Consumers in Zimbabwe are downgrading, opting for cheaper sorghum brew and Chinese clothing imports.
At Pariah State, a trendy, upmarket bar in Harare’s Avondale suburb, waiters carrying buckets of ice and beer weave through crowds of well-dressed patrons.
It’s a month-end Friday and beer is flowing - but not as freely as it used to. Like everywhere else across the economy, establishments such as these are seeing the impact of consumers tightening their belts. Those who can still drink are drinking less, but most are simply giving up on the pricey beer and hitting the cheaper stuff.
To keep the tills ticking over, Pariah State offers discounts to drinkers ordering beers in groups, and it works. “One beer costs $3, but six cost $10. Makes sense in these times,” says accountant Farai Dube, a regular. A year ago, he would have never looked twice at the bill. “Those days are gone,” he says. “We are lucky we can still drink here. Many have stopped altogether.”
Two years ago, Zimbabweans broke national records for beer consumption, with Delta, the country’s largest brewer, struggling to meet demand. Now, the company says, drinkers are downgrading. Across the country, everyone is having to make a change: cheaper beer, a cheaper school for the kids, and shopping trips to the less fashionable downtown malls that sell cheap Chinese clothes.
For companies at the forefront of the consumer business, it’s time to mix things up and chase each dollar down at the lower end of the market.
At Delta, chief executive Pearson Gowero says his company sold 18% fewer lager beers last year than it did the previous year, with drinkers downgrading to the less fashionable Chibuku sorghum traditional brew.
Sexing up the poor man’s drink
Some image-conscious urban drinkers would never be caught dead with their snouts in the “scud”, the plastic gourd in which the brew is traditionally sold. After all, sorghum has always been regarded as a poor man’s drink. Delta realised this and has sexed up the brew, dressing it up in jazzy new packaging, carbonating it and calling it Chibuku Super.
Now, just a year since its launch, it is flying off the shelves, performing so well that Delta is sinking $10 million into building a new plant to package more of it.
As Gowero puts it, Chibuku Super “offers refuge to a lot of consumers”. Consumer spending is falling, so people are making tough decisions to cut back and go down-market.
SABMiller’s Chibuku has cleverly created a sorghum beer that appeals to the well heeled. (Tom Parker/OneRedEye)
“We are not seeing any green shoots or hope that things will get better. Consumption trends remain poor. The fourth quarter was subdued, Christmas especially. We don’t know where this will take us, but we hope for a bright future,” Gowero says.
Delta’s 18% decrease in lager volumes was the biggest drop among SABMiller’s subsidiaries in Africa.
The results, say top stockbrokers IH Securities, “mirrored the prevailing trend in the consumer sector, which has seen consumers trading downwards in the face of severe liquidity constraints”. There has been a “migration to lower-priced sorghum products”.
The effect of falling lager sales is also hitting downstream, where Delta has had to effect a 30% cut on the number of farms contracted to grow the barley used to brew beer.
The downgrading is being felt everywhere.
From Edgars to Power Sales
Edgars, the country’s biggest clothing retailer, faces weakening consumer spend and is also making changes, managing director Linda Masterson says. “Zimbabweans are now heavily borrowed. Lending institutions are lending to every formally employed person as hard as they can, at the highest interest rates they can, and it’s affecting the disposable income of our customers,” she told analysts.
Civil servants, once the mainstay of Edgars’s customer base, have gone down-market, shopping at stores such as Power Sales, where bargain hunters are attracted by its cheap Chinese imports.
This has seen Power Sales, once the butt of jokes by well-to-do shoppers, stealing market share from the trendier Edgars. “Power Sales increased its market share as they are operating on a 100% China imports model. This makes them very attractive in terms of price,” says Masterson.
Edgars has also taken steps to chase the down-market dollar, opening more of its low-cost Jet stores over the past year. “We’ve identified some opportunities, which will mean that our customers are going to have more fashion at [lower] prices and a wider choice,” Masterson says.
Others retailers have simply given up and joined the trek down-market.
Last year Truworths, once an icon of high-street shopping, started stocking cheaper clothing from China for the first time. Its chief executive, Themba Ndebele, said at the time his company could simply no longer compete with cheap Chinese imports.
Targeting lower-earning consumers
Meikles, a group that owns Harare’s most prestigious hotel and the TM Supermarket chain, announced this week it is shutting down Greatermans, an iconic department store famed for quality clothing and furniture. In its place will be a new Pick n Pay supermarket.
Meikles, for decades a name associated with luxury and fashion, has recently opened a new line of stores targeting lower-earning consumers. The Meikles Mega Market, general manager Panganai Ngorima says, will “cater for all classes of society and this new concept will service and support the lower end of the market”. In a recent trading update, Meikles reported that the new chain had been “well received by customers”.
As more belt-tightening beckons, Meikles, like many other companies, will no doubt look more to that market than its traditional wealthy consumer base.
Best wine, whisky still flows for privileged few
Although many people in Zimbabwe are tightening belts, a select few continue to wonder what all the fuss is about.
A market remains for luxury, and some savvy businesses are taking advantage. In Harare’s northern suburbs, there is something of a boom in exclusive restaurants, many of them displaying improbable menus that include “fresh seafood” and pricey imported wines.
Customers don’t bat an eyelid when ordering bottles of whisky, according to one restaurateur.
“The Johnnie Walker Blue is a huge favourite here, and the William Lawson is growing too. These ‘babies’ can set you back $500 or more,” Pearson Gowero, chief executive of Delta Beverages, says.
Private schools still find takers for their high fees. Recently, St Johns College in Harare wrote to the guardians of students: “An acceptance fee of $2 700 will be required to secure the place offered … “
At Sam Levy’s, an exclusive mall in Harare’s affluent Borrowdale area, a new, deluxe $5-million Ster-Kinekor theatre was recently opened and packs in customers despite its high charges.
In Glen Lorne, Mildred Kasu runs an exclusive spa, hawking what she says are Asian herbal beauty treatments and therapeutic exercises to her wealthy clientele, who descend on her spa from the mansions rising on the nearby hills. Her customers pay hundreds of dollars to be taught in the ways of her qing dan diets.
“The clientele has been loyal; people are willing to spend a lot on good things. They work hard for their money and they deserve it,” she says. “Business has never been better.” – Jason Moyo