For Sechaba Holdings’ interests in the beverages sector, particularly alcohol, continuity and profitability first and foremost means the economy opening, allowing trade with restrictions, thereby creating a stable environment for growth, innovation and investment. But COVID-19 is resetting the landscape and businesses have to rapidly adapt, being equally sensitive to the needs of employees, customers and consumers. Such is the climate the newly appointed MD at Sechaba, Mabu Nteta, finds herself in. The self-made entrepreneur and business leader succeeded Thabo Matthews who stepped down with effect from 30 June 2021.
Nteta who has been in office for just over a month tells this publication that the group’s associates continue to forecast demand to the best of their ability and are intent on producing the highest quality products, strengthening stakeholder relations and collaborating with government to address challenges of COVID-19. Sechaba owns 49.9 percent stake in Coca Cola Beverages Botswana (CCBB) and Kgalagadi Breweries Limited (KBL) each.
When a crisis of the magnitude of the COVID-19 global pandemic forced the industry to close, revenues dropped overnight and things got particularly dire for alcohol sellers. “But we are pivoting within the new business landscape,” Nteta confidently declares, adding that the group is modifying its operations in order to stay in business and to better serve employees, customers and communities during the COVID-19 crisis. Nteta is an advocate for social change and community participation and a human rights activist who specifically champions women and youth empowerment.
“Our associates continue to forecast the demand to the best of their ability and are intent on being innovative, strengthening customer relationships, focusing on our best products and collaborating with government to address challenges of COVID-19,” Nteta divulges.
She believes Sechaba’s unique brand position is still very strong. At a time like this, people are spending even more time in front of an array of screens of social media applications, television, the Internet or streaming services. To capitalise on this, Nteta informs these reporters that the group will maintain consumer interest by being consistently visible and interactive because capturing market share now will produce significant Return on Investment when the market recovers. “If, for example, you consider the alcohol side, we are now alive to the fact that our offerings will now be enjoyed in the comfort of our consumer’s homes as opposed to in-house dining,” she points out. “So the drive is to promote this with a clear messaging around responsible drinking in a home environment.”
The unstable regulatory environment means businesses in the sector constantly have to re-strategise plans and re-allocate funds. Nteta warns that this uncertainty has an impact on future investments and innovations because the focus of businesses is on survival and recovery rather than growth. “We are concerned about decreased participation of local businesses in the sector, evidenced in the closure of hundreds of businesses and job insecurity which will inflate the already staggering unemployment rate, growth of illicit alcohol trade, increased criminality, as well as consumption of products with higher alcohol by volume (ABV).”
The severity of business interruption in Botswana will continue to endure and will be further complicated by the escalating COVID-19 pandemic. Even after restrictions are reduced, it is clear for Nteta that the industry that emerges from the global pandemic will likely look fundamentally different from the one that existed a year ago. Given the unprecedented nature of this crisis, Nteta observes: “We will need to consistently stay abreast and aligned with evolving government responses, key shifts in consumer behaviour and share best practices and valuable insights into how beverages companies can mitigate the impact this crisis might have on their business, their employees and the public.”
Every player in the fragile ecosystem is facing a threat, and the industry will have to pull together to shore up each part of the system. What is clear to Nteta, however, is that for the industry to recover, it must incorporate health and safety measures into the environment and have well-trained and appropriately incentivised employees whose interactions with customers induce them to return. In her view, this will be vital to “our successful revival so that we can continue to provide employment opportunities and future careers for the youth”. She believes growth will come from innovation in dealing with challenges encountered and those they anticipate. This could be in the form of introducing new liquids (other types of products), packaging, marketing and promotions. Furthermore, she says, growth includes closure of distribution gaps and include e-commerce. There will have to be “premiumisation,” which she defines as “consumer demand trends in the direction of more ‘premium’ products characterised by an increased focus on flavour and high-quality ingredients”.
The impact of COVID-19 on the beverages sector was reflected in the group’s subsidiaries in the past year. Coca Cola sold 2 percent less volume in 2020 compared to 2019. Volumes sold by KBL, the country’s largest brewer, declined by 29 percent in the year under review. Coca Cola profit after tax declined by 3 percent in 2020. The biggest impact was realised at KBL, which registered a 21 percent drop in profit after tax. Looking back to when the pandemic was first acknowledged and measures such as lockdowns and other movement restrictions were instated, Nteta says there were immediate and short-term impacts such as product expiries and the associated losses, diminished revenues, shortage of working capital, and limited operations, on the sector.
After 14 months of dealing with COVID-19 in Botswana, she says challenges that “we initially considered to be severe have been significantly compounded”. She notes that businesses in this sector (and others), regardless of size, have felt the impact to different extents but in just as meaningful ways. For example, approximately 650 retail outlets in the alcohol industry have permanently closed. Additionally, she points out, there are feeder industries such as transport and packaging material companies that have also lost out. “I have closely followed the performance of the Botswana economy and the beverages sector in particular,” Nteta says. “The truth is that the outlook for the sector in the medium to long term has evolved from complex to extremely uncertain.”
However, as the MD of the listed company that has the government and over 300 000 pensioners as shareholders, Nteta remains optimistic. “We have seen several strategies that sector participants like ourselves as Sechaba, our stakeholders and the country’s leaders have adopted and planned to improve resilience in today’s changing environment and beyond COVID-19,” she says.
With regards to the government’s COVID-19 response, minimising movement of people and restricting large gatherings is a proven and globally accepted method of preventing spread of the virus. While Sechaba is committed to aligning with the government in this regard, she believes “we need to also focus our collective attention on finding additional and effective mechanisms to reduce the transmission of the virus, as evidenced in the current surge in COVID-19 infections in Botswana”.
Such mechanisms, she says, can balance the wellbeing of the citizenry with their ability to support and sustain their livelihoods with restricted and regulated sale of alcohol for off-site consumption, when the industry opens. The government banned the sale of alcohol in response to rising infections but KBL has frequently argued that there is no evidence that alcohol consumption contributes to the surge. This week, KBL lost its case in which it sought intervention of the courts to set aside the ban because of loss of revenue by the giant brewer and risk of job losses, among other reasons. Nteta says the industry should continue to mount robust responsible consumption education campaigns that target behaviour change.
The sugar tax, which is levied on sugar saturated beverages (‘SSBs’) such as fizzy and energy drinks, is another stumbling block. Tax expert Jonathan Hore has explained it thus: “It is charged with the main intention of reducing the consumption of such beverages as they are linked to diseases such as sugar diabetes and strokes,” he said, adding that the imposition of the tax would result in an increase in the prices of those beverages, inevitably reducing the demand and consumption of the impacted products.
A reduction in consumption of the beverages is expected to reduce the negative effects of sugar-linked diseases. On the other end, it may result in reduced profits for entities which produce or sell the sugar saturated beverages. However, since most of the products are imported, the tax expert says it is not likely to impact jobs and businesses significantly.
The Sugar Sweetened Beverages’ (SSB) levy is now law that took effect in April. Hore explained that the tax is P 0.02 of sugar in excess of 4g per 100ml for labelled SSBs. Unlabelled beverages’ deemed sugar content shall be 25g per 100ml, attracting a deemed excess of 21g/100ml. Through its Coca Cola subsidiary, Nteta says Sechaba supports the sugar reduction goal to reduce consumption of sugar by the population. This is an earnest commitment by the company to align with public health objectives while ensuring the taste of so many people’s favourite beverage is not jeopardised.
However, she argues, taxes are not necessarily the answer to changing human behaviour. The effectiveness of any tax will ultimately depend on how both consumers and businesses adapt and change their behaviour in response, she says, which is something that they cannot as yet determine. In addition, Nteta believes there are more ways to tackle problems spawned by sugar and related overconsumption of it. “Hopefully, we begin exploring other initiatives to address our current health challenges,” she says. “I think we can anticipate impact on profitability of the group due to reformulation of recipes and implementation of new packaging, for instance, which is not cheap, and the ripple effect that will have on CCBB employment and productivity.”
She fears that a domino effect will occur, with knock-on costs incurred by customers of restaurants, retailers and bars. But COVID-19 aside, Nteta says there are other serious issues that command the attention of Sechaba as a group. Among these are global climate challenges. “We are worried about the future of our planet and will continue to play a crucial role in helping to safeguard it,” she says. “Recycling, adoption of sustainable methods of manufacturing, and distribution and sale of our products are some of the ways we are doing so.”