Distell eyes expanding African market

30 Aug 2010

Distell, the Stellenbosch-based producer of Nederburg wine, Van Ryn's brandy and Hunter's cider, is looking to expand production capacity outside SA to meet a growing African market, MD Jan Scannell said late last week.

With limited scope for growth in Distell's local market, which accounts for three-quarters of sales, it is looking to meet growing regional demand, such as for brandy in East Africa.

"The strongest growth is in sub-Saharan Africa," Mr Scannell said. "We are looking for opportunities (to) establish in-market production capacity aimed at consumers in that market."

Distell is competing with foreign companies such as Diageo of the UK to take spirits to Africa's increasingly affluent consumers.

Distell has manufacturing facilities in locations including Mauritius, where it produces a popular white spirit, and Kenya, where it makes a top brandy.

Mr Scannell did not say how much the company will spend in the coming year on expansion. The focus, rather, will be on "bedding down" sales and marketing offices in new territories.

In the year to June, for which Distell reported results yesterday, sales growth of 15,2% outstripped the 9,2% seen in the much larger South African business.

The faster-growing foreign market was hit by the rand's strength, however, which meant operating profit actually fell 19,4% to R389,7m. Operating profit at the South African business grew 11,3% to R1,5bn to give an overall decline in group operating profit of 1,2% to R1,39bn.

"We expect the market to remain competitive and under pressure in the year going forward," Mr Scannell said.

In the South African market, the company's range of products stood it in good stead as consumers traded down.

Source: Business Day

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