Wine and Spirit group Distell reports fall in sales volume as competition stiffens

SOUTH AFRICA – Distell, South Africa’s wine and spirit producer reported a 6.6% fall in volumes in its half year to end December, with profit falling 1.2% to R1.26bn (US$81.6m).

Group revenues were up 2.7% to R14.8 billion (US$958.95m) thanks largely to double digit revenue growth outside of South Africa, but this did not keep pace with cost growth of 3.6%.

Distell’s revenues in its home market SA grew 1.7% despite volumes falling 7.8%, with the group saying its due to SA’s weak economy and declining disposable income for consumers and deep discounting by beer competitors which hit wine sales.

African markets, outside South Africa, delivered strong revenue growth of 10.5% on sales volumes, which were marginally lower as a result of a comparable decline in Namibian and Zimbabwean performances affected by challenging economies.

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Focus markets on the continent, outside the Southern African Customs Union (SACU), grew revenue by 12.0%.

Mozambique, Nigeria, Kenya and Zambia all recorded strong double-digit volume and revenue growth as investments in route-to-market (RTM) and in-country production continue to deliver on strategic ambitions for the continent.

Trading conditions in Angola remained challenging, but structural VAT and excise policy implementation showed an improved performance by associate company Best Global Brands (BGB), resulting in a positive swing in earnings.

Commissioning of local manufacturing plants in Nigeria and Angola delivered encouraging volume momentum during the period.

Botswana, Lesotho, Namibia and Swaziland (BLNS) countries in SACU delivered single-digit overall revenue growth as a result of challenging drought conditions in Namibia.

Volumes in international markets outside Africa declined by 6.5% and revenue remained flat.

The start of the financial year saw the implementation of the Venture Business division by the company to reorganise its international business into an export unit to focus on export trading business; and a premium spirits business unit to building out key premium spirits brands including its Scotch Whisky portfolio.

The unit intentionally reduced the portfolio of export trading brands in order to improve the quality and sustainability of the business.

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Strong international premium spirits growth was led by double digit single malt growth in all major markets. A decline in wine exports and Premium Wine business were reflective of the portfolio strategy to refocus the wine portfolio on higher margin products.

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