The festive period is in play this month as many Zambian budgets will once again be thrown out the window. Employees have just been paid their Christmas bonuses, children (and adults) are demanding all manner of things and companies are looking to cash in. Consumer spending will also be boosted by the recent reduction in petroleum pump prices necessitated by the sharp drop in global oil prices.
Based on the national daily average fuel consumption patterns of the first quarter on 2014, the reduction will result in a savings of K40 million ($6.4M) in the 23 days from price drop to the end of December (with 98% being saved by diesel and petrol users). We have already seen some of the effects with December inflation coming in at 7.9%, down 0.2% from last month (driven by a reduction in non-food inflation).
Here are 11 companies poised to do very well this holiday season because of their reach, pricing or competitive advantage (with some having all 3):
The supermarket chain has 22 stores countrywide and growing. Its flagship Manda Hill store has been said to be “the busiest store in Africa“ because of the volumes of foot traffic it receives. People from Kabulonga all the way to Ng’ombe rub shoulders in Shoprite outlets in order to purchase a variety of well-priced products. They will be given a run for their money by Pick N Pay which is growing its presence in the country.
Zambeef has 122 butcheries countrywide and operates all butcheries in each Shoprite outlets as part of their long standing partnership. They will be looking to make sure their products make it to every household in the country. The company had a rough go of it in the first half of the year because of the Kwacha’s sharp decline and increased competition but they could get a much needed boost from the festive period. More Beef Zambia, which is partnered with Pick N Pay will be snapping at their heels though.
Last year Zambia Breweries opened their $90 million plant with a production capacity of one million hectolitres in Ndola. The company’s portfolio of clear beer (Mosi Lager, Castle and Castle Lite) will be in very high demand. For those who don’t drink alcohol, they are also the main bottlers of Coca-Cola brands (Coke, Fanta etc) which should also see a surge in sales over the holidays. Sales growth of clear beer slowed down to 6 percent in the first quarter of the year as a consequence of earlier price hikes but the festive season should help shore up their numbers.
Kazuma Enterprises is one of the leading suppliers of imported liquor and beer in the Zambian market. Their portfolio of clear beer and liquor includes Whindoek, Heineken, Amstel and Jägermeister. Increased disposable income over the festive period should see higher demand for the premium brands that Kazuma supplies. During the holidays, people who normally drink Mosi usually graduate to drinking Heineken when it’s your turn to buy a round!
Freshview Cinemas and Ster Kinekor
A number of movies will be coming out from the beginning of December to New Year’s Day. Competitors Freshview and Ster Kinekor will be fighting for movie-goers to flock to their respective cinemas. Ster Kinekor has the edge in price but Freshview has more outlets. The must-see movies are ‘The Hobbit 3’, ‘Big Hero 6’, ‘Night at the Museum ‘, ‘Exodus: Gods and Kings’ and ‘Penguins of Madagascar’. This selection should be able to attract a strong mix of children and adults. It is a pity that only Lusaka residents will have access the two cinemas as they still have not branched out to other provinces yet.
MTN and Airtel
The holidays are a time when people catch up with family whether domestic or living abroad. They will also be communicating via social media to find out where the best events are happening in the areas they live in. MTN surpassed Airtel to become the leading service provider in the first half of the year as their mobile subscribers reached 4.26 million (4.04 million for Airtel). They should be leading the way in raking in revenue from increased voice and data usage with Airtel following closely.
Much to the chagrin of many Zambians, ZESCO is also well positioned to make strong gains over the season as well especially after they raised electricity tariffs in July this year. There will be increased commercial and domestic activity which should result in increased power usage over the holidays. Load shedding could POSSIBLY see a slowdown as the rainy season kicks into high gear (over 90 percent of electricity is generated from hydro-power in Zambia) – but don’t hold your breath!
Puma Energy and Total
Many people tend to travel domestically or abroad to see family and friends over the holiday season. As of 2013, there was a population of 534,523 registered vehicles in Zambia with 61.7 percent being light passenger vehicles. The festive season will see increased use of public and private transport. The two dominant oil marketing companies Puma (over 55 retail sites) and Total (48 retail sites) will see a sharp increase in demand for their petroleum products countrywide.
And not to be left out - the women’s hair business (which contains a plethora of boutique players) will also be cashing in as they should see higher than normal demand for Brazilian, Indian and Peruvian hair over the festive period.
Which other companies do you think are finely poised to win this festive period?
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *