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Distell MD hopes to ‘substantially’ boost spirits in US

Despite volatile economic and political conditions, Africa remains a land of opportunity for drinks brands. SB speaks to Richard Rushton, MD of Distell, a company that has roots in South Africa but global ambitions.

Richard Rushton, managing director of Distell

*This feature was first published in the August 2017 edition of The Spirits Business

The African continent has one of the most diverse geographic landscapes on earth: along the northern brow, a seemingly endless stretch of arid desert, while lush tropical rainforests sprawl across the central belt, and the bustling cities of Cape Town, Johannesburg and Durban light up the night skies in the south.

These various environments are reflective of the vast differences in politics, culture and economics across the continent. Africa is at once conservative and liberal, traditional and modern, poor but with the potential for future prosperity. The World Bank predicts that Ethiopia, Djibouti and Tanzania will be some of the world’s fastest-­growing economies in 2017 according to GDP growth.

As a middle­-class consumer base emerges and disposable incomes rise, multinational drinks groups increasingly view Africa as an untapped profit pool – and a deep one at that. Industry leaders Diageo and Pernod Ricard have enhanced their operations in the region and devised new strategies to target its coveted population.

Wine, cider and spirits producer Distell describes itself as a “global business with roots in South Africa”, boasting a portfolio “suited to intermediate premiumisation in developing markets”. Surely working from within one of the most hotly contested spirits landscapes provides an edge over the competition? “I guess you could say our location places us at a disadvantage, in some respects, with regards to international markets,” says Richard Rushton, managing director of Distell. “But, conversely, it gives us an advantage in Africa. Being on the continent, we have traded with and exported to a number of its markets for a long time, so we have built up the knowledge and networks that will be important for expanding our business.”


Rushton joined Amarula liqueur, Bisquit Cognac and Bain’s Cape Mountain Whisky maker Distell in 2013 after 15 years with SABMiller, where he largely focused on developing

the brewers’ international business. Now, his ambition for Distell is also a decidedly global one.

Bain’s Cape Mountain Whisky

“Our priority has been to expand, with a focus on Africa, and to choose one or two international markets where we think we can grow our portfolio,” says Rushton. He identifies the UK and other “pockets of Europe”, South East Asia, China, Taiwan and the US as priority markets. However, Rushton notes: “The beauty of our portfolio is we have a broad range of products. The difficulty with this is we have to be choiceful around which categories and markets we focus on, and it’s not necessarily a case of one size fits all.”

In Africa, Distell will focus on growing the presence of its mainstream wines and spirits, while at the same time “seeding premium ciders, spirits and wines for the longer term”. Internationally, the group will centre its attention on its premium brands – particularly premium single malt Scotch whiskies that sit under its Burn Stewart subsidiary.

Despite this global outlook, Africa will remain central to Distell’s growth. “A focus on the African continent for the expansion of wine, spirits and cider is a strong priority of ours,” Rushton states. “There are still many opportunities for growth on the continent. I guess that is one of the most important galvanising steps for us.”

He continues: “The South African market in particular is quite a big market, and if you look at the size of the population, the profit pool is a large one – and it’s heavily contested by all the multinationals. But we have a strong presence in the country.”

It may be one of the most desired regions among multinational drinks producers, but Africa is certainly volatile, and economic slowdowns in the continent’s oil rich countries dampened Distell’s latest half­-year results. “This year has been quite tough, and we did report slower half-year results, and that’s the result of many African economies slowing down sharply as oil prices rebased in the prior 18­month period,” states Rushton. “However, the slowdown in Africa represents an opportunity for us in the sense that we see this as cyclical, rather than a permanent structural change to the underlying dynamics of the continent.” Angola is one of the main markets where Distell has experienced difficulty. “Things are starting to stabilise there,” claims Rushton, “but it’s still going to be one or two years before we start seeing signs of strong growth.”

Bunnahabhain distillery in the 1960s


Distell is optimistic about the future, so much so that last year the group announced plans to double the size of its business in terms of revenue and profit by 2020. “Due to challenging economic conditions in Africa, we are probably a year off the pace,” Rushton admits, “but we will catch up as our footprint expands and as these economies start to rebound – which they will.”

Trade in the US has certainly not been plain sailing in recent years, but Distell is hoping to “substantially” boost the profile of its spirits brands in the market after establishing a 50­50 joint venture with Terlato Wine Group in 2015. Rushton says that while the venture, called Terlato Artisan Spirits, is still in its infancy, both partners have “been busy consolidating all of our route to market partners in each state”.

Another significant piece of news for the company was announced last year, when AB InBev agreed to sell SABMiller’s 26% shareholding in Distell following the mega-merger of the brewers. Africa’s largest pension administrator, Public Investment Corporation (PIC), acting on behalf of the Government Employees Pension Fund, purchased the stake – estimated to be worth US$559 million. Rushton believes PIC will “play less of a passive role” in the business and will “perhaps be more proactive in advancing Distell’s agenda.” He adds: “PIC is very supportive of our strategy and our goals to expand the business. PIC is also a shareholder focused on long­term sustainability and transformation, and we welcome that focus.” Rushton says Distell “has a strong balance sheet to finance acquisitions”. While he would not rule out buying brands, his focus will be centred on “identifying opportunities with established distribution and sales companies in priority markets to bulk up the businesses and extract value”. Distell has made similar purchases in the past, and this year bought a stake in distributor Kenya Wine Agency. Also in 2017, the firm increased its brand portfolio with the purchase of Cruz Vodka, which Rushton says was a “clear statement of intent to grow our presence in white spirits”. While Rushton claims that as a category, white spirits “has not traditionally been a strength” of Distell’s, he notes that the company has secured “consistent growth” for Gordon’s gin – which it distributes in South Africa under an evergreen contract with Diageo. Rushton identifies Distell as a producer of predominantly brown spirits, with a focus on whisky and brandy. In 2013, the company acquired Scotch whisky maker Burn Stewart Distillers for £160m, inheriting three single malt whisky distilleries. One – Islay’s Bunnahabhain – recently received an £11m (US$14m) investment boost, which will be phased over three years to fund a major revamp of the site.

Work will be geared towards enhancing the visitor experience, but will also improve the infrastructure of the distillery – for example, with the build of new sea­facing warehouses. “It’s a multifaceted project,” says Rushton.

He adds: “Certainly there were, historically, areas of under­investment at Burn Stewart [and] the business didn’t necessarily have all the right levels of stock required for the long term. So we have been judiciously investing in stock as parcels do become available, particularly for our single malts.”

How Bunnahabhain will look after the renovation


Rushton also reveals that Distell is considering additional investment in its maturation and warehousing logistics in East Kilbride. Furthermore he “foresees the need to make further investments” in Deanston distillery, which has experienced “exponential growth” in consumer traffic. At the start of this year, Distell announced that Tobermory distillery on the Isle of Mull would cease production for two years while refurbishment work is carried out.

Developments to Distell’s Scottish distilleries will not, however, involve an increase to production capacity. “Making sure we have the right brand experiences, the right visitor experiences, and then the right parcels of stock are critical requirements so that we can fully explore the potential for these brands in our chosen markets,” asserts Rushton.

Of the group’s brandy brands, Rushton says that “after a prolonged lacklustre period we have started to see renewed brandy growth in South Africa”. Distell is the leading producer of brandy in South Africa, and owns the Van Ryn’s brand, among others.

Turning his attention to Amarula liqueur, Rushton notes that while cream liqueurs is a “stagnant category, it’s a category in which we have built a marvelous position”. He adds: “We believe the prospects of growing the Amarula brand, both in and around the cream category, will be an incredibly important part of our business.”

Distell’s plans for the future are undoubtedly ambitious, and targeting international expansion at a time of extreme volatility will be difficult. Rushton is bullish, but certainly not blindsided: “We have seen increased volatility throughout the world, uncertainty, and intense pressure for lower growth. It’s challenging competitively, but for us it’s about being selective in the markets that we compete in, and doing the right things – investing in our brands and our routes to market for the longer term.”

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