23 Aug 2015 Distell looking good despite tough times
Rushton moved from a top executive position at SABMiller to take up the top job at Distell, but his SABMiller roots are still showing, reports the Business Times.
It’s not that Rushton talks about beer; it’s that he talks about brand packs and value propositions with the sort of energy and military precision more commonly associated with the drive that made SAB the No2 player in the world.
This is a far cry from the typical way of doing business at the laid-back Stellenbosch-based liquor conglomerate, Distell, whose brands include Nederburg wines, Three Ships whisky, Richelieu brandy, Amarula liqueur and Savanna cider.
A year ago, Rushton appeared happy enough with a pedestrian performance from Distell’s domestic business, which notched up a 2.6% increase in sales volume in 2014. The focus appeared to be on growing international sales and developing a global footprint.
So much for appearances. The financial 2015 results suggest Rushton was far from happy with the previous sluggish South African performance. Money and energy have been pumped into “revenue management initiatives”, which included adding 100 people to the local sales force and doing a thorough market analysis.
Expect a more aggressive push in the mainstream market and in particular township outlets, which have tended to be overlooked in favour of traditional outlets. Distell will be up against SAB in these markets.
Good news for shareholders is that the reinvigorated domestic push is showing results. South African sales volumes increased by 6.7% and revenue was up 11.8% despite the low economic growth and constrained consumer spending.
Rushton said Distell’s wines are the star performers locally and gained market share. Among the standout performers were 4th Street, Nederburg and Durbanville Hills.
The group’s ciders, which include Hunter’s – the second-largest cider brand in the world – and Savanna – the fourth-largest – turned in a more pedestrian performance than shareholders have come to expect. After six years of remarkable growth, the pace slowed to around 4%.
“The segment is attaining maturity in the domestic market, so this is to be expected,” said Rushton. But there’s still much room for growth, particularly in the “mainstream” market.
Premium spirit brands, led by Bisquit cognac, delivered strong growth, but other spirits showed only a marginal volume increase.
Elsewhere in sub-Saharan Africa, Distell also managed to ignore the adverse economic and geopolitical conditions and pumped out good results. Angola, Mozambique, Zambia and Kenya were notable contributors to the region’s revenue growth of 11.6% and 6.6% volume increase. The region accounted for 51.4% of Distell’s R6-billion foreign revenue. This strong performance helped to make up for the otherwise sluggish international showing.
Rushton said Distell had invested in strengthening its structures and capabilities to better serve its selected African, European, North American and Asian markets.
“The impact of these investments will need time to take effect, but it is essential that we are primed to capitalise on the longer-term opportunities in these markets.”
Capital spending rose 11% to R768.4 million, with 446.6 million rand spent on expanding capacity including Distell’s cider and whiskey manufacturing facilities.
The hefty investment in building capacity to boost its competitiveness saw the 10.4% revenue hike to R19.6-billion restrained to a 6.5% increase in normalised operating profit to R2.1-billion. Shareholders received a full-year dividend of 346c a share.
Source: Business Times