SOUTH AFRICA – Distell has announced that it will consolidate its core wine brands and capabilities to focus on growth in mainstream and accessible premium segments and offload its struggling wine farms in a bid to improve financial performance.
The company is one of Africa’s leading producers of spirits, wines, ciders and “ready-to-drinks” (RTDs) as well as the world’s second-biggest producer of ciders.
Some of its top brands include Amarula, Hunter’s, Savanna, 4th Street, Klipdrift, Nederburg, Richelieu, Viceroy, and J.C. Le Roux.
In the six months ended December 31 2019, Distell’s wine sales came under pressure from huge discounts by beer competitors, according to CEO Richard Rushton.
The wine business reported a 7% decline in interim revenues to R3.7bn (US$206.9m).
Distell buys 35% of South Africa’s grape volumes each year, of which less than 4% is from its own farms. Its wine business represents about 36% of total wine sales by value in South Africa, and it is the largest exporter of wine into Africa.
According to its five-year strategy, presented at its recent interim results presentation, includes a further focus on sustainable growth and returns, “leveraging core strengths and capabilities to drive, defend, and expand its markets on the African continent and select International markets,” it said in a statement.
Distell has decided, after careful analysis that the Libertas Vineyards and Estates (LVE) business entity will reintegrate back into the compan.
It foresees that the Nederburg, Durbanville Hills and Pongrácz brands will continue to play a significant role in its wine portfolio, as will the Fleur du Cap, Zonnebloem and Chateau Libertas brands.
Distell will also continue the process of selling certain assets. Therefore, to utilise its strengths in the mainstream and accessible premium wine segments, the company says it will unlock value from certain assets on the balance sheet with Alto and Plaisir de Merle being put on the market.
“These iconic, ultra-premium brands compete and focus in the super-premium categories and would be sold to owners more focussed in this segment, to make them thrive,” said Richard Rushton.
“Managing our wine brands collectively will bring significant synergy to the business locally and internationally, further enhancing our ability to meet customer’s needs,” he added.
Distell says it will continue to focus on scaling accessible premium and mainstream wines, which are key to profitability and returns. Therefore, it will continue to support and investment in the industry to ensure local and global success.
“We are committed to supporting our farmers and customers through this challenging period as a result of the lockdown and appreciate how tough this is for us all,” concluded Rushton.
Outlook on South Africa’s wine Industry
South Africa’s wine industry has warned of the collapse of the industry if the government does not allow it to continue harvesting and exporting during the 21-day national lockdown.
The industry has held talks with various government departments to reverse the lockdown regulations that will result in the shutting down of cellars and a ban on wine exports.
Vinpro, which represents 2500 South African wine grape producers, and cellars, said that switching off cellars would have catastrophic economic and socio-economic implications.
Vinpro managing director, Rico Basson, said that it was essential for the industry to complete harvesting activities in the next two weeks, and to secure the stock. It also contested current regulations that prohibit the export of wine.
“This is an extremely important aspect for current and future economic sustainability and socio-economic stability,” said Basson.
Vinpro said the final amended regulations of the lockdown contradicted verbal commitment from national departments, within the economic cluster of government.
According to the regulations, only food products including non-alcoholic beverages were listed as essential products and the trade and manufacturing of alcoholic products were scheduled to cease during the lockdown.