BEVERAGE manufacturer Schweppes Zimbabwe Limited is set to optimise a US$15 million capital expenditure on a new production line as it faces increasing costs due to the recently introduced sugar tax, businessdigest can report.
On February 9, the government implemented a sugar tax of US$0,001 per gramme of sugar in beverages, under Statutory Instrument 16 of 2024.
This new tax has significantly raised production costs for beverage companies, forcing them to adjust pricing.
For instance, in May, the price of Schweppes’ flagship product, Mazoe Orange Crush (2-litre bottle), increased from US$3,50 to US$4 due to the tax.
Speaking to businessdigest during a factory tour in Harare last Friday, Schweppes general manager Denmos Mbauya said the company was focusing on maximising the returns from its recent capital investment to mitigate the impact of the tax.
“The most significant capex that we did — I am sure when you went into the production line, you saw a brand new line right at the back there,” he said.
“We put in about US$10 million. We imported that line from Germany. Adding other costs to do with seals and everything, I think we put US$15 million into the business.
“So, for this year to date, the most significant investment that we made was in December 2023. So right now, we want to make sure we optimise on that.
- Regional industrialists invade Zim market for USD
- Schweppes to invest US$28m in citrus project
- Schweppes to leverage US$15m investment to deal with sugar tax
Keep Reading
“We invested in a new line, which is going to increase our capacity to produce water, our juice drinks, and Mazoe. The investment in terms of the equipment purchase was about US$10 million. Add all the other seals and everything, about $15 million total,” Mbauya said.
He said the introduction of the sugar tax had increased the cost of doing business.
Mbauya said this was putting pressure on the company’s pricing model.
“Look, like every other business that is producing beverages that contain sugar, we have been affected. It affected pricing, but be that as it may, we are in discussions with the stakeholders about the sugar tax,” he said.
“But, as far as we are concerned right now, we are looking forward to seeing if it is going to stay the way it is, and how we make sure that our consumers continue to get affordable Mazoe.
“So, we are past conversations about the sugar tax, we are focusing on what we can do.”
To address these challenges, Mbauya said Schweppes was exploring various strategies to streamline operations and reduce costs.
The company is also working on launching a low-sugar product line to offer consumers more choices and mitigate the tax’s impact.
“Look, you would recall that when the tax was implemented, the price of Mazoe went up from US$3,50 to US$4. Definitely, we have yet to re-look at several things, number one, being our operation because it was a big significant cost,” Mbauya said.
To deter the impact of the sugar tax, he said the company was working on a low-sugar product line, adding that this could broaden the customer options on the shelves.
“Number two, is there any need for us to reformulate it, a consideration so that perhaps we have a lower calorie offering in terms of sugar content, which is also healthy for consumers. It will also then reduce the cost of the product,” Mbauya explained.
“Moreover, we are doing this to make sure that our customers have other options.
“Those who want full sugar will have full sugar, and those who want reduced sugar will have reduced sugar. Within the next three weeks, we should have the product on the shelves.”
Schweppes Zimbabwe offers a wide range of beverages, including Mazoe Orange Crush, Mazoe Syrups, Minute Maid Delight, Minute Maid Refresh, and various water products.
The country’s largest beverage manufacturer, Delta Corporation Limited, holds a 49% stake in Schweppes’ parent company, Schweppes Holdings Africa Limited.
