Being a lifelong resident of Cape Town I understand that Friday lunchtimes often signal the end of the work week. But have a look at this interview with the Distell MD. We are luck South Africans to have guys that make superb whisky and people in the boardrooms who understand alcohol.
Have a great weekend and drink responsibly.
A business that has tremendous upside potential.’
HILTON TARRANT: Distell South Africa and Africa’s largest producer of spirits, wines, ciders and ready-to-drink products reporting results for the six months to 31 December today. Best known for some of its brands like Klipdrift, Mainstay, Hunters, Savanna, Nederburg and Bunnahabhain Single Malt Whisky. The producer saying sales volumes up 5.5% in the half year… revenue up 15.1% with normalised headline earnings per share up 8.5%. Richard Rushton the new managing director of Distell joining us now.
Richard you are ex SABMiller and most recently ran the Columbian business there, what have you found at Distell?
RICHARD RUSHTON: Hilton I found a business with a tremendous platform for international growth and well-established brands in many markets across Africa and select geographies in Europe. So yes, it certainly is a business that has tremendous upside potential.
HILTON TARRANT: If you look at the trends worldwide in terms of beer versus ciders, the ready-to-drink category, spirits as well… the trend perhaps a little bit more in favour of where you’re sitting now versus some of the other categories in beer.
RICHARD RUSHTON: It depends on the geography. Essentially in the case of ciders, while it is a very much smaller niche market compared to mainstream beer globally, it is a category that’s growing. That growth isn’t uniform across the world and in markets like South Africa, some markets in Africa, Australia, Western Europe, UK where ciders are particularly strong… and we’re starting to see the growth of ciders even in niche craft type segments in the US. So certainly I think ciders have a long way to go in terms of growth potential, and as a result Distell is extremely well placed both domestically and internationally to capitalise on that growth given our two outstanding brands that we have in the portfolio. With respect to spirits, that’s a slightly different story. Spirits depend on the country… obviously in the US we are seeing spirits growing share at the expense of beer, but the inter-plays in the rest of the world globally is pretty stable… the trends are pretty stable.
Within spirits itself, we are seeing strong whisky growth and local spirits like brandy, Cachaça in in Brazil, Baijiu in China… these local spirits are under more pressure so obviously a lot of local manufacturers, ourselves included, are looking to premiumise and add further attributes and reasons to buy those local spirit offerings like our brandy portfolio.
HILTON TARRANT: You mentioned whisky there, that’s definitely the rising stars… astonishing to see just how whisky has grown in volume worldwide, and where South Africa takes its place at the ranking table as well. We seem to consume a very large amount of whisky.
RICHARD RUSHTON: Ja, that’s true and obviously it has grown in the last decade and that’s a kind of global story as much as it is a South African story. We’re obviously very pleased with our performance. Firstly, we acquired Burn Stewart for that purpose, to participate strategically in the medium to long-term in the growth of that segment of the market. And then our own domestic whisky portfolio has a very good performance in the first six months, both Three Ships and the recently launched Bain’s are performing exceptionally well. So ja we’re also lower based as a company in whisky but certainly participating aggressively in what is likely to be a strong category growth driver in the future.
HILTON TARRANT: Richard if we look at these numbers, the real driver has been the international operations. Locally things are tough, still growing… things are tough but the real star… offshore.
RICHARD RUSHTON: That’s true. Obviously we grew in South Africa, both revenue just over 5%, volumes just over 3% and we think when you compare that growth to some of our major recent competitor announcements, we think we’ve done really well in South Africa, notwithstanding the challenging economic conditions that we face here. And that again, is largely as a result of our strong cider performance. And then internationally, our star performer has been Africa and our reach, our platform, the years that we’ve spent exporting into Africa are starting to pay dividends for us, albeit still off a low base and you will have seen recently that we have announced a Greenfields investment in Nigeria. We’re advanced in the final phases of starting up local production in Ghana… that facility is now commissioned and we’ve got through a number of regulatory hurdles to acquire land and bulk up our business in Angola. So our plans now are to invest pretty aggressively in local infrastructure and root-to-market in select African geographies to capitalise on the seeds that have been laid for our portfolio in Africa.
HILTON TARRANT: Speaking of regulation, there is the prospect of the South African market going dark with the banning of alcohol advertising. Have you got experience in this arena in other geographies?
RICHARD RUSHTON: Ja a good question… firstly we’re not sure whether there will be a full advertising ban in South Africa and that depends I think, on the engagement between stakeholders and a fact-based evaluation of the impact of advertising on harmful abuse of alcohol. My experience as it relates to restrictive advertising actually goes back to Columbia where it is more restrictive than South Africa and so certain time windows are allowed for advertising. Perhaps that could be a potential outcome going forward. But I wouldn’t want to speculate at this point. Obviously the industry is engaged with government on this topic. We, like government, are concerned about the harmful abuse of alcohol and will do everything in our power, and are doing a number of things in order to tackle the at-risk target populations who do elect to drink and then abuse alcohol. That, for us is as much of a concern as it is for government.
HILTON TARRANT: Richard Rushton, the managing director of Distell.
Original report here