Delta Beverages has moved to address its cost inefficiencies by relocating the PET plant with new additions to the main factory at Graniteside. The move will result in a 31 percent reduction in manufacturing costs to $50/hectolitre from $73 and in the process significantly improve efficiencies, a saving which the group says it will be able to pass on to the consumer.
The move is in line with the call made by central bank governor Dr John Mangudya last week that industry should consider a downward review of prices.
Dr Mangudya said the continued appreciation of the US dollar against the country’s major trading partners’ currencies has made imports cheaper thereby making local goods uncompetitive.
An analysis moved on a financial information service last week, noted that while a call had been made for industry to reduce prices, such correction will only occur once industries are producing goods and services efficiently and not as a result of liquidity pressure as is the situation in the country.
“The real issue is that we cannot compete and therefore price our goods correctly because firstly the exchange rate works against us; secondly our industry is dead and most importantly the companies that are still in existence do not have the capital to invest in newer advanced efficient machinery that lowers production costs.
“The old antiquated machinery consumes a lot of energy resources and in most case are labour intensive.
“Sable Chemicals is your typical example of a company that is utilising technology from the 1950s to produce ammonia.
“How can that compete with Chinese fertiliser producers that are taking advantage of latest energy efficient technology?” reads part of the analysis.
Delta’s PET plant, which cost $7,6 million will now include a blow moulding unit, a syrup manufacturing plant as well as a lab upgrade.
Plant manager Mr Dave Nyika told The Herald Business during a tour last week that the relocation of the plant to Graniteside was part of the company’s initiative to reduce operational costs.
“When we brought the PET plant to Graniteside we equipped it with an online blow moulder.
“We used to buy finished bottles from Mega Pak our sister company but now we will be able to blow our own bottles on site.”
Mr Nyika said while the new PET plant will not alter its capacity of 15 000 bottles (500ml) per hour, the line will, however, have capacity to package more pack varieties as well as flavours.
The first bottle is due out today.
“As there is intention to continue to improve availability of the more convenient one way packaging, the expectation is to be able to avail more sparkling beverage varieties in PET,” said Mr Nyika.
Recent developments have seen the introduction of Schweppes Lemon and Orange in PET.
Analysts believe that Delta will unlock value if the group’s business model is more volume driven with a strong focus on operational efficiencies.
Meanwhile, Delta says it did not increase production of sorghum this year since it does not anticipate a substantial rise in beer sales mainly due to the economic challenges the country is facing.
Delta company secretary Mr Alex Makamure said that they were still assessing the hectares planted this season though the target yields were at four to six tonnes per hectare for commercial and one to two tonnes for communal.
“The target output for 2015 is at the same levels as last year as the volumes of beer sales are not expected to increase substantially given the state of the economy,” he said.
Delta contracts farmers to grow sorghum following the decline in its production as most farmers shifted to growing cash crops such as tobacco.
Mr Makamure said Delta contracted 27 commercial and 5 000 communal farmers to produce sorghum in this cropping season.
He said the company uses about 12 500 tonnes of red sorghum and 2 000 tonnes of white and sweet red sorghum annually to produce opaque beer and Eagle lager.