Distell wine prices hurt by drought, send buyers flocking to hard spirits

THE Distell Group said its wine portfolio continues to feel the effects of the 2018 and 2019 drought as consumers flocked to hard spirits because of costs.

The multinational brewing and beverage company said in a trading guidance yesterday that its wine portfolio experienced overall flat revenue growth due to increased grape and wine prices being passed through to the consumer because of the drought effects on the 2018 and 2019 harvests.

“However, select mainstream and premium wine brands continued commendable revenue growth despite this,” the group said.

Distell produces brands such as Amarula, 4th Street, Hunter’s, Klipdrift, Nederburg, Richelieu, Savanna, Viceroy, and JC Le Roux.

Distell said its group revenue for the first quarter increased a single-digit but declined in its volumes compared to last year.

The group said revenue growth in the ready-to-drink (RTD) segment continued to take market share from beer while spirits increased during the quarter as a result of the shift in consumer appetite. It said it would take advantage of the shift and defend its market share of the spirits.

The group said it expected revenue across the continent to average a single digit. It said the previous period included stronger sales in Namibia and Zimbabwe which have since been affected by varying levels of challenging economic conditions.

“Key markets such as Kenya, Botswana, Zambia and Mozambique continue to grow double-digit revenues and volumes. The mainstream spirits category continues to record double-digit revenue growth off a high base alongside growth in RTDs across the continent,” the group said.

In its international markets, the group said overall revenues were incrementally lower while its venture business continues to focus its portfolio on higher margin premium spirits which grew revenue by double-digits in the quarter.

Its strategic brands, such as Bunnahabhain, Scottish Leader, Amarula and Deanston, all recorded revenue growth.

The group said its economic outlook for the next few months remained mixed with varying levels of risks in many of the markets in which it operates.

“While the group has ensured future cost savings through efficiencies and an improved operating model, this needs to be balanced with maintaining market share and growing revenues,” the group said.

Distell said it planned to invest responsibly behind the expansion of its African route-to-market.

Distell shares gained 1.97 percent on the JSE yesterday to close at R140.72.