Constellation Brands said it would love to “unlock” the South African market but domestic competition was a headwind for its wine-and-spirits portfolio.
Speaking to Just Drinks at ProWein trade fair in Germany earlier this month, Constellation’s EMEA vice-president Taco Lucassen said many other African countries needed a “bottom-up” approach to growing the alcohol market, particularly wine.
He said South Africa’s “stable and growing economy” was a major draw, despite the US group's general focus on sales growth in non-producing/import-focussed countries.
“We have a very tactical approach in Africa. We would love to unlock South Africa but they have their own wines so I think that's what we're up against,” he said.
“We have a strong presence in countries that do not produce… Maybe Germany is the exception, but countries we are strong in are [generally] strong import markets – and I think South Africa is the exception to that, but it's a stable and growing economy so that's something we'd love to unlock.”
In the rest of Africa, Lucassen said a patient approach was necessary to “get consumers to understand the wine category” and encourage them to trade up into Constellation’s portfolio range.
The New York-headquartered company's portfolio includes Kim Crawford in New Zealand, US stalwart Robert Mondavi and Napa Valley peer Domaine Curry, which it acquired last year.
Finding the right partners is also “awfully important”, he said. “We want to build our portfolio, we're not after quick commercial trade.”
In 2022, Constellation signed a new partner to focus on growing sales in Kenya, Uganda, Rwanda and Tanzania. “That's growing as we anticipated after being from a small base, but growing percentage-wise very rapidly. That's good business for us,” Lucassen said.
Business and expat hubs such as Nairobi, the Kenyan capital, provide further opportunity for Constellation's stable of brands, he said.
“There's a lot of tourism in high-end resorts and there's a lot of, for instance, American general managers in the Marriotts and in the Hiltons, who take their wine knowledge to their new role in Hong Kong or Nairobi and they ask for brands like Robert Mondavi Winery or The Prisoner Wine Company because they’ve served it before.”
Sales in Africa focus on the on-premise, due to Constellation’s recent portfolio reshuffling towards higher-end wines and spirits.
“Given our portfolio strategy and given what we have, there will be operators that have a very strong retail presence in those countries. But obviously price is at the lower end and excise and import duties are at the high end,” Lucassen said.
“It is a model some wineries go after and they have a good retail presence. For us, we were more satisfied to go to the higher end and indeed be more on-premise driven, similar to the Middle East.
“In general, given our portfolio and we focus on that sort of $15-plus category, we are by nature not necessarily present in traditional retail.”
Lucassen said the division was eyeing M&A opportunities in New Zealand, the US and Italy to build on its portfolio “premiumisation” strategy.
“But the current outlook is it will not be a sizable acquisition,” he said. “I think Lingua Franca and Copper & Kings American Brandy Company are very good examples of that strategy: small in operation but amazing quality, award-winning wines which we then expand and integrate in our portfolio.”
In January, Constellation slashed its wine-and-spirits business’ forecasts amid slowing demand.
Lucassen told Just Drinks the outlook for next fiscal year was “brighter” as inflation eases, however.
During ProWein, the company announced its appointment of Sam Glaetzer as head of the struggling wine-and-spirits division, succeeding Robert Hanson.
The group will report its full-year results on 11 April.
