Distell to continue with wine farm asset sales
By Christian Eedes, 30 March 2020
Subsequent to today’s column by Tim James on moves by major producer-wholesaler Distell to put Alto and Plaisir de Merle on the market, more details are now available after an official media release was received:
Distell will be reducing its core wine brands and capabilities to focus on growth in “mainstream and accessible premium segments” and as such will continue with asset sales.
Distell’s five-year strategy, presented at its recent interim results presentation, is focused on sustainable growth and returns in key markets on the African continent and select areas beyond that. The “mainstream and accessible premium price tiers” are deemed central to the company’s success. The intention now is to “improve efficiencies and decentralise operations”.
- Distell is Africa’s leading producer of spirits, wines, ciders and ready-to-drinks (RTDs) as well as the world’s second-biggest producer of ciders. Some of the company’s top brands include Amarula, Hunter’s, Savanna, 4th Street, Klipdrift, Nederburg, Richelieu, Viceroy, and J.C. Le Roux. Distell employs nearly 5 000 people worldwide.
- Wine contributes approximately 35% of total group volumes and 27% of group revenues.
- Distell buys 35% of South Africa’s grape volumes per annum, making it the largest procurer of all its competitors. Of these volumes, less than 4% is from its own farms.
- Distell’s wine business represents approximately 36% of total wine sales by value in South Africa, and is the largest exporter of wine into Africa.
- Nederburg is South Africa’s number one brand with FY19 volumes of 11 million litres, and R600 million in revenues, representing 5,6% of value share in SA.
The future for Libertas Vineyards and Estates
Libertas Vineyards and Estates, the stand-alone company that was launched at the beginning of last year with ownership of all the premium wine brands, will reintegrate back into Distell.
Nederburg, Durbanville Hills, and Pongrácz brands will continue to play a significant role in Distell’s wine portfolio, as will the smaller, asset-light brands of Fleur du Cap, Zonnebloem and Chateau Libertas.
Going forwards, Distell intends to unlock value from certain assets on the balance sheet with Alto and Plaisir de Merle being put on the market. The intention is to find owners more focussed on the “super-premium” end of the market. Alto and Plaisir de Merle collectively represent 0.22% in volume and 0.95% in revenue of total Group wine.
Distell will continue to focus on scaling accessible “premium and mainstream” wines, which are key to profitability and returns.