Distell battles declining SA spirits market

South Africa’s leading drinks group Distell, producer of Amarula liqueur, has reported double digit growth over the past year despite tax hikes and a declining domestic spirits market.

Distell has reported double digit growth in its 2013/14 financial results despite “extreme difficulties”

Announcing its financial results for the 12 months to June 2014, the group reported revenue growth of 12.8% to R17.7 billion, with sales volumes increasing 3.1%.

Including the sales of Burn Stewart Distillers, the maker of Bunnahabhain which was acquired by Distell for £160m (R2.2bn) in April last year, the company has grown operating profits by 22.9% to R2.2bn.

The international markets proved “extremely difficult” for Distell in 2013/14 due to “steep” increases in excise duties while the domestic market experienced headwinds of its own with a declining spirits market hampered by the on-going poor performance of the brandy category.

However, the incorporation of the Burn Stewart Distillers brands and a weaker rand allowed Distell to offset this trend of decline to report “good growth”.

“Efficiencies gained in procurement, production, distribution and support services, coupled with the foreign currency gains and a more balanced sales mix, helped to offset the impact of steep increases in excise duties and the greater investment in marketing and sales resources,” Richard Rushton, managing director of Distell said.

“Our decision to exercise price restraint, together with our broad portfolio offering of both premium and accessible brands enabled us to compete and grow effectively in the market, despite mixed results in some segments.”

In particular, “healthy sales” of Bisquit Cognac helped counter poor brandy sales, along with local whisky brands Bain’s Cape Mountain Whisky and Three Ships.

Meanwhile, Amarula Gold, which launched in March this year, was said that have “dramatically exceeded” expectations against “intensified competition” in the cream liqueur category.

Rushton also confirmed that a bottling line had been commissioned in Ghana and land had been purchased in Nigeria and Angola with plants scheduled to come into operation in 2015.

He also confirmed Distell’s acquisition of a 26% stake in he formerly government-owned KWA Holding East Africa Limited (KHEAL) for KES860 million (£5.7m).