Dairibord shoulders sugar tax burden

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LISTED milk products processor, Dairibord Holdings, says it will not pass on the cost of the recently imposed sugar tax on its products to customers but will increase its volume performance to retain profitability.
This comes in the wake of rising inflation across the domestic economy that has already weakened consumer purchasing power.
The government introduced a tax on sugar content in beverages of US$0,002 cents per gram with effect from January 1, 2024 which was later revised to US$0,001 cents, after experts and industry players warned of significant price hikes for sugary products.
Despite the revision of the tariff by the authorities, captains of industry have insisted that it still carries an incremental effect on cost of production which other manufacturers have already passed on to consumers.

In an interview with The Financial Gazette, Dairibord chief executive, Mercy Ndoro said the company will not pile pressure on its already financially-stretched customers.
“We are not going to add that sugar tax onto the consumers because of the considerations of the erosion of disposable income on the consumer. What we are going to do is we are going to drive volumes to retain our profitability,” Ndoro said.
Zimbabwe’s annual blended inflation rate rose from 47,6 percent in February this year to 55,3 percent in March 2024.
Consumer prices rose by 4,9 percent month on month in March compared to 5,4 percent during the previous month.
While prices of goods and services have continued to move north-wards, incomes have largely remained stagnant as employers grapple with exchange rate distortions and elevated costs among other challenges.
“If you do not push 100 percent onto the consumer, it means there is going to be an erosion on margins, it is going to eat into our margins. We have said to ourselves, for the sake of the consumer, we will accept that then we start driving volumes so that we have the price, volume compensation coming through,” Ndoro said.
Meanwhile, in the financial year ending December 31, 2023, Dairibord experienced significant cost increases on account of imported inflation and price distortions arising from exchange rate movements.
Board chairperson Josphat Sachikonye said there were sharp increases in material costs and utilities, resulting in a 41 percent surge in the cost of sales in inflation-adjusted terms.