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JSE listing for Distell
Distell, the new South African wine and spirits giant, has been officially listed on the JSE Securities Exchange - just short of a year after the commencement of talks to merge SFW and Distillers Corporation.
Speaking at a media conference following the listing, Jan Scannell, managing director, said the time was ripe to create a South African champion with the necessary resources to take on the giants in the highly competitive international wine and spirits market.
"We have the passion, energy and drive to become a leader and innovator in the world arena. The merger has galvanised the strengths of two industry leaders into a united South African front which will create global brands and spearhead new foreign markets."
According to excise figures from 1997 to June 2000, the industry has seen losses in sales volumes of 13,5 million litres in the brandy category, 4,3 million litres in whisky, 5,9 million litres in fortified wine and 3 million litres in natural wine. The alcoholic fruit beverage (AFB) sector, however, has gained 22 million litres and white spirits 3 million litres during the same period.
"In order to grow, we are forced to look at overseas markets. Our main focus for the next five years is to increase our total turnover from the areas outside the SA Customs Union to 30% and to achieve a 25% return on invested capital. We are committed to creating new markets, new levels of efficiency and new benchmarks of service and product excellence," said Scannell.
Distell now has an asset base of R3,8 billion, turnover of R4,6 billion and headline earnings of about R278 million. The combined workforce of 6 300 of the two companies is being scaled down to about 4 500, but the number of people who will actually lose their jobs should be limited to only a few hundred, through voluntary retirements etc. The company has 58 depots throughout South Africa and maintains a network of international agents throughout the world. Its brand portfolio comprises over 300 products.
The merger officially took effect on December 4, 2000, when SFW delisted from the Johannesburg Securities Exchange. The new group continued to be listed as Distillers on the JSE and the name of the holding company changed to Distell Group Ltd which was listed as such on the JSE on 19 March 2001. The name is derived from the names of the two constituent companies.
Distell’s board comprises 12 non-executive directors and 10 executive directors. Non-Executive Chairman is David Nurek and the Managing Director is Jan Scannell. The other nine Executive Directors are: Smartryk Genade (Group Operations), André Steyn (Corporate Affairs), Stoffel Cronjé (Company Secretary and Human Resources) Hennie Heÿl (Primary production), Koos Fouché (International), Merwe Botha (Finance), Scott Pitman (Marketing), Tim Tarr (Sales: South Africa) and Gert Loubser (Quality Management and Research). - CdP
SAWIT funds for alcohol research
The South African Wine Industry Trust (SAWIT) is the major donor of a DNA Sequencer to the Foundation for Alcohol-related Research (FARR), used to identify genes that cause susceptibility to or protect against fetal alcohol syndrome, alcoholism and diseases related to alcohol abuse. The Foundation develops prevention strategies to combat alcohol abuse among high-risk groups. SAWIT’s general manager, Marthinus Saunderson, says alcohol abuse is widely evident among South Africa’s disempowered communities and is also closely linked with societies in transition, where people are faced by significant changes in socio-political and family dynamics and the capacity to find sustainable employment. It is now believed that one in four general hospital admissions in South Africa can be linked, either directly or indirectly, to alcohol abuse.
SAWIT has contributed R600 000 of the R1m donated towards the acquisition of the DNA Sequencer. Other major donors are the SA Institute for Medical Research and the University of the Witwatersrand.
The FARR is based at the medical schools of the Universities of Cape Town and of the Witwatersrand and chaired by Human Genetics professor Denis Viljoen, who is also a specialist paediatrician and ranked as a world authority on Fetal Alcohol Syndrome (FAS). - CdP
Small crop augurs better stock balance - KWV chairman
Over the past two years efforts by VinPro (SA) to remove unsold wine from the market on a voluntary basis did not receive any noteworthy support, said KWV chairman, Lourens Jonker, at the recently held annual district conferences.
"The lack of support for the Industry Sales Plan and Code of Conduct for the marketing of good wine was a huge disappointment. With industry wide support, these two initiatives could have made a crucial contribution to price stabilisation.
"To be successful, participation of at least 80% was required, but much less was obtained. Our ability to collaborate in the common interest will be an extremely important prerequisite for the industry’s future success as an international player of note.
"Cellar directors and managers will simply have to join forces and negotiate so that we can extricate ourselves from this predicament. They may not allow prices to reach these totally uneconomic levels again," Mr Jonker said.
Meanwhile an industry committee has been formed to evaluate the situation and the government will probably be approached to institute a statutory minimum price system.
Mr Jonker said that in 1998, only 1% of the industry’s bulk wine was sold below R1,25 per litre, but the figure increased to 44% in 2000. "The producer’s ability to survive financially is taxed to the utmost if 44% of his wine sells at below cost. The minimum average cellar cost amounts to approximately 45 cent, while average production cost is approximately 80 cents per litre.
"We still have the situation this year where wine is being delivered to the foil bag market at 50/60 cents per litre and five litres of wine sell below R12 in the retail trade. The producer is therefore subsidising these wines to the amount of 60/70 cents per litre."
Mr Jonker also expressed concern about the extent of red grape plantings. "If we are going to put up expensive red wine pressing facilities without making very sure that a realistic price might be obtained in the market, we may again find that once cellar and marketing costs have been recovered, what remains does not compensate the producer for his expenses."
Meanwhile the 2001 crop is expected to amount to 964 434 tons, which will produce 734,9 million litres of wine at a recovery of 762 litres per ton. This is the smallest crop since 1986, 13% smaller than the 2000 crop, and 20% smaller than the record crop of 1999.
The smaller crop will probably result in good quality grapes and therefore high quality wines, meaning that prices ought to rise considerably in the wake of the past two years’ giveaways. The negotiating power of the producer should also increase considerably. We expect a shortfall of approximately 76 million litres (10,3%) when comparing the 2001 crop and sales. This should reduce stock levels to approximately 214 million litres - a dramatic improvement. - CdP
Special committee to investigate foil bag problems
The wine industry itself will have to ensure higher standards for wine in foil bags. There is a lot of pressure on the government to ban cheap alcohol and the foil bag is singled out as a culprit. But if the foil bag is prohibited, the same wine will only be packaged in other containers and the marketers of traditional bag-in-box wines will suffer because competition in this sector will then become much more fierce.
That is the opinion of the chairman of the Special Packaging Committee, Izak Visagie of Vredendal Cellar. The committee has just been formed to try and solve problems surrounding the marketing of foil bags and also to investigate the marketing of standard price wine on the whole.
At its first meeting late in March the committee suggested packaging and labelling standards, as well as proper producer prices and responsible marketing to counter negative social consequences of the foil bag. The assurance was given by Mr Visagie that legally enforceable measures would strenghten their hand in this matter and that if the government was prepared to help in a statutory way, they would be able to count on the support of the new committee.
Altogether four representatives of the industry’s co-operative sector, two of the foil bag suppliers and two of the marketers serve on the committee, but the Cape Wine and Spirits Institute (CWSI) has already let on that it wants the foil bag prohibited and does not really see any sense in being part of the committee. KWV has also condemned the low prices and negative image of the foil bag, but the wine producers’ organisation, VinPro (SA), which forms part of the KWV Group, remains neutral and will only commit itself to secretarial functions on behalf of the new committee.
The problem of surplus white wine and the foil bag only came about when the industry abandoned its surplus removal mechanisms without providing proper and responsible alternatives. The remaining 100 million litres were not export quality and as a result of not being distilled either, most of the wine went into foil bags.
More stringent control will be discussed in earnest when the committee holds its second meeting early in May.
The chairman of the independent Wine Marketers’ Association, Kobus Louw of Simonsvlei, has already indicated that the organisation is divided on the issue of the foil bag. His personal view is that it will disappear in due course, be that in the long or medium run, but many members do not want it abolished yet. The association consists of co-operative wineries who do their own marketing or who have been transformed into companies and conduct their affairs as such. Together they are responsible for about 30% of the country’s total wine production and they move about 50% of the wine on the local market. - Henry Hopkins
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