10 Apr 2014 Apple at the eye of Distell

Distell was originally rooted in the vineyards with traditional brands like Fleur du Cap, Nederburg, Zonnebloem, Klipdrift and Richelieu. Cream-based liqueur Amarula has been a wonderful export earner, and the company’s recent acquisition of international whisky maker, Burn Stewart, is another significant shift in strategy.

But Distell’s real transformation from the ‘grape’ brands to a diversified liquor offering has been driven by its hugely successful cider brands, which were launched in the late eighties and early nineties.

Distell has found huge volume and profit growth in the apple orchards with the continued success of its cider brands like Savanna and Hunters. Liquor industry observers believe Distell – currently the second largest cider player in the world – can become a major global player in this niche.

Recent management changes could be significant in this regard. Late last year a former SABMiller executive Richard Rushton – who has extensive offshore expertise – took over as MD of Distell following the retirement of long-serving MD Jan Scannel. Most market watchers are expecting Rushton to boost Distell’s offshore presence by extending existing operations into fast-growing African markets and possibly also by the acquisition of international assets.

There’s no doubt that cider – which by now probably accounts for more than 30% of Distell’s total revenue – will play a key role in the company’s strategy to flow into new markets.

Rushton said, “Distell’s ongoing investment to enhance its product range, improve distribution networks and strengthen operations in Africa in particular, was crucial in priming the company for focused global growth.” He said this after Distell’s interim results to end December 2013 showed revenue up 15% to R9,9bn despite muted global consumer spending.

“The cider portfolio of Hunter’s and Savanna had continued to deliver strong growth in South Africa.”

Savanna recently added to its offering with a Savanna Dark range. The cider and ready-to-drink (RTD) brands have largely been responsible for Distell managing an acceptable performance in SA where brandy sales have been under pressure and the wine segment increasingly competitive due to a plethora of brands available to the consumer.

Interestingly, Rushton also admits that Distell’s ciders and RTDs had continued to perform strongly in international markets. This would likely include sub-Saharan African markets, which accounted for some 55% of foreign revenue in the latest interim period.

Not surprisingly, Distell’s capital expenditure for the six months amounted of R387m included R243m spent on expanding the capacity of mainly cider and whisky manufacturing facilities.

Source: Cape Business News