Interview

"The mainstream part of our wine portfolio is incredibly important for Africa" - just-drinks meets Distell CEO Richard Rushton - Part I

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In late-November, just-drinks met up with the CEO of Distell at the IWSC awards dinner in London. As guests filed into the banqueting hall, Richard Rushton took a pre-meal grilling from editor Olly Wehring. In part one of this exclusive, two-part interview, we consider Distell's place in the drinks industry, the group's over-reliance on South Africa and its aspirations for Africa and beyond.

Richard Rushton became CEO of Distell in 2013

Richard Rushton became CEO of Distell in 2013

Historically, Distell has been one of the harder drinks companies to get a handle on. For a start, the South Africa-based group operates across all alcohol categories, with its Savanna cider business, Nederburg wine brand and Burn Stewart Distillers unit leading the way. Then, there's been the company's preference in recent years to keep itself to itself.

On the latter, however, change is in the air, as my meeting with CEO Richard Rushton in London late last year suggests. "We've had a reputation for probably being media shy, operating under the radar," admits Rushton. "That's changing, though: We've now got an investor relations team and we've relisted the company. As a result, we've got a higher free-float. So, it's more interesting now.

"There's a need to be outward-looking, frankly. That's a requirement to deal with the investor community proactively, but we also want to embrace the world."

With five years at the helm on his CV, Rushton has previous, spending around 16 years with SABMiller including stints covering India, Africa and Latin America. Switching from solely beer to multi-sector has proved "more interesting" for Rushton. "It's more complex and comes with challenges in the sense that you need to keep your eye on all the categories and lots of geographies," he says. "The complexity of our portfolio and our geographical spread gives us challenges of prioritisation, focus and cost. Having said that, the beauty of this portfolio is that it plays across consumer occasions - that's our unique strength. It also works across the price spectrum. As a result, when one category or one brand is battling with others that are doing quite well, it comes with that sort of natural risk hedging factor."

While the portfolio reach is broad, in market terms, Distell continues to rely heavily on its home turf: South Africa presently accounts for around 75% of group sales. "It's an issue for us, no question," Rushton admits. "Notwithstanding the difficulties of the South African economy, our competitive position in the country is strong. We've fortified our position in spite of a lot of multinational competitive activity."

Rushton maintains that the group's smaller African and International divisions, evenly split at 12% and 13%, respectively of total sales, is where the excitement is. "We've got a unique opportunity in Africa to grow, using the core parts of our cider, spirits and wine portfolio to grow into markets.

"There are some big markets in Africa that are so exciting for us - Nigeria, Angola, Kenya, Uganda, Tanzania and Ethiopia. Then, closer to home, we've got strong positions in Mozambique and Zimbabwe. Our brands have travelled well through these markets. We've got a good presence and growing franchises. What we now need to do is accelerate investment in people, sales & marketing. We can't do it all, but our investments are accelerating."

Distell CEO Richard Rushton was in London late last year for the IWSC awards dinner

The group's high hopes for Africa, however, are tempered by what Rushton concedes was a slow start by Distell in the continent. "If we were being self-critical," he says, "we should have started a little earlier to establish production and route-to-market, particularly marketing, sales and distribution operations in some of the African countries. We rely quite heavily on an export model out of South Africa into Africa. In the last three years, we've started to pick up a bit of pace and investment across the continent, either in local companies or in building our own local business.

"We've got an opportunity in both wine and spirits at the mainstream end in Africa."

Rushton's reference to mainstream in terms of wine offerings flies in the face of the wider trend towards premiumisation in the category. Both Treasury Wine Estates and Concha y Toro, to name but two, have actively moved their focus to their higher-priced offerings. For Distell, however, its closest markets are too early in their development to make premiumisation a strategy choice in Africa. "The mainstream part of our wine portfolio is incredibly important for our entrance into Africa," says Rushton. "Internationally, like Treasury and the others, we don't see a tremendous endgame that is highly interesting and profitable for our business. We do have strong premium brands in Nederburg and others, which have got strong positions in Germany and other markets. We will continue to build those at the premium end.

"For wine, it is about premiumising, no question, while recruiting in Africa through the mainstream. We've got to do it choicefully. The problem with our portfolio is its breadth and the geographic split. We're in the process of refining the portfolio offering and the geographic split of our business."

Outside of Africa, the company's position belies its size. How does a large company – with annual sales of around US$950m - cope with being a small player internationally? "It's incredibly difficult," admits Rushton. "Unlike some of our competitors, we believe strongly in a very decentralised management model. Increasingly, we've got to let the reins free, encouraging more entrepreneurial thinking in our businesses. We don't have that multi-dimensional bandwidth - in people, mental capacity or know-how - in all our categories to do it any other way.

"We allow our people to experiment a little, to make a few mistakes. The challenge in our organisation is prioritising effort. We need to be on the front foot, be a little edgier and a little earlier."

In part two of our interview with Distell's Richard Rushton, which can be found here, we delve deeper into the company's international efforts as well as looking at the group's flagship Amarula brand and considering the pros and cons of being listed publicly.


Sectors: Beer & cider, Spirits, Wine

Companies: Distell

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