Advertise with fastmoving.co.za
 
 

Distell creates new Libertas Vineyards structure that will focus on its premium wines — including some old favourites.
Distell creates new Libertas Vineyards structure that will focus on its premium wines — including some old favourites.

Distell: Chateau gets a wider roof

LIQUOR NEWS

By Marc Hasenfuss - Jan 28th, 08:41

Distell creates new Libertas Vineyards structure that will focus on its premium wines — including some old favourites. 

Distell’s launch of a stand-alone premium wine company under the Libertas Vineyards & Estates banner requires some sober assessment.

Excitable punters might read too much into the development — especially with the Remgro-controlled liquor giant targeting volume brands in the premium cider and burgeoning ready-to-drink (RTD) segments, as well as the affordable wine and spirits category.

Libertas will house premium wine brands like Alto, Nederburg, Durbanville Hills, Plaisir de Merle, Pongrácz, Fleur du Cap and Allesverloren as well as heritage assets like Chateau Libertas, Zonnebloem and the Tabernacle wine library.

As a stand-alone hub, these brands collectively probably boast sales topping R1bn, compared with Distell’s total annual revenues of more than R24bn.

Most of the brands have their roots in the old Stellenbosch Farmers’ Winery and were created by the collective marketing genius that the late Rembrandt group founder, Anton Rupert, cultivated around brands in the liquor and tobacco industries.

But it is unlikely that the premium wine brands — despite the possibility of higher margins — will ever drive Distell’s bottom line with the same vigour that its higher-volume brands in cider (Savanna and Hunter’s), affordable wines (4th Street, Paarl Perlé and Drostdy-Hof) and RTD products (Bernini) have done in recent years.

Naturally, Distell’s success in the frothy (albeit more competitive) cider segment and in the lower end of the wine market will fuel speculation around whether Libertas is being set up for unbundling or for sale.

Libertas probably is too small to be separately listed, at least for now. In terms of the possibility of a sale, Libertas has the brand power (and market share) to appeal to a smaller SA liquor group, with a player like Viv Imerman (who recently acquired KWV) springing to mind. The acquisitive Australian-based Treasury Wines — which has a nose for premium brands — might also be willing to take a peek.

A liquor industry source, though, says Libertas is being created to go up against other premium wine producers. "From Distell’s point of view, it is about capital allocation and operational focus … nothing more."

In truth, Distell — officially — has not given any indication that it intends to shift away from the premium brand market. In fact, it has proclaimed some serious premium wine market ambitions.

What’s more, there is some reassurance in that Libertas will function efficiently inside Distell without hampering CEO Richard Rushton’s team from building a mass-market powerhouse with international reach into Africa and offshore.

While premium wines might not be seen as a volume game, comments by Rushton in Distell’s latest annual report are quite telling. "We will lead the premiumisation of SA wines in key target markets, with the aim to triple Distell’s premium wine volumes within the next decade."

While wine represents around 37% of Distell’s volume and only 28% of revenue, the last financial year saw the group reporting overall revenue from wine increasing a sprightly 7% after strong performances from a mix of mainstream and premium brands (most notably Nederburg).

In a media statement, Libertas MD Kay Nash described the decision to create a separate structure for the premium wine brands as a "significant shift" from Distell’s previous approach of managing the brands as a division within a multicategory portfolio.

In truth, the premium wine hub was always on the cards after Distell pruned its portfolio in late 2017 when it sold the La Bonheur and Stellenzicht wine farms and brands — which formed part of the Lusan Premium Wines estate. The retained premium brands presumably are the most profitable or promising. This is borne out by recent enthusiastic comments around individual brands (Nederburg and Durbanville Hills in particular), and the fact that revenue has grown at double digits off single-digit growth in volume sales.

But Nash stresses the premium category is challenging and inherently complex, requiring "a specialist focus, different culture and entrepreneurial approach".

The first challenge will be to critically review the large portfolio — eight brands and 40 sub-brands operating in 88 markets globally across 22 grape varietals. Nash notes: "The cost of this complexity is significant and it hinders our ability to focus and support winning propositions."

Libertas has already started to consolidate secondary production from four sites to a single site at Nederburg to ensure a more efficient supply chain.

It will be too early to judge the decision to set up Libertas when Distell releases interim results to end-December. But investors should have some indication of cost savings and efficiencies at the June year-end — and hopefully an idea of top-line ambitions for the medium term.

Business Live 

Related News

Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.

Pick n Pay moves to make healthier eating more accessible
22/11/2019 - 11:20
South Africa has been named one of the unhealthiest countries in the world1. Complicating this is the fact that healthy eating is often seen as expensive or complicated. Pick n Pay will now help customers make more informed choices in a major healthy eating drive to make healthier eating cheaper, easier, and more accessible.

Online reviews shape how buyers make their decisions
12/11/2019 - 13:37
Requesting online reviews from customers is proving to give brands access to a host of opportunities.

Distell: no reward for shareholders patience
07/11/2019 - 10:23
It’s difficult to know what to make of Distell’s shareholders — they’re either a particularly forgiving bunch or they don’t see much connection between executive remuneration and profits.

AB InBev reports weak results in "challenging" third quarter
01/11/2019 - 14:49
AB InBev, the world’s largest brewer, reported weaker-than-expected third-quarter profit and sales, due to higher cost of sales, marketing investments and price increases in two major markets, South Korea and Brazil.