Delta’s pivot to low sugar products amid tax pressure and import competition

SAMANTHA MADE

Zimbabwe’s largest brewer, Delta  Corporation’, is scaling up its range of low and zero-sugar drinks in response to the country’s recently introduced sugar levy, which has triggered sharp price hikes, declining volumes, and a surge in cheaper imports. As part of a broader strategy to remain competitive and consumer-focused, the company is introducing healthier, reformulated offerings in new, affordable packaging to cushion customers from rising costs while tapping into growing demand for low-sugar alternatives.

In a trading update for the third quarter ended 31 December 2024, Delta Corporation’ Company Secretary Faith Musinga announced the company’s renewed focus on low and zero-sugar beverages. The move is designed to counter the adverse effects of Zimbabwe’s sugar levy, which has reshaped consumer demand and market dynamics.

“There are ongoing strategic interventions to support low and zero sugar offerings and availing packs at more accessible price points,” Musinga said.

The policy shift toward healthier beverages reflects Delta’s attempt to mitigate the financial strain consumers face following the introduction of a sugar levy on soft drinks and cordials in 2023. While the tax was implemented as a public health measure to reduce sugar consumption, it has had ripple effects across the sector—including price hikes, reduced demand, and increased competition from regional imports.

According to Musinga, the impact on Delta’s core soft drink business has been severe.

“The Sparkling Beverages volume declined by 16% compared to prior year for the quarter and 1% for the nine months,” she said. “The volume loss is attributed to the impact of sugar tax-induced price increases and the surge in imports from the region. The sector’s competitiveness was affected by the relatively high sugar tax and cost differentials, leading to an increase in imports of similar offerings from neighbouring countries.”

Delta’s popular soft drink brands, which include Coca-Cola, Fanta, and Sprite, have been hit hardest as consumers respond to price increases by turning to cheaper imported alternatives. These imports—mainly from South Africa and Zambia—often bypass similar taxes, giving them a price advantage and complicating the local pricing structure.

In response, Delta is not only reformulating its beverage recipes to reduce sugar content but also rethinking packaging sizes to offer more affordable options. These measures are part of the company’s broader effort to align with both health-conscious trends and a more price-sensitive consumer base.

“The operating environment in Zimbabwe remains complex, influenced by policy changes and currency instability,” Musinga said. “The beverages sector faces further challenges relating to uncooperative retail prices arising from high input costs and taxes which attract lower priced imports from the region and policy-driven changes to the route market.”

Industry experts note that Zimbabwe’s sugar levy, while aligned with global health trends, may require adjustments to ensure local manufacturers remain competitive. Unlike many of its regional peers, Zimbabwe has implemented the sugar tax at a relatively high rate, creating significant cost pressures for producers.

Musinga emphasized that improving access to foreign currency through formal banking systems and stabilizing the local currency would go a long way in creating a more predictable and viable business environment.

“The implementation of policies that promote the stability of the local currency and access to foreign currency through formal banking channels would improve the operating environment,” she said.

Despite the tough operating climate, Delta remains optimistic about growth opportunities—particularly from rising consumer spending, recovery in aggregate demand, and seasonal market shifts.

“Despite these challenges, the business remains well-positioned to seize any opportunities from increased consumer spending. Our focus remains on leveraging activities that generate aggregate demand and positioning the business for future growth,” Musinga added.

As the country’s dominant brewer and beverage producer, Delta has a strong track record of navigating economic uncertainty and policy volatility. Over the years, it has developed a robust product mix—including soft drinks, lager beers like Castle and Zambezi, and sorghum beers such as Chibuku Super—that helps cushion its financial performance against segment-specific shocks.

The company’s brewing operations, less affected by the sugar levy, continue to provide a stabilizing foundation. However, Delta’s ability to innovate within its non-alcoholic beverage segment—especially through expanded low and zero-sugar offerings—will be critical to maintaining market share and consumer loyalty.

With support from its global partner, The Coca-Cola Company, Delta is also likely to benefit from access to global product development expertise. Coca-Cola’s success in rolling out reduced-sugar versions across international markets may serve as a blueprint for Delta’s evolving strategy in Zimbabwe.

Looking ahead, Delta is expected to ramp up local production of reformulated drinks, expand distribution of lower-cost packaging formats, and deepen consumer engagement around healthier choices. It also plans to continue advocating for regulatory clarity and a more balanced tax structure to foster competitiveness in the domestic beverage industry.

As health consciousness rises and economic pressures persist, Delta’s pivot to low and zero-sugar drinks could prove to be both a defensive and forward-looking play—positioning the company to lead Zimbabwe’s transformation toward a more sustainable and health-focused beverage market.