Sugar tax cripples beverage demand in Zimbabwe

Published: 3 hours ago

Hippo Valley Estates Limited, one of Zimbabwe's largest sugar producers, is facing mounting pressure following a sharp decline in demand from beverage manufacturers who have blamed the government's sugar tax for eroding profits and weakening sales.

The company revealed that offtake from the beverage sector - a vital component of its business - has plunged by between 10% and 15%, a blow that has compounded an already difficult financial year marked by reduced sales and pricing challenges.

For the year ended March 31, 2025, Hippo Valley's revenue fell by 44% to US$191.59 million, underscoring the toll of the sugar tax on the local value chain.

"In terms of offtake, in terms of sugar to the beverage industry, I am looking at about a 10% to 15% reduction. That is the figure I can give, and it is quite significant," Hippo Valley Estates chief executive officer Tendai Masawi told businessdigest.

The sugar tax, introduced in early 2024 as part of government's public health measures to curb sugar consumption, was initially pegged at US$0.02 per gram of sugar in beverages. However, after an industry outcry, it was revised down to US$0.001 per gram for general beverages and US$0.0005 for cordials. Despite the revision, the levy has continued to ripple across the sector.

"Has there been any effect from the sugar tax the government has imposed? Yes, certainly," Masawi said, noting that beverage producers have been forced to reduce sugar use and explore artificial sweeteners to contain rising costs.

He explained that Hippo Valley, which produces brown sugar for refinery processing, has been indirectly affected by lower demand from bottlers.

"Hippo Valley does not make white sugar. We supply refineries with brown sugar, which they then refine to supply the beverage industry. So, if beverages are not taken, the refineries cannot supply; it means our raw sugar offtake is going to become compromised," he added.

While beverage companies are experimenting with sugar substitutes, Masawi observed that Zimbabwean consumers have been slow to embrace products made with artificial sweeteners.

"Some of them are using artificial sweeteners. But unfortunately, in Zimbabwe, the appetite for artificial sweeteners has not been very high," he said.

Major beverage producers have felt the pinch more directly. Delta Corporation Limited and Innscor Africa Limited reported paying US$21.1 million and US$10.1 million, respectively, in sugar taxes in their recent financial years.

Innscor chairperson Addington Chinake criticised the levy, saying it had "the unintended consequence of materially raising the production cost of compliant local beverage manufacturers, directly suppressing demand in the cordials and carbonated soft drink categories, and simultaneously distorting the competitive landscape through the proliferation of cheaper, non-compliant, local and imported alternatives."

Despite a marginal 1.4% rise in national sugarcane output to 6.71 million metric tonnes this season, industry experts say production gains have failed to translate into growth for processors due to weak beverage sector demand.

A report by IH Securities noted that the increased output had "little impact on processors, mainly due to muted uptake by drinks manufacturers facing increasing exogenous costs."

With the combined pressure of reduced sales and policy headwinds, Hippo Valley and other sugar producers are now engaging government authorities in hopes of a policy review that will balance health objectives with the survival of one of Zimbabwe's key agro-industrial sectors.
- the independent

Tags: Tax,