AfDIS targets market rebound | Business Times

LIVINGSTONE MARUFU

African Distillers Limited (AfDIS), a publicly traded wine and spirits maker, is positioning itself to reclaim its lost market share following a sustained government crackdown on illicit and smuggled alcoholic beverages.

The company, which has faced declining revenues due to unregulated competition, believes that stricter enforcement measures will restore market stability and drive renewed growth.

Before the COVID-19 pandemic, AfDIS dominated the formal market, holding an estimated 70% market share. However, independent reports indicate that by 2024, this figure had dropped to 51%, as illicit traders flooded the market with untaxed and unregulated products, undercutting legally compliant businesses.

AfDIS Managing Director Stanley Muchenje told Business Times that the company’s revenue and operational sustainability had been severely impacted by the infiltration of illicit products, particularly smuggled wines, ciders, and spirits.

“Over the past few years, illicit alcohol has significantly eroded our market share, making it difficult for us to maintain operational efficiency. Our revenue streams have been under immense pressure, and we have struggled to cover our daily operating costs due to suppressed sales volumes,” Muchenje said.

However, he expressed optimism that the government’s ongoing crackdown would help reverse the damage and enable AfDIS to reclaim its position as the dominant player in Zimbabwe’s alcoholic beverage market.

“We have already seen a notable improvement in sales following the clampdown on illicit traders. If the authorities remain committed to these enforcement efforts, we expect a continued recovery of our lost market share,” he added.

The proliferation of smuggled alcohol has distorted market dynamics, allowing unregulated players to evade critical costs such as taxes and compliance fees. This has not only put legitimate businesses at a disadvantage but has also resulted in significant tax revenue losses for the government.

In response, authorities have instructed border control agencies to implement stricter monitoring to curb illegal imports. The Zimbabwe Revenue Authority (ZIMRA) has issued warnings to cross-border traders and travelers, urging them to adhere to customs regulations.

“Travelers must present valid proof of customs declarations at designated checkpoints. Failure to declare goods—whether intentional or unintentional—can lead to substantial penalties, including heavy fines and confiscation,” ZIMRA stated.

These measures are expected to strengthen formal market players like AfDIS, ensuring that competition is based on fair and legal business practices.

The crackdown is already yielding positive results for AfDIS, as reflected in the company’s third-quarter trading update for the period ending December 2024.

The ongoing regulatory action has helped curtail illicit trade, leading to improved sales volumes for legally compliant businesses.

Wines and spirits recorded a 14% volume growth compared to the same period the previous year.

Despite this progress, Muchenje noted that smugglers continue to adapt their tactics, finding alternative entry points to bypass traditional border checks.

“We hope the authorities maintain this enforcement drive, as illicit traders are constantly shifting strategies. Many are now using less-monitored routes, such as the Chiredzi border, to smuggle goods. If border agencies extend their focus to these areas, we can significantly reduce the presence of illicit alcohol in the market,” he said.

The illicit alcohol trade has far-reaching consequences, including job losses, revenue declines for formal businesses, and lower tax collections for the government. A sustained crackdown is essential to safeguard legal industry players, protect employment, and ensure tax compliance.

Experts argue that beyond enforcement, structural solutions are needed to transition informal traders into the regulated economy. Additionally, consumer awareness campaigns highlighting the health and quality risks of illicit alcohol could help drive demand for legitimate products.

With government intervention gaining momentum, AfDIS remains optimistic about its market recovery prospects. The company is committed to strengthening its supply chain, increasing production capacity, and leveraging consumer demand for premium brands to regain its foothold in Zimbabwe’s alcoholic beverage industry.

As regulatory efforts continue, the coming months will be pivotal for AfDIS’ resurgence, determining whether the company can restore its former dominance in an industry that is gradually shifting back towards fair and regulated competition.

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