SOUTH AFRICA: Shake-up in South Africa after Seagram sell-off
The South African subsidiaries of Seagram, Diageo and Pernod Ricard are all waiting with bated breath to see how the sell-off of Seagram is going to impact on their operations. Seagram Africa has between 3.5%-4% of the domestic spirits market at the foot of Africa and the hard work which has been put in over the past six years will definitely benefit the local Diageo and Pernod Ricard subsidiaries.
The local companies are holding their collective breath to see what their respective head offices are going to do and are naturally reluctant to comment on developments.
Analysts in the industry, however, expect another shake-up next year, as the Seagram brands get juggled around and as the Distillers Corporation-Stellenbosch Farmers Winery (SFW) merger impacts on the market.
The Seagram brand split will follow the international trends, with a few local and minor brands expected to fall by the wayside.
It could, however, take several months before the impact of the deal filters through, because of the number of competition authorities in key European and North American markets that have to approve and sign-off the $8.15 billion deal.
Seagram Africa MD, Peter Fleck, said that it was still too early to comment on when any changes would be made.
Diageo head office in London could not give an indication on what was going to happen in smaller operations such as South Africa. Its local subsidiary United Distillers and Vintners SA, previously Gilbey's, has been operating under its present guise for the past year.
Another issue to contend with is Seagram Africa's involvement in a legal wrangle with SFW in the Cape High Court about the alleged failure by SFW to meet agreed sales figures for Martell brandy in South Africa for the financial year between July 1997 and June 1998.
Final arguments were heard earlier this month and Her Ladyship Jeanette Treverso has reserved judgement in the case until early next year.
According to an agreement signed in 1990, it was stipulated that SFW, which has produced, distributed and marketed Martell in South Africa since the mid 1960s, had to meet a minimum of 80% of the agreed sales targets for each year.
Seagram claimed that for the period in question the sales target was for 5,366 million litres, while SFW maintained the volume was 5,317 million litres. The amount of brandy sold was within the figure claimed by SFW, but short of that stated by Seagram.
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