South Africa's alcoholic beverage industry is under immense pressure and three large companies, the KWV Group, Distell and South African Breweries are all restructuring. None are providing exact details to what extent jobs are being shed but many are sure to go. Arnold Kirkby reports.

The latest to join the fray is the KWV Group, which has admitted it intends slashing its operational costs by 20%. Over the past two years it reduced its workforce from around 1,200 to about 850 and further cuts are on the cards.

Personnel received management notification last week stating that growing global competition, substitute products and a drop in demand for brandy had influenced financial results negatively.

KWV range

This resulted in the need to investigate possible retrenchments. Efforts would be made to prevent or lessen the impact thereof. The letter served as notice that some employees could be retrenched by the end of the month.

Distell, in which KWV and SAB each have a 30% share, is also restructuring as part of its merger and trade unions have for several months claimed that as many as 1,800 jobs could be in the balance. Management state the figure would not be that high, but said that a final tally would only be made towards the fourth quarter of this year.

They say they are investigating ways of providing personnel with the skills to operate independently, so that the company can outsource some tasks such as deliveries, to former employees. Programmes to ensure this happens have been put in place.

SAB has confirmed that volumes for the financial year that ended in March were down between 5% and 6% on the previous year, but the current reshuffle is not a knee-jerk reaction to the present downswing.

Distell, in which KWV and SAB each have a 30% share, is also restructuring as part of its merger

It was being co-ordinated with the trade unions and all due processes were being followed.

Just-Drinks learned from sources that SAB has done periodic restructuring over the past 10 years, halving its workforce from over 12,000 to between 6,000 and 7,000.

Most of these retrenchments have taken place during growth periods as part of a streamlining of the company.

At SAB's newest plant in the Eastern Cape, the Ibayi Brewery, which came online last year, use of new technology and mechanisation had cut the labour force from about 240 to 120.

SAB too has a programme aimed at assisting personnel to either find work elsewhere in the group, or to provide those with viable schemes to set themselves up in business.

SAB - Castle Lager

KWV's woes are double edged. Playing in the international market with a weak currency, it has to find funds to pay for its advertising and promotional requirements, as well as fund the group's R38m ($4.73m) a year commitment to the South African Wine Industry Trust.

KWV has to pay that amount each year for a period of ten years as part of a "win-win" deal struck with the ANC government when it converted from a co-operative to a company in the late 1990s.This has now become a millstone around its neck.

KWV also claims to produce 50% of all brandy in South Africa and the latest statistics show that that segment of the market is in decline. Rebate brandy production fell from 48m litres in 1999 to 24.8m litres last year.

Producer sales dropped from 54.9m litres at a value of R70.39m ($8.76m), to 28.2m litres at a value of R34.02m ($4.23m).

The latest excise figures for brandy sales in 2000 are still pending, but are expected to reflect a similar pattern.