Advertise with

Richard Rushton.
Richard Rushton.

Why Distell toasts acquisitions


By Marc Hasenfuss - Feb 24th 2017, 11:17

Liquor conglomerate Distell has its eye on game changers in the industry. 

Acquisitions are key to fortifying growth prospects and duty-free access to China could be a game changer for the local wine market, liquor conglomerate Distell has indicated.

Boasting Remgro and the Public Investment Corporation (PIC) as major shareholders, Distell has a presence in the wine, cider, spirits and ready-to-drink market. Its best-known brands are Savanna, Hunters Dry, Bernini, Nederburg, Durbanville Hills, 4th Street, JC Le Roux, Klipdrift, Viceroy, Amarula, Bisquit, and Scottish Leader.

At an investment presentation covering the interim results to end-December on Thursday, CEO Richard Rushton noted that acquisitions were crucial to enhance existing markets and unlock new markets.

"There is a strong pipeline with interesting potential for diversification and step change. But we will be responsible in terms of what we are willing to pay for acquisitions."

Opportune Investments CEO Chris Logan argued that duty-free access to China could be a great opportunity to market Distell’s wine.

Australia-based Treasury Wines was earning a 36% ebit (earnings before interest and tax) margin in China – facilitated by duty-free access into that country, he said.

South African wine producers were disadvantaged by the ad valorem tax on South African wines brought into China, Rushton said. But he conceded there would be a lot of opportunity to market premium local African wines. "Duty-free access to China would be a game changer for SA’s wine industry."

Distell already has a foothold in China via a joint venture company which has been marketing Savanna cider since last December. Plans are to introduce ready-to-drink brand Bernini from April, while Distell plans to break ground on local production shortly.

Distell’s interim numbers showed the effects of tough consumer conditions and added competition. Revenue was up only 2.4% to R12.5bn on a sales volume decline of 3.1%. This is the first time since 2004 that Distell has reported a volume decline. Cider, Distell’s reliable profit spinner for more than two decades, was affected by trade down as disposable incomes come under pressure in SA.

Rushton also noted intensified competition from beer pricing as well as recent ready-to-drink launches. Beer giant Heineken relaunched Strongbow cider into SA recently.

"We will defend our cider position in SA with innovation and investments."

Looking ahead, Rushton said Distell was evaluating its operating model in a bid to reduce costs and enhance efficiencies as the company chased growth domestically and in selected global markets. "We will invest more resources in fewer brands and play to our strengths.

"We will also increase efficiency by building fewer brands in validated priority markets."
© BusinessLIVE MMXVII 

Read more about: pic | distell | aquisitions

Related News

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.

SA's under-pressure consumers switching to spirits, Distell says
23/10/2019 - 13:01
Distell, the maker of Amarula, Klipdrift and Hunter’s Dry brands, says pressure on consumer spending is resulting in a shift to harder liquors, which will be a focus area for the group in the coming months.

Distell waits for tribunal ruling
16/09/2019 - 10:03
Local alcoholic beverages company, Distell Limited, will have to wait for the Competition Tribunal’s decision whether or not global beer brewer Anheuser-Busch (AB) InBev and SABMiller plc (SAB) have breached their merger conditions by striking exclusive deals with outlets.

Distell and AB Inbev square off in booze showdown
13/09/2019 - 10:28
Exclusive branding arrangements with liquor outlets and agreements with sports stadiums took centre stage at Competition Tribunal hearings on Thursday, into Distell's accusation that Anheuser-Busch InBev (AB InBev) is contravening the conditions of its 2016 merger with SABMiller.

Distell says rest of Africa offset lower volumes in SA
28/08/2019 - 09:23
Alcoholic drinks company Distell, whose brands include Nederburg wines and Klipdrift brandies, says its rest-of-Africa business made up for lower sales volumes in SA in the year to end-June.