- South Africa, Distell’s largest market by revenue, was impacted by the government imposing further restrictions on alcohol trade.
- Increased in-home consumption and stockpiling is reflected in trend preferences towards spirits and mainstream wine, says Distell.
- Other markets in Africa and the rest of the world where the group operates or exports to, still have active off-consumption channels.
Increased in-home consumption and stockpiling in fear of unexpected alcohol bans in South Africa, is reflected in trend preferences towards spirits and mainstream wine, according to large South African manufacturer of alcoholic beverages Distell, makers of brands like Hunter’s, Savanna, Klipdrift and Amarula.Â
Select premium ready-to-drink brands also continue to perform well with gains in market share, it said in a voluntary trading statement on Wednesday for the 6 months ended 31 December 2020.Â In general, however, trading conditions across all of the group’s operating areas continue to be impacted in various ways as governments deal with the challenges of the Covid-19 pandemic.
South Africa, the group’s largest market by revenue, was impacted by the government imposing further restrictions on alcohol trade, the group’s trading period over the interim period by 22%.
Other markets in Africa and the rest of the world where the group operates or exports to, still have active off-consumption channels. At the same time, international travel restrictions have adversely affected the global travel retail market.
Notwithstanding these challenges, the groups says its agility, previous investments in route-to-market and optimisation of its production network – particularly in markets outside of SA – have enabled it to capture growth and productivity opportunities.Â The management and board believe these actions have improved the positioning of the company for a long-term recovery as trading normalises in all markets.
Over the interim period, group revenue increased by 3.8% alongside volume expansion of 0.8% compared to the previous 6 months ended 31 December 2019. In South Africa, although 41 trading days were lost due to the alcohol ban in the current period, the business was able to recover and achieve near flat revenues and a 1.4% volume decline.Â
In the rest of Africa, excluding Botswana, Lesotho, Namibia and Eswatini, the group increased revenues and volumes of about 20% compared to the prior period. This was largely driven by Kenya, Mozambique and Nigeria. The Africa business, including Botswana, Lesotho, Namibia and Eswatini, had a revenue increase of 12.7% supported by 11.7% growth in volumes. This was mainly driven by a recovery in trading following the easing of border closures and no further bans on alcohol sales.
The international business performed strongly across all markets, with 15.4% revenue growth and significant margin improvement as the business capitalises on its premium whisky brands, improved online sales channels and historical investments in aged stock. Amarula delivered strong revenue and volume growthÂ
Whilst overall performance and cash generation are ahead of expectations, the group says it remains cautious as it trades into the second half of the current reporting period where a full month’s trading has already been lost, and potential implementation of future alcohol bans in South Africa remain unpredictable.
Furthermore, the current surplus of wine in SA, created by previous bans, is also a major concern to the group as it may bring long-term structural challenges to the wine industry.
As part of the group’s diversification strategy, it will continue its measured investment behind key markets and brands to pursue strategic growth opportunities.
Distell says it continues to play a positive role within the industry to ensure safe and responsible trading alongside Governments own efforts to contain the effects of the pandemic.Â
The groups interim financial results for the six months ended 31 December 2020 will be released on or about 25 February 2021.