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Distell aims to double in size by 2020

The Distell Group, Africa’s biggest producer of wines, spirits and ciders, has revealed plans to double in size by 2020, following a record 2015 festive trading period.

Distell vineyards in Africa
Distell vineyards in Africa

Releasing its first half results, the group said year-on-year revenue grew 11.2% to R12.2 billion for the six months to December 31, 2015, driven by an 7.7% increase in sales volumes. Operating profit rose 16.5% to R1.7bn.

Top volume performers included cider brands Hunter’s and Savanna, 4th Street, now the country’s biggest-selling wine brand, Scottish Leader whisky and Viceroy, which Distill said was leading a “brandy resurgence” in South Africa. Sedgwick’s Old Brown, which celebrates its centenary this year, and Bisquit Cognac, also made impressive gains.

Richard Rushton, managing director of Distell Group, said a strong performance in South Africa, which saw revenues increase by 14.6% and volumes by 13.3%, and good gains in some African, northern European markets and Taiwan, had helped to offset the effects of weak demand from Angola, the UK, Russia, China and Latin America.

“The challenging global macroeconomic environment is leading to constrained conditions and subdued consumer spending,” said Rushton. “Consumers responded positively to our product offerings and promotions especially over the festive season. Our performance also reflects the continued progress we are making in South Africa where we are strengthening our market position with significant improvements in market penetration and customer service”.

Distell’s other markets in sub-Sahara delivered mixed results. Revenue grew 1.2% as sales volumes dropped by 7.4%. Angola, the company’s biggest market in the region outside South Africa, proved more challenging, due to “adverse macroeconomic conditions”, which were further compounded by hikes in excise and import duties.

Richard Rushton, Distell's managing director
Richard Rushton, Distell’s managing director

Rushton highlighted Namibia, Botswana, Zambia and Mozambique, which all posted strong growth, as its focus markets, reiterating Distell’s commitment to Africa which contributed 55.2% of its foreign revenue.

“Our participation in Africa is part of our long-term goal to increase our competitiveness in delivering sustainable revenue and profit growth”, said Rushton. “We are focussed on developing the right mix of brands, human capital and capacity to achieve this goal.”

Overall revenue of its wine portfolio declined by 7%, with volumes dropping by 14.8%. This was attributed to “lost summer promotional slots” in some European markets following a trade recall in May last year.

Distell’s wine portfolio includes Nederburg, Two Oceans and Fleur du Cap brands, while its spirits portfolio includes Scotch whisky Deanston, Ledaig, Bunnahabhain, and South African cream liqueur Amarula.

 Despite a positive outlook, Rushton expressed concern over the “persistently challenging and volatile trading conditions” in many of its key markets, adding that “tougher trading conditions” were expected in the second half of the financial year.

Rushton also pointed to the potential of Distell’s new route-to-market established in the US through a partnership with Terlato Wine Group, which he said would help the company to achieve “long-term” growth in the country.

 

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