A drop in beer prices at the beginning of this year helped beer volumes to return to growth at Zambian Breweries plc in the fourth quarter of its financial year, shareholders were told at the company’s annual general meeting (AGM) yesterday.
January’s drop in the price of the company’s flagship Mosi and Castle lagers to K6.5 from K6 enabled the company to increase production volume by 21 percent during the quarter, mitigating a 23 percent fall in production in the first three quarters of the year to March 31, 2015.
“The reduction in price demonstrated how price sensitive the beer market, is and how prices drive volume. Affordability is so important to our consumers.” said managing director Annabelle Degroot. “It was a difficult year for Zambian Breweries, but our investment in a K200 million maltings plant in the Lusaka South – Multi Facility Economic Zone (MFEZ) shows our long-term commitment to the Zambian market and our optimism for the continued growth of the economy.”
“This commitment is reflective of our belief that we are long-term partners with the Government of the Republic of Zambia on their social and economic growth agenda,” she added.
Investment continues despite the company’s poor financial performance in the year, driven by a decline in beer volumes following the increase in clear beer excise tax in January 2014, and the depreciation in the kwacha, which heavily impacted raw material costs.
Outlining Zambian Breweries’ performance for the year ending March 31, 2015, finance director Herman Lubbe said the company continued to focus on long-term growth prospects, practically demonstrated through the consistent development of a local sourcing model for barley, sorghum and cassava from farmers.
Zambian Breweries’ mainstream 375ml Mosi, Castle and Carling Black Labels volumes declined by 23 percent in the first three quarters of the financial year. The company mitigated this decline by launching a 750ml bulk economy bottle option in Mosi and Castle in the last quarter and by driving its Eagle brand. In addition, in the last quarter the company reduced the price of the 375ml Mosi, Castle and Carling Black Label packs from K6.5 to K6.
On a positive note, the company reported that soft drink volume grew 10 percent on the back of improved availability and a focus on distribution.
Shareholders heard about the Zambian Breweries sustainable development agenda under the SABMiller Prosper strategy, through which the company seeks to achieve five imperatives: accelerate growth and social development across our entire value chain; endeavour to make products the natural choice for the moderate and responsible drinker; secure shared water resources for the business and local communities; create value through the reduction of waste and carbon emissions; and support responsible, sustainable use of land for brewing crops.
The major new initiative under the Prosper agenda during the year was the set up and launch of a recycling project. Under this project, the company is determined to take responsibility for improving the environment by establishing a collection network and market for recycled plastic bottles. The company believes it must take the first step to ensuring a cleaner living environment in Zambia.
During the year, Zambian Breweries also focused on aggressive water usage reduction in its plants.
And it has successfully introduced cassava into its Eagle brand which now allows it to provide a viable commercial market for cassava to small-scale farmers in the north. The Cassava project was a highlighted as a priorority for the company for the year ahead.
Whilst GDP declined from 2013 levels of 6.5 percent to 5.5 percent in 2014, Zambian Breweries has confidence in the growth prospects of the country’s economy, in spite of the deterioration in the CPI and exchange rate measures in the final quarter of the financial year. Government’s business agenda and continued investment in infrastructure projects will continue to spur economic activity and promote employment creation, which will in turn generate demand for the company’s products. The company will remain focused on providing affordable and quality products to loyal customers while remaining competitive and attracting new consumers, said Ms Degroot.