AfDIS adopts cost containment model

LIVINGSTONE MARUFU

Listed wines and spirits maker, African Distillers (AfDIS), says it is focusing on enhancing profitability through  cost containment model in an attempt to reclaim market share that has been lost to cheap and smuggled products that poses  a severe  threat to the business.

The development was revealed by AfDIS managing director, Stanley Muchenje.

It comes at a time AfDIS is battling the influx of illicit beers.

“We can’t continue complaining against illicit beers as it’s a new norm in the country but what we are now doing is to cut costs across the value chain so that we can make our products affordable and competitive despite current threats.

“We have already entered illicit products’ territory by targeting small traders but a twerking is needed on the pricing to make it a product of choice,” AfDIS managing director Stanley Muchenje told Business Times.

According to observers, AfDIS, which once held a monopoly in Zimbabwe’s wine and spirit markets, has lost 30% of its market share to illicit products.

In its financial results for the six months to September 30, 2023, AfDIS reported a  ZWL$22.37bn  profit, up from ZWL$2.056bn achieved  in the prior comparative period. This was made possible by high volumes.

The group’s revenue climbed by 156% to ZWL$134bn, while its operating income soared by 311% to ZWL$28.30bn.

Higher volume, a favourable sales mix, and replacement cost-based pricing drove rise in both inflation-adjusted revenue and operating profit, although stringent cost reduction measures and volume growth also contributed to the latter.

The company recorded a volume growth of 11% above prior year benefitting from good product availability across all key brands, intensified product distribution and brand innovation.

Spirits category grew by 8% leveraging on the premiumisation of the Whitestone brand and firm demand on the affordable range and wine volume grew by 7% driven by increased market penetration in the second quarter.

The Ready to Drink (“RTD”) segment registered a growth of 14% despite competition from lower priced smuggled imports.

With regard to the future, AfDIS is still committed to providing the market with its whole product line, seeking out chances for expansion, defending market share, and enhancing profitability through cost containment, production efficiency, and new product development.