• Sugar tax now US$1,000/tonne for RTDs vs US$800 sugar price - incentive to reformulate, CZI says sweetener use has tripled.
• Domestic market now absorbs 94% of Zim sugar sales (379,319 tonnes FY2026), making sugar intensity per litre the key risk for Hippo –
• Government reviewing levy to include non-nutritive sweeteners as tax raised ~US$100m since 2024

Harare- Zimbabwe's beverage sugar tax is beginning to reshape demand across the country's sugar value chain, with Hippo Valley Estates acknowledging that manufacturers' growing use of artificial sweeteners is depriving the sugar industry of potential sales, even as domestic consumption continues to expand.

In an interview with Equity Axis journalist Blessing Kanyemba, Hippo Valley Estates Finance Director Tapera Masarakufa said the company had yet to experience a direct decline in sugar sales attributable to the levy, introduced in 2024, but acknowledged that the shift towards artificial sweeteners was limiting the growth the company could otherwise achieve.

The distinction matters for Zimbabwe's sugar industry, whose commercial performance is increasingly dependent on domestic consumers and industrial manufacturers. Beverage production can continue expanding while the amount of locally produced sugar required to support that expansion grows more slowly, particularly as manufacturers adjust formulations to reduce their exposure to the tax.

"I would say there's an opportunity loss but in reality we haven't felt it at the moment," Masarakufa told Equity Axis.

"When we look at our local market, demand is rising. The general business environment in the country, all our customers, the industrial manufacturers and so forth, they are growing double digit. And also when we look at our own sales, our local business is also growing double digit."

His assessment introduces an important distinction between realised revenue losses and foregone growth. Hippo's current sales performance remains positive, supported by increasing local demand, although the expanding use of sugar substitutes means part of the potential growth in beverage production may no longer translate into equivalent demand for natural sugar.

The pressure originates further down the value chain, where beverage manufacturers including Delta Corporation and Dairibord Zimbabwe have reported significant cost increases following the introduction of the sugar content surtax. Their responses, ranging from product reformulation to pricing adjustments, have implications for the country's sugar producers because the tax changes the economics of using sugar as an industrial input.

Zimbabwe introduced the beverage sugar content surtax in February 2024, with the effective levy subsequently set at US$0.001 per gram of added sugar in specified beverages. The tax applies to the sugar content of affected products, creating a direct financial incentive for manufacturers to reduce the quantity of taxable sugar used in their formulations.

Delta Corporation provides one of the clearest measures of the burden. The beverages group disclosed US$31.2 million in sugar tax payments for February to December 2024, a substantial additional cost for its sparkling beverages and cordial operations.

The company's response included price adjustments, changes to packaging sizes and product reformulation, as it attempted to preserve affordability and protect market share. Higher retail prices contributed to weaker competitiveness against imported alternatives, particularly within its soft drinks portfolio.

During the final quarter of 2024, Delta reported a 16% decline in sparkling beverage volumes, while cumulative volumes for the nine-month reporting period fell by 1%. The company linked its difficulties partly to tax-induced pricing pressures and increased competition from regional imports.

The Government subsequently reduced the sugar tax applicable to cordials from US$0.001 to US$0.0005 per gram from January 2025, recognising the disproportionately high effective burden on concentrated beverages.

However, the levy continued to absorb a significant share of manufacturers' earnings. Delta and Schweppes Zimbabwe paid US$15 million in sugar tax during the six months to September 2025, with more than half of that amount absorbed by the business rather than passed directly to consumers.

The group subsequently reported US$20.3 million in sugar tax payments for the nine months to December 2025, compared with US$25.7 million in the corresponding previous period. Delta maintained that the tax remained disproportionately high relative to earnings performance, despite the relief granted to cordials.

By the quarter ended June 2026, Delta had accrued a further US$7.3 million in sugar tax, up from US$6.7 million in the comparable period, reinforcing the continuing cost exposure of domestic beverage manufacturing.

For industrial sugar suppliers, this taxation structure alters their customers' purchasing incentives. Beverage manufacturers must consider the cost of acquiring sugar alongside the additional tax incurred when that sugar becomes part of the finished product. Reducing sugar content can therefore deliver savings beyond the price of the ingredient itself.

The larger the production volumes of affected beverages, the greater the potential financial benefit from reformulation, making alternative sweeteners commercially attractive even where conventional sugar remains readily available.

Dairibord Zimbabwe has also identified the sugar content surtax as a persistent burden on its beverages business, alongside imported input costs, utility disruptions and other operating expenses.

In its financial results for the year ended December 2024, Dairibord reported that the introduction of the levy, together with changes in VAT treatment and transaction taxes, had increased operating costs. The company has subsequently relied on pricing adjustments, distribution improvements and production efficiencies to defend its margins and maintain sales growth.

The pressure continued into 2026. In its half-year results to June, Dairibord identified the sugar tax among the structural costs affecting its beverages division, even as overall volumes increased by 26% to 78.3 million litres.

Beverages accounted for 67% of group volumes, increasing by 33% to 52.8 million litres. Its Quench cordial brand recorded 82% volume growth, while Cascade and Fun n Fresh registered increases of 68% and 56%, respectively.

Dairibord's results demonstrate how a manufacturer can expand production despite an increasing tax burden on its inputs. However, the company's disclosures do not establish how much sugar it consumed per litre of beverage, making it difficult to determine whether volume growth translated into proportionate additional sugar purchases.

Dairibord has also not separately quantified a cumulative sugar-tax payment in the financial disclosures examined, limiting a direct comparison with Delta's reported expenditure.

For Hippo, the crucial variable is increasingly the sugar intensity of beverage production. A manufacturer producing substantially more beverages can still purchase less sugar than it would have under its previous formulations. Consequently, growing beverage volumes alone provide an incomplete basis for forecasting industrial sugar demand.

The scale of the incentive to replace natural sugar becomes clearer when the levy is compared with the underlying cost of the commodity. During parliamentary consultations for the 2027 National Budget in October, Confederation of Zimbabwe Industries chief economist Cornelius Dube said the tax translated into US$1,000 for every tonne of sugar used in affected ready-to-drink beverages and US$500 per tonne for cordials.

These charges compare with an indicative sugar purchase price of approximately US$800 per tonne cited by Dube. For a beverage manufacturer purchasing sugar at that price, the combined cost of the ingredient and associated levy can therefore reach approximately US$1,800 per tonne of sugar incorporated into ready-to-drink beverages, before accounting for other production costs. The tax component alone can exceed the original purchase price of the sugar.

Although these figures illustrate the economics of the levy, actual production costs depend on procurement prices, beverage formulations and the extent to which manufacturers pass the tax to consumers.

The financial incentive to reduce taxable sugar content has become substantial, particularly for high-volume beverage producers operating in a price-sensitive market.

The Confederation of Zimbabwe Industries estimates that artificial sweetener usage has more than tripled since the introduction of the tax. It also estimates that the sugar-related sector has lost at least 20% of its anticipated growth potential, although that estimate cannot be directly translated into Hippo's individual revenue losses.

The manufacturers' responses now extend beyond pricing and packaging adjustments to decisions about product composition. These decisions can have lasting consequences for sugar producers because reformulation changes the amount of natural sugar required for future production.

Once manufacturers establish alternative formulations, undertake product testing and build consumer acceptance around reduced-sugar products, restoring natural sugar content can involve additional costs. The resulting demand changes may therefore persist even if the tax is subsequently reduced.

Hippo's local growth masks potential demand displacement

Hippo's domestic market performance provides an important measure of the company's resilience. During the financial year ended March 2026, Zimbabwe's sugar industry recorded local sales of 379,319 tonnes, increasing by 12% from 337,228 tonnes in the preceding year.

That expansion continued into the current milling season. By August 2026, domestic sugar sales had reached approximately 167,900 tonnes, representing year-on-year growth of about 14.5%, while the local market absorbed approximately 94% of total industry sales.

Domestic demand has become particularly important as export markets face increased competitive and regulatory pressures. Trade restrictions affecting Kenya, together with weaker international sugar prices, have reduced the attractiveness of some external markets.

Hippo consequently has a growing commercial interest in protecting local consumption, where the company has historically achieved more favourable margins than in export markets.

Yet strong domestic volumes cannot establish how much additional sugar would have been sold without the tax. That requires information on the proportion of demand attributable to industrial customers, changes in manufacturers' recipes and the quantities of sugar displaced by alternatives.

Masarakufa acknowledged this limitation when explaining the company's experience.

"What it means is that within the shelf there is the one with artificial sweeteners and there's the one with sugar. And because they are both growing, we don't feel it. However, if there was no artificial sweeteners, I think our own growth would have been higher, in line with what is happening."

His comments place Hippo's exposure in the context of forgone incremental demand. The company has not disclosed an estimate of the quantities or revenue involved, and its continued sales growth means the financial effect cannot currently be isolated from the broader expansion in domestic consumption.

The possible transmission extends beyond Hippo's revenue. Sustained substitution could eventually reduce the industrial market's ability to absorb additional sugar production, affecting future investment decisions across milling, irrigation and cane cultivation.

Those consequences would depend on the pace of reformulation and the industry's ability to develop alternative domestic and export markets.

Zimbabwe's sugar content tax was introduced with public health objectives, including discouraging excessive sugar consumption and mobilising resources for cancer diagnosis and treatment.

The Confederation of Zimbabwe Industries estimated that the levy generated US$73 million in 2025. During parliamentary consultations in October 2026, the tax was reported to have raised nearly US$100 million since its introduction, with proceeds supporting the procurement of cancer-treatment equipment.

The revenue contribution provides an important fiscal dimension to the policy debate. However, the tax also affects the relative competitiveness of domestic beverage manufacturers, the composition of their products and the demand they generate for locally produced agricultural inputs.

The Ministry of Finance acknowledged the emerging regulatory challenge in the 2026 National Budget, identifying the exclusion of artificial sweeteners from the existing framework as an incentive for manufacturers to reformulate products.

Treasury proposed reviewing the levy to consider beverages containing non-nutritive sweeteners, including aspartame, sucralose and saccharin. The review also included consideration of competitiveness, employment and agricultural viability alongside public health objectives.

The Confederation of Zimbabwe Industries has called for a threshold-based approach similar to arrangements in South Africa and Botswana, under which a specified quantity of sugar is exempt before the levy applies. Such a structure could reduce the tax burden on lower-sugar formulations while retaining an incentive to limit sugar content.

The implications for domestic sugar producers would depend on the final design. A lower effective levy could improve the competitiveness of sugar-containing beverages, while extending taxation to artificial sweeteners would change the relative economics of competing formulations.

In either case, restoring demand for natural sugar would also depend on manufacturers' production strategies, ingredient costs and consumer preferences.

For Hippo, the immediate commercial position remains favourable, supported by expanding domestic sales and strong industrial activity. The longer-term concern is whether the growth in local food and beverage manufacturing will continue generating comparable growth in the quantity of natural sugar consumed.

"So far, no direct impact. The numbers are still holding, but we believe we are losing some opportunities," Masarakufa said.

The company's future exposure will increasingly depend on how much natural sugar manufacturers use per unit of production, the pace at which alternative sweeteners gain market share and the outcome of the Government's proposed tax review. Those developments will determine whether Hippo continues capturing the benefits of expanding domestic beverage demand or experiences a widening gap between industrial production growth and its own potential sales.

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