STELLENBOSCH-based liquor group Distell might have built its reputation on grape based products like wine and brandy, but these days it’s the company’s apple-based cider brands that are reinforcing bottom line.
It might surprise some readers that Distell, which holds the popular Savanna and Hunter’s cider brands, is now ranked as the second biggest cider producer (by volume) in the world. Savanna is ranked as the third largest cider brand in the world.
In the year to end June the growth in Distell’s main segments (up 14% to R10.6bn) cider and ready-to-drink (RTD ) brands managing double digit growth (18.9% to be precise) with wine and spirit brands chalking up only marginal growth.
Distell is in the enviable position of dominating the local cider market - helped by the fact that rival SABMiller is restricted to manufacturing apple flavoured - rather than apple-based - alternatives. Fortunately SABMiller remains a sizeable shareholder in Distell, clinging on to a 28% stake.
Distell CEO Jan Scannel singled out Hunter’s as making good share gains and outperforming all other brands in the cider category. He said sales were backed by an excellent communication campaign – “the Hunter’s global cooling” pitch - that resonated extremely well with consumers.
He said Savanna sales were stable and closed the year well, led by the launch of larger 500ml packs.
RTD and cider sales in SA jumped 25% to R4.4bn in the year to end June on the back of a 16% push in volumes to 236 million litres. RTD and cider sales now account for around 35% of Distell’s total sales.
RTD and cider sales now outstrip Distell’s local spirit sales of R4bn and wine sales of R2.8bn – which is not a bad achievement considering the company only launched into ciders in the late eighties in a bid to capture a slice of the younger beer drinking market.
It seems Distell has every confidence the RTD and cider business can continue to run hard in the years ahead.
The company spent some R500m to maintain and expand operations, of which a hefty R342m was used to (successfully) increase the production capability at the cider and RTD plants.
Scannel said the extraordinary growth of the cider and RTD market had necessitated incremental investment to meet the greater demand for ciders in particular.
“Over the past year we further expanded production capacity in both primary production and blending, as well as bottling facilities.”
While Distell is enjoying strong growth in RTDs and cider locally, it is encouraging to note that strong gains are also being made in African markets. RTD/Cider sales in Africa were up 30% to R757m, well ahead of African spirits sales of R413m and catching up to wine sales of R900m.
Scannel said that as the world’s second largest cider producer by volume, Distell had capitalised on the global growth of this segment. “We continue to entrench our position by expanding the footprint of our cider business.”
CBN would not be surprised to see another R350m spent in the year ahead on increasing cider capacity with demand in both the local and African markets looking strong.