burn

·         Monster

#3. Subsidiaries,

a)   United National Breweries – South Africa

·         A manufacturer of traditional African sorghum beer (Umqombothi) in South Africa

b)   Nampak – Zimbabwe

·         Created out of the merger of 3 packaging related entities,

o   Megapak

o   Hunyani

o   Carnaud Metal box

c)    National Breweries (Natbrew) – Zambia

·         A producer of traditional African beer under the “Chibuku” brand

·         The business was founded by Max Heinrich of Heinrich Syndicate from the town of Kitwe

·         Max spotted a gap in the provision of traditional beer to scale

d)   Schweppes Holdings Africa

A manufacturer and distributor of non-carbonated, still water beverages under license from Coca-Cola

The product portfolio includes

·         Cordials

·         Fruit Juices

·         Bottled water

The company has two units the

·         Beitbridge Juice

·         Best Fruit

e)   African Distillers

The core business is the manufacture, distribution and marketing of branded

·         Wines

·         Spirits

·         Liqueurs

·         Ciders

For the Zimbabwean market.

·         Operates 1 distillery in Harare and 6 depots across the country.

f)    Food & Industrial Processors – Zimbabwe

·         A business that wholesales starches and glucose for food manufacturing companies.

g)   Petrecozim

·         Recycling of PET plastics which are sold to beverage enterprises. It has 1 factory.

h)   Mandel Training Centre

#4. Competitors,

The business has a dominant position in the market for lager beer and traditional beer market but competition in sorghum beer segment includes

·         Bulawayo Municipality’s Ingwebu

·         Mutare City Council’s Pungwe

·         Kwekwe Town’s Simba

·         Gweru City Council’s Go-Beer

The Alternative Beverages Business is a highly competitive market with strong rivals such as Dairiboad’s Pfuko

Sparkling Beverages

Delta Corporation has an equally resourced and deeply incentivised rival in Varun Beverages.

Varun Beverages Limited (VBL or Company) is a key player in beverage industry and one of the largest franchisee of PepsiCo in the world (outside USA). The Company produces and distributes a wide range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.

PepsiCo CSD brands produced and sold by VBL include Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Mountain Dew Ice, Seven-Up

#6. Share Price,

ZWL359.95 per share as at April 20, 2022

ZWL162.53 per share as at January 4, 2022

ZWL469.4 billion market cap (cUS$1.68bn)

121.5% YTD gain

12th on the ZSE ranking in terms of performance.

6th most traded stock in the past 3 months to April 14.

1,304,272,595 shares issued.

#7. Shareholding,

Anheuser Busch InBev is the majority shareholder of Delta Corporation.

The world largest brewer which is based in Belgium bought SABMiller which was the former owner of Delta in 2016.

SABMiller had invested in Delta when it was RBL

#8. Pitch

The business is controlled by a foreign shareholder who has deeper pockets, extensive supply chain and markets.

Managed to acquire Mutare Bottling from Econet Wireless giving it control of the whole Zimbabwean market.

Well experienced management team

Strong corporate governance

Each week will be on a DATE with a company listed on the ZSE with Martin Mataga Twitter @MartinMataga.

The purpose of this thread is to assist investors to have a minimum appreciation of listed firms.

Disclaimer: Do not misconstrue this thread as investment advice. DATE companies before you buy their shares.